<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 19, 1999
REGISTRATION STATEMENT NO. 333-78137
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
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REPUBLIC SERVICES, INC.
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
DELAWARE 4953 65-0716904
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
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<S> <C>
DAVID A. BARCLAY
SENIOR VICE PRESIDENT
REPUBLIC SERVICES, INC. AND GENERAL COUNSEL
110 S.E. SIXTH STREET, 28TH FLOOR REPUBLIC SERVICES, INC.
FORT LAUDERDALE, FLORIDA 33301 110 S.E. SIXTH STREET, 28TH FLOOR
(954) 769-2400 FORT LAUDERDALE, FLORIDA 33301
(Address, including zip code, and telephone number, (954) 769-2400
including (Name, address, including zip code, and telephone
area code, of registrant's principal executive offices) number, including area code, of agent for service)
</TABLE>
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COPIES TO:
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<S> <C>
JONATHAN L. AWNER, ESQ. VALERIE FORD JACOB, ESQ.
AKERMAN, SENTERFITT & EIDSON, P.A. FRIED, FRANK, HARRIS, SHRIVER & JACOBSON
ONE S.E. THIRD AVENUE, 28TH FLOOR ONE NEW YORK PLAZA
MIAMI, FLORIDA 33131-1704 NEW YORK, NEW YORK 10004
(305) 374-5600 (212) 859-8000
</TABLE>
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
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PROPOSED
MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES AMOUNT TO BE AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED OFFERING PRICE FEE(1)
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<S> <C> <C> <C>
Notes........................................... $500,000,000 $500,000,000 $139,000
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(1) Previously paid.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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<PAGE> 2
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED MAY 19, 1999
PROSPECTUS
$500,000,000
REPUBLIC SERVICES, INC. (LOGO)
$ % NOTES DUE 200
$ % NOTES DUE 200
-------------------------
Interest on the notes will be payable on and of
each year beginning , 1999. The % notes will mature on
, 200 and the % notes will mature on , 200 . We
may redeem some or all of the notes at any time. We describe the redemption
price under the heading "Description of the Notes -- Optional Redemption" on
page 59 of this prospectus.
The notes are unsecured and will rank equally with all of our other
unsecured senior indebtedness. The notes will not be entitled to the benefit of
any sinking fund.
INVESTING IN THE NOTES INVOLVES CERTAIN RISKS WHICH ARE DESCRIBED IN THE
"RISK FACTORS" SECTION BEGINNING ON PAGE 7 OF THIS PROSPECTUS.
-------------------------
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PUBLIC OFFERING UNDERWRITING PROCEEDS BEFORE
PRICE(1) DISCOUNT EXPENSES
--------------- ------------ ---------------
<S> <C> <C> <C>
Per Note due 200 .......................... % % %
Total.................................... $ $ $
Per Note due 200 .......................... % % %
Total.................................... $ $ $
</TABLE>
- -------------------------
(1) Plus accrued interest from , 1999, if settlement occurs
after that date.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The notes will be ready for delivery in book-entry form only through the
Depository Trust Company on or about , 1999.
-------------------------
Joint Book-Running Managers
BANC OF AMERICA SECURITIES LLC MERRILL LYNCH & CO.
-------------------------
BANC ONE CAPITAL MARKETS, INC.
CHASE SECURITIES INC.
DEUTSCHE BANK SECURITIES
DONALDSON, LUFKIN & JENRETTE
SALOMON SMITH BARNEY
-------------------------
The date of this prospectus is May , 1999.
<PAGE> 3
TABLE OF CONTENTS
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PAGE
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Prospectus Summary.......................................... 3
Risk Factors................................................ 7
Use of Proceeds............................................. 10
Capitalization.............................................. 10
Selected Financial Data..................................... 11
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 13
Business.................................................... 26
Management.................................................. 40
Security Ownership of Beneficial Owners and Management...... 47
Intercompany Relationships and Related Transactions......... 49
Description of Other Indebtedness........................... 57
Description of the Notes.................................... 59
United States Federal Income Tax Considerations............. 69
Underwriting................................................ 74
Legal Matters............................................... 76
Experts..................................................... 76
Available Information....................................... 77
Index to Financial Statements............................... F-1
</TABLE>
-------------------------
You should rely only on the information contained in this prospectus. We
have not, and the underwriters have not, authorized any other person to provide
you with different information. If anyone provides you with different or
inconsistent information, you should not rely on it. We are not, and the
underwriters are not, making an offer to sell these securities in any
jurisdiction where the offer or sale is not permitted. You should assume that
the information appearing in this prospectus is accurate only as of the date on
the front cover of this prospectus. Our business, financial condition, results
of operations and prospects may have changed since that date.
2
<PAGE> 4
PROSPECTUS SUMMARY
This summary highlights some information contained in this prospectus. The
summary may not contain all of the information that is important to you. You
should carefully read the entire prospectus, including the risk factors and the
financial statements, in order to understand this offering. With the exception
of the section of this prospectus captioned "Description of the Notes," where we
refer to ourself in this prospectus, including our references to "Republic
Services" or "our company," we mean Republic Services, Inc. and its subsidiaries
since we completed our initial public offering of common stock in July 1998,
along with the historical operating results and activities of, and assets and
liabilities of, the solid waste services business and operations of AutoNation,
Inc. before we completed our initial public offering of common stock in July
1998.
This prospectus contains forward-looking statements that involve risks and
uncertainties. Our actual results may differ significantly from the results we
discuss in the forward-looking statements. We discuss some of the factors that
might cause differences in actual results in the "Risk Factors" section of this
prospectus.
OUR COMPANY
We are a leading provider of services in the domestic non-hazardous solid
waste industry. We provide non-hazardous solid waste collection services for
commercial, industrial, municipal and residential customers through 139
collection companies in 26 states. We also own or operate 76 transfer stations
and 58 solid waste landfills. We had revenue of $403.5 million and operating
income of $79.4 million for the three months ended March 31, 1999 and revenue of
$300.8 million and operating income of $59.0 million for the three months ended
March 31, 1998. We had revenue of $1,369.1 million and operating income of
$284.3 million in the year ended December 31, 1998, and revenue of $1,127.7
million and operating income of $201.3 million in the year ended December 31,
1997. We believe that the $241.4 million, or 21.4%, increase in revenue and the
$83.0 million, or 41.2%, increase in operating income from 1997 to 1998 are
primarily attributable to the successful execution of our growth and operating
strategies.
Our presence in high growth markets throughout the Sunbelt, including
Florida, Georgia, Nevada, Southern California and Texas and other domestic
markets that have experienced higher than average population growth during the
past several years supports our internal growth strategy. We believe that our
presence in these markets positions our company to experience growth at rates
that are generally higher than the industry's overall growth rate.
Since 1995, we have acquired numerous solid waste companies with an
aggregate of over $1.4 billion in annual revenue. We believe that we are well
positioned to continue to increase our revenue and operating income through
acquisitions in addition to our internal growth. We focus our acquisition growth
strategy on the approximately $8.0 billion of revenue generated by the over
5,000 privately held solid waste companies in 1997. We believe that several
factors enhance our ability to acquire many of these privately held companies,
including,
- increasing competition in the solid waste industry,
- increasing requirements for capital as a result of regulatory
changes in the solid waste industry, and
- the existence of only a limited number of exit strategies for the
owners and principals of these privately held solid waste companies.
Until our initial public offering of common stock in July 1998, we were a
wholly owned subsidiary of AutoNation, Inc., formerly known as Republic
Industries, Inc. Recently, AutoNation completed the sale of substantially all of
its shares of our common stock through a secondary public offering.
3
<PAGE> 5
THE NOTES OFFERING
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<S> <C>
The Issuer...................................... Republic Services, Inc., a Delaware corporation
110 S.E. Sixth Street, 28th Floor
Fort Lauderdale, Florida 33301
(954) 769-2400
Notes Offered................................... $ aggregate principal amount of %
notes due 200 .
$ aggregate principal amount of %
notes due 200 .
Maturity Date................................... , 200 for the 200 notes.
, 200 for the 200 notes.
Interest Payment Dates.......................... On and of each year,
beginning on , 1999.
Ranking......................................... The notes will rank equally with all of our other
senior unsecured indebtedness, including
indebtedness outstanding under our revolving credit
facility.
Optional Redemption............................. We may redeem some or all of the notes at any time.
We describe the redemption price under the heading
"Description of the Notes -- Optional Redemption."
Form of Note.................................... One or more global securities, held in the name of
The Depository Trust Company.
Covenants....................................... The indenture governing the notes will contain
covenants that, among other things, generally will
limit our ability and the ability of our
subsidiaries to:
- enter into sale and leaseback transactions;
- consolidate, merge or sell all or substantially
all of our assets; and
- create liens.
These covenants are subject to important exceptions
and qualifications, which are described under the
heading "Description of the Notes" in this
prospectus.
Use of Proceeds................................. We intend to use the net proceeds from the sale of
the notes to reduce amounts outstanding under our
revolving credit facility.
</TABLE>
4
<PAGE> 6
SUMMARY HISTORICAL, PRO FORMA AND PRO FORMA AS ADJUSTED FINANCIAL DATA
(IN MILLIONS, EXCEPT RATIOS AND PER SHARE DATA)
In the table below, we provide you with a summary of our historical, pro
forma and pro forma as adjusted financial and operating data for the periods
indicated. The summary historical, pro forma and pro forma as adjusted financial
data set forth below should be read in conjunction with our Consolidated
Financial Statements and their Notes included elsewhere in this prospectus and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." See Notes 1, 3, 6 and 9 of Notes to Consolidated Financial
Statements for a discussion of basis of presentation, business combinations,
stockholders' equity and restructuring and other charges. The pro forma data set
forth below assumes the initial public offering and the repayment in full of the
amounts due to AutoNation occurred as of January 1, 1998. The pro forma as
adjusted financial data further gives effect to the sale of $500.0 million of
the notes offered hereby and the application of net proceeds of $495.0 million
as if such transaction had occurred as of the beginning of the periods
presented. The summary historical, pro forma and pro forma as adjusted financial
data below is not necessarily indicative of the results of operations or
financial position which would have resulted had our separation from AutoNation,
our initial public offering and our sale of $500.0 million of the notes offered
hereby occurred at the beginning of the periods presented.
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, YEAR ENDED DECEMBER 31,
--------------------------------- ---------------------------------------------------------
PRO FORMA PRO FORMA
AS ADJUSTED AS ADJUSTED PRO FORMA
1999 1999 1998 1998 1998 1998 1997 1996
----------- -------- -------- ----------- --------- -------- -------- ---------
(UNAUDITED)
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<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue....................... $ 403.5 $ 403.5 $ 300.8 $1,369.1 $1,369.1 $1,369.1 $1,127.7 $ 953.3
Expenses:
Cost of operations.......... 244.7 244.7 185.9 842.7 842.7 842.7 723.0 628.3
Depreciation, amortization
and depletion............. 33.4 33.4 23.8 106.3 106.3 106.3 86.1 75.3
Selling, general and
administrative............ 46.0 46.0 32.1 135.8 135.8 135.8 117.3 135.3
Restructuring and other
charges................... -- -- -- -- -- -- -- 8.8
-------- -------- -------- -------- -------- -------- -------- --------
Operating income.............. 79.4 79.4 59.0 284.3 284.3 284.3 201.3 105.6
Interest expense.............. (12.7) (11.3) (5.4) (33.9) (7.4) (44.7) (25.9) (29.7)
Interest income............... 2.6 2.6 .5 1.5 1.5 1.5 4.9 11.7
Other income (expense), net... (.1) (.1) .3 (.9) (.9) (.9) 1.8 2.2
-------- -------- -------- -------- -------- -------- -------- --------
Income before income taxes.... 69.2 70.6 54.4 251.0 277.5 240.2 182.1 89.8
Provision for income taxes.... 26.6 27.2 19.6 90.4 99.9 86.5 65.9 38.0
-------- -------- -------- -------- -------- -------- -------- --------
Net income.................... $ 42.6 $ 43.4 $ 34.8 $ 160.6 $ 177.6 $ 153.7 $ 116.2 $ 51.8
======== ======== ======== ======== ======== ======== ======== ========
Basic and diluted earnings per
share(a).................... $ .24 $ .25 $ .36 $ .92 $ 1.01 $ 1.13 $ 1.21 $ .54
======== ======== ======== ======== ======== ======== ======== ========
Weighted average common and
common equivalent shares
outstanding(a).............. 175.4 175.4 95.7 175.4 175.4 135.6 95.7 95.7
======== ======== ======== ======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, YEAR ENDED DECEMBER 31,
--------------------------------- ---------------------------------------------------------
PRO FORMA PRO FORMA
AS ADJUSTED AS ADJUSTED PRO FORMA
1999 1999 1998 1998 1998 1998 1997 1996
----------- -------- -------- ----------- --------- -------- -------- ---------
(UNAUDITED)
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<S> <C> <C> <C> <C> <C> <C> <C> <C>
OTHER OPERATING DATA:
EBITDA(b)..................... $ 112.8 $ 112.8 $ 82.8 $ 390.6 $ 390.6 $ 390.6 $ 287.4 $ 180.9
EBITDA margin(c).............. 28.0% 28.0% 27.5% 28.5% 28.5% 28.5% 25.5% 19.0%
Capital expenditures.......... $ 55.7 $ 55.7 $ 29.0 $ 193.0 $ 193.0 $ 193.0 $ 165.3 $ 146.9
Cash flows from operating
activities.................. 63.2 64.0 80.3 278.0 295.0 271.1 279.4 143.5
Cash flows from investing
activities.................. (489.1) (489.1) (21.2) (607.4) (607.4) (607.4) (168.1) (175.7)
Cash flows from financing
activities.................. (116.2) (116.2) (59.1) 892.9 892.9 892.9 (135.5) 20.3
Ratio of earnings to fixed
charges(d).................. 5.4x 5.9x 9.9x 7.6x 25.3x 5.9x 7.3x 3.7x
</TABLE>
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<TABLE>
<CAPTION>
MARCH 31,
----------------------
PRO FORMA DECEMBER 31,
AS ADJUSTED ------------------------------
1999 1999 1998 1997 1996
----------- -------- -------- -------- --------
(UNAUDITED)
----------------------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 15.3 $ 15.3 $ 556.6 $ -- $ 24.2
Total assets................................................ 2,793.3 2,788.3 2,812.1 1,348.0 1,090.3
Amounts due to AutoNation(e)................................ -- -- -- 266.1 254.9
Total debt.................................................. 947.6 942.6 1,057.1 75.1 142.7
Total stockholders' equity.................................. 1,344.5 1,344.5 1,299.1 750.8 494.5
</TABLE>
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(a) Prior to our initial public offering on July 1, 1998, we had only 100 shares
of common stock outstanding, all of which were owned by AutoNation.
Historical share and per share data have been retroactively adjusted for the
recapitalization of our 100 shares of common stock into 95.7 million shares
of common stock in July 1998.
(b) EBITDA represents operating income plus depreciation, amortization and
depletion. While EBITDA data should not be construed as a substitute for
operating income, net income or cash flows from operations in analyzing our
operating performance, financial position and cash flows, we have included
EBITDA data, which is not a measure of financial performance under generally
accepted accounting principles, because we believe that this data is
commonly used by certain investors to evaluate a company's performance in
the solid waste industry. Due to the fact that not all companies calculate
non-GAAP measures in the same manner, the EBITDA presentation herein may not
be comparable to similarly titled measures reported by other companies.
(c) EBITDA margin represents EBITDA divided by revenue.
(d) The ratio of earnings to fixed charges is determined by dividing the sum of
income before income taxes, interest expense, income tax expense and a
portion of rent expense representative of the interest component by the sum
of interest expense and the portion of rent expense representative of the
interest component.
(e) In July 1998, we repaid all amounts due to AutoNation as of June 30, 1998
through the issuance of common stock and through all of the proceeds of our
initial public offering.
6
<PAGE> 8
RISK FACTORS
You should carefully consider the risks below before making a decision to
invest in our notes. You should carefully consider these risk factors, together
with all of the other information included in this prospectus, before you make
an investment decision.
If any of the following risks, or other risks not presently known to us or
that we currently believe to not be significant, develop into actual events,
then our business, financial condition, results of operations or prospects could
be materially adversely affected.
WE OPERATE IN A HIGHLY COMPETITIVE INDUSTRY AND MAY BE UNABLE TO COMPETE
EFFECTIVELY.
We operate in a highly competitive business environment. Some of our
competitors have significantly larger operations and may have significantly
greater financial resources than we do. In addition, the solid waste industry is
constantly changing as a result of rapid consolidation which may create
additional competitive pressures in our business environment.
We also compete with municipalities that maintain their own waste
collection or disposal operations. These municipalities may have a financial
advantage over us as a result of the availability of tax revenue and tax-exempt
financing.
In each market in which we own or operate a landfill, we compete for solid
waste volume on the basis of disposal or "tipping" fees, geographical location
and quality of operations. Our ability to obtain solid waste volume for our
landfills may be limited by the fact that some major collection companies also
own or operate landfills to which they send their waste.
We compete for collection accounts primarily on the basis of price and the
quality of services. From time to time our competitors may reduce the price of
their services in an effort to expand their market share or to win a
competitively bid municipal contract.
As a result, we may have difficulty competing effectively from time to
time.
WE MAY BE UNABLE TO EXECUTE OUR ACQUISITION GROWTH STRATEGY.
Our ability to execute our growth strategy depends in part on our ability
to identify and acquire desirable acquisition candidates as well as our ability
to successfully integrate the acquired operations into our business. The
consolidation of our operations with the operations of acquired companies,
including the integration of systems, procedures, personnel and facilities, the
relocation of staff, and the achievement of anticipated cost savings, economies
of scale and other business efficiencies, presents significant challenges to our
management, particularly if several acquisitions occur at the same time. In
short, we cannot assure you that:
- we will be able to identify desirable acquisition candidates;
- we will be able to acquire any of the identified candidates;
- we will effectively integrate companies which are acquired and fully
realize the expected cost savings, economies of scale or business
efficiencies; or
- any acquisitions will be profitable or accretive to our earnings.
Additional factors may negatively impact our acquisition growth strategy.
Our acquisition strategy requires spending significant amounts of capital. If we
are unable to obtain additional needed financing on acceptable terms, we may
need to reduce the scope of our acquisition growth strategy, which could have a
material adverse effect on our growth prospects. The intense competition among
our competitors pursuing the same acquisition candidates may increase purchase
prices for solid waste
7
<PAGE> 9
businesses and increase our capital requirements. In addition, our inability to
account for acquisitions under the pooling of interests method of accounting
until May 2001 may impede our ability to complete some transactions. If any of
the aforementioned factors force us to alter our growth strategy, our financial
condition, results of operations and growth prospects could be adversely
affected.
WE MAY BE UNABLE TO MANAGE OUR GROWTH EFFECTIVELY.
Our growth strategy places significant demands on our financial,
operational and management resources. In order to continue our growth, and to
operate independently of AutoNation, we will need to add administrative and
other personnel, and make additional investments in operations and systems. We
cannot assure you that we will be able to find and train qualified personnel, or
do so on a timely basis, or expand our operations and systems to the extent, and
in the time, required.
BUSINESSES WE ACQUIRE MAY HAVE UNDISCLOSED LIABILITIES.
In pursuing our acquisition strategy, our investigations of the acquisition
candidates may fail to discover certain undisclosed liabilities of the
acquisition candidates. If we acquire a company having undisclosed liabilities,
as a successor owner we may be responsible for such undisclosed liabilities. We
typically try to minimize our exposure to such liabilities by obtaining
indemnification from each seller of the acquired companies, by deferring payment
of a portion of the purchase price as a security for the indemnification and by
acquiring only specified assets. However, we cannot assure you that we will be
able to obtain indemnifications or that they will be enforceable, collectible or
sufficient in amount, scope or duration to fully offset any undisclosed
liabilities arising from our acquisitions.
WE DEPEND ON KEY PERSONNEL.
Our future success depends on the continued contributions of several key
employees and officers. Most of our officers do not have employment agreements
and we do not maintain key man life insurance policies on any of our officers.
The loss of the services of key employees and officers, whether such loss is
through resignation or other causes, or the inability to attract additional
qualified personnel, could have a material adverse effect on our financial
condition, results of operations and growth prospects.
COMPLIANCE WITH ENVIRONMENTAL REGULATION MAY IMPEDE OUR GROWTH.
We may need to spend considerable time, effort and capital to keep our
facilities in compliance with federal, state and local requirements regulating
health, safety, environment, zoning and land use. In addition, some of our waste
operations that cross state boundaries could be adversely affected if the
federal government, or the state or locality in which these waste operations are
located, imposes discriminatory fees on, or otherwise limits or prohibits, the
transportation or disposal of solid waste. If environmental laws become more
stringent, our environmental capital expenditures and costs for environmental
compliance may increase in the future. In addition, due to the possibility of
unanticipated events or regulatory developments, the amounts and timing of
future environmental expenditures could vary substantially from those we
currently anticipate. Because of the nature of our operations, we have in the
past and may in the future be named as a potentially responsible party in
connection with the investigation or remediation of environmental conditions. We
cannot assure you that the resolution of these investigations will not have a
material adverse effect on our financial condition or results of operations. A
significant judgment or fine against our company, or our loss of significant
permits or licenses, could have a material adverse effect on our financial
condition, results of operations or prospects.
Citizens' groups have become increasingly active in challenging the grant
or renewal of permits and licenses for landfills and other waste facilities.
Responding to the challenges presented by those
8
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citizens' groups has at times further increased our costs and extended the time
associated with establishing new facilities and expanding existing facilities.
We currently accrue for landfill closure and post-closure costs based on
consumption of landfill airspace. As of December 31, 1998, assuming that all
available landfill capacity is used, we expect to expense approximately $370.5
million of landfill closure and post-closure costs over the remaining lives of
these facilities. We cannot assure you that our reserves for landfill and
environmental costs will be adequate to cover the requirements of existing
environmental regulations, future changes or interpretations of existing
regulations or the identification of adverse environmental conditions previously
unknown to us.
POTENTIAL YEAR 2000 PROBLEMS MAY ADVERSELY AFFECT OUR BUSINESS.
We use computer software and related technologies throughout our business
that are likely to be affected by the date change in the year 2000. We may not
discover and remediate all potential problems with our systems in a timely
manner. In addition, computer software and related technologies used by our
customers, service providers, vendors and suppliers are likely to be affected by
the year 2000 date change. Failure of any of these parties to properly process
dates for the year 2000 and thereafter could result in unanticipated expenses
and delays to us, including delays in the payment by our customers for services
provided and delays in our ability to conduct normal banking operations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Year 2000."
SEASONAL CHANGES AND ECONOMIC FLUCTUATIONS MAY ADVERSELY AFFECT OUR BUSINESS AND
OPERATIONS.
Our operations may 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 our landfill sites and
other facilities.
Our commercial and industrial collection operations, and our landfills
which accept construction and demolition debris, may be adversely affected by
periods of economic downturn or declines in the construction industry.
OUR AGREEMENTS WITH AUTONATION MAY NOT BE AS FAVORABLE AS AGREEMENTS WITH THIRD
PARTIES.
We entered into agreements with AutoNation while we were its wholly owned
subsidiary. We cannot assure you that these agreements were made on terms as
favorable as could have been obtained from parties with whom we were not
related.
9
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USE OF PROCEEDS
The net proceeds we will receive from the sale of the notes are estimated
to be $495.0 million, after deducting the underwriting discount and other
offering expenses.
We expect to use the net proceeds from this offering to repay $378.0
million and $117.0 million of the short-term and long-term portions of our
revolving credit facility, respectively, which amounts will be available to be
reborrowed. Our credit facility is unsecured and consists of a long-term
revolving credit facility of $500.0 million expiring July 2003 and a short-term
revolving credit facility of $500.0 million expiring July 1999. Interest under
the revolving credit facility is based on LIBOR rates. We used the proceeds of
our revolving credit facility to complete acquisitions and to fund capital
expenditures, as well as for working capital.
CAPITALIZATION
The following table summarizes our capitalization as of March 31, 1999 and
as adjusted to give effect to our receipt of the estimated net proceeds from the
sale by our company of $500.0 million of the notes we are selling hereunder. For
the three months ended March 31, 1999, our borrowings under our short-term and
long-term credit facility had a weighted average interest rate of 5.71%. You
should read this information in conjunction with our Consolidated Financial
Statements and the related Notes that appear in this prospectus beginning on
page F-1.
<TABLE>
<CAPTION>
AS OF MARCH 31, 1999
----------------------
PRO FORMA
ACTUAL AS ADJUSTED
-------- -----------
(IN MILLIONS, EXCEPT
SHARE DATA)
<S> <C> <C>
Cash and cash equivalents................................... $ 15.3 $ 15.3
======== ========
Notes payable and current maturities of long-term debt:
Short-term credit facility(1)............................. $ 378.0 $ --(4)
Other debt................................................ 7.2 7.2
-------- --------
Total notes payable and current maturities of long-term
debt................................................... 385.2 7.2
-------- --------
Long-term debt, net of curent maturities:
Long-term credit facility................................. 500.0 383.0(4)
Senior notes.............................................. -- 500.0
Other debt................................................ 57.4 57.4
-------- --------
Total long-term debt.................................... 557.4 940.4
-------- --------
Total debt(2)........................................... 942.6 947.6
-------- --------
Stockholders' equity:
Preferred stock, par value $.01 per share; 50,000,000
shares authorized; none issued.......................... -- --
Common stock, par value $.01 per share; 375,000,000 shares
authorized; 175,412,500 shares issued and
outstanding(3).......................................... 1.8 1.8
Additional paid-in capital.................................. 1,205.5 1,205.5
Retained earnings........................................... 137.2 137.2
-------- --------
Total stockholders' equity.............................. 1,344.5 1,344.5
-------- --------
Total capitalization................................ $2,287.1 $2,292.1
======== ========
</TABLE>
- ---------------
(1) We are currently negotiating with our lenders to extend the maturity of the
portion of our credit facility expiring July 1999 to July 2000.
(2) For a description of our outstanding debt, see "Description of Other
Indebtedness."
(3) Excludes (A) 12.6 million shares subject to options outstanding as of April
30, 1999 and (B) 7.4 million additional shares reserved for issuance
pursuant to options available for grant under our stock option plan. See
"Management -- Stock Incentive Plan."
(4) Reflects repayment of $378.0 million and $117.0 million of the short-term
and long-term portions of our credit facility.
10
<PAGE> 12
SELECTED FINANCIAL DATA
(IN MILLIONS EXCEPT RATIOS AND PER SHARE DATA)
The following table presents selected financial data of our company for the
periods and dates indicated. Our selected statement of operations data and other
operating data for each of the full fiscal years 1998, 1997, 1996 and 1995, and
our selected balance sheet data at December 31, 1998, 1997 and 1996 presented
below were derived from our Consolidated Financial Statements, which have been
audited by Arthur Andersen LLP, independent certified public accountants. Our
selected statement of operations data and other operating data for the full
fiscal year 1994, and our selected balance sheet data at December 31, 1995 and
1994 presented below are derived from our unaudited consolidated financial
statements, which we believe reflect all adjustments, consisting of only normal
recurring adjustments, necessary for a fair presentation of this data. Our
selected financial data for the three months ended March 31, 1999 and 1998 and
as of March 31, 1999 are derived from our unaudited interim consolidated
financial statements included elsewhere in this prospectus. The unaudited
interim consolidated financial statements include all material adjustments,
consisting only of normal recurring adjustments, which we consider necessary for
a fair presentation of our financial position and results of operations for
these periods. Operating results for the three months ended March 31, 1999 are
not necessarily indicative of the results that may be expected for a full year.
You should read the following selected financial data along with our
Consolidated Financial Statements and their Notes as of March 31, 1999
(unaudited) and December 31, 1998 and 1997 and for the three months ended March
31, 1999 and 1998 (unaudited) and for each of the three years in the period
ended December 31, 1998, included elsewhere in this prospectus and "Management's
Discussion and Analysis of Financial Condition and Results of Operations." See
Notes 1, 3, 6 and 9 of the Notes to our Consolidated Financial Statements for a
discussion of basis of presentation, business combinations, stockholders' equity
and restructuring and other charges and their effect on comparability of
year-to-year data.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31, YEAR ENDED DECEMBER 31,
------------------- -------------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
-------- -------- -------- -------- -------- -------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue................................... $403.5 $300.8 $1,369.1 $1,127.7 $953.3 $805.0 $610.1
Expenses:
Cost of operations...................... 244.7 185.9 842.7 723.0 628.3 507.1 380.8
Depreciation, amortization and
depletion............................. 33.4 23.8 106.3 86.1 75.3 63.0 53.2
Selling, general and administrative..... 46.0 32.1 135.8 117.3 135.3 137.7 115.0
Restructuring and other charges......... -- -- -- -- 8.8 3.3 --
------ ------ -------- -------- ------ ------ ------
Operating income.......................... 79.4 59.0 284.3 201.3 105.6 93.9 61.1
Interest expense.......................... (11.3) (5.4) (44.7) (25.9) (29.7) (19.1) (13.2)
Interest income........................... 2.6 .5 1.5 4.9 11.7 4.4 1.5
Other income (expense), net............... (.1) .3 (.9) 1.8 2.2 1.8 (5.5)
------ ------ -------- -------- ------ ------ ------
Income from continuing operations before
income taxes............................ 70.6 54.4 240.2 182.1 89.8 81.0 43.9
Provision for income taxes................ 27.2 19.6 86.5 65.9 38.0 31.6 17.0
------ ------ -------- -------- ------ ------ ------
Income from continuing operations......... 43.4 34.8 153.7 116.2 51.8 49.4 26.9
Loss from discontinued operations......... -- -- -- -- -- (24.8) (5.4)
------ ------ -------- -------- ------ ------ ------
Net income................................ $ 43.4 $ 34.8 $ 153.7 $ 116.2 $ 51.8 $ 24.6 $ 21.5
====== ====== ======== ======== ====== ====== ======
Basic and diluted earnings per share(a)... $ .25 $ .36 $ 1.13 $ 1.21 $ .54 $ .26 $ .22
====== ====== ======== ======== ====== ====== ======
Weighted average common and common
equivalent shares outstanding(a)........ 175.4 95.7 135.6 95.7 95.7 95.7 95.7
====== ====== ======== ======== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31, YEAR ENDED DECEMBER 31,
------------------- -------------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
-------- -------- -------- -------- -------- -------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
OTHER OPERATING DATA:
EBITDA(b)................................. $112.8 $ 82.8 $ 390.6 $ 287.4 $180.9 $156.9 $114.3
EBITDA margin(c).......................... 28.0% 27.5% 28.5% 25.5% 19.0% 19.5% 18.7%
Capital expenditures...................... $ 55.7 $ 29.0 $ 193.0 $ 165.3 $146.9 $147.9 $ 41.8
Cash flows from operating activities...... 64.0 80.3 271.1 279.4 143.5 125.4 59.0
Cash flows from investing activities...... (489.1) (21.2) (607.4) (168.1) (175.7) (110.7) (62.4)
Cash flows from financing activities...... (116.2) (59.1) 892.9 (135.5) 20.3 2.8 5.8
Ratio of earnings to fixed charges(d)..... 5.9x 9.9x 5.9x 7.3x 3.7x 4.4x 3.6x
</TABLE>
11
<PAGE> 13
<TABLE>
<CAPTION>
DECEMBER 31,
MARCH 31, ----------------------------------------------------
1999 1998 1997 1996 1995 1994
----------- -------- -------- -------- -------- --------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............................ $ 15.3 $ 556.6 $ -- $ 24.2 $ 36.1 $ 39.2
Total assets......................................... 2,788.3 2,812.1 1,348.0 1,090.3 838.9 681.1
Amounts due to AutoNation(e)......................... -- -- 266.1 254.9 125.0 27.4
Total debt........................................... 942.6 1,057.1 75.1 142.7 160.1 195.2
Total stockholders' equity........................... 1,344.5 1,299.1 750.8 494.5 372.2 272.4
</TABLE>
- ---------------
(a) Prior to our initial public offering on July 1, 1998, we had only 100 shares
of common stock outstanding, all of which AutoNation owned. Historical share
and per share data have been retroactively adjusted for the recapitalization
of our 100 shares of common stock into 95.7 million shares of common stock
in July 1998.
(b) EBITDA represents operating income plus depreciation, amortization and
depletion. While EBITDA data should not be construed as a substitute for
operating income, net income or cash flows from operations in analyzing our
operating performance, financial position and cash flows, we have included
EBITDA data, which is not a measure of financial performance under generally
accepted accounting principles, because we believe that this data is
commonly used by certain investors to evaluate a company's performance in
the solid waste industry. Due to the fact that not all companies calculate
non-GAAP measures in the same manner, the EBITDA presentation herein may not
be comparable to similarly titled measures reported by other companies.
(c) EBITDA margin represents EBITDA divided by revenue.
(d) The ratio of earnings to fixed charges is determined by dividing the sum of
income before income taxes, interest expense, income tax expense and a
portion of rent expense representative of the interest component by the sum
of interest expense and the portion of rent expense representative of the
interest component.
(e) In July 1998, we repaid all amounts due to AutoNation as of June 30, 1998
through the issuance of common stock and through all of the proceeds of our
initial public offering.
12
<PAGE> 14
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
You should read the following discussion in conjunction with our
Consolidated Financial Statements and their Notes contained in this prospectus.
All references to historical share and per share data of our common stock have
been retroactively adjusted for the recapitalization of the 100 shares of our
common stock into 95,688,083 shares of common stock in July 1998.
OVERVIEW
In May 1998, AutoNation announced its intention to separate our company,
which at the time was a wholly owned subsidiary of AutoNation, from AutoNation,
and for our company to complete an initial public offering of common stock. As a
result, we entered into certain agreements with AutoNation providing for the
separation and governing various interim and ongoing relationships between our
company and AutoNation.
As part of the separation, and prior to our initial public offering of
common stock, we declared and paid a $2.0 billion dividend in April 1998 to
AutoNation with a series of promissory notes. In addition, we owed AutoNation
approximately $139.5 million and owed Republic Resources Company, at that time a
subsidiary of ours, approximately $165.4 million, net of an approximate $90.5
million that Resources owed to our company. On June 30, 1998, we repaid $565.4
million of the promissory notes that we owed to AutoNation with cash, assets we
received from Resources and with the receivable that Resources owed to our
company. In addition, we distributed all of our shares of common stock of
Resources to AutoNation. We repaid the approximately $139.5 million we owed to
AutoNation and the approximately $255.9 million we owed to Resources by issuing
16,474,417 shares of our common stock to AutoNation, and we repaid the remaining
balance of the promissory notes due to AutoNation with the net proceeds from our
issuance and sale of 63,250,000 shares of common stock in our initial public
offering completed in July 1998, which totalled approximately $1.4 billion.
Following our initial public offering and the repayment of amounts due to
AutoNation, AutoNation owned approximately 63.9% of the outstanding shares of
our common stock. Following the recapitalization of our common stock, repayment
of amounts due to AutoNation and our initial public offering, we had the
following shares of common stock outstanding (in millions):
<TABLE>
<S> <C>
Recapitalization of our common stock........................ 95.7
Repayment of amounts due to AutoNation...................... 16.5
Initial public offering of common stock..................... 63.2
-----
175.4
=====
</TABLE>
In March 1999, AutoNation exercised registration rights that it had with
our company in order to be able to sell its entire interest in our company,
consisting of approximately 112.2 million shares of common stock, and in May
1999, AutoNation sold 100.0 million shares of common stock in a secondary public
offering. The remaining 12.2 million shares owned by AutoNation are subject to
an over-allotment option which may be exercised by the underwriters in whole or
in part on or before May 26, 1999. We received no proceeds in the secondary
public offering and will receive no proceeds upon any exercise by the
underwriters of the over-allotment option.
Prior to our initial public offering, our employees received options under
AutoNation's stock option plans. In March 1999, options to purchase
approximately 8.3 million shares of AutoNation common stock were cancelled and
were replaced, on a one-for-one basis, with options to purchase shares of our
common stock under our 1998 Stock Incentive Plan. These replacement options
retained the vesting and exercise rights of the original options, subject to
exercise limitations for individuals who signed stock option repricing
agreements with AutoNation. The individual
13
<PAGE> 15
replacement options are priced so that the unrealized gain or loss on each grant
of AutoNation options will generally be maintained under the replacement
options. The compensation expense related to our granting of replacement options
with exercise prices below the quoted market price of the common stock at the
date of grant is approximately $2.0 million, which we recorded in the first
quarter of 1999 as a one-time charge to earnings. As of April 30, 1999, options
to purchase a total of approximately 12.6 million shares of Class A common
stock, at a weighted average exercise price of $18.50 per share, were
outstanding under our 1998 Stock Incentive Plan, approximately 2.6 million of
which were exercisable.
Prior to our initial public offering, we were a wholly owned subsidiary of
AutoNation. As a result, AutoNation provided us with various services including:
- 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.
AutoNation also provided our company with the services of a number of its
executives and employees. In consideration for these services, AutoNation
allocated to our company a portion of its general and administrative costs
related to these services. This allocation had historically been based on the
proportion of our invested capital as a percentage of the consolidated invested
capital of AutoNation and its subsidiaries, including our company. In June 1998,
we entered into a services agreement with AutoNation under which AutoNation
agreed to continue to provide various services to our company in exchange for a
monthly fee of $1.25 million. This fee is subject to review and adjustment from
time to time as we reduce the services we require from AutoNation. Effective
January 1, 1999, we negotiated a reduction in this fee to $0.9 million per
month. The services agreement has a one-year term and expires on June 30, 1999.
Our management believes that the amounts allocated to our company and/or charged
under the services agreement were no less favorable to our company than costs we
would have incurred to obtain such services on our own or from unaffiliated
third parties.
The historical consolidated financial information included in this
prospectus does not necessarily reflect what our financial position and results
of operations would have been had we been operated as a separate, stand-alone
entity during the periods presented.
14
<PAGE> 16
OUR BUSINESS
We are a leading provider of non-hazardous solid waste collection and
disposal services in the United States. We provide solid waste collection
services for commercial, industrial, municipal and residential customers through
139 collection companies in 26 states. We also own or operate 76 transfer
stations and 58 solid waste landfills.
We generate revenue primarily from our solid waste collection operations,
and our remaining revenue is from landfill disposal services and other services,
including recycling and composting operations. Collection, transfer and
disposal, recycling and other services accounted for approximately 78.7%, 10.1%,
3.1% and 8.1%, respectively, of consolidated revenue for the year ended December
31, 1998.
Our revenue from collection operations consists of fees we receive from
commercial, industrial, municipal and residential customers. In 1998, our
revenue from collection services was approximately one third from services
provided to commercial customers, one third from services provided to industrial
customers and one third from services provided to municipal and residential
customers. Our residential and commercial collection operations in some markets
are based on long-term contracts with municipalities. We generally provide
industrial and commercial collection operations to individual customers under
contracts with terms up to three years. Our revenue from landfill operations is
from disposal or tipping fees charged to third parties. In general, we integrate
our recycling operations with our collection operations and obtain revenue from
the sale of recyclable materials. No one customer has individually accounted for
more than 10% of our consolidated revenue in any of the last three years.
The cost of our collection operations is primarily variable and includes
disposal, labor, fuel and equipment maintenance costs. We try to be more
efficient by controlling the movement of waste streams from the point of
collection through disposal. During 1998, we disposed of approximately 40% of
the total volume of waste we collected at our landfills. Our landfill cost of
operations includes most daily operating expenses, costs of capital for cell
development, accruals for closure and post-closure costs, and the legal and
administrative costs of ongoing environmental compliance. We expense all
indirect landfill development costs as they are incurred and we capitalize and
deplete the following direct landfill development costs based on consumed
airspace:
- engineering,
- upgrading,
- cell construction and
- permitting costs.
BUSINESS COMBINATIONS
We make decisions to acquire or invest in businesses based on financial and
strategic considerations.
We have retroactively included significant businesses that we acquired and
accounted for under the pooling of interests method of accounting in our
consolidated financial statements as if the companies had operated as one entity
since inception. We have included businesses that we acquired and accounted for
under the purchase method of accounting in our consolidated financial statements
from the date of acquisition.
In September 1998, we signed an agreement with Waste Management, Inc. to
acquire assets and to enter into disposal agreements at various Waste Management
facilities. By March 1999, we had
15
<PAGE> 17
completed the purchase of the assets for approximately $438.0 million in cash
plus properties. The assets included 16 landfills, 11 transfer stations and 139
commercial collection routes across the United States, and were accounted for
under the purchase method of accounting. $251.1 million of the purchase price
for these assets was paid during the three months ended March 31, 1999.
In addition to the acquisitions from Waste Management, we also acquired
various other solid waste businesses during the three months ended March 31,
1999, which were accounted for under the purchase method of accounting. The
aggregate purchase price we paid in these transactions was $189.9 million in
cash.
Prior to our initial public offering, AutoNation acquired various
businesses operating in the solid waste services industry using cash and shares
of AutoNation common stock. AutoNation then contributed these businesses to our
company. We have applied the same accounting method AutoNation used in
accounting for business acquisitions.
During the year ended December 31, 1998, AutoNation acquired various solid
waste services businesses which it contributed to our company. The aggregate
purchase price AutoNation paid in transactions accounted for under the purchase
method of accounting was $128.3 million, consisting of cash and approximately
3.4 million shares of AutoNation common stock. Subsequent to our initial public
offering, we acquired various solid waste businesses. The aggregate purchase
price we paid in transactions accounted for under the purchase method of
accounting was $450.5 million consisting of cash and certain properties. Cost in
excess of fair value of net assets acquired for 1998 acquisitions totaled
approximately $572.4 million. As of December 31, 1998, we had intangible assets,
net of accumulated amortization, of $918.3 million, which consists primarily of
the cost in excess of fair value of net assets acquired. We amortize cost in
excess of the fair value of net assets acquired over 40 years on a straight-line
basis. As of December 31, 1998, the amortization expense associated with these
intangible assets on an annualized basis is approximately $32.2 million. We
believe the 40 year life assigned to the cost in excess of the fair value of net
assets acquired is reasonable as the businesses we acquired are generally
well-established companies which have been in existence for many years and have
stable, long-term customer relationships.
During the year ended December 31, 1997, AutoNation acquired various solid
waste services businesses which it contributed to our company. The aggregate
purchase price AutoNation paid in transactions accounted for under the purchase
method of accounting was $147.9 million, consisting of cash and approximately
5.7 million shares of AutoNation common stock. Cost in excess of the fair value
of net assets acquired in these acquisitions totaled $149.1 million. In
addition, AutoNation issued an aggregate of approximately 34.1 million shares of
AutoNation common stock in transactions accounted for under the pooling of
interests method of accounting. Included in the shares of AutoNation common
stock issued in acquisitions accounted for under the pooling of interests method
of accounting are approximately 0.3 million shares issued for acquisitions that
were not material individually or in the aggregate and, consequently, prior
period financial statements were not restated for such acquisitions.
During the year ended December 31, 1996, AutoNation acquired various solid
waste services businesses which it contributed to our company. The aggregate
purchase price AutoNation paid in transactions accounted for under the purchase
method of accounting was $87.6 million, consisting of cash and approximately 6.6
million shares of AutoNation common stock. Cost in excess of the fair value of
net assets acquired in these acquisitions totaled $73.6 million. In addition,
AutoNation issued an aggregate of approximately 40.0 million shares of
AutoNation common stock in transactions accounted for under the pooling of
interests method of accounting. Included in the shares of AutoNation common
stock issued in acquisitions accounted for under the pooling of interests method
16
<PAGE> 18
of accounting are approximately 1.1 million shares issued for acquisitions that
were not material individually or in the aggregate and, consequently, prior
period financial statements were not restated for such acquisitions.
See Note 3, Business Combinations, of the Notes to our Consolidated
Financial Statements, for further discussion of business combinations.
PRO FORMA CONSOLIDATED RESULTS OF OPERATIONS
Our pro forma net income was $177.6 million, or $1.01 per share, for the
year ended December 31, 1998. Our pro forma operating results assume our initial
public offering and the repayment in full of the amounts we owed to AutoNation
had occurred as of January 1, 1998.
See Note 1, Basis of Presentation, of the Notes to our Consolidated
Financial Statements, for further discussion of pro forma operating results.
CONSOLIDATED RESULTS OF OPERATIONS
Three Months Ended March 31, 1999 and 1998
Net income was $43.4 million for the three months ended March 31, 1999, or
$.25 per share, as compared to $34.8 million, or $.36 per share, for the three
months ended March 31, 1998.
The following table summarizes our costs and expenses in millions of
dollars and as a percentage of our revenue for the three months ended March 31:
<TABLE>
<CAPTION>
1999 % 1998 %
------ ----- ------ -----
(UNAUDITED)
<S> <C> <C> <C> <C>
Revenue........................................... $403.5 100.0% $300.8 100.0%
Cost of operations................................ 244.7 60.6 185.9 61.8
Depreciation, amortization and depletion.......... 33.4 8.3 23.8 7.9
Selling, general and administrative expenses...... 42.0 10.4 32.1 10.7
Other charges..................................... 4.0 1.0 -- --
------ ----- ------ -----
Operating income.................................. $ 79.4 19.7% $ 59.0 19.6%
====== ===== ====== =====
</TABLE>
Revenue. Revenue was $403.5 million and $300.8 million for the three
months ended March 31, 1999 and 1998, respectively, which was an increase of
34.1%. Internal growth, consisting of price and primarily volume, accounted for
8.1% of the increase, and "tuck-in" acquisitions contributed 10.8%. Other
acquisitions accounted for the remaining 15.2% of the increase.
Cost of Operations. Cost of operations was $244.7 million for the three
months ended March 31, 1999, versus $185.9 million for the comparable 1998
period. The increase in aggregate dollars is primarily due to acquisitions. Cost
of operations as a percentage of revenue was 60.6% for the three months ended
March 31, 1999, versus 61.8% for the comparable 1998 period. The decrease in
these costs as a percentage of revenue is primarily a result of improved
operating efficiencies and an increase in higher margin landfill operations
primarily due to acquisitions.
Depreciation, Amortization and Depletion. Depreciation, amortization and
depletion expenses were $33.4 million for the three months ended March 31, 1999,
versus $23.8 million for the comparable 1998 period. The increase in aggregate
dollars is primarily due to acquisitions. Depreciation, amortization and
depletion expenses as a percentage of revenue were 8.3% for the three months
ended March 31, 1999, versus 7.9% for the comparable 1998 period. The increase
in such expenses as a percentage of revenue is primarily the result of an
increase in amortization expense due to acquisitions.
17
<PAGE> 19
Selling, General and Administrative Expenses. Selling, general and
administrative expenses were $42.0 million for the three months ended March 31,
1999, versus $32.1 million for the comparable 1998 period. The increase in
aggregate dollars is primarily due to acquisitions. Selling, general and
administrative expenses as a percentage of revenue were 10.4% for the three
months ended March 31, 1999, versus 10.7% for the comparable 1998 period. The
decrease in such expenses as a percentage of revenue is primarily due to
leveraging our existing overhead structure over an expanding revenue base.
Included in selling, general and administrative expenses are fees paid to
AutoNation under the services agreement of $2.7 million for the three months
ended March 31, 1999 and allocations of AutoNation's corporate general and
administrative costs to us of $3.8 million for the three months ended March 31,
1998. See Note 10, Related Party Transactions, of the Notes to our Consolidated
Financial Statements for further information.
Other Charges. Other charges were $4.0 million for the three months ended
March 31, 1999. These costs relate to our separation from AutoNation and consist
primarily of $2.0 million of compensation expense related to the granting of
replacement employee stock options at exercise prices below the quoted market
price of our common stock on the date the options were granted and $2.0 million
of additional charges directly related to this separation. We expect to incur an
additional $1.5 to $2.0 million in additional separation costs during the second
quarter of 1999.
Interest Expense. Interest expense was $11.3 million for three months
ended March 31, 1999, versus $5.4 million for the comparable 1998 period.
Interest expense for the three months ended March 31, 1999 is primarily due to
revolving credit facility borrowings and debt assumed in acquisitions.
Borrowings under our revolving credit facility were used primarily to fund
acquisitions. Interest expense for the three months ended March 31, 1998 was
primarily due to $4.8 million of interest expense on borrowings from AutoNation
and interest expense on debt assumed in acquisitions. All amounts due to
AutoNation were repaid in full in July 1998 through the issuance of shares of
our Class A common stock and proceeds from our initial public offering.
Interest Income. Interest income was $2.6 million for the three months
ended March 31, 1999, versus $.5 million for the comparable 1998 period. The
increase in interest income for the three months ended March 31, 1999, versus
the comparable period in 1998 is primarily due to higher average cash balances
on hand during 1999.
Income Taxes. Our provision for income taxes was $27.2 million for the
three months ended March 31, 1999, versus $19.6 million for the comparable 1998
period. Our effective income tax rate was 38.5% and 36.0% for the three months
ended March 31, 1999 and 1998, respectively. Income taxes have been provided
based upon our anticipated annual effective tax rate.
Years Ended December 31, 1998, 1997 and 1996
Our net income was $153.7 million for the year ended December 31, 1998, as
compared to $116.2 million in 1997 and $51.8 million in 1996. Our operating
results for the year ended December 31, 1996 includes restructuring and other
charges further described below.
18
<PAGE> 20
The following table summarizes our costs and expenses in millions of
dollars and as a percentage of our revenue for 1996 through 1998:
<TABLE>
<CAPTION>
1998 % 1997 % 1996 %
-------- ------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Revenue....................... $1,369.1 100.0% $1,127.7 100.0% $ 953.3 100.0%
Cost of operations............ 842.7 61.6 723.0 64.1 628.3 65.9
Depreciation, amortization and
depletion................... 106.3 7.8 86.1 7.6 75.3 7.9
Selling, general and
administrative expenses..... 135.8 9.9 117.3 10.4 135.3 14.2
Restructuring and other
charges..................... -- -- -- -- 8.8 .9
-------- ------- -------- ------- -------- -------
Operating income.............. $ 284.3 20.8% $ 201.3 17.9% $ 105.6 11.1%
======== ======= ======== ======= ======== =======
</TABLE>
Revenue. Revenue was $1,369.1 million, $1,127.7 million and $953.3 million
for the years ended December 31, 1998, 1997 and 1996, respectively. The increase
in 1998 over 1997 of $241.4 million, or 21.4%, is a result of internal growth
consisting of price and primarily volume, which accounted for 7.0% of the
increase, tuck-in acquisitions which accounted for 5.8% of the increase, and
other acquisitions which accounted for 8.6% of the increase. The increase in
1997 over 1996 of $174.4 million, or 18.3%, is a result of internal growth,
consisting of price and primarily volume, which accounted for 7.4% of the
increase, and tuck-in acquisitions, which accounted for 3.4% of the increase and
other acquisitions, which accounted for 7.5% of the increase.
Cost of Operations. Cost of operations was $842.7 million, $723.0 million
and $628.3 million or, as a percentage of revenue, 61.6%, 64.1% and 65.9%, for
the years ended December 31, 1998, 1997 and 1996, respectively. The increases in
aggregate dollars are a result of the expansion of our operations through
acquisitions and internal growth. The decreases in cost of operations as a
percentage of revenue are primarily a result of our improved operating
efficiencies.
Depreciation, Amortization and Depletion. Depreciation, amortization and
depletion expenses were $106.3 million, $86.1 million and $75.3 million or, as
percentages of revenue, 7.8%, 7.6% and 7.9%, for the years ended December 31,
1998, 1997 and 1996, respectively. The increases in depreciation, amortization
and depletion expenses in aggregate dollars are primarily due to our
acquisitions.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses were $135.8 million, $117.3 million and $135.3 million
or, as percentages of revenue, 9.9%, 10.4% and 14.2%, for the years ended
December 31, 1998, 1997 and 1996, respectively. The decreases in selling,
general and administrative expenses as percentages of revenue in each of the
years are primarily due to applying our existing overhead structure over an
expanding revenue base. Included in selling, general and administrative expenses
are allocations of AutoNation's corporate general and administrative costs of
$7.5 million, $10.2 million and $8.4 million for the years ended December 31,
1998, 1997 and 1996, respectively, and fees paid to AutoNation under the
services agreement of $7.5 million for the year ended December 31, 1998. See
Note 10, Related Party Transactions, of the Notes to our Consolidated Financial
Statements for further information.
Restructuring and Other Charges. We recorded restructuring and other
charges of approximately $8.8 million for the year ended December 31, 1996,
which includes costs to close certain landfill operations, asset write-offs and
merger expenses associated with certain business combinations accounted for
under the pooling of interests method of accounting.
Operating Income. Operating income was $284.3 million, $201.3 million and
$105.6 million for the years ended December 31, 1998, 1997 and 1996,
respectively. Excluding restructuring and other charges, operating income would
have been $114.4 million in 1996.
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Interest Expense. We incurred interest expense on our revolving credit
facility, on amounts due to AutoNation and on the debt we assumed in
acquisitions. Interest expense was $44.7 million, $25.9 million and $29.7
million for the years ended December 31, 1998, 1997 and 1996, respectively, and
includes interest expense on amounts due to AutoNation of $37.3 million, $20.2
million and $18.8 million for the years ended December 31, 1998, 1997 and 1996,
respectively. We repaid in full the amounts due to AutoNation in July 1998 by
issuing our common stock and from the net proceeds of our initial public
offering. Pro forma interest expense was $7.4 million for the year ended
December 31, 1998.
Interest and Other Income. Interest and other income was $0.6 million,
$6.7 million and $13.9 million for the years ended December 31, 1998, 1997 and
1996, respectively. The variances during the periods are primarily due to
fluctuations in cash balances on hand and related interest income.
Income Taxes. Our provision for income taxes was $86.5 million, $65.9
million and $38.0 million for the years ended December 31, 1998, 1997 and 1996,
respectively. The effective income tax rate was 36.0%, 36.2% and 42.3% for the
years ended December 31, 1998, 1997 and 1996, respectively. The higher 1996
effective income tax rate is primarily due to varying higher historical
effective income tax rates of acquired businesses.
As of our initial public offering on July 1, 1998, we are no longer
included in AutoNation's federal tax returns.
ENVIRONMENTAL AND LANDFILL MATTERS
As of April 30, 1999, we owned or operated 58 solid waste landfills. We
owned or operated 48 solid waste landfills with approximately 6,200 permitted
acres and total available permitted disposal capacity of approximately 1.2
billion in-place cubic yards as of December 31, 1998. As of December 31, 1998
and 1997, we had 1,230.1 million and 1,104.7 million, respectively, in-place
cubic yards of available airspace at our landfills. Airspace increased during
1998 by 125.4 million cubic yards as a result of landfills we acquired and
internally developed totaling 145.3 million cubic yards, offset by consumption
of 19.9 million cubic yards during the year.
We provide 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. We accrued these costs based on consumed airspace
at the landfills. We estimate our future cost requirements for closure and
post-closure monitoring and maintenance for our solid waste facilities based on
our 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 our total estimated costs. We have
engineering reviews of the future cost requirements for closure and post-closure
monitoring and maintenance for our operating landfills generally performed on an
annual basis. These reviews provide the basis upon which we estimate future
costs and revise the related accruals. Changes in these estimates primarily
relate to modifications in available airspace, inflation and changes in
regulations, all of which we take into consideration annually. As of December
31, 1998, assuming that all available landfill capacity is used, we expect to
expense approximately $370.5 million of these costs over the remaining lives of
these facilities.
As of December 31, 1998 and 1997, accrued closure and post-closure costs
associated with landfills were $73.4 million and $47.3 million, respectively.
The current and long-term portion of these costs reflected in our Consolidated
Balance Sheets are included in other current liabilities and
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<PAGE> 22
accrued environmental and landfill costs, respectively. The increase in such
accruals resulted primarily from landfill acquisitions.
We accrue costs related to environmental remediation activities through a
charge to income in the period such liabilities become probable and can be
reasonably estimated.
FINANCIAL CONDITION
At December 31, 1998, we had $556.6 million of unrestricted cash. We used
this cash primarily to fund acquisitions in the first quarter of 1999. At March
31, 1999, we had $15.3 million of unrestricted cash.
As previously discussed, in July 1998, we completed our initial public
offering of common stock, resulting in net proceeds of approximately $1.4
billion. In July 1998, we repaid all remaining amounts due to AutoNation with
all of the net proceeds of our initial public offering and by issuing additional
shares of our Class A common stock.
Prior to our initial public offering, we obtained working capital and
capital for our general corporate purposes, including acquisitions, from
AutoNation. Since our initial public offering, AutoNation has not provided funds
to finance our operations or acquisitions. We use our own operating cash flow to
finance our working capital, acquisitions and other requirements. Additionally,
in July 1998, we entered into a $1.0 billion unsecured revolving credit facility
with a group of banks. $500.0 million of the credit facility has a term expiring
in July 1999 and the remaining $500.0 million has a term expiring in July 2003.
Borrowings under the credit facility bear interest at LIBOR-based rates. We use
proceeds from the credit facility for working capital needs, capital
expenditures and acquisitions. As of March 31, 1999, we had approximately $109.0
million of availability under the short-term portion of the credit facility.
The net proceeds from this offering will be used to repay amounts
outstanding under our revolving credit facility, which amounts will be available
to be reborrowed. In addition, we expect to extend the maturity of our revolving
short-term credit facility, prior to its expiration in July 1999, to July 2000.
At present, we believe that we will be able to raise additional debt or equity
financing to fund general corporate needs and to complete acquisitions; however,
we cannot assure you that we will be able to obtain additional financing under
favorable terms.
We believe that we have sufficient financial resources available to meet
our anticipated capital requirements and obligations as they come due.
LIQUIDITY AND CAPITAL RESOURCES
The major components of changes in cash flows for the three months ended
March 31, 1999 and 1998 and for the years ended December 31, 1998, 1997 and 1996
are discussed below.
Cash Flows from Operating Activities. Cash provided by operating
activities was $64.0 million and $80.3 million during the three months ended
March 31, 1999 and 1998, respectively, and $271.1 million, $279.4 million and
$143.5 million for the years ended December 31, 1998, 1997 and 1996,
respectively. The changes in cash provided by operating activities during the
periods are due to expansion of our business.
Cash Flows from Investing Activities. Cash flows from investing activities
consist primarily of cash used for business acquisitions and capital additions.
Cash (used in) provided by business acquisitions, net of cash acquired, was
$(432.5) million and $1.8 million during the three months ended March 31, 1999
and 1998, respectively, and $425.2 million during the year ended December 31,
1998. Prior to our initial public offering, business acquisitions were funded by
AutoNation. Capital additions were $55.7 million and $29.0 million during the
three months ended
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March 31, 1999 and 1998, respectively, and $193.0 million, $165.3 million and
$146.9 million during the years ended December 31, 1998, 1997 and 1996,
respectively.
We believe capital expenditures and cash used in business acquisitions will
increase during the remainder of 1999 and in the foreseeable future as a result
of the expansion of our business. In addition, we expect to use primarily cash
for business acquisitions. We intend to finance capital expenditures and
acquisitions through cash on hand, cash flow from operations, our credit
facility and other financings.
Cash Flows from Financing Activities. Cash flows from financing activities
during the three months ended March 31, 1999 and 1998 and during the years ended
December 31, 1998, 1997 and 1996 included commercial bank and affiliate
borrowings and repayments of debt and, in 1998, proceeds from our sale of common
stock in our initial public offering.
We used proceeds from bank and affiliate borrowings to fund acquisitions
and capital additions, and to repay debt. We used all of the proceeds from our
initial public offering of common stock to repay amounts due to AutoNation.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The table below provides information about our market sensitive financial
instruments and constitutes a "forward-looking statement." Our major market risk
exposure is changing interest rates in the United States and fluctuations in
LIBOR. We intend to manage interest rate risk through the use of a combination
of fixed and floating rate debt. All items described below are non-trading.
<TABLE>
<CAPTION>
EXPECTED MATURITY DATE FAIR VALUE
--------------------------------------------------------------- DECEMBER 31,
1999 2000 2001 2002 2003 THEREAFTER TOTAL 1998
------ ----- ----- ----- ------ ---------- -------- ------------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
VARIABLE RATE DEBT
Amount outstanding.................. $495.2 $ 3.4 $ 3.2 $ 3.0 $503.1 $35.9 $1,043.8 $1,043.8
Average interest rates.............. 6.40% 5.06% 5.31% 5.19% 6.42% 5.21% 6.36%
</TABLE>
SEASONALITY
Our 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 our landfill sites and
other facilities.
YEAR 2000
We utilize software and related technologies throughout our business that
will be affected by the date change in the year 2000. We are currently
addressing the impact of Y2K on our computer programs, embedded chips and third
party suppliers. We have developed a dedicated Y2K project office to coordinate
the compliance efforts and to monitor and report the project status throughout
our company.
We have identified four core phases in preparing for the year 2000:
- Assessment -- In the assessment phase, an inventory of software,
hardware, telecommunications equipment, embedded chip technology and
significant third party suppliers is performed and critical systems and
vendors are identified and prioritized.
- Analysis -- In the analysis phase, each system or item assessed as
critical is reviewed to determine its Y2K compliance. Key vendors are
also evaluated at this time to determine their compliance status.
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- Remediation -- In the remediation phase, modifications or replacements
are made to critical systems and equipment to make them Y2K compliant or
the systems and/or vendors are replaced with compliant systems or
vendors. Decisions are also made as to whether changes are necessary or
feasible for key third party suppliers.
- Testing and Validation -- In this phase, our company prepares, executes
and verifies the testing of critical systems.
We have focused on six critical systems or processes in our compliance
efforts:
(1) hauling and disposal fleet operations,
(2) electrical systems,
(3) telecommunications,
(4) payroll processing,
(5) billing systems and
(6) payments to critical third parties.
We primarily use industry standard automated applications provided by third
parties in most of our locations. We believe that the majority of these
applications comply with Y2K requirements, but we are currently testing
compliance in coordination with our vendors. We expect to complete the testing
and validation of these applications by the third quarter of 1999. Our three
locations using proprietary software are currently in the remediation phase,
which we expect to be completed in the second quarter of 1999. We expect to
complete testing and validation of the software at these locations by the third
quarter of 1999.
We are currently finalizing our assessment of embedded chips and third
party suppliers. We expect to complete the inventory and assessment of this
information during the second quarter of 1999. As we receive information related
to these areas, we analyze the compliance of products and develop a strategy for
repair or replacement of non-compliant systems through testing and validation.
We expect to complete the testing and validation phases by the third quarter of
1999.
To date, we estimate that we have spent approximately $1.7 million on Y2K
efforts across all areas of our company and expect to spend a total of
approximately $4.0 million by the time we are complete. We expect to fund Y2K
costs through our operating cash flows. We will expense all system modification
costs associated with Y2K as incurred. Our Y2K expenditures vary significantly
in project phases and vary depending on remedial methods used. Our past
expenditures in relation to total estimated costs should not be used as a basis
for estimating our progress to completion for any element of our Y2K project.
We presently believe that upon the remediation of our business software
applications, as well as other equipment with embedded technology, the Y2K issue
will not present a materially adverse risk to our future consolidated results of
operations, liquidity and capital resources. However, if we do not complete such
remediation in a timely manner or if the level of timely compliance by our key
suppliers or vendors is not sufficient, we believe that the most likely
reasonable worst-case scenario would involve the failures of one of our critical
systems delaying or disrupting the delivery of services and resulting in:
- loss of revenue,
- increased operating costs,
- loss of customers or suppliers and/or
- other significant disruptions in our business.
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In response to this scenario, we are currently testing comprehensive
contingency and business continuation plans which address the six critical
processes described above. We expect our contingency and business continuation
plans to be implemented by the third quarter of 1999. These plans include the
manual performance of processes that are currently automated, such as billing,
accounts payable and payroll.
Determining the Y2K readiness of third party products, including
information technology and other computerized equipment, and business
dependencies, including suppliers, distributors or ancillary industry groups,
requires pursuit, collection and appraisal of voluntary statements made or
provided by those parties, if available, together with independent factual
research. Our company has a number of material third party relationships, the
most significant of which include billing services provided by municipalities,
delivery of fuel for collection vehicles and delivery of parts and supplies for
collection vehicles. Surveys have been distributed to each of the material third
parties identified and results are being analyzed as surveys are received. We
expect to complete this task in the second quarter of 1999. In addition,
employees of our company will independently verify and validate these responses
by the end of the third quarter of 1999. Although we have taken, and will
continue to take, reasonable efforts to gather information to determine and
verify the readiness of such products and business dependencies, we cannot
assure you that we will be able to obtain reliable information. In addition,
verification methods, including testing methods, may not prove to be reliable or
may not be fully implemented. Accordingly, notwithstanding our efforts, we
cannot assure you that a product or a business dependency of ours is Y2K ready.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities." Standard No. 133 establishes accounting and reporting
standards requiring that every derivative instrument, including certain
derivative instruments embedded in other contracts, be recorded on the balance
sheet as either an asset or liability measured at its fair value. Standard No.
133 requires that changes in the derivative's fair value be recognized currently
in earnings unless specific hedge accounting criteria are met. Standard No. 133
cannot be applied retroactively. We will adopt Standard No. 133 beginning
January 1, 2000. We do not expect the adoption of this standard to have a
material impact on our consolidated financial position or results of operations.
DISCLOSURE REGARDING FORWARD LOOKING STATEMENTS
This document contains certain statements that are "Forward Looking
Statements," which include, among other things, the discussions of our growth
and operating strategies, and expectations concerning market position, future
operations, margins, revenue, profitability, liquidity and capital resources, as
well as statements concerning the integration of the operations of acquired
businesses and achievement of financial benefits and operational efficiencies in
connection therewith.
Forward Looking Statements are included in the sections entitled
"Prospectus Summary," "Selected Financial Data," "Management's Discussion and
Analysis of Financial Condition and Results of Operations," "Business" and
elsewhere in this prospectus. Although we believe that the expectations
reflected in our forward looking statements are reasonable, we can give no
assurance that the expectations will prove to have been correct. Generally,
these statements relate to business plans or strategies, projected or
anticipated benefits or other consequences of such plans or strategies, number
of acquisitions and projected or anticipated benefits from acquisitions that we
made or will
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<PAGE> 26
make, or projections involving our operations, and are subject to a number of
uncertainties, risks and other influences, many of which are outside our control
and any one of which, or a combination of which, could materially affect the
results of our operations. Important factors that could cause actual results to
differ materially from our expectations include, but are not limited to, those
that are disclosed in this section and under the "Risk Factors" section included
herein. We assume no duty to update our forward looking statements.
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<PAGE> 27
BUSINESS
COMPANY OVERVIEW
We are a leading provider of services in the domestic non-hazardous solid
waste industry. We provide non-hazardous solid waste collection services for
commercial, industrial, municipal and residential customers through 139
collection companies in 26 states. We also own or operate 76 transfer stations
and 58 solid waste landfills.
We had revenue of $403.5 million and operating income of $79.4 million for
the three months ended March 31, 1999 and revenue of $300.8 million and
operating income of $59.0 million for the three months ended March 31, 1998. We
had revenue of $1,369.1 million and $1,127.7 million and operating income of
$284.3 million and $201.3 million for the years ended December 31, 1998 and
1997, respectively. The $241.4 million, or 21.4%, increase in revenue and the
$83.0 million, or 41.2%, increase in operating income from 1997 to 1998 are
primarily attributable to our successful execution of our growth and operating
strategies described below.
Our presence in high growth markets throughout the Sunbelt, including
Florida, Georgia, Nevada, Southern California and Texas, and in other domestic
markets that have experienced higher than average population growth during the
past several years supports our internal growth strategy. We believe that our
presence in these markets positions our company to experience growth at rates
that are generally higher than the industry's overall growth rate.
Since 1995, we have acquired numerous solid waste companies with an
aggregate of over $1.4 billion in annual revenue. In September 1998, we agreed
to purchase 16 landfills, 11 transfer stations, 139 commercial collection routes
and related assets from Waste Management. By March 1999, we completed the
purchase for approximately $438.0 million in cash plus certain properties. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Business Combinations."
We believe that we are well positioned to continue to increase our revenue
and operating income in order to enhance stockholder value.
INDUSTRY OVERVIEW
Based on analyst reports and industry trade publications, we believe that
the United States non-hazardous solid waste services industry generated revenue
of approximately $35.0 billion in 1997, of which approximately 44% was generated
by publicly-owned waste companies, 23% was generated by privately-held waste
companies and 33% was generated by municipal and other local governmental
authorities. Only five companies generated the substantial majority of the
publicly-owned companies' total revenue of approximately $15.4 billion in 1997.
However, according to industry data, the domestic non-hazardous waste industry
remains highly fragmented as more than 5,000 privately-held companies generate
total annual revenue of approximately $8.0 billion.
We believe that in recent years there has been a trend toward rapid
consolidation in the solid waste collection industry, which has historically
been characterized by numerous small companies. We believe that this trend will
continue as a result of the following factors:
Subtitle D Regulation. Subtitle D of the Resource Conservation and
Recovery Act of 1976, as currently in effect, and similar state regulations
have significantly increased the amount of capital, technical expertise,
operating costs and financial assurance obligations required to own and
operate a landfill and other solid waste facilities. Many of the smaller
participants in our industry have found these costs difficult, if not
impossible, to bear. Large publicly-owned companies, like our company, have
greater access to capital, and a lower cost of capital, available
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<PAGE> 28
to finance such increased capital expenditures and costs relative to many
of the privately-owned companies in the industry. Additionally, the
required permits for landfill development, expansion or construction have
become more difficult to acquire. Consequently, many smaller, independent
operators have decided to either close their operations or sell them to
larger operators with greater access to capital.
Integration of Solid Waste Businesses. By being able to control the
waste stream in a market through the collection, transfer and disposal
process, integrated solid waste companies gain further competitive
advantage over non-integrated operators. The ability of the integrated
companies to both collect and dispose of solid waste, coupled with access
to significant capital resources necessary for acquisitions, has created an
environment in which large publicly-owned integrated companies can operate
more cost effectively and competitively than non-integrated operators.
Municipal Privatization. The trend toward consolidation in the solid
waste services industry is further supported by the increasing tendency of
a number of municipalities to privatize their waste disposal operations.
Privatization of municipal waste operations is often an attractive
alternative to funding the changes required by Subtitle D.
These developments, as well as the fact that there are a limited number of
viable exit strategies for many of the owners and principals of numerous
privately-held companies in the industry, have contributed to the overall
consolidation trend in the solid waste industry.
GROWTH STRATEGY
Our growth strategy focuses on increasing revenue, gaining market share and
enhancing stockholder value through internal growth and acquisitions. For
certain risks related to our growth strategy, see "Risk Factors."
- - INTERNAL GROWTH. Our internal growth strategy focuses on retaining existing
customers and obtaining commercial, municipal and industrial customers through
our well-managed sales and marketing activities.
Long-Term Contracts. We seek to obtain long-term contracts for
collecting solid waste in high-growth markets. These include exclusive
franchise agreements with municipalities as well as commercial and
industrial contracts. By obtaining such long-term agreements, we have the
opportunity to grow our contracted revenue base at the same rate as the
underlying population growth in these markets. For example, we have secured
exclusive, long-term franchise agreements in high-growth markets such as
Los Angeles and Orange Counties, California, Las Vegas, Nevada, Arlington,
Texas and many areas of Florida. We believe that this positions our company
to experience internal growth rates that are generally higher than our
industry's overall growth rate. In addition, we believe that by securing a
base of long-term recurring revenue in growth markets, we are better able
to protect our market position from competition and our business is less
susceptible to downturns in economic conditions.
Sales and Marketing Activities. Our well-managed sales and marketing
activities enable our company to capitalize on our leading positions in
many of the markets in which we operate. We currently have over 400 sales
and marketing employees in the field, who are incentivized by a commission
structure to generate high levels of revenue. For the most part, these
employees directly solicit business from existing and prospective
commercial, industrial, municipal and residential customers. We emphasize
our rate and cost structures when we train new and existing sales
personnel.
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<PAGE> 29
- - ACQUISITION GROWTH. As a result of the highly fragmented nature of the solid
waste industry, we have been able to grow significantly through acquisitions.
Our acquisition growth strategy focuses on the approximately $8.0 billion of
revenue generated by over 5,000 privately-held solid waste companies in 1997.
We believe that our ability to acquire many of these privately-held companies
is enhanced by increasing competition in the solid waste industry, increasing
capital requirements as a result of changes in solid waste regulatory
requirements and the limited number of exit strategies for these
privately-held companies' owners and principals. Our acquisition growth
strategy focuses on:
- acquiring businesses that position our company for growth in existing and
new markets,
- acquiring well-managed companies and retaining local management,
- integrating business in existing markets and
- acquiring operations and facilities from municipalities that are
privatizing.
For certain risks involved with our growth strategy, see "Risk Factors -- We
may be unable to execute our acquisition growth strategy."
Acquiring Businesses Positioning the Company for Growth. In making
acquisitions, we principally target high quality businesses that will allow
our company to be, or provide our company favorable prospects of becoming,
a leading provider of integrated solid waste services in markets with
favorable demographic growth. Generally, we have acquired, and will
continue to seek, solid waste collection, transfer and disposal companies
that:
- have strong operating margins,
- are in growth markets,
- are among the largest or have a significant presence in their local
markets and
- have long-term contracts or franchises with municipalities and other
customers.
Although we are seeking to expand our operations to selected new
markets where the potential for growth and further integration of
operations exists, our primary focus is on acquisition efforts in our
existing markets in the Sunbelt, including Florida, Georgia, Nevada,
Southern California and Texas, and in other domestic markets that have
experienced higher than average population growth during the past several
years. We are, however, not limited to this target criteria for
acquisitions, and may also acquire additional non-hazardous solid waste
operations as opportunities arise. We continuously review possible
acquisition candidates and are in discussions from time to time with one or
more of such candidates. In September 1998, we entered into an agreement
with Waste Management to purchase 16 landfills, 11 transfer stations and
139 commercial collection routes across the United States, as well as to
obtain disposal agreements at various Waste Management disposal sites. With
the completion of these acquisitions in March 1999, we have expanded our
presence in four existing markets and have entered 16 new markets. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Business Combinations."
Acquire Well-Managed Companies. We also seek to acquire businesses
that have experienced management teams that are willing to work with our
company. We generally retain the local management of the larger acquired
companies in order to capitalize on their local market knowledge, community
relations and name recognition, and to instill their entrepreneurial drive
at all levels of our operations. By furnishing the local management of such
acquired
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<PAGE> 30
companies with our financial and marketing resources and technical
expertise, we believe that the acquired companies are better able to secure
additional municipal franchises and other contracts. This enables our
company to grow internally acquired businesses at faster rates than the
industry average.
Integrate Business in Existing Markets. Once we have a base of
operations in a particular market, we focus on acquiring trucks and routes
of smaller businesses that also operate in that market and surrounding
markets, which are typically referred to as "tuck-in" acquisitions. We
integrate the operations of such tuck-in businesses into our existing
operations in that market. In addition, we seek to acquire landfills,
transfer stations and collection companies that operate in markets that we
are already servicing. By doing so, we are able to increase our revenue and
market share and integrate operations and consolidate duplicative
facilities and functions to maximize cost efficiencies and economies of
scale.
Privatize Municipal Operations. We also seek to acquire solid waste
collection operations, transfer stations and landfills that municipalities
and other governmental authorities are privatizing. Many municipalities are
seeking to outsource or sell these types of solid waste operations, as they
lack the capital, technical expertise and/or operational resources
necessary to comply with increasingly stringent regulatory standards and/or
to compete effectively with private-sector companies.
OPERATING STRATEGY
We seek to leverage existing assets and revenue growth to increase
operating margins and enhance stockholder value. Our operating strategy to
accomplish this goal is to:
(1) utilize the extensive industry knowledge and experience of our
executive management,
(2) utilize a decentralized management structure in overseeing day-to-day
operations,
(3) integrate waste operations,
(4) improve operating margins through economies of scale, cost efficiencies
and asset utilization and
(5) achieve high levels of customer satisfaction.
For certain risks related to our operating strategy, see "Risk Factors."
- - EXPERIENCED EXECUTIVE MANAGEMENT TEAM. We believe that we have one of the
most experienced executive management teams among publicly-traded companies in
the solid waste industry.
H. Wayne Huizenga, who serves as our Chairman, after several years of
owning and operating private waste hauling companies in Florida, co-founded
Waste Management in 1971. From 1971 to 1984, he served in various executive
capacities with Waste Management, including President and Chief Operating
Officer. By then, Waste Management had become the world's largest integrated
solid waste services company. From 1987 to 1994, Mr. Huizenga served as
Chairman and Chief Executive Officer of Blockbuster Entertainment Corporation,
leading its growth from 19 stores to the world's largest video rental company.
In August 1995, he became Chairman and Chief Executive Officer of AutoNation.
Harris W. Hudson, who serves as our Vice Chairman, worked closely with
Mr. Huizenga, from 1964 until 1982, at Waste Management and at the private
waste hauling firms they operated
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prior to the formation of Waste Management. In 1982, Mr. Hudson retired as
Vice President of Waste Management of Florida, Inc., a subsidiary of Waste
Management. In 1983, Mr. Hudson founded Hudson Management Corporation, a solid
waste collection company in Florida, and served as its Chairman and Chief
Executive Officer until it merged with AutoNation in August 1995. By that
time, Hudson Management had grown to over $50.0 million in annual revenue,
becoming one of Florida's largest privately-held solid waste collection
companies based on revenue. Since August 1995, Mr. Hudson has served in
various capacities as an executive officer of AutoNation, including as
President and Vice Chairman.
James E. O'Connor, who has served as our Chief Executive Officer since
December 1998, also worked at Waste Management from 1972 to 1978 and from 1982
to 1998. During that time, he served in various management positions,
including Senior Vice President in 1997 and 1998, and Area President of Waste
Management of Florida, Inc., from 1992 to 1997.
James H. Cosman, our President and Chief Operating Officer, joined
AutoNation as President of its Solid Waste Group in January 1997. Prior to
joining AutoNation, Mr. Cosman was employed by Browning-Ferris Industries,
Inc. for over 24 years. During that time, he served in various management
positions, including Regional Vice President -- Northern Region, from 1993 to
1996.
The other officers with responsibility for our operational affairs have
an average of over 16 years of management experience in the solid waste
industry.
- - DECENTRALIZED MANAGEMENT STRUCTURE. We maintain a relatively small corporate
headquarters staff, relying on a decentralized management structure to
minimize administrative overhead costs and to manage our day-to-day operations
more efficiently. Our local management has extensive industry experience in
growing, operating and managing solid waste companies, and substantial
experience in their local geographic markets. Our four Regional Vice
Presidents have an average of 22 years of experience in the industry, and our
23 Area Presidents have an average of 20 years of experience in the industry.
The Regional Vice Presidents and Area Presidents have extensive authority,
responsibility and autonomy for operations within their geographic markets.
Compensation for management within regions and areas is in large part based on
the improvement in operating income produced in each manager's geographic area
of responsibility. In addition, through long-term incentive programs,
including stock options, we believe we have one of the lowest turnover levels
in the industry for our local management teams. As a result of retaining
experienced managers with extensive local knowledge, community relations and
name recognition, we react rapidly to changes in our markets. We also seek to
implement the best practices of our various regions and areas throughout our
operations to improve operating margins.
- - INTEGRATE OPERATIONS. By controlling waste streams from the point of
collection through disposal, we seek to achieve a high rate of waste
integration. Through acquisitions and other market development activities, we
create market specific, integrated operations typically consisting of one or
more collection companies, transfer stations and landfills. We consider
acquiring companies which own or operate landfills with significant permitted
disposal capacity and appropriate levels of waste volume. We also seek to
acquire solid waste collection companies in markets in which we own or operate
landfills. In addition, we generate internal growth in our disposal operations
by constructing new landfills and expanding our existing landfills from time
to time in markets in which we have significant collection operations or in
markets that we determine lack sufficient disposal capacity. During the year
ended December 31, 1998, we disposed of approximately 40% of the total volume
of waste that we collected at our own landfills. Because we do not have
landfill facilities for all markets in which we provide collection services,
we believe that through landfill
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and transfer station acquisitions and development we have the opportunity to
increase our waste internalization rate and further integrate our operations.
By further integrating operations in existing markets through acquisitions and
development of landfills and transfer stations, we are able to reduce our
disposal costs.
- - ECONOMIES OF SCALE AND COST EFFICIENCIES. To improve operating margins, our
management focuses on achieving economies of scale and cost efficiencies. The
consolidation of acquired businesses into existing operations reduces costs by
decreasing capital and expenses used for routing, personnel, equipment and
vehicle maintenance, inventories and back-office administration. Generally, we
are consolidating our administrative centers to reduce our general and
administrative costs. We have reduced our selling, general and administrative
expenses from 14.2% of consolidated revenue in 1996 to 9.9% of consolidated
revenue in 1998. In addition, our size allows our company to negotiate volume
discounts for certain purchases, including waste disposal rates at landfills
operated by third parties. Furthermore, we have taken steps to increase
utilization of our assets. For example, to reduce the number of collection
vehicles, drivers are paid incentive wages based upon the number of customers
they service on each route. In addition, routes are frequently analyzed and
rerouted to ensure that the highest number of customers are efficiently
serviced over the fewest possible miles. By using assets more efficiently,
operating expenses are lowered significantly.
- - HIGH LEVELS OF CUSTOMER SATISFACTION. Our goal of maintaining high levels of
customer satisfaction complements our operating strategy. Our personalized
sales process of periodically contacting commercial, industrial and municipal
customers is oriented towards maintaining relationships and ensuring that
service is being properly provided.
OPERATIONS
Our operations primarily consist of the collection and disposal of
non-hazardous solid waste.
Collection Services. We provide solid waste collection services to
commercial, industrial, municipal and residential customers in 26 states through
139 collection companies. In 1998, the revenue we derived from collection
services was approximately one third from services provided to municipal and
residential customers, one third from services provided to commercial customers
and one third from services provided to industrial customers.
Our residential collection operations involve the curbside collection of
refuse from small containers into collection vehicles for transport to transfer
stations or directly to landfills. Residential solid waste collection services
are typically performed under contracts with municipalities, which we generally
secure by competitive bid and which give our company exclusive rights to service
all or a portion of the homes in their respective jurisdictions. These contracts
or franchises usually range in duration from one to five years, although some of
our exclusive franchises are for as long as 20 years. Residential solid waste
collection services may also be performed on a subscription basis, in which
individual households contract directly with our company. The fees received for
subscription residential collection are based primarily on market factors,
frequency and type of service, the distance to the disposal facility and cost of
disposal. In general, subscription residential collection fees are paid
quarterly in advance by the residential customers receiving the service.
In our commercial and industrial collection operations, we supply our
customers with small waste containers or large waste containers commonly known
as "roll-off" containers. We also rent
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compactors to large waste generators. Commercial collection services are
generally performed under one to three-year service agreements, and fees are
determined by such considerations as:
- market factors,
- collection frequency,
- type of equipment furnished,
- the type and volume or weight of the waste collected,
- the distance to the disposal facility and
- the cost of disposal.
We also provide waste collection services to industrial and construction
facilities on a contractual basis with terms generally ranging from a single
pickup to one year and we rent waste roll-off containers to construction sites.
We collect the containers or compacted waste and transport them either to a
landfill, where the waste is disposed of, or to a transfer station.
We own or operate 76 transfer stations. We deposit waste at these stations,
as do other private haulers and municipal haulers, for compaction and transfer
to trailers for transport to landfills, incinerators, recycling facilities or
other disposal sites.
Also, we currently provide recycling services in certain markets primarily
to comply with local laws or obligations under our franchise agreements. These
services include the curbside collection of residential recyclable waste and the
provision of a variety of recycling services to commercial and industrial
customers.
Disposal Services. We own or operate 58 solid waste landfills. As of
December 31, 1998, we owned or operated 48 landfills, which had approximately
6,200 permitted acres and total available permitted disposal capacity of
approximately 1.2 billion in-place cubic yards. The in-place capacity of our
landfills is subject to change based on engineering factors, requirements of
regulatory authorities and successful site expansions. Some of our landfills
accept non-hazardous special waste, including utility ash, asbestos and
contaminated soils. See "-- Properties."
Most of our existing landfill sites have the potential for expanded
disposal capacity beyond the currently permitted acreage. We monitor the
availability of permitted disposal capacity at each of our landfills and
evaluate whether to pursue expansion at a given landfill based on estimated
future waste volumes and prices, remaining capacity and likelihood of obtaining
expansion. As of December 31, 1998, we believe that each of our landfills has
adequate permitted capacity. To satisfy future disposal demand, we are currently
seeking to expand permitted capacity at certain of our landfills.
Other Services. We have materials recovery facilities and other recycling
operations, which are generally required to fulfill our obligations under
long-term municipal contracts for residential collection services. These
facilities primarily sort recyclable paper, aluminum, glass and other materials.
Most of these recyclable materials are internally collected by our residential
collection operations. In some areas, we receive commercial and industrial solid
waste that is sorted at our facilities into recyclable materials and
non-recyclable waste. The recyclable materials are salvaged, repackaged and sold
to third parties and the non-recyclable waste is disposed of at landfills or
incinerators. Wherever possible, our strategy is to reduce our exposure to
fluctuations in recyclable commodity prices by utilizing third party facilities,
thereby minimizing our recycling investment. We use long-term contracts for the
sale of recycling materials to mitigate the impact of commodity price
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fluctuations. We also have composting operations at which yard waste is
composted, packaged and sold as mulch.
SALES AND MARKETING
We seek to provide quality services that will enable our company to
maintain high levels of customer satisfaction. We derive our business from a
broad customer base which we believe will enable our company to experience
stable growth. We focus our marketing efforts on continuing and expanding
business with existing customers, as well as attracting new customers.
We employ more than 400 sales and marketing employees. Our sales and
marketing strategy is to provide high-quality comprehensive solid waste
collection, recycling, transfer and disposal services to our customers at
competitive prices. We target potential customers of all sizes, from small
quantity generators to large "Fortune 500" companies and municipalities.
All our marketing activity is local in nature. We generally do not change
the tradenames of the local businesses we acquire, and therefore we do not
operate nationally under any one mark or tradename. Rather, we rely on the
goodwill associated with the acquired companies' local tradenames as used in
each geographic market in which we operate.
CUSTOMERS
We provide services to commercial, industrial, municipal and residential
customers. No one customer has individually accounted for more than 10% of our
consolidated revenue in any of the last three years.
REGULATION
Our facilities and operations are subject to a variety of federal, state
and local requirements which regulate health, safety, the environment, zoning
and land use. Operating and other permits are generally required for landfills,
certain waste collection vehicles, fuel storage tanks and other facilities that
we own or operate, and these permits are subject to revocation, modification and
renewal. Federal, state and local regulations vary, but generally govern
wastewater or stormwater discharges, air emissions, the treatment, storage,
transportation and disposal of hazardous and non-hazardous wastes and the
remediation of contamination associated with the release of hazardous
substances. These regulations provide governmental authorities with strict
powers of enforcement, which include the ability to obtain injunctions and/or
impose fines or penalties in the case of violations, including criminal
penalties. The U.S. Environmental Protection Agency and various other federal,
state and local environmental, health and safety agencies and authorities,
including the Occupational Safety and Health Administration of the U.S.
Department of Labor, administer these regulations.
We strive to conduct our operations in compliance with applicable laws and
regulations. However, in the existing climate of heightened environmental
concerns, from time to time, we have been issued citations or notices from
governmental authorities which have resulted in the need to expend funds for
remedial work and related activities at various landfills and other facilities.
We have established a reserve which we believe, based on currently available
information, will be adequate to cover any potential regulatory costs. However,
we cannot assure you that actual costs will not exceed our reserve.
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Federal Regulation. The following summarizes the primary environmental and
safety-related federal statutes of the United States affecting our facilities
and operations:
(1) The Solid Waste Disposal Act, as amended by the Resource
Conservation and Recovery Act. The RCRA and its implementing regulations
establish a framework for regulating the handling, transportation,
treatment, storage and disposal of hazardous and non-hazardous solid
wastes, and require states to develop programs to ensure the safe disposal
of solid wastes in sanitary landfills.
Subtitle D of the RCRA establishes a framework for regulating the
disposal of municipal solid wastes. Regulations under Subtitle D currently
include minimum comprehensive solid waste management criteria and
guidelines, including location restrictions, facility design and operating
criteria, closure and post-closure requirements, financial assurance
standards, groundwater monitoring requirements and corrective action
standards, many of which have not commonly been in effect or enforced in
the past in connection with municipal solid waste landfills. Each state was
required to submit a permit program designed to implement Subtitle D
regulations to the EPA by April 9, 1993. These state permit programs may
include landfill requirements which are more stringent than those of
Subtitle D. Some states have not yet fully implemented permit programs
pursuant to the RCRA and Subtitle D. Once a state has an approved permit
program it is required to review all existing landfill permits to ensure
compliance with the new regulations.
All of our planned landfill expansions or new landfill development
projects have been engineered to meet or exceed Subtitle D requirements.
Operating and design criteria for existing operations have been modified to
comply with these new regulations. Compliance with the Subtitle D
regulations has resulted in increased costs and may in the future require
substantial additional expenditures in addition to other costs normally
associated with our waste management activities.
(2) The Comprehensive Environmental Response, Compensation, and
Liability Act of 1980. CERCLA, among other things, provides for the cleanup
of sites from which there is a release or threatened release of a hazardous
substance into the environment. This Act may impose strict, joint and
several liability for the costs of cleanup and for damages to natural
resources upon current owners and operators of the site, parties who were
owners or operators of the site at the time the hazardous substances were
disposed of, parties who transported the hazardous substance to the site
and parties who arranged for disposal at the site. Under the authority of
this Act and its implementing regulations, detailed requirements apply to
the manner and degree of investigation and remediation of facilities and
sites where hazardous substances have been or are threatened to be released
into the environment. Liability under this Act is not dependent upon the
existence or disposal of "hazardous wastes" but can also be based upon the
existence of small quantities of more than 700 "substances" characterized
by the EPA as "hazardous," many of which may be found in common household
waste.
Among other things, this Act authorizes the federal government to
investigate and remediate sites at which hazardous substances have been or
are threatened to be released into the environment, or to order (or offer
an opportunity to) persons potentially liable for the cleanup of the
hazardous substances to do so. In addition, the EPA has established a
National Priorities List of sites at which hazardous substances have been
or are threatened to be released and which require investigation or
cleanup.
Liability under CERCLA is not dependent upon the intentional disposal
of hazardous wastes. It can be founded upon the release or threatened
release, even as a result of
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unintentional, non-negligent or lawful action, of thousands of hazardous
substances, including very small quantities of such substances. Thus, even
if our landfills have never knowingly received hazardous wastes as such, it
is possible that one or more hazardous substances may have been deposited
or "released" at our landfills or at other properties which we may have
owned or operated. Therefore, we could be liable under CERCLA for the cost
of cleaning up such hazardous substances at such sites and for damages to
natural resources, even if those substances were deposited at our
facilities before we acquired or operated them. The costs of a CERCLA
cleanup can be very expensive. Given the difficulty of obtaining insurance
for environmental impairment liability, such liability could have a
material impact on our business and financial condition. For a further
discussion, see "-- Liability Insurance and Bonding."
(3) The Federal Water Pollution Control Act of 1972. This Act
regulates the discharge of pollutants from a variety of sources, including
solid waste disposal sites, into streams, rivers and other waters. Point
source runoff from our landfills and transfer stations that is discharged
into surface waters must be covered by discharge permits that generally
require us to conduct sampling and monitoring and, under certain
circumstances, reduce the quantity of pollutants in those discharges. Storm
water discharge regulations under this Act require a permit for certain
construction activities, which may affect our operations. If a landfill or
transfer station discharges wastewater through a sewage system to a
publicly-owned treatment works, the facility must comply with discharge
limits imposed by that treatment works. In addition, states may adopt
groundwater protection programs under this Act or the Safe Drinking Water
Act that could affect solid waste landfills. Furthermore, development which
alters or affects "wetlands" must generally be permitted prior to such
development commencing, and certain mitigation requirements may be required
by the permitting agencies.
(4) The Clean Air Act. The Clean Air Act imposes limitations on
emissions from various sources, including landfills. In March 1996, the EPA
enacted rules that require large municipal solid waste landfills to install
landfill gas monitoring systems. These regulations apply to landfills that
have been operating since November 1987, and that can accommodate 2.5
million cubic meters or more of municipal solid waste. The regulations
apply whether the landfill is active or closed. The date by which each
affected landfill must have the required gas collection and control system
is dependent upon the adoption of state regulations and the date the EPA
approves the state program. Many state regulatory agencies currently
require monitoring systems for the collection and control of landfill gas.
We do not expect that compliance with the new regulations will have a
material effect on us.
(5) The Occupational Safety and Health Act of 1970. This act
authorizes the Occupational Safety and Health Administration to promulgate
occupational safety and health standards. Various of these standards,
including standards for notices of hazardous chemicals and the handling of
asbestos, apply to our facilities and operations.
State Regulation. Each state in which we operate has its own laws and
regulations governing solid waste disposal, water and air pollution and, in most
cases, releases and cleanup of hazardous substances and liability for such
matters. States also have adopted regulations governing the design, operation,
maintenance and closure of landfills and transfer stations. Our facilities and
operations are likely to be subject to these types of requirements. In addition,
our solid waste collection and landfill operations may be affected by the trend
in many states toward requiring the development of waste reduction and recycling
programs. For example, several states have enacted laws that require counties or
municipalities to adopt comprehensive plans to reduce, through waste planning,
composting, recycling or other programs, the volume of solid waste deposited in
landfills. Additionally, laws and
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regulations restricting the disposal of certain wastes, including yard waste,
newspapers, beverage containers, unshredded tires, lead-acid batteries and
household appliances in solid waste landfills have been promulgated in several
states and are being considered in others. Legislative and regulatory measures
to mandate or encourage waste reduction at the source and waste recycling also
are under consideration by Congress and the EPA.
In order to construct, expand and operate a landfill, one or more
construction or operating permits, as well as zoning approvals, must be
obtained. These are difficult and time-consuming to obtain, are often opposed by
neighboring landowners and citizens' groups, may be subject to periodic renewal
and are subject to modification and revocation by the issuing agency. In
connection with our acquisition of existing landfills, it may be necessary for
our company to expend considerable time, effort and money to bring the acquired
facilities into compliance with applicable requirements and to obtain the
permits and approvals necessary to increase their capacity.
Many of our facilities own and operate underground storage tanks which are
generally used to store petroleum-based products. These tanks are generally
subject to federal, state and local laws and regulations that mandate their
periodic testing, upgrading, closure and removal and that, in the event of
leaks, require that polluted groundwater and soils be remediated. We believe
that all our underground storage tanks currently meet federal regulations. If
underground storage tanks we own or operate leak, and the leakage migrates onto
the property of others, we could be liable for response costs and other damages
to third parties. We do not believe that our compliance with regulations related
to underground storage tanks will have a material adverse effect on our business
or financial condition.
Finally, with regard to our solid waste transportation operations, we are
subject to the jurisdiction of the Interstate Commerce Commission and are
regulated by the Federal Highway Administration, Office of Motor Carriers and by
regulatory agencies in each state. Various states have enacted, or are
considering enacting, laws and regulations that would restrict the interstate
transportation and processing of solid waste. In 1978, the United States Supreme
Court held similar laws and regulations unconstitutional; however, states have
attempted to distinguish proposed laws and regulations from the laws and
regulations involved in that ruling. In May 1994, the Supreme Court ruled that
state and local flow control laws and ordinances, which attempt to restrict
waste from leaving its place of generation, were an impermissible burden on
interstate commerce, and therefore, were unconstitutional. In response to these
Supreme Court rulings, Congress has considered passing legislation authorizing
states and local governments to restrict the free movement of solid waste in
interstate commerce. If federal legislation authorizing state and local
governments to restrict the free movement of solid waste in interstate commerce
is enacted, such legislation could adversely affect our operations.
We have established a reserve for environmental and landfill costs, which
includes landfill site closure and post-closure costs. We periodically reassess
such costs based on various methods and assumptions regarding landfill airspace
and the technical requirements of Subtitle D of the RCRA and adjust our accruals
accordingly. Based on current information and regulatory requirements, we
believe that our reserve for such environmental expenditures is adequate.
However, environmental laws may change, and there can be no assurance that our
reserves will be adequate to cover requirements under existing or new
environmental regulations, future changes or interpretations of existing
regulations or the identification of adverse environmental conditions previously
unknown to us. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Environmental and Landfill Matters" and "Risk
Factors -- Compliance with environmental regulation may impede our growth."
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COMPETITION
We operate in a highly competitive industry, which is changing as a result
of rapid consolidation. Entry into our business and the ability to operate
profitably in the industry requires substantial amounts of capital and
managerial experience.
Competition in the non-hazardous solid waste industry comes from a few
large, national publicly-owned companies, including Waste Management,
Browning-Ferris and Allied Waste Industries, Inc. several regional publicly- and
privately-owned solid waste companies, and from thousands of small
privately-owned companies in their respective markets. Some of our
publicly-owned competitors also are engaging in aggressive acquisition
strategies. Some of our competitors have significantly larger operations, and
may have significantly greater financial resources, than we do. In addition to
national and regional firms and numerous local companies, we compete with those
municipalities that maintain waste collection or disposal operations. These
municipalities may have financial advantages due to the availability of tax
revenues and tax-exempt financing.
We compete for collection accounts primarily on the basis of price and the
quality of our services. From time to time, our competitors may reduce the price
of their services in an effort to expand market share or to win a competitively
bid municipal contract.
In each market in which we own or operate a landfill, we compete for
landfill business on the basis of disposal costs, geographical location and
quality of operations. Our ability to obtain landfill business may be limited by
the fact that some major collection companies also own or operate landfills to
which they send their waste. There also has been an increasing trend at the
state and local levels to mandate waste reduction at the source and to prohibit
the disposal of certain types of wastes, such as yard wastes, at landfills. This
may result in the volume of waste going to landfills being reduced in certain
areas, which may affect our ability to operate our landfills at their full
capacity and/or affect the prices that we can charge for landfill disposal
services. In addition, most of the states in which we operate landfills have
adopted plans or requirements that set goals for specified percentages of
certain solid waste items to be recycled.
LIABILITY INSURANCE AND BONDING
The nature of our business exposes our company to the risk of liabilities
arising out of our operations, including possible damages to the environment.
Such potential liabilities could involve, for example, claims for remediation
costs, personal injury, property damage and damage to the environment in cases
where we may be held responsible for the escape of harmful materials; claims of
employees, customers or third parties for personal injury or property damage
occurring in the course of our operations; or claims alleging negligence or
professional errors and omissions in the planning or performance of work. We
could also be subject to fines and civil and criminal penalties in connection
with alleged violations of regulatory requirements. Because of the nature and
scope of the possible environmental damages, liabilities imposed in
environmental litigation can be significant. The majority of our solid waste
operations have third party environmental liability insurance with limits in
excess of those required by permit regulations, subject to certain limitations
and exclusions. However, we cannot assure you that the limits of such
environmental liability insurance would be adequate in the event of a major
loss, nor can we assure you that we would continue to carry environmental
liability insurance should market conditions in the insurance industry make such
coverage costs prohibitive.
We have general liability, vehicle liability, workers compensation and
employer's liability coverage, as well as umbrella liability policies to provide
excess coverage over the underlying limits contained in these primary policies.
We also carry property insurance. Although we try to operate
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safely and prudently and while we have, subject to limitations and exclusions,
substantial liability insurance, no assurance can be given that we will not be
exposed to uninsured liabilities which could have a material adverse effect on
our financial condition or results of operations.
In the normal course of business, we may be required to post a performance
bond or a bank letter of credit in connection with municipal residential
collection contracts, the operation, closure or post-closure of landfills,
certain remediation contracts, certain environmental permits and certain
business licenses and permits. Bonds issued by surety companies operate as a
financial guarantee of our performance. To date, we have satisfied financial
responsibility requirements by making cash deposits, obtaining bank letters of
credit or by obtaining surety bonds.
LEGAL PROCEEDINGS
We are and will continue to be involved in various administrative and legal
proceedings in the ordinary course of business. We can give you no assurance
regarding the outcome of these proceedings or the effect their outcomes may
have, or that our insurance coverages or reserves are adequate. A significant
judgment against our company, the loss of significant permits or licenses, or
the imposition of a significant fine could have a material adverse effect on our
financial condition, results of operations or prospects.
Except for routine litigation incidental to our business, there are no
pending material legal proceedings to which we are a party or to which any of
our property is subject. We believe that the outcome of the proceedings to which
we are currently a party will not have a material adverse effect upon our
financial condition, results of operations or prospects. However, unfavorable
resolution of any proceedings could affect the consolidated results of
operations or cash flows for the quarterly period in which they are resolved.
EMPLOYEES
As of March 31, 1999, we employed approximately 11,000 full time employees,
approximately 2,500 of whom were covered by collective bargaining agreements.
Our management believes that we have good relations with our employees.
PROPERTIES
Our corporate headquarters are located in Ft. Lauderdale, Florida in
premises we lease from a subsidiary of AutoNation. As of March 31, 1999, we
owned approximately 5,200 collection vehicles. Some of our property and
equipment are subject to liens securing payment of indebtedness. We also lease
offices and equipment. We believe that all of our facilities are sufficient for
our current needs. See "Intercompany Relationships and Related
Transactions -- Lease."
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The following table provides information regarding the 58 landfills that we
owned or operated as of April 30, 1999:
<TABLE>
<CAPTION>
UNUSED
TOTAL PERMITTED PERMITTED
LANDFILL NAME LOCATION ACREAGE ACREAGE ACREAGE
------------- -------- ------- --------- ---------
<S> <C> <C> <C> <C>
Apex................................. Clark County, Nevada 2,340 1,233 1,128
Brazoria............................. Clute, Texas 1,000 195 75
Broadhurst Landfill*................. Jesup, Georgia 900 90 64
Brent Run............................ Montrose, Michigan 370 106 67
C&T Regional......................... Linn, Texas 200 77 19
Capital Waste & Recycling
Disposal........................... Rotterdam, New York 33 5 --
Carleton Farms....................... Detroit, Michigan 495 388 261
Charter Waste........................ Abilene, Texas 396 300 283
Chiquita Canyon...................... Valencia, California 592 257 103
Cleveland Container.................. Shelby, North Carolina 174 77 40
Countywide........................... East Sparta, Ohio 818 88 22
CWI Florida.......................... Winter Haven, Florida 80 58 14
Dozit Landfill....................... Morganfield, Kentucky 232 47 33
East Carolina Landfill............... Aulander, North Carolina 729 108 71
Elk Run.............................. Onaway, Michigan 99 40 33
Epperson Landfill.................... Williamstown, Kentucky 861 100 58
Foothills Landfill*.................. Lenior, North Carolina 231 78 72
Forest Lawn.......................... Three Oaks, Michigan 387 126 57
Front Range.......................... Denver, Colorado 602 195 162
Green Ridge.......................... Scottdale, Pennsylvania 580 87 54
Green Valley Landfill................ Ashland, Kentucky 263 37 --
Honeygo.............................. Perry Hall, Maryland 68 39 31
Kestrel Hawk......................... Racine, Wisconsin 210 125 37
Laughlin*............................ Laughlin, Nevada 40 40 --
Los Mangos........................... Alajuela, Costa Rica 41 24 8
Mallard Ridge........................ Delavan, Wisconsin 659 40 14
Modern............................... York, Pennsylvania 716 167 167
National Serv-All.................... Fort Wayne, Indiana 265 204 41
Nine Mile Road....................... St. Augustine, Florida 154 28 9
North County......................... Houston, Texas 40 31 17
Northern Wasco....................... The Dalles, Oregon 308 165 135
Northwest Tennessee.................. Union City, Tennessee 600 120 99
Oak Grove............................ Winder, Georgia 301 60 32
Ohio County Balefill*................ Beaver Dam, Kentucky 908 179 143
Pepperhill........................... North Charleston, South Carolina 37 22 13
Pine Grove........................... Amanda, Ohio 734 112 83
Pine Ridge........................... Griffin, Georgia 850 101 81
Pinellas*............................ St. Petersburg, Florida 750 478 200
Presidio*............................ Presidio, Texas 10 10 6
Republic/Alpine*..................... Alpine, Texas 80 74 63
Republic/CSC......................... Avalon, Texas 298 205 133
Republic/Imperial.................... Imperial, California 250 73 37
Republic/Maloy....................... Campbell, Texas 388 195 130
Safety Lights........................ Memphis, Tennessee 49 21 6
San Angelo*.......................... San Angelo, Texas 257 232 109
Savannah Regional.................... Savannah, Georgia 132 59 52
Southern Illinois Regional........... DeSoto, Illinois 249 113 47
Springfield Environmental............ Mt. Vernon, Indiana 55 25 --
Swiftcreek Landfill.................. Macon, Georgia 792 81 33
Tay-Ban.............................. Birch Run, Michigan 90 25 6
Tri-K Landfill....................... Stanford, Kentucky 572 64 49
United Refuse........................ Fort Wayne, Indiana 305 77 16
Upper Piedmont Environmental......... Roxboro, North Carolina 614 70 54
Uwharrie Landfill*................... Mt. Gilead, North Carolina 905 90 31
Valley View.......................... Louisville, Kentucky 663 109 82
Victory Environmental................ Terre Haute, Indiana 461 260 138
Wabash Valley........................ Wabash, Indiana 284 69 12
Whitefeather......................... Pinconning, Michigan 105 70 45
------ ----- -----
Total................................ 24,622 7,549 4,775
====== ===== =====
</TABLE>
- ---------------
* We operate, but do not own this landfill.
39
<PAGE> 41
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
Our directors and executive officers are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
H. Wayne Huizenga.................... 61 Chairman of the Board
Harris W. Hudson..................... 56 Vice Chairman, Secretary and Director
James E. O'Connor.................... 50 Chief Executive Officer and Director
James H. Cosman...................... 56 President and Chief Operating Officer
David A. Barclay..................... 37 Senior Vice President, General Counsel and
Assistant Secretary
Steven R. Goldberg................... 48 Senior Vice President -- Corporate Development
Tod C. Holmes........................ 50 Senior Vice President and Chief Financial
Officer
John W. Croghan...................... 68 Director
Ramon A. Rodriguez................... 54 Director
Allan C. Sorensen.................... 61 Director
</TABLE>
Directors and Executive Officers
H. WAYNE HUIZENGA was named Chairman of the Board in May 1998. He also
served as our Chief Executive Officer from May 1998 until December 1998. Mr.
Huizenga has served as the Chairman of the Board of AutoNation since August 1995
and as Co-Chief Executive Officer of AutoNation since October 1996. From August
1995 until October 1996, Mr. Huizenga served as Chief Executive Officer of
AutoNation. Since September 1996, Mr. Huizenga also has served as the Chairman
of the Board of Florida Panthers Holdings, Inc., a sports, entertainment and
leisure company that owns and operates the Florida Panthers professional sports
franchise and several luxury resort hotels and other facilities. Since January
1995, Mr. Huizenga also has served as the Chairman of the Board of Extended Stay
America, Inc., an operator of extended stay lodging facilities. From September
1994 until October 1995, Mr. Huizenga served as the Vice Chairman of Viacom
Inc., a diversified entertainment and communications company. During such
period, Mr. Huizenga also served as the Chairman of the Board of Blockbuster
Entertainment Group, a division of Viacom. From April 1987 through September
1994, Mr. Huizenga served as the Chairman of the Board and Chief Executive
Officer of Blockbuster, during which time he helped build Blockbuster from a 19-
store chain into the world's largest video rental company. In September 1994,
Blockbuster merged into Viacom. In 1971, Mr. Huizenga co-founded Waste
Management, which he helped build into the world's largest integrated solid
waste services company, and he served in various capacities, including
President, Chief Operating Officer and a director from its inception until 1984.
Mr. Huizenga also owns the Miami Dolphins professional sports franchise, as well
as Pro Player Stadium in South Florida, and is a director of theglobe.com, an
internet on-line community, and NationsRent, Inc., a national equipment rental
company.
HARRIS W. HUDSON was named Vice Chairman and Secretary and a director in
May 1998. Mr. Hudson has served as a director of AutoNation since August 1995
and as Vice Chairman of AutoNation since October 1996. He served as Chairman of
AutoNation's Solid Waste Group from October 1996 until July 1998. From August
1995 until October 1996, Mr. Hudson served as President of AutoNation. From 1983
until August 1995, Mr. Hudson served as Chairman of the Board, Chief Executive
Officer and President of Hudson Management, a solid waste collection company
that he founded, which was acquired by AutoNation in August 1995. From 1964 to
1982, Mr. Hudson served as Vice President of Waste Management of Florida, Inc.,
a subsidiary of Waste
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<PAGE> 42
Management and its predecessor. Mr. Hudson also serves as a director of
NationsRent and Florida Panthers Holdings.
JAMES E. O'CONNOR was named Chief Executive Officer and a director in
December 1998. From 1972 to 1978 and from 1982 to 1998, Mr. O'Connor served in
various positions with Waste Management, including Senior Vice President from
1997 to 1998, Area President of Waste Management of Florida, Inc. from 1992 to
1997, Senior Vice President of Waste Management-North America from 1991 to 1992
and Vice President -- Southeastern Region from 1987 to 1991.
JAMES H. COSMAN was named President and Chief Operating Officer in May
1998. Mr. Cosman served as President and Chief Operating Officer of AutoNation's
Solid Waste Group from January 1997 until July 1998. From 1972 until December
1996, Mr. Cosman served in various positions with Browning-Ferris, including
Regional Vice President -- Northern Region from 1993 to 1996, Regional Vice
President -- Mid America Region from 1989 to 1993, Regional Vice
President -- South Central Region from 1979 to 1988 and District Manager from
1975 to 1979.
DAVID A. BARCLAY was named Senior Vice President, General Counsel and
Assistant Secretary in August 1998. Mr. Barclay served as Senior Vice President
and General Counsel of AutoNation's Solid Waste Group from March 1998 until July
1998. Prior to that, from January 1997 to February 1998, Mr. Barclay was Vice
President and Associate General Counsel of AutoNation. From June 1995 to January
1997, Mr. Barclay was Vice President, General Counsel and Secretary of Discovery
Zone, Inc. Discovery Zone filed a voluntary petition under the federal
bankruptcy laws in March 1996. Mr. Barclay served in various positions with
Blockbuster, including Senior Corporate Counsel from 1993 to 1995 and Corporate
Counsel from 1991 to 1993. Prior to joining Blockbuster, Mr. Barclay was an
attorney in private practice in Miami, Florida.
STEVEN R. GOLDBERG was named Senior Vice President -- Corporate Development
in October 1998. From 1987 to 1998, Mr. Goldberg served in various positions
with Ryder System, Inc., including Vice President of Corporate Development
during 1998, Chief Financial Officer of Ryder Transportation Services, a
division of Ryder, from 1996 to 1998, and Vice President and Treasurer from 1993
to 1996.
TOD C. HOLMES was named Senior Vice President and Chief Financial Officer
in August 1998. Mr. Holmes served as our Vice President -- Finance from June
1998 until August 1998 and as Vice President of Finance of AutoNation's Solid
Waste Group from January 1998 until July 1998. From 1987 to 1998, Mr. Holmes
served in various positions with Browning-Ferris, including Vice President,
Investor Relations from 1996 to 1998, Divisional Vice President, Collection
Operations from 1995 to 1996, Divisional Vice President and Regional Controller,
Northern Region, from 1993 to 1995 and Divisional Vice President and Assistant
Corporate Controller from 1991 to 1993.
JOHN W. CROGHAN was named a director in July 1998. Mr. Croghan is President
and General Partner of Lincoln Partners, a partnership of Lincoln Capital
Management Inc. He was a founder and, through 1997, the Chairman of Lincoln
Capital Management, an investment management firm. He is a director of Morgan
Stanley Dean Witter & Co.'s public closed-end funds, Lindsay Manufacturing Co.,
and St. Paul Bancorp, Inc.
RAMON A. RODRIGUEZ was named a director in March 1999. Mr. Rodriguez has
served as President of Madsen, Sapp, Meng, Rodriguez & Co., P.A., a certified
public accounting firm, since 1971.
ALLAN C. SORENSEN was named a director in November 1998. Mr. Sorensen is
also a director of Let's Talk Cellular & Wireless, Inc. and Westmark Group
Holdings, Inc. He is also a co-founder and Vice Chairman of the Board of Interim
Health Care, Inc., which was spun-off from Interim Services, Inc. in October
1997. Prior to that, Mr. Sorensen served as a director and in various capacities
41
<PAGE> 43
including President, Chief Executive Officer and Chairman of Interim Services
from 1967 to 1997. He was a member of the Board of Directors of H&R Block, Inc.
from 1979 until September 1993 when Interim Services was spun off in an initial
public offering.
There is no family relationship between any of our executive officers and
directors, except that Mr. Huizenga is Mr. Hudson's brother-in-law. Our
executive officers are selected by and serve at the discretion of our board of
directors. Our directors hold office until the next annual meeting of
stockholders and until their successors have been duly elected and qualified.
The board of directors develops our business strategy, establishes our
overall policies and standards and reviews the performance of management in
executing our business strategy and implementing our policies and standards. The
directors are kept informed of our operations at meetings of the board of
directors and committees of the board of directors, through reports and analyses
presented to the board of directors, and by discussions with management.
Significant communications between the directors and management also occur apart
from meetings of the board of directors and committees of the board of
directors.
COMMITTEES OF THE BOARD
The board of directors has established three committees: the Executive
Committee, the Audit Committee and the Compensation Committee.
The Executive Committee has full authority to exercise all the powers of
the board of directors between meetings of the board of directors, except as
reserved by the board of directors. The Executive Committee does not have the
power to elect or remove executive officers, approve a merger, recommend a sale
of substantially all of our assets, recommend a dissolution of our company,
amend our certificate of incorporation or bylaws, declare dividends on our
outstanding securities, or, except as authorized by the board of directors,
issue any common stock or preferred stock. The board of directors has given the
Executive Committee the authority to approve acquisitions, borrowings,
guarantees and other transactions individually not involving more than $100
million in cash, securities, including common stock that we might issue, or
other consideration. The Executive Committee consists of Messrs. Huizenga and
Hudson.
The Audit Committee has the power to oversee the retention, performance and
compensation of the independent public accountants and the establishment and
oversight of such systems of internal accounting and auditing control as it
deems appropriate. The Audit Committee consists of Messrs. Croghan and Sorensen.
The Compensation Committee reviews and approves the compensation of our
executive officers, including payment of salaries, bonuses and incentive
compensation, determines our compensation philosophy and programs, and
administers our stock option plans. The Compensation Committee consists of
Messrs. Croghan and Sorensen.
EXECUTIVE COMPENSATION
Summary Compensation Information
The following tables set forth certain compensation information regarding
our Chief Executive Officer, our former Chief Executive Officer and our four
most highly compensated executive officers during the year ended December 31,
1998. Compensation earned by Messrs. Hudson, Cosman, Holmes and Goldberg was
paid or awarded by AutoNation, and/or our company, through the end of 1998. All
amounts paid by AutoNation were paid on our behalf and we reimbursed AutoNation
for those amounts.
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<PAGE> 44
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL ------------
COMPENSATION(1) SECURITIES
---------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS(2) COMPENSATION
--------------------------- ---- ---------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
H. Wayne Huizenga.................................... 1998 -- -- -- --
(Chairman of the Board and Chief 1997 -- -- -- --
Executive Officer through 1996 -- -- -- --
December 1998)(3)
James E. O'Connor.................................... 1998 $ 20,731 $ 8,432 250,000 --
(Chief Executive Officer 1997 -- -- -- --
and Director)(4) 1996 -- -- -- --
Harris W. Hudson..................................... 1998 398,461 200,000 -- --
(Vice Chairman and Secretary) 1997 395,769 100,000 -- --
1996 286,501 -- -- --
James H. Cosman...................................... 1998 340,961 87,500 -- --
(President and Chief 1997 300,000 75,000 -- $ 33,775(6)
Operating Officer)(5) 1996 -- -- -- --
Tod C. Holmes........................................ 1998 187,692 50,000 -- 46,342(8)
(Senior Vice President and 1997 -- -- -- --
Chief Financial Officer)(7) 1996 -- -- -- --
Steven R. Goldberg................................... 1998 58,173 35,000 110,000 105,000(10)
(Senior Vice President -- 1997 -- -- -- --
Corporate Development)(9) 1996 -- -- -- --
</TABLE>
- ---------------
(1) The aggregate total value of perquisites, other personal benefits,
securities or property or other annual compensation did not equal $50,000,
or ten percent of the annual salary and bonus for any person named in this
chart, during 1996, 1997 or 1998 and has not been included in this table.
(2) Messrs. O'Connor and Goldberg were the only people named in this chart who
received options to purchase shares of our common stock in 1998.
(3) We did not pay Mr. Huizenga any cash salary or bonus.
(4) Mr. O'Connor became an employee in December 1998.
(5) Mr. Cosman joined AutoNation in January 1997.
(6) Consists of certain relocation expenses for Mr. Cosman.
(7) Mr. Holmes joined AutoNation in January 1998.
(8) Consists of certain relocation expenses for Mr. Holmes.
(9) Mr. Goldberg became an employee in October 1998.
(10) Consists of an initial signing bonus received by Mr. Goldberg that is not
part of a recurring arrangement.
OPTION GRANTS IN YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------------- POTENTIAL REALIZABLE
PERCENT VALUE AT ASSUMED
NUMBER OF OF TOTAL ANNUAL RATES OF STOCK
SECURITIES OPTIONS PRICE APPRECIATION
UNDERLYING GRANTED TO FOR OPTION TERM
OPTIONS EMPLOYEES IN EXERCISE EXPIRATION -------------------------
NAME GRANTED(1) FISCAL YEAR PRICE DATE 5% 10%
---- ---------- ------------ -------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
H. Wayne Huizenga.......................... -- -- -- -- -- --
James E. O'Connor.......................... 250,000 53% $18.0625 12/6/08 $ 2,839,852 $ 7,196,743
James H. Cosman............................ -- -- -- -- -- --
Harris W. Hudson........................... -- -- -- -- -- --
Tod C. Holmes.............................. -- -- -- -- -- --
Steven R. Goldberg......................... 110,000 23% 14.50 10/8/08 879,369 2,165,927
</TABLE>
- ---------------
(1) Messrs. O'Connor and Goldberg were the only people named in this chart who
received options to purchase shares of our common stock in 1998.
43
<PAGE> 45
YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS
DECEMBER 31, 1998(1) DECEMBER 31, 1998(1)
--------------------------- ---------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
H. Wayne Huizenga.................................. -- -- -- --
James E. O'Connor.................................. 62,500 187,500 $ 23,437 $ 70,312
Harris W. Hudson................................... -- -- -- --
James H. Cosman.................................... -- -- -- --
Tod C. Holmes...................................... -- -- -- --
Steven R. Goldberg................................. -- 110,000 -- 433,125
</TABLE>
- ---------------
(1) Messrs. O'Connor and Goldberg were the only people named in this chart who
received options to purchase shares of our common stock in 1998.
COMPENSATION COMMITTEE INTERLOCK AND INSIDER PARTICIPATION
Messrs. Croghan and Sorensen served as members of the Compensation
Committee in 1998. No member of the Compensation Committee was an officer or
employee of our company or AutoNation during the prior year or was formerly an
officer of our company or AutoNation. During the fiscal year ended December 31,
1998, none of our executive officers served on the compensation committee of any
other entity, any of whose directors or executive officers served either on our
board of directors or on our Compensation Committee.
COMPENSATION OF DIRECTORS
Commencing in January 1999, we pay each of our non-employee directors
$25,000 per year, and $1,000 for each board or committee meeting they attend in
person. Under our 1998 Stock Incentive Plan, we grant options to purchase shares
of Class A common stock to our non-employee directors. As of April 30, 1999,
170,000 options have been granted to our non-employee directors. Other than as
provided in our Stock Incentive Plan and the reimbursement of reasonable
expenses incurred for attending board of directors and committee meetings, we
have not adopted any other policies on directors' compensation and benefits. See
"-- Stock Incentive Plan."
EMPLOYMENT AGREEMENTS
We entered into a three year employment agreement with James E. O'Connor
who is our Chief Executive Officer, effective as of December 7, 1998. The
employment agreement provides that our board of directors will appoint Mr.
O'Connor to the board and that Mr. O'Connor will be nominated for election to
our board of directors at each annual meeting of our stockholders during the
term of the agreement. The employment agreement provides that Mr. O'Connor will
receive an annual base salary of $385,000. In addition, Mr. O'Connor will be
eligible for an annual bonus of up to 30% of his base salary, based on the
achievement of certain corporate goals and objectives. Pursuant to his
employment agreement, Mr. O'Connor also received options to purchase up to
250,000 shares of our Class A common stock, of which 62,500 shares were fully
vested and could be purchased immediately. The remaining shares shall vest and
be eligible for purchase in equal amounts of 46,875 shares each year on the
first four anniversary dates of the grant. If Mr. O'Connor is terminated
"without cause" or if he elects to terminate his employment for "good reason,"
in each case as defined in his employment agreement, Mr. O'Connor will continue
to receive his salary and health benefits for a period ending on the later of
the first anniversary date of the termination or the end of his employment
period. Mr. O'Connor is also subject to confidentiality obligations as well as
to non-
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<PAGE> 46
compete and non-solicitation covenants for a three year period following the
termination of his employment period.
We also entered into a three year employment agreement with Mr. Cosman, our
President and Chief Operating Officer, effective as of January 11, 1999. The
employment agreement provides that Mr. Cosman will receive an annual base salary
of $400,000. In addition, Mr. Cosman will be eligible for an annual bonus of up
to 30% of his base salary, based on the achievement of certain corporate goals
and objectives. If Mr. Cosman is terminated "without cause" or if he elects to
terminate his employment for "good reason," in each case as defined in his
employment agreement, Mr. Cosman shall be entitled to continue to receive his
salary and health benefits for a period ending on the later of the first
anniversary date of the termination or the end of his employment period. Mr.
Cosman is also subject to confidentiality obligations as well as to non-compete
and non-solicitation covenants for a three year period following the termination
of his employment period.
SEVERANCE AGREEMENTS
Mr. Holmes entered into a severance agreement with AutoNation when hired by
AutoNation. Mr. Holmes' severance agreement provides that if his employment with
AutoNation is terminated without cause during the first 24 months of his
employment, then Mr. Holmes is entitled to continue to receive severance pay
equal to his base monthly salary for a period equal to the greater of the
balance of such 24 month period or 12 months. Mr. Holmes' severance agreement
also provides that if his employment with AutoNation is terminated without cause
after the first 24 months of his employment, Mr. Holmes is entitled to continue
to receive his base monthly salary for a period of 12 months. All options
granted under AutoNation's stock option plans would continue to vest throughout
the severance period. We assumed AutoNation's severance obligations under Mr.
Holmes' agreement prior to the closing of our initial public offering. Mr.
Holmes will not be entitled to any severance payments as a result of our
separation from AutoNation.
Mr. Goldberg entered into a severance agreement with us which provides that
if his employment is terminated without cause in the first 24 months of his
employment, then Mr. Goldberg is entitled to continue to receive severance pay
equal to his base monthly salary for a period of 18 months as well as a prorated
portion of his annual incentive bonus. All options granted under our 1998 Stock
Incentive Plan would continue to vest throughout the severance period.
STOCK INCENTIVE PLAN
In July 1998, we adopted our 1998 Stock Incentive Plan to provide for the
grant of options to purchase shares of Class A common stock, stock appreciation
rights and stock grants to employees, non-employee directors and independent
contractors who are eligible to participate in the Stock Incentive Plan. The
Stock Incentive Plan provides for the grant of options to employees and
independent contractors at the discretion of our board of directors.
Additionally, the Stock Incentive Plan provides for an automatic grant of an
option to purchase 50,000 shares of Class A common stock to each member of the
board of directors who joins the board of directors as a non-employee director,
and an additional automatic grant of an option to purchase 10,000 shares of
common stock at the beginning of each fiscal year thereafter to each
non-employee director continuing to serve on the board of directors at such
date. We have reserved 20.0 million shares of Class A common stock for issuance
as a result of options granted under the Stock Incentive Plan. In March 1999, we
issued approximately 8.3 million options to employees under our 1998 Stock
Incentive Plan to replace options our employees held under AutoNation's stock
option plans. As of April 30, 1999, options to
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<PAGE> 47
purchase approximately 12.6 million shares of Class A common stock were
outstanding under our 1998 Stock Incentive Plan, approximately 2.6 million of
which are presently exercisable.
401(K) PLAN
Our board of directors is planning to adopt a 401(k) Savings and Retirement
Plan that is intended to qualify for preferential tax treatment under section
401(a) of the Internal Revenue Code. Although we have not yet adopted the
specific terms of this plan, we intend that most of our employees will be
eligible to participate in this plan when it is adopted.
46
<PAGE> 48
SECURITY OWNERSHIP OF BENEFICIAL
OWNERS AND MANAGEMENT
The following table provides information as of April 22, 1999 regarding the
beneficial ownership of shares of common stock by (1) each of our stockholders
whom we know to be a beneficial owner of more than 5% of shares of common stock
outstanding, (2) each of our directors, (3) our Chief Executive Officer, our
former Chief Executive Officer and each of our four other most highly
compensated officers and (4) all of our current directors and executive officers
as a group. Share amounts and percentages shown for each individual, entity or
group in the table are adjusted to give effect to shares of common stock that
are not outstanding but may be acquired by the individual, entity or group upon
exercise of any options exercisable within 60 days of April 22, 1999. However,
these shares of common stock are not deemed to be outstanding for the purpose of
computing the percentage of outstanding shares beneficially owned by any other
person. Except for AutoNation, we are not aware of any individual, entity or
group that beneficially owns more than 5% of the outstanding shares of our
common stock.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED
NAME OF ---------------------
BENEFICIAL OWNER NUMBER PERCENT
---------------- ----------- -------
<S> <C> <C>
AutoNation, Inc............................................. 12,162,500 6.9%
H. Wayne Huizenga........................................... -- *
James E. O'Connor........................................... 64,700 *
Harris W. Hudson............................................ -- *
John W. Croghan............................................. 110,000 *
Ramon A. Rodriguez.......................................... 50,000 *
Allan C. Sorensen........................................... 60,000 *
James H. Cosman............................................. 16,000 *
Tod C. Holmes............................................... 5,000 *
Steven R. Goldberg.......................................... 2,000 *
All directors and executive officers as a group (10
persons).................................................. 307,700 *
</TABLE>
- ---------------
* Less than 1 percent
The address of AutoNation is 110 S.E. Sixth Street, Fort Lauderdale, FL
33301. AutoNation beneficially owns all of the shares through its indirect
wholly owned subsidiary, AutoNation Insurance Company, Inc., a Vermont
corporation. The address of AutoNation Insurance is 76 St. Paul Street, Suite
501, Burlington, VT 05401.
The underwriters may exercise their over-allotment option on or before May
26, 1999 for all or part of the 12,162,500 shares of common stock that
AutoNation still owns. If the over-allotment option is exercised in full, then
AutoNation will not own any of our stock. At this time, however, we do not know
whether, when or with respect to how many shares the underwriters will exercise
their over-allotment option.
The aggregate amount of common stock beneficially owned by Mr. O'Connor
consists of 2,200 shares owned directly by him and vested options to purchase
62,500 shares.
The aggregate amount of common stock beneficially owned by Mr. Croghan
consists of 50,000 shares owned directly by him and vested options to purchase
60,000 shares.
The aggregate amount of common stock beneficially owned by Mr. Rodriguez
consists of vested options to purchase 50,000 shares.
The aggregate amount of common stock beneficially owned by Mr. Sorensen
consists of vested options to purchase 60,000 shares.
The aggregate amount of common stock beneficially owned by Mr. Cosman
consists of 16,000 shares owned by Mr. Cosman and his wife as joint tenants.
47
<PAGE> 49
The aggregate amount of common stock beneficially owned by all directors
and executive officers as a group consists of (a) 75,200 shares and (b) vested
options to purchase 232,500 shares. The table above does not include a total of
136,809 options issued by our company to some officers replacing options to
purchase shares of AutoNation common stock which, although vested, may not be
exercised until after January 2, 2000 under the terms of repricing agreements
between the officers and AutoNation.
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<PAGE> 50
INTERCOMPANY RELATIONSHIPS AND RELATED TRANSACTIONS
The following includes brief summaries of the Separation and Distribution
Agreement, the Services Agreement, the Tax Indemnification and Allocation
Agreement and the Employee Benefits Agreement between our company and
AutoNation. The summaries of these agreements are qualified in their entirety by
the actual agreements, copies of which are incorporated herein by reference as
exhibits.
Prior to our initial public offering, we had been a wholly owned subsidiary
of AutoNation. After our initial public offering, AutoNation owned 63.9% of our
outstanding common stock. AutoNation sold substantially all of its shares of our
common stock in a secondary public offering in May 1999. AutoNation currently
owns approximately 12.2 million shares of our common stock, which constitutes
approximately 6.9% of the outstanding shares of our common stock, and has
granted the underwriters an over-allotment option to purchase those shares, in
whole or in part, until May 26, 1999. Mr. Huizenga is the Chairman of the Board
and Co-Chief Executive Officer of AutoNation and Mr. Hudson is the Vice Chairman
and a director of AutoNation. Messrs. Huizenga and Hudson beneficially own a
total of approximately 11.3% of AutoNation's outstanding common stock, including
their presently exercisable warrants and options to purchase AutoNation common
stock. As a result, the following transactions between our company and
AutoNation may be deemed to be intercompany or related party transactions.
HISTORICAL INTERCOMPANY RELATIONSHIPS
Prior to our initial public offering of common stock in July 1998,
AutoNation provided our company with various services, including:
- 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.
AutoNation also provided our company with the services of a number of its
executives and employees. In consideration for these services, AutoNation
allocated to our company a portion of its general and administrative costs
related to such services. Our management believes that the amounts allocated to
our company were no less favorable to our company than the expenses we would
have incurred to obtain such services on our own or from unaffiliated third
parties.
From time to time, AutoNation guaranteed some of our obligations. These
guarantees remain in place and may be called upon should there be a default
under these obligations. In that event, we would be obligated to reimburse
AutoNation for all liabilities AutoNation incurred as a result of the
49
<PAGE> 51
obligations. Now that we are no longer a subsidiary of AutoNation, we are
required to cause all such guarantees by AutoNation to be released by the
creditors and other parties holding such guarantees.
DIVIDEND AND INTERCOMPANY DEBT REPAYMENTS
As part of our separation from AutoNation, and prior to our initial public
offering, our company declared and paid a $2.0 billion dividend in April 1998 to
AutoNation in the form of promissory notes. In addition, we owed AutoNation
approximately $139.5 million and owed Resources, at that time one of our
subsidiaries, approximately $165.4 million, net of an approximate $90.5 million
Resources owed to our company. On June 30, 1998, we repaid $565.4 million of the
promissory notes that we issued to AutoNation with cash, assets that we received
from Resources and with the receivable Resources owed to our company. In
addition, we distributed all of our shares of common stock of Resources to
AutoNation. We also repaid the amounts we owed to AutoNation and Resources by
issuing 16,474,417 shares of Class A common stock to AutoNation and we repaid
the remaining balance of the promissory notes that we had issued to AutoNation
with the net proceeds from the sale of 63,250,000 shares of Class A common stock
in our initial public offering, which totalled approximately $1.4 billion.
SEPARATION AND DISTRIBUTION AGREEMENT
The Separation and Distribution Agreement that we entered into with
AutoNation in June 1998 provided for the principal corporate transactions
required to effect our separation from AutoNation, for the then-contemplated
distribution by AutoNation of our common stock that it owned to its stockholders
and for other arrangements governing the future relationship between our company
and AutoNation.
The Separation. Under the Separation and Distribution Agreement that we
entered into with AutoNation and prior to our initial public offering, (1) we
distributed to AutoNation all of the common stock of Resources, whose assets and
liabilities related to AutoNation's automotive retail businesses, and (2) we
reorganized internally within our consolidated group of subsidiaries certain
subsidiaries engaged in the solid waste services business, that we owned
directly or indirectly. Our financial statements exclude the accounts of
Resources.
The Initial Public Offering. Under the Separation and Distribution
Agreement, in July 1998, we issued and sold 63,250,000 shares of our Class A
common stock in our initial public offering, resulting in net proceeds of
approximately $1.4 billion. We used all the net proceeds, and issued an
additional 16,474,417 shares of our Class A common stock, to repay in full all
amounts that we owed to AutoNation.
The Distribution. Under the Separation and Distribution Agreement, the
distribution of our common stock that AutoNation owned to its stockholders was
subject to the satisfaction or waiver by the AutoNation board of directors, in
its sole discretion, of several conditions, including the receipt of a favorable
private letter ruling from the IRS. In March 1999, the IRS advised AutoNation in
writing that the IRS would not rule as requested. As a result, with our consent,
AutoNation decided to sell its shares of our common stock. In May 1999,
AutoNation sold substantially all of its shares of our common stock in a
secondary public offering, and has given the underwriters in the offering
options exercisable on or prior to May 26, 1999 to purchase all or a portion of
its remaining shares.
Registration Rights. The Separation and Distribution Agreement provides
that AutoNation and any of AutoNation's wholly owned subsidiaries that own our
common stock will have the right in certain circumstances to require our company
to use our best efforts to register for resale shares of our common stock held
by AutoNation under the Securities Act and applicable state securities laws,
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subject to conditions, limitations and exceptions. We also agreed with
AutoNation that if we file a registration statement for the sale of securities
under the Securities Act, then AutoNation and its subsidiaries may, subject to
conditions, limitations and exceptions, include in the registration statement
shares of common stock held by AutoNation and its subsidiaries. AutoNation
agreed to pay all of the offering expenses related to the registration statement
that we file at the request of AutoNation, provided that if we registered any
new shares of our common stock in the registration statement that we prepared at
AutoNation's request, then we would pay our pro rata portion of the offering
expenses. We agreed to pay offering expenses related to the registration
statement that we may file on our own behalf; however, AutoNation must pay its
pro rata portion of the offering expenses if any shares of our common stock held
by AutoNation and its subsidiaries are included in that registration statement.
In March 1999, AutoNation exercised its right under the Separation and
Distribution Agreement to have us register all of the common stock it owns,
resulting in the secondary public offering by AutoNation of its shares of our
common stock in May 1999.
Releases and Indemnification. The Separation and Distribution Agreement
provides for a full and complete release and discharge as of the time we made
our initial public offering of all liabilities, including any contractual
agreements or arrangements existing or alleged to exist, 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 our initial public offering, between our company and
AutoNation, including in connection with the transactions and all other
activities to implement our spinoff from AutoNation, our initial public offering
and the distribution of our common stock to AutoNation stockholders, except as
otherwise expressly stated in the Separation and Distribution Agreement.
Except as provided in the Separation and Distribution Agreement, we have
agreed to indemnify, defend and hold harmless AutoNation and each of
AutoNation's directors, officers and employees from and against all liabilities
relating to, arising out of or resulting from (1) our or any other person's
failure to pay, perform or otherwise promptly discharge any of our liabilities
under the Separation and Distribution Agreement and (2) any breach by our
company of the Separation and Distribution Agreement or any of the ancillary
agreements entered into by the parties related to the Separation and
Distribution Agreement.
Except as provided in the Separation and Distribution Agreement, AutoNation
has agreed to defend and hold us harmless and to indemnify our company and each
of our directors, officers and employees from and against all liabilities
relating to, arising out of or resulting from (1) the failure of AutoNation or
any other person to pay, perform or otherwise promptly discharge any liabilities
of AutoNation other than our liabilities, (2) any breach by AutoNation of the
Separation and Distribution Agreement or any of the other agreements that we
entered into related to the Separation and Distribution Agreement and (3) any
untrue statement of a material fact or omission to state a material fact, or
alleged untrue statements or omissions, with respect to information relating to
AutoNation contained in the registration statement for our common stock that was
issued in our initial public offering or the registration statement that we
filed on behalf of AutoNation for its secondary offering.
The Separation and Distribution Agreement also specifies certain procedures
regarding claims subject to indemnification and related matters.
Contingent Liabilities and Contingent Gains. The Separation and
Distribution Agreement provides for indemnification by our company and
AutoNation regarding contingent liabilities primarily relating to our respective
businesses or otherwise assigned to our company.
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The Separation and Distribution Agreement provides for the establishment of
a Contingent Claims Committee comprised of one representative designated from
time to time by each of AutoNation and ourselves that will establish procedures
for resolving disagreements among our company and AutoNation as to contingent
gains and contingent liabilities.
The Separation and Distribution Agreement provides for the sharing of
shared contingent liabilities, which means:
- any contingent liabilities that are not exclusive contingent liabilities
of AutoNation or exclusive contingent liabilities of ours and
- specifically identified liabilities.
The parties have agreed to allocate responsibility for shared contingent
liabilities based upon the respective market capitalizations of each party at
the time of our initial public offering or on other methodology to be
established by a committee that we and AutoNation will establish for this
purpose. AutoNation will assume the defense of, and may seek to settle or
compromise, any third party claim that is a shared contingent liability, and the
costs and expenses of the claim will be included in the amount to be shared by
AutoNation and our company.
The Separation and Distribution Agreement provides that the parties will
each have the exclusive right to any benefit received with respect to any
contingent gain that primarily relates to the business of that party, or that is
expressly assigned to that party. Each party will have sole and exclusive
authority to manage, control and otherwise determine all matters whatsoever with
respect to a contingent gain that primarily relates to its respective business.
We have agreed with AutoNation to share any benefit that may be received from
any contingent gain based upon market capitalizations of each party as of the
date we completed our initial public offering or another methodology that a
committee that the parties appoint may determine. We have agreed that AutoNation
will have the sole and exclusive authority to manage, control and otherwise
determine all matters whatsoever with respect to any contingent gain. Under the
Separation and Distribution Agreement, we have agreed that AutoNation may decide
not to pursue any 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 interests of AutoNation, without regard to our best
interests, and that AutoNation will have no liability to us as a result of that
determination.
Certain Business Transactions. Under the terms of the Separation and
Distribution Agreement, AutoNation has agreed that, for a period of five years
after we are no longer a subsidiary of AutoNation, AutoNation will not directly
or indirectly compete with us in the solid waste services industry anywhere in
North America, and we have agreed that, for a period of five years after that
time, we will not directly or indirectly compete with AutoNation in the
automotive retail or vehicle rental industries anywhere in North America. The
Separation and Distribution Agreement also provided for the allocation of
corporate opportunities prior to the time we separated from AutoNation. During
this period, neither party had any duty to communicate or offer opportunities to
the other and, subject to the non-competition covenants, could pursue or acquire
any opportunity for itself or direct the opportunity to another. However, (1) if
the opportunity related primarily to the business of the other party, the party
that had the opportunity generally was required to let the other party know
about it and (2) if the opportunity related to both of our businesses, the party
that learned about the opportunity had to use its reasonable best efforts to let
the other party know about it.
Insurance. Under the Separation and Distribution Agreement, AutoNation
agreed to permit our company to continue to participate in some of its insurance
policies and to provide claims adjustment services for automobile liability and
general liability claims. We have paid AutoNation a monthly fee
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of $43,000 for insurance costs plus an amount equal to 5% of incurred losses for
claims adjustment services. We are securing insurance policies independent of
AutoNation. We have agreed with AutoNation to cooperate in good faith to provide
for an orderly transition of insurance coverage. However, AutoNation will not be
liable to our company in the event any of these policies are terminated or prove
to be inadequate. See "Business -- Liability and Insurance Bonding."
Expenses. Except as set forth in an ancillary agreement, the Separation
and Distribution Agreement treats specific third-party fees, costs and expenses
paid or incurred in anticipation of the distribution of our shares to
AutoNation's stockholders in the same manner as we will treat the expenses that
are incurred for the contingent liabilities, and all other fees, costs and
expenses in connection with the distribution will be paid by AutoNation.
Termination. The Separation and Distribution Agreement provides that it
may be terminated at any time prior to the time our shares are distributed to
AutoNation's stockholders, if AutoNation and our company both agree. In the
event of any such termination, only the provisions of the Separation and
Distribution Agreement that obligate each party to pursue the distribution
terminate and the other provisions of the Separation and Distribution Agreement
and other related agreements will remain in full force and effect.
SERVICES AGREEMENT
AutoNation and our company have entered into a Services Agreement under
which AutoNation provides our company with:
- 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 providing these services, we paid AutoNation a fee of $1.25
million per month, subject to review and adjustment based upon a reduction in
the amount of services AutoNation provided. Effective January 1, 1999, the fee
was reduced to $0.9 million per month. The fee is payable 15 days after the
close of each month and our management thinks that the fee is no less favorable
than if we were to provide these services ourselves or if we had obtained them
from unaffiliated third parties.
The Services Agreement has been amended to provide for an initial term
expiring June 30, 1999, with an option to extend the term until December 31,
1999. After that, we have an additional option
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to extend the term for another year. At any time, we can terminate the agreement
upon 30 days' written notice.
Any services that AutoNation provides our company beyond the services to be
provided under the terms of the Services Agreement that AutoNation determines
are not covered by the fees provided for under the terms of the Services
Agreement will be billed to our company as described in the Services Agreement,
or on such other basis as AutoNation and we may agree. The price payable by our
company for these non-covered services will be established on a negotiated basis
which is no less favorable than the charges for comparable services from
unaffiliated third parties.
TAX INDEMNIFICATION AND ALLOCATION AGREEMENT
We have entered into a Tax Indemnification and Allocation Agreement with
AutoNation that provides that AutoNation will indemnify us for income taxes that
we might incur if the internal restructuring transactions that we entered into
in June 1998 in connection with our initial public offering fail to qualify as
tax-free spin-offs.
In addition to the foregoing indemnities, the Tax Indemnification and
Allocation Agreement provides for four things:
(1) the allocation and payment of taxes for periods during which we and
AutoNation were included in the same consolidated group for federal
income tax purposes or the same consolidated, combined or unitary
returns for state tax purposes,
(2) the allocation of responsibility for the filing of tax returns,
(3) the conduct of tax audits and the handling of tax controversies and
(4) various related matters.
For periods during which AutoNation included our company in its
consolidated federal income tax returns or state consolidated, combined or
unitary tax returns, which included the periods on or before we became a public
company, we will be required to pay an amount of income tax equal to the
consolidated tax liability attributable to our operations. We will be
responsible for our own separate tax liabilities that are not determined on a
consolidated or combined basis. In the future, we will also be responsible for
any increases to the consolidated tax liability of AutoNation and our company
that is attributable to our company, and we will be entitled to refunds for
reductions of tax liabilities attributable to our company for prior periods.
We were included in AutoNation's consolidated group for federal income tax
purposes for periods during which AutoNation beneficially owned at least 80% of
the total voting power and value of our outstanding common stock. Each
corporation that is a member of a consolidated group during any portion of the
group's tax year is jointly and severally liable for the federal income tax
liability of the group for that year. We and our subsidiaries stopped being
members of AutoNation's consolidated group after we became a public company.
While the Tax Indemnification and Allocation Agreement allocates tax liabilities
between AutoNation and our company during the periods when we were in included
in AutoNation's consolidated group, we could be liable in the event federal tax
liability allocated to AutoNation is incurred, but not paid, by AutoNation or
any other member of AutoNation's consolidated group for AutoNation's tax years
before we were a public company. If this were to happen, we could seek
indemnification from AutoNation under the Tax Indemnification and Allocation
Agreement.
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EMPLOYEE BENEFITS AGREEMENT
We entered into an Employee Benefits Agreement with AutoNation. Under this
Agreement, we have assumed and agreed to pay, perform, fulfill and discharge all
liabilities to, or relating to, former employees of AutoNation or its affiliates
whom we will employ as of the date we are no longer affiliated with AutoNation
and certain former employees of AutoNation or its affiliates, including
retirees, who were employed by or provided services primarily for our solid
waste business. Now that we are no longer affiliated with AutoNation, these
employees and former employees no longer participate in AutoNation's employee
benefit plans, although we are responsible for our allocable share of the costs
of such plans. We are in the process of establishing our own employee benefit
plans, which are generally similar to AutoNation's plans as in effect. The
Employee Benefits Agreement that we are describing does not preclude our company
from discontinuing or changing such plans at any time thereafter, with a few
exceptions. Our plans generally will assume all liabilities under AutoNation's
plans to employees and former employees that are assigned to us, and any assets
funding these liabilities will be transferred from funding vehicles associated
with AutoNation's plans to the corresponding funding vehicles associated with
our plans.
REPLACEMENT OPTIONS
Prior to the initial public offering, employees of our company were granted
options to purchase AutoNation common stock under AutoNation's stock option
plans. In March 1999, the approximately 8.3 million AutoNation stock options
held by our employees were canceled, and our company's Compensation Committee
granted replacement options to purchase our common stock on a one-for-one basis.
The replacement options retained the vesting and exercise rights of the original
options, subject to exercise limitations for individuals who signed stock option
repricing agreements with AutoNation. The exercise price for individual
replacement options are priced so that the potential gain or loss on each grant
of AutoNation stock options generally has been maintained under the replacement
options. We recorded $2.0 million of compensation expense during the three
months ended March 31, 1999 relating to our granting of replacement options at
favorable exercise prices.
LEASE
In July 1998, we signed a lease with a subsidiary of AutoNation for
approximately 10,555 square feet of office space at AutoNation's corporate
headquarters in Fort Lauderdale, Florida. The annual lease rate is $220,320
($20.40 per square foot), and we pay for certain common area maintenance
charges. Effective January 1, 1999, we amended the lease to increase the space
we are renting to approximately 14,443 square feet at an annual rate of $294,637
($20.40 per square foot). The lease has an initial term of one year, and we can
terminate it on 90 days' prior written notice. It is automatically renewable by
us for an additional one year term. The rent includes utilities, security,
parking, building maintenance and cleaning services. We believe that the lease
is on terms no less favorable than could be obtained from persons unrelated to
our company.
OTHER RELATIONSHIPS WITH AUTONATION
During 1998, we collected solid waste from, and leased roll-off containers
to, certain automotive retail and vehicle rental subsidiaries of AutoNation and
other properties. We provided all of these services at standard rates. We
continue to provide these services to AutoNation on the same terms. During 1998,
we rented vehicles from AutoNation's Alamo Rent-A-Car and National Car Rental
System subsidiaries, under standard form vehicle rental agreements under which
we were charged standard rates. We still, at times, rent vehicles from
AutoNation on the same terms. In November
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1998, we purchased a corporate aircraft from AutoNation for $11 million. We
believe these transactions were on terms as favorable as we would have obtained
from an unrelated third party.
OTHER TRANSACTIONS WITH RELATED PARTIES
The following is a summary of other agreements and transactions that we are
involved in with related parties. It is our policy that transactions with
related parties must be on terms that, on the whole, are no less favorable than
those that would be available from unaffiliated parties. Based on our
experience, it is our belief that all of these transactions met that standard at
the time such transactions were effected.
Pro Player Stadium is a professional sports stadium in South Florida that
is owned and controlled by Mr. Huizenga. One of our subsidiaries collected solid
waste from, and leased roll-off waste containers to, Pro Player Stadium pursuant
to standard agreements under which Pro Player Stadium paid an aggregate of
approximately $219,000 in 1998. We continue to provide these services on the
same terms. In September 1998, one of our subsidiaries began collecting solid
waste from the National Car Rental Center, an arena in Broward County, Florida,
which is operated by a subsidiary of Florida Panthers Holdings, Mr. Huizenga is
the Chairman, and Mr. Hudson is a director, of Florida Panthers Holdings.
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DESCRIPTION OF OTHER INDEBTEDNESS
THE CREDIT FACILITY
In July 1998, we entered into a $1.0 billion unsecured revolving credit
facility with a group of banks. $500.0 million of the facility is short-term and
expires in July 1999 and the remaining $500.0 million is long-term and expires
in July 2003. Borrowings under the credit facility bear interest at LIBOR-based
rates. We use the proceeds from the credit facility to satisfy working capital
requirements, capital expenditures and acquisitions. As of March 31, 1999 we had
approximately $109.0 million available under the credit facility. The credit
facility contains various covenants, including covenants regarding our financial
performance and covenants that require us to maintain minimum consolidated
stockholder's equity and limit the amount of additional debt we incur.
We expect to use the net proceeds of the sale of the notes to repay $378.0
million of the short-term portion of the credit facility and to repay $117.0
million of the long-term portion of the credit facility, which amounts will be
available to be reborrowed under the credit facility.
Following the issuance of the notes offered hereby, the credit facility
will remain outstanding. The credit facility will rank equally with the notes in
right of repayment.
We expect to extend the maturity of the short-term portion of the credit
facility to July 2000, prior to its expiration in July 1999.
CALIFORNIA POLLUTION CONTROL BONDS
When we acquired Taormina Industries, Inc. in 1997, we assumed its
obligations with respect to three series of pollution control bonds issued by
the California Pollution Control Financing Authority. These 20 year bonds were
issued under indentures dated August 1, 1994, November 1, 1994 and September 1,
1996, respectively. The aggregate amount issued under these three series of
bonds was $43.0, of which $42.0 remained outstanding on March 31, 1999. The
proceeds of each series of bonds was loaned by the California Authority to
Taormina Industries under loan agreements secured by letters of credit issued in
favor of the State Street Bank and Trust Company of California, N.A., as trustee
for the holders of the bonds.
The bonds bear interest at a variable rates depending upon the term of each
individual interest period that we select: weekly, monthly, 3 months, 6 months,
9 months, yearly, and if longer than a year, any multiple of 6 months
thereafter, up to a maximum rate of 12% per annum. The particular interest rate
is determined in advance by a remarketing agent based on the minimum prevailing
interest rates that the remarketing agent believes that it would have to use in
order to sell the bonds at their face value. On March 31, 1999, the interest
rate on each series of bonds was 2.75%. The bonds are subject to a demand
purchase by their holders, may sometimes be redeemed with the consent of various
parties, and have mandatory and optional redemptions upon the occurrence of some
events. In the case of optional redemption, the bonds may be repurchased at
times for a premium, beginning at 102% of their face value and declining to
their face value over the term during which they are outstanding.
Letters of credit have been established with NationsBank, N.A. from which
the trustee of the bonds is able to draw funds required to pay principal and
interest on and/or to redeem or repurchase the bonds.
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The indentures, the loan agreements and the related documentation for the
bonds contain standard representations and warranties, covenants and
restrictions relating to the business operations of Taormina Industries and/or
our company and provide for standard default provisions, including failure to
pay principal and interest on the bonds and events of bankruptcy.
Following the issuance of the notes offered hereby, the bonds will remain
outstanding. The bonds will rank equally with the notes in right of repayment.
OTHER INDEBTEDNESS
Certain of our subsidiaries are indebted under various other notes payable
with total principal outstanding of approximately $22.6 million as of March 31,
1999. These notes payable are secured by real property, equipment and other
assets. The interest rates on these other notes payable range from 4% to 10% and
mature at various times through 2009. Generally, these notes payable were
incurred by companies we acquired prior to our acquisition of the companies and
are subject to prepayment penalties or premiums. We expect to continue to assume
similar notes payable, which may be secured by assets, in the course of
acquiring other companies.
OTHER OBLIGATIONS
From time to time, our company and our subsidiaries are required to post
surety bonds and letters of credit that secure the performance of obligations to
various municipalities.
As of March 31, 1999, we had outstanding surety bonds of approximately
$417.0 million in the aggregate. The surety bonds have various terms, expiration
dates and provisions, and represent debt obligations that will rank equally with
the notes issued hereunder. The surety bonds have been issued under an agreement
of indemnity between our company, our subsidiaries and affiliates and Liberty
Bond Services. Under the indemnity agreement, our company, our subsidiaries and
affiliates are obligated to pay Liberty upon demand all premiums, costs and
charges for any surety bonds until such time as their release. Our company, our
subsidiaries and affiliates have agreed to indemnify Liberty against liability
for its issuance and enforcement of the terms of the surety bonds and, as
security, we have assigned applicable contracts to Liberty. The indemnity
agreement contains standard terms and conditions and other provisions affecting
our company's, our subsidiaries' and affiliates' and the surety's rights and
obligations.
As of March 31, 1999, we had outstanding letters of credit of approximately
$13.0 million in the aggregate. The letters of credit are issued against our
revolving credit facility.
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DESCRIPTION OF THE NOTES
GENERAL
The notes will be issued under an indenture (we refer to the indenture, as
supplemented from time to time, as the "Indenture") between Republic Services,
Inc. and The Bank of New York as Trustee.
The following summary of certain provisions of the notes and the Indenture
is not complete and is subject to the detailed provisions of the Indenture. We
have filed a copy of the Indenture as an exhibit to the Registration Statement.
Whenever particular provisions or defined terms in the Indenture are referred to
in this prospectus, such provisions or defined terms are incorporated by
reference in this prospectus. Section references used in this prospectus are
references to the Indenture. References, in this Section only, to "Republic
Services, Inc." refer to Republic Services, Inc. exclusive of its Subsidiaries.
TERMS
The notes due 200 issued under the Indenture will:
- be limited to $ million aggregate principal amount; and
- mature on , 200 .
The notes due 200 issued under the Indenture will:
- be limited to $ million aggregate principal amount; and
- mature on , 200 .
The notes due 200 and the notes due 200 will be unsecured obligations of
Republic Services, Inc. and will rank equally with all of our other unsecured
and unsubordinated indebtedness.
The notes due 200 and the notes due 200 will bear interest at the
respective rates shown on the front cover of this prospectus from ,
1999, payable semi-annually on each and to the persons
in whose name they are registered at the close of business on or
preceding the interest payment date.
The first interest payment on each series of the notes will be made on
, 1999.
The notes of each series may be redeemed before their maturity as described
below, but are not entitled to the benefit of any sinking fund. They will be
issued in book-entry form only. See "Book-Entry System." At March 31, 1999, on a
pro forma basis after giving effect to the offering of the notes, Republic
Services, Inc. would have had approximately $947.6 million of senior
indebtedness outstanding.
OPTIONAL REDEMPTION
The notes of each series will be redeemable, as a whole or in part, at our
option, at any time or from time to time, at a redemption price equal to the
greater of:
(1) 100% of the principal amount of the applicable series of notes to be
redeemed, and
(2) the sum of the present values of the remaining scheduled payments of
principal and interest on the applicable series of notes to be redeemed
discounted to the date of redemption on a semi-annual basis (assuming a 360-day
year consisting of twelve 30-day months) at the applicable Treasury Rate, plus
basis points for the notes due 200 and basis points for the notes due
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200 , respectively. In the case of each of clause (1) and (2), accrued interest
will be payable to the redemption date.
Holders of notes to be redeemed will receive notice thereof by first-class
mail at least 30 and not more than 60 days prior to the date fixed for
redemption. If fewer than all of the notes of a particular series are to be
redeemed, the Trustee will select, not more than 60 days prior to the redemption
date, the particular notes or portions thereof for redemption from the
outstanding notes not previously called by such method as the Trustee deems fair
and appropriate.
On and after the redemption date, interest will cease to accrue on the
notes of a particular series or any portion of the notes called for redemption
unless we default in the payment of the redemption price and accrued interest.
On or before the redemption date, we will deposit with a paying agent (or the
Trustee) money sufficient to pay the redemption price of and accrued interest on
the notes to be redeemed on such date. If less than all of the notes of a
particular series are to be redeemed, the notes to be redeemed shall be selected
by the Trustee by such method as the Trustee shall deem fair and appropriate.
BOOK-ENTRY SYSTEM
The notes initially will be represented by one or more global securities
deposited with The Depository Trust Company ("DTC") and registered in the name
of DTC's nominee. Except under the circumstances described below, we will not
issue the notes in definitive form.
Upon the issuance of a global security, DTC will credit on its book-entry
registration and transfer system the accounts of persons designated by the
underwriters with the respective principal amounts of the notes represented by
the global security. Ownership of beneficial interests in a global security is
limited to persons that have accounts with DTC or its nominee ("participants")
or persons that may hold interests through participants. Ownership of beneficial
interests in a global security will be shown on, and the transfer of that
ownership may be effected only through, records maintained by DTC or its nominee
(for interests of persons who are participants) and records maintained by
participants (for interests of persons who are not participants). The laws of
some states require that certain purchasers of securities take physical delivery
of the securities in definitive form. Such limits and laws may impair a
purchaser's ability to transfer beneficial interests in a global security.
DTC or its nominee will be considered the sole owner or holder of the notes
represented by a global security for all purposes under the Indenture. Except as
provided below, owners of beneficial interests in a global security will not be
entitled to have notes represented by the global security registered in their
names, will not receive or be entitled to receive physical delivery of notes in
definitive form, and will not be considered the owners of record or holders of
notes under the Indenture.
We will make principal and interest payments on notes registered in the
name of DTC or its nominee to DTC or its nominee as the registered holder of the
relevant global security. None of us, the Trustee, any paying agent nor the
registrar for the notes will have any responsibility or liability for any aspect
of the records relating to, or payment made on account of, beneficial interests
in a global security or for maintaining, supervising or reviewing any records
relating to such beneficial interests.
We expect that DTC or its nominee, upon receipt of any payment of principal
or interest, will credit immediately participants' accounts with payments in
amounts proportionate to their respective beneficial interests in the principal
amount of the relevant global security as shown on the records of DTC or its
nominee. We also expect that payments by participants to owners of beneficial
interests in
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a global security held through such participants will be governed by standing
instructions and customary practices, as is the case with securities held for
the accounts of customers in bearer form or registered in "street name," and
will be the responsibility of such participants.
If DTC at any time is unwilling or unable to continue as a depository and
we do not appoint a successor depository within 90 days, we will issue notes in
definitive form in exchange for the entire global security. In addition, we may
at any time and in our sole discretion determine not to have notes represented
by a global security and, in such event, we will issue notes in definitive form
in exchange for the entire global security. In any such instance, an owner of a
beneficial interest in a global security will be entitled to physical delivery
in definitive form of notes represented by such global security equal in
principal amount to such beneficial interest and to have such notes registered
in the owner's name. Notes so issued in definitive form will be issued as
registered notes in denominations of $1,000 and integral multiples thereof,
unless we specify otherwise.
The information in this section concerning DTC and its book-entry system
has been obtained from sources that we believe to be reliable, but we do not
take responsibility for its accuracy.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full disclosure of all such terms, as well as any
other capitalized terms used herein for which no definition is provided.
"Attributable Debt" means, when used in connection with a sale and
leaseback transaction, at any date of determination, the product of (1) the net
proceeds from such sale and leaseback transaction multiplied by (2) a fraction,
the numerator of which is the number of full years of the term of the lease
relating to the property involved in such sale and leaseback transaction
(without regard to any options to renew or extend such term) remaining at the
date of the making of such computation and the denominator of which is the
number of full years of the term of such lease measured from the first day of
such term.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, rights to purchase, warrants, options, participations or other
equivalents of or interests (including partnership interests) in (however
designated) the equity of such Person, including any preferred stock, but
excluding any debt securities convertible into such equity.
"Comparable Treasury Issue" means the U.S. Treasury security selected by an
Independent Investment Banker as having a maturity comparable to the remaining
term ("Remaining Life") of the notes to be redeemed that would be utilized, at
the time of selection and in accordance with customary financial practice, in
pricing new issues of corporate debt securities of comparable maturity to the
remaining term of such notes.
"Comparable Treasury Price" means, with respect to any redemption date, (1)
the average of five Reference Treasury Dealer Quotations for such redemption
date, after excluding the highest and lowest Reference Treasury Dealer
Quotations, or (2) if the Independent Investment Banker obtains fewer than five
such Reference Treasury Dealer Quotations, the average of all such quotations.
"Consolidated Net Tangible Assets" means, as any date, the total amount of
assets of Republic Services, Inc. and its Restricted Subsidiaries on a
consolidated basis (less applicable reserves and other properly deductible
items) after deducting therefrom (1) all current liabilities (excluding any
current liabilities which are by their terms extendible or renewable at the
option of the obligor
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thereon to a time more than 12 months after the time as of which the amount
thereof is being computed or which is supported by other borrowings with a
maturity of more than 12 months from the date of calculation), (2) all goodwill,
trade names, trademarks, patents, unamortized debt discount and expense and
other like intangibles and (3) appropriate adjustments on account of minority
interests of other Persons holding stock of Republic Services, Inc.'s
Subsidiaries, all as set forth on the most recent balance sheet of Republic
Services, Inc. and its consolidated Subsidiaries (but, in any event, as of a
date within 120 days of the date of determination) in each case excluding
intercompany items and computed in accordance with generally accepted accounting
principles as in effect from time to time.
"Exempted Debt" means the sum, without duplication, of the following items
outstanding as of the date Exempted Debt is being determined: (1) Indebtedness
of Republic Services, Inc. and the Restricted Subsidiaries Incurred after the
date of the Indenture and secured by Liens created, assumed or otherwise
Incurred or permitted to exist pursuant to the Indenture under "Certain
Covenants of Republic Services, Inc. -- Restrictions on Liens" and (2)
Attributable Debt of Republic Services, Inc. and the Restricted Subsidiaries in
respect of all sale and leaseback transactions with regard to any Principal
Property entered into pursuant the Indenture under "Certain Covenants of
Republic Services, Inc. -- Limitation on Sale and Leaseback Transactions."
"Funded Debt" means all Indebtedness for money borrowed, including purchase
money indebtedness, having a maturity of more than one year from the date of its
creation or having a maturity of less than one year but by its terms being
renewable or extendible, at the option of the obligor in respect thereof, beyond
one year from its creation.
"guarantee" means any obligation, contingent or otherwise, of any person
directly or indirectly guaranteeing any Indebtedness of any other Person and any
obligation, direct or indirect, contingent or otherwise, of such Person (1) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Indebtedness of such other Person (whether arising by virtue of partnership
arrangements, or by agreement to keep-well, to purchase assets, goods,
securities or services, to take-or-pay, or to maintain financial statement
conditions or otherwise) or (2) entered into for purposes of assuring in any
other manner the obligee of such Indebtedness of the payment thereof or to
protect such obligee against loss in respect thereof (in whole or in part);
provided, however, that the term "guarantee" will not include endorsements for
collection or deposit in the ordinary course of business. The term "guarantee"
used as a verb has a corresponding meaning.
"Incur" means issue, assume, guarantee, incur or otherwise become liable
for. The terms "Incurred," "Incurrence" and "Incurring" shall each have a
correlative meaning.
"Indebtedness" means with respect to any Person at any date of
determination (without duplication), indebtedness for borrowed money or
indebtedness evidenced by bonds, notes, debentures or other similar instruments
given to finance the acquisition of any businesses, properties or assets of any
kind (including, without limitation, Capital Stock or other equity interests in
any Person).
"Independent Investment Banker" means either Banc of America Securities LLC
or Merrill Lynch, Pierce, Fenner & Smith Incorporated or, if both firms are
unwilling or unable to select the Comparable Treasury Issue, an independent
investment banking institution of national standing appointed by the Trustee
after consultation with Republic Services, Inc.
"Lien" with respect to any property or assets, means any mortgage or deed
of trust, pledge, hypothecation, assignment, deposit arrangement, security
interest, lien, charge, easement (other than any easement not materially
impairing usefulness or marketability), encumbrance, preference, priority
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or other security agreement or preferential arrangement of any kind or nature
whatsoever on or with respect to such property or assets (including, without
limitation, any conditional sale or other title retention agreement having
substantially the same economic effect as any of the foregoing), but not
including the interest of a lessor under a lease that is an operating lease
under generally accepted accounting principles.
"Person" means any individual, corporation, partnership, limited liability
company, joint venture, association, joint-stock company, trusts, unincorporated
organization or government or any agency or political subdivisions thereof.
"Principal Property" means any land, land improvements or building,
together with the land upon which it is erected and fixtures comprising a part
thereof, in each case, owned or leased by Republic Services, Inc. or any
Restricted Subsidiary and located in the United States, the gross book value
(without deduction of any reserve for depreciation) of which on the date as of
which the determination is being made is an amount which exceeds 2% of
Consolidated Net Tangible Assets but not including such land, land improvements,
buildings or portions thereof which is financed through the issuance of tax
exempt governmental obligations, or any such property that has been determined
by board resolution of Republic Services, Inc. not to be of material importance
to the respective businesses conducted by Republic Services, Inc. or such
Restricted Subsidiary effective as of the date such resolution is adopted.
"Reference Treasury Dealer" means (1) each of Banc of America Securities
LLC and Merrill Lynch, Pierce, Fenner & Smith Incorporated and their respective
successors, provided, however, that if any of the foregoing shall cease to be a
primary U.S. Government securities dealer in New York City (a "Primary Treasury
Dealer"), we will substitute for such initial purchaser another Primary Treasury
Dealer and (2) any other Primary Treasury Dealer selected by the Independent
Investment Banker after consultation with Republic Services, Inc.
"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any redemption date, the average, as determined by
the Independent Investment Banker, of the bid and asked prices for the
Comparable Treasury Issue (expressed in each case as a percentage of its
principal amount) quoted in writing to the Independent Investment Banker at 5:00
p.m., New York City time, on the third Business Day preceding such redemption
date.
"Restricted Subsidiary" means any Subsidiary which, at the time of
determination, owns or is a lessee pursuant to a capital lease of any Principal
Property.
"Subsidiary" of a Person means, with respect to any Person, any
corporation, association, partnership or other business entity of which at least
a majority the total voting power of the Capital Stock entitled (without regard
to the occurrence of any contingency) to vote in the election of directors,
managers or trustees thereof is at the time owned or controlled, directly or
indirectly, by (1) such Person, (2) such Person and one or more Subsidiaries of
such Person or (3) one or more Subsidiaries of such Person.
"Treasury Rate" means, with respect to any redemption date, (1) the yield,
under the heading which represents the average for the immediately preceding
week, appearing in the most recently published statistical release designated
"H.15(519)" or any successor publication which is published weekly by the Board
of Governors of the Federal Reserve System and which establishes yields on
actively traded U.S. Treasury securities adjusted to constant maturity under the
caption "Treasury Constant Maturities," for the maturity corresponding to the
comparable Treasury Issue (if no maturity is within three months before or after
the Remaining Life, yields for the two published
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maturities most closely corresponding to the Comparable Treasury Issue will be
determined and the Treasury Rate will be interpolated or extrapolated from such
yields on a straight line basis, rounding to the nearest month) or (2) if such
release (or any successor release) is not published during the week preceding
the calculation date or does not contain such yields, the rate per annum equal
to the semi-annual equivalent yield to maturity of the Comparable Treasury
Issue, calculated using a price for the Comparable Treasury Issue (expressed as
a percentage of its principal amount) equal to the Comparable Treasury Price for
such redemption date. The Treasury Rate will be calculated on the third Business
Day preceding the redemption date.
CERTAIN COVENANTS OF REPUBLIC SERVICES
The following restrictions apply to each series of notes.
RESTRICTIONS ON LIENS. We will not, and will not permit any Restricted
Subsidiary to, Incur any Lien on any shares of stock, Indebtedness or other
obligations of a Subsidiary or any Principal Property of Republic Services, Inc.
or a Restricted Subsidiary, whether such shares of stock, Indebtedness or other
obligations of a Subsidiary or Principal Property is owned at the date of the
Indenture or thereafter acquired, without in any such case effectively providing
that all the notes will be directly secured equally and ratably with such Lien.
These restrictions do not apply to:
(1) the Incurrence of any Lien on any shares of stock, Indebtedness or
other obligations of a Subsidiary or any Principal Property acquired after
the date of the Indenture (including acquisitions by way of merger or
consolidation) by Republic Services, Inc. or a Restricted Subsidiary
contemporaneously with such acquisition, or within 120 days thereafter, to
secure or provide for the payment or financing of any part of the purchase
price thereof, or the assumption of any Lien upon any shares of stock,
Indebtedness or other obligations of a Subsidiary or any Principal Property
acquired after the date of the Indenture existing at the time of such
acquisition, or the acquisition of any shares of stock, Indebtedness or
other obligations of a Subsidiary or any Principal Property subject to any
Lien without the assumption thereof, provided that every such Lien referred
to in this clause (1) shall attach only to the shares of stock,
Indebtedness or other obligations of a Subsidiary or any Principal Property
so acquired and fixed improvements thereon;
(2) any Lien on any shares of stock, Indebtedness or other obligations
of a Subsidiary or any Principal Property existing at the date of the
Indenture;
(3) any Lien on any shares of stock, Indebtedness or other obligations
of a Subsidiary or any Principal Property in favor of Republic Services,
Inc. or any Restricted Subsidiary;
(4) any Lien on Principal Property being constructed or improved
securing loans to finance such construction or improvements;
(5) any Lien on shares of stock, Indebtedness or other obligations of
a Subsidiary or any Principal Property Incurred in connection with the
issuance of tax exempt government obligations; and
(6) any renewal of or substitution for any Lien permitted by any of
the preceding clauses (1) through (5), provided, in the case of a Lien
permitted under clause (1), (2) or (4), the debt secured is not increased
nor the Lien extended to any additional assets.
Notwithstanding the foregoing, Republic Services, Inc. or any Restricted
Subsidiary may create or assume Liens in addition to those permitted by clauses
(1) through (6), and renew, extend or
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replace such Liens, provided that at the time of such creation, assumption,
renewal, extension or replacement of such Lien, and after giving effect thereto,
together with any sale and leaseback transactions in addition to those permitted
under the covenant entitled "Limitation on Sale and Leaseback Transactions,"
Exempted Debt does not exceed 20% of Consolidated Net Tangible Assets. (Section
1005)
For the purposes of this "Restrictions on Liens" covenant and the
"Limitation on Sale and Leaseback Transactions" covenant, the giving of a
guarantee which is secured by a Lien on any shares of stock, Indebtedness or
other obligations of a Subsidiary or any Principal Property, and the creation of
a Lien on any shares of stock, Indebtedness or other obligations of a Subsidiary
or any Principal Property to secure Indebtedness that existed prior to the
creation of such Lien, shall be deemed to involve the creation of Indebtedness
in an amount equal to the principal amount guaranteed or secured by such Lien.
LIMITATION ON SALE AND LEASEBACK TRANSACTIONS. The Indenture provides that
Republic Services, Inc. will not, and will not permit any Restricted Subsidiary
to, sell or transfer, directly or indirectly, except to Republic Services, Inc.
or a Restricted Subsidiary, any Principal Property as an entirety, or any
substantial portion thereof, with the intention of taking back a lease of such
property, except a lease for a period of two years or less at the end of which
it is intended that the use of such property by the lessee will be discontinued;
provided that, notwithstanding the foregoing, Republic Services, Inc. or any
Restricted Subsidiary may sell any such Principal Property and lease it back for
a longer period:
(1) if Republic Services, Inc. or such Restricted Subsidiary would be
entitled, pursuant to the provisions of the Indenture described above under
"Certain Covenants of Republic Services, Inc.--Restrictions on Liens," to
create a mortgage on the property to be leased securing Funded Debt in an
amount equal to the Attributable Debt with respect to such sale and
leaseback transaction without equally and ratably securing the outstanding
notes; or
(2) if Republic Services, Inc. promptly informs the Trustee of such
transaction, the net proceeds of such transaction are at least equal to the
fair value (as determined by board resolution of Republic Services, Inc.)
of such property, and Republic Services, Inc. causes an amount equal to the
net proceeds of the sale to be applied to the retirement, within 180 days
after receipt of such proceeds, of Funded Debt Incurred or assumed by
Republic Services, Inc. or a Restricted Subsidiary (including the notes);
provided further that, in lieu of applying all or any part of such net
proceeds to such retirement, Republic Services, Inc. may, within 75 days
after such sale or transfer, deliver or cause to be delivered to the
applicable trustee for cancellation either debentures or notes evidencing
Funded Debt of Republic Services, Inc. (which may include the outstanding
notes offered in this prospectus) or of a Restricted Subsidiary previously
authenticated and delivered by the applicable trustee, and not theretofore
tendered for sinking fund purposes or called for a sinking fund or
otherwise applied as a credit against an obligation to redeem or retire
such notes or debentures. If Republic Services, Inc. so delivers debentures
or notes to the applicable trustee with an Officers' Certificate, the
amount of cash that Republic Services, Inc. will be required to apply to
the retirement of Funded Debt will be reduced by an amount equal to the
aggregate of the then applicable optional redemption prices (not including
any optional sinking fund redemption prices) of such debentures or notes,
or if there are no such redemption prices, the principal amount of such
debentures or notes, provided, that in the case of debentures or notes
which provide for an amount less than the principal amount thereof to be
due and payable upon a declaration of the maturity thereof, such amount of
cash shall be reduced by the amount of principal of such debentures or
notes that
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would be due and payable as of the date of such application upon a
declaration of acceleration of the maturity thereof pursuant to the terms
of the indenture pursuant to which such debentures or notes were issued; or
(3) if Republic Services, Inc., within 180 days after the sale or
transfer, applies or causes a Restricted Subsidiary to apply an amount
equal to the greater of the net proceeds of such sale or transfer or fair
market value of the Principal Property so sold and leased back at the time
of entering into such sale and leaseback transaction (in either case as
determined by board resolution of Republic Services, Inc.) to purchase
other Principal Property having a fair market value at least equal to the
fair market value of the Principal Property (or portion thereof) sold or
transferred in such sale and leaseback transaction.
Notwithstanding the foregoing, Republic Services, Inc. or any Restricted
Subsidiary may enter into sale and leaseback transactions in addition to those
permitted in this paragraph and without any obligation to retire any outstanding
notes or other Funded Debt, provided that at the time of entering into such sale
and leaseback transactions and after giving effect thereto, together with any
Liens in addition to those permitted under the covenant entitled "Restrictions
on Liens," Exempted Debt does not exceed 20% of Consolidated Net Tangible
Assets. (Section 1006)
CONSOLIDATION, MERGER OR SALE OF SUBSTANTIALLY ALL ASSETS
We may consolidate or merge with, or sell all or substantially all of our
assets to, another corporation as long as we are not in default under the
Indenture and the consolidation, merger or sale does not create a default under
the Indenture. The remaining or acquiring corporation must assume all of our
responsibilities and liabilities under the Indenture, including the payment of
all amounts due on the notes and performance of the covenants. Under these
circumstances, if our properties or assets become subject to a Lien not
permitted by the Indenture, we will equally and ratably secure the notes.
(Section 801)
FILING OF FINANCIAL STATEMENTS
The Indenture will require us to file quarterly and annual financial
statements with the Securities and Exchange Commission.
EVENTS OF DEFAULT
An event of default under the Indenture with respect to a series of notes
includes the following:
- failure to pay interest on the notes of such series for 30 days;
- failure to pay principal on the notes of such series when due;
- failure to perform any of the other covenants or agreements in the
Indenture relating to the notes of such series that continues for 60 days
after notice to us by the Trustee or holders of at least 25% in principal
amount of the notes of each affected series then outstanding (voting as
one class);
- failure to pay when due any obligation of ours or any subsidiary having
an aggregate principal amount outstanding of at least $25.0 million that
continues for 25 days after notice to us by the Trustee or holders of at
least 25% in principal amount of the notes of each affected series then
outstanding (voting as one class); or
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- certain events of bankruptcy, insolvency or reorganization relating to us
or any Subsidiary. (Section 501)
The Indenture provides that the Trustee will, with certain exceptions,
notify the holders of the notes of any event of default known to it within 90
days after the occurrence of such event. (Section 602)
If an event of default (other than with respect to certain events of
bankruptcy, insolvency or reorganization) occurs and is continuing for the notes
of a series, the Trustee or the holders of not less than 25% in principal amount
of the notes of each affected series then outstanding (voting as one class) may
declare the principal amount to be due and payable. In such a case, subject to
certain conditions, the holders of a majority in principal amount of the notes
of each affected series then outstanding (voting as one class) can rescind and
annul such declaration and its consequences. (Section 502)
In the event of a declaration or an acceleration because an event of
default related to the failure to perform or breach of a covenant or agreement
has occurred and is continuing, such declaration or acceleration shall be
automatically rescinded and annulled if the default triggering such event of
default shall be remedied or cured by the Republic Services, Inc. or the
relevant Subsidiary or waived by the holders of the relevant Indebtedness within
60 days after the declaration or acceleration with respect thereto.
We are required to file an annual officers' certificate with the Trustee
concerning our compliance with the Indenture. (Section 705) Subject to the
provisions of the Indenture relating to the duties of the Trustee, the Trustee
is not obligated to exercise any of its rights or powers at the request or
direction of any of the holders unless they have offered the Trustee security or
indemnity. (Section 603) If the holders provide security or indemnity
satisfactory to the Trustee, the holders of a majority in principal amount of
the outstanding notes of the applicable series during an event of default may
direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee under the Indenture or exercising any of the Trustee's
trusts or powers with respect to the notes. (Section 512)
MODIFICATION AND AMENDMENT OF THE INDENTURE
We may enter into supplemental indentures with the Trustee without the
consent of the holders of the notes to, among other things:
- evidence the assumption by a successor corporation of our obligations;
- appoint additional, separate or successor trustees to act under the
Indenture;
- add covenants for the protection of the holders of one or more series of
the notes;
- cure any ambiguity or correct any inconsistency in the Indenture;
- add guarantees or security; and
- make any change that does not adversely affect the rights of holders of
the notes of such series. (Section 901)
With the consent of the holders of a majority in principal amount of the
notes of all series then outstanding and affected (voting as one class) we may
execute supplemental indentures with the Trustee to add provisions or change or
eliminate any provision of the Indenture or any supplemental indenture or to
modify the rights of the holders of the notes of each series so affected.
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Without the consent of the holders of each outstanding note affected, no
such supplemental indenture will, with respect to the notes:
- change their stated maturity;
- reduce their principal amount or their interest rate;
- reduce the principal amount payable upon their acceleration;
- change the place or currency in which they are payable;
- impair the right to institute suit for their enforcement;
- reduce the premium payable upon redemption;
- reduce the percentage in principal amount of notes, the consent of the
holders of which is required for any such supplemental indenture;
- reduce the percentage in principal amount of notes required for waiver of
compliance with certain provisions of the Indenture or certain defaults;
or
- modify provisions with respect to modification and waiver. (Section 902)
DISCHARGE OF INDENTURE
At our option, we (1) will be discharged from all obligations under the
Indenture in respect of the notes of a particular series (except for certain
obligations to exchange or register the transfer of the notes of such series,
replace stolen, lost or mutilated notes of such series, maintain paying agencies
and hold monies for payment in trust) or (2) need not comply with certain
restrictive covenants of the Indenture (including the restrictions on Liens)
with respect to the notes of such series, in each case if we deposit with the
Trustee, in trust, money or U.S. government obligations (or a combination
thereof) sufficient to pay the principal of and any premium or interest on the
notes of such series when due. In order to select either option, we must provide
the Trustee with an opinion of counsel or a ruling from, or published by, the
Internal Revenue Service, to the effect that holders of the notes of such series
will not recognize gain or loss for Federal income tax purposes, as if we had
not exercised either option. (Section 404)
In the event we exercise our option under (2) above with respect to the
notes of a particular series and the notes of such series are declared due and
payable because of the occurrence of any event of default other than default
with respect to such obligations, the amount of money and U.S. government
obligations on deposit with the Trustee will be sufficient to pay amounts due on
the notes at the time of their stated maturity but may not be sufficient to pay
amounts due on the notes of such series at the time of the acceleration
resulting from such event of default. We would remain liable, however, for such
amounts. (Sections 403 and 404)
GOVERNING LAW
The Indenture will be governed by, and construed in accordance with, the
laws of the State of New York.
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CONCERNING THE TRUSTEE
The Bank of New York, Trustee under the Indenture, is a member of the
syndicate of lenders for our credit facility.
UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of material U.S. federal income tax consequences
and material U.S. federal estate tax consequences of the acquisition, ownership
and disposition of the notes by investors. The "issue price" is generally the
first price at which a substantial amount of the notes is sold from their
original issuance other than to bond houses, brokers, or similar persons or
organizations acting in the capacity of underwriters, placement agents or
wholesalers. Because the amount payable at maturity will not exceed the issue
price by more than a de minimis amount, as those amounts and issue price are
determined under the Internal Revenue Code and Treasury Regulations thereunder,
the following discussion assumes the notes will not be issued with original
issue discount for federal income tax purposes.
This summary does not discuss all of the aspects of U.S. federal income and
estate taxation that may be relevant to investors in light of their particular
investment or other circumstances. In addition, this summary does not discuss
any U.S. state or local income or foreign income or other tax consequences. This
summary is based upon the provisions of the Internal Revenue Code of 1986, as
amended, the Treasury Regulations and administrative and judicial
interpretations of the Internal Revenue Code, all as in effect as of the date of
this prospectus and all of which are subject to change or differing
interpretation, possibly with retroactive effect. The discussion below deals
only with the notes held as capital assets as defined in Section 1221 of the
Internal Revenue Code, which is generally property held for investment, and does
not address purchasers of the notes that may be subject to special rules,
including, without limitation, certain U.S. expatriates, financial institutions,
insurance companies, tax-exempt entities, dealers in securities or currencies,
traders in securities, and persons that hold the notes as part of a straddle,
hedge, conversion or other integrated transaction. Prospective investors should
consult their own tax advisors regarding the particular U.S. federal, state and
local and foreign income and other tax consequences of acquiring, owning and
disposing of the notes that may be applicable to them.
For purposes of the following discussion, a U.S. holder is a beneficial
owner of a note that is, for U.S. federal income tax purposes:
- an individual citizen or resident of the United States;
- a corporation or partnership, unless the Internal Revenue Service
provides otherwise by Treasury Regulation, created or organized in or
under the laws of the United States or any of its political subdivisions;
- an estate the income of which is subject to U.S. federal income taxation
regardless of its source; or
- a trust if, in general, the trust is subject to the supervision of a
court within the United States and the control of one or more United
States persons as described in section 7701(a)(30) of the Internal
Revenue Code.
THE FOLLOWING DISCUSSION OF CERTAIN FEDERAL TAX INCOME TAX CONSEQUENCES IS
FOR GENERAL INFORMATION ONLY AND IS NOT TAX ADVICE. ACCORDINGLY, INVESTORS
CONSIDERING THE PURCHASE OF NOTES
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SHOULD CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE APPLICATION OF THE
UNITED STATES FEDERAL INCOME AND ESTATE TAX LAWS TO THEIR PARTICULAR SITUATIONS
AS WELL AS ANY TAX CONSEQUENCES ARISING UNDER THE LAWS OF ANY STATE, LOCAL OR
FOREIGN TAXING JURISDICTION OR UNDER ANY APPLICABLE TAX TREATY.
UNITED STATES FEDERAL INCOME TAXATION OF U.S. HOLDERS
Payment of Interest
Stated interest on a note generally will be includable in the income of the
U.S. holder of such note as ordinary income at the time such interest is
received or accrued, in accordance with such holder's method of accounting for
United States federal income tax purposes.
Amortizable Bond Premium
If a U.S. holder purchases a note for an amount in excess of the principal
amount the holder will be considered to have purchased the note at a "premium."
A U.S. holder generally may elect to amortize the premium over the remaining
term of the note on a constant yield method. However, if the note is purchased
at a time when the note may be optionally redeemed for an amount that is in
excess of its principal amount, special rules would apply that could result in a
smaller premium eligible for amortization during the call period and a deferral
of the amortization of bond premium until later in the term of the note. The
amount amortized in any year will be treated as a reduction of the U.S. holder's
interest income from the note. Bond premium on a note held by a U.S. holder that
does not make such an election will decrease the gain or increase the loss
otherwise recognized on disposition of the note. The election to amortize
premium on a constant yield method, once made, applies to all debt obligations
held or subsequently acquired by electing U.S. holder on or after the first day
of the first taxable year to which the election applies and may not be revoked
without the consent of the Internal Revenue Service.
Sale, Exchange or Retirement of the Notes
Upon the sale, exchange or redemption of a note, a U.S. holder generally
will recognize capital gain or loss equal to the difference between:
(1) the amount of cash proceeds and the fair market value of any property
received on the sale, exchange or redemption (except to the extent such
amount is attributable to accrued interest income not previously
included in income, which is taxable as ordinary income); and
(2) such holder's adjusted tax basis in the note. A holder's adjusted tax
basis in a note generally will equal the cost of the note to the U.S.
holder, decreased by any bond premium therefore amortized by the U.S.
holder with respect to the note. Such capital gain or loss will be
long-term capital gain or loss if the note was held by the U.S. holder
for more than 12 months. The net capital gain of an individual derived
in respect of the notes generally will be taxed at a maximum rate of
20% if it is long-term capital gain.
Market Discount
If a U.S. holder, other than a holder who purchases the notes from the
initial purchasers, purchases a Note for an amount that is less than its
principal amount, the amount of the difference will be treated as "market
discount" for United States federal income tax purposes, unless such
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difference is less than a specified de minimus amount. Under the market discount
rules, a U.S. holder will be required to treat any partial principal payment on,
or any gain on the sale, exchange, retirement or other disposition of, a note as
ordinary income to the extent of the market discount which has not previously
been included in income and is treated as having accrued on such note at the
time of such payment or disposition. In addition, the U.S. holder may be
required to defer, until the maturity of the note or its earlier disposition in
a taxable transaction, the deduction of all or a portion of the interest expense
on any indebtedness incurred or continued to purchase or carry such note.
Any market discount will be considered to accrue ratably during the period
from the date of acquisition to the maturity date of the note, unless the U.S.
holder elects to accrue on a constant interest method. A U.S. holder may elect
to include market discount in income currently as it accrues (on either a
ratable or constant interest method), in which case the rule described above
regarding deferral of interest deductions will not apply. This election to
include market discount in income currently, once made, applies to all market
discount obligations acquired on or after the first taxable year to which the
election applies and may not be revoked without the consent of the Internal
Revenue Service.
Information Reporting and Backup Withholding
In general, information reporting requirements will apply to payments of
principal, premium, if any, and interest of a note and payments of the proceeds
of the sale of a note to certain noncorporate holders, and a 31% backup
withholding tax may apply to such payments if the U.S. holder:
(1) fails to furnish or certify his correct taxpayer identification number
to the payer in the manner required;
(2) is notified by the Internal Revenue Service that he has failed to
report payments of interest and dividends properly;
(3) under certain circumstances, fails to certify that he has not been
notified by the Internal Revenue Service that he is subject to backup
withholding for failure to report interest and dividend payments; or
(4) the Internal Revenue Service notifies us or our paying agent that the
taxpayer identification number furnished by the U.S. holder is
incorrect. Any amounts withheld under the backup withholding rules from
a payment to a U.S. holder will be allowed as a credit against such
holder's United States federal income tax and may entitle the holder to
a refund, provided that the required information is furnished to the
Internal Revenue Service.
MATERIAL U.S. FEDERAL INCOME AND ESTATE TAX CONSEQUENCES TO NON-U.S. HOLDERS
For purposes of the following discussion, a non-U.S. holder is a beneficial
owner of a note that is not, for U.S. federal income tax purposes, a U.S.
holder. An individual may, subject to exceptions, be deemed to be a resident
alien, as opposed to a non-resident alien, by virtue of being present in the
United States on at least 31 days in the calendar year and for an aggregate of
at least 183 days during a three year period ending in the current calendar
year. For this purpose the number of days an individual is present in the U.S.
includes all of the days present in the current year, one-third of the days
present in the immediately preceding year, and one-sixth of the days present in
the second preceding year. Resident aliens are subject to U.S. federal tax as if
they were U.S. citizens.
71
<PAGE> 73
Under present U.S. federal income and estate tax law and subject to the
discussion of backup withholding below:
(1) payments of principal, premium, if any, and interest on a note by us or
any of our agents to any non-U.S. holder will not be subject to withholding of
U.S. federal income tax, provided that in the case of interest:
- the non-U.S. holder does not directly or indirectly, actually or
constructively, own 10% or more of the total combined voting power of all
classes of our stock entitled to vote;
- the non-U.S. holder is not a controlled foreign corporation that is
related to us through sufficient stock ownership, or a bank receiving
interest described in Section 881(c)(3)(A) of the Internal Revenue Code;
and
- either the beneficial owner of the note certifies to us or our agent,
under penalties of perjury, that it is not a "United States person" under
the meaning of the Internal Revenue Code and provides its name and
address, or a securities clearing organization, bank or other financial
institution that holds customers' securities in the ordinary course of
its trade or business that holds the note on behalf of the beneficial
owner certifies to us or our agent under penalties of perjury that it, or
the financial institution between it and the beneficial owner, has
received from the beneficial owner a statement, under penalties of
perjury, that it is not a "United States person" and provides the payor
with a copy of this statement;
(2) a non-U.S. holder will not be subject to U.S. federal income tax on any
gain or income realized on the sale, exchange, redemption, retirement at
maturity or other disposition of a note, provided that, in the case of proceeds
representing accrued interest, the conditions described in paragraph (1) above
are met, unless:
- the non-U.S. holder is an individual who is present in the United States
for 183 days or more during the taxable year and some other conditions
are met; or
- the gain is effectively connected with the conduct of a U.S. trade or
business by the non-U.S. holder, or if an income tax treaty applies, is
generally attributable to a U.S. "permanent establishment" maintained by
the non-U.S. holder; and
(3) a note held by an individual who at the time of death is not a citizen
or resident of the United States will not be subject to U.S. federal estate tax
as a result of the individual's death if, at the time of the individual's death:
- the individual did not directly or indirectly, actually or
constructively, own 10% or more of the total combined voting power of all
classes of our stock entitled to vote; and
- the income on the note would not have been effectively connected with the
conduct of a trade or business by the individual in the United States.
If a non-U.S. holder is engaged in a trade or business in the United States
and interest on the note is effectively connected with the conduct of this trade
or business or if an income tax treaty applies and the non-U.S. holder maintains
a U.S. "permanent establishment" to which the interest is generally
attributable, although the non-U.S. holder is exempt from the withholding tax
discussed in the preceding paragraph (1) provided that the holder furnishes a
properly executed United States Internal Revenue Service Form W-8ECI or
successor form on or before any payment date to claim the exemption, the holder
may be subject to U.S. federal income tax on such interest on a net basis in the
same manner as if it were a U.S. holder.
In addition, a foreign corporation that is a holder of a note may be
subject to a branch profits tax equal to 30% of its effectively connected
earnings and profits for the taxable year, subject to some adjustments, unless
it qualifies for a lower rate under an applicable income tax treaty. For this
72
<PAGE> 74
purpose, interest on a note or gain recognized on the disposition of a note will
be included in earnings and profits if the interest or gain is effectively
connected with the conduct by the foreign corporation of a trade or business in
the United States.
Republic Services will, where required, report to the holder of notes and
the Internal Revenue Service the amount of any interest paid on the notes in
each calendar year and the amounts of tax withheld, if any, with respect to such
payments. Copies of these information returns may also be made available under
the provisions of a specific treaty agreement to the tax authorities of the
country in which the non-U.S. holder resides.
Recently finalized Treasury Regulations generally effective for payments
made after December 31, 2000 will provide alternative methods for satisfying the
certification requirement described in the third bullet point of paragraph (1)
above and will require a non-U.S. holder that provides an Internal Revenue
Service Form W-8ECI or successor form as discussed above, as well as a non-U.S.
holder claiming the benefit of an income tax treaty, to also provide its U.S.
taxpayer identification number. The finalized Treasury Regulation generally also
will require, in the case of a note held by a foreign partnership, that the
certification described in the third bullet point of paragraph (1) above be
provided by the partners and that the partnership provide certain information,
including a U.S. taxpayer identification number. A look-through rule will apply
in the case of tiered partnerships.
Under current Treasury Regulations, backup withholding and information
reporting will not apply to payments made by us or any of our agents, in their
capacities as agents, to a non-U.S. holder of a note if the holder has provided
the required certification that it is not a United States person as set forth in
paragraph (1) above, provided that neither we nor our agent has actual knowledge
that the holder is a United States person. We or our agent may, however, report
payments of interest on the notes. Payments of the proceeds from a disposition
by a non-U.S. holder of a note made to or through a foreign office of a broker
will not be subject to information reporting or backup withholding, except that
information reporting may apply to those payments if the broker is
- a United States person,
- a controlled foreign corporation for U.S. federal income tax purposes,
- a foreign person 50% or more of whose gross income is effectively
connected with a U.S. trade or business for a specified three year period
or
- with respect to payments made after December 31, 2000, a foreign
partnership, if at any time during its tax year, one or more of its
partners are U.S. persons, as defined in Treasury Regulations, who in the
aggregate hold more than 50% of the income or capital interest in the
partnership or if, at any time during its tax year, the foreign
partnership is engaged in a U.S. trade or business.
Payments of the proceeds from a disposition by a non-U.S. holder of a note
made to or through the U.S. office of a broker are subject to information
reporting and backup withholding unless the holder or beneficial owner certifies
as to its taxpayer identification number or otherwise establishes an exemption
from information reporting and backup withholding.
Any amounts withheld under the backup withholding rules from a payment to a
non-U.S. holder would be allowed as a refund or a credit against the holder's
U.S. federal income tax liability, provided the required information is
furnished to the Internal Revenue Service.
73
<PAGE> 75
UNDERWRITING
GENERAL
Subject to the terms and conditions set forth in a purchase agreement among
our company and each of Banc of America Securities LLC and Merrill Lynch,
Pierce, Fenner & Smith Incorporated, as joint book-running managers, and Banc
One Capital Markets, Inc., Chase Securities Inc., Deutsche Bank Securities Inc.,
Donaldson, Lufkin & Jenrette Securities Corporation and Salomon Smith Barney
Inc., we have agreed to sell to the underwriters, and each of the underwriters
severally and not jointly has agreed to purchase from us, the aggregate
principal amount of each series of the notes set forth opposite its name below.
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT PRINCIPAL AMOUNT
OF NOTES DUE OF NOTES DUE
UNDERWRITERS 200 200
- ------------ ---------------- ----------------
<S> <C> <C>
Banc of America Securities LLC......................... $ $
Merrill Lynch, Pierce, Fenner & Smith
Incorporated .............................
Banc One Capital Markets, Inc..........................
Chase Securities Inc...................................
Deutsche Bank Securities Inc...........................
Donaldson, Lufkin & Jenrette Securities Corporation....
Salomon Smith Barney Inc...............................
------------ ------------
Total..................................... $ $
============ ============
</TABLE>
The several underwriters have agreed, subject to the terms and conditions
included in the purchase agreement, to purchase all of the notes being sold
under the agreement, if any of the notes being sold under the agreement are
purchased. In the event of a default by an underwriter, the purchase agreement
provides that, in certain circumstances, the purchase commitments of the
nondefaulting underwriters may be increased or the purchase agreement may be
terminated.
We have agreed to indemnify the underwriters against some liabilities,
including some liabilities under the Securities Act, or to contribute to
payments the underwriters may be required to make in respect of those
liabilities.
The notes are being offered by the several underwriters, subject to prior
sale, when, as and if issued to and accepted by them, subject to approval of
legal matters by counsel for the underwriters and other conditions. The
underwriters reserve the right to withdraw, cancel or modify such offer and to
reject orders in whole or in part.
CONCESSIONS AND DISCOUNTS
The underwriters have advised us that they propose initially to offer the
notes to the public at the initial public offering prices set forth on the cover
page of this prospectus, and to dealers at such prices, less the concessions
shown below. The underwriters may allow, and such dealers may reallow, discounts
on the notes to other dealers, at the discounts shown below. After the initial
public offerings, the public offering prices, concessions and discounts may be
changed.
<TABLE>
<CAPTION>
NOTES DUE 200 NOTES DUE 200
-------------- --------------
<S> <C> <C>
Concession............................................. % %
Discount............................................... % %
</TABLE>
74
<PAGE> 76
The expenses of the offering, exclusive of the underwriting discount, are
estimated at approximately $1.1 million and are payable by us.
NO SALES OF SIMILAR SECURITIES
We have agreed, subject to exceptions, not to directly or indirectly offer,
pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant for
the sale of, lend or otherwise dispose of or transfer any debt securities (other
than, in each case, in connection with an extension or amendment of our
revolving credit facility, replacement of our revolving credit facility with
another credit facility, or entering into a credit facility to purchase or lease
equipment) or any securities convertible into or exercisable or exchangeable for
debt securities, or file a registration statement under the Securities Act with
respect to the foregoing, without the prior written consent of Banc of America
Securities LLC and Merrill Lynch on behalf of the underwriters for a period of
90 days after the date of this prospectus.
NEW ISSUE OF NOTES
The notes are a new issue of securities with no established trading market.
We do not intend to apply for listing of the notes on any national securities
exchange or for quotation of the notes on any automated dealer quotation system.
We have been advised by the underwriters that they presently intend to make a
market in the notes after the consummation of the offering contemplated hereby,
although they are under no obligation to do so and may discontinue any
market-making activities at any time without any notice. No assurance can be
given as to the liquidity of the trading market for the notes or that an active
public market for the notes will develop. If an active public trading market for
the notes does not develop, the market price and liquidity of the notes may be
adversely affected.
NASD REGULATIONS
Part of the proceeds of the offering will be used to repay borrowings under
our revolving credit facility. Because more than 10% of the net proceeds of the
offering may be paid to members or affiliates of members of the National
Association of Securities Dealers, Inc. participating in the offering, the
offering will be conducted in accordance with NASD Conduct Rule 2710(c)(8).
PRICE STABILIZATION AND SHORT POSITIONS
In connection with the offering, the underwriters are permitted to engage
in transactions that stabilize the market price of the notes. These transactions
consist of bids or purchases for the purpose of pegging, fixing or maintaining
the price of the notes. If the underwriters create a short position in the notes
in connection with the offering, i.e., if they sell more notes than are set
forth on the cover page of this prospectus, the underwriters may reduce that
short position by purchasing notes in the open market. In general, purchases of
a security for the purpose of stabilization or to reduce a short position could
cause the price of the security to be higher than it might be in the absence of
such purchases.
Neither our company nor any of the underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the notes. In addition, neither our
company nor any of the underwriters makes any representation that the
underwriters will engage in such transactions or that such transactions, once
commenced, will not be discontinued without notice.
75
<PAGE> 77
OTHER RELATIONSHIPS
Some of the underwriters and their affiliates engage in transactions with,
and perform services for, our company in the ordinary course of business and
have engaged, and may in the future engage, in commercial banking and investment
banking transactions with our company, for which they have received customary
compensation. Merrill Lynch, Deutsche Bank Securities and Donaldson, Lufkin &
Jenrette were U.S. representatives of the underwriters in our initial public
offering in July 1998, and Banc of America Securities LLC and Salomon Smith
Barney each participated in the underwriting syndicate for our initial public
offering.
Merrill Lynch, Deutsche Bank Securities, Donaldson, Lufkin & Jenrette and
Salomon Smith Barney served as U.S. representatives of the underwriters in a
secondary public offering by our selling stockholder in April 1999. Banc of
America Securities LLC participated in the underwriting syndicate for the
secondary offering.
Bank of America NTSA is the administrative agent for our credit facility.
Banc of America Securities LLC is an affiliate of Bank of America NTSA. The
Chase Manhattan Bank, Citibank, N.A., Deutsche Bank AG, The First National Bank
of Chicago and NationsBank, N.A. are each members of the syndicate of lenders
under our credit facility. Chase Securities Inc. is an affiliate of The Chase
Manhattan Bank, Salomon Smith Barney is an affiliate of Citibank, N.A., Deutsche
Bank Securities is an affiliate of Deutsche Bank AG, Banc One Capital Markets,
Inc. is an affiliate of The First National Bank of Chicago and Banc of America
Securities LLC is an affiliate of NationsBank, N.A.
We expect to use the net proceeds from this offering to pay some of the
amounts outstanding under our credit facility. Each member of the lending
syndicate will receive a portion of the net proceeds of this offering toward the
reduction of these amounts under our credit facility.
LEGAL MATTERS
Legal matters regarding the validity of the notes offered under this
prospectus will be passed upon on our behalf by Akerman, Senterfitt & Eidson,
P.A., Miami, Florida. Some attorneys employed by Akerman, Senterfitt & Eidson,
P.A. own shares of our common stock. Legal matters relating to the offering will
be passed upon for the underwriters by Fried, Frank, Harris, Shriver & Jacobson
(a partnership including professional corporations), New York, New York.
Akerman, Senterfitt and Eidson, P.A. will rely on Fried, Frank, Harris, Shriver
& Jacobson with respect to New York law.
EXPERTS
The consolidated financial statements and schedule for each of the three
years ended December 31, 1998, included in this prospectus and registration
statement, have been audited by Arthur Andersen LLP, independent certified
public accountants, as indicated in their reports with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in giving
said reports.
76
<PAGE> 78
AVAILABLE INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement on Form S-1 under the Securities Act to register the notes being
offered by Republic Services under this prospectus. This prospectus does not
contain all of the information in the registration statement, certain portions
of which are omitted as permitted by the rules and regulations of the
Commission. For further information pertaining to our company and the notes
being offered, reference is made to the registration statement, including its
exhibits and the financial statements, notes and schedules filed as a part
thereof. Statements contained in this prospectus regarding the contents of any
contract or other document referred to herein or therein are not necessarily
complete, and in each instance reference is made to the copy of the contract or
other document filed as an exhibit to the registration statement or other
document, each statement being qualified in all respects by the reference.
Our company is subject to the informational requirements of the Exchange
Act and, in accordance therewith, will file reports, proxy statements and other
information with the Commission. The reports, proxy statements and other
information, as well as the registration statement and its exhibits and
schedules, may be inspected, without charge, at the public reference facility
maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the Commission's regional offices located
at Seven World Trade Center, New York, New York 10048 and Northwestern Atrium
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511.
Copies of the materials may also be obtained from the Public Reference Section
of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. The materials can also be inspected at the offices of the
NYSE, 20 Broad Street, New York, New York 10005 or on the Commission's site on
the Internet at http://www.sec.gov.
77
<PAGE> 79
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Certified Public Accountants.......... F-2
Consolidated Balance Sheets as of December 31, 1998 and
1997...................................................... F-3
Consolidated Statements of Operations for each of the Three
Years Ended December 31, 1998............................. F-4
Consolidated Statements of Stockholders' Equity for each of
the Three Years Ended
December 31, 1998......................................... F-5
Consolidated Statements of Cash Flows for each of the Three
Years Ended December 31, 1998............................. F-6
Notes to Consolidated Financial Statements.................. F-7
</TABLE>
F-1
<PAGE> 80
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To Republic Services, Inc.:
We have audited the accompanying consolidated balance sheets of Republic
Services, Inc. (a Delaware corporation) and subsidiaries as of December 31, 1998
and 1997, and the related consolidated statements of operations, stockholders'
equity and cash flows for each of the years in the three-year period ended
December 31, 1998. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Republic Services, Inc. and
subsidiaries as of December 31, 1998 and 1997, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1998, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Fort Lauderdale, Florida,
January 28, 1999, except with respect to the
matters discussed in Note 12, as to which
the date is May 3, 1999.
F-2
<PAGE> 81
REPUBLIC SERVICES, INC.
CONSOLIDATED BALANCE SHEETS
(IN MILLIONS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
MARCH 31, -------------------
1999 1998 1997
----------- -------- --------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 15.3 $ 556.6 $ --
Restricted cash........................................... 6.8 7.1 18.8
Accounts receivable, less allowance for doubtful accounts
of $22.1 and $13.6 at December 31, 1998 and 1997,
respectively........................................... 207.8 182.7 131.0
Prepaid expenses and other current assets................. 43.7 37.6 26.1
-------- -------- --------
Total Current Assets.............................. 273.6 784.0 175.9
PROPERTY AND EQUIPMENT, NET................................. 1,391.4 1,096.1 801.8
INTANGIBLE AND OTHER ASSETS, NET............................ 1,123.3 932.0 370.3
-------- -------- --------
$2,788.3 $2,812.1 $1,348.0
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable.......................................... $ 45.0 $ 64.7 $ 40.2
Accrued liabilities....................................... 156.5 146.2 57.6
Deferred revenue.......................................... 52.0 46.6 29.5
Due to Republic Industries................................ -- 266.1
Notes payable and current maturities of long-term debt.... 385.2 499.9 10.8
Other current liabilities................................. 54.9 26.4 19.9
-------- -------- --------
Total Current Liabilities......................... 693.6 783.8 424.1
LONG-TERM DEBT, NET OF CURRENT MATURITIES................... 557.4 557.2 64.3
ACCRUED ENVIRONMENTAL AND LANDFILL COSTS.................... 102.1 77.3 46.0
DEFERRED INCOME TAXES....................................... 73.9 71.4 47.5
OTHER LIABILITIES........................................... 16.8 23.3 15.3
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Investment by Republic Industries......................... -- 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; 79,724,417 and none issued and
outstanding, respectively............................ 1.8 .8 --
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................................ 1,205.5 1,203.5 --
Retained earnings......................................... 137.2 93.8 --
-------- -------- --------
Total Stockholders' Equity........................ 1,344.5 1,299.1 750.8
-------- -------- --------
$2,788.3 $2,812.1 $1,348.0
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
F-3
<PAGE> 82
REPUBLIC SERVICES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN MILLIONS, EXCEPT EARNINGS PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEARS ENDED DECEMBER 31,
------------------- ------------------------------
1999 1998 1998 1997 1996
-------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUE........................................ $ 403.5 $ 300.8 $1,369.1 $1,127.7 $ 953.3
EXPENSES:
Cost of operations........................... 244.7 185.9 842.7 723.0 628.3
Depreciation, amortization and depletion..... 33.4 23.8 106.3 86.1 75.3
Selling, general and administrative.......... 46.0 32.1 135.8 117.3 135.3
Restructuring and other charges.............. -- -- -- -- 8.8
-------- -------- -------- -------- --------
OPERATING INCOME............................... 79.4 59.0 284.3 201.3 105.6
INTEREST EXPENSE............................... (11.3) (5.4) (44.7) (25.9) (29.7)
INTEREST INCOME................................ 2.6 .5 1.5 4.9 11.7
OTHER INCOME (EXPENSE), NET.................... (.1) .3 (.9) 1.8 2.2
-------- -------- -------- -------- --------
INCOME BEFORE INCOME TAXES..................... 70.6 54.4 240.2 182.1 89.8
PROVISION FOR INCOME TAXES..................... 27.2 19.6 86.5 65.9 38.0
-------- -------- -------- -------- --------
NET INCOME..................................... $ 43.4 $ 34.8 $ 153.7 $ 116.2 $ 51.8
======== ======== ======== ======== ========
BASIC AND DILUTED EARNINGS PER SHARE........... $ .25 $ .36 $ 1.13 $ 1.21 $ .54
======== ======== ======== ======== ========
WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT
SHARES OUTSTANDING........................... 175.4 95.7 135.6 95.7 95.7
======== ======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE> 83
REPUBLIC SERVICES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN MILLIONS)
<TABLE>
<CAPTION>
INVESTMENT COMMON STOCK ADDITIONAL
BY REPUBLIC ----------------- PAID-IN RETAINED
INDUSTRIES CLASS A CLASS B CAPITAL EARNINGS
----------- ------- ------- ---------- --------
<S> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1995..................... $ 371.2 $ -- $1.0 $ -- $ --
Net income..................................... 51.8 -- -- -- --
Business acquisitions contributed by Republic
Industries.................................. 79.7 -- -- -- --
Other.......................................... (9.2) -- -- -- --
--------- ---- ---- -------- ------
BALANCE AT DECEMBER 31, 1996..................... 493.5 -- 1.0 -- --
Net income..................................... 116.2 -- -- -- --
Business acquisitions contributed by Republic
Industries.................................. 148.4 -- -- -- --
Investment in Resources........................ (17.4) -- -- -- --
Other.......................................... 9.1 -- -- -- --
--------- ---- ---- -------- ------
BALANCE AT DECEMBER 31, 1997..................... 749.8 -- 1.0 -- --
Net income..................................... 59.9 -- -- -- 93.8
Business acquisitions contributed by Republic
Industries.................................. 128.3 -- -- -- --
Dividend to Republic Industries................ (2,000.0) -- -- -- --
Dividend from Resources........................ 437.3 -- -- -- --
Transfer to additional paid-in capital......... 624.7 -- -- (624.7) --
Issuance of Class A Common Stock to Republic
Industries.................................. -- .2 -- 395.2 --
Sale of Class A Common Stock................... -- .6 -- 1,433.0 --
--------- ---- ---- -------- ------
BALANCE AT DECEMBER 31, 1998..................... -- .8 1.0 1,203.5 93.8
--------- ---- ---- -------- ------
Net income..................................... -- -- -- -- 43.4
Conversion of Common Stock owned by AutoNation,
Inc......................................... -- 1.0 (1.0) -- --
Issuance of compensatory stock options......... -- -- -- 2.0 --
--------- ---- ---- -------- ------
BALANCE AT MARCH 31, 1999........................ $ -- $1.8 $ -- $1,205.5 $137.2
========= ==== ==== ======== ======
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE> 84
REPUBLIC SERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN MILLIONS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEARS ENDED DECEMBER 31,
--------------------- ---------------------------------
1999 1998 1998 1997 1996
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH PROVIDED BY OPERATING ACTIVITIES:
Net income.............................. $ 43.4 $ 34.8 $ 153.7 $ 116.2 $ 51.8
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation, amortization and
depletion of property and
equipment.......................... 26.3 20.3 88.6 76.1 66.6
Amortization of intangible assets.... 7.1 3.5 17.7 10.0 8.7
Deferred tax provision............... 7.1 7.6 19.2 36.5 3.2
Non-cash charge...................... 2.0 -- -- -- --
Changes in assets and liabilities,
net of effects from business
acquisitions:
Accounts receivable................ (22.6) (3.3) (41.8) (15.6) (16.4)
Prepaid expenses and other
assets.......................... (6.4) (2.9) (11.3) 17.4 7.0
Accounts payable and accrued
liabilities..................... (18.4) (3.0) (14.1) (26.7) (32.0)
Other liabilities.................. 25.5 23.3 59.1 65.5 54.6
--------- --------- --------- --------- ---------
64.0 80.3 271.1 279.4 143.5
--------- --------- --------- --------- ---------
CASH USED IN INVESTING ACTIVITIES:
Purchases of property and equipment..... (55.7) (29.0) (193.0) (165.3) (146.9)
Cash used in acquisitions, net of cash
acquired............................. (432.5) 1.8 (425.2) 2.7 1.2
Other................................... (.9) 6.0 10.8 (5.5) (30.0)
--------- --------- --------- --------- ---------
(489.1) (21.2) (607.4) (168.1) (175.7)
--------- --------- --------- --------- ---------
CASH PROVIDED BY (USED IN) FINANCING
ACTIVITIES:
Proceeds from the sale of common
stock................................ -- -- 1,433.6 -- --
Proceeds from notes payable and
long-term debt....................... 1.3 .5 10.6 5.2 44.5
Payments of notes payable and long-term
debt................................. (15.5) (16.3) (61.8) (100.2) (91.4)
Increase (decrease) in amounts due to
Republic Industries.................. -- (27.3) (1,469.5) (47.3) 166.9
Net proceeds from (payments on)
revolving credit facility............ (102.0) -- 980.0 -- --
Other................................... -- (16.0) -- 6.8 (99.7)
--------- --------- --------- --------- ---------
(116.2) (59.1) 892.9 (135.5) 20.3
--------- --------- --------- --------- ---------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS............................. (541.3) -- 556.6 (24.2) (11.9)
CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD.................................. 556.6 -- -- 24.2 36.1
--------- --------- --------- --------- ---------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD.................................. $ 15.3 $ -- $ 556.6 $ -- $ 24.2
========= ========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
F-6
<PAGE> 85
REPUBLIC SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(ALL TABLES IN MILLIONS, EXCEPT PER SHARE DATA)
(INFORMATION RELATED TO THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998 IS
UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying Consolidated Financial Statements include the accounts of
Republic Services, Inc. and its subsidiaries (the "Company"). As of December 31,
1998, approximately 63.9% 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"), was owned by Republic Industries, Inc.
("Republic Industries"). The Company provides non-hazardous solid waste
collection and disposal services in the United States. All material intercompany
transactions have been eliminated.
The accompanying Consolidated Financial Statements exclude the accounts of
the Company's formerly wholly owned subsidiary, Republic Resources Company, Inc.
("Resources"), all of the common stock of which was distributed to Republic
Industries in June 1998. The Company and Resources have been in dissimilar
businesses, have been managed and financed historically as if they were
autonomous, have had no more than incidental common facilities and costs, have
been operated and financed autonomously after the distribution of Resources to
Republic Industries, and have no financial commitments, guarantees, or
contingent liabilities to each other following the distribution. Based on these
facts, the accounts of Resources have been excluded from the Company's
consolidated financial statements as the Company has elected to characterize the
distribution of Resources as resulting in a change in the reporting entity.
In the opinion of management, the Unaudited Consolidated Financial
Statements contain all material adjustments, consisting of only normal recurring
adjustments, necessary to present fairly the consolidated financial position of
the Company at March 31, 1999 and the consolidated results of operations and
cash flows for the three months ended March 31, 1999 and 1998. Income taxes
during these interim periods have been provided for based upon the Company's
anticipated annual effective income tax rate. Operating results for these
interim periods are not necessarily indicative of the results that can be
expected for a full year.
The accompanying Consolidated Financial Statements reflect the accounts of
the Company as a subsidiary of Republic Industries subject to corporate general
and administrative expense allocations or charges under the Services Agreement
as described in Note 10, 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.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
All historical share and per share data of the Company's Common Stock for
all periods included in the consolidated financial statements and the notes
thereto have been retroactively adjusted for the recapitalization of 100 shares
of the Company's common stock previously held by Republic Industries
F-7
<PAGE> 86
REPUBLIC SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
into 95,688,083 shares of Class B Common Stock in July 1998, as more fully
described in Note 6, Stockholders' Equity.
In May 1998, Republic Industries announced its intention to separate the
Company from Republic Industries (the "Separation"). Republic Industries also
announced its intention to distribute its remaining shares of Common Stock in
the Company as of the distribution date to Republic Industries' shareholders in
1999, subject to certain conditions and consents (the "Distribution"). The
Company and Republic Industries have entered into certain agreements providing
for the Separation and the Distribution, and the governing of various interim
and ongoing relationships between the companies. The Distribution was
conditioned, in part, on Republic Industries obtaining a private letter ruling
from the Internal Revenue Service ("IRS") 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 Republic Industries. In July 1998
Republic Industries filed its application for the private letter ruling with the
IRS. See also Note 12, Subsequent Events, for further information.
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 Republic
Industries as of June 30, 1998 through the issuance of shares of Class A Common
Stock and through all of the proceeds from the Initial Public Offering.
Following the Initial Public Offering and the repayment of amounts due to
Republic Industries, 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 were owned by Republic Industries.
The following unaudited pro forma consolidated statement of operations data
for the year ended December 31, 1998 has been prepared assuming the Initial
Public Offering and the repayment in full of the amounts due to Republic
Industries had occurred as of January 1, 1998:
<TABLE>
<S> <C>
Operating income............................................ $284.3
Interest expense............................................ (7.4)
Interest income............................................. 1.5
Other income (expense), net................................. (.9)
------
Income before income taxes.................................. 277.5
Provision for income taxes.................................. 99.9
------
Net income.................................................. $177.6
======
Basic and diluted earnings per share........................ $ 1.01
======
Weighted average common and common equivalent shares
outstanding............................................... 175.4
======
</TABLE>
The unaudited pro forma consolidated statement of operations data are
provided for informational purposes only and should not be construed to be
indicative of the Company's consolidated results of operations had the
transactions and events described above been consummated on the date assumed and
do not project the Company's results of operations for any future date or
period.
F-8
<PAGE> 87
REPUBLIC SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Certain reclassifications have been made to the prior period balance sheet
to conform to the current presentation.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
RESTRICTED CASH
Restricted cash consists of amounts held in trust as a financial guaranty
of the Company's performance as well as funds restricted for capital
expenditures under certain debt facilities.
OTHER CURRENT ASSETS
Other current assets consist primarily of inventories and short-term notes
receivable. Inventories totaled approximately $13.3 million and $11.7 million at
December 31, 1998 and 1997, respectively, and consist primarily of equipment
parts, compost materials and supplies that are valued under a method that
approximates the lower of cost (first-in, first-out) or market.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. Expenditures for major
additions and improvements are capitalized, while maintenance and repairs are
charged to expense as incurred. When property is retired or otherwise disposed
of, the related cost and accumulated depreciation are removed from the accounts
and any resulting gain or loss is reflected in the Consolidated Statements of
Operations.
The Company revises the estimated useful lives of property and equipment
acquired through business acquisitions to conform with its policies regarding
property and equipment. Depreciation is provided over the estimated useful lives
of the assets involved using the straight-line method. The estimated useful
lives are: twenty to forty years for buildings and improvements, three to
fifteen years for trucks and equipment, and five to ten years for furniture and
fixtures.
Landfills are stated at cost and are depleted based on consumed airspace.
Landfill improvements include direct costs incurred to obtain a landfill permit
and direct costs incurred to construct and develop the site. These costs are
depleted based on consumed airspace. All indirect landfill development costs are
expensed as incurred.
Interest costs are capitalized in connection with the construction of
landfill sites. Interest capitalized was $.8 million, $.8 million and $1.8
million for the years ended December 31, 1998, 1997 and 1996, respectively.
F-9
<PAGE> 88
REPUBLIC SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
A summary of property and equipment is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
MARCH 31, --------------------
1999 1998 1997
----------- -------- --------
(UNAUDITED)
<S> <C> <C> <C>
Land, landfills and improvements...................... $ 903.3 $ 611.7 $ 420.1
Furniture, fixtures, trucks and equipment............. 826.3 806.8 668.9
Buildings and improvements............................ 154.7 150.6 126.6
-------- -------- --------
1,884.3 1,569.1 1,215.6
Less: accumulated depreciation, amortization and
depletion........................................... (492.9) (473.0) (413.8)
-------- -------- --------
$1,391.4 $1,096.1 $ 801.8
======== ======== ========
</TABLE>
The Company periodically evaluates whether events and circumstances have
occurred that may warrant revision of the estimated useful life of property and
equipment or whether the remaining balance of property and equipment should be
evaluated for possible impairment. The Company uses an estimate of the related
undiscounted cash flows over the remaining life of the property and equipment in
measuring their recoverability.
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 is
amortized over forty 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 was $73.0 million and $57.9
million at December 31, 1998 and 1997, respectively.
The Company periodically evaluates whether events and circumstances have
occurred that may warrant revision of the estimated useful life of intangible
assets or whether the remaining balance of intangible assets should be evaluated
for possible impairment. The Company uses an estimate of the related
undiscounted cash flows over the remaining life of the intangible assets in
measuring their recoverability.
ACCRUED LIABILITIES
A summary of accrued liabilities is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------
1998 1997
------ ------
<S> <C> <C>
Amounts due former owners of acquired businesses............ $ 26.7 $ --
Accrued payroll and benefits................................ 25.7 17.0
Accrued disposal costs...................................... 16.1 5.1
Accrued fees and taxes...................................... 12.7 5.4
Other....................................................... 65.0 30.1
------ ------
$146.2 $ 57.6
====== ======
</TABLE>
F-10
<PAGE> 89
REPUBLIC SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
ACCRUED ENVIRONMENTAL AND LANDFILL COSTS
A summary of accrued environmental and landfill costs is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------
1998 1997
----- -----
<S> <C> <C>
Accrued landfill site closure/post-closure costs............ $73.4 $47.3
Accrued environmental costs................................. 9.5 8.6
----- -----
82.9 55.9
Less: current portion (included in other current
liabilities).............................................. (5.6) (9.9)
----- -----
$77.3 $46.0
===== =====
</TABLE>
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. Available airspace is generally based on
estimates of remaining permitted and likely to be permitted airspace developed
by independent engineers together with the Company's engineers and accounting
personnel utilizing information provided by aerial surveys of landfills which
are generally performed annually. These aerial surveys form the basis for the
volume available for disposal. Accruals for closure and post-closure costs
totaled approximately $11.4 million, $7.9 million and $4.4 million during the
years ended December 31, 1998, 1997 and 1996, respectively. Estimated aggregate
closure and post-closure costs will be fully accrued for these landfills at the
time that such facilities cease to accept waste and are closed. At December 31,
1998, approximately $370.5 million of such costs are to be expensed over the
remaining lives of these facilities. 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 United States Environmental Protection Agency's Subtitle D regulations.
These estimates do not take into account discounts for the present value of such
total estimated costs. The Company periodically reassesses such costs based on
various methods and assumptions regarding landfill airspace and the technical
requirements of the Environmental Protection Agency's Subtitle D regulations and
adjusts such accruals accordingly.
In the normal course of business, the Company is subject to ongoing
environmental investigations by certain regulatory agencies, as well as other
claims and disputes that could result in litigation. Environmental costs are
accrued by the Company through a charge to income in the period such liabilities
become probable and can be reasonably estimated. No material amounts were
charged to expense during the years ended December 31, 1998, 1997 and 1996.
REVENUE RECOGNITION
Revenue consists primarily of collection fees from commercial, industrial,
residential and municipal customers and transfer and landfill disposal fees
charged to third parties. Collection, transfer and disposal, recycling and other
services accounted for approximately 78.7%, 10.1%, 3.1% and 8.1%, respectively,
of consolidated revenue for the year ended December 31, 1998. Advance billings
are recorded as deferred revenue and revenue is recognized over the period in
which services are provided. No one customer has individually accounted for more
than 10.0% of the Company's consolidated revenues in any of the past three
years.
F-11
<PAGE> 90
REPUBLIC SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
INCOME TAXES
Effective with the Initial Public Offering on July 1, 1998, the Company is
no longer included in the consolidated federal income tax return of Republic
Industries. For the periods prior to the Initial Public Offering, all tax
amounts have been recorded as if the Company filed a separate federal tax
return. The Company accounts for income taxes in accordance with SFAS No. 109,
"Accounting for Income Taxes." Accordingly, deferred income taxes have been
provided to show the effect of temporary differences between the recognition of
revenue and expenses for financial and income tax reporting purposes and between
the tax basis of assets and liabilities and their reported amounts in the
financial statements.
Certain businesses acquired in 1997 and 1996 and accounted for under the
pooling of interests method of accounting were subchapter S corporations for
income tax purposes. The subchapter S corporation status of these companies was
terminated effective with the closing date of the acquisitions. For purposes of
these Consolidated Financial Statements, federal and state income taxes have
been recorded as if these companies had filed subchapter C corporation tax
returns for the pre-acquisition periods, and the current income tax expense is
reflected in shareholders' equity. Pre-acquisition income taxes related to
pooled S corporations recorded in the consolidated financial statements were $0
million and $4.0 million during the years ended December 31, 1997 and 1996,
respectively.
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 Republic
Industries into 95,688,083 shares of Class B Common Stock. Diluted earnings per
share equals basic earnings per share for all periods presented since there was
substantially no dilutive effect of common share equivalents outstanding during
the periods presented. See Note 7, Stock Options, for further information
regarding stock options which could potentially dilute earnings per share in
future periods.
COMPREHENSIVE INCOME
The Company has no components of other comprehensive income. Accordingly,
net income equals comprehensive income for all periods presented.
STATEMENTS OF CASH FLOWS
The Company considers all highly liquid investments with purchased
maturities of three months or less to be cash equivalents. The effect of
non-cash transactions related to business combinations, as discussed in Note 3,
Business Combinations, and other non-cash transactions are excluded from the
accompanying Consolidated Statements of Cash Flows.
The Company made interest payments on notes payable and long-term debt of
approximately $44.8 million, $25.1 million and $30.1 million for the years ended
December 31, 1998, 1997 and 1996, respectively. The Company made income tax
payments of approximately $65.4 million, $29.4 million and $31.7 million for the
years ended December 31, 1998, 1997 and 1996, respectively.
F-12
<PAGE> 91
REPUBLIC SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of cash and cash equivalents, restricted cash,
receivables, and accounts payable and accrued liabilities approximate fair value
due to the short maturity of these instruments. The carrying amounts of notes
payable and long-term debt approximate fair value because interest rates
generally are variable and, accordingly, approximate current market rates.
CONCENTRATION OF CREDIT RISK
The Company provides services to commercial, industrial, municipal and
residential customers in the United States. Concentrations of credit risk with
respect to trade receivables are limited due to the wide variety of customers
and markets in which services are provided as well as their dispersion across
many geographic areas in the United States. The Company performs ongoing credit
evaluations of its customers, but does not require collateral to support
customer receivables. The Company establishes an allowance for doubtful accounts
based on factors surrounding the credit risk of specific customers, historical
trends and other information.
3. BUSINESS COMBINATIONS
Republic Industries has acquired various businesses operating in the solid
waste services industry using cash and/or shares of its common stock ("Republic
Industries Common Stock"). These businesses were contributed by Republic
Industries to the Company subsequent to their acquisition. The Company has
applied the same accounting method used by Republic Industries in accounting for
business combinations.
Significant businesses acquired and accounted for under the pooling of
interests method of accounting have been included retroactively in the
Consolidated Financial Statements as if the companies had operated as one entity
since inception. Businesses acquired and accounted for under the purchase method
of accounting are included in the Consolidated Financial Statements from the
date of acquisition. The value of the Republic Industries Common Stock issued to
effect business combinations accounted for under the purchase method of
accounting is based on the average market price of Republic Industries Common
Stock over a five day period before and after the parties have reached agreement
on the purchase price and the proposed transaction has been publicly announced,
if applicable.
In September 1998, the Company entered into a definitive agreement with
Waste Management, Inc. ("Waste Management") to acquire certain assets. The
assets to be acquired include 16 landfills, 11 transfer stations and 136
collection routes across the United States as well as disposal agreements at
various Waste Management sites, and will be accounted for under the purchase
method of accounting. At December 31, 1998, closings had been completed for 6
landfills, 7 transfer stations and all 136 of the collection routes discussed
above, at a purchase price of approximately $200.8 million consisting of cash
and certain properties.
During the year ended 1998, Republic Industries acquired various solid
waste services businesses which were contributed to the Company. The aggregate
purchase price paid by Republic Industries in transactions accounted for under
the purchase method of accounting was $128.3 million, consisting of $60.3
million in cash and approximately 3.4 million shares of Republic Industries
Common Stock
F-13
<PAGE> 92
REPUBLIC SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
valued at $68.0 million. Subsequent to the Initial Public Offering, the Company
acquired various solid waste businesses. The aggregate purchase price paid by
the Company in transactions accounted for under the purchase method of
accounting was $450.5 million consisting of cash and certain properties.
During the year ended December 31, 1997, Republic Industries acquired
various solid waste services businesses which were contributed to the Company.
The aggregate purchase price paid by Republic Industries in transactions
accounted for under the purchase method of accounting was $147.9 million
consisting of $11.5 million in cash and 5.7 million shares of Republic
Industries Common Stock valued at $136.4 million. In addition, Republic
Industries issued an aggregate of 34.1 million shares of Republic Industries
Common Stock in transactions accounted for under the pooling of interests method
of accounting. Included in the shares of Republic Industries Common Stock issued
in acquisitions accounted for under the pooling of interests method of
accounting are approximately 0.3 million shares issued for acquisitions that
were not material individually or in the aggregate and, consequently, prior
period financial statements were not restated for such acquisitions.
During the year ended December 31, 1996, Republic Industries acquired
various solid waste services businesses which were contributed to the Company.
The aggregate purchase price paid by Republic Industries in transactions
accounted for under the purchase method of accounting was $87.6 million,
consisting of $16.9 million in cash and 6.6 million shares of Republic
Industries Common Stock valued at $70.7 million. In addition, Republic
Industries issued an aggregate of 40.0 million shares of Republic Industries
Common Stock in transactions accounted for under the pooling of interests method
of accounting. Included in the shares of Republic Industries Common Stock issued
in acquisitions accounted for under the pooling of interests method of
accounting are approximately 1.1 million shares issued for acquisitions that
were not material individually or in the aggregate and, consequently, prior
period financial statements were not restated for such acquisitions.
The following summarizes the preliminary purchase price allocations for
business combinations accounted for under the purchase method of accounting:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEARS ENDED DECEMBER 31,
------------------- ---------------------------
1999 1998 1998 1997 1996
-------- -------- ------- ------ ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Property and equipment................. $ 295.7 $ 13.2 $ 180.3 $ 36.8 $ 71.8
Cost in excess of net assets
acquired............................. 206.1 109.7 572.4 149.1 73.6
Working capital deficit................ (44.0) (8.0) (108.0) (18.0) (20.3)
Long-term debt assumed................. (1.7) (13.8) (51.7) (26.8) (27.1)
Other assets (liabilities)............. (23.6) (1.2) (39.5) 4.6 (19.5)
Investment by Republic Industries...... -- (101.7) (128.3) (148.4) (79.7)
------- ------- ------- ------ ------
Cash used in acquisitions, net of cash
acquired............................. $ 432.5 $ (1.8) $ 425.2 $ (2.7) $ (1.2)
======= ======= ======= ====== ======
</TABLE>
F-14
<PAGE> 93
REPUBLIC SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company's unaudited pro forma consolidated results of operations
assuming acquisitions accounted for under the purchase method of accounting had
occurred at the beginning of the periods presented are as follows for the years
ended December 31:
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Revenue..................................................... $1,552.0 $1,392.9
Income from continuing operations........................... 155.5 116.1
Basic and diluted earnings per share........................ 1.15 1.21
Weighted average common and common equivalent shares
outstanding............................................... 135.6 95.7
</TABLE>
The unaudited pro forma 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 the
periods presented.
4. NOTES PAYABLE AND LONG-TERM DEBT
Notes payable and long-term debt are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1998 1997
------- -------
<S> <C> <C>
$1.0 billion unsecured revolving credit facility; interest
payable using LIBOR based rates (6.4% at December 31,
1998); $500.0 million matures July 1999 and $500.0 million
matures 2003.............................................. $ 980.0 $ --
Bonds payable under loan agreements with California
Pollution Control Financing Authority; interest at
prevailing market rates (4.3% and 5.0% at December 31,
1998 and 1997, respectively).............................. 42.0 43.1
Other notes; secured by real property, equipment and other
assets; interest rates ranging from 4% to 10%; maturing
through 2009.............................................. 35.1 32.0
------- -------
1,057.1 75.1
Less: current portion....................................... (499.9) (10.8)
------- -------
$ 557.2 $ 64.3
======= =======
</TABLE>
At December 31, 1998, aggregate maturities of notes payable and long-term
debt are as follows:
<TABLE>
<S> <C>
1999........................................................ $ 499.9
2000........................................................ 7.0
2001........................................................ 4.5
2002........................................................ 4.0
2003........................................................ 503.5
Thereafter.................................................. 38.2
--------
$1,057.1
========
</TABLE>
The unsecured revolving credit facility and the loan agreements with the
California Pollution Control Financing Authority require the Company to maintain
certain financial ratios and comply with certain financial covenants. At
December 31, 1998, the Company was in compliance with the financial covenants
under these agreements.
F-15
<PAGE> 94
REPUBLIC SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. INCOME TAXES
The components of the provision for income taxes for the years ended
December 31 are as follows:
<TABLE>
<CAPTION>
1998 1997 1996
------ ----- -----
<S> <C> <C> <C>
Current:
Federal................................................... $ 59.8 $20.9 $30.1
State..................................................... 7.5 8.5 4.7
Federal and state deferred.................................. 23.2 36.5 2.4
Change in valuation allowance............................... (4.0) -- 0.8
------ ----- -----
Provision for income taxes.................................. $ 86.5 $65.9 $38.0
====== ===== =====
</TABLE>
A reconciliation of the statutory federal income tax rate to the Company's
effective tax rate for the years ended December 31 is shown below:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Statutory federal income tax rate........................... 35.0% 35.0% 35.0%
Non-deductible expenses..................................... 1.3 1.5 2.6
State income taxes, net of federal benefit.................. 2.1 2.0 3.6
Other, net.................................................. (2.4) (2.3) 1.1
---- ---- ----
Effective income tax rate................................... 36.0% 36.2% 42.3%
==== ==== ====
</TABLE>
Components of the net deferred income tax liability in the accompanying
Consolidated Balance Sheets at December 31 are as follows:
<TABLE>
<CAPTION>
1998 1997
------- -------
<S> <C> <C>
Deferred income tax liabilities:
Book basis in property over tax basis..................... $ 95.7 $ 64.9
Deferred income tax assets:
Net operating losses and other carryforwards.............. -- (4.0)
Accruals not currently deductible......................... (33.0) (23.0)
Valuation allowance......................................... 8.7 9.6
------- -------
Net deferred income tax liability........................... $ 71.4 $ 47.5
======= =======
</TABLE>
In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax
assets will not be realized. The Company has provided a valuation allowance to
offset a portion of the deferred tax assets due to uncertainty surrounding the
future realization of such deferred tax assets. The Company adjusts the
valuation allowance in the period management determines it is more likely than
not that deferred tax assets will or will not be realized.
6. STOCKHOLDERS' EQUITY
In April 1998, the Company declared a $2.0 billion dividend to Republic
Industries that it paid in the form of notes payable ("Company Notes"). Interest
expense on the Company Notes was $27.6 million for the year ended December 31,
1998.
F-16
<PAGE> 95
REPUBLIC SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In June 1998, the Company received a dividend of certain assets from
Resources totaling approximately $437.3 million (the "Resources Dividend"). In
June 1998, the Company prepaid a portion of the amounts outstanding under the
Company Notes totaling $565.4 million using the Resources Dividend, cash and
certain other assets.
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 Republic Industries
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.
See also Note 12, Subsequent Events, for further information.
In July 1998, the Company repaid amounts due to Republic Industries
totaling $395.4 million through the issuance of approximately 16.5 million
shares of Class A Common Stock.
In July 1998, the Company completed the Initial Public Offering of
approximately 63.2 million shares of its Class A Common Stock resulting in net
proceeds of approximately $1.4 billion. All of the proceeds from the Initial
Public Offering were used to repay remaining amounts due under the Company
Notes.
7. 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. Options
granted under the Stock Incentive Plan are non-qualified and are granted at a
price equal to the fair market value of the Company's Common Stock at the date
of grant. Generally, options granted will have a term of ten years from the date
of grant, and vest in increments of 25% per year over a four year period on the
yearly anniversary date of the grant. Options granted to non-employee directors
have a term of ten years and vest immediately at the date of grant. The Company
has reserved 20.0 million shares of Class A Common Stock for issuance pursuant
to options granted under the Stock Incentive Plan and Substitute Options (as
defined below). During 1998, options to acquire 573,000 shares of Class A Common
Stock were granted under the Stock Incentive Plan.
F-17
<PAGE> 96
REPUBLIC SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table summarizes information about the Company's outstanding
and exercisable stock options at December 31, 1998 (shares in thousands):
<TABLE>
<CAPTION>
OUTSTANDING EXERCISABLE
-------------------------------- ------------------
WEIGHTED-
AVERAGE WEIGHTED- WEIGHTED-
REMAINING AVERAGE AVERAGE
CONTRACTUAL EXERCISE EXERCISE
RANGE OF EXERCISE PRICE SHARES LIFE (YRS.) PRICE SHARES PRICE
- ----------------------- ------ ----------- --------- ------ ---------
<S> <C> <C> <C> <C> <C>
$14.50-$18.75..................................... 473.0 9.85 $16.81 62.5 $18.06
$23.00-$25.69..................................... 100.0 9.51 $24.35 100.0 $24.35
----- -----
$14.50-$25.69..................................... 573.0 9.79 $18.12 162.5 $21.93
===== =====
</TABLE>
In January 1999, the Board of Directors approved additional grants of
options to acquire approximately 2.0 million shares of Class A Common Stock at
an exercise price of $18 7/16 per share.
Republic Industries has various stock option plans under which options to
acquire shares of Republic Industries Common Stock were granted to key employees
of the Company prior to the Initial Public Offering (the "Republic Industries
Stock Options"). Options granted under the plans are non-qualified and are
granted at a price equal to the fair market value of the Republic Industries
Common Stock at the date of grant. Generally, options granted will have a term
of ten years from the date of grant, and will vest in increments of 25% per year
over a four year period on the yearly anniversary of the grant date. As of
December 31, 1998, approximately 8.3 million Republic Industries Stock Options
held by employees of the Company were outstanding, 1.8 million of which were
exercisable.
The Company applies Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees" in accounting for stock-based employee
compensation arrangements whereby no compensation cost related to stock options
is deducted in determining net income. Had compensation cost for stock option
grants under the Republic Industries' stock option plans and the Company's Stock
Incentive Plan been determined pursuant to SFAS No. 123, "Accounting for
Stock-Based Compensation", the Company's net income would have decreased
accordingly. Using the Black-Scholes option pricing model for all options
granted after December 31, 1995, the Company's pro forma net income and pro
forma weighted average fair value of options granted, with related assumptions,
are as follows for the years ended December 31:
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Pro forma net income............................ $ 132.7 $ 108.3 $ 47.6
Pro forma earnings per share.................... .98 1.13 .50
Pro forma weighted average fair value of
Republic Industries Stock Options granted..... 14.45 13.60 7.34
Pro forma weighted average fair value of the
Company's stock options granted............... 7.71 -- --
Risk free interest rates........................ 4.76% 5.74% 5.98%
Expected lives.................................. 5 years 5 years 5 years
Expected volatility............................. 40.0% 40.0% 40.0%
</TABLE>
Following such time as the Company is no longer a subsidiary of Republic
Industries (the "Stand-alone Date") the Company intends to issue substitute
options under the Company's Stock Incentive Plan (collectively "Substitute
Options") in substitution for grants of Republic Industries Stock Options under
Republic Industries' stock option plans as of the Stand-alone Date held by
individuals employed by the Company as of such date (the "Company Employees").
Such Substitute Options will provide for the purchase of a number of shares of
Class A Common Stock determined
F-18
<PAGE> 97
REPUBLIC SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
based on a ratio of average trading prices of Republic Industries Common Stock
and Class A Common Stock immediately prior to the Stand-alone Date. 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 Republic Industries Stock Options
consisting of stock options held by the Company Employees will be exercised and
that some will be forfeited, and that additional Republic Industries Stock
Options could be granted prior to the Stand-alone Date. In addition, the
remaining balance of unexercised Republic Industries Stock Options will be
converted into Substitute Options by reference to the ratio described above,
which will not be known until the Stand-alone Date. See also Note 12, Subsequent
Events, for further information.
8. COMMITMENTS AND CONTINGENCIES
LEGAL PROCEEDINGS
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.
LEASE COMMITMENTS
The Company and its subsidiaries lease real property, equipment and
software under various operating leases with terms from one to twenty-five
years.
Future minimum lease obligations under noncancelable real property,
equipment and software leases with initial terms in excess of one year at
December 31, 1998 are as follows:
<TABLE>
<S> <C>
Year Ending December 31:
1999........................................................ $2.5
2000........................................................ 2.3
2001........................................................ 1.5
2002........................................................ .9
2003........................................................ .8
Thereafter.................................................. .5
----
$8.5
====
</TABLE>
LIABILITY INSURANCE
The Company carries general liability, vehicle liability, workers
compensation and employer's liability coverage, as well as umbrella liability
policies to provide excess coverage over the underlying limits contained in
these primary policies. The Company also carries property insurance.
The Company's liabilities for unpaid and incurred but not reported claims
at December 31, 1998 was $16.9 million under its current risk management program
and $11.1 million under its previous risk management program with Republic
Industries (see Note 10, Related Party Transactions, for further information),
and are included in other current and other liabilities in the accompanying
F-19
<PAGE> 98
REPUBLIC SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Consolidated Balance Sheets. While the ultimate amount of claims incurred are
dependent on future developments, in management's opinion, recorded reserves are
adequate to cover the future payment of claims. However, it is reasonably
possible that recorded reserves may not be adequate to cover the future payment
of claims. Adjustments, if any, to estimates recorded resulting from ultimate
claim payments will be reflected in operations in the periods in which such
adjustments are known.
OTHER MATTERS
In the normal course of business, the Company is required to post
performance bonds, letters of credit, and/or cash deposits as a financial
guarantee of the Company's performance. To date, the Company has satisfied
financial responsibility requirements for regulatory agencies by making cash
deposits, obtaining bank letters of credit or by obtaining surety bonds. At
December 31, 1998, surety bonds and letters of credit totaling $380.3 million
expire through 2005.
The Company's business activities are conducted in the context of a
developing and changing statutory and regulatory framework. Governmental
regulation of the waste management industry requires the Company to obtain and
retain numerous governmental permits to conduct various aspects of its
operations. These permits are subject to revocation, modification or denial. The
costs and other capital expenditures which may be required to obtain or retain
the applicable permits or comply with applicable regulations could be
significant.
9. RESTRUCTURING AND OTHER CHARGES
During the year ended December 31, 1996, the Company recorded restructuring
and other charges of approximately $8.8 million. These costs included $5.3
million to close certain landfill operations, $1.0 million of asset write-offs
and $2.5 million of merger expenses associated with certain business
combinations accounted for under the pooling of interests method of accounting.
There are no remaining liabilities associated with the 1996 restructuring and
other charges as of December 31, 1997.
10. RELATED PARTY TRANSACTIONS
Amounts due to Republic Industries consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
1997
------------
<S> <C>
Due to Republic Corporate Management Company ("RCMC")....... $107.8
Notes payable to Resources.................................. 158.3
------
$266.1
======
</TABLE>
F-20
<PAGE> 99
REPUBLIC SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following is an analysis of activity in the due to RCMC account for the
years ended December 31:
<TABLE>
<CAPTION>
1998 1997 1996
------ ------ ------
<S> <C> <C> <C>
Balance at beginning of period.............................. $107.8 $ 49.3 $86.3
Republic Industries overhead allocations.................... 7.5 10.2 8.4
Service Agreement fees...................................... 7.5 -- --
Insurance allocations....................................... 9.7 15.9 10.2
Self-insurance reserve allocations.......................... (9.8) (7.3) (4.8)
Intercompany purchases...................................... 42.4 13.8 12.0
Income taxes................................................ 24.0 28.7 23.4
Cash transfers.............................................. (49.6) (2.8) (86.2)
Repayment in shares of Class A Common Stock................. (139.5) -- --
------ ------ -----
Balance at end of period.................................... $ -- $107.8 $49.3
====== ====== =====
</TABLE>
Prior to the Initial Public Offering, due to RCMC included allocations of
various expenses from Republic Industries including general and administrative
expenses, risk management premiums, income taxes and other costs. Such
liabilities were non-interest bearing and had no specified repayment terms. In
July 1998, the Company repaid in full amounts due to RCMC as of June 30, 1998
through the issuance of approximately 5.8 million shares of Class A Common
Stock. Subsequent to the Initial Public Offering, due to RCMC consists primarily
of charges under the Services Agreement described below. Such amounts are
non-interest bearing and are repaid periodically using cash.
Prior to the Initial Public Offering, Republic Industries' corporate
general and administrative costs not specifically attributable to its operating
subsidiaries were allocated to the Company based upon the ratio of the Company's
invested capital to Republic Industries' consolidated invested capital. Such
allocations are included in the Company's selling, general and administrative
costs and were approximately $7.5 million, $10.2 million and $8.4 million for
the years ended December 31, 1998, 1997 and 1996, respectively. These amounts
approximate management's estimate of Republic Industries' 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 have incurred
to obtain such services on its own or from unaffiliated third parties.
In June 1998, the Company and Republic Industries entered into a services
agreement (the "Services Agreement") pursuant to which Republic Industries
provides 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 are payable by the Company to Republic Industries in the amount of $1.25
million per month, subject to review and adjustment from time to time as the
Company reduces the amount of services it obtains from Republic Industries.
Effective January 1, 1999, such fees payable by the Company to Republic
Industries have been reduced to $.9 million per month. The Company believes that
the fees for services provided under the Services Agreement are no less
favorable to the Company than could be obtained by the Company internally or
from unaffiliated third parties. Charges under the Services
F-21
<PAGE> 100
REPUBLIC SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Agreement for the year ended December 31, 1998 were $7.5 million and are
included in selling, general and administrative expenses.
Prior to the Initial Public Offering, the Company participated in Republic
Industries' combined risk management programs for property, casualty and general
liability insurance. The Company was charged for annual premiums of $9.7
million, $15.9 million and $10.2 million for the years ended December 31, 1998,
1997 and 1996, respectively.
Notes payable to Resources represent borrowings prior to the Initial Public
Offering 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. In July 1998,
the Company repaid the notes payable to Resources through the issuance of
approximately 10.7 million shares of Class A Common Stock. Interest expense on
notes payable to Resources was $9.7 million, $20.2 million and $18.8 million for
the years ended December 31, 1998, 1997 and 1996, respectively.
11. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
The following is an analysis of certain items in the Consolidated
Statements of Operations by quarter for 1998 and 1997.
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Revenue.............................................. 1998 $300.8 $335.9 $355.0 $377.4
1997 $263.2 $283.7 $287.6 $293.2
Operating income..................................... 1998 $ 59.0 $ 70.7 $ 75.3 $ 79.3
1997 $ 41.0 $ 47.1 $ 56.3 $ 56.9
Net income........................................... 1998 $ 34.8 $ 25.1 $ 46.2 $ 47.6
1997 $ 23.2 $ 25.9 $ 32.5 $ 34.6
Basic and diluted net income per share............... 1998 $ .36 $ .26 $ .26 $ .27
1997 $ .24 $ .27 $ .34 $ .36
Weighted average common and common equivalent shares
outstanding........................................ 1998 95.7 95.7 175.4 175.4
1997 95.7 95.7 95.7 95.7
</TABLE>
12. SUBSEQUENT EVENTS
In March 1999, the IRS advised Republic Industries in writing that the IRS
would not rule as requested on Republic Industries' application for a private
letter ruling regarding the proposed Distribution. In light of the IRS action,
Republic Industries converted all 95.7 million shares of Class B Common Stock
into 95.7 million shares of Class A Common Stock on March 2, 1999. The Company
is registering all 112.2 million shares of its Class A Common Stock owned by
Republic Industries for sale by Republic Industries.
Prior to the Initial Public Offering, employees of the Company were granted
stock options under Republic Industries' stock option plans. As of March 2,
1999, approximately 8.3 million Republic Industries options held by the
Company's employees were canceled, and the Company's Compensa-
F-22
<PAGE> 101
REPUBLIC SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
tion Committee granted replacement options on a one-for-one basis. The
replacement options retained the vesting and exercise rights of the original
options, subject to certain exercise limitations for individuals who signed
stock option repricing agreements with Republic Industries. The exercise price
for individual replacement options are priced such that the unrealized gain or
loss on each grant of Republic Industries stock options shall generally be
maintained under the replacement options. Compensation expense related to the
granting of certain replacement options at exercise prices below the fair market
value of the common stock at the date of grant is estimated to be approximately
$2.0 million, and will be recorded by the Company in the first quarter of 1999.
On April 5, 1999, Republic Industries transferred all of its Class A Common
Stock in the Company to its indirect, wholly owned subsidiary, AutoNation
Insurance Company, Inc. On April 6, 1999, Republic Industries changed its name
to AutoNation, Inc. On May 3, 1999, AutoNation Insurance Company sold 100.0
million shares of its Class A Common Stock in the Company through an
underwritten secondary public offering.
F-23
<PAGE> 102
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
$500,000,000
REPUBLIC SERVICES, INC. (LOGO)
$ % NOTES DUE 200
$ % NOTES DUE 200
---------------------
PROSPECTUS
---------------------
BANC OF AMERICA SECURITIES LLC
MERRILL LYNCH & CO.
BANC ONE CAPITAL MARKETS, INC.
CHASE SECURITIES INC.
DEUTSCHE BANK SECURITIES
DONALDSON, LUFKIN & JENRETTE
SALOMON SMITH BARNEY
, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 103
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the various expenses in connection with the
sale and distribution of the securities being registered hereby, other than
underwriting discounts and commissions. All amounts are estimated except the
Securities and Exchange Commission (the "Commission") registration fee and the
National Association of Securities Dealers' filing fee.
<TABLE>
<CAPTION>
PAYABLE BY
THE
REGISTRANT
----------
<S> <C>
SEC registration fee........................................ $ 139,000
Fee and expenses of the Trustee............................. 15,000*
Rating agency fees.......................................... 372,500*
Accounting fees and expenses................................ 100,000*
Legal fees and expenses..................................... 150,000*
Printing and engraving expenses............................. 245,000*
Miscellaneous fees and expenses............................. 80,500*
----------
Total....................................................... $1,102,000*
==========
</TABLE>
- -------------------------
* Estimated
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law provides that a
corporation may indemnify directors and officers as well as other employees and
individuals against expenses, including attorneys' fees, judgments, fines and
amounts paid in settlement in connection with specified actions, suits or
proceedings, whether civil, criminal, administrative or investigative, other
than an action by or in the right of the corporation, a "derivative action", if
they acted in good faith and in a manner they reasonably believed to be in or
not opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, if they had no reasonable cause to believe their
conduct was unlawful. A similar standard is applicable in the case of derivative
actions, except that indemnification only extends to expenses, including
attorneys' fees, incurred in connection with the defense or settlement of such
actions, and the statute requires court approval before there can be any
indemnification where the person seeking indemnification has been found liable
to the corporation. The statute provides that it is not exclusive of other
indemnification that may be granted by a corporation's bylaws, disinterested
director vote, stockholder vote, agreement or otherwise.
Our certificate of incorporation provides that 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, 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 our
company or is or was serving at our request 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
II-1
<PAGE> 104
agent, will be indemnified and held harmless by us to the fullest extent
authorized by Delaware law, as the same exists or may hereafter be amended,
against all expense, liability and loss reasonably incurred or suffered by such
person in connection therewith. This right to indemnification includes the right
to have our company pay the expenses incurred in defending a proceeding in
advance of its final disposition, subject to the provisions of Delaware law.
These rights are not exclusive of any other right which any person may have or
later acquire under any statute, provision of our certificate of incorporation,
bylaws, agreement, vote of stockholders or disinterested directors or otherwise.
No repeal or modification of the provision will in any way diminish or adversely
affect the rights of any director, officer, employee or agent of ours regarding
any occurrence or matter arising prior to any repeal or modification. Our
certificate of incorporation also specifically authorizes our company to
maintain insurance and to grant similar indemnification rights to our employees
or agents.
Delaware law permits a corporation to provide in its certificate of
incorporation that 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 for liability for (1) any breach of the
director's duty of loyalty to the corporation or its stockholders, (2) acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (3) payments of unlawful dividends or unlawful stock
repurchases or redemptions, or (4) any transaction from which the director
derived an improper personal benefit.
Our certificate of incorporation provides that a director of our company
will not be personally liable to our company or our stockholders for monetary
damages for breach of fiduciary duty as a director, except, if required by
Delaware law as amended from time to time, for liability (1) for any breach of
the director's duty of loyalty to the our company or our stockholders, (2) for
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (3) under Section 174 of the Delaware General
Corporation Law, which concerns unlawful payments of dividends, stock purchases
or redemptions, or (4) for any transaction from which the director derived an
improper personal benefit. Repeal of the provision will eliminate or reduce the
effect of the provision regarding any matter occurring, or any cause of action,
suit or claim that, but for the provision, would accrue or arise prior to such
amendment or repeal.
The form of underwriting agreement filed as Exhibit 1.1 provides for
indemnification by the underwriters of our company, our directors and officers,
and by our company of the underwriters, for some liabilities, including
liabilities arising under the 1933 Act, and affords certain rights of
contribution.
The Separation and Distribution Agreement by and between our company and
AutoNation will provide for indemnification by our company of AutoNation and its
directors, officers and employees for certain liabilities, including liabilities
under the 1933 Act.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
On July 1, 1998, we issued 16,474,417 shares of Class A common stock to
subsidiaries of AutoNation 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 AutoNation in our unaudited
condensed consolidated financial statements. We issued the Class A common stock
under an exemption from registration provided by Section 4(2) of the Securities
Act of 1933, as amended.
II-2
<PAGE> 105
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits.
<TABLE>
<CAPTION>
EXHIBITS DESCRIPTION OF EXHIBIT
- --------- ----------------------
<C> <C> <S>
1.1+ -- Form of Purchase Agreement.
3.1 -- Amended and Restated Certificate of Incorporation of the
Company (incorporated by reference to Exhibit 3.1 of the
Registrant's Quarterly Report on Form 10-Q for the period
ended June 30, 1998).
3.2 -- Amended and Restated Bylaws of the Company (incorporated by
reference to Exhibit 3.2 of the Registrant's Quarterly
Report on Form 10-Q for the period ended June 30, 1998).
4.1 -- Long Term Credit Agreement, dated as of July 10, 1998, among
the Company, Bank of America National Trust and Savings
Association, as Administrative Agent, and the several
financial institutions party thereto (incorporated by
reference to Exhibit 4.1 of the Registrant's Quarterly
Report on Form 10-Q for the period ended June 30, 1998).
4.2* -- Form of Indenture.
4.3* -- Form of % Note due 200 .
4.4* -- Form of % Note due 200 .
5.1+ -- Form of Opinion of Akerman, Senterfitt & Eidson, P.A. re:
legality of notes being registered.
10.1 -- Separation and Distribution Agreement dated as of June 30,
1998 by and between the Company and Republic Industries
(incorporated by reference to Exhibit 10.1 of the
Registrant's Quarterly Report on Form 10-Q for the period
ended June 30, 1998).
10.2 -- Amended and Restated Employee Benefits Agreement dated as of
March 4, 1999 by and between the Company and Republic
Services (incorporated by reference to Exhibit 10.2 of the
Registrant's Registration Statement on Form S-1/A, Amendment
No. 2, dated April 6, 1999).
10.3 -- Services Agreement, dated as of June 30, 1998, by and
between the Company and Republic Services (incorporated by
reference to Exhibit 10.3 of the Registrant's Quarterly
Report on Form 10-Q for the period ended June 30, 1998).
10.4 -- Amendment to Services Agreement, dated as of March 4, 1999,
by and between the Company and Republic Services
(incorporated by reference to Exhibit 10.4 of the
Registrant's Registration Statement on Form S-1/A, Amendment
No. 2, dated April 6, 1999).
10.5 -- Tax Indemnification and Allocation Agreement, dated as of
June 30, 1998, by and between the Company and Republic
Services (incorporated by reference to Exhibit 10.4 of the
Registrant's Quarterly Report on Form 10-Q for the period
ended June 30, 1998).
10.6 -- 1998 Stock Incentive Plan (incorporated by reference to
Exhibit 10.5 of the Registrant's. Registration Statement on
Form S-1/A, Amendment No. 2, dated June 30, 1998).
10.7 -- Employment Agreement, dated as of December 7, 1998, by and
between James E. O'Connor and the Company (incorporated by
reference to Exhibit 10.6 of the Registrant's Annual Report
on Form 10-K for the fiscal year ended December 31, 1998).
10.8 -- Employment Agreement, dated as of January 11, 1999, by and
between James H. Cosman and the Company (incorporated by
reference to Exhibit 10.7 of the Registrant's Annual Report
on Form 10-K for the fiscal year ended December 31, 1998).
10.9 -- Asset Sale Agreement, dated September 27, 1998, by and
between the Company and Waste Management, Inc., as amended,
and the supplemental agreements thereto (incorporated by
reference to Exhibits 2.1, 2.2 and 2.3 of the Registrant's
Current Report on Form 8-K dated February 16, 1999).
21.1+ -- Subsidiaries of the Company.
23.1* -- Consent of Arthur Andersen LLP.
23.2+ -- Consent of Akerman, Senterfitt & Eidson, P.A. (included in
Exhibit 5.1).
24.1+ -- Power of Attorney (included on the signature page of the
Registration Statement).
25.1+ -- Statement of Eligibility of Trustee.
</TABLE>
- ---------------
* filed herewith
+ previously filed.
II-3
<PAGE> 106
(b) Financial Statement Schedule. The following financial statement
schedule is filed on page herewith:
Financial Statement Schedule II, Valuation and Qualifying Accounts and
Reserves, for Each of the Three Years Ended December 31, 1998.
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-4
<PAGE> 107
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of Fort
Lauderdale, State of Florida, on May 19, 1999.
REPUBLIC SERVICES, INC.
By: /s/ HARRIS W. HUDSON
----------------------------------
Harris W. Hudson
Vice Chairman
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* Chairman of the Board May 19, 1999
- -----------------------------------------------------
H. Wayne Huizenga
/s/ HARRIS W. HUDSON Vice Chairman and Director May 19, 1999
- -----------------------------------------------------
Harris W. Hudson
* Chief Executive Officer and May 19, 1999
- ----------------------------------------------------- Director (principal
James E. O'Connor executive officer)
* Senior Vice President and May 19, 1999
- ----------------------------------------------------- Chief Financial Officer
Tod C. Holmes (principal financial
officer and principal
accounting officer)
* Director May 19, 1999
- -----------------------------------------------------
John W. Croghan
* Director May 19, 1999
- -----------------------------------------------------
Ramon A. Rodriguez
* Director May 19, 1999
- -----------------------------------------------------
Allan C. Sorensen
*By: /s/ HARRIS W. HUDSON
---------------------------------------------
Harris W. Hudson, by
power of attorney
</TABLE>
II-5
<PAGE> 108
REPORT OF INDEPENDENT CERTIFIED PUBLIC
ACCOUNTANTS ON SCHEDULE
To Republic Services, Inc.:
We have audited in accordance with generally accepted auditing standards,
the consolidated financial statements of Republic Services, Inc. and
subsidiaries included in this registration statement and have issued our report
thereon dated January 28, 1999, except with respect to the matters discussed in
Note 12, as to which the date is May 3, 1999. Our audit was made for the purpose
of forming an opinion on the basic financial statements taken as a whole. The
schedule included under Item 16(b) is the responsibility of the Company's
management and is presented for purposes of complying with the Securities and
Exchange Commission's rules and is not part of the basic financial statements.
This schedule has been subjected to the auditing procedures applied in the audit
of the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Fort Lauderdale, Florida,
January 28, 1999, except with respect
to the matters discussed in Note 12, as
to which the date is May 3, 1999.
S-1
<PAGE> 109
REPUBLIC SERVICES, INC.
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
SCHEDULE II
(IN MILLIONS)
<TABLE>
<CAPTION>
BALANCE AT ADDITIONS ACCOUNTS BALANCE AT
BEGINNING CHARGED TO WRITTEN END
OF YEAR INCOME OFF OTHER(1) OF YEAR
---------- ---------- -------- -------- ----------
<S> <C> <C> <C> <C> <C>
CLASSIFICATIONS
Allowance for doubtful accounts:
1998........................................ $13.6 $5.1 $(7.2) $10.6 $22.1
1997........................................ 8.3 4.1 (4.1) 5.3 13.6
1996........................................ 7.2 2.6 (2.5) 1.0 8.3
</TABLE>
- ---------------
(1) Allowance of acquired businesses.
S-2
<PAGE> 110
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C> <C>
1.1+ -- Form of Purchase Agreement.
3.1 -- Amended and Restated Certificate of Incorporation of the
Company (incorporated by reference to Exhibit 3.1 of the
Registrant's Quarterly Report on Form 10-Q for the period
ended June 30, 1998).
3.2 -- Amended and Restated Bylaws of the Company (incorporated by
reference to Exhibit 3.2 of the Registrant's Quarterly
Report on Form 10-Q for the period ended June 30, 1998).
4.1 -- Long Term Credit Agreement, dated as of July 10, 1998, among
the Company, Bank of America National Trust and Savings
Association, as Administrative Agent, and the several
financial institutions party thereto (incorporated by
reference to Exhibit 4.1 of the Registrant's Quarterly
Report on Form 10-Q for the period ended June 30, 1998).
4.2* -- Form of Indenture.
4.3* -- Form of % Note due 200 .
4.4* -- Form of % Note due 200 .
5.1+ -- Form of Opinion of Akerman, Senterfitt & Eidson, P.A. re:
legality of notes being registered.
10.1 -- Separation and Distribution Agreement dated as of June 30,
1998 by and between the Company and AutoNation (incorporated
by reference to Exhibit 10.1 of the Registrant's Quarterly
Report on Form 10-Q for the period ended June 30, 1998).
10.2 -- Amended and Restated Employee Benefits Agreement dated as of
March 4, 1999 by and between the Company and Republic
Services (incorporated by reference to Exhibit 10.2 of the
Registrant's Registration Statement on Form S-1/A, Amendment
No. 2, dated April 6, 1999).
10.3 -- Services Agreement, dated as of June 30, 1998, by and
between the Company and AutoNation (incorporated by
reference to Exhibit 10.3 of the Registrant's Quarterly
Report on Form 10-Q for the period ended June 30, 1998).
10.4 -- Amendment to Services Agreement, dated as of March 4, 1999,
by and between the Company and Republic Services
(incorporated by reference to Exhibit 10.4 of the
Registrant's Registration Statement on Form S-1/A, Amendment
No. 2, dated April 6, 1999).
10.5 -- Tax Indemnification and Allocation Agreement, dated as of
June 30, 1998, by and between the Company and AutoNation
(incorporated by reference to Exhibit 10.4 of the
Registrant's Quarterly Report on Form 10-Q for the period
ended June 30, 1998).
10.6 -- 1998 Stock Incentive Plan (incorporated by reference to
Exhibit 10.5 of the Registrant's. Registration Statement on
Form S-1/A, Amendment No. 2, dated June 30, 1998).
10.7 -- Employment Agreement, dated as of December 7, 1998, by and
between James E. O'Connor and the Company (incorporated by
reference to Exhibit 10.7 of the Registrant's Annual Report
on Form 10-K for the fiscal year ended December 31, 1998).
10.8 -- Employment Agreement, dated as of January 11, 1999, by and
between James H. Cosman and the Company (incorporated by
reference to Exhibit 10.7 of the Registrant's Annual Report
on Form 10-K for the fiscal year ended December 31, 1998).
10.9 -- Asset Sale Agreement, dated September 27, 1998, by and
between the Company and Waste Management, Inc., as amended,
and the supplemental agreements thereto (incorporated by
reference to Exhibits 2.1, 2.2 and 2.3 of the Registrant's
Current Report on Form 8-K dated February 16, 1999).
21.1+ -- Subsidiaries of the Company.
23.1* -- Consent of Arthur Andersen LLP.
23.2+ -- Consent of Akerman, Senterfitt & Eidson, P.A. (included in
Exhibit 5.1).
24.1+ -- Power of Attorney (included on the signature page of the
Registration Statement).
25.1+ -- Statement of Eligibility of Trustee.
</TABLE>
- ---------------
* filed herewith
+ previously filed
<PAGE> 1
EXHIBIT 4.2
REPUBLIC SERVICES, INC., AS ISSUER,
AND
THE BANK OF NEW YORK, AS TRUSTEE
------------------------
INDENTURE
DATED AS OF MAY __, 1999
------------------------
___% NOTES DUE 200_
___% NOTES DUE 200_
<PAGE> 2
REPUBLIC SERVICES, INC.
RECONCILIATION AND TIE WITH THE TRUST INDENTURE ACT OF 1939
<TABLE>
<CAPTION>
TRUST INDENTURE ACT SECTION INDENTURE SECTION
<S> <C> <C>
Section 310(a)(1).......................................... 609
(a)(2)................................................. 609
(b).................................................... 608, 610
Section 311(a)............................................. 613
Section 312(a)............................................. 701
(b).................................................... 702
(c).................................................... 702
Section 313(a)............................................. 703(a)
(b).................................................... 703(a)
(c).................................................... 703(a)
(d).................................................... 703(b)
Section 314(a)............................................. 704
(a)(4)................................................. 705
(c)(1)................................................. 103
(c)(2)................................................. 103
(e).................................................... 103
Section 315(a)............................................. 601
(b).................................................... 602
(c).................................................... 601(a)
(d).................................................... 601, 603
(e).................................................... 514
Section 316(a)(last sentence).............................. 101 ("Outstanding")
(a)(1)(A).............................................. 502, 512
(a)(1)(B).............................................. 513
(b).................................................... 508
(c).................................................... 105
Section 317(a)(1).......................................... 503
(a)(2)................................................. 504
(b).................................................... 1003
Section 318(a)............................................. 108
</TABLE>
Note: This reconciliation and tie shall not, for any purpose, be deemed to
be a part of the Indenture.
-i-
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE ONE DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION..............................................1
Section 101. Definitions......................................................................................1
"Affiliate"................................................................................................2
"Applicable Procedures"....................................................................................2
"Attributable Debt"........................................................................................2
"Bankruptcy Law"...........................................................................................3
"Board of Directors".......................................................................................3
"Board Resolution".........................................................................................3
"Book-Entry Security"......................................................................................3
"Business Day".............................................................................................3
"Capital Stock"............................................................................................3
"Code".....................................................................................................3
"Commission"...............................................................................................3
"Company"..................................................................................................4
"Company Request"or "Company Order"........................................................................4
"Comparable Treasury Issue"................................................................................4
"Comparable Treasury Price"................................................................................4
"Consolidated Net Tangible Assets".........................................................................4
"Consolidation"............................................................................................5
"Corporate Trust Office"...................................................................................5
"Default"..................................................................................................5
"Depositary"...............................................................................................5
"Event of Default".........................................................................................5
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<S> <C>
"Exchange Act".............................................................................................5
"Exempted Debt"............................................................................................5
"Fair Market Value"........................................................................................5
"Funded Debt"..............................................................................................6
"Generally Accepted Accounting Principles"or "GAAP"........................................................6
"Global Securities"........................................................................................6
"Guarantee"................................................................................................6
"Holder"...................................................................................................6
"Incur"....................................................................................................6
"Indebtedness".............................................................................................6
"Indenture"................................................................................................7
"Indenture Obligations"....................................................................................7
"Independent Investment Banker"............................................................................7
"Interest Payment Date"....................................................................................7
"Issue Date"...............................................................................................7
"Lien".....................................................................................................7
"Maturity".................................................................................................7
"Moody's"..................................................................................................8
"Officers' Certificate"....................................................................................8
"Opinion of Counsel".......................................................................................8
"Opinion of Independent Counsel"...........................................................................8
"Outstanding"..............................................................................................8
"Paying Agent".............................................................................................9
"Person"...................................................................................................9
"Predecessor Security".....................................................................................9
"Preferred Stock"..........................................................................................9
"Principal Property"......................................................................................10
</TABLE>
-iii-
<PAGE> 5
<TABLE>
<S> <C>
"Redemption Date".........................................................................................10
"Redemption Price"........................................................................................10
"Reference Treasury Dealer"...............................................................................10
"Reference Treasury Dealer Quotations"....................................................................10
"Regular Record Date".....................................................................................10
"Responsible Officer".....................................................................................11
"Restricted Subsidiary"...................................................................................11
"S&P".....................................................................................................11
"Securities Act"..........................................................................................11
"Senior Indebtedness".....................................................................................11
"Special Record Date".....................................................................................11
"Stated Maturity".........................................................................................11
"Subsidiary"..............................................................................................11
"Temporary Cash Investments"..............................................................................11
"Treasury Rate"...........................................................................................12
"Trustee".................................................................................................12
"Trust Indenture Act".....................................................................................13
"Voting Stock"............................................................................................13
Section 102. Other Definitions...............................................................................13
Section 103. Compliance Certificates and Opinions............................................................13
Section 104. Form of Documents Delivered to Trustee..........................................................14
Section 105. Acts of Holders.................................................................................15
Section 106. Notices, etc., to the Trustee, the Company......................................................16
Section 107. Notice to Holders; Waiver.......................................................................17
Section 108. Conflict with Trust Indenture Act...............................................................17
Section 109. Effect of Headings and Table of Contents........................................................18
Section 110. Successors and Assigns..........................................................................18
</TABLE>
-iv-
<PAGE> 6
<TABLE>
<S> <C>
Section 111. Separability Clause.............................................................................18
Section 112. Benefits of Indenture...........................................................................18
Section 113. Governing Law...................................................................................18
Section 114. Legal Holidays..................................................................................18
Section 115. Independence of Covenants.......................................................................19
Section 116. Schedules and Exhibits..........................................................................19
Section 117. Counterparts....................................................................................19
ARTICLE TWO SECURITY FORMS......................................................................................20
Section 201. Forms Generally.................................................................................20
ARTICLE THREE THE SECURITIES....................................................................................21
Section 301. Title and Terms.................................................................................21
Section 302. Denominations...................................................................................22
Section 303. Execution, Authentication, Delivery and Dating..................................................22
Section 304. Temporary Securities............................................................................23
Section 305. Registration, Registration of Transfer and Exchange.............................................24
Section 306. Book Entry Provisions for Global Securities.....................................................25
Section 307. Mutilated, Destroyed, Lost and Stolen Securities................................................27
Section 308. Payment of Interest; Interest Rights Preserved..................................................28
Section 309. CUSIP Numbers...................................................................................29
Section 310. Persons Deemed Owners...........................................................................29
Section 311. Cancellation....................................................................................29
Section 312. Computation of Interest.........................................................................30
ARTICLE FOUR DEFEASANCE AND COVENANT DEFEASANCE.................................................................31
Section 401. Company's Option to Effect Defeasance or Covenant Defeasance....................................31
Section 402. Defeasance and Discharge........................................................................31
</TABLE>
-v-
<PAGE> 7
<TABLE>
<S> <C>
Section 403. Covenant Defeasance.............................................................................31
Section 404. Conditions to Defeasance or Covenant Defeasance.................................................32
Section 405. Deposited Money and U.S. Government Obligations to Be Held in Trust; Other
Miscellaneous Provisions.....................................................................................34
Section 406. Reinstatement...................................................................................35
ARTICLE FIVE REMEDIES...........................................................................................36
Section 501. Events of Default...............................................................................36
Section 502. Acceleration of Maturity; Rescission and Annulment..............................................37
Section 503. Collection of Indebtedness and Suits for Enforcement by Trustee.................................38
Section 504. Trustee May File Proofs of Claim................................................................39
Section 505. Trustee May Enforce Claims without Possession of Securities.....................................40
Section 506. Application of Money Collected..................................................................41
Section 507. Limitation on Suits.............................................................................41
Section 508. Unconditional Right of Holders to Receive Principal, Premium and Interest.......................42
Section 509. Restoration of Rights and Remedies..............................................................42
Section 510. Rights and Remedies Cumulative..................................................................42
Section 511. Delay or Omission Not Waiver....................................................................43
Section 512. Control by Holders..............................................................................43
Section 513. Waiver of Past Defaults.........................................................................43
Section 514. Undertaking for Costs...........................................................................44
Section 515. Waiver of Stay, Extension or Usury Laws.........................................................44
Section 516. Remedies Subject to Applicable Law..............................................................44
ARTICLE SIX THE TRUSTEE.........................................................................................45
Section 601. Duties of Trustee...............................................................................45
Section 602. Notice of Defaults..............................................................................46
Section 603. Certain Rights of Trustee.......................................................................46
</TABLE>
-vi-
<PAGE> 8
<TABLE>
<S> <C>
Section 604. Trustee Not Responsible for Recitals, Dispositions of Securities or
Application of Proceeds Thereof.................................................................48
Section 605. Trustee and Agents May Hold Securities; Collections; etc........................................49
Section 606. Money Held in Trust.............................................................................49
Section 607. Compensation and Indemnification of Trustee and Its Prior Claim.................................49
Section 608. Conflicting Interests...........................................................................50
Section 609. Trustee Eligibility.............................................................................50
Section 610. Resignation and Removal; Appointment of Successor Trustee.......................................50
Section 611. Acceptance of Appointment by Successor..........................................................52
Section 612. Merger, Conversion, Consolidation or Succession to Business.....................................53
Section 613. Preferential Collection of Claims Against Company...............................................53
ARTICLE SEVEN HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY.................................................54
Section 701. Company to Furnish Trustee Names and Addresses of Holders.......................................54
Section 702. Disclosure of Names and Addresses of Holders....................................................54
Section 703. Reports by Trustee..............................................................................54
Section 704. Reports by Company..............................................................................55
Section 705. Statement as to Compliance......................................................................55
Section 706. Statement by Officers as to Default.............................................................55
ARTICLE EIGHT CONSOLIDATION, MERGER, SALE OF ASSETS.............................................................56
Section 801. Company May Consolidate, etc., Only on Certain Terms............................................56
Section 802. Successor Substituted...........................................................................57
ARTICLE NINE SUPPLEMENTAL INDENTURES............................................................................58
Section 901. Supplemental Indentures and Agreements without Consent of Holders...............................58
Section 902. Supplemental Indentures and Agreements with Consent of Holders..................................59
Section 903. Execution of Supplemental Indentures and Agreements.............................................60
</TABLE>
-vii-
<PAGE> 9
<TABLE>
<S> <C>
Section 904. Effect of Supplemental Indentures...............................................................61
Section 905. Conformity with Trust Indenture Act.............................................................61
Section 906. Reference in Securities to Supplemental Indentures..............................................61
Section 907. Notice of Supplemental Indentures...............................................................61
ARTICLE TEN COVENANTS...........................................................................................62
Section 1001. Payment of Principal, Premium and Interest.....................................................62
Section 1002. Maintenance of Office or Agency................................................................62
Section 1003. Money for Security Payments to Be Held in Trust................................................62
Section 1004. Corporate Existence............................................................................64
Section 1005. Restrictions on Liens..........................................................................64
Section 1006. Limitation on Sale and Leaseback Transactions..................................................66
Section 1007. Provisions of Financial Statements.............................................................67
Section 1008. Waiver of Certain Covenants....................................................................67
ARTICLE ELEVEN REDEMPTION OF SECURITIES.........................................................................68
Section 1101. Rights of Redemption...........................................................................68
Section 1102. Applicability of Article.......................................................................68
Section 1103. Election to Redeem; Notice to Trustee..........................................................68
Section 1104. Selection by Trustee of Securities to Be Redeemed..............................................68
Section 1105. Notice of Redemption...........................................................................69
Section 1106. Deposit of Redemption Price....................................................................70
Section 1107. Securities Payable on Redemption Date..........................................................70
Section 1108. Securities Redeemed or Purchased in Part.......................................................71
ARTICLE TWELVE SATISFACTION AND DISCHARGE.......................................................................72
Section 1201. Satisfaction and Discharge of Indenture........................................................73
Section 1202. Application of Trust Money.....................................................................73
</TABLE>
TESTIMONIUM
SIGNATURES
-viii-
<PAGE> 10
INDENTURE, dated as of May __, 1999, between Republic Services, Inc.
and The Bank of New York, as trustee (the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the creation of two separate series of
securities under this Indenture: (i) an issue of ___% Notes due 200__ in the
aggregate principal amount of $____ million and (ii) an issue of ___% Notes due
200_ in the aggregate principal amount of $____ million (together, the
"Securities"), of substantially the tenor and amount hereinafter set forth, and
to provide therefor the Company has duly authorized the execution and delivery
of this Indenture and the Securities;
This Indenture is subject to, and shall be governed by, the provisions
of the Trust Indenture Act that are required to be part of and to govern
indentures qualified under the Trust Indenture Act;
All acts and things necessary have been done to make (i) the
Securities, when duly issued and executed by the Company and authenticated and
delivered hereunder, the valid obligations of the Company and (ii) this
Indenture a valid agreement of the Company;
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of
the Securities by the Holders thereof, it is mutually covenanted and agreed, for
the equal and proportionate benefit of all Holders of the Securities, as
follows:
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
Section 101. Definitions.
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
(a) the terms defined in this Article have the meanings assigned to
them in this Article, and include the plural as well as the singular;
(b) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein;
(c) all accounting terms not otherwise defined herein have the meanings
assigned to them in accordance with GAAP;
-1-
<PAGE> 11
(d) the words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision;
(e) all references to $, US$, dollars or United States dollars shall
refer to the lawful currency of the United States of America; and
(f) all references herein to particular Sections or Articles refer to
this Indenture unless otherwise so indicated.
Certain terms used principally in Article Four are defined in Article
Four.
"Affiliate" means, with respect to any specified Person: (i) any other
Person directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person; (ii) any other Person that
owns, directly or indirectly, 5% or more of such specified Person's Capital
Stock or any officer or director of any such specified Person or other Person
or, with respect to any natural Person, any person having a relationship with
such Person by blood, marriage or adoption not more remote than first cousin; or
(iii) any other Person 5% or more of the Voting Stock of which is beneficially
owned or held directly or indirectly by such specified Person. For the purposes
of this definition, "control" when used with respect to any specified Person
means the power to direct the management and policies of such Person, directly
or indirectly, whether through ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Applicable Procedures" means, with respect to any transfer or
transaction involving a Global Security or beneficial interest therein, the
rules and procedures of the Depositary for such Security to the extent
applicable to such transaction and as in effect at the time of such transfer or
transaction.
"Attributable Debt" means, when used in connection with a sale and
leaseback transaction, at any date of determination, the product of (1) the net
proceeds from such sale and leaseback transaction multiplied by (2) a fraction,
the numerator of which is the number of full years of the term of the lease
relating to the property involved in such sale and leaseback transaction
(without regard to any options to renew or extend such term) remaining at the
date of the making of such computation and the denominator of which is the
number of full years of the term of such lease measured from the first day of
such term.
-2-
<PAGE> 12
"Bankruptcy Law" means Title 11, United States Bankruptcy Code of 1978,
as amended, or any similar United States federal or state law or foreign law
relating to bankruptcy, insolvency, receivership, winding up, liquidation,
reorganization or relief of debtors or any amendment to, succession to or change
in any such law.
"Board of Directors" means either the Board of Directors of the Company
or any duly authorized committee or subcommittee of such Board, except as the
context may otherwise require.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company, as the case may be, to have
been duly adopted by the Board of Directors and to be in full force and effect
on the date of such certification, and delivered to the Trustee.
"Book-Entry Security" means any Global Securities bearing the legend
specified in Exhibits A and B evidencing all or part of a series of Securities,
authenticated and delivered to the Depositary for such series or its nominee,
and registered in the name of such Depositary or nominee.
"Business Day" means any day that is not a Saturday, a Sunday or a day
on which banking institutions or trust companies in New York City and Fort
Lauderdale, Florida are authorized or obligated by law to close.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, rights to purchase, warrants, options, participations or other
equivalents of or interests (including partnership interests) in (however
designated) the equity of such Person, including any Preferred Stock, but
excluding any debt securities convertible into such equity.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the Securities and Exchange Commission, as from time
to time constituted, created under the Exchange Act, or if at any time after the
execution of this Indenture such Commission is not existing and performing the
duties now assigned to it under the Securities Act, Exchange Act and Trust
Indenture Act then the body performing such duties at such time.
-3-
<PAGE> 13
"Company" means Republic Services, Inc., until a successor Person shall
have become such pursuant to the applicable provisions of this Indenture, and
thereafter "Company" shall mean such successor Person.
"Company Request" or "Company Order" means a written request or order
signed in the name of the Company by any one of its Chairman of the Board, its
President, its Chief Executive Officer, its Chief Financial Officer or a Vice
President (regardless of Vice Presidential designation), and by any one of its
Treasurer, an Assistant Treasurer, its Secretary or an Assistant Secretary and
delivered to the Trustee.
"Comparable Treasury Issue" means the United States Treasury security
selected by an Independent Investment Banker as having a maturity comparable to
the remaining term (the "Remaining Life") of the Securities to be redeemed that
would be utilized, at the time of selection and in accordance with customary
financial practice, in pricing new issues of corporate debt securities of a
comparable maturity to the remaining term of such Notes.
"Comparable Treasury Price" means, with respect to any Redemption Date,
(A) the average of five Reference Treasury Dealer Quotations for such Redemption
Date, after excluding the highest and lowest Reference Treasury Dealer
Quotations, or (B) if the Independent Investment Banker obtains fewer than five
such Reference Treasury Dealer Quotations, the average of all such quotations.
"Consolidated Net Tangible Assets" means, as of any date, the total
amount of assets of the Company and its Restricted Subsidiaries on a
consolidated basis (less applicable reserves and other properly deductible
items) after deducting therefrom (1) all current liabilities (excluding any
current liabilities which are by their terms extendible or renewable at the
option of the obligor thereon to a time more than 12 months after the time as of
which the amount thereof is being computed or which is supported by other
borrowings with a maturity of more than 12 months from the date of calculation,)
(2) all goodwill, trade names, trademarks, patents, unamortized debt discount
and expense and other like intangibles and (3) appropriate adjustments on
account of minority interests of other Persons holding stock of the Company's
Subsidiaries, all as set forth on the most recent balance sheet of the Company
and its consolidated Subsidiaries (but, in any event, as of a date within 120
days of the date of determination) in each case excluding intercompany items and
computed in accordance with generally accepted accounting principles as in
effect from time to time.
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<PAGE> 14
"Consolidation" means, with respect to any Person, the consolidation of
the accounts of such Person and each of its subsidiaries if and to the extent
the accounts of such Person and each of its subsidiaries would normally be
consolidated with those of such Person, all in accordance with GAAP. The term
"Consolidated" shall have a similar meaning.
"Corporate Trust Office" means the office of the Trustee or an
affiliate or agent thereof at which at any particular time the corporate trust
business for the purposes of this Indenture shall be principally administered,
which office at the date of execution of this Indenture is located at 101
Barclay Street, Floor 21W, New York, New York 10286.
"Default" means any event which is, or after notice or passage of time
or both would be, an Event of Default.
"Depositary" means, with respect to the Securities issued in the form
of one or more Book-Entry Securities, The Depository Trust Company ("DTC"), its
nominees and successors, or another Person designated as Depositary by the
Company, which must be a clearing agency registered under the Exchange Act.
"Event of Default" has the meaning specified in Section 501.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exempted Debt" means the sum, without duplication, of the following
items outstanding as of the date Exempted Debt is being determined: (1)
Indebtedness of Republic Services, Inc. and the Restricted Subsidiaries Incurred
after the date of the Indenture and secured by Liens created, assumed or
otherwise Incurred or permitted to exist pursuant to Section 1005 hereof and (2)
Attributable Debt of Republic Services, Inc. and the Restricted Subsidiaries in
respect of all sale and leaseback transactions with regard to any Principal
Property entered into pursuant to Section 1006 hereof.
"Fair Market Value" means, with respect to any asset or property, the
sale value that would be obtained in an arm's-length free market transaction
between an informed and willing seller under no compulsion to sell and an
informed and willing buyer under no compulsion to buy. Fair Market Value shall
be determined by the Board of Directors of the Company acting in good faith and
shall be evidenced by a resolution of the Board of Directors.
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<PAGE> 15
"Funded Debt" means all Indebtedness for money borrowed, including
purchase money indebtedness, having a maturity of more than one year from the
date of its creation or having a maturity of less than one year but by its terms
being renewable or extendible, at the option of the obligor in respect thereof,
beyond one year from its creation.
"Generally Accepted Accounting Principles" or "GAAP" means generally
accepted accounting principles in the United States as in effect on the Issue
Date.
"Global Securities" means Global Securities to be issued as Book-Entry
Securities issued to the Depositary in accordance with Section 306.
"Guarantee" means any obligation, contingent or otherwise, of any
person directly or indirectly guaranteeing any Indebtedness of any other Person
and any obligation, direct or indirect, contingent or otherwise, of such Person
(1) to purchase or pay (or advance or supply funds for the purchase or payment
of) such Indebtedness of such other Person (whether arising by virtue of
partnership arrangements, or by agreement to keep-well, to purchase assets,
goods, securities or services, to take-or-pay, or to maintain financial
statement conditions or otherwise) or (2) entered into for purposes of assuring
in any other manner the obligee of such Indebtedness of the payment thereof or
to protect such obligee against loss in respect thereof (in whole or in part);
provided, however, that the term "Guarantee" will not include endorsements for
collection or deposit in the ordinary course of business. The term "Guarantee"
used as a verb has a corresponding meaning.
"Holder" means the registered holder of any Security.
"Incur" means issue, assume, guarantee, incur or otherwise become
liable for. The terms "Incurred," "Incurrence" and "Incurring" shall each have a
correlative meaning.
"Indebtedness" means with respect to any Person at any date of
determination (without duplication), indebtedness for borrowed money or
indebtedness evidenced by bonds, notes, debentures or other similar instruments
given to finance the acquisition of any businesses, properties or assets of any
kind (including, without limitation, capital stock or other equity interests in
any Person).
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<PAGE> 16
"Indenture" means this instrument as originally executed (including all
exhibits and schedules thereto) and as it may from time to time be supplemented
or amended by one or more indentures supplemental hereto entered into pursuant
to the applicable provisions hereof.
"Indenture Obligations" means the obligations of the Company and any
other obligor under this Indenture or under the Securities, to pay principal of,
premium, if any, and interest when due and payable, and all other amounts due or
to become due under or in connection with this Indenture, the Securities and the
performance of all other obligations to the Trustee and the Holders under this
Indenture and the Securities, according to the respective terms hereof and
thereof.
"Independent Investment Banker" means either Banc of America Securities
LLC or Merrill Lynch, Pierce, Fenner & Smith Incorporated, or, if both firms are
unwilling or unable to select the Comparable Treasury Issue, an independent
investment banking institution of national standing appointed by the Trustee
after consultation with the Company.
"Interest Payment Date" means the Stated Maturity of an installment of
interest on the Securities.
"Issue Date" means the original issue date of the Securities under this
Indenture.
"Lien" with respect to any property or assets, means any mortgage or
deed of trust, pledge, hypothecation, assignment, deposit arrangement, security
interest, lien, charge, easement (other than any easement not materially
impairing usefulness or marketability), encumbrance, preference, priority or
other security agreement or preferential arrangement of any kind or nature
whatsoever on or with respect to such property or assets (including, without
limitation, any conditional sale or other title retention agreement having
substantially the same economic effect as any of the foregoing), but not
including the interest of a lessor under a lease that is an operating lease
under GAAP.
"Maturity" means, when used with respect to the Securities, the date on
which the principal of the Securities becomes due and payable as therein
provided or as provided in this Indenture, whether at Stated Maturity or the
Redemption Date and whether by declaration of acceleration, call for redemption
or otherwise.
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<PAGE> 17
"Moody's" means Moody's Investors Service, Inc. or any successor rating
agency.
"Officers' Certificate" means a certificate signed by the Chairman of
the Board, the President, the Chief Executive Officer, the Chief Financial
Officer or a Vice President (regardless of Vice Presidential designation), and
by the Treasurer, an Assistant Treasurer, the Secretary or an Assistant
Secretary, of the Company and in form and substance reasonably satisfactory to,
and delivered to, the Trustee.
"Opinion of Counsel" means a written opinion of counsel, who may be
counsel for the Company or the Trustee, unless an Opinion of Independent Counsel
is required pursuant to the terms of this Indenture, and who shall be reasonably
acceptable to the Trustee, and which opinion shall be in form and substance
reasonably satisfactory to the Trustee.
"Opinion of Independent Counsel" means a written opinion of counsel
which is issued by a Person who is not an employee, director or consultant
(other than non-employee legal counsel) of the Company and who shall be
reasonably acceptable to the Trustee, and which opinion shall be in form and
substance reasonably satisfactory to the Trustee.
"Outstanding" when used with respect to Securities means, as of the
date of determination, all Securities theretofore authenticated and delivered
under this Indenture, except:
(a) Securities theretofore canceled by the Trustee or delivered to the
Trustee for cancellation;
(b) Securities, or portions thereof, for whose payment or redemption
money in the necessary amount has been theretofore deposited with the Trustee or
any Paying Agent (other than the Company or any Affiliate thereof) in trust or
set aside and segregated in trust by the Company or any Affiliate thereof (if
the Company or any Affiliate thereof shall act as its own Paying Agent) for the
Holders of such Securities; provided that if such Securities are to be redeemed,
notice of such redemption has been duly given pursuant to this Indenture or
provision therefor reasonably satisfactory to the Trustee has been made;
(c) Securities, to the extent provided in Sections 402 and 403, with
respect to which the Company has effected defeasance or covenant defeasance as
provided in Article Four; and
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<PAGE> 18
(d) Securities in exchange for or in lieu of which other Securities
have been authenticated and delivered pursuant to this Indenture, other than any
such Securities in respect of which there shall have been presented to the
Trustee and the Company proof reasonably satisfactory to each of them that such
Securities are held by a bona fide purchaser in whose hands the Securities are
valid obligations of the Company;
provided, however, that in determining whether the Holders of the requisite
principal amount of Outstanding Securities have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Securities owned
by the Company or any other obligor upon the Securities or any Affiliate of the
Company or such other obligor shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Trustee shall be protected
in relying upon any such request, demand, authorization, direction, notice,
consent or waiver, only Securities which a Responsible Officer of the Trustee
actually knows to be so owned shall be so disregarded. Securities so owned which
have been pledged in good faith may be regarded as Outstanding if the pledgee
establishes to the reasonable satisfaction of the Trustee the pledgee's right so
to act with respect to such Securities and that the pledgee is not the Company
or any other obligor upon the Securities or any Affiliate of the Company or such
other obligor.
"Paying Agent" means any Person (including the Company) authorized by
the Company to pay the principal of, premium, if any, or interest on, any
Securities on behalf of the Company.
"Person" means any individual, corporation, partnership, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"Predecessor Security" of any particular Security means every previous
Security evidencing all or a portion of the same debt as that evidenced by such
particular Security; and, for the purposes of this definition, any Security
authenticated and delivered under Section 307 in exchange for a mutilated
Security or in lieu of a lost, destroyed or stolen Security shall be deemed to
evidence the same debt as the mutilated, lost, destroyed or stolen Security.
"Preferred Stock" means, with respect to any Person, any and all
shares, interests, participations or other equivalents (however designated,
whether voting or nonvoting) of such Person's preferred or preference stock,
whether now outstanding or issued after the date of the Indenture, including,
without limitation, all series and classes of such preferred or preference
stock.
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<PAGE> 19
"Principal Property" means any land, land improvements or building,
together with the land upon which it is erected and fixtures comprising a part
thereof, in each case, owned or leased by the Company or any Restricted
Subsidiary and located in the United States, the gross book value (without
deduction of any reserve for depreciation) of which on the date as of which the
determination is being made is an amount which exceeds 2% of Consolidated Net
Tangible Assets but not including such land, land improvements, buildings or
portions thereof which is financed through the issuance of tax exempt
governmental obligations, or any such property that has been determined by Board
Resolution of Republic Services, Inc. not to be of material importance to the
respective businesses conducted by the Company or such Restricted Subsidiary
effective as of the date such resolution is adopted.
"Redemption Date" when used with respect to any Security to be redeemed
pursuant to any provision in this Indenture means the date fixed for such
redemption by or pursuant to this Indenture.
"Redemption Price" when used with respect to any Security to be
redeemed pursuant to any provision in this Indenture means the price at which it
is to be redeemed pursuant to this Indenture.
"Reference Treasury Dealer" means (i) each of Banc of America
Securities LLC and Merrill Lynch, Pierce Fenner & Smith Incorporated, provided,
however, that if either of the foregoing shall cease to be a primary U.S.
Government securities dealer in New York City (a "Primary Treasury Dealer"), the
Company will substitute for such initial purchaser another Primary Treasury
Dealer and (2) any other Primary Treasury Dealer selected by the Independent
Investment Banker after consultation with the Company.
"Reference Treasury Dealer Quotations" mean, with respect to each
Reference Treasury Dealer and any Redemption Date, the average, as determined by
the Independent Investment Banker, of the bid and asked prices for the
Comparable Treasury Issue (expressed in each case as a percentage of its
principal amount) quoted in writing to the Independent Investment Banker at 5:00
p.m., New York City time, on the third Business Day preceding such Redemption
Date.
"Regular Record Date" for the interest payable on any Interest Payment
Date means the May 15th or November 15th (whether or not a Business Day) next
preceding such Interest Payment Date.
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<PAGE> 20
"Responsible Officer" when used with respect to the Trustee means any
officer assigned to the Corporate Trust Office or any agent of the Trustee
appointed hereunder, including any vice president, assistant vice president,
assistant secretary or any other officer or assistant officer of the Trustee or
any agent of the Trustee appointed hereunder to whom any corporate trust matter
is referred because of his or her knowledge of and familiarity with the
particular subject and who shall have direct responsibility for the
administration of this Indenture.
"Restricted Subsidiary" means any Subsidiary which, at the time of
determination, owns or is a lessee pursuant to a capital lease of any Principal
Property.
"S&P" means Standard & Poor's Rating Group, a division of McGraw Hill,
Inc. or any successor rating agency.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Indebtedness" means any Indebtedness of the Company which is
not expressly subordinated in right of payment to any other Indebtedness of the
Company.
"Special Record Date" for the payment of any Defaulted Interest means a
date fixed by the Trustee pursuant to Section 308.
"Stated Maturity" means, when used with respect to any Security, the
date specified in such Security as the fixed date on which the payment of
principal or interest of such Security is due and payable.
"Subsidiary" of a Person means, with respect to any Person, any
corporation, association, partnership or other business entity of which at least
a majority of the total voting power of the Capital Stock entitled (without
regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time owned or controlled,
directly or indirectly, by (1) such Person, (2) such Person and one or more
Subsidiaries of such Person or (3) one or more Subsidiaries of such Person.
"Temporary Cash Investments" means (1) any evidence of Indebtedness,
maturing not more than one year
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<PAGE> 21
after the date of acquisition, issued by the United States of America, or an
instrumentality or agency thereof, and guaranteed fully as to principal,
premium, if any, and interest by the United States of America, (2) any
certificate of deposit, maturing not more than one year after the date of
acquisition, issued by, or time deposit of, a commercial banking institution
that is a member of the Federal Reserve System and that has combined capital and
surplus and undivided profits of not less than $500,000,000, whose debt has a
rating, at the time as of which any investment therein is made, of "P-1" (or
higher) according to Moody's or any successor rating agency or "A-1" (or higher)
according to S&P or any successor rating agency, including the Trustee or any of
its affiliates, (3) commercial paper, maturing not more than one year after the
date of acquisition, issued by a corporation (other than an Affiliate or
Subsidiary of the Company) organized and existing under the laws of the United
States of America with a rating, at the time as of which any investment therein
is made, of "P-1" (or higher) according to Moody's or "A-1" (or higher)
according to S&P, including the Trustee or any of its affiliates, and (4) any
money market deposit accounts issued or offered by a domestic commercial bank
having capital and surplus in excess of $500,000,000; provided that the short
term debt of such commercial bank has a rating, at the time of investment, of
"P-1" (or higher) according to Moody's or "A-1" (or higher) according to S&P.
"Treasury Rate" means, with respect to any Redemption Date, (1) the
yield, under the heading which represents the average for the immediately
preceding week, appearing in the most recently published statistical release
designated "H.15(519)" or any successor publication which is published weekly by
the Board of Governors of the Federal Reserve System and which establishes
yields on actively traded U.S. Treasury securities adjusted to constant maturity
under the caption "Treasury Constant Maturities," for the maturity corresponding
to the comparable Treasury Issue (if no maturity is within three months before
or after the Remaining Life, yields for the two published Maturities most
closely corresponding to the Comparable Treasury Issue will be determined and
the Treasury Rate will be interpolated or extrapolated from such yields on a
straight line basis, rounding to the nearest month) or (2) if such release (or
any successor release) is not published during the week preceding the
calculation date or does not contain such yields, the rate per annum equal to
the semi-annual equivalent yield to maturity of the Comparable Treasury Issue,
calculated using a price for the Comparable Treasury Issue (expressed as a
percentage of its principal amount) equal to the Comparable Treasury Price for
such Redemption Date. The Treasury Rate will be calculated on the third Business
Day preceding the Redemption Date.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this Indenture, until a successor trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean such successor trustee.
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<PAGE> 22
"Trust Indenture Act" means the Trust Indenture Act of 1939, as
amended, or any successor statute.
"Voting Stock" of a Person means Capital Stock of any class or kind
ordinarily having the power to vote for the election of directors of the
Company.
Section 102. Other Definitions.
<TABLE>
<CAPTION>
Term Defined in Section
---- ------------------
<S> <C>
"Act" 105
"Agent Members" 306
"CUSIP" 309
"Defaulted Interest" 308
"Defeased Securities" 401
"Securities" Recitals
"Security Register" 305
"Security Registrar" 305
"Special Payment Date" 308
"Successor Company" 801
"U.S. Government Obligations" 404
</TABLE>
Section 103. Compliance Certificates and Opinions.
Upon any application or request by the Company to the Trustee to take
any action under any provision of this Indenture, the Company and any other
obligor on the Securities (if applicable) shall furnish to the Trustee an
Officers' Certificate in a form and substance reasonably acceptable to the
Trustee stating that all conditions precedent, if any, provided for in this
Indenture (including any covenant compliance with which constitutes a condition
precedent) relating to the proposed action have been complied with, and an
Opinion of Counsel in a form and substance reasonably acceptable to the Trustee
stating that in the opinion of such counsel all such conditions precedent, if
any, have been complied with, except that, in the case of any such application
or request as to which the furnishing of such certificates or opinions is
specifically required by any provision of this Indenture relating to such
particular application or request, no additional certificate or opinion need be
furnished.
Every certificate or Opinion of Counsel with respect to compliance with
a condition or covenant provided for in this Indenture shall include:
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<PAGE> 23
(a) a statement that each individual signing such certificate or
individual or firm signing such opinion has read and understands such covenant
or condition and the definitions herein relating thereto;
(b) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of each such individual or such
firm, he or it has made such examination or investigation as is necessary to
enable him or it to express an informed opinion as to whether or not such
covenant or condition has been complied with; and
(d) a statement as to whether, in the opinion of each such individual
or such firm, such condition or covenant has been complied with.
Section 104. Form of Documents Delivered to Trustee.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate of an officer of the Company or other obligor on the
Securities may be based, insofar as it relates to legal matters, upon a
certificate or opinion of, or representations by, counsel, unless such officer
knows, or in the exercise of reasonable care should know, that the certificate
or opinion or representations with respect to the matters upon which his
certificate or opinion is based are erroneous. Any such certificate or opinion
may be based, insofar as it relates to factual matters, upon a certificate or
opinion of, or representations by, an officer or officers of the Company or
other obligor on the Securities stating that the information with respect to
such factual matters is in the possession of the Company or other obligor on the
Securities, unless such officer or counsel knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to such matters are erroneous. Opinions of Counsel required to be
delivered to the Trustee may have qualifications customary for opinions of the
type required and counsel delivering such Opinions of Counsel may rely on
certificates of the Company or government or other officials customary for
opinions of the type required, including certificates certifying as to matters
of fact, including that various financial covenants have been complied with.
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<PAGE> 24
Any certificate or opinion of an officer of the Company or other
obligor on the Securities may be based, insofar as it relates to accounting
matters, upon a certificate or opinion of, or representations by, an accountant
or firm of accountants in the employ of the Company, unless such officer knows,
or in the exercise of reasonable care should know, that the certificate or
opinion or representations with respect to the accounting matters upon which his
certificate or opinion may be based are erroneous. Any certificate or opinion of
any independent firm of public accountants filed with the Trustee shall contain
a statement that such firm is independent with respect to the Company.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
Section 105. Acts of Holders.
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture to be given or taken by
Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by an agent duly
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments are delivered
to the Trustee and, where it is hereby expressly required, to the Company. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Holders signing
such instrument or instruments. Proof of execution of any such instrument or of
a writing appointing any such agent shall be sufficient for any purpose of this
Indenture and conclusive in favor of the Trustee and the Company, if made in the
manner provided in this Section 105.
(b) The ownership of Securities shall be proved by the Security
Register.
(c) Any request, demand, authorization, direction, notice, consent,
waiver or other Act by the Holder of any Security shall bind every future Holder
of the same Security or the Holder of every Security issued upon the transfer
thereof or in exchange therefor or in lieu thereof, in respect of anything done,
suffered or omitted to be done by the Trustee, any Paying Agent or the Company
or any other obligor of the Securities in reliance thereon, whether or not
notation of such action is made upon such Security.
(d) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or
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<PAGE> 25
writing acknowledged to him the execution thereof. Where such execution is by a
signer acting in a capacity other than his individual capacity, such certificate
or affidavit shall also constitute sufficient proof of his authority. The fact
and date of the execution of any such instrument or writing, or the authority of
the Person executing the same, may also be proved in any other manner which the
Trustee deems sufficient.
(e) If the Company shall solicit from the Holders any request, demand,
authorization, direction, notice, consent, waiver or other Act, the Company may,
at its option, by or pursuant to a Board Resolution, fix in advance a record
date for the determination of such Holders entitled to give such request,
demand, authorization, direction, notice, consent, waiver or other Act, but the
Company shall have no obligation to do so. Notwithstanding Trust Indenture Act
Section 316(c), any such record date shall be the record date specified in or
pursuant to such Board Resolution, which shall be a date not more than 30 days
prior to the first solicitation of Holders generally in connection therewith and
no later than the date such first solicitation is completed.
If such a record date is fixed, such request, demand, authorization,
direction, notice, consent, waiver or other Act may be given before or after
such record date, but only the Holders of record at the close of business on
such record date shall be deemed to be Holders for purposes of determining
whether Holders of the requisite proportion of Securities then Outstanding have
authorized or agreed or consented to such request, demand, authorization,
direction, notice, consent, waiver or other Act, and for this purpose the
Securities then Outstanding shall be computed as of such record date; provided
that no such request, demand, authorization, direction, notice, consent, waiver
or other Act by the Holders on such record date shall be deemed effective unless
it shall become effective pursuant to the provisions of this Indenture not later
than six months after such record date. (f) For purposes of this Indenture, any
action by the Holders which may be taken in writing may be taken by electronic
means or as otherwise reasonably acceptable to the Trustee.
Section 106. Notices, etc., to the Trustee, the Company.
Any request, demand, authorization, direction, notice, consent, waiver
or Act of Holders or other document provided or permitted by this Indenture to
be made upon, given or furnished to, or filed with:
(a) the Trustee by any Holder or by the Company or any other obligor on
the Securities shall be sufficient for every purpose (except as provided in
Section 501(d), in which case, the notice shall be delivered by certified mail)
hereunder if in writing and mailed, first-class postage prepaid, or delivered by
recognized overnight
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<PAGE> 26
courier, to or with the Trustee at its Corporate Trust Office, Attention:
Corporate Trust Trustee Administration, or at any other address previously
furnished in writing to the Holders or the Company, or any other obligor on the
Securities by the Trustee and shall be deemed given upon actual receipt by the
Trustee; or
(b) the Company by the Trustee or any Holder shall be sufficient for
every purpose (except as provided in Section 501(d), in which case, the notice
shall be delivered by certified mail) hereunder if in writing and mailed,
first-class postage prepaid, or delivered by recognized overnight courier, to
the Company addressed to Republic Services, Inc., 110 S.E. 6th Street, 28th
Floor, Fort Lauderdale, Florida 33301, Attention: Chief Financial Officer, or at
any other address previously furnished in writing to the Trustee by the Company.
Section 107. Notice to Holders; Waiver.
Where this Indenture provides for notice to Holders of any event, such
notice shall be sufficiently given (unless otherwise herein expressly provided)
if in writing and mailed, first-class postage prepaid, or delivered by
recognized overnight courier, to each Holder affected by such event, at its
address as it appears in the Security Register, not later than the latest date,
and not earlier than the earliest date, prescribed for the giving of such
notice. In any case where notice to Holders is given by mail, neither the
failure to mail such notice, nor any defect in any notice so mailed, to any
particular Holder shall affect the sufficiency of such notice with respect to
other Holders. Any notice when mailed to a Holder in the aforesaid manner shall
be conclusively deemed to have been received by such Holder whether or not
actually received by such Holder. Where this Indenture provides for notice in
any manner, such notice may be waived in writing by the Person entitled to
receive such notice, either before or after the event, and such waiver shall be
the equivalent of such notice. Waivers of notice by Holders shall be filed with
the Trustee, but such filing shall not be a condition precedent to the validity
of any action taken in reliance upon such waiver.
In case by reason of the suspension of regular mail service or by
reason of any other cause, it shall be impracticable to mail notice of any event
as required by any provision of this Indenture, then any method of giving such
notice as shall be reasonably satisfactory to the Trustee and reasonably
calculated to reach its destination shall be deemed to be a sufficient giving of
such notice.
Section 108. Conflict with Trust Indenture Act.
If any provision hereof limits, qualifies or conflicts with any
provision of the Trust Indenture Act or another provision which is required or
deemed to be included in this Indenture by any of the provisions of the Trust
Indenture Act, the provision or
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<PAGE> 27
requirement of the Trust Indenture Act shall control. If any provision of this
Indenture modifies or excludes any provision of the Trust Indenture Act that may
be so modified or excluded, the latter provision shall be deemed to apply to
this Indenture as so modified or to be excluded, as the case may be.
Section 109. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of Contents are
for convenience only and shall not affect the construction hereof.
Section 110. Successors and Assigns.
All covenants and agreements in this Indenture by the Company and the
Trustee shall bind their respective successors and assigns, whether so expressed
or not.
Section 111. Separability Clause.
In case any provision in this Indenture or in the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
Section 112. Benefits of Indenture.
Nothing in this Indenture or in the Securities, express or implied,
shall give to any Person (other than the parties hereto and their successors
hereunder, any Paying Agent and the Holders) any benefit or any legal or
equitable right, remedy or claim under this Indenture.
Section 113. Governing Law.
THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO
THE CONFLICT OF LAWS PRINCIPLES THEREOF.
Section 114. Legal Holidays.
In any case where any Interest Payment Date, Redemption Date, Maturity
or Stated Maturity of any Security shall not be a Business Day, then
(notwithstanding any other provision of this Indenture or of the Securities)
payment of interest or principal or premium, if any, need not be made on such
date, but may be made on the next succeeding Business Day with the same force
and effect as if made on such Interest Payment Date or Redemption Date, or at
the Maturity or Stated Maturity and no interest shall accrue with respect to
such payment for the period from and after such Interest Payment Date,
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Redemption Date, Maturity or Stated Maturity, as the case may be, to the next
succeeding Business Day.
Section 115. Independence of Covenants.
All covenants and agreements in this Indenture shall be given
independent effect so that if a particular action or condition is not permitted
by any such covenants, the fact that it would be permitted by an exception to,
or be otherwise within the limitations of, another covenant shall not avoid the
occurrence of a Default or an Event of Default if such action is taken or
condition exists.
Section 116. Schedules and Exhibits.
All schedules and exhibits attached hereto are by this reference made a
part hereof with the same effect as if herein set forth in full.
Section 117. Counterparts.
This Indenture may be executed in any number of counterparts, each of
which shall be deemed an original; but all such counterparts shall together
constitute but one and the same instrument.
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ARTICLE TWO
SECURITY FORMS
Section 201. Forms Generally.
The (i) __% Notes due 200_ and the Trustee's certificate of
authentication thereon shall be in substantially the form of Exhibit A hereto;
and (ii) the __% Notes due 200_ and the Trustee's certification of
authentication thereon shall be in substantially the form of Exhibit B hereto,
with such appropriate insertions, omissions, substitutions and other variations
as are required or permitted hereby and may have such letters, numbers or other
marks of identification and such legends or endorsements placed thereon as may
be required to comply with the rules of any securities exchange, any
organizational document or governing instrument or applicable law or as may,
consistently herewith, be determined by the officers executing such Securities,
as evidenced by their execution of the Securities. Any portion of the text of
any Security may be set forth on the reverse thereof, with an appropriate
reference thereto on the face of the Security.
The definitive Securities shall be printed, lithographed or engraved or
produced by any combination of these methods or may be produced in any other
manner permitted by the rules of any securities exchange on which the Securities
may be listed, all as determined by the officers executing such Securities, as
evidenced by their execution of such Securities.
The Securities shall be issued initially in the form of one or more
Global Securities, substantially in the forms set forth on Exhibits A and B,
respectively, deposited upon issuance with the Trustee, as custodian for the
Depositary, registered in the name of the Depositary or its nominee, in each
case for credit to an account of a direct or indirect participant of the
Depositary, duly executed by the Company and authenticated by the Trustee as
hereinafter provided. The aggregate principal amount of the Global Securities
may from time to time be increased (but in no event shall the aggregate
principal amount of the Global Securities exceed $___ million) or decreased upon
the written direction of the Company by adjustments made on the records of the
Trustee, as custodian for the Depositary or its nominee, as hereinafter
provided.
The terms and provisions contained in the form of the Securities set
forth in Exhibits A and B shall constitute, and are hereby expressly made, a
part of this Indenture and, to the extent applicable, the Company and the
Trustee, by their execution and delivery of this Indenture, expressly agree to
such terms and provisions and to be bound thereby.
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ARTICLE THREE
THE SECURITIES
Section 301. Title and Terms.
The aggregate principal amount of Securities which may be authenticated
and delivered under this Indenture is limited to $___,000,000 in principal
amount of Securities, except for Securities authenticated and delivered upon
registration of transfer of, or in exchange for, or in lieu of, other Securities
pursuant to Section 303, 304, 305, 307, 906 or 1108.
The Securities shall be known and designated as the "___% Notes due
200_" and the "___% Notes due 200_" of the Company.
The Stated Maturity of the ___% Notes due 200_ shall be June 1, 200_,
and the Securities shall each bear interest at the rate of ___% per annum, as
such interest rate may be adjusted as set forth in the Securities, from
__________, 1999, or from the most recent Interest Payment Date to which
interest has been paid, payable semiannually on June 1 and December 1 in each
year, commencing _________, 1999, until the principal thereof is paid or duly
provided for.
The Stated Maturity of the ___% Notes due 200_ shall be June 1, 200_,
and the Securities shall each bear interest at the rate of ___% per annum, as
such interest rate may be adjusted as set forth in the Securities, from
__________, 1999, or from the most recent Interest Payment Date to which
interest has been paid, payable semiannually on June 1 and December 1 in each
year, commencing _________, 1999, until the principal thereof is paid or duly
provided for.
The principal of, premium, if any, and interest on, the Securities
shall be payable and the Securities shall be exchangeable and transferable at an
office or agency of the Company in The City of New York maintained for such
purposes (which initially will be the Corporate Trust Office of the Trustee;
provided, however, that payment of interest may be made at the option of the
Company by check mailed to addresses of the Persons entitled thereto as shown on
the Security Register.
The Securities shall be redeemable as provided in Article Eleven and in
the Securities.
The Indebtedness evidenced by the Securities shall rank pari passu in
right of payment with all other Senior Indebtedness.
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At the election of the Company, the entire Indebtedness on the
Securities or certain of the Company's obligations and covenants and certain
Defaults and Events of Default thereunder may be defeased as provided in Article
Four.
Section 302. Denominations.
The Securities shall be issuable only in fully registered form without
coupons and only in denominations of $1,000 and any integral multiple thereof.
Section 303. Execution, Authentication, Delivery and Dating.
The Securities shall be executed on behalf of the Company by one of its
Chairman of the Board, its President, its Chief Executive Officer, its Chief
Financial Officer or one of its Vice Presidents. The signatures of any of these
officers on the Securities may be manual or facsimile.
Securities bearing the manual or facsimile signatures of individuals
who were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Securities or did not
hold such offices at the date of such Securities.
At any time and from time to time after the execution and delivery of
this Indenture, the Company may deliver Securities executed by the Company to
the Trustee for authentication, together with a Company Order for the
authentication and delivery of such Securities; and the Trustee in accordance
with such Company Order shall authenticate and deliver such Securities as
provided in this Indenture and not otherwise.
Each Security shall be dated the date of its authentication.
No Security endorsed thereon shall be entitled to any benefit under
this Indenture or be valid or obligatory for any purpose unless there appears on
such Security a certificate of authentication substantially in the form provided
for herein duly executed by the Trustee by manual signature of an authorized
signatory, and such certificate upon any Security shall be conclusive evidence,
and the only evidence, that such Security has been duly authenticated and
delivered hereunder and is entitled to the benefits of this Indenture.
In case the Company, pursuant to Article Eight, shall, in a single
transaction or through a series of related transactions, be consolidated,
amalgamated, combined or merged with or into any other Person or shall sell,
assign, convey, transfer, lease or otherwise dispose of all or substantially all
of its properties and assets to any Person, and the successor Person resulting
from such consolidation, amalgamation, or combination or surviving such merger,
or into which the Company shall have been merged, or the
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successor Person which shall have participated in the sale, assignment,
conveyance, transfer, lease or other disposition as aforesaid, shall have
executed an indenture supplemental hereto with the Trustee pursuant to Article
Eight, any of the Securities authenticated or delivered prior to such
consolidation, amalgamation, combination, merger, sale, assignment, conveyance,
transfer, lease or other disposition may, from time to time, at the request of
the successor Person, be exchanged for other Securities executed in the name of
the successor Person with such changes in phraseology and form as may be
appropriate, but otherwise in substance of like tenor as the Securities
surrendered for such exchange and of like principal amount; and the Trustee,
upon Company Request of the successor Person, shall authenticate and deliver
Securities as specified in such request for the purpose of such exchange. If
Securities shall at any time be authenticated and delivered in any new name of a
successor Person pursuant to this Section 303 in exchange or substitution for or
upon registration of transfer of any Securities, such successor Person, at the
option of the Holders but without expense to them, shall provide for the
exchange of all Securities at the time Outstanding for Securities authenticated
and delivered in such new name.
The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Securities on behalf of the Trustee. Unless limited by
the terms of such appointment, an authenticating agent may authenticate
Securities whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as any Security Registrar or Paying
Agent to deal with the Company and its Affiliates.
If an officer whose signature is on a Security no longer holds that
office at the time the Trustee authenticates such Security such Security shall
be valid nevertheless.
Section 304. Temporary Securities.
Pending the preparation of definitive Securities, the Company may
execute, and upon Company Order the Trustee shall authenticate and deliver,
temporary Securities which are printed, lithographed, typewritten or otherwise
produced, in any authorized denomination, substantially of the tenor of the
definitive Securities in lieu of which they are issued and with such appropriate
insertions, omissions, substitutions and other variations as the officers
executing such Securities may determine, as conclusively evidenced by their
execution of such Securities.
If temporary Securities are issued, the Company will cause definitive
Securities to be prepared without unreasonable delay. After the preparation of
definitive Securities, the temporary Securities shall be exchangeable for
definitive Securities upon surrender of the temporary Securities at the office
or agency of the Company designated for such purpose pursuant to Section 1002,
without charge to the Holder. Upon surrender
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for cancellation of any one or more temporary Securities, the Company shall
execute and the Trustee shall authenticate and deliver in exchange therefor a
like principal amount of definitive Securities of authorized denominations.
Until so exchanged, the temporary Securities shall in all respects be entitled
to the same benefits under this Indenture as definitive Securities.
Section 305. Registration, Registration of Transfer and Exchange.
The Company shall cause the Trustee to keep, so long as it is the
Security Registrar, at the Corporate Trust Office of the Trustee, or such other
office as the Trustee may designate, a register (the register maintained in such
office or in any other office or agency designated pursuant to Section 1002
being herein sometimes referred to as the "Security Register") in which, subject
to such reasonable regulations as the Security Registrar may prescribe, the
Company shall provide for the registration of Securities and of transfers of
Securities. The Trustee shall initially be the "Security Registrar" for the
purpose of registering Securities and transfers of Securities as herein
provided. The Company may change the Security Registrar or appoint one or more
Co-Security Registrars without prior notice; provided that the Company shall
promptly notify the Trustee if the Company changes the Security Registrar or
appoints a co-Security Registrar.
Upon surrender for registration of transfer of any Security at the
office or agency of the Company designated pursuant to Section 1002, the Company
shall execute, and the Trustee shall authenticate and deliver, in the name of
the designated transferee or transferees, one or more new Securities of the same
series of any authorized denomination or denominations, of a like aggregate
principal amount.
Furthermore, any Holder of the Global Security shall, by acceptance of
such Global Security, agree that transfers of beneficial interests in such
Global Security may be effected only through a book-entry system maintained by
the Holder of such Global Security (or its agent), and that ownership of a
beneficial interest in a Security shall be required to be reflected in a book
entry. At the option of the Holder, Securities may be exchanged for other
Securities of any authorized denomination or denominations, of a like aggregate
principal amount, upon surrender of the Securities to be exchanged at such
office or agency. Whenever any Securities are so surrendered for exchange, the
Company shall execute, and the Trustee shall authenticate and deliver,
Securities of the same series which the Holder making the exchange is entitled
to receive.
All Securities issued upon any registration of transfer or exchange of
Securities shall be the valid obligations of the Company, evidencing the same
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Indebtedness, and entitled to the same benefits under this Indenture, as the
Securities surrendered upon such registration of transfer or exchange.
Every Security presented or surrendered for registration of transfer,
or for exchange, repurchase or redemption, shall (if so required by the Company
or the Trustee) be duly endorsed, or be accompanied by a written instrument of
transfer in form satisfactory to the Company and the Security Registrar, duly
executed by the Holder thereof or his attorney duly authorized in writing.
No service charge shall be made to a Holder for any registration of
transfer, exchange or redemption of Securities, other than exchanges pursuant to
Sections 305 or 307 not involving any transfer, except for any tax or other
governmental charge that may be imposed in connection therewith.
The Company shall not be required (a) to issue, register the transfer
of or exchange any Security during a period beginning at the opening of business
15 days before the mailing of a notice of redemption of the Securities selected
for redemption under Section 1104 and ending at the close of business on the day
of such mailing or (b) to register the transfer of or exchange any Security so
selected for redemption in whole or in part, except the unredeemed portion of
Securities being redeemed in part.
Any Security authenticated and delivered upon registration of transfer
of, or in exchange for, or in lieu of, any Global Security, whether pursuant to
this Section 305, Sections 303, 304, 307, 906 or 1108 or otherwise, shall also
be a Global Security and bear the legend specified in Exhibits A and B hereto.
Section 306. Book Entry Provisions for Global Securities.
(a) Each Global Security initially shall (i) be registered in the name
of the Depositary for such Global Security or the nominee of such Depositary,
(ii) be deposited with, or on behalf of, the Depositary or with the Trustee as
custodian for such Depositary and (iii) bear legends as set forth in Exhibits A
and B hereto.
Members of, or participants in, the Depositary ("Agent Members") shall
have no rights under this Indenture with respect to any Global Security held on
their behalf by the Depositary, or the Trustee as its custodian, or under such
Global Security, and the Depositary may be treated by the Company, the Trustee
and any agent of the Company or the Trustee as the absolute owner of such Global
Security for all purposes whatsoever. Notwithstanding the foregoing, nothing
herein shall prevent the Company, the Trustee or any agent of the Company or the
Trustee from giving effect to any written certification, proxy or other
authorization furnished by the Depositary or shall impair, as between the
Depositary and its Agent Members, the operation of customary practices governing
the exercise of the rights of a holder of any Security.
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(b) Notwithstanding any other provision in this Indenture, no Global
Security may be exchanged in whole or in part for Securities registered, and no
transfer of a Global Security in whole or in part may be registered, in the name
of any Person other than the Depositary for such Global Security or a nominee
thereof unless (i) such Depositary (A) has notified the Company that it is
unwilling or unable to continue as Depositary for such Global Security or (B)
has ceased to be a clearing agency registered as such under the Exchange Act,
and in either case the Company fails to appoint a successor Depositary, (ii) the
Company, at its option, executes and delivers to the Trustee a Company Order
stating that it elects to cause the issuance of the Securities in certificated
form and that all Global Securities shall be exchanged in whole for Securities
that are not Global Securities (in which case, such exchange shall be effected
by the Trustee) or (iii) there shall have occurred and be continuing an Event of
Default or any Default.
(c) If any Global Security is to be exchanged for other Securities or
canceled in whole, it shall be surrendered by or on behalf of the Depositary or
its nominee to the Trustee, as Security Registrar, for exchange or cancellation
as provided in this Article Three. If any Global Security is to be exchanged for
other Securities or canceled in part, or if another Security is to be exchanged
in whole or in part for a beneficial interest in any Global Security, then
either (i) such Global Security shall be so surrendered for exchange or
cancellation as provided in this Article Three or (ii) the principal amount
thereof shall be reduced or increased by an amount equal to the portion thereof
to be so exchanged or canceled, or equal to the principal amount of such other
Security to be so exchanged for a beneficial interest therein, as the case may
be, by means of an appropriate adjustment made on the records of the Trustee, as
Security Registrar, whereupon the Trustee, in accordance with the Applicable
Procedures, shall instruct the Depositary or its authorized representative to
make a corresponding adjustment to its records. Upon any such surrender or
adjustment of a Global Security, the Trustee shall, subject to this Section
306(c) and as otherwise provided in this Article Three, authenticate and deliver
any Securities issuable in exchange for such Global Security (or any portion
thereof) to or upon the order of, and registered in such names as may be
directed by, the Depositary or its authorized representative. Upon the request
of the Trustee in connection with the occurrence of any of the events specified
in the preceding paragraph, the Company shall promptly make available to the
Trustee a reasonable supply of Securities that are not in the form of Global
Securities. The Trustee shall be entitled to conclusively rely upon any order,
direction or request of the Depositary or its authorized representative which is
given or made pursuant to this Article Three if such order, direction or request
is given or made in accordance with the Applicable Procedures.
(d) Every Security authenticated and delivered upon registration of
transfer of, or in exchange for or in lieu of, a Global Security or any portion
thereof, whether pursuant to this Article Three or otherwise, shall be
authenticated and delivered
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in the form of, and shall be, a Global Security, unless such Security is
registered in the name of a Person other than the Depositary for such Global
Security or a nominee thereof.
(e) The Depositary or its nominee, as registered owner of a Global
Security, shall be the Holder of such Global Security for all purposes under
this Indenture and the Securities, and owners of beneficial interests in a
Global Security shall hold such interests pursuant to the Applicable Procedures.
Accordingly, any such owner's beneficial interest in a Global Security will be
shown only on, and the transfer of such interest shall be effected only through,
records maintained by the Depositary or its nominee or its Agent Members.
Section 307. Mutilated, Destroyed, Lost and Stolen Securities.
If (a) any mutilated Security is surrendered to the Trustee, or (b) the
Company and the Trustee receive evidence to their satisfaction of the
destruction, loss or theft of any Security, and there is delivered to the
Company and the Trustee, such security or indemnity, in each case, as may be
required by them to save each of them harmless, then, in the absence of notice
to the Company or the Trustee that such Security has been acquired by a bona
fide purchaser, the Company shall execute and upon a Company Request the Trustee
shall authenticate and deliver, in exchange for any such mutilated Security or
in lieu of any such destroyed, lost or stolen Security, a replacement Security
of like tenor and principal amount, bearing a number not contemporaneously
outstanding.
In case any such mutilated, destroyed, lost or stolen Security has
become or is about to become due and payable, the Company in its discretion may,
instead of issuing a replacement Security, pay or purchase such Security, as the
case may be.
Upon the issuance of any replacement Securities under this Section, the
Company may require the payment of a sum sufficient to pay all documentary,
stamp or similar issue or transfer taxes or other governmental charges that may
be imposed in relation thereto and any other expenses (including the fees and
expenses of the Trustee) connected therewith.
Every replacement Security issued pursuant to this Section in lieu of
any destroyed, lost or stolen Security shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Security shall be at any time enforceable by anyone, and shall be
entitled to all benefits of this Indenture equally and proportionately with any
and all other Securities duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities.
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Section 308. Payment of Interest; Interest Rights Preserved.
Interest on any Security which is payable, and is punctually paid or
duly provided for, on the Stated Maturity of such interest shall be paid to the
Person in whose name the Security (or any Predecessor Securities) is registered
at the close of business on the Regular Record Date for such interest payment.
Any interest on any Security which is payable, but is not punctually
paid or duly provided for, on the Stated Maturity of such interest, and interest
on such defaulted interest at the then applicable interest rate borne by the
Securities, to the extent lawful (such defaulted interest and interest thereon
herein collectively called "Defaulted Interest"), shall forthwith cease to be
payable to the Holder on the Regular Record Date; and such Defaulted Interest
may be paid by the Company, at its election in each case, as provided in
Subsection (a) or (b) below:
(a) The Company may elect to make payment of any Defaulted Interest to
the Persons in whose names the Securities (or any relevant Predecessor
Securities) are registered at the close of business on a Special Record
Date for the payment of such Defaulted Interest, which shall be fixed
in the following manner. The Company shall notify the Trustee in
writing of the amount of Defaulted Interest proposed to be paid on each
Security and the date (not less than 30 days after such notice) of the
proposed payment (the "Special Payment Date"), and at the same time the
Company shall deposit with the Trustee an amount of money equal to the
aggregate amount proposed to be paid in respect of such Defaulted
Interest or shall make arrangements satisfactory to the Trustee for
such deposit prior to the Special Payment Date, such money when
deposited to be held in trust for the benefit of the Persons entitled
to such Defaulted Interest as in this Subsection provided. Thereupon,
the Trustee shall fix a Special Record Date for the payment of such
Defaulted Interest which shall be not more than 15 days and not less
than 10 days prior to the date of the Special Payment Date and shall
fix the Special Record Date not less than 10 days after the receipt by
the Trustee of the notice of the proposed payment. The Trustee shall
promptly notify the Company in writing of such Special Record Date. In
the name and at the expense of the Company, the Trustee shall cause
notice of the proposed payment of such Defaulted Interest and the
Special Record Date therefor to be mailed, first-class postage prepaid,
to each Holder at its address as it appears in the Security Register,
not less than 10 days prior to such Special Record Date. Notice of the
proposed payment of such Defaulted Interest and the Special Record Date
and Special Payment Date therefor having been so mailed, such Defaulted
Interest shall be paid to the Persons in whose names the Securities are
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registered on such Special Record Date and shall no longer be payable
pursuant to the following Subsection (b).
(b) The Company may make payment of any Defaulted Interest in any other
lawful manner not inconsistent with the requirements of any securities
exchange on which the Securities may be listed, and upon such notice as
may be required by this Indenture not inconsistent with the
requirements of such exchange, if, after written notice given by the
Company to the Trustee of the proposed payment pursuant to this
Subsection, such payment shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section 308, each Security
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Security shall carry the rights to interest accrued
and unpaid, and to accrue, which were carried by such other Security.
Section 309. CUSIP Numbers.
The Company in issuing the Securities may use "CUSIP" numbers (if then
generally in use), and the Company, or the Trustee on behalf of the Company,
shall use CUSIP numbers in notices of redemption or exchange as a convenience to
Holders; provided, however, that any such notice shall state that no
representation is made as to the correctness of such numbers either as printed
on the Securities or as contained in any notice of redemption or exchange and
that reliance may be placed only on the other identification numbers printed on
the Securities; and provided further, however, that failure to use CUSIP numbers
in any notice of redemption or exchange shall not affect the validity or
sufficiency of such notice. The Company will promptly notify the Trustee of any
change in the "CUSIP" numbers.
Section 310. Persons Deemed Owners.
Prior to and at the time of due presentment of a Security for
registration of transfer, the Company, the Trustee and any agent of the Company,
or the Trustee may treat the Person in whose name any Security is registered as
the owner of such Security for the purpose of receiving payment of principal of,
premium, if any, and (subject to Section 308) interest on, such Security and for
all other purposes whatsoever, whether or not such Security is overdue, and
neither the Company, the Trustee nor any agent of the Company or the Trustee
shall be affected by notice to the contrary.
Section 311. Cancellation.
All Securities surrendered for payment, purchase, redemption,
registration of transfer or exchange shall be delivered to the Trustee and, if
not already canceled, shall
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be promptly canceled by it. The Company may at any time deliver to the Trustee
for cancellation any Securities previously authenticated and delivered hereunder
which the Company may have acquired in any manner whatsoever, and all Securities
so delivered shall be promptly canceled by the Trustee. No Securities shall be
authenticated in lieu of or in exchange for any Securities canceled as provided
in this Section 311, except as expressly permitted by this Indenture. All
canceled Securities held by the Trustee shall, upon written request of the
Company, be disposed in accordance with the Trustee's standard procedures,
unless by a Company Order received by the Trustee prior to such disposition, the
Company shall direct that the canceled Securities be returned to it. The Trustee
shall provide the Company a list of all Securities that have been canceled from
time to time as requested by the Company.
Section 312. Computation of Interest.
Interest on the Securities shall be computed on the basis of a 360-day
year comprised of twelve 30-day months.
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ARTICLE FOUR
DEFEASANCE AND COVENANT DEFEASANCE
Section 401. Company's Option to Effect Defeasance or Covenant Defeasance.
The Company may, at its option by Board Resolution, at any time, with
respect to a series of Securities, elect to have either Section 402 or Section
403 be applied to all of the Outstanding Securities of the applicable series
(the "Defeased Securities"), upon compliance with the conditions set forth below
in this Article Four.
Section 402. Defeasance and Discharge.
Upon the Company's exercise under Section 401 of the option applicable
to this Section 402, the Company and any other obligor upon the applicable
series of Securities, if any, shall be deemed to have been discharged from its
obligations with respect to the Defeased Securities on the date the conditions
set forth in Section 404 below are satisfied (hereinafter, "defeasance"). For
this purpose, such defeasance means that the Company and any other obligor under
this Indenture shall be deemed to have paid and discharged the entire
Indebtedness represented by the Defeased Securities, which shall thereafter be
deemed to be "Outstanding" only for the purposes of Section 405 and the other
Sections of this Indenture referred to in (a) and (b) below, and to have
satisfied all its other obligations under such series of Securities and this
Indenture insofar as such series of Securities are concerned (and the Trustee,
at the expense of the Company and upon Company Request, shall execute proper
instruments acknowledging the same), except for the following which shall
survive until otherwise terminated or discharged hereunder: (a) the rights of
Holders of Defeased Securities to receive, solely from the trust fund described
in Section 404 and as more fully set forth in such Section, payments in respect
of the principal of, premium, if any, and interest on, such series of
Securities, when such payments are due, (b) the Company's obligations with
respect to such Defeased Securities under Sections 303, 304, 305, 307, 1002 and
1003, (c) the rights, powers, trusts, duties and immunities of the Trustee
hereunder, including, without limitation, the Trustee's rights under Section
607, and (d) this Article Four. Subject to compliance with this Article Four,
the Company may exercise its option under this Section 402 notwithstanding the
prior exercise of its option under Section 403 with respect to a series of
Securities.
Section 403. Covenant Defeasance.
Upon the Company's exercise under Section 401 of the option applicable
to this Section 403, the Company shall be released from its obligations under
any covenant or provision contained or referred to in Sections 1005, 1006 and
1007, with respect to the
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Defeased Securities, on and after the date the conditions set forth in Section
404 below are satisfied (hereinafter, "covenant defeasance"), and the Defeased
Securities shall thereafter be deemed to be not "Outstanding" for the purposes
of any direction, waiver, consent or declaration or Act of Holders (and the
consequences of any thereof) in connection with such covenants, but shall
continue to be deemed "Outstanding" for all other purposes hereunder, and the
Events of Default under Section 501(c) and (d) shall cease to be in full force
and effect with respect to the applicable series of Securities. For this
purpose, such covenant defeasance means that, with respect to the Defeased
Securities, the Company may omit to comply with and shall have no liability in
respect of any term, condition or limitation set forth in any such Section,
whether directly or indirectly, by reason of any reference elsewhere herein to
any such Section or by reason of any reference in any such Section to any other
provision herein or in any other document and such omission to comply shall not
constitute a Default or an Event of Default under Section 501(c) and (d) but,
except as specified above, the remainder of this Indenture and such Defeased
Securities shall be unaffected thereby.
Section 404. Conditions to Defeasance or Covenant Defeasance.
The following shall be the conditions to application of either Section
402 or Section 403 to the Defeased Securities:
(1) The Company shall irrevocably have deposited or caused to be
deposited with the Trustee as trust funds in trust for the purpose of making the
following payments, specifically pledged as security for, and dedicated solely
to, the benefit of the Holders of such series of Securities, (a) cash in United
States dollars in an amount, (b) U.S. Government Obligations which through the
scheduled payment of principal and interest in respect thereof in accordance
with their terms and with no further reinvestment will provide, not later than
one day before the due date of payment, money in an amount, or (c) a combination
thereof, in such amounts as will be sufficient, in the opinion of a nationally
recognized firm of independent public accountants expressed in a written
certification thereof delivered to the Trustee, to pay and discharge, and which
shall be applied by the Trustee to pay and discharge, the principal of, premium,
if any, and interest on, the Defeased Securities, on the Stated Maturity of such
principal or interest. For this purpose, "U.S. Government Obligations" means
securities that are (i) direct obligations of the United States of America for
the timely payment of which its full faith and credit is pledged or (ii)
obligations of a Person controlled or supervised by and acting as an agency or
instrumentality of the United States of America the timely payment of which is
unconditionally guaranteed as a full faith and credit obligation by the United
States of America, which, in either case, are not callable or redeemable at the
option of the issuer thereof, and shall also include a depository receipt issued
by a bank (as defined in Section 3(a)(2) of the Securities Act), as custodian
with respect to any such U.S. Government Obligation or a specific payment of
principal of or interest on any such U.S. Government
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Obligation held by such custodian for the account of the holder of such
depository receipt, provided that (except as required by law) such custodian is
not authorized to make any deduction from the amount payable to the holder of
such depository receipt from any amount received by the custodian in respect of
the U.S. Government Obligation or the specific payment of principal of or
interest on the U.S. Government Obligation evidenced by such depository receipt;
(2) In the case of an election under Section 402, the Company shall
have delivered to the Trustee an Opinion of Independent Counsel in the United
States stating that (A) the Company has received from, or there has been
published by, the Internal Revenue Service a ruling or (B) since the date
hereof, there has been a change in the applicable federal income tax law, in
either case to the effect that, and based thereon such Opinion of Independent
Counsel in the United States shall confirm that, the Holders of the Outstanding
Securities will not recognize income, gain or loss for federal income tax
purposes as a result of such defeasance and will be subject to federal income
tax on the same amounts, in the same manner and at the same times as would have
been the case if such defeasance had not occurred;
(3) In the case of an election under Section 403, the Company shall
have delivered to the Trustee an Opinion of Independent Counsel in the United
States to the effect that the Holders of the Outstanding Securities will not
recognize income, gain or loss for federal income tax purposes as a result of
such covenant defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the case if
such covenant defeasance had not occurred;
(4) No Default or Event of Default shall have occurred and be
continuing on the date of such deposit or insofar as Section 501(e) is
concerned, at any time during the period ending on the 91st day after the date
of deposit (it being understood that this condition shall not be deemed
satisfied until the expiration of such period);
(5) Such defeasance or covenant defeasance shall not result in a breach
or violation of, or constitute a default under, this Indenture or any other
material agreement or instrument to which the Company or any Restricted
Subsidiary is a party or by which it is bound;
(6) Such defeasance or covenant defeasance shall not result in the
trust arising from such deposit constituting an investment company within the
meaning of the Investment Company Act of 1940, as amended, unless such trust
shall be registered under such Act or exempt from registration thereunder;
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(7) The Company shall have delivered to the Trustee an Opinion of
Independent Counsel in the United States to the effect that after the 91st day
following the deposit, the trust funds will not be subject to the effect of any
applicable bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally;
(8) The Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the intent
of preferring the holders of the applicable series of Securities over the other
creditors of the Company with the intent of defeating, hindering, delaying or
defrauding creditors of the Company or others;
(9) No event or condition shall exist that would prevent the Company
from making payments of the principal of, premium, if any, and interest on the
applicable series of Securities on the date of such deposit or at any time
ending on the 91st day after the date of such deposit; and
(10) The Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Independent Counsel, each stating that all
conditions precedent provided for relating to either the defeasance under
Section 402 or the covenant defeasance under Section 403 (as the case may be)
have been complied with.
Opinions of Counsel or Opinions of Independent Counsel required to be
delivered under this Section shall be in form and substance reasonably
satisfactory to the Trustee and may have qualifications customary for opinions
of the type required and counsel delivering such opinions may rely on
certificates of the Company or government or other officials customary for
opinions of the type required, which certificates shall be limited as to matters
of fact, including that various financial covenants have been complied with.
Section 405. Deposited Money and U.S. Government Obligations to Be Held in
Trust; Other Miscellaneous Provisions.
Subject to the provisions of the last paragraph of Section 1003, all
United States dollars and U.S. Government Obligations (including the proceeds
thereof) deposited with the Trustee pursuant to Section 404 in respect of the
Defeased Securities shall be held in trust and applied by the Trustee, in
accordance with the provisions of such series of Securities and this Indenture,
to the payment, either directly or through any Paying Agent (excluding the
Company or any of its Affiliates acting as Paying Agent), as the Trustee may
determine, to the Holders of such series of Securities of all sums due and to
become due thereon in respect of principal, premium, if any, and interest, but
such money need not be segregated from other funds except to the extent required
by law.
The Company shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the U.S. Government Obligations
deposited
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pursuant to Section 404 or the principal and interest received in respect
thereof other than any such tax, fee or other charge which by law is imposed,
assessed or for the account of the Holders of the Defeased Securities.
Anything in this Article Four to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon Company
Request any United States dollars or U.S. Government Obligations held by it as
provided in Section 404 which, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee, are in excess of the amount thereof which would then
be required to be deposited to effect defeasance or covenant defeasance.
Section 406. Reinstatement.
If the Trustee or Paying Agent is unable to apply any United States
dollars or U.S. Government Obligations in accordance with Section 402 or 403, as
the case may be, by reason of any order or judgment of any court or governmental
authority enjoining, restraining or otherwise prohibiting such application, then
the Company's obligations under this Indenture and the applicable series of
Securities shall be revived and reinstated, with present and prospective effect,
as though no deposit had occurred pursuant to Section 402 or 403, as the case
may be, until such time as the Trustee or Paying Agent is permitted to apply all
such United States dollars or U.S. Government Obligations in accordance with
Section 402 or 403, as the case may be; provided, however, that if the Company
makes any payment to the Trustee or Paying Agent of principal of, premium, if
any, or interest on any Security of such series following the reinstatement of
its obligations, the Trustee or Paying Agent shall promptly pay any such amount
to the Holders of the Securities of such series and the Company shall be
subrogated to the rights of the Holders of such series of Securities to receive
such payment from the United States dollars and U.S. Government Obligations held
by the Trustee or Paying Agent pursuant to Section 402 or 403.
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ARTICLE FIVE
REMEDIES
Section 501. Events of Default.
"Event of Default," wherever used herein, means any one of the
following events (whatever the reason for such Event of Default and whether it
shall be voluntary or involuntary or be effected by operation of law or pursuant
to any judgment, decree or order of any court or any order, rule or regulation
of any administrative or governmental body) with respect to a particular series
of Securities:
(a) there shall be a default in the payment of any installment of
interest on any of the Securities of such series when it becomes due and
payable, and such default shall continue for a period of 30 days;
(b) there shall be a default in the payment of the principal of (or
premium, if any, on) any of the Securities of such series when it becomes due
and payable, whether at Maturity, upon redemption by declaration or otherwise);
(c) there shall be a default in the performance, or breach, of any
covenant or agreement of the Company applicable to such series of Securities
(other than a default in the performance, or breach, of a covenant or agreement
which is specifically dealt with in clause (a) and (b)) and such default or
breach shall continue for a period of 60 days after written notice to the
Company specifying such failure and requiring the Company or any Restricted
Subsidiary to remedy the same has been given, by certified mail, (x) to the
Company by the Trustee or (y) to the Company and the Trustee by the holders of
at least 25% in aggregate principal amount of the Outstanding Securities of each
affected series, with each affected series voting as a separate class;
(d) any Indebtedness of the Company or any Restricted Subsidiary of the
Company with an aggregate principal amount of at least $25,000,000 shall not
have been paid when due and shall continue not to be paid for 25 days after
written notice by certified mail, (x) to the Company by the Trustee or (y) to
the Company and the Trustee by the holders of at least 25% in aggregate
principal amount of the Outstanding Securities of each series (with the Holders
of all Outstanding Securities voting as one class);
(e) (i) there shall have been the entry by a court of competent
jurisdiction of (A) a decree or order for relief in respect of the Company or
any of its Significant Subsidiaries in an involuntary case or proceeding under
any applicable Bankruptcy Law or (B) a decree or order adjudging the Company or
any Subsidiary bankrupt or insolvent, or seeking reorganization, arrangement,
adjustment or composition of or in respect of the Company or any Subsidiary
under any applicable federal or state
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law, or appointing a custodian, receiver, liquidator, assignee, trustee,
sequestrator (or other similar official) of the Company or any Subsidiary or of
any substantial part of their respective properties, or ordering the winding up
or liquidation of their affairs, and any such decree or order for relief shall
continue to be in effect, or any such other decree or order shall be unstayed
and in effect, for a period of 60 consecutive days or (ii) (A) the Company or
any Subsidiary commences a voluntary case or proceeding under any applicable
Bankruptcy Law or any other case or proceeding to be adjudicated bankrupt or
insolvent, (B) the Company or any Subsidiary consents to the entry of a decree
or order for relief in respect of the Company or such Subsidiary in an
involuntary case or proceeding under any applicable Bankruptcy Law or to the
commencement of any bankruptcy or insolvency case or proceeding against it, (C)
the Company or any Subsidiary files a petition or answer or consent seeking
reorganization or relief under any applicable federal or state law, (D) the
Company or any Subsidiary (1) consents to the filing of such petition or the
appointment of, or taking possession by, a custodian, receiver, liquidator,
assignee, trustee, sequestrator or similar official of the Company or such
Subsidiary or of any substantial part of their respective properties, (2) makes
an assignment for the benefit of creditors or (3) admits in writing its
inability to pay its debts generally as they become due or (E) the Company or
any Subsidiary takes any corporate action in furtherance of any such actions in
this paragraph (e)(ii).
Section 502. Acceleration of Maturity; Rescission and Annulment.
If an Event of Default (other than an Event of Default specified in
Sections 501(e)) shall occur and be continuing, unless the principal and
interest with respect to all of the Securities of such series shall have already
become due and payable, the Trustee or the Holders of not less than 25% in
aggregate principal amount of the Securities of all series affected thereby then
Outstanding may, and the Trustee at the request of such Holders shall, declare
all unpaid principal of, premium, if any, and accrued interest on all Securities
of the series affected thereby to be due and payable immediately, by a notice in
writing to the Company (and to the Trustee if given by the Holders of the
Securities) and upon any such declaration, such principal, premium, if any, and
interest shall become due and payable immediately. If an Event of Default
specified in clause (e) of Section 501 occurs and is continuing, unless the
principal and interest with respect to the Securities shall have already become
due and payable, then all the Securities shall ipso facto become and be due and
payable immediately in an amount equal to the principal amount of the
Securities, together with accrued and unpaid interest, if any, to the date the
Securities become due and payable, without any declaration or other act on the
part of the Trustee or any Holder. Thereupon, the Trustee may, at its
discretion, proceed to protect and enforce the rights of the Holders of the
Securities by appropriate judicial proceedings.
In the event of a declaration of acceleration because of an Event of
Default set forth in clause (d) of Section 501 has occurred and is continuing,
such declaration
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acceleration shall be automatically rescinded and annulled if the Event of
Default triggering such Event of Default pursuant to clause (d) above shall be
remedied or cured by the Company or the relevant Subsidiary or waived by the
holders of the relevant Indebtedness within 60 days after the declaration of
acceleration with respect thereto.
At any time after a declaration of acceleration with respect to any of
the Securities of any series, but before a judgment or decree for payment of the
money due has been obtained by the Trustee as hereinafter in this Article
provided, the holders of a majority in aggregate principal amount of the
Outstanding Securities of any affected series (with each affected series voting
as a separate class), by written notice to the Company and the Trustee, may
rescind and annul such declaration and its consequences if:
(a) the Company has paid or deposited with the Trustee a sum sufficient
to pay
(i) all sums paid or advanced by the Trustee under this Indenture
and the reasonable compensation, fees and expenses, disbursements and
advances of the Trustee, its agents and counsel,
(ii) all overdue interest on all Outstanding Securities of such
series,
(iii) the principal of and premium, if any, on any Outstanding
Securities of such series which have become due otherwise than by such
declaration of acceleration and interest thereon at the rate borne by
such series of Securities, and
(iv) to the extent that payment of such interest is lawful, interest
upon overdue interest at the rate borne by the applicable series of
Securities;
(b) the rescission would not conflict with any judgment or decree of a
court of competent jurisdiction; and
(c) all Events of Default, other than the non-payment of principal of,
premium, if any, and interest on the applicable series Securities which have
become due solely by such declaration of acceleration, have been cured or waived
as provided in Section 513. No such rescission shall affect any subsequent
Default or impair any right consequent thereon.
Section 503. Collection of Indebtedness and Suits for Enforcement by
Trustee.
The Company covenants that if
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(a) default is made in the payment of any interest on any Security of
any series when such interest becomes due and payable and such default continues
for a period of 30 days, or
(b) default is made in the payment of the principal of or premium, if
any, on any Security of any series at the Stated Maturity thereof or otherwise,
the Company will, upon demand of the Trustee, pay to it, for the benefit of the
Holders of such series of Securities, the whole amount then due and payable on
the Securities of such series for principal and premium, if any, and interest,
with interest upon the overdue principal and premium, if any, and, to the extent
that payment of such interest shall be legally enforceable, upon overdue
installments of interest, at the rate borne by the Securities of such series;
and, in addition thereto, such further amount as shall be sufficient to cover
the costs and expenses of collection, including the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel.
If the Company fails to pay such amounts forthwith upon such demand,
the Trustee, in its own name and as trustee of an express trust, may institute a
judicial proceeding for the collection of the sums so due and unpaid and may
prosecute such proceeding to judgment or final decree, and may enforce the same
against the Company or any other obligor upon the Securities of such series and
collect the moneys adjudged or decreed to be payable in the manner provided by
law out of the property of the Company or any other obligor upon the Securities
of such series, wherever situated.
If an Event of Default occurs and is continuing, the Trustee may in its
discretion proceed to protect and enforce its rights and the rights of the
Holders under this Indenture by such appropriate private or judicial proceedings
as the Trustee shall deem most effectual to protect and enforce such rights,
whether for the specific enforcement of any covenant or agreement in this
Indenture or in aid of the exercise of any power granted herein or therein, or
to enforce any other proper remedy or to enforce any other proper remedy,
subject however to Section 512. No recovery of any such judgment upon any
property of the Company shall affect or impair any rights, powers or remedies of
the Trustee or the Holders.
Section 504. Trustee May File Proofs of Claim.
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceeding relative to the Company or any other obligor, upon the
Securities of any series or the property of the Company or of such other obligor
or their creditors, the Trustee (irrespective of whether the principal of such
series of Securities shall then be due and
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payable as therein expressed or by declaration or otherwise and irrespective of
whether the Trustee shall have made any demand on the Company for the payment of
overdue principal or interest) shall be entitled and empowered, by intervention
in such proceeding or otherwise,
(a) to file and prove a claim for the whole amount of principal, and
premium, if any, and interest owing and unpaid in respect of the Securities of
any series and to file such other papers or documents as may be necessary or
advisable in order to have the claims of the Trustee (including any claim for
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel) and of the Holders allowed in such judicial
proceeding, and
(b) to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
similar official in any such judicial proceeding is hereby authorized by each
Holder to make such payments to the Trustee and, in the event that the Trustee
shall consent to the making of such payments directly to the Holders, to pay the
Trustee any amount due it for the reasonable compensation, fees and expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 607.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Securities
of any series or the rights of any Holder thereof, or to authorize the Trustee
to vote in respect of the claim of any Holder in any such proceeding.
For purposes of this Section, the Trustee is hereby designated as the
attorney-in-fact for the Holders.
Section 505. Trustee May Enforce Claims without Possession of Securities.
All rights of action and claims under this Indenture with respect to
any series of Securities may be prosecuted and enforced by the Trustee without
the possession of any of the Securities of such series or the production thereof
in any proceeding relating thereto, and any such proceeding instituted by the
Trustee shall be brought in its own name and as trustee of an express trust, and
any recovery of judgment shall, after provision for the payment of the
reasonable compensation, fees and expenses, disbursements and advances of the
Trustee, its agents and counsel, be for the ratable benefit of the Holders of
the Securities of such series in respect of which such judgment has been
recovered.
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Section 506. Application of Money Collected.
Any money collected by the Trustee pursuant to this Article or
otherwise on behalf of the Holders or the Trustee pursuant to this Article or
through any proceeding or any arrangement or restructuring in anticipation or in
lieu of any proceeding contemplated by this Article shall be applied, subject to
applicable law, in the following order, at the date or dates fixed by the
Trustee and, in case of the distribution of such money on account of principal,
premium, if any, or interest, upon presentation of the several Securities and
the notation thereon of the payment if only partially paid and upon surrender
thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee under Section 607;
SECOND: To the payment of the amounts then due and unpaid upon the
Securities for principal, premium, if any, and interest, in respect of which or
for the benefit of which such money has been collected, on the Securities of
such series in the order of the maturity of the installments of such interest,
such payments to be made ratably to the Persons entitled thereto, without
preference or priority of any kind, according to the amounts due and payable on
such Securities for principal, premium, if any, and interest; and
THIRD: The balance, if any, to the Person or Persons entitled thereto,
including the Company, provided that all sums due and owing to the Holders and
the Trustee have been paid in full as required by this Indenture.
Section 507. Limitation on Suits.
No Holder of any series of Securities shall have any right to institute
any proceeding, judicial or otherwise, with respect to this Indenture or any
series of Securities, or for the appointment of a receiver or trustee, or for
any other remedy hereunder, unless
(a) such Holder has previously given written notice to the Trustee of a
continuing Event of Default;
(b) the Holders of not less than 25% in aggregate principal amount of
the Outstanding Securities of each affected series (voting as one class) shall
have made written request to the Trustee to institute proceedings in respect of
such Event of Default in its own name as trustee hereunder;
(c) such Holder or Holders have offered to the Trustee indemnity
reasonably satisfactory to it against the costs, fees and expenses and
liabilities to be incurred in compliance with such request;
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(d) the Trustee for 60 days after its receipt of such notice, request
and offer (and, if requested, provision) of indemnity has failed to institute
any such proceeding; and
(e) no direction inconsistent with such written request has been given
to the Trustee during such 60-day period by the Holders of a majority in
principal amount of the Outstanding Securities of the affected series (voting as
one class);
it being understood and intended that no one or more Holders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Indenture or any Security of any series to affect, disturb or prejudice the
rights of any other Holders, or to obtain or to seek to obtain priority or
preference over any other Holders or to enforce any right under this Indenture
or any Security of any series, except in the manner provided in this Indenture
and for the equal and ratable benefit of all the Holders.
Section 508. Unconditional Right of Holders to Receive Principal, Premium
and Interest.
Notwithstanding any other provision in this Indenture, the Holder of
any Security shall have the right based on the terms stated herein, which is
absolute and unconditional, to receive payment of the principal of, premium, if
any, and (subject to Section 308) interest on such Security on the respective
Stated Maturities expressed in such Security (or, in the case of redemption or
repurchase, on the Redemption Date or the repurchase date) and to institute suit
for the enforcement of any such payment, and such rights shall not be impaired
without the consent of such Holder.
Section 509. Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every such case the Company, any
other obligor on the Securities, the Trustee and the Holders shall, subject to
any determination in such proceeding, be restored severally and respectively to
their former positions hereunder, and thereafter all rights and remedies of the
Trustee and the Holders shall continue as though no such proceeding had been
instituted.
Section 510. Rights and Remedies Cumulative.
No right or remedy herein conferred upon or reserved to the Trustee or
to the Holders is intended to be exclusive of any other right or remedy, and
every right and remedy shall, to the extent permitted by law, be cumulative and
in addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or
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otherwise. The assertion or employment of any right or remedy hereunder, or
otherwise, shall not prevent the concurrent assertion or employment of any other
appropriate right or remedy.
Section 511. Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder of any Security to
exercise any right or remedy accruing upon any Event of Default shall impair any
such right or remedy or constitute a waiver of any such Event of Default or an
acquiescence therein. Every right and remedy given by this Article or by law to
the Trustee or to the Holders may be exercised from time to time, and as often
as may be deemed expedient, by the Trustee or by the Holders, as the case may
be.
Section 512. Control by Holders.
The Holders of not less than a majority in aggregate principal amount
of the Outstanding Securities of any or all series affected (voting as one
class) shall have the right to direct the time, method and place of conducting
any proceeding for exercising any remedy available to the Trustee, or exercising
any trust or power conferred on the Trustee under this Article Five, provided
that
(a) such direction shall not be in conflict with any rule of law or
with this Indenture (including, without limitation, Section 507), expose the
Trustee to personal liability or be unduly prejudicial to Holders not joining
therein; and
(b) subject to the provisions of Section 315 of the Trust Indenture
Act, the Trustee may take any other action deemed proper by the Trustee which is
not inconsistent with such direction.
Section 513. Waiver of Past Defaults.
Prior to the acceleration of the maturity of the Securities, the
Holders of not less than a majority in aggregate principal amount of the
Outstanding Securities of any or all series affected may on behalf of the
Holders of all Outstanding Securities of such series waive any past Default or
Event of Default and its consequences, except a Default or Event of Default
(a) in the payment of the principal of, premium, if any, or interest on
any Security (which may only be waived with the consent of each Holder of
Securities affected); or
(b) in respect of a covenant or a provision hereof which under this
Indenture cannot be modified or amended without the consent of the Holder of
each Security Outstanding affected by such modification or amendment.
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Upon any such waiver, such default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other default or impair any right consequent thereon.
Section 514. Undertaking for Costs.
All parties to this Indenture agree, and each Holder of any Security by
his acceptance thereof shall be deemed to have agreed, that any court may in its
discretion require, in any suit for the enforcement of any right or remedy under
this Indenture, or in any suit against the Trustee for any action taken,
suffered or omitted by it as Trustee, the filing by any party litigant in such
suit of an undertaking to pay the costs of such suit, and that such court may in
its discretion assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in such suit, having due regard to the merits and
good faith of the claims or defenses made by such party litigant, but the
provisions of this Section shall not apply to any suit instituted by the
Trustee, to any suit instituted by any Holder, or group of Holders, holding in
the aggregate more than 10% in principal amount of the Outstanding Securities
(voting as one class), or to any suit instituted by any Holder for the
enforcement of the payment of the principal of, premium, if any, or interest on,
any Security on or after the respective Stated Maturities expressed in such
Security (or, in the case of redemption, on or after the Redemption Date).
Section 515. Waiver of Stay, Extension or Usury Laws.
The Company covenants (to the extent that it may lawfully do so) that
it will not at any time insist upon, or plead, or in any manner whatsoever claim
or take the benefit or advantage of, any stay or extension law or any usury or
other law wherever enacted, now or at any time hereafter in force, which would
prohibit or forgive the Company from paying all or any portion of the principal
of, premium, if any, or interest on the Securities contemplated herein or in the
Securities or which may affect the covenants or the performance of this
Indenture; and the Company (to the extent that it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law, and covenants that it
will not hinder, delay or impede the execution of any power herein granted to
the Trustee, but will suffer and permit the execution of every such power as
though no such law had been enacted.
Section 516. Remedies Subject to Applicable Law.
All rights, remedies and powers provided by this Article Five may be
exercised only to the extent that the exercise thereof does not violate any
applicable provision of law in the premises, and all the provisions of this
Indenture are intended to
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be subject to all applicable mandatory provisions of law which may be
controlling in the premises and to be limited to the extent necessary so that
they will not render this Indenture invalid, unenforceable or not entitled to be
recorded, registered or filed under the provisions of any applicable law.
ARTICLE SIX
THE TRUSTEE
Section 601. Duties of Trustee.
Subject to the provisions of Trust Indenture Act Sections 315(a)
through 315(d):
(a) if a Default or an Event of Default has occurred and is continuing,
the Trustee shall exercise such of the rights and powers vested in it by this
Indenture and use the same degree of care and skill in its exercise thereof as a
prudent person would exercise or use under the circumstances in the conduct of
his own affairs;
(b) except during the continuance of a Default or an Event of Default:
(1) the Trustee need perform only those duties as are specifically
set forth in this Indenture and no covenants or obligations shall be
implied in this Indenture against the Trustee; and
(2) in the absence of bad faith or willful misconduct on its part,
the Trustee may conclusively rely, as to the truth of the statements
and the correctness of the opinions expressed therein, upon
certificates or opinions furnished to the Trustee and conforming to the
requirements of this Indenture. However, the Trustee shall examine the
certificates and opinions which by any provision hereof are required to
be furnished to the Trustee, to determine whether or not they conform
to the requirements of this Indenture (but need not confirm or
investigate the accuracy of mathematical calculations or other facts
stated therein);
(c) the Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(1) this Subsection (c) does not limit the effect of Subsection (b)
of this Section 601;
(2) the Trustee shall not be liable for any error of judgment made
in good faith by a Responsible Officer, unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts; and
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(3) the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith, in accordance with a direction of
the Holders of a majority in principal amount of Outstanding Securities
relating to the time, method and place of conducting any proceeding for
any remedy available to the Trustee, or exercising any trust or power
confirmed upon the Trustee under this Indenture;
(d) no provision of this Indenture shall require the Trustee to expend
or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it;
(e) whether or not therein expressly so provided, every provision of
this Indenture that in any way relates to the Trustee is subject to Subsections
(a), (b), (c) and (d) of this Section 601; and
(f) the Trustee shall not be liable for interest on any money or assets
received by it except as the Trustee may agree in writing with the Company.
Assets held in trust by the Trustee need not be segregated from other assets
except to the extent required by law.
Section 602. Notice of Defaults.
Within 90 days after a Responsible Officer of the Trustee receives
actual notice of the occurrence of any Default, the Trustee shall transmit by
mail to all Holders and any other Persons entitled to receive reports pursuant
to Section 313(c) of the Trust Indenture Act, as their names and addresses
appear in the Security Register, notice of such Default hereunder actually known
to the Trustee, unless such Default shall have been cured or waived; provided,
however, that, except in the case of a Default in the payment of the principal
of, premium, if any, or interest on any Security, the Trustee shall be protected
in withholding such notice if and so long as a trust committee of Responsible
Officers of the Trustee in good faith determines that the withholding of such
notice is in the interest of the Holders.
Section 603. Certain Rights of Trustee.
Subject to the provisions of Section 601 hereof and Trust Indenture Act
Sections 315(a) through 315(d):
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(a) the Trustee may conclusively rely and shall be protected in acting
or refraining from acting upon receipt by it of any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction, consent,
order, bond, debenture, note, other evidence of Indebtedness or other paper or
document believed by it to be genuine and to have been signed or presented by
the proper party or parties;
(b) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order and any resolution
of the Board of Directors may be sufficiently evidenced by a Board Resolution;
(c) the Trustee may consult with counsel of its selection and any
advice of such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or omitted
by it hereunder in good faith and in reliance thereon in accordance with such
advice or Opinion of Counsel;
(d) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction of
any of the Holders pursuant to this Indenture, unless such Holders shall have
offered to the Trustee security or indemnity satisfactory to the Trustee against
the costs, expenses and liabilities which might be incurred by it in compliance
with such request or direction;
(e) the Trustee shall not be liable for any action taken or omitted by
it in good faith and believed by it to be authorized or within the discretion,
rights or powers conferred upon it by this Indenture other than any liabilities
arising out of the negligence, bad faith or willful misconduct of the Trustee;
(f) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, approval,
appraisal, bond, debenture, note, coupon, security or other paper or document
unless requested in writing to do so by the Holders of not less than a majority
in aggregate principal amount of the Securities then Outstanding; provided that,
if the payment within a reasonable time to the Trustee of the costs, expenses or
liabilities likely to be incurred by it in the making of such investigation is,
in the opinion of the Trustee, not reasonably assured to the Trustee by the
security afforded to it by the terms of this Indenture, the Trustee may require
reasonable indemnity against such expenses or liabilities as a condition to
proceeding; the reasonable expenses of every such investigation so requested by
the Holders of not less than 25% in aggregate principal amount of the Securities
Outstanding shall be paid by the Company or, if paid by the Trustee or any
predecessor Trustee, shall be repaid by the Company upon demand; provided,
further, the Trustee in its discretion may make such further inquiry or
investigation into such facts or matters as it may deem fit, and, if the Trustee
shall determine to make such further inquiry or investigation, it shall be
entitled to examine the books, records and premises of the Company, personally
or by agent or attorney;
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(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by it
hereunder;
(h) the Trustee shall not be required to take notice, and shall not be
deemed to have notice, of any Default or Event of Default hereunder, except
Events of Default described in paragraphs (a) and (b) of Section 501 hereof
unless the Trustee shall be notified specifically of the Default or Event of
Default on a written instrument or document received by the Trustee at its
Notice Address by the Company or by the Holders of at least 10% of the aggregate
principal amount of the Securities then outstanding and such notice references
the Securities and this Indenture. In the absence of delivery of notice
satisfying those requirements, the Trustee may assume conclusively that there is
no Default or Event of Default, except as noted above;
(i) whenever in the administration of this Indenture the Trustee shall
deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, the Trustee (unless other evidence
be herein specifically prescribed) may, in the absence of bad faith on its part,
conclusively rely upon an Officers' Certificate; and
(j) the rights, privileges, protections, immunities and benefits given
to the Trustee, including, without limitation, its right to be indemnified, are
extended to, and shall be enforceable by, the Trustee in each of its capacities
hereunder, and to each agent, custodian and other Person employed by the Trustee
to act hereunder.
Section 604. Trustee Not Responsible for Recitals, Dispositions of
Securities or Application of Proceeds Thereof.
The recitals contained herein and in the Securities, except the
Trustee's certificates of authentication, shall be taken as the statements of
the Company, and the Trustee assumes no responsibility for their correctness.
The Trustee makes no representations as to the validity or sufficiency of this
Indenture or of the Securities, except that the Trustee represents that it is
duly authorized to execute and deliver this Indenture, authenticate the
Securities and perform its obligations hereunder and that the statements made by
it in any Statement of Eligibility and Qualification on Form T-1 to be supplied
to the Company will be true and accurate subject to the qualifications set forth
therein. The Trustee shall not be accountable for the use or application by the
Company of Securities or the proceeds thereof.
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Section 605. Trustee and Agents May Hold Securities; Collections; etc.
The Trustee, any Paying Agent, Security Registrar or any other agent of
the Company, in its individual or any other capacity, may become the owner or
pledgee of Securities, with the same rights it would have if it were not the
Trustee, Paying Agent, Security Registrar or such other agent and, subject to
Trust Indenture Act Sections 310 and 311, may otherwise deal with the Company
and receive, collect, hold and retain collections from the Company with the same
rights it would have if it were not the Trustee, Paying Agent, Security
Registrar or such other agent.
Section 606. Money Held in Trust.
All moneys received by the Trustee shall, until used or applied as
herein provided, be held in trust for the purposes for which they were received,
but need not be segregated from other funds, except to the extent required by
mandatory provisions of law. Except for funds or securities deposited with the
Trustee pursuant to Article Four, the Trustee shall be required to invest all
moneys received by the Trustee, until used or applied as herein provided, in
Temporary Cash Investments in accordance with the written directions of the
Company.
In the event of a loss on the sale of such investments (after giving
effect to any interest or other income thereon except to the extent theretofore
paid to the Company), the Trustee shall have no responsibility in respect of
such loss except that the Trustee shall notify the Company of the amount of such
loss and the Company shall promptly pay such amount to the Trustee to be
credited as part of the moneys originally invested.
Section 607. Compensation and Indemnification of Trustee and Its Prior
Claim.
The Company covenants and agrees to pay to the Trustee from time to
time, such compensation as agreed to in writing by the Company and the Trustee
and reasonable compensation for all other services rendered by it hereunder
(which compensation shall not be limited by any provision of law in regard to
the compensation of a trustee of all express trust), and the Company covenants
and agrees to pay or reimburse the Trustee and each predecessor Trustee upon its
request for all reasonable fees, expenses, disbursements and advances incurred
or made by or on behalf of the Trustee in accordance with any of the provisions
of this Indenture and as agreed upon in the fee agreement between the Trustee
and the Company (including the reasonable compensation and the fees, expenses
and disbursements of its counsel and of all agents and other persons not
regularly in its employ); except any such expense, disbursement or advance as
may arise from its negligence, bad faith or willful misconduct. The Company also
covenants and agrees to indemnify the Trustee and its directors, officers,
agents and employees and each predecessor Trustee (the "Indemnitees") for, and
to hold them harmless against, any claim, loss, liability, damage, tax,
assessment or other
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governmental charge (other than taxes applicable to the Trustee's compensation
hereunder) or expense incurred without negligence, bad faith or willful
misconduct on its part, arising out of or in connection with the acceptance or
administration of this Indenture or the trusts hereunder and its duties
hereunder, including enforcement of this Section 607 and also including any
liability which the Indemnitees may incur as a result of failure to withhold,
pay or report any tax, assessment, fine, penalty, damages or other governmental
charge, and the costs, fees and expenses of defending itself against or
investigating any claim or liability in connection with the exercise or
performance of any of its powers or duties hereunder. The obligations of the
Company under this Section 607 to compensate and indemnify the Indemnitees and
each predecessor Trustee and to pay or reimburse the Trustee and each
predecessor Trustee for reasonable fees, expenses, disbursements and advances
shall constitute an additional obligation hereunder and shall survive the
satisfaction and discharge of this Indenture and the resignation or removal of
the Trustee and each predecessor Trustee.
Section 608. Conflicting Interests.
The Trustee shall comply with the provisions of Section 310(b) of the
Trust Indenture Act.
Section 609. Trustee Eligibility.
There shall at all times be a Trustee hereunder which shall be eligible
to act as trustee under Trust Indenture Act Section 310(a) and which shall have
a combined capital and surplus of at least $50,000,000, to the extent there is
an institution eligible and willing to serve. If the Trustee does not have a
Corporate Trust Office in The City of New York, the Trustee may appoint an agent
in The City of New York reasonably acceptable to the Company to conduct any
activities which the Trustee may be required under this Indenture to conduct in
The City of New York. If such Trustee publishes reports of condition at least
annually, pursuant to law or to the requirements of federal, state, territorial
or District of Columbia supervising or examining authority, then for the
purposes of this Section 609, the combined capital and surplus of such
corporation shall be deemed to be its combined capital and surplus as set forth
in its most recent report of condition so published. If at any time the Trustee
shall cease to be eligible in accordance with the provisions of this Section
609, the Trustee shall resign immediately in the manner and with the effect
hereinafter specified in this Article.
Section 610. Resignation and Removal; Appointment of Successor Trustee.
(a) No resignation or removal of the Trustee and no appointment of a
successor trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor trustee under Section 611.
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(b) The Trustee, or any trustee or trustees hereafter appointed, may at
any time resign by giving written notice thereof to the Company no later than 30
Business Days prior to the proposed date of resignation. Upon receiving such
notice of resignation, the Company shall promptly appoint a successor trustee by
written instrument executed by authority of the Board of Directors of the
Company, a copy of which shall be delivered to the resigning Trustee and a copy
to the successor trustee. If an instrument of acceptance by a successor trustee
shall not have been delivered to the Trustee within 30 days after the giving of
such notice of resignation, the resigning Trustee may, or any Holder who has
been a bona fide Holder of a Security for at least six months may, on behalf of
himself and all others similarly situated, petition any court of competent
jurisdiction for the appointment of a successor trustee. Such court may
thereupon, after such notice, if any, as it may deem proper, appoint and
prescribe a successor trustee.
(c) The Trustee may be removed at any time for any cause or for no
cause by an Act of the Holders of not less than a majority in aggregate
principal amount of the Outstanding Securities, delivered to the Trustee and to
the Company.
(d) If at any time:
(1) the Trustee shall fail to comply with the provisions of Trust
Indenture Act Section 310(b) after written request therefor by the
Company or by any Holder who has been a bona fide Holder of a Security
for at least six months,
(2) the Trustee shall cease to be eligible under Section 609 and
shall fail to resign after written request therefor by the Company or
by any Holder who has been a bona fide Holder of a Security for at
least six months, or
(3) the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent, or a receiver of the Trustee or of
its property shall be appointed or any public officer shall take charge
or control of the Trustee or of its property or affairs for the purpose
of rehabilitation, conservation or liquidation,
then, in any case, (i) the Company by a Board Resolution may remove the Trustee,
or (ii) subject to Section 514, the Holder of any Security who has been a bona
fide Holder of a Security for at least six months may, on behalf of himself and
all others similarly situated, petition any court of competent jurisdiction for
the removal of the Trustee and the appointment of a successor trustee. Such
court may thereupon, after such notice, if any, as it may deem proper and
prescribe, remove the Trustee and appoint a successor trustee.
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(e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause, the
Company, by a Board Resolution, shall promptly appoint a successor trustee and
shall comply with the applicable requirements of Section 611. If, within 60 days
after such resignation, removal or incapability, or the occurrence of such
vacancy, the Company has not appointed a successor Trustee, a successor trustee
shall be appointed by the Act of the Holders of a majority in principal amount
of the Outstanding Securities delivered to the Company and the retiring Trustee.
If no successor trustee shall have been so appointed by the Company or the
Holders of the Securities and accepted appointment in the manner provided
herein, the Trustee or the Holder of any Security who has been a bona fide
Holder for at least six months may, subject to Section 514, on behalf of himself
and all others similarly situated, petition any court of competent jurisdiction
for the appointment of a successor trustee.
(f) The Company shall give notice of each resignation and each removal
of the Trustee and each appointment of a successor trustee by mailing written
notice of such event by first-class mail, postage prepaid, to the Holders of
Securities as their names and addresses appear in the Security Register. Each
notice shall include the name of the successor trustee and the address of its
Corporate Trust Office or agent hereunder.
Section 611. Acceptance of Appointment by Successor.
Every successor trustee appointed hereunder shall execute, acknowledge
and deliver to the Company and to the retiring Trustee an instrument accepting
such appointment, and thereupon the resignation or removal of the retiring
Trustee shall become effective and such successor trustee, without any further
act, deed or conveyance, shall become vested with all the rights, powers, trusts
and duties of the retiring Trustee as if originally named as Trustee hereunder;
but, nevertheless, on the written request of the Company or the successor
trustee, upon payment of its charges pursuant to Section 607 then unpaid, such
retiring Trustee shall pay over to the successor trustee all moneys, Temporary
Cash Investments and other property relating thereto at the time held by it
hereunder and shall execute and deliver an instrument transferring to such
successor trustee all such rights, powers, duties and obligations. Upon request
of any such successor trustee, the Company shall execute any and all instruments
for more fully and certainly vesting in and confirming to such successor trustee
all such rights and powers.
No successor trustee with respect to the Securities shall accept
appointment as provided in this Section 611 unless at the time of such
acceptance such successor trustee shall be eligible to act as trustee under the
provisions of Trust Indenture Act Section 310(a) and this Article Six and shall
have a combined capital and surplus of at least $50,000,000 and have a Corporate
Trust Office or an agent selected in accordance with Section 609.
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Upon acceptance of appointment by any successor trustee as provided in
this Section 611, the Company shall give notice thereof to the Holders of the
Securities, by mailing such notice to such Holders at their addresses as they
shall appear on the Security Register. If the acceptance of appointment is
substantially contemporaneous with the appointment, then the notice called for
by the preceding sentence may be combined with the notice called for by Section
610. If the Company fails to give such notice within 10 days after acceptance of
appointment by the successor trustee, the successor trustee shall cause such
notice to be given at the expense of the Company.
Section 612. Merger, Conversion, Consolidation or Succession to Business.
Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all of the corporate trust
business of the Trustee (including the trust created by this Indenture) shall be
the successor of the Trustee hereunder, provided that such corporation shall be
eligible under Trust Indenture Act Section 310(a) and this Article Six and shall
have a combined capital and surplus of at least $50,000,000 and have a Corporate
Trust Office or an agent selected in accordance with Section 609, without the
execution or filing of any paper or any further act on the part of any of the
parties hereto.
In case at the time such successor to the Trustee shall succeed to the
trusts created by this Indenture any of the Securities shall have been
authenticated but not delivered, any such successor to the Trustee may adopt the
certificate of authentication of any predecessor Trustee and deliver such
Securities so authenticated; and, in case at that time any of the Securities
shall not have been authenticated, any successor to the Trustee may authenticate
such Securities either in the name of any predecessor hereunder or in the name
of the successor trustee; and in all such cases such certificate shall have the
full force which it is anywhere in the Securities or in this Indenture provided
that the certificate of the Trustee shall have; provided that the right to adopt
the certificate of authentication of any predecessor Trustee or to authenticate
Securities in the name of any predecessor Trustee shall apply only to its
successor or successors by merger, conversion or consolidation.
Section 613. Preferential Collection of Claims Against Company.
If and when the Trustee shall be or become a creditor of the Company
(or other obligor under the Securities), the Trustee shall be subject to the
provisions of the Trust Indenture Act regarding the collection of claims against
the Company (or any such other obligor). A Trustee who has resigned or been
removed shall be subject to Trust Indenture Act Section 311(a) to the extent
indicated therein, as qualified by Trust Indenture Act Section 311(b).
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ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
Section 701. Company to Furnish Trustee Names and Addresses of Holders.
The Company will furnish or cause to be furnished to the Trustee
(a) semiannually, not more than 10 days after each Regular Record Date,
a list, in such form as the Trustee may reasonably require, of the names and
addresses of the Holders as of such Regular Record Date; and
(b) at such other times as the Trustee may reasonably request in
writing, within 30 days after receipt by the Company of any such request, a list
of similar form and content to that in subsection (a) hereof as of a date not
more than 15 days prior to the time such list is furnished;
provided, however, that if and so long as the Trustee shall be the Security
Registrar, no such list need be furnished.
Section 702. Disclosure of Names and Addresses of Holders.
Holders may communicate pursuant to Trust Indenture Act Section 312(b)
with other Holders with respect to their rights under this Indenture or the
Securities, and the Trustee shall comply with Trust Indenture Act Section
312(b). The Company, the Trustee, the Security Registrar and any other Person
shall have the protection of Trust Indenture Act Section 312(c). Further, every
Holder of Securities, by receiving and holding the same, agrees with the Company
and the Trustee that neither the Company nor the Trustee or any agent of either
of them shall be held accountable by reason of the disclosure of any information
as to the names and addresses of the Holders in accordance with Trust Indenture
Act Section 312, regardless of the source from which such information was
derived, and that the Trustee shall not be held accountable by reason of mailing
any material pursuant to a request made under Trust Indenture Act Section 312.
Section 703. Reports by Trustee.
(a) Within 60 days after May 1 of each year commencing with the first
May 1 after the issuance of Securities, the Trustee, if so required under the
Trust Indenture Act, shall transmit by mail to all Holders, in the manner and to
the extent provided in Trust Indenture Act Section 313(c), a brief report dated
as of such May 1 in accordance with and with respect to the matters required by
Trust Indenture Act Section 313(a). The Trustee shall also transmit by mail to
all Holders, in the manner and to the extent provided in Trust Indenture Act
Section 313(c), a brief report in accordance
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with and with respect to the matters required by Trust Indenture Act Section
313(b)(2).
(b) A copy of each report transmitted to Holders pursuant to this
Section 703 shall, at the time of such transmission, be mailed to the Company
and filed with each stock exchange, if any, upon which the Securities are listed
and also with the Commission. The Company will notify the Trustee promptly if
the Securities are listed on any stock exchange.
Section 704. Reports by Company.
The Company shall file with the Trustee and the Commission, and
transmit to Holders, such information, documents and other reports, and such
summaries thereof, as may be required pursuant to the Trust Indenture Act at the
times and in the manner provided pursuant to such Act; provided that any such
information, documents or reports required to be filed with the Commission
pursuant to Section 13 or 15(d) of the Exchange Act shall be filed with the
Trustee within 15 days after the same is so required to be filed with the
Commission.
The Trustee shall be under no obligation to analyze or make any credit
decision with respect to any financial statements or reports received by it
hereunder, but shall hold such financial statements or reports solely for the
benefit of and/or review by the holders of the Securities.
Delivery of such reports, information and documents to the Trustee
hereunder and under Section 1007 is for informational purposes only and the
Trustee's receipt of such shall not constitute constructive notice of any
information contained therein or determinable from information contained
therein, including the Company's compliance with any of its covenants hereunder
(as to which the Trustee is entitled to rely exclusively on Officers'
Certificates).
Section 705. Statement as to Compliance.
The Company will deliver to the Trustee within 120 days after the end
of each fiscal year of the Company ending after the date hereof, an Officers'
Certificate stating whether or not to the best knowledge of the signers thereof
the Company is in compliance (without regard to periods of grace or notice
requirements) with all conditions and covenants under this Indenture, and if the
Company shall not be in compliance, specifying such non-compliance and the
nature and status thereof of which such signers may have knowledge.
Section 706. Statement by Officers as to Default.
The Company shall deliver to the Trustee, as soon as possible and in
any event within five days after the Company becomes aware of the occurrence of
any Event of Default or an event which, with notice or the lapse of time or
both, would constitute an Event of Default, an Officers' Certificate setting
forth the details of such Event of Default or default and the action which the
Company proposes to take with respect thereto.
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ARTICLE EIGHT
CONSOLIDATION, MERGER, SALE OF ASSETS
Section 801. Company May Consolidate, etc., Only on Certain Terms.
The Company will not, in a single transaction or through a series of
related transactions, consolidate, amalgamate, combine or merge with or into any
other Person or, directly or indirectly, sell, assign, convey, lease, transfer
or otherwise dispose of all or substantially all of its properties and assets to
any Person or group of Persons, or permit any of its Restricted Subsidiaries to
enter into any such transaction or series of transactions, if such transaction
or series of transactions, in the aggregate, would result in a sale, assignment,
conveyance, lease, transfer or disposition of all or substantially all of the
properties and assets of the Company and its Restricted Subsidiaries on a
Consolidated basis to any other Person or group of Persons, unless at the time
and after giving effect thereto:
(i) either (a) the Company will be the continuing corporation in the
case of a merger, combination or consolidation or (b) the Person (if
other than the Company) formed by such consolidation or the resulting,
surviving or transferee Person, if other than the Company (the
"Successor Company",) will be a corporation duly organized and validly
existing under the laws of the United States of America, any state
thereof or the District of Columbia and such Person expressly assumes,
by a supplemental indenture, in a form reasonably satisfactory to the
Trustee, all the obligations of the Company under the Securities and
this Indenture, and in each case, the Securities and the Indenture will
remain in full force and effect as so supplemented;
(ii) immediately after giving effect to such transaction or series
of transactions on a pro forma basis, including, without limitation,
any Indebtedness Incurred or anticipated to be Incurred in connection
with or in respect of such transaction or series of transactions, no
Default or Event of Default will have occurred and be continuing and
the Company will have delivered to the Trustee an Officer's Certificate
to that effect;
(iii) at the time of the transaction the Company or the Successor
Company will have delivered, or caused to be delivered, to the Trustee,
in form and substance reasonably satisfactory to the Trustee, an
Officers' Certificate and an Opinion of Counsel, each to the effect
that such transaction or series of transactions, and, if a supplemental
indenture is required in connection with such transaction or series of
transactions to
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effectuate such assumption, such supplemental indenture in respect
thereof comply with this covenant and that all conditions precedent in
the Indenture relating to such transaction have been satisfied.
Notwithstanding the foregoing, any Restricted Subsidiary may
consolidate, amalgamate or combine with or merge with or into or, directly or
indirectly, sell, assign, convey, lease, transfer or otherwise dispose of all or
substantially all of its properties and assets to the Company or, subject to the
condition set forth in clause (ii) in the preceding sentence, to any other
Restricted Subsidiary.
Section 802. Successor Substituted.
Upon any consolidation, combination, amalgamation or merger, or any
sale, assignment, conveyance, transfer, lease or disposition of all or
substantially all of the properties and assets of the Company, if any, in
accordance with Section 801, the successor Person formed by such consolidation
or into which the Company is merged or the successor Person to which such sale,
assignment, conveyance, transfer, lease or disposition is made shall succeed to,
and be substituted for, and may exercise every right and power of, the Company
under this Indenture and the Securities with the same effect as if such
successor had been named as the Company herein, in the Securities and the
Company shall be discharged from all obligations and covenants under the
Indenture and the Securities; provided that in the case of a transfer by lease,
the predecessor shall not be released from the payment of principal and interest
on the Securities.
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ARTICLE NINE
SUPPLEMENTAL INDENTURES
Section 901. Supplemental Indentures and Agreements without Consent of
Holders.
Without the consent of any Holders, the Company and any other obligor
under the Securities when authorized by a Board Resolution, and the Trustee, at
any time and from time to time, may enter into one or more indentures
supplemental hereto or agreements or other instruments with respect to the
Indenture or any series of the Securities, in form satisfactory to the Trustee,
for any of the following purposes:
(a) to evidence the succession of another Person to the Company
pursuant to the provisions of Article Eight and the assumption by such successor
of the covenants, agreements and obligations of the Company in the Indenture and
in the Securities;
(b) to surrender any right or power conferred upon the Company by the
Indenture, to add to the covenants of the Company such further covenants,
restrictions, conditions or provisions for the protection of the Holders as the
Board of Directors of the Company shall consider to be for the protection of the
Holders, and to make the occurrence, or the occurrence and continuance, of a
default in any of such additional covenants, restrictions, conditions, or
provisions a default or an Event of Default under the Indenture (provided,
however, that with respect to any such additional covenant, restriction,
condition, or provision, such supplemental indenture may provide for a period of
grace after default, which may be shorter or longer than that allowed in the
case of other defaults, may provide for an immediate enforcement upon such
default, may limit the remedies available to the Trustee upon such default, or
may limit the right of Holders of a majority in aggregate principal amount of
any series of the Securities to waive such default);
(c) to cure any ambiguity or to correct or supplement any provision
contained in the Indenture, in any supplemental indenture or in the Securities
of any series that may be defective or inconsistent with any other provision
contained herein or therein, to convey, transfer, assign, mortgage or pledge any
property to or with the Trustee, or to make such other provisions in regard to
matters or questions arising under the Indenture as shall not adversely affect
the interests of any Holders;
(d) to modify or amend the Indenture in such a manner as to permit the
qualification of the Indenture or any supplemental indenture under the Trust
Indenture Act as then in effect;
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(e) to comply with the provisions of Article Eight;
(f) to add guarantees with respect to any series of the Securities of
any series or to secure any series of the Securities of any series;
(g) to make any change that does not adversely affect the rights of any
Holder; and
(h) to evidence and provide for the acceptance of appointment by a
successor or separate Trustee with respect to the Securities of any series and
to add to or change any of the provisions of the Indenture as shall be necessary
to provide for or facilitate the administration of the Indenture by more than
one Trustee.
Section 902. Supplemental Indentures and Agreements with Consent of
Holders.
Except as permitted by Section 901, with the consent of the Holders of
at least a majority in aggregate principal amount of the Outstanding Securities
of all series affected thereby (voting as one class), by Act of said Holders
delivered to the Company and the Trustee, the Company when authorized by Board
Resolutions, and the Trustee may (i) enter into an indenture or indentures
supplemental hereto or agreements in form and substance reasonably satisfactory
to the Trustee, for the purpose of adding any provisions to, amending, modifying
or changing in any manner, or eliminating any of the provisions of the
Indenture, of any supplemental indenture or the Securities of each such series
(including but not limited to, for the purpose of modifying in any manner the
rights of the Holders under this Indenture or the Securities of such series) or
(ii) waive compliance with any provision in the Indenture or the Securities of
such series (other than waivers of past defaults covered by Section 513 and
waivers of covenants covered by Section 1008); provided, however, that no such
supplemental indenture, agreement or instrument shall, without the consent of
the Holder of each Outstanding Security of all series affected thereby:
(a) reduce the percentage in principal amount of the Outstanding
Securities of such series, the consent of whose Holders is required for any such
supplemental indenture, or the consent of whose Holders is required for any
waiver or compliance with certain provisions of this Indenture;
(b) reduce the rate of or extend the time for payment of interest on
the Securities of such series or reduce the amount of any payment of interest on
the Securities of such series;
(c) reduce the principal of or extend the Stated Maturity of the
Securities of such series;
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(d) reduce the premium payable upon the redemption of the Securities of
such series or change the time at which the Securities of such series may or
shall be redeemed;
(e) impair the right to institute suit for enforcement of any payment
of principal, premium, if any, or interest on the Securities of such series
after the Stated Maturity thereof (or in the case of redemption, on or after the
Redemption Date);
(f) make the Securities of such series payable in a currency other than
U.S. dollars;
(g) modify any of the provisions of this Section 902 or Section 513 or
1008, except to increase the percentage of such Outstanding Securities of such
series required for such actions or to provide that certain other provisions of
this Indenture cannot be modified or waived without the consent of the Holder of
each such Security of such series affected thereby;
(h) amend or modify any of the provisions of this Indenture in any
manner which subordinates the Securities of such series issued hereunder in
right of payment to any other Indebtedness of the Company;
(i) release any security that may have been granted with respect to the
Securities of such series; or
(j) make any change in the provisions of the Indenture relating to
waivers of defaults or amendments that require unanimous consent.
Upon the written request of the Company, accompanied by a copy of Board
Resolutions authorizing the execution of any such supplemental indenture, and
upon the filing with the Trustee of evidence of the consent of Holders as
aforesaid, the Trustee shall join with the Company in the execution of such
supplemental indenture.
It shall not be necessary for any Act of Holders under this Section 902
to approve the particular form of any proposed supplemental indenture, but it
shall be sufficient if such Act shall approve the substance thereof.
Section 903. Execution of Supplemental Indentures and Agreements.
In executing, or accepting the additional trusts created by, any
supplemental indenture, agreement, instrument or waiver permitted by this
Article Nine or the modifications thereby of the trusts created by this
Indenture, the Trustee shall be entitled to receive, and (subject to Trust
Indenture Act Sections 315(a) through 315(d) and Section 601 hereof) shall be
fully protected in relying upon, an Opinion of Counsel and
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an Officers' Certificate stating that the execution of such supplemental
indenture, agreement or instrument (a) is authorized or permitted by this
Indenture and (b) does not violate the provisions of any agreement or instrument
evidencing any other Indebtedness of the Company or any Restricted Subsidiary.
The Trustee may, but shall not be obligated to, enter into any such supplemental
indenture, agreement or instrument which affects the Trustee's own rights,
duties or immunities under this Indenture or otherwise.
Section 904. Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this Article,
this Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Securities of the series affected thereby theretofore or thereafter
authenticated and delivered hereunder shall be bound thereby.
Section 905. Conformity with Trust Indenture Act.
Every supplemental indenture executed pursuant to this Article Nine
shall conform to the requirements of the Trust Indenture Act as then in effect.
Section 906. Reference in Securities to Supplemental Indentures.
Securities of any series authenticated and delivered after the
execution of any supplemental indenture pursuant to this Article Nine may, and
shall if required by the Trustee, bear a notation in form approved by the
Trustee as to any matter provided for in such supplemental indenture. If the
Company shall so determine, new Securities so modified as to conform, in the
opinion of the Trustee and the Board of Directors, to any such supplemental
indenture may be prepared and executed by the Company and authenticated and
delivered by the Trustee in exchange for Outstanding Securities of such series.
Section 907. Notice of Supplemental Indentures.
Promptly after the execution by the Company and the Trustee of any
supplemental indenture pursuant to the provisions of Section 902, the Company
shall give notice thereof to the Holders of each Outstanding Security of any
series affected, in the manner provided for in Section 106, setting forth in
general terms the substance of such supplemental indenture. Any failure of the
Company to mail such notice, or any defect therein, shall not, however, in any
way impair or affect the validity of any such supplemental indenture.
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ARTICLE TEN
COVENANTS
Section 1001. Payment of Principal, Premium and Interest.
The Company shall duly and punctually pay the principal of, premium, if
any, and interest on each of the series of Securities in accordance with the
terms of the applicable series of the Securities and this Indenture.
Section 1002. Maintenance of Office or Agency.
The Company shall maintain an office or agency where Securities may be
presented or surrendered for payment. The Company also will maintain in The City
of New York an office or agency where Securities may be surrendered for
registration of transfer, redemption or exchange and where notices and demands
to or upon the Company in respect of the Securities and this Indenture may be
served. The office of the Trustee or its affiliates, at its corporate trust
office initially located at 101 Barclay Street, Floor 21W, New York, New York
10286, will be such office or agency of the Company, unless the Company shall
designate and maintain some other office or agency for one or more of such
purposes. The Company will give prompt written notice to the Trustee of the
location and any change in the location of any such offices or agencies. If at
any time the Company shall fail to maintain any such required offices or
agencies or shall fail to furnish the Trustee with the address thereof, such
presentations, surrenders, notices and demands may be made or served at the
office of the Trustee or its affiliates and the Company hereby appoints the
Trustee or its affiliates such agent as its agent to receive all such
presentations, surrenders, notices and demands.
The Company may from time to time designate one or more other offices
or agencies (in or outside of The City of New York) where the Securities may be
presented or surrendered for any or all such purposes, and may from time to time
rescind such designation. The Company will give prompt written notice to the
Trustee of any such designation or rescission and any change in the location of
any such office or agency.
The Trustee shall initially act as Paying Agent for the Securities.
Section 1003. Money for Security Payments to Be Held in Trust.
If the Company or any of its Affiliates shall at any time act as Paying
Agent, it will, on or before each due date of the principal of, premium, if any,
or interest on any of the Securities, segregate and hold in trust for the
benefit of the Holders entitled thereto a sum sufficient to pay the principal,
premium, if any, or interest so becoming due until such sums shall be paid to
such Persons or otherwise disposed of as herein provided, and will promptly
notify the Trustee of its action or failure so to act.
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If the Company or any of its Affiliates is not acting as Paying Agent,
the Company will, on or before 10:00 a.m. New York City time of each due date of
the principal of, premium, if any, or interest on any of the Securities, deposit
with a Paying Agent a sum in same day funds sufficient to pay the principal,
premium, if any, or interest so becoming due, such sum to be held in trust for
the benefit of the Persons entitled to such principal, premium or interest, and
(unless such Paying Agent is the Trustee) the Company will promptly notify the
Trustee of such action or any failure so to act.
If the Company is not acting as Paying Agent, the Company will cause
each Paying Agent other than the Trustee to execute and deliver to the Trustee
an instrument in which such Paying Agent shall agree with the Trustee, subject
to the provisions of this Section, that such Paying Agent will:
(a) hold all sums held by it for the payment of the principal of,
premium, if any, or interest on the Securities in trust for the benefit of the
Persons entitled thereto until such sums shall be paid to such Persons or
otherwise disposed of as herein provided;
(b) give the Trustee notice of any Default by the Company (or any other
obligor upon the Securities) in the making of any payment of principal, premium,
if any, or interest on the Securities;
(c) at any time during the continuance of any such Default, upon the
written request of the Trustee, forthwith pay to the Trustee all sums so held in
trust by such Paying Agent; and
(d) acknowledge, accept and agree to comply in all aspects with the
provisions of this Indenture relating to the duties, rights and liabilities of
such Paying Agent.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay or by
Company Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by the Company or such Paying Agent, such sums to be held by the Trustee
upon the same trusts as those upon which such sums were held by the Company or
such Paying Agent; and, upon such payment by any Paying Agent to the Trustee,
such Paying Agent shall be released from all further liability with respect to
such money.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of, premium, if any,
or interest on any Security and remaining unclaimed for two years after such
principal and premium, if any, or interest has become due and payable shall
promptly be paid to the Company on
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Company Request, or (if then held by the Company) shall be discharged from such
trust; and the Holder of such Security shall thereafter, as an unsecured general
creditor, look only to the Company for payment thereof, and all liability of the
Trustee or such Paying Agent with respect to such trust money, and all liability
of the Company as trustee thereof, shall thereupon cease; provided, however,
that the Trustee or such Paying Agent, before being required to make any such
repayment, may at the expense of the Company cause to be published once, in the
New York Times and The Wall Street Journal (national edition), and mail to each
such Holder, notice that such money remains unclaimed and that, after a date
specified therein, which shall not be less than 30 days from the date of such
notification, publication and mailing, any unclaimed balance of such money then
remaining will promptly be repaid to the Company.
Section 1004. Corporate Existence.
Subject to Article Eight, the Company shall do or cause to be done all
things necessary to preserve and keep in full force and effect the corporate
existence and related rights and franchises (charter and statutory) of the
Company and each Restricted Subsidiary; provided, however, that the Company
shall not be required to preserve any such right or franchise or the corporate
existence of any such Restricted Subsidiary or any trademark, trade name or
service mark of the Company or any Restricted Subsidiary if the Board of
Directors of the Company shall determine that the preservation thereof is no
longer necessary or desirable in the conduct or the business of the Company and
its Restricted Subsidiaries taken as a whole and that the loss thereof is not
adverse in any material respect to the ability of the Company to perform its
obligations hereunder.
Section 1005. Restrictions on Liens.
(a) The Company will not, and will not permit any Restricted Subsidiary
of the Company to, Incur any Lien on any shares of stock, Indebtedness or other
obligations of a Subsidiary or any Principal Property of the Company or a
Restricted Subsidiary, whether such shares of stock, Indebtedness or other
obligations of a Subsidiary or Principal Property is owned at the date of the
Indenture or thereafter acquired, without in any such case effectively providing
that all the Securities will be directly secured equally and ratably with such
Lien.
(b) The foregoing restrictions will not apply to:
(1) the Incurrence of any Lien on any shares of stock, Indebtedness or
other obligations of a Subsidiary or any Principal Property acquired after the
date of the Indenture (including acquisitions by way of merger or consolidation)
by the Company or a Restricted Subsidiary contemporaneously with such
acquisition, or within 120 days thereafter, to secure or provide for the payment
or financing of any part of the purchase
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price thereof, or the assumption of any Lien upon any shares of stock,
Indebtedness or other obligations of a Subsidiary or any Principal Property
acquired after the date of the Indenture existing at the time of such
acquisition, or the acquisition of any shares of stock, Indebtedness or other
obligations of a subsidiary or any Principal Property subject to any Lien
without the assumption thereof, provided that every such Lien referred to in
this clause (1) shall attach only to the shares of stock, Indebtedness or other
obligations of a Subsidiary or any Principal Property so acquired and fixed
improvements thereon;
(2) any Lien on any shares of stock, Indebtedness or other obligations
of a Subsidiary or any Principal Property existing at the date of the Indenture;
(3) any Lien on any shares of stock, Indebtedness or other obligations
of a Subsidiary or any Principal Property in favor of the Company or any
Restricted Subsidiary;
(4) any Lien on Principal Property being constructed or improved
securing loans to finance such construction or improvements;
(5) any Lien on shares of stock, Indebtedness or other obligations of a
Subsidiary or any Principal Property Incurred in connection with the issuance of
tax exempt government obligations; and
(6) any renewal of or substitution for any Lien permitted by any of the
preceding clauses (1) through (5), provided, in the case of a Lien permitted
under clause (1), (2) or (4), the debt secured is not increased nor the Lien
extended to any additional assets.
(c) Notwithstanding the foregoing, the Company or any Restricted
Subsidiary may create or assume Liens in addition to those permitted by clauses
(1) through (6), and renew, extend or replace such Liens, provided that at the
time of such creation, assumption, renewal, extension or replacement of such
Lien, and after giving effect thereto, together with any sale and leaseback
transactions permitted under Section 1006(b) hereof, Exempted Debt does not
exceed 20% of Consolidated Net Tangible Assets.
(d) For the purposes of this Section 1005 and Section 1006, the giving
of a guarantee which is secured by a Lien on any shares of stock, Indebtedness
or other obligations of a Subsidiary or any Principal Property, and the creation
of a Lien on any shares of stock, Indebtedness or other obligations of a
Subsidiary or any Principal Property to secure Indebtedness that existed prior
to the creation of such Lien, shall be deemed to involve the creation of
Indebtedness in an amount equal to the principal amount guaranteed or secured by
such Lien.
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Section 1006. Limitation on Sale and Leaseback Transactions.
(a) The Company will not, and will not permit any Restricted Subsidiary
to, sell or transfer, directly or indirectly, except to the Company or a
Restricted Subsidiary, any Principal Property as an entirety, or any substantial
portion thereof, with the intention of taking back a lease of such property,
except a lease for a period of two years or less at the end of which it is
intended that the use of such property by the lessee will be discontinued;
provided that, notwithstanding the foregoing, the Company or any Restricted
Subsidiary may sell any such Principal Property and lease it back for a longer
period:
(1) if the Company or such Restricted Subsidiary would be entitled,
pursuant to Section 1005 hereof, to create a mortgage on the property to be
leased securing Funded Debt in an amount equal to the Attributable Debt with
respect to such sale and leaseback transaction without equally and ratably
securing the outstanding Securities; or
(2) if the Company promptly informs the Trustee of such transaction,
the net proceeds of such transaction are at least equal to the Fair Market Value
(as determined by Board Resolution) of such property, and the Company causes an
amount equal to the net proceeds of the sale to be applied to the retirement,
within 180 days after receipt of such proceeds, of Funded Debt Incurred or
assumed by the Company or a Restricted Subsidiary (including the Securities);
provided further that, in lieu of applying all or any part of such net proceeds
to such retirement, the Company may, within 75 days after such sale or transfer,
deliver or cause to be delivered to the applicable trustee for cancellation
either debentures or notes evidencing Funded Debt of the Company (which may
include the Outstanding Securities) or of a Restricted Subsidiary previously
authenticated and delivered by the applicable trustee, and not theretofore
tendered for sinking fund purposes or called for a sinking fund or otherwise
applied as a credit against an obligation to redeem or retire such Notes or
debentures. If the Company so delivers debentures or Notes to the applicable
trustee with an Officers' Certificate, the amount of cash that the Company will
be required to apply to the retirement of Funded Debt will be reduced by an
amount equal to the aggregate of the then applicable optional redemption prices
(not including any optional sinking fund redemption prices) of such debentures
or Notes, or if there are no such redemption prices, the principal amount of
such debentures or Notes, provided, that in the case of debentures or Notes
which provide for an amount less than the principal amount thereof to be due and
payable upon a declaration of the maturity thereof, such amount of cash shall be
reduced by the amount of principal of such debentures or Notes that would be due
and payable as of the date of such application upon a declaration of
acceleration of the maturity thereof pursuant to the terms of the indenture
pursuant to which such debentures or Notes were issued; or
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(3) if the Company, within 180 days after the sale or transfer, applies
or causes a Restricted Subsidiary to apply an amount equal to the greater of the
net proceeds of such sale or transfer or Fair Market Value of the Principal
Property so sold and leased back at the time of entering into such sale and
leaseback transaction (in either case as determined by Board Resolution of the
Company) to purchase other Principal Property having a Fair Market Value at
least equal to the Fair Market Value of the Principal Property (or portion
thereof) sold or transferred in such sale and leaseback transaction.
(b) Notwithstanding the foregoing, the Company or any Restricted
Subsidiary may enter into sale and leaseback transactions in addition to those
permitted in this paragraph and without any obligation to retire any outstanding
notes or other Funded Debt, provided that at the time of entering into such sale
and leaseback transactions and after giving effect thereto, together with any
Liens permitted under Section 1005(c) hereof, Exempted Debt does not exceed 20%
of Consolidated Net Tangible Assets.
Section 1007. Provisions of Financial Statements.
Whether or not the Company is subject to Section 13(a) or 15(d) of the
Exchange Act, the Company will, to the extent permitted under the Exchange Act,
file with the Commission the annual reports, quarterly reports and other
documents which the Company would have been required to file with the Commission
pursuant to Sections 13(a) or 15(d) if the Company was so subject, such
documents to be filed with the Commission on or prior to the date (the "Required
Filing Date") by which the Company would have been required so to file such
documents if the Company was so subject. The Company will also in any event (x)
within 15 days of each Required Filing Date (i) transmit by mail to all holders,
as their names and addresses appear in the security register, without cost to
such holders and (ii) file with the Trustee copies of the annual reports,
quarterly reports and other documents which the Company would have been required
to file with the Commission pursuant to Sections 13(a) or 15(d) of the Exchange
Act if the Company were subject to either of such Sections and (y) if filing
such documents by the Company with the Commission is not permitted under the
Exchange Act, promptly upon written request and payment of the reasonable cost
of duplication and delivery, supply copies of such documents to any prospective
holder at the Company's cost.
Section 1008. Waiver of Certain Covenants.
The Company may omit in any particular instance to comply with any
covenant or condition set forth in Sections 1005, 1006 and 1007 if, before or
after the time for such compliance, the Holders of not less than a majority in
aggregate principal amount of the Securities at the time Outstanding of each
series affected thereby (voting as one class) shall, by Act of such Holders,
waive such compliance in such instance with such covenant or provision, but no
such waiver shall extend to or affect such covenant or condition except to the
extent so expressly waived, and, until such waiver shall become effective, the
obligations of the Company and the duties of the Trustee in respect of any such
covenant or condition shall remain in full force and effect.
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ARTICLE ELEVEN
REDEMPTION OF SECURITIES
Section 1101. Rights of Redemption.
Each series of Securities will be redeemable, as a whole or in part, at
the option of the Company, at any time or from time to time, at a Redemption
Price (a "Redemption Price") equal to the greater of (i) 100% of the principal
amount of the applicable series of Securities to be redeemed and (ii) the sum of
the present values of the remaining scheduled payments of principal and interest
on the applicable series of Securities discounted to the Redemption Date (the
"Redemption Date") on a semiannual basis (assuming a 360-day year consisting of
twelve 30-day months) at the applicable Treasury Rate, plus __ basis points for
the __% Notes due 200_ and ___ basis points for the __% Notes due 200_,
respectively, plus, in each case, accrued interest thereon to the Redemption
Date.
Section 1102. Applicability of Article.
Redemption of Securities at the election of the Company or otherwise,
as permitted or required by any provision of this Indenture, shall be made in
accordance with such provision and this Article Eleven.
Section 1103. Election to Redeem; Notice to Trustee.
The election of the Company to redeem any Securities pursuant to
Section 1101 shall be evidenced by a Company Order and an Officers' Certificate.
In case of any redemption at the election of the Company, the Company shall, not
less than 45 days prior to the Redemption Date fixed by the Company (unless a
shorter notice period shall be satisfactory to the Trustee), notify the Trustee
in writing of such Redemption Date and of the principal amount of the applicable
series of Securities to be redeemed.
Section 1104. Selection by Trustee of Securities to Be Redeemed.
If less than all of the applicable series of Securities are to be
redeemed, the particular Securities or portions thereof to be redeemed shall be
selected not more than 60 nor less than 30 days prior to the Redemption Date.
The Trustee shall select the Securities or portions thereof to be redeemed on a
pro rata basis, by lot or by any other method the Trustee shall deem fair and
appropriate. The amounts to be redeemed shall be equal to $1,000 or any integral
multiple thereof.
The Trustee shall promptly notify the Company and the Security
Registrar in writing of the Securities selected for redemption and, in the case
of any Securities selected for partial redemption, the principal amount thereof
to be redeemed.
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For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to redemption of Securities shall relate, in
the case of any Security redeemed or to be redeemed only in part, to the portion
of the principal amount of such Security which has been or is to be redeemed.
Section 1105. Notice of Redemption.
Notice of redemption shall be given by first-class mail, postage
prepaid, mailed not less than 30 days nor more than 60 days prior to the
Redemption Date, to each Holder of Securities to be redeemed, at its address
appearing in the Security Register.
All notices of redemption shall state:
(a) the Redemption Date;
(b) the Redemption Price;
(c) if less than all Outstanding Securities of a series are to be
redeemed, the identification of the particular Securities to be redeemed;
(d) in the case of a Security to be redeemed in part, the principal
amount of such Security to be redeemed and that after the Redemption Date upon
surrender of such Security, new Security or Securities in the aggregate
principal amount equal to the unredeemed portion thereof will be issued;
(e) that Securities called for redemption must be surrendered to the
Paying Agent to collect the Redemption Price;
(f) that on the Redemption Date, the Redemption Price will become due
and payable upon each such Security or portion thereof to be redeemed, and that
(unless the Company shall default in payment of the Redemption Price) interest
thereon shall cease to accrue on and after said date;
(g) the names and addresses of the Paying Agent and the offices or
agencies referred to in Section 1002 where such Securities are to be surrendered
for payment of the Redemption Price;
(h) the CUSIP number, if any, relating to such Securities; and
(i) the procedures that a Holder must follow to surrender the
Securities to be redeemed.
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Notice of redemption of Securities to be redeemed at the election of
the Company shall be given by the Company or, at the Company's written request,
by the Trustee in the name and at the expense of the Company. If the Company
elects to give notice of redemption, it shall provide the Trustee with a
certificate stating that such notice has been given in compliance with the
requirements of this Section 1105.
The notice if mailed in the manner herein provided shall be
conclusively presumed to have been given, whether or not the Holder receives
such notice. In any case, failure to give such notice by mail or any defect in
the notice to the Holder of any Security designated for redemption as a whole or
in part shall not affect the validity of the proceedings for the redemption of
any other Security.
Section 1106. Deposit of Redemption Price.
On or prior to 10:00 a.m. New York City time on any Redemption Date,
the Company shall deposit with the Trustee or with a Paying Agent (or, if the
Company or any of its Affiliates is acting as Paying Agent, segregate and hold
in trust as provided in Section 1003) an amount of money in same day funds
sufficient to pay the Redemption Price of, and (except if the Redemption Date
shall be an Interest Payment Date or Special Payment Date) accrued interest on,
all the applicable series of Securities or portions thereof which are to be
redeemed on that date. The Paying Agent shall promptly mail or deliver to
Holders of Securities so redeemed payment in an amount equal to the Redemption
Price of the Securities purchased from each such Holder. Subject to Section
601(f), all money, if any, earned on funds held in trust by the Trustee or any
Paying Agent shall be remitted to the Company.
Section 1107. Securities Payable on Redemption Date.
Notice of redemption having been given as aforesaid, the Securities of
the series so to be redeemed shall, on the Redemption Date, become due and
payable at the Redemption Price therein specified and from and after such date
(unless the Company shall default in the payment of the Redemption Price and
accrued interest) such Securities of such series shall cease to bear interest.
Upon surrender of any such Security for redemption in accordance with said
notice, such Security shall be paid by the Company at the Redemption Price,
together with accrued interest to the Redemption Date; provided, however, that
installments of interest whose Stated Maturity is on or prior to the Redemption
Date shall be payable to the Holders of such Securities, or one or more
Predecessor Securities, registered as such on the relevant Regular Record Dates
and Special Record Dates according to the terms and the provisions of Section
308.
If any Security called for redemption shall not be so paid upon
surrender thereof for redemption, the principal and premium, if any, shall,
until paid, bear interest from the Redemption Date at the rate borne by such
Security.
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Section 1108. Securities Redeemed or Purchased in Part.
Any Security which is to be redeemed or purchased only in part shall be
surrendered to the Paying Agent at the office or agency maintained for such
purpose pursuant to Section 1002 (with, if the Company, the Security Registrar
or the Trustee so requires, due endorsement by, or a written instrument of
transfer in form satisfactory to the Company, the Security Registrar or the
Trustee, as the case may be, duly executed by, the Holder thereof or such
Holder's attorney duly authorized in writing), and the Company shall execute,
and the Trustee shall authenticate and deliver to the Holder of such Security
without service charge, a new Security or Securities, of any authorized
denomination as requested by such Holder in aggregate principal amount equal to,
and in exchange for, the unredeemed portion of the principal of the Security so
surrendered that is not redeemed or purchased.
-71-
<PAGE> 81
ARTICLE TWELVE
SATISFACTION AND DISCHARGE
Section 1201. Satisfaction and Discharge of Indenture.
This Indenture shall be discharged and shall cease to be of further
effect (except as to surviving rights of registration of transfer or exchange of
Securities as expressly provided for herein) as to all Outstanding Securities of
any series hereunder, and the Trustee, upon Company Request and at the expense
of the Company, shall execute proper instruments acknowledging satisfaction and
discharge of this Indenture, when
(a) either
(1) all the Securities of such series theretofore authenticated and
delivered (other than (i) lost, stolen or destroyed Securities of such
series which have been replaced or paid as provided in Section 308 or
(ii) all Securities of such series for whose payment money has
theretofore been deposited in trust or segregated and held in trust by
the Company and thereafter repaid to the Company or discharged from
such trust as provided in Section 1003) have been delivered to the
Trustee for cancellation; or
(2) all such Securities of such series not theretofore delivered to
the Trustee for cancellation (i) have become due and payable or, (ii)
will become due and payable at their Stated Maturity within one year;
and the Company has irrevocably deposited or caused to be deposited
with the Trustee as trust funds in trust an amount in United States
dollars sufficient (in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification
thereof delivered to the Trustee) to pay and discharge (without
consideration of any reinvestment and after payment of all taxes or
other charges and assessments in respect thereof payable by the
Trustee) the entire Indebtedness on the Securities of such series not
theretofore delivered to the Trustee for cancellation, including the
principal of, premium, if any, and accrued interest on, the Securities
of such series at such Maturity, Stated Maturity or Redemption Date;
(b) the Company has paid or caused to be paid all other sums payable
hereunder by the Company; and
(c) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Independent Counsel, in form and substance satisfactory to the
-72-
<PAGE> 82
Trustee, each stating that (i) all conditions precedent herein relating to the
satisfaction and discharge hereof have been complied with, (ii) no default with
respect to the Securities of such series has occurred and is continuing on the
date of such deposit and (iii) such deposit does not result in a breach or
violation of, or constitute a default under, the Indenture or any other
agreement or instrument to which the Company is a party.
Notwithstanding the satisfaction and discharge hereof, the obligations
of the Company to the Trustee under Section 607 and, if United States dollars
shall have been deposited with the Trustee pursuant to subclause (2) of
subsection (a) of this Section 1201, the obligations of the Trustee under
Section 1202 and the last paragraph of Section 1003 shall survive.
Section 1202. Application of Trust Money.
Subject to the provisions of the last paragraph Section 1003, all
United States dollars deposited with the Trustee pursuant to Section 1201 shall
be held in trust and applied by it, in accordance with the provisions of the
Securities and this Indenture, to the payment, either directly or through any
Paying Agent (including the Company acting as its own Paying Agent) as the
Trustee may determine, to the Persons entitled thereto, of the principal of,
premium, if any, and interest on, the Securities for whose payment such United
States dollars have been deposited with the Trustee.
* * *
-73-
<PAGE> 83
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, all as of the day and year first above written.
REPUBLIC SERVICES, INC.
By:
-------------------------------
Name:
Title:
THE BANK OF NEW YORK
By:
-------------------------------
Name:
Title:
-74-
<PAGE> 84
EXHIBIT A
[Legend if Security is a Global Security]
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY
OR A NOMINEE OF A DEPOSITARY OR A SUCCESSOR DEPOSITARY. TRANSFERS OF
THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN
PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY
SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS
SET FORTH IN SECTION 306 OF THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE
COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT
AND ANY SUCH CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO.
OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE
OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY
AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER,
PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.
-75-
<PAGE> 85
REPUBLIC SERVICES, INC.
------------------
___% NOTE DUE 200_
CUSIP NO. ___________
No. 1 $____,000,000
Republic Services, Inc., a Delaware corporation (herein called the
"Company," which term includes any successor Person under the Indenture
hereinafter referred to), for value received, hereby promises to pay to Cede &
Co. or registered assigns, the principal sum of _____ HUNDRED MILLION DOLLARS
($____,000,000) United States dollars on ________, 200_, at the office or agency
of the Company referred to below, and to pay interest thereon from __________,
1999, or from the most recent Interest Payment Date to which interest has been
paid or duly provided for, semiannually on June 1 and December 1 in each year,
commencing __________, 1999 at the rate of ___% per annum, in United States
dollars, until the principal hereof is paid or duly provided for. Interest shall
be computed on the basis of a 360-day year comprised of twelve 30-day months.
The interest so payable, and punctually paid or duly provided for, on
any Interest Payment Date will, as provided in such Indenture, be paid to the
Person in whose name this Security is registered at the close of business on the
Regular Record Date for such interest, which shall be the May 15 or November 15
(whether or not a Business Day), as the case may be, next preceding such
Interest Payment Date. Any such interest not so punctually paid, or duly
provided for, and interest on such defaulted interest at the interest rate borne
by the Securities, to the extent lawful, shall forthwith cease to be payable to
the Holder on such Regular Record Date, and may either be paid to the Person in
whose name this Security (or any Predecessor Securities) is registered at the
close of business on a Special Record Date for the payment of such defaulted
interest to be fixed by the Trustee, notice thereof shall be given to Holders of
Securities not less than 10 days prior to such Special Record Date, or be paid
at any time in any other lawful manner not inconsistent with the requirements of
any securities exchange on which the Securities may be listed, and upon such
notice as may be required by such exchange, all as more fully provided in this
Indenture.
Payment of the principal of, premium, if any, and interest on, this
Security, and exchange or transfer of this Security, will be made at the office
or agency of the Company in The City of New York maintained for such purpose
(which initially will be a corporate trust office of the Trustee or its
affiliate located at 101 Barclay Street, Floor
-76-
<PAGE> 86
21W, New York, NY 10286), or at such other office or agency as may be maintained
for such purpose, in such coin or currency of the United States of America as at
the time of payment is legal tender for payment of public and private debts;
provided, however, that payment of interest may be made at the option of the
Company by check mailed to the address of the Person entitled thereto as such
address shall appear on the Security Register.
Reference is hereby made to the further provisions of this Security set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been duly executed
by the Trustee referred to on the reverse hereof or by the authenticating agent
appointed as provided in the Indenture by manual signature of an authorized
signer, this Security shall not be entitled to any benefit under the Indenture,
or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by the manual or facsimile signature of its authorized officers.
REPUBLIC SERVICES, INC.
By:
-----------------------------------
Name:
Title:
-77-
<PAGE> 87
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the ___% Notes due 200_ referred to in the
within-mentioned Indenture.
THE BANK OF NEW YORK, as Trustee
By:
-----------------------------------
Authorized Signatory
Dated:
-78-
<PAGE> 88
[FORM OF REVERSE SIDE OF SECURITY]
REPUBLIC SERVICES, INC.
___% Note due 200__
This Security is one of a duly authorized issue of Securities of the
Company designated as its ___% Notes due 200__ (herein called the "Securities"),
limited (except as otherwise provided in the Indenture referred to below) in
aggregate principal amount to $___,000,000, issued under and subject to the
terms of an indenture (herein called the "Indenture") dated as of May __ , 1999,
between the Company and The Bank of New York, as trustee (herein called the
"Trustee," which term includes any successor trustee under the Indenture), to
which Indenture and all indentures supplemental thereto reference is hereby made
for a statement of the respective rights, limitations of rights, duties,
obligations and immunities thereunder of the Company, the Trustee and the
Holders of the Securities, and of the terms upon which the Securities are, and
are to be, authenticated and delivered.
The Securities may be redeemed at any time, at the option of the
Company, in whole or in part, at any time and from time to time, upon not less
than 30 and not more than 60 days' notice to the Holders thereof as provided in
the Indenture, at a Redemption Price equal to the greater of (1) 100% of the
principal amount of the Securities to be redeemed and (2) the sum of the present
values of the remaining scheduled payments of principal and interest thereon
discounted to the Redemption Date on a semiannual basis (assuming a 360-day year
consisting of twelve 30-day months) at the applicable Treasury Rate, plus __
basis points, plus, in each case, accrued interest to the Redemption Date
(subject to the right of holders of record of such Securities on relevant record
dates to receive interest due on an interest payment date), if any.
If less than all of the Securities are to be redeemed, the Trustee
shall select, not more than 60 nor less than 30 days before the Redemption Date,
the Securities or portions thereof to be redeemed on a pro rata basis, by lot or
by any other method the Trustee shall deem fair and appropriate.
In the case of any redemption of Securities in accordance with the
Indenture, interest installments whose Stated Maturity is on or prior to the
Redemption Date will be payable to the Holders of such Securities of record as
of the close of business on the relevant Regular Record Date or Special Record
Date referred to on the face hereof. Securities (or portions thereof) for whose
redemption and payment provision is made in accordance with the Indenture shall
cease to bear interest from and after the Redemption Date.
-79-
<PAGE> 89
In the event of redemption or repurchase of this Security in accordance
with the Indenture in part only, a new Security or Securities for the unredeemed
portion hereof shall be issued in the name of the Holder hereof upon the
cancellation hereof.
If an Event of Default shall occur and be continuing, the principal
amount of all the Securities may be declared due and payable in the manner and
with the effect provided in the Indenture.
The Indenture contains provisions for defeasance at any time of (a) the
entire Indebtedness on the Securities and (b) certain covenants and Defaults and
Events of Default, in each case upon compliance with certain conditions set
forth therein.
The Indenture permits, with certain exceptions (including certain
amendments permitted without the consent of any Holders and certain amendments
which required the consent of all of the Holders) as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders under the Indenture and the Securities at
any time by the Company and the Trustee with the consent of the Holders of at
least a majority in aggregate principal amount of the Securities of all series
at the time Outstanding that are affected (voting as one class). The Indenture
also contains provisions permitting the Holders of at least a majority in
aggregate principal amount of the Securities (100% of the Holders in certain
circumstances) of all series at the time Outstanding that are affected (voting
as one class), on behalf of the Holders of all the Securities of such affected
series, to waive compliance by the Company with certain provisions of the
Indenture and the Securities of such series and certain past Defaults and Events
of Default under the Indenture and the Securities and their consequences. Any
such consent or waiver by or on behalf of the Holder of this Security shall be
conclusive and binding upon such Holder and upon all future Holders of this
Security and of any Security issued upon the registration of transfer hereof or
in exchange herefor or in lieu hereof whether or not notation of such consent or
waiver is made upon this Security.
No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Company or any
other obligor on the Securities (in the event such other obligor is obligated to
make payments in respect of the Securities), which is absolute and
unconditional, to pay the principal of, and premium, if any, and interest on,
this Security at the times, place, and rate, and in the coin or currency, herein
prescribed.
As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Security is registrable in the Security
Register, upon surrender of this Security for registration of transfer at the
office or agency of the Company in the Borough of Manhattan, The City of New
York, duly endorsed by, or accompanied by a
-80-
<PAGE> 90
written instrument of transfer in form satisfactory to the Company and the
Security Registrar duly executed by, the Holder hereof or its attorney duly
authorized in writing, and thereupon one or more new Securities, of authorized
denominations and for the same aggregate principal amount, will be issued to the
designated transferee or transferees.
The Securities in certificated form are issuable only in registered
form without coupons in denominations of $1,000 and any integral multiple
thereof. As provided in the Indenture and subject to certain limitations therein
set forth, the Securities are exchangeable for a like aggregate principal amount
of Securities of a differing authorized denomination, as requested by the Holder
surrendering the same.
Except as indicated in the Indenture, no service charge shall be made
for any registration of transfer or exchange of Securities, but the Company may
require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection therewith.
Prior to due presentment of this Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name this Security is registered as the owner hereof for all
purposes, whether or not this Security is overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice to the contrary.
THIS SECURITY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE TO CONFLICT OF LAWS
PRINCIPLES THEREOF.
All terms used in this Security which are defined in the Indenture and
not otherwise defined herein shall have the meanings assigned to them in the
Indenture.
-81-
<PAGE> 91
EXHIBIT B
[Legend if Security is a Global Security]
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY
OR A NOMINEE OF A DEPOSITARY OR A SUCCESSOR DEPOSITARY. TRANSFERS OF
THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN
PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY
SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS
SET FORTH IN SECTION 306 OF THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE
COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT
AND ANY SUCH CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO.
OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE
OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY
AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER,
PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.
-82-
<PAGE> 92
REPUBLIC SERVICES, INC.
------------------
___% NOTE DUE 200_
CUSIP NO. _________
No. 1 $____,000,000
Republic Services, Inc., a Delaware corporation (herein called the
"Company," which term includes any successor Person under the Indenture
hereinafter referred to), for value received, hereby promises to pay to Cede &
Co. or registered assigns, the principal sum of _____ HUNDRED MILLION DOLLARS
($____,000,000) United States dollars on ________, 200_, at the office or agency
of the Company referred to below, and to pay interest thereon from __________,
1999, or from the most recent Interest Payment Date to which interest has been
paid or duly provided for, semiannually on June 1 and December 1 in each year,
commencing __________, 1999 at the rate of ___% per annum, in United States
dollars, until the principal hereof is paid or duly provided for. Interest shall
be computed on the basis of a 360-day year comprised of twelve 30-day months.
The interest so payable, and punctually paid or duly provided for, on
any Interest Payment Date will, as provided in such Indenture, be paid to the
Person in whose name this Security is registered at the close of business on the
Regular Record Date for such interest, which shall be the May 15 or November 15
(whether or not a Business Day), as the case may be, next preceding such
Interest Payment Date. Any such interest not so punctually paid, or duly
provided for, and interest on such defaulted interest at the interest rate borne
by the Securities, to the extent lawful, shall forthwith cease to be payable to
the Holder on such Regular Record Date, and may either be paid to the Person in
whose name this Security (or any Predecessor Securities) is registered at the
close of business on a Special Record Date for the payment of such defaulted
interest to be fixed by the Trustee, notice thereof shall be given to Holders of
Securities not less than 10 days prior to such Special Record Date, or be paid
at any time in any other lawful manner not inconsistent with the requirements of
any securities exchange on which the Securities may be listed, and upon such
notice as may be required by such exchange, all as more fully provided in this
Indenture.
Payment of the principal of, premium, if any, and interest on, this
Security, and exchange or transfer of this Security, will be made at the office
or agency of the Company in The City of New York maintained for such purpose
(which initially will be a corporate trust office of the Trustee or its
affiliate located at 101 Barclay Street, Floor 21W, New York, NY 10286), or at
such other office or agency as may be maintained for such purpose, in such coin
or currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts; provided, however, that payment
of interest may be made at the option of the Company by check mailed to the
-83-
<PAGE> 93
address of the Person entitled thereto as such address shall appear on the
Security Register.
Reference is hereby made to the further provisions of this Security set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been duly executed
by the Trustee referred to on the reverse hereof or by the authenticating agent
appointed as provided in the Indenture by manual signature of an authorized
signer, this Security shall not be entitled to any benefit under the Indenture,
or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by the manual or facsimile signature of its authorized officers.
REPUBLIC SERVICES, INC.
By:
------------------------------
Name:
Title:
-84-
<PAGE> 94
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the ___% Notes due 200_ referred to in the
within-mentioned Indenture.
THE BANK OF NEW YORK, as Trustee
By:
-----------------------------------
Authorized Signatory
Dated:
-85-
<PAGE> 95
[FORM OF REVERSE SIDE OF SECURITY]
REPUBLIC SERVICES, INC.
___% Note due 200__
This Security is one of a duly authorized issue of Securities of the
Company designated as its ___% Notes due 200__ (herein called the "Securities"),
limited (except as otherwise provided in the Indenture referred to below) in
aggregate principal amount to $___,000,000, issued under and subject to the
terms of an indenture (herein called the "Indenture") dated as of May __ , 1999,
between the Company and The Bank of New York, as trustee (herein called the
"Trustee," which term includes any successor trustee under the Indenture), to
which Indenture and all indentures supplemental thereto reference is hereby made
for a statement of the respective rights, limitations of rights, duties,
obligations and immunities thereunder of the Company, the Trustee and the
Holders of the Securities, and of the terms upon which the Securities are, and
are to be, authenticated and delivered.
The Securities may be redeemed at any time, at the option of the
Company, in whole or in part, at any time and from time to time, upon not less
than 30 and not more than 60 days' notice to the Holders thereof as provided in
the Indenture, at a Redemption Price equal to the greater of (1) 100% of the
principal amount of the Securities to be redeemed and (2) the sum of the present
values of the remaining scheduled payments of principal and interest thereon
discounted to the Redemption Date on a semiannual basis (assuming a 360-day year
consisting of twelve 30-day months) at the applicable Treasury Rate, plus __
basis points, plus, in each case, accrued interest to the Redemption Date
(subject to the right of holders of record of such Securities on relevant record
dates to receive interest due on an interest payment date), if any.
If less than all of the Securities are to be redeemed, the Trustee
shall select, not more than 60 nor less than 30 days before the Redemption Date,
the Securities or portions thereof to be redeemed on a pro rata basis, by lot or
by any other method the Trustee shall deem fair and appropriate.
In the case of any redemption of Securities in accordance with the
Indenture, interest installments whose Stated Maturity is on or prior to the
Redemption Date will be payable to the Holders of such Securities of record as
of the close of business on the relevant Regular Record Date or Special Record
Date referred to on the face hereof. Securities (or portions thereof) for whose
redemption and payment provision is made in accordance with the Indenture shall
cease to bear interest from and after the Redemption Date.
-86-
<PAGE> 96
In the event of redemption or repurchase of this Security in accordance
with the Indenture in part only, a new Security or Securities for the unredeemed
portion hereof shall be issued in the name of the Holder hereof upon the
cancellation hereof.
If an Event of Default shall occur and be continuing, the principal
amount of all the Securities may be declared due and payable in the manner and
with the effect provided in the Indenture.
The Indenture contains provisions for defeasance at any time of (a) the
entire Indebtedness on the Securities and (b) certain covenants and Defaults and
Events of Default, in each case upon compliance with certain conditions set
forth therein.
The Indenture permits, with certain exceptions (including certain
amendments permitted without the consent of any Holders and certain amendments
which required the consent of all of the Holders) as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders under the Indenture and the Securities at
any time by the Company and the Trustee with the consent of the Holders of at
least a majority in aggregate principal amount of the Securities of all series
at the time Outstanding that are affected (voting as one class). The Indenture
also contains provisions permitting the Holders of at least a majority in
aggregate principal amount of the Securities (100% of the Holders in certain
circumstances) of all series at the time Outstanding that are affected (voting
as one class), on behalf of the Holders of all the Securities of such affected
series, to waive compliance by the Company with certain provisions of the
Indenture and the Securities of such series and certain past Defaults and Events
of Default under the Indenture and the Securities and their consequences. Any
such consent or waiver by or on behalf of the Holder of this Security shall be
conclusive and binding upon such Holder and upon all future Holders of this
Security and of any Security issued upon the registration of transfer hereof or
in exchange herefor or in lieu hereof whether or not notation of such consent or
waiver is made upon this Security.
No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Company or any
other obligor on the Securities (in the event such other obligor is obligated to
make payments in respect of the Securities), which is absolute and
unconditional, to pay the principal of, and premium, if any, and interest on,
this Security at the times, place, and rate, and in the coin or currency, herein
prescribed.
As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Security is registrable in the Security
Register, upon surrender of this Security for registration of transfer at the
office or agency of the Company in the Borough of Manhattan, The City of New
York, duly endorsed by, or accompanied by a
-87-
<PAGE> 97
written instrument of transfer in form satisfactory to the Company and the
Security Registrar duly executed by, the Holder hereof or its attorney duly
authorized in writing, and thereupon one or more new Securities, of authorized
denominations and for the same aggregate principal amount, will be issued to the
designated transferee or transferees.
The Securities in certificated form are issuable only in registered
form without coupons in denominations of $1,000 and any integral multiple
thereof. As provided in the Indenture and subject to certain limitations therein
set forth, the Securities are exchangeable for a like aggregate principal amount
of Securities of a differing authorized denomination, as requested by the Holder
surrendering the same.
Except as indicated in the Indenture, no service charge shall be made
for any registration of transfer or exchange of Securities, but the Company may
require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection therewith.
Prior to due presentment of this Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name this Security is registered as the owner hereof for all
purposes, whether or not this Security is overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice to the contrary.
THIS SECURITY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE TO CONFLICT OF LAWS
PRINCIPLES THEREOF.
All terms used in this Security which are defined in the Indenture and
not otherwise defined herein shall have the meanings assigned to them in the
Indenture.
-88-
<PAGE> 1
EXHIBIT 4.3
REPUBLIC SERVICES, INC.
------------------
___% NOTE DUE 200_
CUSIP NO. ___________
No. 1 $____,000,000
Republic Services, Inc., a Delaware corporation (herein called the
"Company," which term includes any successor Person under the Indenture
hereinafter referred to), for value received, hereby promises to pay to Cede &
Co. or registered assigns, the principal sum of _____ HUNDRED MILLION DOLLARS
($____,000,000) United States dollars on ________, 200_, at the office or agency
of the Company referred to below, and to pay interest thereon from __________,
1999, or from the most recent Interest Payment Date to which interest has been
paid or duly provided for, semiannually on June 1 and December 1 in each year,
commencing __________, 1999 at the rate of ___% per annum, in United States
dollars, until the principal hereof is paid or duly provided for. Interest shall
be computed on the basis of a 360-day year comprised of twelve 30-day months.
The interest so payable, and punctually paid or duly provided for, on
any Interest Payment Date will, as provided in such Indenture, be paid to the
Person in whose name this Security is registered at the close of business on the
Regular Record Date for such interest, which shall be the May 15 or November 15
(whether or not a Business Day), as the case may be, next preceding such
Interest Payment Date. Any such interest not so punctually paid, or duly
provided for, and interest on such defaulted interest at the interest rate borne
by the Securities, to the extent lawful, shall forthwith cease to be payable to
the Holder on such Regular Record Date, and may either be paid to the Person in
whose name this Security (or any Predecessor Securities) is registered at the
close of business on a Special Record Date for the payment of such defaulted
interest to be fixed by the Trustee, notice thereof shall be given to Holders of
Securities not less than 10 days prior to such Special Record Date, or be paid
at any time in any other lawful manner not inconsistent with the requirements of
any securities exchange on which the Securities may be listed, and upon such
notice as may be required by such exchange, all as more fully provided in this
Indenture.
Payment of the principal of, premium, if any, and interest on, this
Security, and exchange or transfer of this Security, will be made at the office
or agency of the Company in The City of New York maintained for such purpose
(which initially will be a corporate trust office of the Trustee or its
affiliate located at 101 Barclay Street, Floor
-1-
<PAGE> 2
21W, New York, NY 10286), or at such other office or agency as may be maintained
for such purpose, in such coin or currency of the United States of America as at
the time of payment is legal tender for payment of public and private debts;
provided, however, that payment of interest may be made at the option of the
Company by check mailed to the address of the Person entitled thereto as such
address shall appear on the Security Register.
Reference is hereby made to the further provisions of this Security set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been duly executed
by the Trustee referred to on the reverse hereof or by the authenticating agent
appointed as provided in the Indenture by manual signature of an authorized
signer, this Security shall not be entitled to any benefit under the Indenture,
or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by the manual or facsimile signature of its authorized officers.
REPUBLIC SERVICES, INC.
By:
-----------------------------------
Name:
Title:
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<PAGE> 3
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the ___% Notes due 200_ referred to in the
within-mentioned Indenture.
THE BANK OF NEW YORK, as Trustee
By:
-----------------------------------
Authorized Signatory
Dated:
-3-
<PAGE> 4
[FORM OF REVERSE SIDE OF SECURITY]
REPUBLIC SERVICES, INC.
___% Note due 200__
This Security is one of a duly authorized issue of Securities of the
Company designated as its ___% Notes due 200__ (herein called the "Securities"),
limited (except as otherwise provided in the Indenture referred to below) in
aggregate principal amount to $___,000,000, issued under and subject to the
terms of an indenture (herein called the "Indenture") dated as of May __ , 1999,
between the Company and The Bank of New York, as trustee (herein called the
"Trustee," which term includes any successor trustee under the Indenture), to
which Indenture and all indentures supplemental thereto reference is hereby made
for a statement of the respective rights, limitations of rights, duties,
obligations and immunities thereunder of the Company, the Trustee and the
Holders of the Securities, and of the terms upon which the Securities are, and
are to be, authenticated and delivered.
The Securities may be redeemed at any time, at the option of the
Company, in whole or in part, at any time and from time to time, upon not less
than 30 and not more than 60 days' notice to the Holders thereof as provided in
the Indenture, at a Redemption Price equal to the greater of (1) 100% of the
principal amount of the Securities to be redeemed and (2) the sum of the present
values of the remaining scheduled payments of principal and interest thereon
discounted to the Redemption Date on a semiannual basis (assuming a 360-day year
consisting of twelve 30-day months) at the applicable Treasury Rate, plus __
basis points, plus, in each case, accrued interest to the Redemption Date
(subject to the right of holders of record of such Securities on relevant record
dates to receive interest due on an interest payment date), if any.
If less than all of the Securities are to be redeemed, the Trustee
shall select, not more than 60 nor less than 30 days before the Redemption Date,
the Securities or portions thereof to be redeemed on a pro rata basis, by lot or
by any other method the Trustee shall deem fair and appropriate.
In the case of any redemption of Securities in accordance with the
Indenture, interest installments whose Stated Maturity is on or prior to the
Redemption Date will be payable to the Holders of such Securities of record as
of the close of business on the relevant Regular Record Date or Special Record
Date referred to on the face hereof. Securities (or portions thereof) for whose
redemption and payment provision is made in accordance with the Indenture shall
cease to bear interest from and after the Redemption Date.
-4-
<PAGE> 5
In the event of redemption or repurchase of this Security in accordance
with the Indenture in part only, a new Security or Securities for the unredeemed
portion hereof shall be issued in the name of the Holder hereof upon the
cancellation hereof.
If an Event of Default shall occur and be continuing, the principal
amount of all the Securities may be declared due and payable in the manner and
with the effect provided in the Indenture.
The Indenture contains provisions for defeasance at any time of (a) the
entire Indebtedness on the Securities and (b) certain covenants and Defaults and
Events of Default, in each case upon compliance with certain conditions set
forth therein.
The Indenture permits, with certain exceptions (including certain
amendments permitted without the consent of any Holders and certain amendments
which required the consent of all of the Holders) as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders under the Indenture and the Securities at
any time by the Company and the Trustee with the consent of the Holders of at
least a majority in aggregate principal amount of the Securities of all series
at the time Outstanding that are affected (voting as one class). The Indenture
also contains provisions permitting the Holders of at least a majority in
aggregate principal amount of the Securities (100% of the Holders in certain
circumstances) of all series at the time Outstanding that are affected (voting
as one class), on behalf of the Holders of all the Securities of such affected
series, to waive compliance by the Company with certain provisions of the
Indenture and the Securities of such series and certain past Defaults and Events
of Default under the Indenture and the Securities and their consequences. Any
such consent or waiver by or on behalf of the Holder of this Security shall be
conclusive and binding upon such Holder and upon all future Holders of this
Security and of any Security issued upon the registration of transfer hereof or
in exchange herefor or in lieu hereof whether or not notation of such consent or
waiver is made upon this Security.
No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Company or any
other obligor on the Securities (in the event such other obligor is obligated to
make payments in respect of the Securities), which is absolute and
unconditional, to pay the principal of, and premium, if any, and interest on,
this Security at the times, place, and rate, and in the coin or currency, herein
prescribed.
As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Security is registrable in the Security
Register, upon surrender of this Security for registration of transfer at the
office or agency of the Company in the Borough of Manhattan, The City of New
York, duly endorsed by, or accompanied by a
-5-
<PAGE> 6
written instrument of transfer in form satisfactory to the Company and the
Security Registrar duly executed by, the Holder hereof or its attorney duly
authorized in writing, and thereupon one or more new Securities, of authorized
denominations and for the same aggregate principal amount, will be issued to the
designated transferee or transferees.
The Securities in certificated form are issuable only in registered
form without coupons in denominations of $1,000 and any integral multiple
thereof. As provided in the Indenture and subject to certain limitations therein
set forth, the Securities are exchangeable for a like aggregate principal amount
of Securities of a differing authorized denomination, as requested by the Holder
surrendering the same.
Except as indicated in the Indenture, no service charge shall be made
for any registration of transfer or exchange of Securities, but the Company may
require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection therewith.
Prior to due presentment of this Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name this Security is registered as the owner hereof for all
purposes, whether or not this Security is overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice to the contrary.
THIS SECURITY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE TO CONFLICT OF LAWS
PRINCIPLES THEREOF.
All terms used in this Security which are defined in the Indenture and
not otherwise defined herein shall have the meanings assigned to them in the
Indenture.
-6-
<PAGE> 7
[Legend if Security is a Global Security]
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY
OR A NOMINEE OF A DEPOSITARY OR A SUCCESSOR DEPOSITARY. TRANSFERS OF
THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN
PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY
SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS
SET FORTH IN SECTION 306 OF THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE
COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT
AND ANY SUCH CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO.
OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE
OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY
AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER,
PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.
-7-
<PAGE> 1
EXHIBIT 4.4
REPUBLIC SERVICES, INC.
------------------
___% NOTE DUE 200_
CUSIP NO. _________
No. 1 $____,000,000
Republic Services, Inc., a Delaware corporation (herein called the
"Company," which term includes any successor Person under the Indenture
hereinafter referred to), for value received, hereby promises to pay to Cede &
Co. or registered assigns, the principal sum of _____ HUNDRED MILLION DOLLARS
($____,000,000) United States dollars on ________, 200_, at the office or agency
of the Company referred to below, and to pay interest thereon from __________,
1999, or from the most recent Interest Payment Date to which interest has been
paid or duly provided for, semiannually on June 1 and December 1 in each year,
commencing __________, 1999 at the rate of ___% per annum, in United States
dollars, until the principal hereof is paid or duly provided for. Interest shall
be computed on the basis of a 360-day year comprised of twelve 30-day months.
The interest so payable, and punctually paid or duly provided for, on
any Interest Payment Date will, as provided in such Indenture, be paid to the
Person in whose name this Security is registered at the close of business on the
Regular Record Date for such interest, which shall be the May 15 or November 15
(whether or not a Business Day), as the case may be, next preceding such
Interest Payment Date. Any such interest not so punctually paid, or duly
provided for, and interest on such defaulted interest at the interest rate borne
by the Securities, to the extent lawful, shall forthwith cease to be payable to
the Holder on such Regular Record Date, and may either be paid to the Person in
whose name this Security (or any Predecessor Securities) is registered at the
close of business on a Special Record Date for the payment of such defaulted
interest to be fixed by the Trustee, notice thereof shall be given to Holders of
Securities not less than 10 days prior to such Special Record Date, or be paid
at any time in any other lawful manner not inconsistent with the requirements of
any securities exchange on which the Securities may be listed, and upon such
notice as may be required by such exchange, all as more fully provided in this
Indenture.
Payment of the principal of, premium, if any, and interest on, this
Security, and exchange or transfer of this Security, will be made at the office
or agency of the Company in The City of New York maintained for such purpose
(which initially will be a corporate trust office of the Trustee or its
affiliate located at 101 Barclay Street, Floor 21W, New York, NY 10286), or at
such other office or agency as may be maintained for such purpose, in such coin
or currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts; provided, however, that payment
of interest may be made at the option of the Company by check mailed to the
-1-
<PAGE> 2
address of the Person entitled thereto as such address shall appear on the
Security Register.
Reference is hereby made to the further provisions of this Security set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been duly executed
by the Trustee referred to on the reverse hereof or by the authenticating agent
appointed as provided in the Indenture by manual signature of an authorized
signer, this Security shall not be entitled to any benefit under the Indenture,
or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by the manual or facsimile signature of its authorized officers.
REPUBLIC SERVICES, INC.
By:
------------------------------
Name:
Title:
-2-
<PAGE> 3
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the ___% Notes due 200_ referred to in the
within-mentioned Indenture.
THE BANK OF NEW YORK, as Trustee
By:
-----------------------------------
Authorized Signatory
Dated:
-3-
<PAGE> 4
[FORM OF REVERSE SIDE OF SECURITY]
REPUBLIC SERVICES, INC.
___% Note due 200__
This Security is one of a duly authorized issue of Securities of the
Company designated as its ___% Notes due 200__ (herein called the "Securities"),
limited (except as otherwise provided in the Indenture referred to below) in
aggregate principal amount to $___,000,000, issued under and subject to the
terms of an indenture (herein called the "Indenture") dated as of May __ , 1999,
between the Company and The Bank of New York, as trustee (herein called the
"Trustee," which term includes any successor trustee under the Indenture), to
which Indenture and all indentures supplemental thereto reference is hereby made
for a statement of the respective rights, limitations of rights, duties,
obligations and immunities thereunder of the Company, the Trustee and the
Holders of the Securities, and of the terms upon which the Securities are, and
are to be, authenticated and delivered.
The Securities may be redeemed at any time, at the option of the
Company, in whole or in part, at any time and from time to time, upon not less
than 30 and not more than 60 days' notice to the Holders thereof as provided in
the Indenture, at a Redemption Price equal to the greater of (1) 100% of the
principal amount of the Securities to be redeemed and (2) the sum of the present
values of the remaining scheduled payments of principal and interest thereon
discounted to the Redemption Date on a semiannual basis (assuming a 360-day year
consisting of twelve 30-day months) at the applicable Treasury Rate, plus __
basis points, plus, in each case, accrued interest to the Redemption Date
(subject to the right of holders of record of such Securities on relevant record
dates to receive interest due on an interest payment date), if any.
If less than all of the Securities are to be redeemed, the Trustee
shall select, not more than 60 nor less than 30 days before the Redemption Date,
the Securities or portions thereof to be redeemed on a pro rata basis, by lot or
by any other method the Trustee shall deem fair and appropriate.
In the case of any redemption of Securities in accordance with the
Indenture, interest installments whose Stated Maturity is on or prior to the
Redemption Date will be payable to the Holders of such Securities of record as
of the close of business on the relevant Regular Record Date or Special Record
Date referred to on the face hereof. Securities (or portions thereof) for whose
redemption and payment provision is made in accordance with the Indenture shall
cease to bear interest from and after the Redemption Date.
-4-
<PAGE> 5
In the event of redemption or repurchase of this Security in accordance
with the Indenture in part only, a new Security or Securities for the unredeemed
portion hereof shall be issued in the name of the Holder hereof upon the
cancellation hereof.
If an Event of Default shall occur and be continuing, the principal
amount of all the Securities may be declared due and payable in the manner and
with the effect provided in the Indenture.
The Indenture contains provisions for defeasance at any time of (a) the
entire Indebtedness on the Securities and (b) certain covenants and Defaults and
Events of Default, in each case upon compliance with certain conditions set
forth therein.
The Indenture permits, with certain exceptions (including certain
amendments permitted without the consent of any Holders and certain amendments
which required the consent of all of the Holders) as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders under the Indenture and the Securities at
any time by the Company and the Trustee with the consent of the Holders of at
least a majority in aggregate principal amount of the Securities of all series
at the time Outstanding that are affected (voting as one class). The Indenture
also contains provisions permitting the Holders of at least a majority in
aggregate principal amount of the Securities (100% of the Holders in certain
circumstances) of all series at the time Outstanding that are affected (voting
as one class), on behalf of the Holders of all the Securities of such affected
series, to waive compliance by the Company with certain provisions of the
Indenture and the Securities of such series and certain past Defaults and Events
of Default under the Indenture and the Securities and their consequences. Any
such consent or waiver by or on behalf of the Holder of this Security shall be
conclusive and binding upon such Holder and upon all future Holders of this
Security and of any Security issued upon the registration of transfer hereof or
in exchange herefor or in lieu hereof whether or not notation of such consent or
waiver is made upon this Security.
No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Company or any
other obligor on the Securities (in the event such other obligor is obligated to
make payments in respect of the Securities), which is absolute and
unconditional, to pay the principal of, and premium, if any, and interest on,
this Security at the times, place, and rate, and in the coin or currency, herein
prescribed.
As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Security is registrable in the Security
Register, upon surrender of this Security for registration of transfer at the
office or agency of the Company in the Borough of Manhattan, The City of New
York, duly endorsed by, or accompanied by a
-5-
<PAGE> 6
written instrument of transfer in form satisfactory to the Company and the
Security Registrar duly executed by, the Holder hereof or its attorney duly
authorized in writing, and thereupon one or more new Securities, of authorized
denominations and for the same aggregate principal amount, will be issued to the
designated transferee or transferees.
The Securities in certificated form are issuable only in registered
form without coupons in denominations of $1,000 and any integral multiple
thereof. As provided in the Indenture and subject to certain limitations therein
set forth, the Securities are exchangeable for a like aggregate principal amount
of Securities of a differing authorized denomination, as requested by the Holder
surrendering the same.
Except as indicated in the Indenture, no service charge shall be made
for any registration of transfer or exchange of Securities, but the Company may
require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection therewith.
Prior to due presentment of this Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name this Security is registered as the owner hereof for all
purposes, whether or not this Security is overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice to the contrary.
THIS SECURITY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE TO CONFLICT OF LAWS
PRINCIPLES THEREOF.
All terms used in this Security which are defined in the Indenture and
not otherwise defined herein shall have the meanings assigned to them in the
Indenture.
-6-
<PAGE> 7
[Legend if Security is a Global Security]
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY
OR A NOMINEE OF A DEPOSITARY OR A SUCCESSOR DEPOSITARY. TRANSFERS OF
THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN
PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY
SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS
SET FORTH IN SECTION 306 OF THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE
COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT
AND ANY SUCH CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO.
OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE
OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY
AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER,
PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.
-7-
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
As independent certified public accountants, we hereby consent to the use of
our reports (and to all references to our Firm) included in or made a part of
this Amendment No. 1 to the registration statement.
ARTHUR ANDERSEN LLP
Fort Lauderdale, Florida,
May 19, 1999.
