<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 10, 1999
REGISTRATION STATEMENT NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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)
<TABLE>
<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>
<TABLE>
<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:
<TABLE>
<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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<CAPTION>
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PROPOSED
MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES AMOUNT TO BE AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED(1) OFFERING PRICE(1) FEE(1)
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<S> <C> <C> <C>
% Notes due 2009.............................. $500,000,000 $500,000,000 $139,000
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</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457.
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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 10, 1999
PROSPECTUS
$500,000,000
REPUBLIC SERVICES, INC. (LOGO)
% NOTES DUE 2009
-------------------------
Interest on the notes will be payable on and
of each year beginning , 1999. The notes will mature on
, 2009. 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 58 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.
-------------------------
<TABLE>
<CAPTION>
PER NOTE TOTAL
-------- -----
<S> <C> <C>
Public offering price(1)............................... % $
Underwriting discount.................................. % $
Proceeds, before expenses, to Republic Services........ % $
</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
MERRILL LYNCH & CO. NATIONSBANC MONTGOMERY SECURITIES LLC
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BANC ONE CAPITAL MARKETS, INC.
CHASE SECURITIES INC.
DEUTSCHE BANK SECURITIES
DONALDSON, LUFKIN & JENRETTE
SALOMON SMITH BARNEY
-------------------------
The date of this prospectus is , 1999.
<PAGE> 3
TABLE OF CONTENTS
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PAGE
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<S> <C>
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.................................... 58
United States Federal Income Tax Considerations............. 68
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................................... $500,000,000 aggregate principal amount of %
notes due 2009.
Interest Rate................................... % per year.
Maturity Date................................... , 2009.
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>
5
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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
<PAGE> 10
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 the
date of this prospectus 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 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 accrued
environmental and landfill costs, respectively. The increase in such accruals
resulted primarily from landfill acquisitions.
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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.
We expect to complete our offering of $500.0 million of notes pursuant to
this prospectus during the second quarter of 1999. 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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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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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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- - 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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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 56
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 46 40 20
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................................ 24,628 7,558 4,777
====== ===== =====
</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.
48
<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 are 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 includes our company in its
consolidated federal income tax returns or state consolidated, combined or
unitary tax returns, which will include 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.
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 Bank of New York, the 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
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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 issued under the Indenture will:
- be limited to $500 million aggregate principal amount;
- be unsecured obligations of Republic Services, Inc.;
- rank equally with all of our other unsecured and unsubordinated
indebtedness; and
- mature on , 2009.
The notes will bear interest at the rate 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 the notes will be made on , 1999.
The notes 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
Our notes 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 notes to be redeemed, or
(2) the sum of the present values of the remaining scheduled payments of
principal and interest on the 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. 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 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 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 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.
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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 the 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 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.
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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 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
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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 Merrill Lynch, Pierce, Fenner
& Smith Incorporated or NationsBanc Montgomery Securities LLC, 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 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
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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 Merrill Lynch, Pierce, Fenner
& Smith Incorporated and NationsBanc Montgomery Securities LLC 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 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 the 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,
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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 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
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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 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
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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 the notes includes
the following:
- failure to pay interest on the notes for 30 days;
- failure to pay principal on the notes when due;
- failure to perform any of the other covenants or agreements in the
Indenture relating to the notes that continues for 60 days after notice
to us by the Trustee or holders of at least 25% in principal amount of
the outstanding notes;
- 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 outstanding notes; or
- 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, the Trustee or the holders of not less than 25% in principal amount of
the notes 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 then outstanding 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
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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 ) 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 reasonable
security or indemnity. (Section 603) If the holders provide reasonable security
or indemnity, the holders of a majority in principal amount of the outstanding
notes 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 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. (Section 901)
With the consent of the holders of a majority in principal amount of the
outstanding notes, 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.
Without the consent of the holders of all the notes, 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)
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DISCHARGE OF INDENTURE
At our option, we (1) will be discharged from all obligations under the
Indenture in respect of the notes (except for certain obligations to exchange or
register the transfer of the notes, replace stolen, lost or mutilated notes,
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, 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 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 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 and the notes 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 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.
CONCERNING THE TRUSTEE
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
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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 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
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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 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:
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<PAGE> 72
(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.
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,
71
<PAGE> 73
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
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
72
<PAGE> 74
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 Merrill Lynch, Pierce, Fenner & Smith Incorporated and
NationsBanc Montgomery Securities LLC, 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 the notes set forth opposite its name below.
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
UNDERWRITERS OF NOTES
- ------------ ----------------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated ..................................
NationsBanc Montgomery Securities LLC.......................
Banc One Capital Markets, Inc...............................
Chase Securities Inc........................................
Deutsche Bank Securities Inc................................
Donaldson, Lufkin & Jenrette Securities Corporation.........
Salomon Smith Barney Inc....................................
------------
Total.......................................... $500,000,000
============
</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 price set forth on the cover
page of this prospectus, and to dealers at that price less a concession not in
excess of % of the principal amount of the notes. The underwriters may
allow, and such dealers may reallow, a discount not in excess of % of the
principal amount of the notes to other dealers. After the initial public
offering, the public offering price, concession and discount may be changed.
The expenses of the offering, exclusive of the underwriting discount, are
estimated at approximately $1.1 million and are payable by us.
74
<PAGE> 76
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 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
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 NationsBanc Montgomery 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. NationsBanc
Montgomery Securities LLC participated in the underwriting syndicate for the
secondary offering.
Bank of America NTSA is the administrative agent for our credit facility.
NationsBank Montgomery 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
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
NationsBanc Montgomery 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.
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.
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, 1998 AND 1997 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 2009
---------------------
PROSPECTUS
---------------------
MERRILL LYNCH & CO.
NATIONSBANC MONTGOMERY SECURITIES LLC
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
NASD filing fee............................................. 30,500
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............................. 50,000
----------
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.
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
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 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 7, 1999.
REPUBLIC SERVICES, INC.
By: /s/ HARRIS W. HUDSON
----------------------------------
Harris W. Hudson
Vice Chairman
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints Tod C. Holmes and Harris W. Hudson his
true and lawful attorneys-in-fact, each acting alone, with full powers of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities to sign any or all amendments, including any post-
effective amendments, to this registration statement, and any subsequent
registration statement filed pursuant to Rule 462(b) under the Securities Act of
1933, and to file the same, with exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, hereby
ratifying and confirming all that said attorneys-in-fact or their substitutes,
each acting alone, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ H. WAYNE HUIZENGA Chairman of the Board May 7, 1999
- -----------------------------------------------------
H. Wayne Huizenga
/s/ HARRIS W. HUDSON Vice Chairman and Director May 7, 1999
- -----------------------------------------------------
Harris W. Hudson
/s/ JAMES E. O'CONNOR Chief Executive Officer and May 7, 1999
- ----------------------------------------------------- Director (principal
James E. O'Connor executive officer)
/s/ TOD C. HOLMES Senior Vice President and May 7, 1999
- ----------------------------------------------------- Chief Financial Officer
Tod C. Holmes (principal financial
officer and principal
accounting officer)
/s/ JOHN W. CROGHAN Director May 7, 1999
- -----------------------------------------------------
John W. Croghan
/s/ RAMON A. RODRIGUEZ Director May 7, 1999
- -----------------------------------------------------
Ramon A. Rodriguez
/s/ ALLAN C. SORENSEN Director May 7, 1999
- -----------------------------------------------------
Allan C. Sorensen
</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.
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
<PAGE> 1
- -------------------------------------------------------------------------------
EXHIBIT 1.1
FORM OF PURCHASE AGREEMENT
REPUBLIC SERVICES, INC.
A DELAWARE CORPORATION
$500,000,000 __% NOTES DUE 2009
PURCHASE AGREEMENT
Dated: May __, 1999
- -------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SECTION 1. Representations and Warranties....................................................................2
(a) Representations and Warranties by the Company........................................................2
(i) Compliance with Registration Requirements.....................................................2
(ii) Independent Accountants......................................................................3
(iii) Financial Statements........................................................................3
(iv) No Material Adverse Change in Business.......................................................4
(v) Good Standing of the Company..................................................................4
(vi) Good Standing of Subsidiaries................................................................4
(vii) Capitalization..............................................................................5
(viii) Authorization of Agreement.................................................................5
(ix) Authorization of the Indenture...............................................................5
(x) Authorization of the Securities...............................................................5
(xi) Description of the Securities and the Indenture..............................................6
(xii) Absence of Defaults and Conflicts...........................................................6
(xiii) Absence of Labor Dispute...................................................................6
(xiv) Absence of Proceedings......................................................................7
(xv) Accuracy of Exhibits.........................................................................7
(xvi) Possession of Intellectual Property.........................................................7
(xvii) Absence of Further Requirements............................................................7
(xviii) Possession of Licenses and Permits........................................................8
(xix) Title to Property...........................................................................8
(xx) Investment Company Act.......................................................................8
(xxi) Environmental Laws..........................................................................8
(xxii) Registration Rights........................................................................9
(xxiii) Income Taxes..............................................................................9
(xxiv) Internal Controls..........................................................................9
(xxv) Insurance..................................................................................10
(xxvi) Offering Material.........................................................................10
(xxvii) Related Party Transactions...............................................................10
(xxviii) U.S. Real Property Holding Corporation..................................................10
(xxix) Year 2000 and Euro Disclosures............................................................10
(b) Officer's Certificates..............................................................................11
SECTION 2. Sale and Delivery to Underwriters; Closing......................................................11
(a) Securities..........................................................................................11
(b) Payment.............................................................................................11
(c) Denominations; Registration.........................................................................11
SECTION 3. Covenants of the Company.........................................................................11
</TABLE>
-2-
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C>
(a) Compliance with Securities Regulations and Commission Requests......................................11
(b) Filing of Amendments................................................................................12
(c) Delivery of Registration Statements.................................................................12
(d) Delivery of Prospectus..............................................................................12
(e) Continued Compliance with Securities Laws...........................................................13
(f) Blue Sky Qualifications.............................................................................13
(g) Rule 158............................................................................................13
(h) Use of Proceeds.....................................................................................13
(i) Restriction on Sale of Securities...................................................................13
(j) Reporting Requirements..............................................................................14
SECTION 4. Payment of Expenses..............................................................................14
(a) Expenses............................................................................................14
(b) Termination of Agreement............................................................................14
SECTION 5. Conditions of U.S. Underwriters'Obligations......................................................15
(a) Effectiveness of Registration Statement.............................................................15
(b) Opinion of Counsel for Company......................................................................15
(c) Opinion of Counsel for Underwriters.................................................................15
(d) Company Officers'Certificate........................................................................15
(e) Accountant's Comfort Letter.........................................................................16
(f) Bring-down Comfort Letter...........................................................................16
(g) Maintenance of Rating...............................................................................16
(h) Additional Documents................................................................................16
(i) Termination of Agreement............................................................................16
SECTION 6. Indemnification..................................................................................17
(a) Indemnification of Underwriters.....................................................................17
(b) Indemnification of Company, Directors and Officers..................................................17
(c) Actions against Parties; Notification...............................................................18
(d) Settlement without Consent if Failure to Reimburse..................................................18
SECTION 7. Contribution.....................................................................................19
SECTION 8. Representations, Warranties and Agreements to Survive Delivery...................................20
SECTION 9. Termination of Agreement.........................................................................20
(a) Termination; General................................................................................20
(b) Liabilities.........................................................................................21
SECTION 10. Default by One or More of the Underwriters......................................................21
SECTION 11. Notices.........................................................................................21
SECTION 12. Parties.........................................................................................21
SECTION 13. Governing Law and Time..........................................................................22
SECTION 14. Effect of Headings..............................................................................22
</TABLE>
-3-
<PAGE> 4
<TABLE>
<CAPTION>
<S> <C>
SCHEDULES
Schedule A List of Underwriters...................................................................Sch A-1
Schedule B Pricing Information...................................................................Sch B-1
EXHIBITS
Exhibit A Form of Opinion of Company's Counsel......................................................EXH A
</TABLE>
-4-
<PAGE> 5
REPUBLIC SERVICES, INC.
A DELAWARE CORPORATION
$500,000,000 __% NOTES DUE 2009
PURCHASE AGREEMENT
May __, 1999
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
NationsBanc Montgomery Securities LLC
as Representatives of the several Underwriters
c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
North Tower
World Financial Center
New York, New York 10281-1209
Ladies and Gentlemen:
Republic Services, Inc., a Delaware corporation (the "Company")
confirms its agreement with Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner
& Smith Incorporated ("Merrill Lynch") and each of the other Underwriters named
in Schedule A hereto (collectively, the "Underwriters," which term shall also
include any underwriter substituted as hereinafter provided in Section 10
hereof), for whom Merrill Lynch and NationsBanc Montgomery Securities LLC are
acting as representatives (in such capacity, the "Representatives"), with
respect to the issue and sale by the Company and the purchase by the
Underwriters, acting severally and not jointly, of the respective principal
amounts set forth in Schedule A of $500,000,000 aggregate principal amount of
the Company's __% Notes due 2009 (the "Securities"). The Securities are to be
issued pursuant to an indenture dated as of May __, 1999 (the "Indenture")
between the Company and Bank of New York, as trustee (the "Trustee"). The term
"Indenture," as used herein, includes the Officer's Certificate (as defined in
the Indenture) establishing the form and terms of the Securities pursuant to the
Indenture.
-5-
<PAGE> 6
The Company understands that the Underwriters propose to make a public
offering of the Securities as soon as the Representatives deem advisable after
this Agreement has been executed and delivered and the Indenture has been
qualified under the Trust Indenture Act of 1939, as amended (the "1939 Act").
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-1 (No. 333-____) covering the
registration of the Securities under the Securities Act of 1933, as amended
(the "1933 Act"), including the related preliminary prospectus or prospectuses.
Promptly after execution and delivery of this Agreement, the Company will
either (i) prepare and file a prospectus in accordance with the provisions of
Rule 430A ("Rule 430A") of the rules and regulations of the Commission under
the 1933 Act (the "1933 Act Regulations") and paragraph (b) of Rule 424 ("Rule
424(b)") of the 1933 Act Regulations or (ii) if the Company has elected to rely
upon Rule 434 ("Rule 434") of the 1933 Act Regulations, prepare and file a term
sheet (a "Term Sheet") in accordance with the provisions of Rule 434 and Rule
424(b). The information included in such prospectus or in such Term Sheet, as
the case may be, that was omitted from such registration statement at the time
it became effective but that is deemed to be part of such registration
statement at the time it became effective (a) pursuant to paragraph (b) of Rule
430A is referred to as "Rule 430A Information" or (b) pursuant to paragraph (d)
of Rule 434 is referred to as "Rule 434 Information." Each prospectus used
before such registration statement became effective, and any prospectus that
omitted, as applicable, the Rule 430A Information or the Rule 434 Information,
that was used after such effectiveness and prior to the execution and delivery
of this Agreement, is herein called a "preliminary prospectus." Such
registration statement, including the exhibits thereto and schedules thereto at
the time it became effective and including the Rule 430A Information and the
Rule 434 Information, as applicable, is herein called the "Registration
Statement." Any registration statement filed pursuant to Rule 462(b) of the
1933 Act Regulations is herein referred to as the "Rule 462(b) Registration
Statement," and after such filing the term "Registration Statement" shall
include the Rule 462(b) Registration Statement. The final prospectus in the
form first furnished to the Underwriters for use in connection with the
offering of the Securities is herein called the "Prospectus." If Rule 434 is
relied on, the term "Prospectus" shall refer to the preliminary prospectus
dated May __, 1999, together with the Term Sheet and all references in this
Agreement to the date of such Prospectus shall mean the date of the Term Sheet.
For purposes of this Agreement, all references to the Registration Statement,
any preliminary prospectus, the Prospectus or any Term Sheet or any amendment
or supplement to any of the foregoing shall be deemed to include the copy filed
with the Commission pursuant to its Electronic Data Gathering, Analysis and
Retrieval system ("EDGAR").
SECTION 1. REPRESENTATIONS AND WARRANTIES.
(a) REPRESENTATIONS AND WARRANTIES BY THE COMPANY. The Company
represents and warrants to each Underwriter as of the date hereof, as of the
Closing Time referred to in Section 2(b) hereof, and agrees with each
Underwriter, as follows:
-6-
<PAGE> 7
(i) COMPLIANCE WITH REGISTRATION REQUIREMENTS. Each of the
Registration Statement and any Rule 462(b) Registration Statement has
become effective under the 1933 Act and no stop order suspending the
effectiveness of the Registration Statement or any Rule 462(b)
Registration Statement has been issued under the 1933 Act and no
proceedings for that purpose have been instituted or are pending or,
to the knowledge of the Company, are contemplated by the Commission,
and any request on the part of the Commission for additional
information has been complied with.
At the respective times the Registration Statement, any Rule
462(b) Registration Statement and any post-effective amendments
thereto became effective and at the Closing Time, the Registration
Statement, the Rule 462(b) Registration Statement and any amendments
and supplements thereto complied and will comply in all material
respects with the requirements of the 1933 Act and the 1933 Act
Regulations and the 1939 Act and the rules and regulations of the
Commission under the 1939 Act (the "1939 Act Regulations"), and did
not and will not contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading. Neither the
Prospectus nor any amendments or supplements thereto, at the time the
Prospectus or any amendments or supplements thereto were issued and at
the Closing Time, included or will include an untrue statement of a
material fact or omitted or will omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. If Rule 434
is used, the Company will comply with the requirements of Rule 434 and
the Prospectus shall not be "materially different," as such term is
used in Rule 434, from the prospectus included in the Registration
Statement at the time it became effective. The representations and
warranties in this subsection shall not apply to statements in or
omissions from the Registration Statement or the Prospectus made in
reliance upon and in conformity with information furnished to the
Company in writing by any Underwriter through the Representatives
expressly for use in the Registration Statement or the Prospectus.
Each preliminary prospectus and the prospectus filed as part
of the Registration Statement as originally filed or as part of any
amendment thereto, or filed pursuant to Rule 424 under the 1933 Act,
complied when so filed in all material respects with the 1933 Act
Regulations and each preliminary prospectus and the Prospectus
delivered to the Underwriters for use in connection with this offering
was identical to the electronically transmitted copies thereof filed
with the Commission pursuant to EDGAR, except to the extent permitted
by Regulation S-T.
(ii) INDEPENDENT ACCOUNTANTS. The accountants who certified
the financial statements and supporting schedules included in the
Registration Statement are independent public accountants as required
by the 1933 Act and the 1933 Act Regulations.
-7-
<PAGE> 8
(iii) FINANCIAL STATEMENTS. The financial statements included
in the Registration Statement and the Prospectus, together with the
related schedules and notes, present fairly the financial position of
the Company and its consolidated subsidiaries at the dates indicated
and the statement of operations and cash flows of the Company and its
consolidated subsidiaries for the periods specified; said financial
statements have been prepared in conformity with generally accepted
accounting principles ("GAAP") applied on a consistent basis
throughout the periods involved. The supporting schedules included in
the Registration Statement present fairly in accordance with GAAP the
information required to be stated therein. The selected financial data
and the summary financial information included in the Prospectus
present fairly the information shown therein and have been compiled on
a basis consistent with that of the audited financial statements
included in the Registration Statement. The pro forma financial
information included in the Registration Statement and the Prospectus
present fairly the information shown therein, has been prepared in
accordance with the Commission's rules and guidelines with respect to
pro forma financial information and has been properly compiled on the
bases described therein, and the assumptions used in the preparation
thereof are reasonable and the adjustments used therein are
appropriate to give effect to the transactions and circumstances
referred to therein.
(iv) NO MATERIAL ADVERSE CHANGE IN BUSINESS. Since the
respective dates as of which information is given in the Registration
Statement and the Prospectus, except as otherwise stated therein, (A)
there has been no material adverse change in the condition, financial
or otherwise, or in the earnings, business affairs or business
prospects of the Company and its subsidiaries considered as one
enterprise, whether or not arising in the ordinary course of business
(a "Material Adverse Effect"), (B) there have been no transactions
entered into by the Company or any of its subsidiaries, other than
those in the ordinary course of business, which are material with
respect to the Company and its subsidiaries considered as one
enterprise, and (C) there has been no dividend or distribution of any
kind declared, paid or made by the Company on any class of its capital
stock.
(v) GOOD STANDING OF THE COMPANY. The Company has been duly
organized and is validly existing as a corporation in good standing
under the laws of the State of Delaware and has corporate power and
authority to own, lease and operate its properties and to conduct its
business as described in the Prospectus or as proposed to be conducted
and to enter into and perform its obligations under this Agreement;
and the Company is duly qualified as a foreign corporation to transact
business and is in good standing in each other jurisdiction in which
such qualification is required, whether by reason of the ownership or
leasing of property or the conduct of business, except where the
failure so to qualify or to be in good standing would not result in a
Material Adverse Effect.
(vi) GOOD STANDING OF SUBSIDIARIES. Each "significant
subsidiary" of the Company (as such term is defined in Rule 1-02 of
Regulation S-X) (each a "Subsidiary" and collectively, the
"Subsidiaries") has been duly organized and is validly existing as a
corporation or limited liability company, as the case may be, in good
standing under the laws of the jurisdiction of its organization, has
-8-
<PAGE> 9
the corporate or limited liability company power and authority to own,
lease and operate its properties and to conduct its business as
described in the Prospectus and is duly qualified as a foreign
corporation or limited liability company, as the case may be, to
transact business and is in good standing in each jurisdiction in
which such qualification is required, whether by reason of the
ownership or leasing of property or the conduct of business, except
where the failure so to qualify or to be in good standing would not
result in a Material Adverse Effect; except as otherwise disclosed in
the Registration Statement, all of the issued and outstanding capital
stock or limited liability interests of each such Subsidiary has been
duly authorized and validly issued, is fully paid and non-assessable
and is owned by the Company, directly or through Subsidiaries, free
and clear of any security interest, mortgage, pledge, lien,
encumbrance, claim or equity; none of the outstanding shares of
capital stock or limited liability interests of any Subsidiary was
issued in violation of the preemptive or similar rights of any
securityholder of such Subsidiary. The only subsidiaries of the
Company are (a) the subsidiaries listed on Exhibit 21.1 to the
Registration Statement and (b) certain other subsidiaries which,
considered in the aggregate as a single subsidiary, do not constitute
a "significant subsidiary" as defined in Rule 1-02 of Regulation S-X.
(vii) CAPITALIZATION. The authorized, issued and outstanding
capital stock of the Company is as set forth in the Prospectus under
the caption "Capitalization" (except for subsequent issuances, if any,
pursuant to reservations, agreements or employee benefit plans
referred to in the Prospectus or pursuant to the exercise of
convertible securities, warrants or options referred to in the
Prospectus). The shares of issued and outstanding capital stock of the
Company have been duly authorized and validly issued and are fully
paid and non-assessable; none of the outstanding shares of capital
stock of the Company was issued in violation of the preemptive or
other similar rights of any securityholder of the Company.
(viii) AUTHORIZATION OF AGREEMENT. This Agreement has been
duly authorized, executed and delivered by the Company.
(ix) AUTHORIZATION OF THE INDENTURE. The Indenture has been
duly authorized by the Company and duly qualified under the 1939 Act
and, when duly executed and delivered by the Company and the Trustee,
will constitute a valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms, except
as the enforcement thereof may be limited by bankruptcy, insolvency
(including, without limitation, all laws relating to fraudulent
transfers), reorganization, moratorium or similar laws affecting
enforcement of creditors' rights generally and except as enforcement
thereof is subject to general principles of equity (regardless of
whether enforcement is considered in a proceeding in equity or at
law).
(x) AUTHORIZATION OF THE SECURITIES. The Securities have been
duly authorized and, at the Closing Time, will have been duly executed
by the Company and, when authenticated, issued and delivered in the
-9-
<PAGE> 10
manner provided for in the Indenture and delivered against payment of
the purchase price therefor as provided in this Agreement, will
constitute valid and binding obligations of the Company, enforceable
against the Company in accordance with their terms, except as the
enforcement thereof may be limited by bankruptcy, insolvency
(including, without limitation, all laws relating to fraudulent
transfers), reorganization, moratorium or similar laws affecting
enforcement of creditors' rights generally and except as enforcement
thereof is subject to general principles of equity (regardless of
whether enforcement is considered in a proceeding in equity or at
law), and will be in the form contemplated by, and entitled to the
benefits of, the Indenture.
(xi) DESCRIPTION OF THE SECURITIES AND THE INDENTURE. The
Securities and the Indenture will conform in all material respects to
the respective statements relating thereto contained in the Prospectus
and such descriptions conform to the rights set forth in the
instruments defining the same; no holder of the Securities will be
subject to personal liability by reason of being such a holder. The
Securities and the Indenture will be in substantially the respective
forms filed as exhibits to the Registration Statement.
(xii) ABSENCE OF DEFAULTS AND CONFLICTS. Neither the Company
nor any of its subsidiaries is in violation of its charter or by-laws
or in default in the performance or observance of any obligation,
agreement, covenant or condition contained in any contract, indenture,
mortgage, deed of trust, loan or credit agreement, note, lease or
other agreement or instrument to which the Company or any of its
subsidiaries is a party or by which it or any of them may be bound, or
to which any of the property or assets of the Company or any
subsidiary is subject (collectively, "Agreements and Instruments")
except for such defaults that would not result in a Material Adverse
Effect; and the execution, delivery and performance of this Agreement,
the Indenture and the Securities and the consummation of the
transactions contemplated in this Agreement and in the Registration
Statement (including the sale and delivery of the Securities and the
use of the proceeds from the sale of the Securities as described in
the Prospectus under the caption "Use of Proceeds") and compliance by
the Company with its obligations under this Agreement, the Indenture
and the Securities have been duly authorized by all necessary
corporate action and do not and will not, whether with or without the
giving of notice or passage of time or both, conflict with or
constitute a breach of, or default or Repayment Event (as defined
below) under, or result in the creation or imposition of any lien,
charge or encumbrance upon any property or assets of the Company or
any subsidiary pursuant to, the Agreements and Instruments (except for
such conflicts, breaches or defaults or liens, charges or encumbrances
that would not result in a Material Adverse Effect), nor will such
action result in any violation of the provisions of the charter or
by-laws of the Company or any subsidiary or any applicable law,
statute, rule, regulation, judgment, order, writ or decree of any
government, government instrumentality or court, domestic or foreign,
having jurisdiction over the Company or any subsidiary or any of their
assets, properties or operations. As used herein, a "Repayment Event"
means any event or condition which gives the holder of any note,
debenture or other evidence of indebtedness (or any person acting on
such holder's behalf) the right to require the repurchase, redemption
or repayment of all or a portion of such indebtedness by the Company
or any subsidiary.
-10-
<PAGE> 11
(xiii) ABSENCE OF LABOR DISPUTE. No labor dispute with the
employees of the Company or any subsidiary exists or, to the knowledge
of the Company, is imminent, and the Company is not aware of any
existing or imminent labor disturbance by the employees of any of its
or any subsidiary's principal suppliers, manufacturers, customers or
contractors, which, in any case, may reasonably be expected to result
in a Material Adverse Effect.
(xiv) ABSENCE OF PROCEEDINGS. There is no action, suit,
proceeding, inquiry or investigation before or brought by any court or
governmental agency or body, domestic or foreign, now pending, or, to
the knowledge of the Company, threatened, against or affecting the
Company or any subsidiary, which is required to be disclosed in the
Registration Statement (other than as disclosed therein), or which
might reasonably be expected to result in a Material Adverse Effect,
or which might reasonably be expected to materially and adversely
affect the properties or assets thereof or the consummation of the
transactions contemplated in this Agreement or the performance by the
Company of its obligations hereunder; the aggregate of all pending
legal or governmental proceedings to which the Company or any
subsidiary is a party or of which any of their respective property or
assets is the subject which are not described in the Registration
Statement, including ordinary routine litigation incidental to the
business, could not reasonably be expected to result in a Material
Adverse Effect.
(xv) ACCURACY OF EXHIBITS. There are no contracts or
documents which are required to be described in the Registration
Statement or the Prospectus or to be filed as exhibits thereto which
have not been so described and filed as required.
(xvi) POSSESSION OF INTELLECTUAL PROPERTY. The Company and
its subsidiaries own or possess, or can acquire on reasonable terms,
adequate patents, patent rights, licenses, inventions, copyrights,
know-how (including trade secrets and other unpatented and/or
unpatentable proprietary or confidential information, systems or
procedures), trademarks, service marks, trade names or other
intellectual property (collectively, "Intellectual Property")
necessary to carry on the business now operated by them, and neither
the Company nor any of its subsidiaries has received any notice or is
otherwise aware of any infringement of or conflict with asserted
rights of others with respect to any Intellectual Property or of any
facts or circumstances which would render any Intellectual Property
invalid or inadequate to protect the interest of the Company or any of
its subsidiaries therein, and which infringement or conflict (if the
subject of any unfavorable decision, ruling or finding) or invalidity
or inadequacy, singly or in the aggregate, would result in a Material
Adverse Effect.
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(xvii) ABSENCE OF FURTHER REQUIREMENTS. No filing with, or
authorization, approval, consent, license, order, registration,
qualification or decree of, any court or governmental authority or
agency is necessary or required for the performance by the Company of
its obligations hereunder, in connection with the offering, issuance
or sale of the Securities under this Agreement or the consummation of
the transactions contemplated by this Agreement or for the due
execution, delivery or performance of the Indenture by the Company,
except such as have been already obtained or as may be required under
the 1933 Act or the 1933 Act Regulations and state securities or blue
sky laws and except for the qualification of the Indenture under the
1939 Act.
(xviii) POSSESSION OF LICENSES AND PERMITS. The Company and
its subsidiaries possess such permits, licenses, approvals, consents
and other authorizations (collectively, "Governmental Licenses")
issued by the appropriate federal, state, local or foreign regulatory
agencies or bodies necessary to conduct the business now operated by
them; the Company and its subsidiaries are in compliance with the
terms and conditions of all such Governmental Licenses, except where
the failure so to comply would not, singly or in the aggregate, have a
Material Adverse Effect; all of the Governmental Licenses are valid
and in full force and effect, except when the invalidity of such
Governmental Licenses or the failure of such Governmental Licenses to
be in full force and effect would not have a Material Adverse Effect;
and neither the Company nor any of its subsidiaries has received any
notice of proceedings relating to the revocation or modification of
any such Governmental Licenses which, singly or in the aggregate, if
the subject of an unfavorable decision, ruling or finding, would
result in a Material Adverse Effect.
(xix) TITLE TO PROPERTY. The Company and its subsidiaries
have good and marketable title to all real property owned by the
Company and its subsidiaries and good title to all other properties
owned by them, in each case, free and clear of all mortgages, pledges,
liens, security interests, claims, restrictions or encumbrances of any
kind except such as (a) are described in the Prospectus or (b) do not,
singly or in the aggregate, materially affect the value of such
property as currently used or intended to be used and do not interfere
with the use made and proposed to be made of such property by the
Company or any of its subsidiaries; and all of the leases and
subleases material to the business of the Company and its
subsidiaries, considered as one enterprise, and under which the
Company or any of its subsidiaries holds properties described in the
Prospectus, are in full force and effect, and neither the Company nor
any subsidiary has any notice of any material claim of any sort that
has been asserted by anyone adverse to the rights of the Company or
any subsidiary under any of the leases or subleases mentioned above,
or affecting or questioning the rights of the Company or such
subsidiary to the continued possession of the leased or subleased
premises under any such lease or sublease.
(xx) INVESTMENT COMPANY ACT. The Company is not, and upon the
issuance and sale of the Securities as herein contemplated and the
application of the net proceeds therefrom as described in the
Prospectus will not be, an "investment company" or an entity
"controlled" by an "investment company" as such terms are defined in
the Investment Company Act of 1940, as amended (the "1940 Act").
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(xxi) ENVIRONMENTAL LAWS. Except as described in the
Registration Statement and except as would not, singly or in the
aggregate, result in a Material Adverse Effect, (A) neither the
Company nor any of its subsidiaries is in violation of any federal,
state, local or foreign statute, law, rule, regulation, ordinance,
code, policy or rule of common law or any judicial or administrative
interpretation thereof, including any judicial or administrative
order, consent, decree or judgment, relating to pollution or
protection of human health, the environment (including, without
limitation, ambient air, surface water, groundwater, land surface or
subsurface strata) or wildlife, including, without limitation, laws
and regulations relating to the release or threatened release of
chemicals, pollutants, contaminants, wastes, toxic substances,
hazardous substances, petroleum or petroleum products (collectively,
"Hazardous Materials") or to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling
of Hazardous Materials (collectively, "Environmental Laws"), (B) the
Company and its subsidiaries have all permits, authorizations and
approvals required under any applicable Environmental Laws and are
each in compliance with their requirements, (C) there are no
administrative, regulatory or judicial actions, suits, demands, demand
letters, claims, liens, notices of noncompliance or violation,
investigation or proceedings pending or, to the best of the Company's
knowledge, threatened relating to any Environmental Law against the
Company or any of its subsidiaries and (D) to the best of the
Company's knowledge, there are no events or circumstances that might
reasonably be expected to form the basis of an order for clean-up or
remediation, or an action, suit or proceeding by any private party or
governmental body or agency, against or affecting the Company or any
of its subsidiaries relating to Hazardous Materials or any
Environmental Laws.
(xxii) REGISTRATION RIGHTS. Except as disclosed in the
Prospectus, there are no persons with registration rights or other
similar rights to have any securities registered pursuant to the
Registration Statement, or otherwise registered by the Company under
the 1933 Act.
(xxiii) INCOME TAXES. All United States federal income tax
returns of the Company and its subsidiaries required by law to be
filed have been filed (taking into account extensions granted by the
applicable federal governmental agency) and all taxes shown by such
returns or otherwise assessed, which are due and payable, have been
paid, except for such taxes, if any, as are being contested in good
faith and as to which adequate reserves have been provided. All other
corporate franchise and income tax returns of the Company and its
subsidiaries required to be filed pursuant to applicable foreign,
state or local law have been filed, except insofar as the failure to
file such returns would not individually or in the aggregate have a
Material Adverse Effect, and all taxes shown on such returns or
otherwise assessed which are due and payable have been paid, except
for such taxes, if any, as are being contested in good faith and as to
which adequate reserves have been provided. The charges, accruals and
reserves on the books of the Company in respect of any income and
corporation tax liability for any years not finally determined are
adequate to meet any assessments or re-assessments for additional
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income tax for any years not finally determined, except to the extent
of any inadequacy that would not have a material adverse effect on the
condition (financial or otherwise), earnings, business affairs or
business prospects of the Company and its subsidiaries, considered
together as one enterprise.
(xxiv) INTERNAL CONTROLS. The Company and its subsidiaries
maintain a system of internal accounting controls sufficient to
provide reasonable assurances that (A) transactions are executed in
accordance with management's general or specific authorization; (B)
transactions are recorded as necessary to permit preparation of
financial statements in conformity with GAAP and to maintain
accountability for assets; (C) access to assets is permitted only in
accordance with management's general or specific authorization; and
(D) the recorded accountability for assets is compared with the
existing assets at reasonable intervals and appropriate action is
taken with respect to any material differences.
(xxv) INSURANCE. The Company and its subsidiaries carry or
are entitled to the benefits of insurance, with financially sound and
reputable insurers, in such amounts and covering such risks as is
generally maintained by companies of established repute engaged in the
same or similar business, and all such insurance is in full force and
effect.
(xxvi) OFFERING MATERIAL. The Company has not distributed
and, prior to the Closing Time, will not distribute any offering
material in connection with the offering and sale of the Securities
other than the Registration Statement, any preliminary prospectuses,
the Prospectus or other materials, if any, permitted by the 1933 Act
and approved by Merrill Lynch.
(xxvii) RELATED PARTY TRANSACTIONS. There are no business
relationships or related party transactions of the nature described
in Item 404 of Regulation S-K involving the Company and any person
described in such Item that are required to be disclosed in the
Registration Statement and which have not been so disclosed.
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(xxviii) U.S. REAL PROPERTY HOLDING CORPORATION. The Company
is not, and has not been, at any time within the year prior to the date
hereof, a "United States real property holding corporation" within the
meaning of Section 897 of the Internal Revenue Code of 1986, as
amended.
(xxix) YEAR 2000 AND EURO DISCLOSURES. All disclosure
regarding year 2000 compliance and the Euro conversion that is
required to be described under the 1933 Act and the 1933 Act
Regulations (including disclosures required by Staff Legal Bulletin
No. 6, SEC Release No. 33-7558 (July 29, 1998) and SEC Release No.
33-7609 (November 9, 1998)) has been included in the Prospectus.
Neither the Company nor any of its subsidiaries will incur significant
operating expenses or costs to ensure that its information systems
will be year 2000 compliant or to adjust its operating and information
systems to the conversion to a single currency in Europe, other than
as disclosed in the Prospectus.
(b) OFFICER'S CERTIFICATES. Any certificate signed by any officer of
the Company or any of its subsidiaries delivered to Merrill Lynch, the
Representatives, or to counsel for the Underwriters shall be deemed a
representation and warranty by the Company to each Underwriter as to the
matters covered thereby.
SECTION 2. SALE AND DELIVERY TO UNDERWRITERS; CLOSING.
(a) SECURITIES. On the basis of the representations and warranties
herein contained and subject to the terms and conditions herein set forth, the
Company agrees to sell to each Underwriter, severally and not jointly, and each
Underwriter, severally and not jointly, agrees to purchase from the Company, at
the price set forth in Schedule B, the aggregate principal amount of Securities
set forth in Schedule A opposite the name of such Underwriter, plus any
additional principal amount of Securities which such Underwriter may become
obligated to purchase pursuant to the provisions of Section 10 hereof.
(b) PAYMENT. Payment of the purchase price for, and delivery of
certificates for, the Initial Securities shall be made at the offices of Fried,
Frank, Harris, Shriver & Jacobson, One New York Plaza, New York, New York
10004, or at such other place as shall be agreed upon by the Representatives
and the Company, at 9:00 A.M. (Eastern time) on the third (fourth, if the
pricing occurs after 4:30 P.M. (Eastern time) on any given day) business day
after the date hereof (unless postponed in accordance with the provisions of
Section 10), or such other time not later than ten business days after such
date as shall be agreed upon by the Representatives and the Company (such time
and date of payment and delivery being herein called "Closing Time").
Payment shall be made to the Company by wire transfer of immediately
available funds to a bank account designated by the Company, against delivery
to the Representatives for the respective accounts of the Underwriters of
certificates for the Securities to be purchased by them. It is understood that
each Underwriter has authorized the Representatives, for its account, to accept
delivery of, receipt for, and make payment of the purchase price for, the
Securities that it has agreed to purchase. Merrill Lynch, individually and not
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as representative of the Underwriters, may (but shall not be obligated to) make
payment of the purchase price for the Securities to be purchased by any
Underwriter whose funds have not been received by the Closing Time, but such
payment shall not relieve such Underwriter from its obligations hereunder.
(c) DENOMINATIONS; REGISTRATION. Certificates for the Securities shall
be in such denominations ($1,000 or integral multiples thereof) and registered
in such names as the Representatives may request in writing at least one full
business day before the Closing Time. The Securities will be made available for
examination and packaging by the Representatives in The City of New York not
later than 10:00 A.M. (Eastern time) on the business day prior to the Closing
Time.
SECTION 3. COVENANTS OF THE COMPANY. The Company covenants with each
Underwriter as follows:
(a) COMPLIANCE WITH SECURITIES REGULATIONS AND COMMISSION REQUESTS.
The Company, subject to Section 3(b), will comply with the requirements of Rule
430A or Rule 434, as applicable, and will notify the Representatives as soon as
practicable, and confirm the notice in writing, (i) when any post-effective
amendment to the Registration Statement shall become effective, or any
supplement to the Prospectus or any amended prospectuses shall have been filed,
(ii) of the receipt of any comments from the Commission, (iii) of any request
by the Commission for any amendment to the Registration Statement or any
amendment or supplement to the Prospectus or for additional information, and
(iv) of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or of any order preventing or
suspending the use of any preliminary prospectus, or of the suspension of the
qualification of the Securities for offering or sale in any jurisdiction, or of
the initiation or threatening of any proceedings for any of such purposes. The
Company will promptly effect the filings necessary pursuant to Rule 424(b) and
will take such steps as it deems necessary to ascertain promptly whether the
form of prospectus transmitted for filing under Rule 424(b) was received for
filing by the Commission and, in the event that it was not, it will promptly
file such prospectus. The Company will make every reasonable effort to prevent
the issuance of any stop order and, if any stop order is issued, to obtain the
lifting thereof at the earliest possible moment.
(b) FILING OF AMENDMENTS. The Company will give the Representatives
notice of its intention to file or prepare any amendment to the Registration
Statement (including any filing under Rule 462(b)), any Term Sheet or any
amendment, supplement or revision to either the prospectus included in the
Registration Statement at the time it became effective or to the Prospectus,
will furnish the Representatives with copies of any such documents a reasonable
amount of time prior to such proposed filing or use, as the case may be, and
will not file or use any such document to which the Representatives or counsel
for the Underwriters shall reasonably object.
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(c) DELIVERY OF REGISTRATION STATEMENTS. The Company has furnished or
will deliver to the Representatives and counsel for the Underwriters, without
charge, signed copies of the Registration Statement as originally filed and of
each amendment thereto (including exhibits filed therewith or incorporated by
reference therein) and signed copies of all consents and certificates of
experts, and will also deliver to the Representatives, without charge, a
conformed copy of the Registration Statement as originally filed and of each
amendment thereto (without exhibits) for each of the Underwriters. The copies
of the Registration Statement and each amendment thereto furnished to the
Underwriters will be identical to the electronically transmitted copies thereof
filed with the Commission pursuant to EDGAR, except to the extent permitted by
Regulation S-T.
(d) DELIVERY OF PROSPECTUSES. The Company has delivered to each
Underwriter, without charge, as many copies of each preliminary prospectus as
such Underwriter reasonably requested, and the Company hereby consents to the
use of such copies for purposes permitted by the 1933 Act. The Company will
furnish to each Underwriter, without charge, during the period when the
Prospectus is required to be delivered under the 1933 Act or the Securities
Exchange Act of 1934 (the "1934 Act"), such number of copies of the Prospectus
(as amended or supplemented) as such Underwriter may reasonably request. The
Prospectus and any amendments or supplements thereto furnished to the
Underwriters will be identical to the electronically transmitted copies thereof
filed with the Commission pursuant to EDGAR, except to the extent permitted by
Regulation S-T.
(e) CONTINUED COMPLIANCE WITH SECURITIES LAWS. The Company will comply
with the 1933 Act and the 1933 Act Regulations and the 1939 Act and the 1939
Act Regulations so as to permit the completion of the distribution of the
Securities as contemplated in this Agreement and in the Prospectus. If at any
time when a prospectus is required by the 1933 Act to be delivered in
connection with sales of the Securities, any event shall occur or condition
shall exist as a result of which it is necessary, in the opinion of counsel for
the Underwriters or for the Company, to amend the Registration Statement or
amend or supplement the Prospectus in order that the Prospectus will not
include any untrue statements of a material fact or omit to state a material
fact necessary in order to make the statements therein not misleading in the
light of the circumstances existing at the time it is delivered to a purchaser,
or if it shall be necessary, in the opinion of such counsel, at any such time
to amend the Registration Statement or amend or supplement the Prospectus in
order to comply with the requirements of the 1933 Act or the 1933 Act
Regulations, the Company will promptly prepare and file with the Commission,
subject to Section 3(b), such amendment or supplement as may be necessary to
correct such statement or omission or to make the Registration Statement or the
Prospectus comply with such requirements, and the Company will furnish to the
Underwriters such number of copies of such amendment or supplement as the
Underwriters may reasonably request.
(f) BLUE SKY QUALIFICATIONS. The Company will use its best efforts, in
cooperation with the Underwriters, to qualify the Securities for offering and
sale under the applicable securities laws of such states and other
jurisdictions as the Representatives may designate and to maintain such
qualifications in effect for a period of not less than one year from the later
of the effective date of the Registration Statement and any Rule 462(b)
Registration Statement; provided, however, that the Company shall not be
obligated to file any general consent to service of process or to qualify as a
foreign corporation or as a dealer in securities in any jurisdiction in which
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it is not so qualified or to subject itself to taxation in respect of doing
business in any jurisdiction in which it is not otherwise so subject. In each
jurisdiction in which the Securities have been so qualified, the Company will
file such statements and reports as may be required by the laws of such
jurisdiction to continue such qualification in effect for a period of not less
than one year from the effective date of the Registration Statement and any
Rule 462(b) Registration Statement. The Company will also supply the
Underwriters with such information as is necessary for the determination of the
legality of the Securities for investment under the laws of such jurisdictions
as the Underwriters may request.
(g) RULE 158. The Company will timely file such reports pursuant to
the 1934 Act as are necessary in order to make generally available to its
securityholders as soon as practicable an earnings statement for the purposes
of, and to provide the benefits contemplated by, the last paragraph of Section
11(a) of the 1933 Act.
(h) USE OF PROCEEDS. The Company will use the net proceeds received by
it from the sale of the Securities in the manner specified in the Prospectus
under "Use of Proceeds."
(i) RESTRICTION ON SALE OF SECURITIES. The Company will not 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, or any securities convertible into or exercisable
or exchangeable for debt securities (other than, in each case, in connection
with an extension or amendment of the Company's existing credit facility,
replacement of the Company's existing credit facility with another credit
facility, or entering into new credit facilities to purchase or lease
equipment), or file a registration statement under the Securities Act with
respect to the foregoing, without the prior written consent of Merrill Lynch
on behalf of the Underwriters for a period of 90 days after the date of the
Prospectus, the Company will not, without the prior written consent of Merrill
Lynch, directly or indirectly, issue, sell, offer or contract to sell, grant
any option for the sale of, or otherwise transfer or dispose of, any debt
securities of the Company.
(j) REPORTING REQUIREMENTS. The Company, during the period when the
Prospectus is required to be delivered under the 1933 Act or the 1934 Act, will
file all documents required to be filed with the Commission pursuant to the
1934 Act within the time periods required by the 1934 Act and the rules and
regulations of the Commission thereunder.
SECTION 4. PAYMENT OF EXPENSES. (a) EXPENSES. The Company will pay or
cause to be paid all expenses incident to the performance of its obligations
under this Agreement, including (i) the preparation, printing and filing of the
Registration Statement (including financial statements and exhibits) as
originally filed and of each amendment thereto, (ii) the preparation, printing
and delivery to the Underwriters of this Agreement, any Agreement among
Underwriters, the Indenture and such other documents as may be required in
connection with the offering, purchase, sale, issuance or delivery of the
Securities, (iii) the preparation, issuance and delivery of the certificates for
the Securities to the Underwriters, (iv) the fees and disbursements of the
Company's counsel, accountants and other advisors, (v) the qualification of the
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Securities under securities laws in accordance with the provisions of Section
3(f) hereof, including filing fees and the reasonable fees and disbursements of
counsel for the Underwriters in connection therewith and in connection with the
preparation of the Blue Sky Survey and any supplement thereto, (vi) the printing
and delivery to the Underwriters of copies of each preliminary prospectus, any
Term Sheets and of the Prospectus and any amendments or supplements thereto,
(vii) the preparation, printing and delivery to the Underwriters of copies of
the Blue Sky Survey and any supplement thereto, (viii) the fees and expenses of
the Trustee, including the fees and disbursements of counsel for the Trustee in
connection with the Indenture and the Securities and (ix) any fees payable in
connection with the rating of the Securities.
(b) TERMINATION OF AGREEMENT. If this Agreement is terminated by the
Representatives in accordance with the provisions of Section 5 or Section
9(a)(i) hereof, the Company shall reimburse the Underwriters for all of their
reasonable out-of-pocket expenses, including the reasonable fees and
disbursements of counsel for the Underwriters.
SECTION 5. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The obligations of
the several Underwriters hereunder are subject to the accuracy of the
representations and warranties of the Company contained in Section 1 hereof or
in certificates of any officer of the Company or any subsidiary of the Company
delivered pursuant to the provisions hereof, to the performance by the Company
of its covenants and other obligations hereunder, and to the following further
conditions:
(a) EFFECTIVENESS OF REGISTRATION STATEMENT. The Registration
Statement, including any Rule 462(b) Registration Statement, has become
effective and at Closing Time no stop order suspending the effectiveness of the
Registration Statement shall have been issued under the 1933 Act or proceedings
therefor initiated or threatened by the Commission, and any request on the part
of the Commission for additional information shall have been complied with to
the reasonable satisfaction of counsel to the Underwriters. A prospectus
containing the Rule 430A Information shall have been filed with the Commission
in accordance with Rule 424(b) (or a post-effective amendment providing such
information shall have been filed and declared effective in accordance with the
requirements of Rule 430A) or, if the Company has elected to rely upon Rule
434, a Term Sheet shall have been filed with the Commission in accordance with
Rule 424(b).
(b) OPINION OF COUNSEL FOR COMPANY. At Closing Time, the
Representatives shall have received the opinion, dated as of Closing Time, of
Akerman, Senterfitt & Eidson, P.A., counsel for the Company, in form and
substance reasonably satisfactory to counsel for the Underwriters, together
with signed or reproduced copies of such letter for each of the other
Underwriters to the effect set forth in Exhibit A hereto and to such further
effect as counsel to the Underwriters may reasonably request, based upon events
occurring or information discovered after the date hereof.
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(c) OPINION OF COUNSEL FOR UNDERWRITERS. At Closing Time, the
Representatives shall have received the favorable opinion, dated as of Closing
Time, of Fried, Frank, Harris, Shriver & Jacobson, counsel for the
Underwriters, together with signed or reproduced copies of such letter for each
of the other Underwriters with respect to the matters pertaining to the Company
set forth in clauses [(i) (vi) through (viii),] inclusive, and in the
penultimate paragraph of Exhibit A hereto. In giving such opinion such counsel
may rely, as to all matters governed by the laws of jurisdictions other than the
law of the State of New York and the federal law of the United States and the
General Corporation Law of the State of Delaware, upon the opinions of counsel
satisfactory to the Representatives which may include counsel to the Company.
Such counsel may also state that, insofar as such opinion involves factual
matters, they have relied, to the extent they deem proper, upon certificates of
officers of the Company and its subsidiaries and certificates of public
officials.
(d) COMPANY OFFICERS' CERTIFICATE. At Closing Time, there shall not
have been, since the date hereof or since the respective dates as of which
information is given in the Prospectus, any material adverse change in the
condition, financial or otherwise, or in the earnings, business affairs or
business prospects of the Company and its subsidiaries considered as one
enterprise, whether or not arising in the ordinary course of business, and the
Representatives shall have received a certificate of the Chief Executive
Officer, the President or a Vice President of the Company and of the chief
financial or chief accounting officer of the Company, dated as of Closing Time,
to the effect that (i) there has been no such material adverse change, (ii) the
representations and warranties in Section 1(a) hereof are true and correct with
the same force and effect as though expressly made at and as of Closing Time,
(iii) the Company has complied with all agreements and satisfied all conditions
on its part to be performed or satisfied at or prior to Closing Time, and (iv)
no stop order suspending the effectiveness of the Registration Statement has
been issued and no proceedings for that purpose have been instituted or are
pending or, to the knowledge of such officers, are contemplated by the
Commission.
(e) ACCOUNTANT'S COMFORT LETTER. At the time of the execution of this
Agreement, the Representatives shall have received from Arthur Andersen LLP a
letter dated such date, in form and substance satisfactory to the
Representatives, together with signed or reproduced copies of such letter for
each of the other Underwriters containing statements and information of the
type ordinarily included in accountants' "comfort letters" to underwriters with
respect to the financial statements and certain financial information contained
in the Registration Statement and the Prospectus.
(f) BRING-DOWN COMFORT LETTER. At Closing Time, the Representatives
shall have received from Arthur Andersen LLP a letter, dated as of Closing
Time, to the effect that they reaffirm the statements made in the letter
furnished pursuant to subsection (e) of this Section, except that the specified
date referred to shall be a date not more than three business days prior to
Closing Time.
(g) MAINTENANCE OF RATING. At Closing Time, the Securities shall be
rated at least Baa3 by Moody's Investor's Service Inc. and BBB by Standard &
Poor's Ratings Group, a division of McGraw-Hill, Inc., and the Company shall
have delivered to the Representatives a letter dated the Closing Time, from
each such rating agency, or other evidence satisfactory to the Representatives,
confirming that the Securities have such ratings; and since the date of this
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Agreement until the Closing Time, there shall not have occurred a downgrading
in the rating assigned to the Securities or any of the Company's other debt
securities by any "nationally recognized statistical rating agency," as that
term is defined by the Commission for purposes of Rule 436(g)(2) under the 1933
Act, and no such organization shall have publicly announced that it has under
surveillance or review its rating of the Securities or any of the Company's
other debt securities.
(h) ADDITIONAL DOCUMENTS. At Closing Time, counsel for the
Underwriters shall have been furnished with such documents and opinions as they
may require for the purpose of enabling them to pass upon the issuance and sale
of the Securities as herein contemplated, or in order to evidence the accuracy
of any of the representations or warranties, or the fulfillment of any of the
conditions, herein contained; and all proceedings taken by the Company in
connection with the issuance and sale of the Securities as herein contemplated
shall be satisfactory in form and substance to the Representatives and counsel
for the Underwriters.
(i) TERMINATION OF AGREEMENT. If any condition specified in this
Section shall not have been fulfilled when and as required to be fulfilled,
this Agreement may be terminated by the Representatives by notice to the
Company at any time at or prior to Closing Time, and such termination shall be
without liability of any party to any other party except as provided in Section
4 and except that Sections 1, 6, 7 and 8 shall survive any such termination and
remain in full force and effect.
SECTION 6. INDEMNIFICATION.
(a) INDEMNIFICATION OF UNDERWRITERS. The Company agrees to indemnify
and hold harmless each Underwriter and each person, if any, who controls any
Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of
the 1934 Act as follows:
(i) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of any untrue statement
or alleged untrue statement of a material fact contained in the
Registration Statement (or any amendment thereto), including the Rule
430A Information and the Rule 434 Information, if applicable, or the
omission or alleged omission therefrom of a material fact required to
be stated therein or necessary to make the statements therein not
misleading or arising out of any untrue statement or alleged untrue
statement of a material fact included in any preliminary prospectus or
the Prospectus (or any amendment or supplement thereto), or the
omission or alleged omission therefrom of a material fact necessary in
order to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(ii) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the aggregate amount
paid in settlement of any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or
threatened, or of any claim whatsoever based upon any such untrue
statement or omission, or any such alleged untrue statement or
omission; provided that (subject to Section 6(d) below) any such
settlement is effected with the written consent of the Company; and
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<PAGE> 22
(iii) against any and all expense whatsoever, as incurred
(including the fees and disbursements of counsel chosen by Merrill
Lynch), reasonably incurred in investigating, preparing or defending
against any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or any claim
whatsoever based upon any such untrue statement or omission or any
such alleged untrue statement or omission, to the extent that any such
expense is not paid under (i) or (ii) above;
PROVIDED, HOWEVER, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Company by any
Underwriter through the Representatives expressly for use in the Registration
Statement (or any amendment thereto), including the Rule 430A Information and
the Rule 434 Information, if applicable, or any preliminary prospectus or the
Prospectus (or any amendment or supplement thereto).
(b) INDEMNIFICATION OF COMPANY, DIRECTORS AND OFFICERS . Each
Underwriter severally agrees to indemnify and hold harmless the Company, its
directors, each of its officers who signed the Registration Statement, and each
person, if any, who controls the Company within the meaning of Section 15 of
the 1933 Act or Section 20 of the 1934 Act against any and all loss, liability,
claim, damage and expense described in the indemnity contained in subsection
(a) of this Section, as incurred, but only with respect to untrue statements or
omissions, or alleged untrue statements or omissions, made in the Registration
Statement (or any amendment thereto), including the Rule 430A Information and
the Rule 434 Information, if applicable, or any preliminary prospectus or the
Prospectus (or any amendment or supplement thereto) in reliance upon and in
conformity with written information furnished to the Company by such
Underwriter through the Representatives expressly for use in the Registration
Statement (or any amendment thereto) or such preliminary prospectus or the
Prospectus (or any amendment or supplement thereto).
(c) ACTIONS AGAINST PARTIES; NOTIFICATION. Each indemnified party
shall give notice as promptly as reasonably practicable to each indemnifying
party of any action commenced against it in respect of which indemnity may be
sought hereunder, but failure to so notify an indemnifying party shall not
relieve such indemnifying party from any liability hereunder to the extent it
is not materially prejudiced as a result thereof and in any event shall not
relieve it from any liability which it may have otherwise than on account of
this indemnity agreement. In the case of parties indemnified pursuant to
Section 6(a) above, counsel to the indemnified parties shall be selected by
Merrill Lynch, and, in the case of parties indemnified pursuant to Section 6(b)
above, counsel to the indemnified parties shall be selected by the Company. An
indemnifying party may participate at its own expense in the defense of any
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<PAGE> 23
such action; provided, however, that counsel to the indemnifying party shall
not (except with the consent of the indemnified party) also be counsel to the
indemnified party. In no event shall the indemnifying parties be liable for
fees and expenses of more than one counsel (in addition to any local counsel)
separate from their own counsel for all indemnified parties in connection with
any one action or separate but similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances. No
indemnifying party shall, without the prior written consent of the indemnified
parties, settle or compromise or consent to the entry of any judgment with
respect to any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or any claim whatsoever
in respect of which indemnification or contribution could be sought under this
Section 6 or Section 7 hereof (whether or not the indemnified parties are
actual or potential parties thereto), unless such settlement, compromise or
consent (i) includes an unconditional release of each indemnified party from
all liability arising out of such litigation, investigation, proceeding or
claim and (ii) does not include a statement as to or an admission of fault,
culpability or a failure to act by or on behalf of any indemnified party.
(d) SETTLEMENT WITHOUT CONSENT IF FAILURE TO REIMBURSE. If at any time
an indemnified party shall have requested an indemnifying party to reimburse
the indemnified party for fees and expenses of counsel, such indemnifying party
agrees that it shall be liable for any settlement of the nature contemplated by
Section 6(a)(ii) or (iii) effected without its written consent if (i) such
settlement is entered into more than 45 days after receipt by such indemnifying
party of the aforesaid request, (ii) such indemnifying party shall have
received notice of the terms of such settlement at least 30 days prior to such
settlement being entered into and (iii) such indemnifying party shall not have
reimbursed such indemnified party in accordance with such request prior to the
date of such settlement.
SECTION 7. CONTRIBUTION. If the indemnification provided for in Section
6 hereof is for any reason unavailable to or insufficient to hold harmless an
indemnified party in respect of any losses, liabilities, claims, damages or
expenses referred to therein, then each indemnifying party shall contribute to
the aggregate amount of such losses, liabilities, claims, damages and expenses
incurred by such indemnified party, as incurred, (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company on the one
hand and the Underwriters on the other hand from the offering of the Securities
pursuant to this Agreement or (ii) if the allocation provided by clause (i) is
not permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause (i) above but also the
relative fault of the Company on the one hand and of the Underwriters on the
other hand in connection with the statements or omissions, which resulted in
such losses, liabilities, claims, damages or expenses, as well as any other
relevant equitable considerations.
The relative benefits received by the Company on the one hand and the
Underwriters on the other hand in connection with the offering of the
Securities pursuant to this Agreement shall be deemed to be in the same
respective proportions as the total net proceeds from the offering of the
Securities pursuant to this Agreement (before deducting expenses) received by
the Company and the total underwriting discount received by the Underwriters,
in each case as set forth on the cover of the Prospectus, or, if Rule 434 is
used, the corresponding location on the Term Sheet, bear to the aggregate
initial public offering price of the Securities as set forth on such cover.
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<PAGE> 24
The relative fault of the Company on the one hand and the Underwriters
on the other hand shall be determined by reference to, among other things,
whether any such untrue or alleged untrue statement of a material fact or
omission or alleged omission to state a material fact relates to information
supplied by the Company or by the Underwriters and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.
The Company and the Underwriters agree that it would not be just and
equitable if contribution pursuant to this Section 7 were determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of
the equitable considerations referred to above in this Section 7. The aggregate
amount of losses, liabilities, claims, damages and expenses incurred by an
indemnified party and referred to above in this Section 7 shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in investigating, preparing or defending against any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue or alleged
untrue statement or omission or alleged omission.
Notwithstanding the provisions of this Section 7, no Underwriter shall
be required to contribute any amount in excess of the amount by which the total
price at which the Securities underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of any such untrue or
alleged untrue statement or omission or alleged omission.
No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the 1933 Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation.
For purposes of this Section 7, each person, if any, who controls a
Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of
the 1934 Act shall have the same rights to contribution as such Underwriter,
and each director of the Company, each officer of the Company who signed the
Registration Statement, and each person, if any, who controls the Company
within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act
shall have the same rights to contribution as the Company. The Underwriters'
respective obligations to contribute pursuant to this Section 7 are several in
proportion to the principal amount of Securities set forth opposite their
respective names in Schedule A hereto and not joint.
SECTION 8. REPRESENTATIONS, WARRANTIES AND AGREEMENTS TO SURVIVE
DELIVERY. All representations, warranties and agreements contained in this
Agreement or in certificates of officers of the Company or any of its
subsidiaries submitted pursuant hereto, shall remain operative and in full force
and effect, regardless of any investigation made by or on behalf of any
Underwriter or controlling person, or by or on behalf of the Company, and shall
survive delivery of the Securities to the Underwriters.
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<PAGE> 25
SECTION 9. TERMINATION OF AGREEMENT.
(a) TERMINATION; GENERAL. The Representatives may terminate this
Agreement, by notice to the Company at any time at or prior to Closing Time (i)
if there has been, since the time of execution of this Agreement or since the
respective dates as of which information is given in the Prospectus, any
material adverse change in the condition, financial or otherwise, or in the
earnings, business affairs or business prospects of the Company and its
subsidiaries considered as one enterprise, whether or not arising in the
ordinary course of business, or (ii) if there has occurred any material adverse
change in the financial markets in the United States or the international
financial markets, any outbreak of hostilities or escalation thereof or other
calamity or crisis or any change or development involving a prospective change
in national or international political, financial or economic conditions, in
each case the effect of which is such as to make it, in the judgment of the
Representatives, impracticable to market the Securities or to enforce contracts
for the sale of the Securities, or (iii) if trading in any securities of the
Company has been suspended or materially limited by the Commission, or the New
York Stock Exchange, or if trading generally on the American Stock Exchange or
the New York Stock Exchange or in the Nasdaq National Market has been suspended
or materially limited, or minimum or maximum prices for trading have been
fixed, or maximum ranges for prices have been required, by any of said
exchanges or by such system or by order of the Commission, the National
Association of Securities Dealers, Inc. or any other governmental authority, or
(iv) if a banking moratorium has been declared by either Federal or New York
authorities.
(b) LIABILITIES. If this Agreement is terminated pursuant to this
Section, such termination shall be without liability of any party to any other
party except as provided in Section 4 hereof, and provided further that
Sections 1, 6, 7 and 8 shall survive such termination and remain in full force
and effect.
SECTION 10. DEFAULT BY ONE OR MORE OF THE UNDERWRITERS. If one or more
of the Underwriters shall fail at Closing Time to purchase the Securities which
it or they are obligated to purchase under this Agreement (the "Defaulted
Securities"), the Representatives shall have the right, within 24 hours
thereafter, to make arrangements for one or more of the non-defaulting
Underwriters, or any other underwriters, to purchase all, but not less than all,
of the Defaulted Securities in such amounts as may be agreed upon and upon the
terms herein set forth; if, however, the Representatives shall not have
completed such arrangements within such 24-hour period, then:
(a) if the number of Defaulted Securities does not exceed 10% of the
number of Securities to be purchased on such date, each of the non-defaulting
Underwriters shall be obligated, severally and not jointly, to purchase the
full amount thereof in the proportions that their respective underwriting
obligations hereunder bear to the underwriting obligations of all
non-defaulting Underwriters, or
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<PAGE> 26
(b) if the number of Defaulted Securities exceeds 10% of the number of
Securities to be purchased on such date, this Agreement shall terminate without
liability on the part of any non-defaulting Underwriter.
No action taken pursuant to this Section shall relieve any defaulting
Underwriter from liability in respect of its default.
In the event of any such default which does not result in a
termination of this Agreement, either the Representatives or the Company shall
have the right to postpone Closing Time for a period not exceeding seven days
in order to effect any required changes in the Registration Statement or
Prospectus or in any other documents or arrangements. As used herein, the term
"Underwriter" includes any person substituted for an Underwriter under this
Section 10.
SECTION 11. NOTICES. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of telecommunication. Notices to the
Underwriters shall be directed to the Representatives at North Tower, World
Financial Center, New York, New York 10281-1201, attention of the
Representatives; with a copy to Valerie Ford Jacob, Esq., Fried, Frank, Harris,
Shriver & Jacobson, One New York Plaza, New York, New York 10004; and notices to
the Company shall be directed to it at Republic Services, Inc., 110 S.E. Sixth
Street, Fort Lauderdale, Florida 33301, attention of David A. Barclay, General
Counsel; with a copy to Jonathan L. Awner, Esq., Akerman, Senterfitt & Eidson,
P.A., One S.E. Third Avenue, Miami, Florida 33131.
SECTION 12. PARTIES. This Agreement shall each inure to the benefit of
and be binding upon the Underwriters and the Company, and their respective
successors. Nothing expressed or mentioned in this Agreement is intended or
shall be construed to give any person, firm or corporation, other than the
Underwriters and the Company and their respective successors and the controlling
persons and officers and directors referred to in Sections 6 and 7 and their
heirs and legal representatives, any legal or equitable right, remedy or claim
under or in respect of this Agreement or any provision herein contained. This
Agreement and all conditions and provisions hereof are intended to be for the
sole and exclusive benefit of the Underwriters and the Company and their
respective successors, and said controlling persons and officers and directors
and their heirs and legal representatives, and for the benefit of no other
person, firm or corporation. No purchaser of Securities from any Underwriter
shall be deemed to be a successor by reason merely of such purchase.
SECTION 13. GOVERNING LAW AND TIME. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. SPECIFIED
TIMES OF DAY REFER TO NEW YORK CITY TIME.
SECTION 14. EFFECT OF HEADINGS. The Article and Section headings herein
and the Table of Contents are for convenience only and shall not affect the
construction hereof.
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<PAGE> 27
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company a counterpart hereof,
whereupon this instrument, along with all counterparts, will become a binding
agreement between the Underwriters and the Company, in accordance with its
terms.
Very truly yours,
REPUBLIC SERVICES, INC.
By:
------------------------------
Name:
Title:
CONFIRMED AND ACCEPTED,
as of the date first above written:
MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
NATIONSBANC MONTGOMERY SECURITIES LLC
By: MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By:
---------------------------------------
Authorized Signatory
For themselves and as Representatives of the other Underwriters named in
Schedule A hereto.
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SCHEDULE A
Principal
Amount of
Name of Underwriter Securities
------------------- ----------
Merrill Lynch, Pierce, Fenner & Smith
Incorporated..........................................
NationsBanc Montgomery Securities LLC.............................
Banc One Capital Markets, Inc.....................................
Chase Securities Inc..............................................
Deutsche Bank Securities Inc......................................
Donaldson, Lufkin & Jenrette Securities
Corporation...........................................
Salomon Smith Barney Inc..........................................
Total.......................................... $500,000,000
============
1
<PAGE> 29
SCHEDULE B
REPUBLIC SERVICES, INC.
$500,000,000 __% NOTES DUE 2009
1. The initial public offering price of the Securities shall be __% of
the principal amount thereof, plus accrued interest, if any, from the date of
issuance.
2. The purchase price to be paid by the Underwriters for the Securities
shall be __% of the principal amount thereof.
3. The interest rate on the Securities shall be __% per annum.
4. The Securities are redeemable, in whole or in part, at the Company's
option, at any time and from time to time at a redemption price equal to the
greater of (1) 100% of the principal amount of the notes to be redeemed or (2)
the sum of the present values of the remaining scheduled payments of principal
and interest on the 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. In the case of each of
clause (1) and (2), accrued interest will be payable to the redemption date.
1
<PAGE> 1
EXHIBIT 4.2
REPUBLIC SERVICES, INC., as Issuer,
and
Bank of New York, as Trustee
----------
INDENTURE
Dated as of May __, 1999
----------
___% Notes Due 2009
<PAGE> 2
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
<S> <C>
ARTICLE ONE DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION...............................................10
SECTION 101. DEFINITIONS......................................................................................10
"AFFILIATE"................................................................................................11
"APPLICABLE PROCEDURES"....................................................................................11
"ATTRIBUTABLE DEBT"........................................................................................11
"BANKRUPTCY LAW"...........................................................................................12
"BOARD OF DIRECTORS".......................................................................................12
"BOARD RESOLUTION".........................................................................................12
"BOOK-ENTRY SECURITY"......................................................................................12
"BUSINESS DAY".............................................................................................12
"CAPITAL STOCK"............................................................................................12
"CODE".....................................................................................................12
"COMMISSION"...............................................................................................12
"COMPANY"..................................................................................................13
"COMPANY REQUEST" OR "COMPANY ORDER".......................................................................13
"COMPARABLE TREASURY ISSUE"................................................................................13
"COMPARABLE TREASURY PRICE"................................................................................13
"CONSOLIDATED NET TANGIBLE ASSETS".........................................................................13
"CONSOLIDATION"............................................................................................14
"CORPORATE TRUST OFFICE"...................................................................................14
"DEFAULT"..................................................................................................14
"DEPOSITARY"...............................................................................................14
"EVENT OF DEFAULT".........................................................................................14
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
"EXCHANGE ACT".............................................................................................14
"EXEMPTED DEBT"............................................................................................14
"FAIR MARKET VALUE"........................................................................................14
"FUNDED DEBT"..............................................................................................15
"GENERALLY ACCEPTED ACCOUNTING PRINCIPLES" OR "GAAP".......................................................15
"GLOBAL SECURITIES"........................................................................................15
"GUARANTEE"................................................................................................15
"HOLDER"...................................................................................................15
"INCUR"....................................................................................................15
"INDEBTEDNESS".............................................................................................15
"INDENTURE"................................................................................................16
"INDENTURE OBLIGATIONS"....................................................................................16
"INDEPENDENT INVESTMENT BANKER"............................................................................16
"INTEREST PAYMENT DATE"....................................................................................16
"ISSUE DATE"...............................................................................................16
"LIEN".....................................................................................................16
"MATURITY".................................................................................................16
"MOODY'S"..................................................................................................17
"OFFICERS' CERTIFICATE"....................................................................................17
"OPINION OF COUNSEL".......................................................................................17
"OPINION OF INDEPENDENT COUNSEL"...........................................................................17
"OUTSTANDING"..............................................................................................17
"PAYING AGENT".............................................................................................18
"PERSON"...................................................................................................18
"PREDECESSOR SECURITY".....................................................................................18
"PREFERRED STOCK"..........................................................................................18
"PRINCIPAL PROPERTY".......................................................................................19
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
"REDEMPTION DATE".........................................................................................19
"REDEMPTION PRICE"........................................................................................19
"REFERENCE TREASURY DEALER"...............................................................................19
"REFERENCE TREASURY DEALER QUOTATIONS"....................................................................19
"REGULAR RECORD DATE".....................................................................................19
"RESPONSIBLE OFFICER".....................................................................................20
"RESTRICTED SUBSIDIARY"...................................................................................20
"S&P".....................................................................................................20
"SECURITIES ACT"..........................................................................................20
"SENIOR INDEBTEDNESS".....................................................................................20
"SPECIAL RECORD DATE".....................................................................................20
"STATED MATURITY".........................................................................................20
"SUBSIDIARY"..............................................................................................20
"TEMPORARY CASH INVESTMENTS"..............................................................................20
"TREASURY RATE"...........................................................................................21
"TRUSTEE".................................................................................................21
"TRUST INDENTURE ACT".....................................................................................22
"VOTING STOCK"............................................................................................22
SECTION 102. OTHER DEFINITIONS...............................................................................22
SECTION 103. COMPLIANCE CERTIFICATES AND OPINIONS............................................................22
SECTION 104. FORM OF DOCUMENTS DELIVERED TO TRUSTEE..........................................................23
SECTION 105. ACTS OF HOLDERS.................................................................................24
SECTION 106. NOTICES, ETC., TO THE TRUSTEE, THE COMPANY......................................................25
SECTION 107. NOTICE TO HOLDERS; WAIVER.......................................................................26
SECTION 108. CONFLICT WITH TRUST INDENTURE ACT...............................................................26
SECTION 109. EFFECT OF HEADINGS AND TABLE OF CONTENTS........................................................27
SECTION 110. SUCCESSORS AND ASSIGNS..........................................................................27
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
SECTION 111. SEPARABILITY CLAUSE.............................................................................27
SECTION 112. BENEFITS OF INDENTURE...........................................................................27
SECTION 113. GOVERNING LAW...................................................................................27
SECTION 114. LEGAL HOLIDAYS..................................................................................27
SECTION 115. INDEPENDENCE OF COVENANTS.......................................................................28
SECTION 116. SCHEDULES AND EXHIBITS..........................................................................28
SECTION 117. COUNTERPARTS....................................................................................28
ARTICLE TWO SECURITY FORMS......................................................................................29
SECTION 201. FORMS GENERALLY.................................................................................29
SECTION 202. FORM OF FACE OF SECURITY........................................................................29
SECTION 203. FORM OF REVERSE OF SECURITIES...................................................................33
ARTICLE THREE THE SECURITIES....................................................................................36
SECTION 301. TITLE AND TERMS.................................................................................36
SECTION 302. DENOMINATIONS...................................................................................36
SECTION 303. EXECUTION, AUTHENTICATION, DELIVERY AND DATING..................................................37
SECTION 304. TEMPORARY SECURITIES............................................................................38
SECTION 305. REGISTRATION, REGISTRATION OF TRANSFER AND EXCHANGE.............................................39
SECTION 306. BOOK ENTRY PROVISIONS FOR GLOBAL SECURITIES.....................................................40
SECTION 307. MUTILATED, DESTROYED, LOST AND STOLEN SECURITIES................................................41
SECTION 308. PAYMENT OF INTEREST; INTEREST RIGHTS PRESERVED..................................................41
SECTION 309. CUSIP NUMBERS...................................................................................42
SECTION 310. PERSONS DEEMED OWNERS...........................................................................42
SECTION 311. CANCELLATION....................................................................................42
SECTION 312. COMPUTATION OF INTEREST.........................................................................45
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
ARTICLE FOUR DEFEASANCE AND COVENANT DEFEASANCE.................................................................46
SECTION 401. COMPANY'S OPTION TO EFFECT DEFEASANCE OR COVENANT DEFEASANCE....................................46
SECTION 402. DEFEASANCE AND DISCHARGE........................................................................46
SECTION 403. COVENANT DEFEASANCE.............................................................................46
SECTION 404. CONDITIONS TO DEFEASANCE OR COVENANT DEFEASANCE.................................................47
SECTION 405. DEPOSITED MONEY AND U.S. GOVERNMENT OBLIGATIONS TO BE HELD IN TRUST; OTHER MISCELLANEOUS
PROVISIONS......................................................................................49
SECTION 406. REINSTATEMENT...................................................................................50
ARTICLE FIVE REMEDIES...........................................................................................51
SECTION 501. EVENTS OF DEFAULT...............................................................................51
SECTION 502. ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT..............................................52
SECTION 503. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY TRUSTEE.................................53
SECTION 504. TRUSTEE MAY FILE PROOFS OF CLAIM................................................................54
SECTION 505. TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF SECURITIES.....................................55
SECTION 506. APPLICATION OF MONEY COLLECTED..................................................................55
SECTION 507. LIMITATION ON SUITS.............................................................................56
SECTION 508. UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE PRINCIPAL, PREMIUM AND INTEREST.......................57
SECTION 509. RESTORATION OF RIGHTS AND REMEDIES..............................................................57
SECTION 510. RIGHTS AND REMEDIES CUMULATIVE..................................................................57
SECTION 511. DELAY OR OMISSION NOT WAIVER....................................................................57
SECTION 512. CONTROL BY HOLDERS..............................................................................58
SECTION 513. WAIVER OF PAST DEFAULTS.........................................................................58
SECTION 514. UNDERTAKING FOR COSTS...........................................................................58
SECTION 515. WAIVER OF STAY, EXTENSION OR USURY LAWS.........................................................59
SECTION 516. REMEDIES SUBJECT TO APPLICABLE LAW..............................................................59
ARTICLE SIX THE TRUSTEE.........................................................................................59
SECTION 601. DUTIES OF TRUSTEE...............................................................................59
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
SECTION 602. NOTICE OF DEFAULTS..............................................................................61
SECTION 603. CERTAIN RIGHTS OF TRUSTEE.......................................................................61
SECTION 604. TRUSTEE NOT RESPONSIBLE FOR RECITALS, DISPOSITIONS OF SECURITIES OR APPLICATION OF PROCEEDS
THEREOF.........................................................................................63
SECTION 605. TRUSTEE AND AGENTS MAY HOLD SECURITIES; COLLECTIONS; ETC........................................63
SECTION 606. MONEY HELD IN TRUST.............................................................................63
SECTION 607. COMPENSATION AND INDEMNIFICATION OF TRUSTEE AND ITS PRIOR CLAIM.................................63
SECTION 608. CONFLICTING INTERESTS...........................................................................64
SECTION 609. TRUSTEE ELIGIBILITY.............................................................................64
SECTION 610. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR TRUSTEE.......................................65
SECTION 611. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR..........................................................66
SECTION 612. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS.....................................67
SECTION 613. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY...............................................68
ARTICLE SEVEN HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY.................................................69
SECTION 701. COMPANY TO FURNISH TRUSTEE NAMES AND ADDRESSES OF HOLDERS.......................................69
SECTION 702. DISCLOSURE OF NAMES AND ADDRESSES OF HOLDERS....................................................69
SECTION 703. REPORTS BY TRUSTEE..............................................................................69
SECTION 704. REPORTS BY COMPANY..............................................................................70
ARTICLE EIGHT CONSOLIDATION, MERGER, SALE OF ASSETS.............................................................71
SECTION 801. COMPANY MAY CONSOLIDATE, ETC., ONLY ON CERTAIN TERMS............................................71
SECTION 802. SUCCESSOR SUBSTITUTED...........................................................................72
ARTICLE NINE SUPPLEMENTAL INDENTURES............................................................................73
SECTION 901. SUPPLEMENTAL INDENTURES AND AGREEMENTS WITHOUT CONSENT OF HOLDERS...............................73
SECTION 902. SUPPLEMENTAL INDENTURES AND AGREEMENTS WITH CONSENT OF HOLDERS..................................74
SECTION 903. EXECUTION OF SUPPLEMENTAL INDENTURES AND AGREEMENTS.............................................75
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
SECTION 904. EFFECT OF SUPPLEMENTAL INDENTURES...............................................................76
SECTION 905. CONFORMITY WITH TRUST INDENTURE ACT.............................................................76
SECTION 906. REFERENCE IN SECURITIES TO SUPPLEMENTAL INDENTURES..............................................76
SECTION 907. NOTICE OF SUPPLEMENTAL INDENTURES...............................................................76
ARTICLE TEN COVENANTS...........................................................................................77
SECTION 1001. PAYMENT OF PRINCIPAL, PREMIUM AND INTEREST.....................................................77
SECTION 1002. MAINTENANCE OF OFFICE OR AGENCY................................................................77
SECTION 1003. MONEY FOR SECURITY PAYMENTS TO BE HELD IN TRUST................................................77
SECTION 1004. CORPORATE EXISTENCE............................................................................79
SECTION 1005. RESTRICTIONS ON LIENS..........................................................................79
SECTION 1006. LIMITATION ON SALE AND LEASEBACK TRANSACTIONS..................................................81
SECTION 1007. PROVISIONS OF FINANCIAL STATEMENTS.............................................................82
SECTION 1008. WAIVER OF CERTAIN COVENANTS....................................................................82
SECTION 1009. STATEMENT AS TO COMPLIANCE.....................................................................
ARTICLE ELEVEN REDEMPTION OF SECURITIES.........................................................................84
SECTION 1101. RIGHTS OF REDEMPTION...........................................................................84
SECTION 1102. APPLICABILITY OF ARTICLE.......................................................................84
SECTION 1103. ELECTION TO REDEEM; NOTICE TO TRUSTEE..........................................................84
SECTION 1104. SELECTION BY TRUSTEE OF SECURITIES TO BE REDEEMED..............................................84
SECTION 1105. NOTICE OF REDEMPTION...........................................................................85
SECTION 1106. DEPOSIT OF REDEMPTION PRICE....................................................................86
SECTION 1107. SECURITIES PAYABLE ON REDEMPTION DATE..........................................................86
SECTION 1108. SECURITIES REDEEMED OR PURCHASED IN PART.......................................................87
ARTICLE TWELVE SATISFACTION AND DISCHARGE.......................................................................88
SECTION 1201. SATISFACTION AND DISCHARGE OF INDENTURE........................................................88
SECTION 1202. APPLICATION OF TRUST MONEY.....................................................................89
</TABLE>
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<PAGE> 9
TESTIMONIUM
SIGNATURES AND SEALS
ACKNOWLEDGMENTS
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<PAGE> 10
INDENTURE, dated as of May __, 1999, between Republic
Services, Inc. and Bank of New York, as trustee (the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the creation of an issue of
___% Notes due 2009 in the aggregate principal amount of $500 million (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;
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(c) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with GAAP;
(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.
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"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 Section 202 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
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<PAGE> 13
such duties at such time.
"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 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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"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
___________________, _________, New York, New York _____.
"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
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<PAGE> 15
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.
"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 Merrill Lynch,
Pierce, Fenner & Smith Incorporated or NationsBanc Montgomery Securities LLC,
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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(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 the Trustee 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 Merrill Lynch,
Pierce Fenner & Smith Incorporated and NationsBanc Montgomery Securities LLC,
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 or employee assigned to the Corporate Trust Office or any
agent of the Trustee appointed hereunder, including any vice president,
assistant vice president, secretary, 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.
"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 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 after the date of acquisition,
issued by the United States of America, or an instrumentality
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<PAGE> 21
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.
TERM DEFINED IN SECTION
---- ------------------
"Act" 105
"Agent Members" 306
"CUSIP" 309
"Defaulted Interest" 308
"Defeased Securities" 401
"Securities" Recitals
"Security Register" 305
"Security Registrar" 305
"Special Payment Date" 309
"Successor Person" 801
"U.S. Government Obligations" 404
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
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<PAGE> 23
condition or covenant provided for in this Indenture shall include:
(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
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of fact, including that various financial covenants have been complied with.
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
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acknowledgments of deeds, certifying that the individual signing such
instrument or 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
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writing and mailed, first-class postage prepaid, or delivered by recognized
overnight courier, to or with the Trustee at its Corporate Trust Office,
Attention: Corporate Trust Department, 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; 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 requirement of the Trust Indenture Act shall
control. If any provision of this Indenture
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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,
Redemption Date, Maturity or Stated Maturity, as the case may be, to the next
succeeding Business Day.
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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 Securities and the Trustee's certificate of authentication
thereon shall be in substantially the forms set forth in this Article Two, 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 form set forth in Section 202,
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 or decreased by adjustments made on the records of the
Trustee, as custodian for the Depositary or its nominee, as hereinafter
provided.
Section 202. FORM OF FACE OF SECURITY.
The form of the face of any Securities authenticated and
delivered hereunder shall be substantially as follows:
[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
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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.
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REPUBLIC SERVICES, INC.
------------------
___ % NOTE DUE 2009
CUSIP NO.
-------
No. 1 $500,000,000
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 FIVE HUNDRED MILLION DOLLARS
($500,000,000) United States dollars on ____________, 2009, 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 ___________, ________, ________,
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New York, NY ______), 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
and its corporate seal to be affixed or reproduced hereon.
REPUBLIC SERVICES, INC.
[Seal] By:
Name:
Title:
Attest:
- ----------------------------
Authorized Officer
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<PAGE> 33
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the ___% Notes due 2009 referred to in the
within-mentioned Indenture.
BANK OF NEW YORK, as Trustee
By: _________________________________
Authorized Signer
Dated:
Section 203. FORM OF REVERSE OF SECURITIES.
The form of the reverse of the Securities shall be
substantially as follows:
REPUBLIC SERVICES, INC.
___% Note due 2009
This Security is one of a duly authorized issue of Securities
of the Company designated as its ___% Notes due 2009 (herein called the
"Securities"), limited (except as otherwise provided in the Indenture referred
to below) in aggregate principal amount to $500,000,000, issued under and
subject to the terms of an indenture (herein called the "Indenture") dated as of
May __ , 1999, between the Company and 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 days before the Redemption Date, the
Securities or portions thereof to
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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.
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 at the time Outstanding. 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) at the time
Outstanding, on behalf of the Holders of all the Securities, to waive compliance
by the Company with certain provisions of the Indenture and the Securities 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
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<PAGE> 35
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 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 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.
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<PAGE> 36
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 $500,000,000 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 2009" of the Company. The Stated Maturity of the Securities shall be
June 1, 2009, 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 November 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 a corporate trust office
of the Trustee or its affiliate located at _______________, ________,
______________, New York, NY _____); 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.
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.
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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 under its corporate
seal reproduced thereon attested by its Secretary or one of its Assistant
Secretaries. 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 officer, 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 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
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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 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.
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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 notice.
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 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.
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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 Section 202.
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
Section 202.
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.
(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
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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 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 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
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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.
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.
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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 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
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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.
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 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 destroyed and certification of their
destruction delivered to the Company, unless by a Company Order received by the
Trustee prior to
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such destruction, 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 the Securities, elect to have either Section 402 or
Section 403 be applied to all of the Outstanding Securities (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
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 Securities and this Indenture insofar as such
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 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 the 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 Defeased Securities, on and after the
date the conditions set forth in Section 404 below
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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 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 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 Obligation held by such
custodian for the account of the holder of such depository
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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;
(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
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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 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 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 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 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 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 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
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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
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 following the reinstatement of its obligations,
the Trustee or Paying Agent shall promptly pay any such amount to the Holders of
the Securities and the Company shall be subrogated to the rights of the Holders
of such Securities to receive such payment from the United States dollars and
U.S. Government Obligations held by the Trustee or Paying Agent.
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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):
(a) there shall be a default in the payment of any installment
of interest on any Security 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 Security 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 under this Indenture (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;
(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;
(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
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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 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 the Securities shall have already become
due and payable, with respect to this Indenture, the Trustee or the Holders of
not less than 25% in aggregate principal amount of the Securities 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
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.
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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 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 the Securities, 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 Securities
Outstanding, 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, expenses,
disbursements and advances of the Trustee, its agents and
counsel,
(ii) all overdue interest on all Outstanding
Securities,
(iii) the principal of and premium, if any, on any
Outstanding Securities which have become due otherwise than by
such declaration of acceleration and interest thereon at the
rate borne by the Securities, and
(iv) to the extent that payment of such interest is
lawful, interest upon overdue interest at the rate borne by
the 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 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
(a) default is made in the payment of any interest on any
Security when such interest becomes due and payable and such default continues
for a period of 30 days, or
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(b) default is made in the payment of the principal of or
premium, if any, on any Security 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 Securities, the whole amount then due and payable on such
Securities 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; 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 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,
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 or the property of the Company or of such other obligor or their
creditors, the Trustee (irrespective of whether the principal of the Securities
shall then be due and 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,
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(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 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, 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 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.
Section 505. TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF
SECURITIES.
All rights of action and claims under this Indenture the
Securities may be prosecuted and enforced by the Trustee without the possession
of any of the Securities 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, expenses,
disbursements and advances of the Trustee, its agents and counsel, be for the
ratable benefit of the Holders of the Securities in respect of which such
judgment has been recovered.
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
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account of principal, premium, if any, or interest, upon presentation of the
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, ratably, 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 Securities shall have any right to institute
any proceeding, judicial or otherwise, with respect to this Indenture or the
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 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 a
reasonable indemnity against the costs, expenses and liabilities to be incurred
in compliance with such request;
(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;
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, any Security to affect, disturb or prejudice the rights of any
other Holders, or to obtain or to
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seek to obtain priority or preference over any other Holders or to enforce any
right under this Indenture or any Security, 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 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,
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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 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 may on behalf of the Holders of all Outstanding
Securities 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 effected); 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.
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
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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, 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 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):
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(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 that are
adverse to 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 to determine whether or not they conform to the
requirements of this Indenture;
(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
(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
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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 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 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 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):
(a) the Trustee may 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
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might be incurred therein;
(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; and
(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 delivered to it
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. 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.
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Section 604. TRUSTEE NOT RESPONSIBLE FOR RECITALS, 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.
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 directions
of the Company.
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, and the Trustee shall be entitled to the compensation 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 expenses,
disbursements and advances incurred or made by or on behalf of the Trustee in
accordance with any of the provisions of this Indenture (including the
reasonable compensation and the expenses and disbursements of its counsel and of
all
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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 it harmless against, any claim,
loss, liability, tax, assessment or other 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 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 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 $100,000,000, 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.
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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.
(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
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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.
(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. Such successor trustee so appointed shall forthwith upon its
acceptance of such appointment become the successor trustee and supersede the
successor trustee appointed by the Company. If no successor trustee shall have
been so appointed by the Company or the Holders of the Securities and accepted
appointment in the manner hereinafter provided, 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
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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 $100,000,000 and have a
Corporate Trust Office or an agent selected in accordance with Section 609.
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
$100,000,000 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.
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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 June 1 of each year commencing with
the first June 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 June 1 in accordance with and with respect to the
matters required by Trust Indenture Act
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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 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.
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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 the Securities, in form and substance 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
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 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;
(e) to comply with the provisions of Article Eight;
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(f) to add guarantees with respect to the Securities or to
secure the Securities;
(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 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, 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 (including but not limited to, for the purpose of modifying in any
manner the rights of the Holders under this Indenture or the Securities) or (ii)
waive compliance with any provision in the Indenture or the Securities (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 affected thereby:
(a) reduce the percentage in principal amount of the
Outstanding Securities, 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 or reduce the amount of any payment of interest on
the Securities;
(c) reduce the principal of or extend the Stated Maturity of
the Securities;
(d) reduce the premium payable upon the redemption of the
Securities or change the time at which the Securities 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 after the
Stated Maturity thereof
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(or in the case of redemption, on or after the Redemption Date);
(f) make the Securities 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 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 affected thereby;
(h) amend or modify any of the provisions of this Indenture in
any manner which subordinates the Securities 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; 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 602 hereof) shall be
fully protected in relying upon, an Opinion of Counsel and 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.
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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 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 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.
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
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 the Securities in accordance with the terms 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 _______________, ________,
______________, New York, New York _____, 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,
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and will promptly notify the Trustee of its action or failure so to act.
If the Company or any of its Affiliates is not acting as
Paying Agent, the Company will, on or before 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 if deposited on the due date with respect to the
applicable payment) 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 shall,
by Act of such Holders, waive such compliance in such instance with such
covenant or provision, but no such waiver
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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.
Section 1009. 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, a
written statement (which need not be contained in or accompanied by an
Officers' Certificate) signed by the principal executive officer, the principal
financial officer or the principal accounting officer of the Company, stating
whether or not, to the best of his or her knowledge, the Company is in default
in the performance or observance of any of the terms, provisions and
conditions of this Indenture and if the Company shall be in default, specifying
all such defaults and the nature and status thereof of which he or she may have
knowledge.
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ARTICLE ELEVEN
REDEMPTION OF SECURITIES
Section 1101. RIGHTS OF REDEMPTION.
The 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 such Securities to be redeemed and (ii) the sum of the present values
of the remaining scheduled payments of principal and interest thereon 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, 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 30 nor more than 60 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 Securities to be redeemed.
Section 1104. SELECTION BY TRUSTEE OF SECURITIES TO BE REDEEMED.
If less than all the 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 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.
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
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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 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 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. 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 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 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.
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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 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 theretofore authenticated and
delivered (other than (i) lost, stolen or destroyed Securities
which have been replaced or paid as provided in Section 308 or
(ii) all Securities 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 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 not theretofore delivered to the Trustee for
cancellation, including the principal of, premium, if any, and
accrued interest on, such Securities 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 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
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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.
* * *
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<PAGE> 90
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:
Attest: __________________________
Name:
Title:
BANK OF NEW YORK
By: _________________________________
Name:
Title:
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<PAGE> 91
STATE OF ________________________ )
) ss.:
COUNTY OF _____________________ )
On the _____ day of _______, 1999, before me personally came
___________, to me known, who, being by me duly sworn, did depose and say that
he resides at _________________________; that he is ___________________ of
Republic Services, Inc. which is a corporation described in and which executed
the foregoing instrument; and that he signed his name thereto pursuant to
authority of the Board of Directors of each of such corporations.
(NOTARIAL
SEAL)
--------------------
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<PAGE> 92
STATE OF ________________________ )
) ss.:
COUNTY OF _____________________ )
On the _____ day of ______, 1999, before me personally came
___________, to me known, who, being by me duly sworn, did depose and say that
he resides at _________________________; that he is ___________________ of Bank
of New York, a corporation described in and which executed the foregoing
instrument; and that he signed his name thereto pursuant to authority of the
Board of Directors of such corporation.
(NOTARIAL
SEAL)
---------------
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<PAGE> 1
EXHIBIT 4.3
[FORM OF NOTE]
REPUBLIC SERVICES, INC.
------------------
___ % NOTE DUE 2009
CUSIP NO.
-------
No. 1 $500,000,000
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 FIVE HUNDRED MILLION DOLLARS
($500,000,000) United States dollars on ____________, 2009, 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 ___________, ________, ________,
New York, NY ______), 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
and its corporate seal to be affixed or reproduced hereon.
REPUBLIC SERVICES, INC.
[Seal] By:
Name:
Title:
Attest:
- ----------------------------
Authorized Officer
<PAGE> 1
Exhibit 5.1
[FORM OF OPINION OF AKERMAN, SENTERFITT & EIDSON, P.A.]
May __, 1999
Republic Services, Inc.
110 S.E. Sixth Street, 28th Floor
Fort Lauderdale, FL 33301
RE: ___% Notes due 2009
Gentlemen:
We have acted as counsel to Republic Services, Inc., a Delaware
corporation (the "Company"), in connection with the corporate proceedings (the
"Corporate Proceedings") taken and to be taken relating to the public offering
of the Company's ___% Notes due 2009 (the "Notes"). We have also participated
in the preparation and filing with the Securities and Exchange Commission under
the Securities Act of 1933 of a registration statement on Form S-1 (the
"Registration Statement") relating to the Notes. In this connection, we have
examined such corporate and other records, instruments, certificates and
documents as we considered necessary to enable us to express this opinion.
Based on the foregoing, it is our opinion that the Notes have been
duly authorized for issuance by the Company and, when the Indenture filed as
Exhibit 4.2 to the Registration Statement has been duly executed and delivered
by the parties thereto, and when the Notes are duly executed, authenticated,
issued and delivered in accordance with such Indenture and the Corporate
Proceedings and under the circumstances contemplated by the Registration
Statement, the Notes will be legally issued and will constitute valid and
legally binding obligations of the Company, subject to bankruptcy, insolvency,
reorganization, moratorium, or other similar laws now or hereafter in effect
relating to or affecting the enforcement of creditors' rights generally and by
general equity principles.
Although we have acted as counsel to the Company in connection with
the preparation and filing of the Registration Statement, our engagement has
been limited to certain matters about which we have been consulted.
Consequently, there may exist matters of a legal nature
<PAGE> 2
Republic Services, Inc.
May __, 1999
Page 2
involving the Company in which we have not been consulted and have not
represented the Company. We express no opinion as to laws of any jurisdiction
other than the General Corporation Law of the State of Delaware and laws of the
State of Florida. The opinions expressed herein concern only the effect of the
General Corporation Law of the State of Delaware and of the laws (excluding the
principles of conflict of laws) of the State of Florida as currently in effect.
This opinion letter is limited to the matters stated herein and no opinions may
be implied or inferred beyond the matters expressly stated herein. The opinions
expressed herein are given as of this date, and we assume no obligation to
update or supplement our opinions to reflect any facts or circumstances that
may come to our attention or any change in law that may occur or become
effective at a later date.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our name under the caption
"Legal Matters" in the prospectus comprising a part of the Registration
Statement. In giving such consent, we do not thereby admit that we are included
within the category of persons whose consent is required under Section 7 of the
Act or the rules and regulations promulgated thereunder.
Sincerely,
<PAGE> 1
EXHIBIT 21.1
Subsidiaries of Republic Services, Inc.
Name State
of Company of Incorporation
- -------------------------------------------------------------------------------
A.G. Disposal Service, Inc. NY
A.J. Panzarella & Co., Inc. FL
(d/b/a Larry O'Connor Sanitation Service)
AAA Commercial, Inc. VA
AAA Disposal of Tennessee, Inc. TN
AAA Disposal Services, Inc. VA
AAA Land and Building Co., Inc. VA
AAA Maintenance, Inc. VA
AAA Recycling, Inc. VA
Ace Disposal Service, Inc. OH
Addington Environmental, Inc. KY
Addington Holding Company DE
Addington Resources, Inc. DE
All County Recycling, Inc. NJ
All Refuse Services, Inc. NY
All-Rite Recycling, Inc. FL
All Service Refuse Company, Inc. FL
Alpco Waste Systems, Inc. NY
Anderson Refuse Company, Inc. IN
Anderson Solid Waste, Inc. CA
Antler Park, Inc. IN
Arc Disposal Company, Inc. IL
Ariana, LLC DE
Arlington Disposal Company, Inc. TX
ASCO Sanitation, Inc. MS
Barker Brothers Waste Incorporated TN
- --------------------------------------------------------------------------------
Page 1 of 11
<PAGE> 2
Name State
of Company of Incorporation
- -------------------------------------------------------------------------------
Barker Brothers, Inc. TN
Calvert Trash Service Incorporated MD
Calvert Trash Systems Incorporated MD
Cleaning Corporation NJ
(d/b/a Beran Services)
Berrien County Landfill, Inc. MI
Bluegrass Recycling & Transfer Company KY
Bosman Brothers, Inc. IL
Broadhurst Environmental, Inc. KY
Burgess' Refuse Removal Service, Inc. NC
C.S.C. Disposal and Landfill, Inc. TX
Cal Waste Industries, Inc. CA
Capital Waste & Recycling, Inc. NY
Cascade Pacific Engineering, Inc. OR
Cate's Rubbish Removal Services, Inc. NH
CDS Environmental of Atlanta, Inc. GA
Charter Waste, Inc. TX
CJM Trucking & Soils Company, Inc. TX
Coggins Waste Management, Inc. NJ
Collection Service Company, Inc. NC
Collection Services, Inc. KY
(d/b/a M&M Sanitation, Inc., Epperson Collection
Services, CSI of Northern Kentucky, B&J Sanitation,
Pennyrile Sanitation, Bluegrass Waste Alliance &
Tri-K Hauling)
Commercial Waste Disposal, Inc. KY
(d/b/a CWI of Kentucky)
Compactor Rental Systems of Delaware, Inc. DE
- -------------------------------------------------------------------------------
Page 2 of 11
<PAGE> 3
Name State
of Company of Incorporation
- -------------------------------------------------------------------------------
Consolidated Disposal Service, LLC DE
Continental Waste Industries - Gary, Inc. IN
Continental Waste Industries, Inc. DE
Covington Waste, Inc. TN
CWI of Florida, Inc. FL
(d/b/a Southland Waste Systems)
CWI of Illinois, Inc. IL
CWI of Missouri, Inc. MO
CWI of NJ, Inc. NJ
CWI of Northwest Indiana, Inc. IN
D.W. Gutzmer Rubbish Disposal, Inc. NY
Disposal Inc. FL
Disposal Inc. of Orlando FL
Disposal of Polk, Inc. FL
Disposal Services, Inc. NY
(d/b/a Upstate Disposal Service & R&R Refuse)
Dozit Company, Inc. KY
Duncan Disposal, Inc. TX
E&P Investment Corporation IL
East Bay Sanitation Service, Inc. FL
East Carolina Environmental, Inc. KY
ECO Services of S.C., Inc. SC
El Centro Sanitation Service, Co. CA
Elliot's Agri-Service, Inc. TX
Enviro-Comp Services, Inc. FL
Envirocycle, Inc. FL
Environmental Specialists, Inc. MO
Epperson Waste Disposal, Inc. KY
- --------------------------------------------------------------------------------
Page 3 of 11
<PAGE> 4
Name State
of Company of Incorporation
- -------------------------------------------------------------------------------
Fenn-Vac, Inc. SC
Fennell Container Co, Inc. SC
Fisk Environmental Services, Inc. IN
Fisk Sanitation Service, Inc. IN
FLL, Inc. MI
Florida Refuse Service, Inc. FL
G.E.M. Environmental Management, Inc. DE
Garbage Disposal, Inc. NC
Garbage Disposal Services, Inc. NC
GF/WFF, Inc. SC
Gilliam Transfer, Inc. MO
Grand Prairie Disposal Company, Inc. TX
Green Disposal, Inc. UT
Green Valley Disposal Company, Inc. WI
Green Valley Environmental Corp. KY
Greenfield Environmental Development Corp. DE
Gulf Coast Waste Service, Inc. FL
Hank's Disposal, Inc. IN
Helper's Hand of America, Inc. IN
Hinkson Container Service, Inc. PA
Honeygo Run Reclamation, Inc. MD
Houston Organics, Inc. TX
Hyder Waste Container, Inc. NC
Imperial Sanitation Services, Inc. FL
Indiana Recycling LLC IN
J.C. Duncan Company, Inc. TX
Jamax Corporation IN
JMN, Inc. NC
- --------------------------------------------------------------------------------
Page 4 of 11
<PAGE> 5
Name State
of Company of Incorporation
- -------------------------------------------------------------------------------
Karat Corp. NJ
L.R. Stuart and Son, Inc. VA
Laughlin Environmental, Inc. TX
Lawson Land Company FL
Lawson Realty, Inc. FL
Lazaro's Waste Service, Inc. FL
Living Earth Technology Company DE
LSW Environmental, Inc. GA
Luberto Carting Corp. NJ
M-G Disposal Service, LLC DE
M.C.C. Recycling, Inc. NJ
McCusker & Sons Paper Salvage, Inc. PA
McCusker Recycling, Inc. PA
Marpal Co. NJ
Medical Waste Services, Inc. FL
Metro Recycling, Inc. FL
Meyer Mechanical Services, Inc. IN
Meyer Transportation, LLC IN
Meyer Waste Systems, Inc. IN
Mid-East Waste Services, Inc. NC
Mid-State Environmental, Inc. KY
Middlesex Carting Co., Inc. NJ
(d/b/a Midco Waste Systems)
Midwest Material Management, Inc. IN
Monarch Environmental, Inc. KY
National Serv-All, Inc. IN
Nine Mile Road, Inc. FL
Noble Risley, Jr. & Sons, Inc. IL
Northwest Florida Sanitation, Inc. FL
Northwest Tennessee Disposal Corp. TN
Nova Properties, Inc. NJ
NRL, Inc. KY
Ohio County Balefill, Inc. KY
- --------------------------------------------------------------------------------
Page 5 of 11
<PAGE> 6
Name State
of Company of Incorporation
- -------------------------------------------------------------------------------
Olympic Disposal Corp. NY
P.A.K. Equipment Co., Inc. NJ
Pantego I, Inc. TX
Pepperhill Development Co., Inc. SC
Perdomo & Sons, Inc. CA
Pine Ridge Recycling, Inc. GA
Pinellas Environmental, Inc. KY
Prichard Landfill Corporation WV
PSI Waste Systems, Inc. ID
R.E. Wolfe Enterprises of Edingburg, Inc. TX
R.E. Wolfe Enterprises of Texas, Inc. TX
Rainbow Industries, Inc. VA
Rapid Disposal Service, Inc. NJ
Raritan Valley Disposal Service, Co., Inc. NJ
Raritan Valley Recycling, Inc. NJ
RCLJ Construction, Inc. TX
Recycling Concepts, Inc. NC
Recycling Industries, Inc. NJ
Reliable Disposal, Inc. MI
Reliable Sanitation, Inc. FL
Republic Acquisition Company DE
Republic Dumpco, Inc. NV
Republic Environmental Technologies, Inc. NV
(d/b/a Republic Environmental Technologies of
Nevada & Apex Aggregates Company)
Republic Imperial Acquisition Corp. OK
Republic Resource Company DE
Republic Services Group of Pennsylvania Hauling, LLC PA
Republic Services Group of Pennsylvania I, LLC PA
Republic Services Group of Pennsylvania II, LLC PA
Republic Services Group of Pennsylvania III, LLC PA
Republic Services Group of Pennsylvania IV, LLC PA
- -------------------------------------------------------------------------------
Page 6 of 11
<PAGE> 7
Name State
of Company of Incorporation
- -------------------------------------------------------------------------------
Republic Services of Arizona Hauling, LLC AZ
Republic Services of California Hauling, LLC DE
Republic Services of California I, LLC DE
Republic Services of California II, LLC DE
Republic Services of Colorado Hauling, LLC CO
Republic Services of Colorado I, LLC CO
Republic Services of Florida Hauling, LLC FL
Republic Services of Georgia I, LLC GA
Republic Services of Kentucky Hauling, LLC KY
Republic Services of Kentucky I, LLC KY
Republic Services of Kentucky II, LLC KY
Republic Services of Michigan Hauling, LLC MI
Republic Services of Michigan I, LLC MI
Republic Services of Michigan II, LLC MI
Republic Services of Michigan III, LLC MI
Republic Services of Michigan IV, LLC MI
Republic Services of Michigan V, LLC MI
Republic Services of New York Hauling, LLC NY
Republic Services of New York I, LLC NY
Republic Services of New York II, LLC NY
Republic Services of Ohio Hauling, LLC OH
Republic Services of Ohio I, LLC OH
Republic Services of Ohio II, LLC OH
Republic Services of Ohio III, LLC OH
Republic Services of Ohio IV, LLC OH
Republic Services of Ohio V, LLC OH
Republic Services of Oregon Hauling, LLC OR
Republic Services of Oregon I, LLC OR
Republic Services of Tennessee Hauling, LLC DE
Republic Services of Tennessee I, LLC DE
- --------------------------------------------------------------------------------
Page 7 of 11
<PAGE> 8
Name State
of Company of Incorporation
- -------------------------------------------------------------------------------
Republic Services of Virginia Hauling, LLC VA
Republic Services of Wisconsin Hauling, LLC WI
Republic Services of Wisconsin I, LLC WI
Republic Services of Wisconsin II, LLC WI
Republic Services, Inc. DE
Republic Silver State Disposal, Inc. NV
(d/b/a Republic Silver State Disposal Services)
Republic Wabash Company DE
Republic Waste Services of Texas Hauling, LLC TX
Republic Waste Services of Texas I, LLC TX
Republic Waste Services of Texas II, LLC TX
Republic Waste Services of Texas III, LLC TX
Republic/Maloy Landfill & Sanitation, Inc. TX
Resources Aviation, Inc. FL
RI/ACR Merger Corp. NJ
RI/CDI Merger Corp. CA
RI/DBI Merger Corp. CA
RI/MC Merger Corp. NJ
RI/PAK Merger Corp. NJ
RII Management Company DE
RITM, LLC DE
Robert A. Moor, Jr. Disposal Services, Inc. PA
(d/b/a Area Container)
Rochester Dismantling and Roll-Off, Inc. NY
RS/WM Holding Company, Inc. DE
RSI Waste Management, LLC DE
Rubbish Control, LLC DE
Safety Lights, Inc. TN
Sandy Hollow Landfill Corp. WV
Sanifill, Inc. TN
- --------------------------------------------------------------------------------
Page 8 of 11
<PAGE> 9
Name State
of Company of Incorporation
- -------------------------------------------------------------------------------
Savannah Regional Industrial Landfill, Inc. GA
Schofield Corporation of Orlando FL
(d/b/a Southland Waste Systems)
Seaboard Waste Systems, Inc. FL
South Trans, Inc. NJ
Southern Illinois Regional Landfill, Inc. IL
Southland Environmental Services, Inc. FL
(d/b/a Southland Environmental Systems, Inc.)
Southland Recycling Services, Inc. FL
Southland Waste Systems of Georgia, Inc. GA
Southland Waste Systems of Jax, Inc. FL
Southland Waste Systems, Inc. FL
Space Coast Sanitation, Inc. FL
Specialized Waste, Inc. CA
Spector Waste Paper Corp. NY
Springfield Environmental, Inc. IN
Springfield Environmental, Inc. DE
Statewide Environmental Contractors, Inc. NJ
Suburban Disposal Service, Inc. SC
Suburban Sanitation of California, Inc. CA
Suburban Sanitation Services, Inc. AZ
SunBurst Sanitation Corporation FL
Sunrise Disposal, Inc. IN
Superior Sanitation Services, Inc. NJ
Sure Sanitation Service, Inc. FL
Swift Creek Environmental, Inc. GA
T.W. Recycling, Corp. NJ
Tampa Services, Inc. FL
Taormina Industries, LLC DE
- -------------------------------------------------------------------------------
Page 9 of 11
<PAGE> 10
Name State
of Company of Incorporation
- ---------------------------------------------------------------------------
Tay-Ban Corporation MI
(d/b/a Taymouth Landfill)
Taylor Disposal Services, Inc. VA
Terre Haute Recycling, Inc. IN
Thomas W. DeLisa, Inc. NJ
Tos-It Service Company, Inc. TX
Town & Country Disposal, Inc. NY
Trashaway Services, Inc. TX
Treasure Coast Refuse Corp. FL
Tri-County Refuse Service, Inc. MI
Tri-K Landfill, Inc. KY
Tri-State Ltd. IN
Triple G Landfills, Inc. IN
United Refuse Co., Inc. IN
United Waste Service, Inc. GA
Upper Piedmont Environmental, Inc. KY
Uwharrie Environmental, Inc. KY
Victory Environmental Services, Inc. DE
Victory Waste Incorporated CA
Village Disposal Services, Inc. FL
W.R. Lalevee Realty Company, Inc. NJ
Wabash Valley Landfill Company, Ltd. PA
Wabash Valley Refuse Removal Company, L.P. IN
Waste Collection Services Corp. FL
(d/b/a Seaside Sanitation)
Westchester Investments, Inc. IN
Westside Sanitation, Inc. FL
White Stone of Warren, Inc. KY
Wilshire Disposal Services, Inc. CA
(d/b/a Wilshire Rubbish Serv.,
Zakaroff Rubbish Co., Mike's Rubbish,
Mike's Rubbish Serv.)
- ---------------------------------------------------------------------------
Page 10 of 11
<PAGE> 11
Name State
of Company of Incorporation
- -------------------------------------------------------------------------------
Wood River Rubbish Company, Inc. ID
WPP Continental de Costa Rica, S.A. Costa Rica
WPP Services, Inc. OH
York Waste Disposal, Inc. PA
Zakaroff Services CA
(d/b/a Zakaroff Recycling Services, West,
Hollywood Recycling Services, Inc.
and L.A. Waste Disposal)
- -------------------------------------------------------------------------------
Page 11 of 11
<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 registration statement.
ARTHUR ANDERSEN LLP
Fort Lauderdale, Florida,
May 7, 1999.
<PAGE> 1
Exhibit 25.1
================================================================================
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) [ ]
---------------------------
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
One Wall Street, New York, N.Y. 10286
- ---------------------------------------- --------------------------
(Address of principal executive offices) (Zip code)
---------------------------
REPUBLIC SERVICES, INC.
- --------------------------------------------------------------------------------
(Exact name of obligor as specified in its charter)
Delaware 65-0716904
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
Republic Services, Inc.
110 S.E. Sixth Street, 28th Floor
Fort Lauderdale, Florida 33301
- ---------------------------------------- --------------------------
(Address of principal executive offices) (Zip code)
---------------------------
% Notes due 2009
(Title of the indenture securities)
================================================================================
<PAGE> 2
1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO WHICH
IT IS SUBJECT.
- --------------------------------------------------------------------------------
Name Address
- --------------------------------------------------------------------------------
Superintendent of Banks of the State of 2 Rector Street, New York, N.Y.
New York 10006, and Albany, N.Y. 12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York 10005
(b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Yes.
2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
None.
16. LIST OF EXHIBITS.
EXHIBITS IDENTIFIED IN PARENTHESES BELOW, ON FILE WITH THE COMMISSION, ARE
INCORPORATED HEREIN BY REFERENCE AS AN EXHIBIT HERETO, PURSUANT TO RULE
7a-29 UNDER THE TRUST INDENTURE ACT OF 1939 (THE "ACT") AND 17 C.F.R.
229.10(d).
1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which contains the
authority to commence business and a grant of powers to exercise
corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1
filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to
Form T-1 filed with Registration Statement No. 33-21672 and Exhibit
1 to Form T-1 filed with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form
T-1 filed with Registration Statement No. 33-31019.)
6. The consent of the Trustee required by Section 321(b) of the Act.
(Exhibit 6 to Form T-1 filed with Registration Statement No.
33-44051.)
7. A copy of the latest report of condition of the Trustee published
pursuant to law or to the requirements of its supervising or
examining authority.
-2-
<PAGE> 3
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New
York, a corporation organized and existing under the laws of the State of New
York, has duly caused this statement of eligibility to be signed on its behalf
by the undersigned, thereunto duly authorized, all in The City of New York, and
State of New York, on the 7th day of May, 1999.
THE BANK OF NEW YORK
By: /s/ MICHELE L. RUSSO
-------------------------------
Name: MICHELE L. RUSSO
Title: ASSISTANT TREASURER
-3-
<PAGE> 4
Exhibit 7 to
Exhibit 25.1
- --------------------------------------------------------------------------------
Consolidated Report of Condition of
THE BANK OF NEW YORK
of One Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System, at the close of business December 31,
1998, published in accordance with a call made by the Federal Reserve Bank of
this District pursuant to the provisions of the Federal Reserve Act.
<TABLE>
<CAPTION>
Dollar Amounts
in Thousands
<S> <C>
ASSETS
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin ........... $ 3,951,273
Interest-bearing balances .................................... 4,134,162
Securities:
Held-to-maturity securities .................................. 932,468
Available-for-sale securities ................................ 4,279,246
Federal funds sold and Securities purchased under
agreements to resell ......................................... 3,161,626
Loans and lease financing receivables:
Loans and leases, net of unearned
income ..................................................... 37,861,802
LESS: Allowance for loan and
lease losses ............................................... 619,791
LESS: Allocated transfer risk
reserve .................................................... 3,572
Loans and leases, net of unearned income,
allowance, and reserve ..................................... 37,238,439
Trading Assets .................................................. 1,551,556
Premises and fixed assets (including capitalized
leases) ...................................................... 684,181
Other real estate owned ......................................... 10,404
Investments in unconsolidated subsidiaries and
associated companies ......................................... 196,032
Customers' liability to this bank on acceptances
outstanding .................................................. 895,160
Intangible assets ............................................... 1,127,375
Other assets .................................................... 1,915,742
Total assets .................................................... $ 60,077,664
</TABLE>
<PAGE> 5
<TABLE>
<S> <C>
LIABILITIES
Deposits:
In domestic offices .......................................... $ 27,020,578
Noninterest-bearing .......................................... 11,271,304
Interest-bearing ............................................. 15,749,274
In foreign offices, Edge and Agreement
subsidiaries, and IBFs ..................................... 17,197,743
Noninterest-bearing .......................................... 103,007
Interest-bearing ............................................. 17,094,736
Federal funds purchased and Securities sold under
agreements to repurchase ..................................... 1,761,170
Demand notes issued to the U.S. Treasury ........................ 125,423
Trading liabilities ............................................. 1,625,632
Other borrowed money:
With remaining maturity of one year or less .................. 1,903,700
With remaining maturity of more than one year
through three years ........................................ 0
With remaining maturity of more than three years ............. 31,639
Bank's liability on acceptances executed and
outstanding .................................................. 900,390
Subordinated notes and debentures ............................... 1,308,000
Other liabilities ............................................... 2,708,852
Total liabilities ............................................... 54,583,127
EQUITY CAPITAL
Common stock .................................................... 1,135,284
Surplus ......................................................... 764,443
Undivided profits and capital reserves .......................... 3,542,168
Net unrealized holding gains (losses) on
available-for-sale securities ................................ 82,367
Cumulative foreign currency translation adjustments ............. (29,725)
Total equity capital ............................................ 5,494,537
Total liabilities and equity capital ............................ $ 60,077,664
</TABLE>
I, Thomas J. Mastro, Senior Vice President and Comptroller of the
above-named bank do hereby declare that this Report of Condition has been
prepared in conformance with the instructions issued by the Board of Governors
of the Federal Reserve System and is true to the
<PAGE> 6
best of my knowledge and belief.
Thomas J. Mastro
We, the undersigned directors, attest to the correctness of this Report
of Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
Directors
Thomas A. Reyni
Gerald L. Hassell
Alan R. Griffith
- --------------------------------------------------------------------------------
