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SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, For Use of the Commission
Only
[X] Definitive Proxy Statement (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
BROWNING-FERRIS INDUSTRIES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
N/A
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[ ] Fee computed below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[X] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
[BROWNING-FERRIS INDUSTRIES LOGO]
BROWNING-FERRIS INDUSTRIES, INC.
P.O. BOX 3151
HOUSTON, TEXAS 77253
June 14, 1999
TO OUR STOCKHOLDERS:
You are cordially invited to attend a special meeting of stockholders of
Browning-Ferris Industries, Inc. to be held on July 14, 1999, at 8:30 a.m.,
local time, in the company's auditorium located on the 14th floor of the
corporate offices at 757 N. Eldridge, Houston, Texas.
At the special meeting you will be asked to consider and vote upon a
proposal to approve a merger between BFI and Allied Waste Industries, Inc. If
the merger is completed, BFI will become a subsidiary of Allied Waste, and you
will receive $45.00 in cash for each of your shares of BFI common stock.
Your Board of Directors has determined that the merger is advisable, fair
to and in the best interests of BFI and its stockholders. ACCORDINGLY, YOUR
BOARD HAS APPROVED THE MERGER AGREEMENT AND RECOMMENDS THAT YOU VOTE FOR THE
APPROVAL OF THE MERGER AT THE SPECIAL MEETING. Officers and directors have
interests in the merger that are different from, or in addition to, their
interests as BFI stockholders, including with respect to the receipt of certain
payments, which may create possible conflicts of interest. These interests are
summarized in the section entitled "The Merger -- Interests of Certain Persons
in the Merger; Possible Conflicts of Interest" in the accompanying proxy
statement.
The accompanying notice of meeting and proxy statement explain the proposed
merger and provide specific information concerning the special meeting. Please
read these materials carefully.
We cannot complete the merger unless holders of a majority of the
outstanding shares of BFI common stock vote to approve it. Whether or not you
plan to be present at the special meeting, please sign and return your proxy as
soon as possible in the enclosed self-addressed envelope so that your vote will
be recorded. You can also vote your shares of BFI common stock through the
Internet or by telephone. Details are outlined on the enclosed proxy card. Your
vote is very important.
/s/ William D. Ruckelshaus
William D. Ruckelshaus
Chairman of the Board of Directors
This proxy statement is dated June 14, 1999 and is first being mailed to
stockholders on or about June 15, 1999.
<PAGE> 3
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON JULY 14, 1999
To the Stockholders of
Browning-Ferris Industries, Inc.:
Notice is hereby given that a special meeting of stockholders of
Browning-Ferris Industries, Inc., a Delaware corporation, will be held on July
14, 1999, at 8:30 a.m., local time, in the company's auditorium located on the
14th floor of the corporate offices at 757 N. Eldridge, Houston, Texas for the
following purposes:
- To consider and vote upon a proposal to approve and adopt the Agreement
and Plan of Merger, dated as of March 7, 1999, as amended and restated on
May 21, 1999, among BFI, Allied Waste Industries, Inc. and AWIN I
Acquisition Corporation, and to approve the related merger, pursuant to
which AWIN I Acquisition Corporation will be merged into BFI and each
share of BFI common stock, par value $0.16 2/3, outstanding immediately
prior to the merger (other than shares held by BFI, Allied Waste or their
respective subsidiaries, which will be canceled, and other than shares
with respect to which appraisal rights are perfected) will be converted
into the right to receive $45.00 in cash, without interest.
- To transact such other business as may properly come before the special
meeting or any adjournment or postponement of the special meeting.
Under Delaware law, appraisal rights will be available to BFI stockholders
who do not vote in favor of the merger. In order to exercise such appraisal
rights, BFI stockholders must follow the procedures required by Delaware law,
which are summarized under "Appraisal Rights" in the accompanying proxy
statement.
Only those persons who were holders of record of BFI common stock at the
close of business on June 2, 1999, will be entitled to notice of, and to vote
at, the special meeting and any adjournment or postponement of the special
meeting.
By Order of the Board of Directors,
/s/ Edward C. Norwood
Edward C. Norwood
Vice President and Secretary
Houston, Texas
June 14, 1999
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C>
Questions and Answers About the Merger...................... 1
Forward-Looking Statements.................................. 3
Summary..................................................... 4
The Companies............................................. 4
The Special Meeting....................................... 4
The Merger................................................ 5
Appraisal Rights.......................................... 8
Market Prices of BFI Common Stock......................... 8
The Companies............................................... 9
Browning-Ferris Industries, Inc........................... 9
Allied Waste Industries, Inc.............................. 9
AWIN I Acquisition Corporation............................ 9
Recent Transaction........................................ 9
The Special Meeting......................................... 10
General................................................... 10
Record Date and Voting.................................... 10
Required Vote............................................. 10
Proxies; Revocation....................................... 10
Adjournments or Postponements............................. 11
The Merger.................................................. 12
Background of the Merger.................................. 12
BFI's Reasons for the Merger; Recommendation of the BFI
Board.................................................. 14
Preliminary Report of A.T. Kearney........................ 16
Opinion of Goldman Sachs.................................. 17
Retention of Financial Advisers........................... 21
Certain Financial Projections............................. 22
Material Federal Income Tax Consequences.................. 23
Governmental and Regulatory Approvals..................... 24
Accounting Treatment...................................... 24
Merger Financing.......................................... 25
Interests of Certain Persons in the Merger; Possible
Conflicts of Interest.................................. 27
Indemnification of Directors and Officers................. 29
Amendment to BFI Rights Agreement......................... 29
The Merger Agreement........................................ 30
Structure and Effective Time.............................. 30
Merger Consideration...................................... 30
Payment Procedures........................................ 30
Treatment of BFI Stock Options............................ 30
Directors and Officers.................................... 30
Representations and Warranties............................ 31
Covenants; Conduct of the Business of BFI Prior to the
Merger................................................. 31
No Solicitation of Acquisition Transactions............... 33
Employee Benefits......................................... 33
Best Efforts; Antitrust Matters........................... 35
Indemnification........................................... 36
Conditions to the Merger.................................. 36
</TABLE>
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<TABLE>
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PAGE
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<S> <C>
Termination or Amendment.................................. 38
Termination Fees.......................................... 38
Expenses.................................................. 40
Amendment................................................. 40
Appraisal Rights............................................ 40
Security Ownership of Management............................ 43
Security Ownership of Certain Beneficial Owners............. 44
Selected Financial Data of BFI.............................. 45
Market Price of BFI Common Stock and Dividend Information... 46
Independent Public Accountants.............................. 46
Stockholder Proposals....................................... 46
Where You Can Find More Information......................... 47
Incorporation of Certain Documents by Reference............. 47
APPENDICES
Appendix A -- Agreement and Plan of Merger, dated as of
March 7, 1999, as amended and restated on May 21, 1999.... A-1
Appendix B -- Opinion of Goldman, Sachs & Co................ B-1
Appendix C -- Section 262 of the Delaware General
Corporation Law........................................... C-1
</TABLE>
ii
<PAGE> 6
QUESTIONS AND ANSWERS ABOUT THE MERGER
The following questions and answers are intended to address briefly some
commonly asked questions regarding the merger. These questions and answers may
not address all questions that may be important to you as a BFI stockholder.
Please refer to the more detailed information contained elsewhere in this proxy
statement, the appendices to this proxy statement and the documents referred to
or incorporated by reference in this proxy statement.
Q. WHAT IS THE PROPOSED TRANSACTION?
A. Allied Waste will acquire BFI by merging a subsidiary of Allied Waste into
BFI.
Q. WHY IS THE BFI BOARD OF DIRECTORS RECOMMENDING THE MERGER?
A. The BFI Board believes that the merger is fair to and in the best interests
of BFI and its stockholders. The BFI Board received an opinion from Goldman,
Sachs & Co. that, as of March 7, 1999, and based on and subject to the
matters set forth in that opinion, the $45.00 per share in cash to be
received by holders of BFI common stock pursuant to the merger agreement was
fair from a financial point of view to such holders. To review the BFI
Board's reasons for recommending the merger, see pages 14 through 16. Also,
some members of the BFI Board have additional interests in the merger which
may create possible conflicts of interest as discussed on pages 27 through
29.
Q. IF THE MERGER IS COMPLETED, WHAT WILL I RECEIVE FOR MY BFI COMMON STOCK?
A. You will receive $45.00 in cash, without interest, for each share of BFI
common stock you own.
Q. WHO IS ENTITLED TO VOTE AT THE SPECIAL MEETING?
A. Holders of record of BFI common stock as of the close of business on June 2,
1999 are entitled to vote at the special meeting. Each BFI stockholder has
one vote for each share of BFI common stock owned.
Q. WHAT VOTE IS REQUIRED FOR THE BFI STOCKHOLDERS TO APPROVE THE MERGER?
A. In order for the merger to be approved, holders of a majority of the
outstanding BFI common stock must vote FOR the merger.
Q. WHAT DO I NEED TO DO NOW?
A. After carefully reading and considering the information contained in this
proxy statement, please vote your shares of BFI common stock as soon as
possible. You may vote your shares (1) by returning the enclosed proxy, (2)
through the Internet or by phone, as outlined on the enclosed proxy card, or
(3) by appearing at the special meeting of stockholders. Your proxy materials
include detailed information on how to vote.
Q. IF MY SHARES ARE HELD FOR ME BY MY BROKER, WILL MY BROKER VOTE THOSE SHARES
FOR ME?
A. Your broker will vote your shares only if you provide instructions to your
broker on how to vote. You should instruct your broker on how to vote your
shares, using the instructions provided by your broker.
Q. CAN I CHANGE MY VOTE AFTER I HAVE MAILED MY PROXY CARD?
A. Yes. You can change your vote at any time before your proxy is voted at the
special meeting. You may revoke your proxy by notifying the Secretary of BFI
in writing or by submitting a new proxy, in each case, dated after the date
of the proxy being revoked. In addition, your proxy may be revoked by
attending the special meeting and voting in person. However, simply attending
the special meeting will not revoke your proxy. If you have instructed a
broker to vote your shares, you must follow the instructions received from
your broker to change your vote.
Q. DO I NEED TO ATTEND THE SPECIAL MEETING IN PERSON?
A. No. It is not necessary for you to attend the special meeting in order to
vote your shares, although you are welcome to attend.
1
<PAGE> 7
Q. WILL I HAVE THE RIGHT TO HAVE MY SHARES APPRAISED IF I DISSENT FROM THE
MERGER?
A. Yes. You will have appraisal rights. If you wish to exercise your appraisal
rights you must not vote in favor of the merger and you must strictly follow
the other requirements of Delaware law. A summary describing the requirements
you must meet in order to exercise your appraisal rights is in the section
entitled "Appraisal Rights" on pages 40 through 42 of this proxy statement.
Q. WHEN IS THE MERGER EXPECTED TO BE COMPLETED?
A. We are working toward completing the merger as quickly as possible. The
merger cannot be completed until a number of conditions are satisfied. The
most important conditions are approval by BFI stockholders at the special
meeting and compliance with United States federal antitrust laws. Allied
Waste and BFI filed premerger notifications with the United States antitrust
authorities and received requests for additional information pursuant to the
Hart-Scott-Rodino Antitrust Improvements Act of 1976.
Q. SHOULD I SEND IN MY BFI STOCK CERTIFICATES NOW?
A. No. After the merger is completed, Allied Waste will send you written
instructions for exchanging your BFI stock certificates. You must return your
BFI stock certificate as described in the instructions. You will receive your
cash payment as soon as practicable after Allied Waste receives your BFI
stock certificates, together with the documents requested in the
instructions.
Q. WILL I OWE TAXES AS A RESULT OF THE MERGER?
A. The merger will be a taxable transaction for all holders of BFI common stock.
As a result, the cash you receive in the merger for your shares of BFI common
stock and any cash you receive from exercising your appraisal rights will be
subject to United States federal income tax and also may be taxed under
applicable state, local, and other tax laws. In general, you will recognize
gain or loss equal to the difference between (1) the amount of cash you
receive (other than cash that represents interest you receive in connection
with the exercise of appraisal rights) and (2) the tax basis of your shares
of BFI common stock. Refer to the section entitled "The Merger -- Material
Federal Income Tax Consequences" on pages 23 and 24 of this proxy statement
for a more detailed explanation of the tax consequences of the merger. You
should consult your tax advisor on how specific tax consequences of the
merger apply to you.
Q. WHAT OTHER MATTERS WILL BE VOTED ON AT THE SPECIAL MEETING?
A. BFI does not expect to ask stockholders to vote on any other matter at the
special meeting.
Q. WHERE CAN I FIND MORE INFORMATION ABOUT BFI AND ALLIED WASTE?
A. Both BFI and Allied Waste file periodic reports and other information with
the Securities and Exchange Commission. You may read and copy this
information at the Securities and Exchange Commission's public reference
facilities. Please call the Securities and Exchange Commission at
1-800-SEC-0330 for information about these facilities. This information is
also available at the Internet site maintained by the SEC at
http://www.sec.gov and at the offices of the New York Stock Exchange. For a
more detailed description of the information available, please see page 47.
Q. WHO CAN HELP ANSWER MY QUESTIONS?
A. If you have questions about the merger after reading this proxy statement,
you should contact Morrow & Co., Inc. at (800) 566-9061.
2
<PAGE> 8
FORWARD-LOOKING STATEMENTS
This proxy statement includes and incorporates by reference statements that
are not historical facts. These statements are "forward-looking statements" (as
defined in the Private Securities Litigation Reform Act of 1995) based on our
current plans and expectations relating to analyses of value, expectations for
anticipated growth in the future and future success under various efforts, and,
as such, these forward-looking statements involve uncertainty and risk. These
forward-looking statements are contained in the sections entitled "Summary" and
"The Merger," and other sections of this proxy statement. These forward-looking
statements should be read in conjunction with the "Regulation," "Competition,"
and "Waste Disposal Risk Factors" sections of our Annual Report on Form 10-K for
the year ended September 30, 1998, which sections describe many of the external
factors that could cause our actual results to differ materially from our
expectations. Our Form 10-K is on file with the Securities and Exchange
Commission, a copy of which is available without charge upon written request to:
Browning-Ferris Industries, Inc., P.O. Box 3151, Houston, Texas 77253,
Attention: Assistant Corporate Secretary. In addition, actual results could
differ materially from the forward-looking statements contained in this proxy
statement because of many factors, such as the completion and impact of the
merger on operating results and capital resources, the impact on profitability
from economic and market conditions, and the impact on cash requirements and
liquidity.
Other factors and assumptions not identified above could also cause the
actual results to differ materially from those set forth in the forward-looking
statements. We do not undertake any obligation to update the forward-looking
statements contained or incorporated in this proxy statement to reflect actual
results, changes in assumptions, or changes in other factors affecting these
forward-looking statements.
All information contained in this proxy statement with respect to Allied
Waste, Merger Sub and the financing for the merger has been supplied by Allied
Waste.
3
<PAGE> 9
SUMMARY
This summary highlights selected information from this proxy statement and
may not contain all of the information that is important to you as a BFI
stockholder. Accordingly, we encourage you to carefully read this entire
document and the documents to which we have referred you.
THE COMPANIES (PAGE 9)
BROWNING-FERRIS INDUSTRIES, INC.
757 N. Eldridge
Houston, Texas 77079
(281) 870-8100
We are one of the largest publicly held companies that engages, through our
subsidiaries and affiliates, in providing waste services in the United States
and Canada. We collect, transport, treat and/or process, recycle, and dispose of
commercial, residential and municipal solid wastes, and industrial wastes. We
are also involved in waste-to-energy conversion, medical waste services,
portable restroom services, and municipal and commercial sweeping operations. We
also engage in providing waste services outside North America, principally in
Europe, through our equity ownership in SITA, a publicly traded, Paris-based
subsidiary of Suez Lyonnaise des Eaux.
ALLIED WASTE INDUSTRIES, INC.
15880 North Greenway-Hayden Loop
Suite 100
Scottsdale, Arizona 85260
(602) 423-2946
Allied Waste is a vertically integrated solid waste management company,
providing, through its subsidiaries, non-hazardous waste collection, transfer,
recycling and disposal services to approximately 2.4 million residential,
municipal and commercial customers located in 28 states, primarily in the
Midwest, Northeast, Southeast, Northwest and Southwest United States.
AWIN I ACQUISITION CORPORATION
15880 North Greenway-Hayden Loop
Suite 100
Scottsdale, Arizona 85260
(602) 423-2946
AWIN I Acquisition Corporation is a wholly owned subsidiary of Allied Waste
formed solely for the purpose of effecting the merger with BFI.
THE SPECIAL MEETING
DATE, TIME AND PLACE (PAGE 10)
The special meeting will be held on July 14, 1999, at 8:30 a.m., local time
at the company's auditorium located on the 14th floor of the corporate offices
at 757 N. Eldridge, Houston, Texas.
PURPOSE (PAGE 10)
You will be asked to consider and vote upon a proposal to approve the
merger agreement. The merger agreement provides that a subsidiary of Allied
Waste will be merged into BFI and each outstanding share of BFI common stock
will be converted into the right to receive $45.00 in cash, without interest.
However, you will have the right to demand appraisal rights and receive the fair
market value of your shares as determined under Delaware law. Shares held by
BFI, Allied Waste or any of their respective subsidiaries will be canceled.
The persons named in the accompanying proxy also will have discretionary
authority to vote upon other business, if any, that properly comes before the
special meeting and any adjournments or postponements of the special meeting,
including any adjournments or postponements for the purpose of soliciting
additional proxies to approve the merger.
RECORD DATE AND VOTING POWER (PAGE 10)
You are entitled to vote at the special meeting if you owned shares of BFI
common stock at the close of business on June 2, 1999, the record date for the
special meeting. You will have one vote for each share of BFI common stock you
owned on the record date. There are 156,959,678 shares of BFI common stock
entitled to be voted.
VOTE REQUIRED (PAGE 10)
Approval of the merger requires the affirmative vote of the holders of a
majority of the outstanding shares of BFI common stock.
4
<PAGE> 10
SHARE OWNERSHIP OF DIRECTORS AND EXECUTIVE
OFFICERS (PAGE 43)
As of June 10, 1999, the directors and executive officers of BFI owned less
than 1% of the shares of BFI common stock entitled to vote at the special
meeting. Each of them has advised us that he or she plans to vote all of their
shares in favor of approval of the merger.
VOTING AND PROXIES (PAGE 10)
Any BFI stockholder entitled to vote may vote (1) by returning the enclosed
proxy, (2) through the Internet or by phone as outlined on the enclosed proxy
card, or (3) by appearing at the special meeting.
REVOCABILITY OF PROXY (PAGE 10)
Any BFI stockholder who executes and returns a proxy may revoke that proxy
at any time before it is voted in any one of the following three ways:
- filing with the Secretary of BFI, at or before the special meeting, a
written notice of revocation which is dated a later date than the proxy;
- sending a later-dated proxy relating to the same shares to the Secretary
of BFI, at or before the special meeting; or
- attending the special meeting and voting in person by ballot.
Simply attending the special meeting will not constitute revocation of a
proxy.
BFI'S RECOMMENDATION TO STOCKHOLDERS (PAGE 14)
Your Board of Directors has approved the merger agreement, and determined
that the merger is advisable, fair to and in the best interests of BFI and its
stockholders. Your Board recommends that stockholders vote FOR approval of the
merger at the special meeting. Officers and directors have interests in the
merger that are different from, or in addition to, their interests as BFI
stockholders, including with respect to the receipt of certain payments, which
may create possible conflicts of interest. These interests are summarized under
"The Merger -- Interests of Certain Persons in the Merger; Possible Conflicts of
Interest."
THE MERGER
STRUCTURE OF THE MERGER (PAGE 30)
Upon the terms and conditions of the merger agreement, AWIN I Acquisition
Corporation, a wholly owned subsidiary of Allied Waste, will be merged with and
into BFI. BFI will remain in existence as a wholly owned subsidiary of Allied
Waste.
MERGER CONSIDERATION (PAGE 30)
Upon completion of the merger, each share of BFI common stock will be
converted into the right to receive $45.00 in cash, without interest. Treasury
shares, shares held by BFI's subsidiaries, Allied Waste and Allied Waste's
subsidiaries, and shares with respect to which appraisal rights are perfected
will not be converted into the right to receive $45.00 per share merger
consideration.
CLOSING OF THE MERGER (PAGE 36)
Before we can complete the merger, we must satisfy a number of conditions.
These include:
- approval of the merger agreement by holders of a majority of the
outstanding shares of BFI common stock;
- expiration or early termination of applicable time period under United
States federal antitrust laws;
- the absence of any legal prohibitions against the merger;
- material compliance with our representations and agreements under the
merger agreement;
- receipt of material consents and approvals; and
- receipt of an opinion from an independent appraisal firm as to the
solvency of Allied Waste after giving effect to the merger.
We expect to merge shortly after all of the conditions to the merger have
been satisfied or waived. We expect to complete the merger in the third quarter
of 1999, but we cannot be certain when or if the conditions will be satisfied or
waived.
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<PAGE> 11
EXCHANGE PROCEDURES (PAGE 30)
The exchange agent will mail a letter of transmittal with instructions to
all record holders of BFI common stock as of the time of the completion of the
merger. YOU SHOULD NOT SURRENDER YOUR CERTIFICATES UNTIL YOU HAVE RECEIVED THE
LETTER OF TRANSMITTAL AND INSTRUCTIONS.
TREATMENT OF BFI STOCK OPTIONS (PAGE 30)
The merger agreement provides that all outstanding BFI stock options issued
pursuant to BFI's stock option plans will be canceled upon completion of the
merger. Each holder of an option will receive an amount in cash equal to the
excess of $45.00 over the exercise price for each share covered by an option,
less applicable withholding taxes. As of June 10, 1999, 17,209,112 shares of BFI
common stock were issuable upon exercise of outstanding BFI stock options at a
weighted average exercise price of $29.62.
OPINION OF GOLDMAN SACHS (PAGE 17 AND APPENDIX B)
Goldman, Sachs & Co. has delivered its opinion dated March 7, 1999, to the
BFI Board to the effect that, as of the date of the opinion, and based on and
subject to the matters set forth in that opinion, the $45.00 per share in cash
to be received by holders of BFI common stock pursuant to the merger agreement
was fair from a financial point of view to such holders. The opinion is not a
recommendation on how any BFI stockholder should vote with respect to the
approval of the merger. A copy of the opinion is attached to this proxy
statement as Appendix B. You are urged to read the Goldman Sachs fairness
opinion in its entirety.
MERGER FINANCING (PAGE 25)
It is expected that Allied Waste will need approximately $9 billion in
order to complete the merger. This includes payments to be made to BFI
stockholders and holders of BFI stock options, payments under BFI employee
benefit plans and contracts, refinancing of BFI and Allied Waste indebtedness,
and payment of fees and expenses. Allied Waste has received commitments from The
Chase Manhattan Bank, Citicorp USA, Inc. and DLJ Capital Funding, Inc. for $9.5
billion in debt financing. The proceeds of this financing will be used for these
purposes as well as to provide working capital for Allied Waste following the
merger. In addition, Allied Waste has received commitments from a group led by
affiliates of certain stockholders of Allied Waste to purchase $1 billion of
convertible preferred stock in order to provide funds for the merger. The bank
and equity commitments are subject to conditions. However, Allied Waste's
obligation to complete the merger is not subject to a financing condition.
Allied Waste's liability to BFI for failure to complete the merger may be
limited under certain circumstances. See "The Merger Agreement -- Termination or
Amendment" and "-- Termination Fees."
TERMINATION OF THE MERGER AGREEMENT (PAGE 38)
BFI and Allied Waste may agree in writing to terminate the merger agreement
at any time without completing the merger, even after the stockholders of BFI
have approved it. The merger agreement may also be terminated at any time prior
to the effective time of the merger, in certain circumstances, including:
- if the merger is not completed by September 15, 1999, which date will be
automatically extended to December 31, 1999 if, on September 15, 1999,
the merger has not received the necessary antitrust approvals;
- if any court or governmental agency issues a final order preventing the
merger;
- if the other party to the merger agreement materially breaches its
representations or agreements and fails to cure its breach in 30 days;
- if the BFI Board changes its recommendation of the merger agreement or
approves a more favorable proposal that it believes is reasonably likely
to be completed; and
- if BFI stockholders fail to approve the merger at the special meeting.
TERMINATION FEES IF MERGER NOT COMPLETED (PAGE 38)
We must pay Allied Waste a termination fee of $225 million if the merger
agreement is terminated:
- because the BFI Board changes its recommendation of the merger or
approves a more favorable proposal; or
- the BFI stockholders fail to approve the merger agreement, if (1) a third
party pro-
6
<PAGE> 12
poses an acquisition of BFI prior to the BFI special meeting, and (2)
within nine months following the termination of the merger agreement BFI
is acquired by that third party or any other person who makes an
acquisition proposal within 90 days after the merger agreement is
terminated.
Allied Waste must pay us a termination fee of $225 million if the merger
agreement is terminated because the merger is not completed by September 15,
1999 or December 31, 1999, as the case may be, or because the merger is
prohibited by a final order or ruling of a governmental authority, and, in
either case, at the time of termination all conditions to Allied Waste's
obligation to complete the merger, other than conditions relating to antitrust
matters, have been satisfied.
Allied Waste also must pay us a termination fee of $225 million if the
merger agreement is terminated because the merger is not completed by September
15, 1999 or December 31, 1999, as the case may be, and at that time:
- Allied Waste has not received sufficient funds to complete the merger
under the financing commitments obtained in connection with the merger
agreement;
- all conditions to Allied Waste's obligation to complete the merger have
been satisfied, other than conditions relating to antitrust or
competition matters; and
- We are not in breach of any of our representations or agreements set
forth in the merger agreement, except for breaches that did not prevent
Allied Waste from obtaining funds under the definitive agreement relating
to the debt financing for the merger.
Allied Waste's liability to us for failing to complete the merger may be
limited to payment of the $225 million termination fee under certain
circumstances.
INTERESTS OF CERTAIN PERSONS IN THE MERGER;
POSSIBLE CONFLICTS OF INTEREST (PAGE 27)
Officers and directors have interests in the merger that are different
from, or in addition to, their interests as BFI stockholders. These interests
include:
- all of our officers and directors hold vested and unvested BFI stock
options to acquire BFI common stock; the merger agreement provides that
all outstanding BFI stock options will be canceled at the time of the
merger in exchange for a cash payout equal to the difference between the
$45.00 merger consideration and the exercise price of the BFI stock
options;
- under the terms of their respective employment agreements with BFI and
the merger agreement, all our corporate officers and one director who is
a former officer will be entitled to receive specified payments upon
completion of the merger;
- pursuant to the merger agreement, BFI's Deferred Compensation Plan,
Grandfathered Benefit Restoration Plan and Benefit Restoration Plan will
be terminated at the effective time of the merger and the beneficiaries
of those plans, which include our officers and two directors who are
former officers, will be paid their accrued balances under those plans;
- under the terms of BFI's Annual Management Incentive Plan and Long-Term
Incentive Plan, the completion of the merger will cause an acceleration
of benefits payable under these plans; and
- under the merger agreement, our officers and directors will be
indemnified by Allied Waste and BFI against certain liabilities, and
Allied Waste will maintain in effect directors' and officers' liability
insurance on behalf of those directors and officers.
As of June 10, 1999, the directors and officers together owned a total of
1,227,971 shares of BFI common stock. In addition to the $45.00 they will
receive for each of these shares, these directors and officers will all together
receive the following payments:
<TABLE>
<CAPTION>
SOURCE AMOUNT
- ------ -----------
<S> <C>
Severance..................... $24,536,000
Annual Management Incentive
Plan and Long-Term Incentive
Plan........................ $44,077,000
Stock Options................. $61,806,000
</TABLE>
REGULATORY MATTERS (PAGE 24)
Under the provisions of the Hart-Scott-Rodino Act of 1976, as amended, the
merger may not be
7
<PAGE> 13
completed until Allied Waste and BFI have made filings with the Federal Trade
Commission and the United States Department of Justice and the applicable
waiting periods have expired or been terminated. On March 23, 1999, Allied Waste
and BFI filed notification reports under the HSR Act with the Federal Trade
Commission and the Department of Justice. A request for additional information
and other documentary materials was issued by the Department of Justice on April
22, 1999. Under the HSR Act, the merger may not be completed until 20 days after
substantial compliance with the request by both parties, unless the 20-day
period is earlier terminated by the Department of Justice. We cannot assure you
that a challenge to the merger on antitrust grounds will not be made or, if such
a challenge is made, of the result. Under the merger agreement, Allied Waste has
agreed to offer to take (and if its offer is accepted, commit to take) all steps
that it is capable of taking to avoid or eliminate impediments under any
antitrust laws asserted by any governmental entity to enable the merger to be
completed by September 15, 1999.
ACCOUNTING TREATMENT (PAGE 24)
The merger will be treated as a "purchase" for accounting purposes.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES (PAGE 23)
The merger will be a taxable transaction to you. For United States federal
income tax purposes, you will generally recognize gain or loss in the merger in
an amount determined by the difference between the cash you receive (other than
cash that represents interest you receive in connection with the exercise of
appraisal rights) and your tax basis in BFI common stock. Because determining
the tax consequences of the merger can be complicated, you should consult your
own tax advisor in order to understand fully how the merger will affect you.
APPRAISAL RIGHTS (PAGE 40
AND APPENDIX C)
Under Delaware law, BFI stockholders who do not vote for approval of the
merger and who comply with the other statutory requirements of the Delaware
General Corporation Law may elect to receive, in cash, the judicially determined
fair value of their shares of stock in lieu of the $45.00 merger consideration.
MARKET PRICE OF BFI COMMON
STOCK (PAGE 46)
Our common stock is traded on the New York Stock Exchange under the symbol
"BFI." On March 5, 1999, the last full trading day prior to the public
announcement of the merger agreement, the closing price of BFI common stock as
reported on the New York Stock Exchange Composite Transactions Tape was $34 3/4.
On June 11, 1999, the last full trading day prior to the date of this proxy
statement, the closing price for BFI common stock as reported on the New York
Stock Exchange Composite Transactions Tape was $42 11/16.
8
<PAGE> 14
THE COMPANIES
BROWNING-FERRIS INDUSTRIES, INC.
We are one of the largest publicly held companies that engages, through our
subsidiaries and affiliates, in providing waste services in the United States
and Canada. We collect, transport, treat and/or process, recycle, and dispose of
commercial, residential and municipal solid wastes, and industrial wastes. We
are also involved in waste-to-energy conversion, medical waste services,
portable restroom services, and municipal and commercial sweeping operations. We
also engage in providing waste services outside North America, principally in
Europe, through our minority equity interest in SITA, a publicly traded,
Paris-based subsidiary of Suez Lyonnaise des Eaux. We operate in approximately
450 locations in the United States, Canada and Puerto Rico, and employ
approximately 26,000 persons. We are a Delaware corporation and were
incorporated in 1970. Our executive offices are located at 757 N. Eldridge,
Houston, Texas 77079, telephone (281) 870-8100.
ALLIED WASTE INDUSTRIES, INC.
Allied Waste is a vertically integrated solid waste management company,
providing, through its subsidiaries, non-hazardous waste collection, transfer,
recycling and disposal services to approximately 2.4 million residential,
municipal and commercial customers located in 28 states, primarily in the
Midwest, Northeast, Southeast, Northwest and Southwest United States. As of
November 30, 1998, Allied Waste conducted its operations through 114 collection
companies, 72 transfer stations, 26 recycling facilities, and 72 landfills.
Allied Waste is a Delaware corporation that was incorporated in 1989. Allied
Waste's executive offices are located at 15880 North Greenway-Hayden Loop, Suite
100, Scottsdale, Arizona 85260, telephone (602) 423-2946.
AWIN I ACQUISITION CORPORATION
AWIN I Acquisition Corporation ("Merger Sub") is a Delaware corporation
formed by Allied Waste in 1998 solely for the purpose of merging into BFI.
Merger Sub is a wholly owned subsidiary of Allied Waste. The mailing address of
Merger Sub's principal executive offices is c/o Allied Waste Industries, Inc.,
15880 North Greenway-Hayden Loop, Suite 100, Scottsdale, Arizona 85260,
telephone (602) 423-2946.
RECENT TRANSACTION
On April 9, 1999, BFI and Allied Waste completed the simultaneous purchase
and sale of certain solid waste services assets, including customer contracts,
equipment and facilities, representing approximately $120 million in acquired
revenues to each party pursuant to agreements executed on February 12, 1999. BFI
sold to Allied Waste certain waste services assets located in northern New
Jersey, midtown Chicago, St. Louis, Contra Costa County, California and Branson,
Missouri, and Allied Waste sold to BFI certain waste services assets located in
Boston, Atlanta, Chicago, and Dayton, Toledo, Youngstown, Bellefontaine and
Celina, Ohio. BFI reported for the quarter ended March 31, 1999 a charge of $10
million, $6.5 million net of income tax, arising from this transaction.
9
<PAGE> 15
THE SPECIAL MEETING
GENERAL
This proxy statement is being furnished to BFI stockholders as part of the
solicitation of proxies by the BFI Board for use at a special meeting to be held
on July 14, 1999, starting at 8:30 a.m., local time, in the company's auditorium
located on the 14th floor of the corporate offices at 757 N. Eldridge, Houston,
Texas. The purpose of the special meeting is for the BFI stockholders to
consider and vote upon a proposal to approve the Agreement and Plan of Merger,
dated as of March 7, 1999, as amended and restated on May 21, 1999, among BFI,
Allied Waste and Merger Sub and the related merger of Merger Sub with and into
BFI. A copy of the merger agreement is attached to this proxy statement as
Appendix A. This proxy statement and the enclosed form of proxy are first being
mailed to BFI stockholders on June 15, 1999.
RECORD DATE AND VOTING
The holders of record of BFI common stock as of the close of business on
June 2, 1999 are entitled to receive notice of, and to vote at, the special
meeting. On the record date, there were 156,959,678 shares of BFI common stock
outstanding.
The holders of a majority of the outstanding shares of BFI common stock on
June 2, 1999, represented in person or by proxy, will constitute a quorum for
purposes of the special meeting. A quorum is necessary to hold the special
meeting. Any shares of BFI common stock held in treasury by BFI or by any of its
subsidiaries are not considered to be outstanding for purposes of determining a
quorum. Once a share is represented at the special meeting, it will be counted
for the purpose of determining a quorum at the special meeting and any
adjournment or postponement of the special meeting, unless the holder is present
solely to object to the special meeting. However, if a new record date is set
for the adjourned special meeting, then a new quorum will have to be
established.
REQUIRED VOTE
Each outstanding share of BFI common stock on June 2, 1999 entitles the
holder to one vote at the special meeting. Completion of the merger requires the
approval of the merger proposal by the affirmative vote of the holders of a
majority of the outstanding shares of BFI common stock. You must vote your
shares (1) by returning the enclosed proxy, (2) through the Internet or by
phone, as outlined on the enclosed proxy card, or (3) by appearing at the
special meeting in order for your shares of BFI common stock to be included in
the vote. As of June 10, 1999, the directors and executive officers of BFI
owned, in the aggregate, 1,091,612 shares of BFI common stock, or less than 1%
of the outstanding shares of BFI common stock on that date. The directors and
executive officers have informed BFI that they intend to vote all of their
shares of BFI common stock FOR the merger proposal.
Under the rules of the New York Stock Exchange, Inc., brokers who hold
shares in street name for customers have the authority to vote on "routine"
proposals when they have not received instructions from beneficial owners. Under
the rules of the New York Stock Exchange, brokers are precluded from exercising
their voting discretion with respect to the approval of non-routine matters such
as the merger proposal and thus, absent specific instructions from the
beneficial owner of such shares, brokers are not empowered to vote such shares
with respect to the approval of such proposals (i.e., "broker non-votes").
Abstentions and properly executed broker non-votes will be treated as shares
that are present and entitled to vote at the special meeting for purposes of
determining whether a quorum exists and will have the same effect as votes
against approval of the merger proposal.
PROXIES; REVOCATION
If you vote your shares of BFI common stock by signing a proxy, your shares
will be voted at the special meeting as you indicate on your proxy card. If no
instructions are indicated on your signed proxy card, your shares of BFI common
stock will be voted FOR the approval of the merger. If you vote your shares of
BFI
10
<PAGE> 16
common stock through the Internet or by telephone, your shares will be voted at
the special meeting as instructed.
You may revoke your proxy at any time before the proxy is voted at the
special meeting. A proxy may be revoked prior to the vote at the special meeting
by submitting a written revocation to the Secretary of BFI at 757 N. Eldridge,
Houston, Texas 77079 or by submitting a new proxy, in either case, dated after
the date of the proxy that is being revoked. In addition, a proxy may also be
revoked by voting in person at the special meeting. However, simply attending
the special meeting will not revoke a proxy.
Your Board is not currently aware of any other business to be brought
before the special meeting. If, however, other matters are properly brought
before the special meeting or any adjournment or postponement of the special
meeting, the persons appointed as proxies will have discretionary authority to
vote the shares represented by duly executed proxies in accordance with their
discretion and judgment.
BFI and Allied Waste will share the costs associated with printing and
filing this proxy statement. BFI will pay the costs of soliciting proxies for
the special meeting. Officers and employees of BFI may solicit proxies by
telephone or in person. However, they will not be paid for soliciting proxies.
BFI also will request that persons and entities holding shares in their names or
in the names of their nominees that are beneficially owned by others send proxy
materials to and obtain proxies from those beneficial owners, and will reimburse
those holders for their reasonable expenses in performing those services. BFI
has retained Morrow & Co., Inc. to assist it in the solicitation of proxies,
using the means referred to above, at an anticipated cost of $14,000, plus
reimbursement of out-of-pocket expenses.
ADJOURNMENTS OR POSTPONEMENTS
Although it is not expected, the special meeting may be adjourned or
postponed for the purpose of soliciting additional proxies. Any adjournment or
postponement may be made without notice, other than by an announcement made at
the special meeting, by approval of the holders of a majority of the outstanding
shares of BFI common stock present in person or represented by proxy at the
special meeting, whether or not a quorum exists. Any signed proxies received by
BFI will be voted in favor of an adjournment or postponement in these
circumstances unless a written note on the proxy by the stockholder directs
otherwise. Any adjournment or postponement of the special meeting for the
purpose of soliciting additional proxies will allow BFI stockholders who have
already sent in their proxies to revoke them at any time prior to their use.
11
<PAGE> 17
THE MERGER
BACKGROUND OF THE MERGER
In February 1998, Thomas H. Van Weelden, President and Chief Executive
Officer of Allied Waste, requested a meeting with William D. Ruckelshaus,
Chairman of BFI. Mr. Van Weelden and Mr. Ruckelshaus met on February 17, 1998,
and Mr. Van Weelden raised the possibility of a business combination between
Allied Waste and BFI and described a general outline of such a combination. Mr.
Ruckelshaus advised Mr. Van Weelden that BFI was not for sale and that any
substantive discussions respecting a business combination should be conducted
with Bruce E. Ranck, President and Chief Executive Officer of BFI. Mr.
Ruckelshaus advised Mr. Ranck of his meeting with Mr. Van Weelden.
Mr. Van Weelden subsequently called Mr. Ranck in April 1998, and stated
that he was interested in discussing a business combination between Allied Waste
and BFI. Mr. Ranck advised Mr. Van Weelden that BFI was not interested in such a
combination but, if Allied Waste was interested in further discussions, it
should provide a written proposal for BFI to consider.
Subsequent to the conversation between Messrs. Van Weelden and Ranck, Mr.
Ranck formed, with the concurrence of the BFI Board, an informal group of BFI
Board members to assist him in considering any Allied Waste proposals. The group
included Gerald Grinstein, Gregory D. Brenneman, Marc J. Shapiro, and Robert M.
Teeter.
On June 3, 1998, Mr. Van Weelden left a phone message with Mr. Ranck
stating that a proposal from Allied Waste was being delivered that day. Later on
the same day a letter setting forth the proposal was delivered to BFI and each
of its directors. The proposal was for a merger in which the BFI stockholders
would receive 1.674 shares of Allied Waste common stock for each share of BFI
common stock, a value of $45.00 per BFI share of common stock based on the
Allied Waste common stock market price on June 3, 1998. Allied Waste's proposal
contemplated a fixed exchange ratio, which would cause the value of its offer to
change based upon changes in its stock price prior to completion of a
transaction. The BFI Board, together with certain officers of BFI and its
financial advisors, Goldman, Sachs & Co. and Morgan Stanley & Co. Incorporated,
met by telephone on June 4, 1998. Goldman Sachs and Morgan Stanley had been
retained in September 1996 as financial advisors on stockholder relations
matters, including assisting BFI in evaluating any unsolicited acquisition
proposals. In addition to Mr. Ranck, Messrs. J. Gregory Muldoon, Executive Vice
President and Chief Operating Officer, Norman A. Myers, Executive Vice President
and Chief Development Officer, Jeffrey E. Curtiss, Senior Vice President and
Chief Financial Officer, Rufus Wallingford, Senior Vice President and General
Counsel and Edward C. Norwood, Vice President and Corporate Secretary,
participated in the discussions. During the meeting the BFI Board decided
unanimously to reject the Allied Waste proposal as inadequate, particularly in
view of the risks associated with its all stock offer. This decision was
delivered in a letter dated June 5, 1998, from Mr. Ranck to Mr. Van Weelden.
At a regular quarterly meeting on September 2, 1998, the BFI Board created
the Strategic Industry Development Committee ("SID Committee"), consisting of
Mr. Grinstein as Chairman, Messrs. Brenneman and Teeter as members, and Mr.
Shapiro as an advisory member. The BFI Board authorized the SID Committee to
retain a management consulting firm to undertake a study of BFI's cost
structure, including its general and administrative costs. In November 1998, the
SID Committee selected A.T. Kearney, Inc., a nationally recognized management
consulting firm from among several management consulting firms which had
delivered proposals in response to a request from the SID Committee. A.T.
Kearney had not previously provided any services to BFI.
On November 12, 1998, BFI and Allied Waste announced an agreement in
principle to exchange certain collection and disposal properties. During the
course of negotiations on the exchange transaction, Larry Henk, Executive Vice
President and Chief Operating Officer of Allied Waste, expressed to Charles M.
Cooley, Jr., Vice President, Business Development of BFI, Allied Waste's
continuing interest in discussing a larger transaction with BFI.
12
<PAGE> 18
On January 22 through 23, 1999, the BFI Board held a special meeting to
consider BFI's performance and strategic alternatives. At that meeting BFI's
senior management outlined various alternatives for BFI, including a
continuation of the strategic plan set forth in BFI's 1998 Annual Report (which
emphasizes return on assets, internal growth, cost cutting and share buy-backs),
a sale of the company, and other reorganization alternatives involving
substantial reductions in force, incurring additional debt and pursuing more
aggressive acquisition strategies. In addition, the independent consultant
outlined its proposed time schedule for analysis of BFI's cost structure and
advised that it would present a preliminary report at the annual BFI Board
meeting to be held on March 3, 1999. The BFI Board deferred any strategic
decisions until presentation of the preliminary report from the independent
consultant.
In late January 1999, Mr. Van Weelden called Mr. Grinstein and requested a
meeting which occurred shortly thereafter in Seattle, Washington. At this
meeting Mr. Van Weelden described his background and experience in the solid
waste business. Mr. Van Weelden subsequently called Mr. Grinstein on February 5,
1999, and stated that Allied Waste, with the approval of its two largest
stockholders, was prepared to make an offer to BFI of $40.00 per share in cash.
Mr. Grinstein informed Mr. Van Weelden that he should discuss any proposals with
Mr. Ranck. Mr. Grinstein advised Mr. Ranck and the other members of the SID
Committee of his discussions with Mr. Van Weelden.
Mr. Henk called Mr. Myers on February 9, 1999, and requested a meeting to
discuss a possible business combination between BFI and Allied Waste. Messrs.
Ranck, Myers, Van Weelden and Henk met on February 15, 1999, in Dallas, Texas.
Messrs. Ranck and Myers stated that consideration of a combination was timely
for BFI because of the imminence of the preliminary report from the independent
consultant and the probability that BFI would adopt various strategies as a
result of that report that would commit it to an alternative course of action.
Mr. Ranck set forth certain fundamental factors and assumptions that Allied
Waste should consider in making a proposed offer, including the number of
outstanding shares of BFI common stock and BFI stock options on which to base an
offer, the estimated costs of certain accelerated contractual payments arising
from a change in control of BFI, the allocation of regulatory approval risks and
the necessity of an all cash offer and firm commitments for financing the offer.
The BFI Board considered an all cash offer to be beneficial to stockholders
because of the greater certainty cash provided over stock which fluctuates in
value between the time a transaction is negotiated and the time stockholders
receive the consideration following completion of the transaction. Messrs. Ranck
and Myers requested a response from Allied Waste by February 19. Messrs. Van
Weelden and Henk agreed to this time schedule.
On February 19, Messrs. Myers, Van Weelden and Henk had several telephone
conversations to discuss Allied Waste's proposal, in particular the per share
price Allied Waste was prepared to offer for BFI common stock. Although they did
not agree on a price, Mr. Ranck and Mr. Van Weelden agreed over the weekend of
February 20 to meet in New York, New York on February 24 to continue
discussions. On the morning of February 22, the BFI Board held an informal
telephonic meeting at which Mr. Ranck reported on the status of discussions with
Allied Waste.
On February 24 through 28, Messrs. Ranck and Myers, other members of BFI
management, and BFI's outside financial and legal advisors met in New York, New
York with Messrs. Van Weelden, Henk, other members of Allied Waste's management
and Allied Waste's outside financial and legal advisors, and representatives of
the proposed purchasers of debt and equity to be issued by Allied Waste in
connection with the transaction. These meetings included discussions of the
business combination, including the financing commitments necessary to
accomplish the transaction, and due diligence sessions on various aspects of
BFI's business and operations. During the meetings on February 24 through 28,
BFI provided Allied Waste and Allied Waste's financial advisors with BFI
financial projections for 1999 through 2003. In addition, Allied Waste described
to BFI and BFI's financial advisors in general terms estimated expected annual
costs savings in the range of $350 million to $375 million related to the merger
to be achieved during this time period. The savings were expected to be derived
from corporate selling, general and administrative expenses; field selling,
general and administrative expenses; base company efficiencies; internalization;
redundancies and integration benefits.
13
<PAGE> 19
BFI and Allied Waste executed a confidentiality agreement on February 24,
1999. On February 24 through 28, the parties also began exchanging drafts of
transaction documents, including a form of merger agreement. Goldman Sachs began
consideration of the feasibility of Allied Waste's financing for the transaction
and the terms and conditions of the commitments for the financing.
Allied Waste and BFI continued to negotiate the terms of the merger
agreement during the week of March 1. Concurrently, BFI provided additional
information to Allied Waste and the proposed financing parties in connection
with their due diligence investigation of various aspects of BFI's operations,
financial condition, environmental status and other matters. During the same
week Allied Waste and its financial advisor provided additional information to
BFI and its financial advisors with respect to Allied Waste's plans to finance
the merger. On March 2, 1999, BFI received an initial draft of the proposed
financing commitments for the purchase of debt and equity to be issued by Allied
Waste in connection with the merger.
On the evening of March 2, 1999, A.T. Kearney presented its preliminary
report on BFI's cost structure to an informal meeting of the BFI Board. See
"-- Preliminary Report of A.T. Kearney."
The regular quarterly meeting of the BFI Board was held on March 3, 1999.
At the meeting the BFI Board was informed of the status of negotiations with
Allied Waste. In addition, Goldman, Sachs & Co. reviewed the feasibility of the
financing by Allied Waste. The BFI Board also reviewed the probable financial
condition of Allied Waste subsequent to the merger, reviewed projections of the
financial condition of and various strategic alternatives for BFI, reviewed
other potential purchasers of BFI, and reviewed other aspects of the potential
merger. Since February 1998, BFI has not solicited or engaged in discussions
with any third party to effect a combination or sale, other than contacts with
Allied Waste.
On March 7, 1999, the BFI Board held a special meeting in Dallas, Texas to
consider further the merger. The BFI Board reviewed with BFI senior management
and BFI's financial and legal advisors the terms of the merger agreement, the
terms of revised financing commitment letters from the proposed purchasers of
debt and equity to be issued by Allied Waste, the prospects of BFI as an
independent company, and other matters considered relevant by the BFI Board. The
BFI Board received an oral opinion from Goldman Sachs (which was subsequently
confirmed in writing) to the effect that, as of March 7, and based on and
subject to the matters set forth in that opinion, the $45.00 per share in cash
to be received by holders of BFI common stock pursuant to the merger agreement
was fair from a financial point of view to such holders. Goldman Sachs'
presentation on March 7 was substantially the same as its presentation on March
3, except that the March 3 presentation included factual background on Allied
Waste. The BFI Board voted in favor of the merger, with three abstentions. See
"-- BFI's Reasons for the Merger; Recommendation of the BFI Board." All of BFI's
directors, including the three directors who abstained from voting on March 7,
1999, have advised BFI that they intend to vote their shares of BFI common stock
in favor of the merger. BFI does not expect any of the BFI directors or
officers, including those referred to under "-- Interests of Certain Persons in
the Merger; Possible Conflicts of Interest," to continue in the management of
the combined company after the merger.
Following the BFI Board meeting, BFI and Allied Waste executed the
definitive merger agreement and issued a joint press release announcing the
execution of the merger agreement before the New York Stock Exchange opened for
trading on March 8, 1999.
BFI'S REASONS FOR THE MERGER; RECOMMENDATION OF THE BFI BOARD
At a special board meeting on March 7, 1999, the BFI Board determined that
the merger is advisable, fair to, and in the best interests of BFI and its
stockholders. The BFI Board approved the merger, with three abstentions: Mr.
Shapiro, Vice Chairman, Finance and Risk Management of The Chase Manhattan Bank,
and Dr. Marina v. N. Whitman, director of The Chase Manhattan Corporation,
abstained in view of the role of The Chase Manhattan Bank as one of the
principal lenders to Allied Waste in connection with the financing of the
merger; and Mr. Ranck, who will receive financial benefits under his employment
agreement and BFI's incentive plans upon completion of the merger, also
abstained. Accordingly, the BFI Board recommends that BFI stockholders vote FOR
approval of the merger agreement and the merger at the special meeting. Some
members of the BFI Board have additional interests in the merger which may
create possible conflicts of interest (see "-- Interests of Certain Persons in
the Merger; Possible Conflicts of Interest").
14
<PAGE> 20
In reaching its decision to approve the merger agreement and to recommend
that BFI stockholders vote to approve the merger agreement, the BFI Board
considered the following material factors:
- the current and historical market prices of BFI common stock relative to
those of other industry participants and general market indices, and the
fact that the $45.00 per share merger consideration represents a 29.5%
premium over the closing price of BFI common stock on the last trading
day prior to the public announcement of the merger agreement and a 42.7%
premium over the weighted average price of BFI common stock for the three
years preceding the announcement of the merger agreement;
- the fact that the merger consideration is all cash, which provides
certainty of value to BFI's stockholders compared to a stock transaction;
the BFI Board was aware that an all cash transaction would be taxable to
BFI stockholders for federal income tax purposes whereas an all stock
transaction would not be taxable for federal income tax purposes;
- the BFI Board's familiarity with, and presentation by BFI management and
BFI's financial and strategic advisors regarding, the business,
operations, properties and assets, financial condition, competitive
position, business strategy, and prospects of BFI (as well as the risks
involved in achieving such prospects), the nature of the waste services
industry in which BFI competes, and current industry, economic and market
conditions, both on a historical and on a prospective basis;
- the actions of BFI during the past five years to enhance stockholder
value, including (1) repurchasing approximately 62.3 million shares of
BFI common stock for an aggregate purchase price of approximately $2.2
billion, (2) closing facilities and divesting assets considered
nonessential or underperforming for aggregate proceeds of cash and
securities of approximately $1.8 billion, (3) focusing on cost reductions
through reductions in work force and other measures, (4) focusing on
return on gross assets to enhance investment efficiency, and (5) altering
its organizational structure to increase efficiency;
- the preliminary report of A.T. Kearney delivered on March 2, 1999
regarding potential cost savings for BFI as an independent company, the
fact that projected benefits would be realized over a period of years,
and the uncertainty of the amount of savings that would actually be
realized (see "-- Preliminary Report of A.T. Kearney");
- the presentations by Goldman Sachs on March 3 and March 7, 1999 and its
opinion that, as of March 7, 1999, and based on and subject to the
matters set forth in that opinion, the $45.00 per share in cash to be
received by holders of BFI common stock pursuant to the merger agreement
was fair from a financial point of view to such holders; the BFI Board
considered, among other things, a discounted cash flow analysis presented
by Goldman Sachs based on management projections and certain other
assumptions, which indicated a range of $37.27 to $55.08 and a midpoint
of $45.85. Goldman Sachs advised the BFI Board that, in arriving at its
fairness determination, Goldman Sachs considered the results of all of
its analyses and did not attribute any particular weight to any factor or
analyses considered by it (see "-- Opinion of Goldman Sachs");
- the potential stockholder value that could be expected to be generated
from the various strategic alternatives available to BFI, including the
alternatives of (1) remaining independent and continuing BFI's strategic
plan set forth in its 1998 Annual Report, (2) selling BFI and (3)
pursuing other reorganization alternatives involving substantial
reductions in work force, incurrence of additional debt, and adoption of
more aggressive acquisition strategies, as well as the risks and
uncertainties associated with those alternatives;
- the terms of the merger agreement, as reviewed by the BFI Board with its
legal advisors, including the absence of a financing condition and the
undertakings by Allied Waste with respect to obtaining regulatory
approvals (see "The Merger Agreement");
- the terms of the merger agreement which provide that under certain
circumstances, and subject to certain conditions more fully described
under "The Merger Agreement -- No Solicitation of Acquisition
Transactions," "-- Termination or Amendment" and "-- Termination Fees,"
BFI can furnish information to and conduct negotiations with a third
party, terminate the merger agreement, and enter into an agreement
relating to a superior proposal;
15
<PAGE> 21
- the interests of BFI's officers and directors in the merger described
under "-- Interests of Certain Persons in the Merger; Possible Conflicts
of Interest;"
- the effects of the merger on BFI's employees and other constituencies,
and the terms of the merger agreement relating to such matters;
- the business, operations, financial condition, operating results and
prospects of Allied Waste, giving effect to the merger, and the potential
for cost savings and synergies that could be created by combining the two
companies;
- the terms and conditions of the financing commitments to be received by
Allied Waste (and the identity of the parties committing to provide such
financing), the cash flow projections prepared by Allied Waste for the
combined company to repay such indebtedness and the expected value of the
combined company's assets relative to its liabilities; and
- the condition to BFI's obligation to complete the merger that BFI receive
a solvency letter reasonably satisfactory in form and substance to BFI
from an independent appraisal firm jointly retained by BFI and the
lenders to Allied Waste and a certificate from Allied Waste with respect
to certain solvency matters.
The foregoing discussion addresses the material information and factors
considered by the BFI Board in its consideration of the merger, including
factors that support the merger as well as those that may weigh against it. In
view of the variety of factors and the amount of information considered, the BFI
Board did not find it practicable to and did not make specific assessments of,
quantify or otherwise assign relative weights to the specific factors and
analyses considered in reaching its determination, nor did the BFI Board
specifically identify those factors and analyses that supported fairness or its
recommendation and those that may not. The determination to approve the merger
was made after consideration of all of the factors and analyses as a whole. In
addition, individual members of the BFI Board may have given different weights
to different factors.
PRELIMINARY REPORT OF A.T. KEARNEY
The Board received A.T. Kearney's preliminary report on March 2, 1999. The
Kearney report was not prepared in connection with the proposed merger and
assumed that BFI would be operated as an independent company. It focused on the
following six areas to attain cost savings or to attain the benefits of other
investments previously made by BFI:
(1) The report recommended that BFI accelerate and broaden existing
programs for centralized purchasing in order to maximize the benefits
of volume purchases.
(2) Kearney concluded that the increase in costs arising from more frequent
purchases of vehicles and the consequent reduction of the average age
of BFI's fleet would be more than offset by a reduction of maintenance
expenses of an older fleet combined with a new fleet management
program.
(3) The report recommended that BFI implement additional parts of the SAP
system which BFI has been implementing for over three years. SAP is an
integrated system of software for reporting various business processes.
BFI has implemented parts (or modules) of the SAP system for its
general ledger, project cost management, procurement and human
resources processes, and A.T. Kearney recommended that BFI add the SAP
modules for customer service and billing. BFI has a substantial
investment in the system, and A.T. Kearney concluded that BFI would be
better served by continuing the SAP system, revising the implementation
process and receiving some of the benefits, even if all of the intended
benefits were not attained, rather than incurring the expense of
converting to a different system.
(4) A.T. Kearney proposed an organizational restructuring under which BFI's
existing structure of seven market areas and approximately 120 markets
would be reorganized into three regions and 40 markets, with a general
manager responsible for profits and losses for each of the markets. The
organizational restructuring would result in the eventual elimination
of approximately 2,300 jobs.
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<PAGE> 22
(5) The report envisioned that the corporate office would provide
functional leadership and operational excellence, including the
communication of "best practices" of the field operations on a
proactive basis.
(6) The implementation of the various proposals of the report would be
managed through a process designed to attain the objectives of the
report in an expeditious manner.
The Kearney report envisioned aggregate annual savings of $200 to $300
million. The report was preliminary and had not been subject to detailed
analysis by BFI management or the BFI Board. Nonetheless, the report provided
information with respect to potential operating, general and administrative
savings which might be available to BFI as an independent company.
OPINION OF GOLDMAN SACHS
BFI retained Goldman Sachs, pursuant to a letter agreement dated February
25, 1999, to act as financial advisor in connection with the possible sale of
all or a portion of BFI. Goldman Sachs is a nationally recognized investment
banking firm, and was selected by BFI based on the firm's reputation and
experience in investment banking in general and its recognized expertise in the
valuation of businesses as well as its prior investment banking relationships
with BFI. As noted under "-- Background of the Merger," Goldman Sachs had
advised BFI with respect to the unsolicited proposal of Allied Waste in June
1998 under a different engagement letter. On March 7, 1999, at the meeting of
the BFI Board, Goldman Sachs delivered to the BFI Board its oral opinion (which
was subsequently confirmed in a written opinion dated as of March 7, 1999) that,
as of such date and based on and subject to the matters set forth in that
opinion, the $45.00 per share in cash to be received by holders of BFI common
stock pursuant to the merger agreement was fair from a financial point of view
to such holders.
You should consider the following when reading the discussion of the
opinion of BFI's financial advisor in this document:
- we urge you to read carefully the entire opinion of Goldman Sachs, which
is attached to this proxy statement as Appendix B and is incorporated by
reference;
- Goldman Sachs' advisory services and opinion were provided to the BFI
Board for its information in its consideration of the merger and was
directed only to the fairness of the consideration from a financial point
of view to the holders of the outstanding shares of BFI common stock;
- Goldman Sachs' opinion does not address the merits of BFI's underlying
business decision to engage in the merger;
- Goldman Sachs' opinion was necessarily based upon conditions as they
existed and could be evaluated on March 7, 1999 and Goldman Sachs assumes
no responsibility to update or revise its opinion based upon
circumstances or events occurring after such date; and
- Goldman Sachs' opinion does not constitute a recommendation to any holder
of BFI common stock as to how to vote on the merger or any related
matter.
Although Goldman Sachs evaluated the fairness, from a financial point of
view, of the consideration to be paid to the holders of BFI common stock, the
consideration itself was determined by BFI and Allied Waste through arm's-length
negotiations. BFI did not provide specific instructions to, or place any
limitations on, Goldman Sachs with respect to the procedures to be followed or
factors to be considered by Goldman Sachs in performing its analyses or
providing its opinion.
In connection with its opinion, Goldman Sachs reviewed, among other things,
the following:
- the merger agreement;
- the annual reports to stockholders and Annual Reports on Form 10-K of BFI
for each of the five years ended September 30, 1998;
- Quarterly Reports on Form 10-Q of BFI;
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<PAGE> 23
- certain other communications from BFI to its stockholders; and
- certain internal financial analyses and forecasts for BFI prepared by its
management.
Goldman Sachs also held discussions with members of BFI senior management
regarding the past and current business operations, financial condition and
future prospects of BFI. In addition, Goldman Sachs reviewed the reported price
and trading activity for BFI common stock, compared certain financial and stock
market information for BFI with similar information for certain other companies
the securities of which are publicly traded, reviewed the financial terms of
certain recent business combinations in the waste services industry specifically
and in other industries generally, and performed such other studies and analyses
as it considered appropriate.
Goldman Sachs relied without independent verification upon the accuracy and
completeness of all the financial and other information reviewed by it for
purposes of rendering its opinion. Goldman Sachs did not make an independent
evaluation or appraisal of the assets and liabilities of BFI or any of its
subsidiaries and Goldman Sachs was not furnished with any such evaluation or
appraisal.
Goldman Sachs, as part of its investment banking business, is continually
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements,
and valuations for estate, corporate, and other purposes. Goldman Sachs is
familiar with BFI, having provided certain investment banking services to BFI
from time to time, including having acted as managing underwriter of a public
offering in January 1996 of $200,000,000 aggregate principal amount of 6.10%
Senior Notes due January 2003 and $200,000,000 aggregate principal amount of
6.375% Senior Notes due January 2008, and having acted as its financial advisor
in connection with, and having participated in certain of the negotiations
leading to, the merger agreement. Goldman Sachs has also provided certain
investment banking services to Allied Waste from time to time, including having
acted as managing underwriter of a public offering in September 1997 of
16,200,000 shares of common stock of Allied Waste, and having acted as managing
underwriter of a public offering in December 1998 of $225,000,000 aggregate
principal amount of 7.375% Notes due January 2004, $600,000,000 aggregate
principal amount of 7.625% Notes due January 2006 and $875,000,000 aggregate
principal amount of 7.875% Notes due January 2009. In addition, Goldman Sachs
may provide investment banking services to Allied Waste and its subsidiaries in
the future. Goldman Sachs provides a full range of financial advisory and
securities services and, in the course of its normal trading activities, may
from time to time effect transactions and hold securities, including derivative
securities, of BFI or Allied Waste for its own account and for the accounts of
customers. As of March 7, 1999, Goldman Sachs held a long position of 11,000
shares of Allied Waste common stock and options to purchase 844,000 shares of
Allied Waste common stock and a short position of options to sell 614,000 shares
of Allied Waste common stock against which Goldman Sachs was short 455,760
shares of Allied Waste common stock and $500,000 principal amount of 7.875%
Notes due January 2009. As of March 7, 1999, Goldman Sachs also held a long
position of 28,981 shares of BFI common stock against which Goldman Sachs was
short 32,477 shares of BFI common stock. During the past two years Goldman Sachs
has received in the aggregate $0.2 million and $32.2 million, respectively, from
BFI and Allied Waste as compensation.
The following is a summary of the material financial analyses used by
Goldman Sachs in reaching its opinion and does not purport to be a complete
description of the analyses performed by Goldman Sachs. The following
quantitative information, to the extent it is based on market data, is based on
market data as it existed at or about March 7, 1999 and is not necessarily
indicative of current market conditions. Readers should understand that the
order of analyses and the results derived from these analyses described below do
not represent relative importance or weight given to these analyses by Goldman
Sachs. The summary of the financial analyses includes information presented in
tabular format. IN ORDER TO UNDERSTAND FULLY THE FINANCIAL ANALYSES USED BY
GOLDMAN SACHS, THESE TABLES MUST BE READ TOGETHER WITH THE TEXT OF EACH SUMMARY.
THE TABLES ALONE DO NOT SUMMARIZE COMPLETELY THE FINANCIAL ANALYSES.
Historical Stock Performance
Goldman Sachs reviewed daily indexed historical prices and trading volume
for shares of BFI common stock during the period from March 5, 1996 to March 5,
1999, and compared such market prices to the market
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<PAGE> 24
prices of Allied Waste and the S&P 400 during this period. During this period,
shares of BFI common stock traded from $21.88 to $38.81, with an average of
$31.63 per share. The $45.00 price per share merger consideration exceeds BFI's
3-year high and represents a 43.1% premium to the $31.44 closing price per share
of BFI common stock on March 3, 1999, the latest date prior to rumors of a
potential transaction, and a 29.5% premium to the $34.75 price per share of BFI
common stock on the close of business on March 5, 1999.
Analysis of Selected Companies
Goldman Sachs compared certain financial, market and operating information
of BFI with corresponding data of all of the domestic publicly traded companies
in the waste services industry with at least one year's historical data
available as a public company: Casella Waste Industries, Superior Services,
Inc., Waste Management, Inc., Waste Industries, Inc., Republic Services, Inc.
and Allied Waste. The following table presents the ranges, median and mean for
the selected companies (including BFI) of:
(1) the ratio of total debt to total book capitalization (calculated as
total debt plus stockholders' equity);
(2) multiples of levered value (calculated as equity market capitalization
plus net debt) to each of the annualized latest quarter sales, the
annualized latest quarter earnings before interest, taxes, depreciation
and amortization ("EBITDA") and the annualized latest quarter earnings
before interest and taxes ("EBIT");
(3) price/earnings multiples for 1998 and estimated 1999;
(4) projected five-year earnings per share compound annual growth (based on
I/B/E/S International, Inc. ("IBES") estimates, IBES is a data service
that monitors and publishes compilations of earnings estimates by
selected research analysts regarding companies of interest to
institutional investors);
(5) the ratio of estimated 1999 price/earnings multiple to the growth rate;
and
(6) the ratio of 1998 and estimated 1999 levered market capitalization
(calculated as equity market capitalization plus net debt) to EBITDA.
<TABLE>
<CAPTION>
SELECTED COMPANIES
-----------------------------
RANGE MEDIAN MEAN BFI
----------- ------ ---- ----
<S> <C> <C> <C> <C>
Ratio of total debt to total book
capitalization.............................. 7.5%-73.8% 57.2% 42.7% 57.2%
Multiples of levered value as of March 5, 1999
to:
annualized latest quarter sales............. 1.1x-3.1x 2.1x 2.2x 1.6x
annualized latest quarter EBITDA............ 5.0x-9.4x 7.1x 7.2x 6.7x
annualized latest quarter EBIT.............. 8.3x-14.7x 11.2x 11.6x 11.2x
Price/earnings multiples for 1998............. 16.0x-37.8x 18.1x 21.1x 16.1x
Price/earnings multiples for estimated 1999... 12.0x-19.4x 14.2x 14.9x 13.4x
Projected five-year earnings per share
compound annual growth...................... 16.6%-27.5% 20.0% 21.7% 16.6%
Ratio of estimated 1999 price/earnings
multiples to the growth rate................ 0.5x-0.9x 0.7x 0.7x 0.8x
Ratio of 1998 levered market capitalization to
EBITDA...................................... 7.0x-10.0x 7.5x 8.1x 7.0x
Ratio of estimated 1999 levered market
capitalization to EBITDA.................... 5.2x-7.3x 5.8x 5.9x 6.0x
</TABLE>
BFI's ratio of 1998 levered market capitalization to EBITDA was lower than
the corresponding ratio for the other six companies. Projected earnings per
share and compound annual growth rate were based on IBES estimates. Latest
quarter financial information was based on publicly available reports and
projected EBITDA was based on estimates in various research reports.
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<PAGE> 25
Analysis of Selected Transactions
Goldman Sachs also analyzed certain publicly available financial, operating
and stock market information for the merger and for 10 pending or completed
merger and acquisition transactions having a transaction valuation greater than
$500 million since March 1995 in the solid waste industry (Allied Waste/Laidlaw
Waste Systems, Inc., BFI/Attwoods PLC, Casella Waste/KTI, Inc., Waste
Management/Eastern Environmental Services, Inc., Allied Waste/American Disposal
Services, Inc., USA Waste Services, Inc./Waste Management, USA Waste/United
Waste Systems Inc., USA Waste/Sanifill, Inc., USA Waste/Western Waste and USA
Waste/Chambers Development Corp.). Of these 10 transactions, eight were
stock-for-stock transactions, accounted for as poolings of interests. The
remaining two transactions (Allied Waste/Laidlaw Waste and BFI/Attwoods PLC),
like the proposed merger between BFI and Allied Waste, were primarily cash
transactions, accounted for as purchases.
The following table presents the ranges indicated for these transactions
(including means and medians for pooling transactions), as compared with the
merger:
<TABLE>
<CAPTION>
POOLING TRANSACTIONS RANGE FOR BFI/ALLIED
--------------------------- PURCHASE WASTE
RANGE MEDIAN MEAN TRANSACTIONS MERGER
----------- ------ ----- ------------ ----------
<S> <C> <C> <C> <C> <C>
Levered consideration as a multiple of sales
(without synergies)....................... 1.9x-5.2x 3.5x 3.5x 1.5x-2.0x 2.1x
Levered consideration as a multiple of
EBITDA (without synergies)................ 7.0x-16.8x 11.6x 12.2x 7.9x 8.8x
Levered consideration as a multiple of EBIT
(without synergies)....................... 15.9x-28.2x 20.5x 21.2x 15.9x-17.3x 14.7x
Levered consideration as a multiple of
EBITDA (with synergies)................... 5.5x-13.4x 8.6x 9.1x 5.7x-5.9x 6.8x
Levered consideration as a multiple of EBIT
(with synergies).......................... 9.4x-19.0x 13.4x 13.5x 9.3x-9.4x 9.9x
Levered consideration as a multiple of
projected sales (without synergies)....... 1.6x-3.4x 2.6x 2.5x 1.4x-2.0x 2.1x
Levered consideration as a multiple of
projected EBITDA (without synergies)...... 7.8x-9.4x 8.2x 8.4x 7.1x-8.1x 7.8x
Levered consideration multiple of projected
EBITDA (with synergies)................... 5.8x-7.8x 6.7x 6.8x 5.3x-6.0x 6.2x
</TABLE>
Discounted Cash Flow Analysis of BFI
Based on internal estimates of the management of BFI, Goldman Sachs
performed a discounted cash flow analysis of BFI on a stand-alone basis. The
estimated future cash flows were based on the financial projections for BFI for
the years 1999 through 2003. The terminal values of BFI were calculated based on
projected EBITDA multiples for 2003 of 6.0x to 8.0x and a range of discount
rates of 9.0% to 11.0%. Based on these parameters, Goldman Sachs calculated
BFI's per share equity value to range from $37.27 to $55.08. Based on the
midpoint of the terminal value multiple range and the midpoint of the discount
range, the analysis indicated a per share equity value of $45.85. The $45.00 per
share price to be paid in the merger is slightly below this midpoint but is
within the range of values calculated by Goldman Sachs. In arriving at its
fairness determination, Goldman Sachs considered the results of all such
analyses and did not attribute any particular weight to any factor or analyses
considered by it.
Goldman Sachs also performed a discounted cash flow analysis of BFI based
on sensitivities to changes in some of the assumptions in the estimates of BFI
management with respect to volume growth, margin on price
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<PAGE> 26
increases, and growth rates of sales, general and administrative costs. The
following table presents the per share low, midpoint and high equity value based
on BFI management estimates and the indicated sensitivities:
<TABLE>
<CAPTION>
LOW MIDPOINT HIGH
------ -------- ------
<S> <C> <C> <C>
BFI's management estimates -- projected EBITDA multiples for
2003 ranging from 6.0x to 8.0x and discount rates ranging
from 9.0% to 11.0%........................................ $37.27 $45.85 $55.08
Price growth ranging from -0.5% to 1.5% and volume growth
ranging from 0.0% to 4.0%................................. $32.17 $39.14 $46.71
Margin on volume increase ranging from 10% to 30% and margin
on price increase ranging from 60% to 100%................ $39.83 $43.90 $47.98
External growth ranging from 0.5% to 2.5% and growth rates
for sales, general and administrative costs ranging from
-2.0% to 2.0%............................................. $40.68 $45.48 $50.52
</TABLE>
Goldman Sachs also performed a discounted cash flow analysis of BFI
analyzing the effects of using assumptions for volume growth, price growth and
cost savings that represent improvement from historical trends. Terminal values
for BFI were calculated based on projected EBITDA multiples of 6.5x (low), 7.0x
(medium) and 7.5x (high) and discount rates of 10.5% (low), 10.0% (medium) and
9.5% (high). Based on these assumptions and historical trends, the analysis
showed implied per share values for BFI common stock of $30.75 (low), $34.23
(medium) and $37.83 (high). This analysis, assuming improvements for volume
growth, price growth and cost savings relative to the values historically
achieved, resulted in implied per share values for BFI common stock of $41.48
(low), $45.85 (medium) and $50.38 (high).
The preparation of a fairness opinion is a complex process involving
various determinations as to the most appropriate and relevant methods of
financial analysis and the application of these methods to the particular
circumstances and, therefore, is not necessarily susceptible to partial analysis
or summary description. Selecting portions of the analyses or of the summary set
forth above, without considering the analysis as a whole, could create an
incomplete view of the processes underlying Goldman Sachs' opinion. In arriving
at its fairness determination, Goldman Sachs considered the results of all such
analyses and did not attribute any particular weight to any factor or analysis
considered by it; rather, Goldman Sachs made its determination as to fairness on
the basis of its experience and professional judgment after considering the
results of all such analyses. In addition, in performing its analyses, Goldman
Sachs made numerous assumptions with respect to industry performance, general
business, economic, market and financial conditions, and other matters. No
company or transaction used in the above analyses is directly comparable to BFI
or the contemplated transaction. The analyses were prepared solely for purposes
of Goldman Sachs providing its opinion to the BFI Board as to the fairness of
the consideration and do not purport to be appraisals or necessarily reflect the
prices at which businesses or securities actually may be sold. Analyses based on
forecasts of future results are not necessarily indicative of actual future
results, which may be significantly more or less favorable than suggested by
such analyses. Because such analyses are inherently subject to uncertainty,
being based upon numerous factors or events beyond the control of the parties or
their respective advisors, none of BFI, Goldman Sachs or any other person
assumes responsibility if future results are materially different from those
forecast. As described above, the opinion of Goldman Sachs to the BFI Board was
among many factors taken into consideration by the BFI Board in making its
determination to approve the merger agreement.
RETENTION OF FINANCIAL ADVISERS
Pursuant to Goldman Sachs' engagement letter, BFI has agreed to pay Goldman
Sachs a fee of $7.0 million upon delivery of Goldman Sachs' opinion. Upon
completion of the merger, BFI will pay Goldman Sachs a transaction fee equal to
0.28% of the total consideration to be received in the merger (i.e., the total
consideration paid for BFI's equity securities, including amounts paid to
holders of options, warrants and convertible securities, plus the principal
amount of all indebtedness for borrowed money as set forth in the most recent
consolidated balance sheet of BFI prior to the merger) reduced by the amount of
any fees previously paid to Goldman Sachs pursuant to the engagement letter, for
an aggregate fee of approximately $25.8 million based upon BFI's balance sheet
as of December 31, 1998. BFI has also agreed to pay Goldman
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<PAGE> 27
Sachs its reasonable out-of-pocket expenses, including the fees and
disbursements of its attorneys, and to indemnify Goldman Sachs against certain
liabilities, including certain liabilities arising under the United States
federal securities laws.
Pursuant to engagement letters dated May 3, 1999 and September 5, 1996, as
amended, regarding financial advisory services previously rendered to BFI in
connection with stockholder relations matters, including assisting BFI in
evaluating any unsolicited acquisition proposals, Morgan Stanley will charge BFI
a transaction fee of $3 million, which is payable upon consummation of the
merger. Morgan Stanley participated in meetings regarding Allied Waste's June 3,
1998 all stock offer but did not provide an opinion, report or presentation in
connection with the merger.
CERTAIN FINANCIAL PROJECTIONS
During the course of the discussions between BFI and Allied Waste that led
to the execution of the merger agreement, BFI provided Allied Waste or its
representatives with certain information about BFI and its financial performance
which was not and is not publicly available. The information provided included
financial projections for BFI as an independent company, without regard to the
impact to BFI of a transaction with Allied Waste. The projections do not take
into account any of the potential effects of the transactions contemplated by
the merger agreement. BFI's projections disclose, among other things, the
following:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SEPTEMBER 30
---------------------------------------------------------------
PROJECTED
ESTIMATED --------------------------------------------------
1999 2000 2001 2002 2003
--------- ---------- ---------- ---------- --------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Base Revenue........................... $4,234.0 $4,424.5 $4,623.6 $4,831.7 $5,049.1
Net Income............................. 351.5 407.2 497.2 565.5 642.8
Average Shares......................... 158.2 155.1 155.4 155.8 156.3
Earnings Per Share..................... 2.22 2.63 3.20 3.63 4.11
Total Assets........................... 5,057.7 5,242.6 5,368.4 5,471.0 5,551.5
Cash at Year End....................... 54.7 54.7 54.7 54.7 54.7
</TABLE>
BFI has advised Allied Waste that it does not as a matter of course make public
any projections as to future performance or earnings, and the projections set
forth above are included in this proxy statement only because the information
was provided to Allied Waste.
In addition, during the course of the discussions between BFI and Allied
Waste that led to execution of the merger agreement, Allied Waste described to
BFI or its representatives certain preliminary information on expected annual
cost savings from the merger in the range of $350 million to $375 million from
corporate selling, general and administrative expenses; field selling, general
and administrative expenses; base company efficiencies; internalization;
redundancies and integration benefits.
The BFI projections and expected cost savings were not prepared with a view
to public disclosure or compliance with the published guidelines of the
Securities and Exchange Commission or the guidelines established by the American
Institute of Certified Public Accountants regarding projections or forecasts.
BFI has advised Allied Waste that its internal operating projections are, in
general, prepared solely for internal use and capital budgeting and other
management decisions and are subjective in many respects and thus susceptible to
various interpretations and periodic revision based on actual experience and
business developments. In addition, Allied Waste has advised BFI that its
expectations with respect to the cost savings related to the merger are
subjective in many respects and thus susceptible to various interpretations and
periodic revision based on actual experience and business developments. The
projections and expectations were based on a number of assumptions which may not
be realized and are subject to significant uncertainties and contingencies, many
of which are beyond the control of BFI and Allied Waste. We cannot assure you
that actual results will not vary materially from those described above. Our
independent accountants have not examined or compiled the financial projections
and accordingly do not provide any form of assurance with respect to the
projections. The inclusion of this information should not be regarded as an
indication that Allied
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<PAGE> 28
Waste or anyone who received this information then considered, or now considers,
it a reliable prediction of future events, and this information should not be
relied on as such. In light of the uncertainties inherent in any projected data,
stockholders are cautioned not to place undue reliance on the projections. See
"Forward-Looking Statements" on page 3.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
General
The following is a summary of the material United States federal income tax
consequences of the merger to BFI stockholders. This summary is based upon the
provisions of the Internal Revenue Code of 1986, as amended (the "Code"),
applicable current and proposed United States Treasury Regulations, judicial
authority, and administrative rulings and practice. Legislative, judicial or
administrative rules and interpretations are subject to change, possibly on a
retroactive basis, at any time and, therefore, the following statements and
conclusions could be altered or modified. It is assumed that the shares of BFI
common stock are held as capital assets by a United States person (i.e., a
citizen or resident of the United States or a domestic corporation). This
discussion does not address all aspects of United States federal income taxation
that may be relevant to a particular BFI stockholder in light of such BFI
stockholder's personal investment circumstances, or those BFI stockholders
subject to special treatment under the United States federal income tax laws
(for example, life insurance companies, tax-exempt organizations, financial
institutions, United States expatriates, foreign corporations and nonresident
alien individuals), BFI stockholders who hold shares of BFI common stock as part
of a hedging, "straddle," conversion or other integrated transaction, or BFI
stockholders who acquired their shares of BFI common stock through the exercise
of employee stock options or other compensation arrangements. In addition, the
discussion does not address any aspect of foreign, state or local taxation or
estate and gift taxation that may be applicable to a BFI stockholder.
Consequences of the Merger to BFI Stockholders
The receipt of the merger consideration in the merger (including any cash
amounts received by BFI stockholders that exercise appraisal rights) will be a
taxable transaction for United States federal income tax purposes (and also may
be a taxable transaction under applicable state, local and other income tax
laws). In general, for United States federal income tax purposes, a holder of
BFI common stock will recognize gain or loss equal to the difference between his
or her adjusted tax basis in BFI common stock converted in the merger or subject
to appraisal rights, and the amount of cash received. Gain or loss will be
calculated separately for each block of shares converted in the merger (i.e.,
shares acquired at the same cost in a single transaction). The gain or loss will
be capital gain or loss (other than, with respect to the exercise of appraisal
rights, amounts, if any, which are or are deemed to be interest for federal
income tax purposes, which amounts will be taxed as ordinary income), and will
be short-term gain or loss if, at the effective time of the merger, the shares
of BFI common stock so converted were held for one year or less. If the shares
were held for more than one year, the gain or loss would be long-term, subject
(in the case of stockholders who are individuals) to tax at a maximum United
States federal income tax rate of 20%.
Transfer Taxes
As a result of the merger, certain U.S. state and local real property
transfer and real property gains taxes may be imposed. Allied Waste will pay
those transfer taxes, if any, directly to state taxing authorities. The letter
of transmittal which you will use to surrender your shares of BFI common stock
will authorize Allied Waste or BFI to complete and file any necessary tax forms
on your behalf or otherwise represent you before relevant taxing authorities
with respect to any transfer taxes that result from the merger. For United
States federal income tax purposes, any payments made on your behalf by Allied
Waste should result in the deemed receipt of additional consideration in
proportion to the number of shares which you own. In such event, you should be
deemed to have paid those transfer taxes and therefore you should be permitted
to reduce your gain (or increase your loss) on the sale by the amount of that
tax. Accordingly, the payment of transfer taxes should have no effect on the
amount of your gain or loss for United States federal income tax purposes in
connection with the merger.
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Backup Tax Withholding
Under the United States federal income tax backup withholding rules, unless
an exemption applies, Allied Waste is required to and will withhold 31% of all
payments to which a BFI stockholder or other payee is entitled in the merger,
unless the BFI stockholder or other payee provides a tax identification number
(social security number, in the case of an individual, or employer
identification number in the case of other stockholders), and certifies under
penalties of perjury that such number is correct. Each BFI stockholder and, if
applicable, each other payee, should complete and sign the substitute Form W-9
that will be part of the letter of transmittal to be returned to the exchange
agent (or other agent) in order to provide the information and certification
necessary to avoid backup withholding, unless an applicable exemption exists and
is otherwise proved in a manner satisfactory to the exchange agent (or other
agent). The exemptions provide that certain BFI stockholders (including, among
others, all corporations and certain foreign individuals) are not subject to
these backup withholding and reporting requirements. In order for a foreign
individual to qualify as an exempt recipient, however, he or she must submit a
signed statement (such as a Certificate of Foreign Status on Form W-8) attesting
to his or her exempt status. Any amounts withheld will be allowed as a credit
against the holder's United States federal income tax liability for such year.
BFI STOCKHOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS TO DETERMINE THE
UNITED STATES FEDERAL, STATE AND LOCAL AND FOREIGN TAX CONSEQUENCES OF THE
MERGER TO THEM IN VIEW OF THEIR OWN PARTICULAR CIRCUMSTANCES.
GOVERNMENTAL AND REGULATORY APPROVALS
Transactions such as the merger are reviewed by the United States
Department of Justice and the United States Federal Trade Commission to
determine whether they comply with applicable antitrust laws. Under the
provisions of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and the rules and regulations promulgated thereunder (the "HSR Act")
applicable to the merger, the merger may not be completed until applicable
waiting period requirements have been satisfied. Allied Waste and BFI each filed
notification reports with the Department of Justice and Federal Trade Commission
under the HSR Act on March 23, 1999. On April 22, 1999, the Department of
Justice issued a request for additional information and other documentary
materials to Allied Waste and BFI relating to the merger. Under the HSR Act, the
merger may not be consummated until 20 days following the substantial compliance
with such request by both parties, unless the 20-day period is earlier
terminated by the Department of Justice.
The Department of Justice and the Federal Trade Commission frequently
scrutinize the legality under the antitrust laws of transactions such as the
merger. At any time before or after the merger, the Department of Justice or the
Federal Trade Commission could take such action under the antitrust laws as it
deems necessary or desirable in the public interest, including seeking to enjoin
the merger or seeking divestiture of substantial assets of Allied Waste or BFI
or their subsidiaries. Private parties and state attorneys general may also
bring an action under the antitrust laws under certain circumstances. There can
be no assurance that a challenge to the merger on antitrust grounds will not be
made or, if such a challenge is made, of the result. Under the merger agreement,
Allied Waste has agreed to offer to take (and if its offer is accepted, commit
to take) all steps that it is capable of taking to avoid or eliminate
impediments under any antitrust laws asserted by any governmental entity to
enable the merger to be completed by September 15, 1999. See "The Merger
Agreement -- Best Efforts; Antitrust Matters."
ACCOUNTING TREATMENT
The merger will be accounted for under the purchase method of accounting in
accordance with Accounting Principles Board Opinion No. 16, "Business
Combinations," as amended. Under this method of accounting, the purchase price
will be allocated to assets acquired and liabilities assumed based on their
estimated fair values at the effective time of the merger (with the excess of
the purchase price after such allocations being recorded as goodwill).
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MERGER FINANCING
General
It is expected that Allied Waste will require approximately $9 billion in
order to complete the merger, including payments to be made to BFI stockholders
and holders of BFI stock options, payments under certain BFI employee benefit
plans and contracts, the refinancing of BFI and Allied Waste indebtedness, and
the payment of fees and expenses. Allied Waste has received commitments from a
bank group led by The Chase Manhattan Bank for $9.5 billion in senior financing
to provide funds to complete the merger and to provide working capital for
Allied Waste following the merger. In addition, Allied Waste has received
commitments from a group led by affiliates of certain stockholders of Allied
Waste to purchase for $1 billion a newly issued convertible preferred stock in
order to provide funds for the merger. Allied Waste's obligations to complete
the merger are not subject to its receipt of financing and, other than the
condition that there will not have occurred and be continuing any material
disruption of, or material adverse change in, financial, banking or capital
market conditions prior to the effective time of the merger, the bank and equity
commitments are subject to no material condition not also contained in the
merger agreement.
Bank Financing
Bank financing commitments totaling $9.5 billion were received from The
Chase Manhattan Bank, Citicorp USA, Inc., and DLJ Capital Funding Inc. (the
"Initial Lenders"). The commitments consist of an aggregate of $7 billion of
senior secured facilities and a $2.5 billion senior unsecured increasing rate
note facility. The senior secured facilities consists of (1) a $1 billion Asset
Sale Term Loan Facility maturing on the second anniversary of the effective time
of the merger, (2) a $2.25 billion Tranche A Term Loan Facility maturing on the
sixth anniversary of the effective time of the merger, (3) a $1 billion Tranche
B Term Loan Facility maturing on the seventh anniversary of the effective time
of the merger, (4) a $1.25 billion Tranche C Term Loan Facility maturing on the
eighth anniversary of the effective time of the merger and (5) a $1.5 billion
Revolving Facility maturing on the sixth anniversary of the effective time of
the merger. The senior unsecured increasing rate note facility will mature on
the fifth anniversary of the effective time of the merger; provided that the
Initial Lenders will have the option to change, at any time prior to the
effective time of the merger, the maturity date of the senior unsecured
increasing rate note facility to the eighth anniversary of the effective time of
the merger. Allied Waste may reduce amounts borrowed under the senior unsecured
increasing rate note facility (and, thereafter, the senior secured facilities)
by placements of senior subordinated notes or additional equity prior to, at or
after the effective time of the merger. In addition, Allied Waste may reduce
amounts borrowed under the Asset Sale Term Loan Facility (and thereafter the
other senior secured facilities and the senior unsecured increasing rate note
facility) through divestitures of non-core assets, prior to, at or after the
effective time of the merger. After the effective time of the merger, the senior
secured facilities and the senior unsecured increasing rate note facility also
may be subject to mandatory prepayment.
The Initial Lenders may, subject to certain limitations and after
consultation with Allied Waste, change the pricing, terms or structure of the
senior secured facilities or the unsecured increasing rate notes if the Initial
Lenders reasonably determine that it is advisable to do so in order to ensure a
successful syndication of the facilities.
The obligations of Allied Waste North America, Inc., a wholly owned
subsidiary of Allied Waste and the principal borrower under the senior secured
facilities, and BFI (which will be a wholly owned subsidiary of Allied Waste if
the merger is completed) under the senior secured facilities will be (1) secured
by a first priority lien on (a) all of the equity interests in Allied Waste
North America and its domestic subsidiaries and 65% of the equity interests in
all of the foreign subsidiaries of Allied Waste North America and its domestic
subsidiaries and (b) all tangible and intangible assets (other than certain
landfill properties) owned by Allied Waste North America and its domestic
subsidiaries and (2) guaranteed by Allied Waste and each of Allied Waste North
America's domestic subsidiaries, in each case, subject to the prior consent of
any unaffiliated minority equity holders to the extent that consent is required.
The holders of the existing senior notes of Allied Waste North America and BFI
will also be granted equal and ratable security interests in the stock of BFI's
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subsidiaries and assets of BFI and its subsidiaries to the extent granted as
collateral for the senior secured facilities.
Other than the right of the Initial Lenders to change certain terms, the
unsecured increasing rate notes are not subject to changes in pricing, terms or
structure in order to ensure a successful syndication thereof.
The senior secured facilities and unsecured increasing rate notes will
contain terms as to fees and pricing customary for financing of this type. In
addition, the documentation will contain representations and warranties,
covenants and events of default customary for financings of this type and
reasonably satisfactory to the Initial Lenders.
Equity Commitment
An investor group led by Apollo Management IV, L.P. and Blackstone Capital
Partners III Merchant Banking Fund L.P., affiliates of Allied Waste's two
largest stockholders, private investment funds managed by Apollo Management III,
L.P. and Blackstone Management Partners III, L.L.C., has committed to purchase
for $1 billion, shares of a newly created senior convertible preferred stock of
Allied Waste. Other members of the investor group include DLJ Merchant Banking
Partners II, L.P. and Greenwich Street Capital Partners II, L.P. and certain of
their respective affiliates. The Allied Waste senior convertible preferred stock
will pay a dividend of at least 6.5% per year and is expected to be convertible
into Allied Waste common stock. If the Allied Waste stockholders do not approve
the conversion of the senior convertible preferred stock into Allied Waste
common stock within six months of completion of the merger, the senior
convertible preferred stock dividend rate will increase by 1% for each six-month
period thereafter until the required stockholder approval is obtained; provided,
however, that the maximum dividend rate will not exceed 12% per year. If by the
10th anniversary of completion of the merger, the senior convertible preferred
stock has not been converted into Allied Waste common stock, the dividend rate
will be fixed at that time at 12% per year. The equity commitment is conditioned
upon the bank financing being completed on terms that in all material respects
are as favorable to Allied Waste and its subsidiaries (after giving effect to
the merger) as those set forth in the bank financing commitments, the
termination or expiration of all applicable waiting periods under the HSR Act
and the preparation, execution and delivery of definitive documents relating to
the purchase and sale of the senior convertible preferred stock reasonably
satisfactory to each investor. The equity commitment is not otherwise subject to
any material condition not also contained in the merger agreement.
Fraudulent Conveyance
If at the effective time and after giving effect to the merger (including
the proposed financing of the merger), BFI is, as a matter of United States
federal or state law, determined to have (1) been insolvent or rendered
insolvent by reason of the financing contemplated by the merger agreement, (2)
engaged or about to engage in a business or transaction for which its remaining
assets constituted unreasonably small capital to carry on its business, or (3)
intended to incur, or believed that it would incur, debts beyond its ability to
pay such debts as they matured, the transfer of the consideration in the merger
to BFI's stockholders may be deemed to be a "fraudulent transfer," or an
otherwise impermissible dividend or distribution under applicable United States
federal or state law, and therefore may be subject to claims of the respective
creditors or trustees in bankruptcy of BFI, Allied Waste and Allied Waste North
America or any of such corporations as a debtor-in-possession. If such a claim
is asserted after the merger, there is a risk that persons who were BFI
stockholders at the time of the merger will be ordered by a court to turn over
to BFI, Allied Waste and Allied Waste North America or their respective
creditors, trustees or debtors-in-possession in bankruptcy, all or a portion of
the merger consideration they received in connection with the merger.
The measures of insolvency for purposes of the foregoing will vary
depending on the law of the jurisdiction that is being applied. Generally,
however, a debtor will be considered insolvent at a particular time if the sum
of its debts is then greater than all of its property at a fair valuation or if
the present fair saleable value of its assets was then less than the amount that
would be required to pay its probable liabilities with respect to its existing
debts as they became absolute and matured. It is a condition to the debt
financing that The Chase Manhattan Bank receive a letter in form and substance
and from an independent evaluation firm
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satisfactory to the Initial Lenders which sets forth that firm's opinion as to
the solvency of Allied Waste after giving effect to the merger. The merger
agreement provides that as conditions to BFI's obligation to consummate the
merger, an independent evaluation firm will have delivered a solvency letter to
BFI reasonably satisfactory in form and substance to BFI and that BFI will have
received a certificate from Allied Waste regarding the solvency of Allied Waste
and its subsidiaries, taken as a whole, giving effect to the merger and the
transactions contemplated by the merger agreement, including the financing.
There can be no assurance, however, that a court passing on these same issues
would reach the same conclusion.
INTERESTS OF CERTAIN PERSONS IN THE MERGER; POSSIBLE CONFLICTS OF INTEREST
General
Some members of BFI management and the BFI Board have certain interests in
the merger that are different from or in addition to the interests of BFI
stockholders generally. These interests may create potential conflicts of
interest. These additional interests relate to provisions in the merger
agreement or BFI employee benefit plans and arrangements regarding:
- certain change in control severance payments;
- the treatment of outstanding BFI stock options and restricted stock;
- the vesting of benefits under certain BFI employee benefits plans by
reason of the merger;
- lump sum payments of accrued benefits under BFI deferred compensation and
certain benefit plans; and
- the indemnification and provision of liability insurance for BFI
directors and officers.
All of these additional interests, to the extent material, are described
below. Except as described below, such persons have, to the knowledge of BFI, no
material interest in the merger apart from those of the BFI stockholders
generally. The BFI Board was aware of these interests and considered them, among
other matters, in approving the merger agreement and the transactions
contemplated thereby.
Employment and Severance Agreements
BFI has employment agreements with 21 officers and one director who is a
former officer, which entitle them to severance payments upon a termination of
employment following a change in control of BFI.
Pursuant to the employment agreement with Mr. Ranck, in the event of a
change in control, he may elect (within 12 months after the date of the change
in control) to terminate employment and to receive a lump sum payment equal to
three times the average annualized compensation included in gross income
(including salary, bonus and compensation that has been deferred at the election
of the officer, but excluding any gains from the exercise of stock options and
stock premium received as deferred compensation) over the five years preceding
the year in which the change in control occurs. The election by Mr. Ranck to
take the change in control payment is in lieu of other benefits and rights under
his employment agreement, except, generally, amounts payable under pension,
insurance and similar plans, reimbursement for legal and other advisory
expenses, and certain stock option and indemnification rights.
Pursuant to the employment agreements with Mr. Myers and Harry J. Phillips,
a director and former Chief Executive Officer, in the event of a change in
control, each may elect (within 12 months after the date of the change in
control) to terminate employment and to receive a lump sum payment equal to
three times his average annualized compensation included in gross income (which
would exclude compensation that has been deferred at the election of the
recipient) over the five years preceding the year in which the change in control
occurs. The election by either Mr. Myers or Mr. Phillips to take the change in
control payment is in lieu of other benefits and rights under their employment
agreements, except, generally, amounts payable under pension, insurance and
similar plans, reimbursement for legal and other advisory expenses, and certain
stock option and indemnification rights.
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Pursuant to the employment agreements with J. Gregory Muldoon, Jeffrey E.
Curtiss and Rufus Wallingford, in the event of a change in control, the officer
may elect (within 60 days after the date of the change in control) to terminate
employment and to receive a lump sum payment equal to three times his average
annualized compensation (including salary, bonus and compensation that has been
deferred at the election of the officer, but excluding any gains from the
exercise of stock options and stock premium received as deferred compensation)
over the five years preceding the year in which the change in control occurs.
These lump sum payments will terminate all of the officers' rights under their
employment agreements, except, generally, certain indemnification rights and
reimbursement for legal expenses.
In addition to the five officers described above, 16 other officers and one
director who is a former officer also will have the right to receive severance
payments under their employment agreements upon termination of their employment
following a change in control of BFI.
In addition to the foregoing severance payments, all of the officers and
the director referred to above are entitled to a reimbursement payment to
eliminate the effect of any excise tax they must pay with respect to the
compensation they receive in connection with a change in control.
The merger will constitute a change in control of BFI for purposes of the
employment agreements referred to above. Under the merger agreement, each of the
officers referenced will be deemed to have terminated his or her employment upon
completion of the merger and become entitled to receive severance payments under
their employment agreements at the effective time of the merger. The severance
pay to be received under the employment agreements by each of BFI's Chief
Executive Officer, BFI's other four most highly compensated officers and its
other 16 officers and one director as a group, are approximately as follows: Mr.
Ranck $2,577,000, Mr. Muldoon $1,606,000, Mr. Myers $2,314,000, Mr. Curtiss
$1,385,000, Mr. Wallingford $1,475,000, Mr. Phillips $2,903,000 and others as a
group $12,276,000.
Effect of the Merger on Management Plans
The merger will also constitute a change in control for purposes of BFI's
Annual Management Incentive Plan and Long-Term Incentive Plan. Pursuant to the
merger agreement, these plans will be terminated upon completion of the merger,
and BFI or the surviving corporation will make payments to participants in
accordance with the terms of such plans at that time or as soon as reasonably
practicable thereafter. The payments to be received under these plans by each of
BFI's Chief Executive Officer, BFI's other four most highly compensated
officers, its other 16 officers as a group and its directors as a group, are
approximately as follows: Mr. Ranck, $9,275,000; Mr. Muldoon, $4,698,000; Mr.
Myers, $4,861,000; Mr. Curtiss, $2,747,000; Mr. Wallingford, $2,747,000; BFI's
other 16 officers as a group $18,339,000; and BFI's directors as a group
(excluding Mr. Ranck) $1,411,000.
Pursuant to the merger agreement, immediately prior to completion of the
merger, BFI will also terminate BFI's Deferred Compensation Plan, Grandfathered
Benefit Restoration Plan and Benefit Restoration Plan. Each of the participants
in such plans, including BFI directors and officers, will receive lump sum
payments of their account balances.
Effect of the Merger on Stock Incentive Plans
Immediately prior to completion of the merger, BFI will terminate the
following BFI stock option plans: the Restated 1990 Stock Option Plan, Restated
1993 Non-Employee Director Stock Plan, Restated 1993 Stock Incentive Plan,
Restated 1996 Stock Incentive Plan, and 1987 Stock Option Plan. Upon a change in
control, all unvested BFI stock options granted under these plans vest and all
restrictions attached to shares of restricted stock lapse. The number of stock
options which will become vested because of the change in control of BFI with
respect to BFI's chief executive officer, its other four most highly compensated
officers, its other 16 officers as a group and its directors as a group, are
approximately as follows: Mr. Ranck, 196,500; Mr. Muldoon, 96,500; Mr. Myers,
49,750; Mr. Curtiss, 32,375; Mr. Wallingford, 32,375; other 16 officers as a
group, 307,825; directors as a group (excluding Mr. Ranck), 139,225.
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Upon completion of the merger, each outstanding stock option under these
plans will be canceled, and Allied Waste or BFI will provide each holder of a
BFI stock option with a lump sum cash payment (less applicable withholding
taxes) equal to the excess of $45.00 over the exercise price per share of the
BFI stock option, multiplied by the number of shares of BFI common stock subject
to that BFI stock option.
The payments to be made to BFI's chief executive officer, its other four
most highly compensated officers, its other 16 officers as a group and its
directors as a group (excluding Mr. Ranck) upon cancellation of all of their
stock options, are approximately as follows: Mr. Ranck, $16,034,000; Mr.
Muldoon, $3,980,000; Mr. Myers, $6,213,000; Mr. Curtiss, $3,436,000; Mr.
Wallingford, $1,850,000; BFI's other 16 officers as a group, $16,909,000; and
BFI's directors as a group, $13,383,000.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Allied Waste has agreed that the indemnification provisions of the
certificate of incorporation and bylaws of BFI as in effect at the time of the
completion of the merger will not be amended, repealed or otherwise modified for
a period of six years from the effective time of the merger in any manner that
would adversely affect the rights thereunder of individuals who at the effective
time of the merger, were directors, officers, employees or agents of BFI.
Allied Waste has agreed to cause the surviving corporation in the merger,
to the fullest extent permitted under applicable law, to indemnify and hold
harmless, each present and former director, officer, employee, and agent of BFI
or any of its subsidiaries against any costs or expenses (including attorneys'
fees), damages and liabilities in connection with any actual or threatened claim
or investigation in connection with any action or omission occurring or alleged
to occur prior to the effective time of the merger (including, without
limitation, acts or omissions in connection with such persons serving as an
officer, director or other fiduciary in any entity if such service was at the
request or for the benefit of BFI) or arising out of or pertaining to the
transactions contemplated by the merger agreement.
The merger agreement requires that, for a period of six years after
completion of the merger, Allied Waste will maintain in effect the current
policies of directors' and officers' liability insurance maintained by BFI or
policies of at least the same coverage.
AMENDMENT TO BFI RIGHTS AGREEMENT
BFI amended the Rights Agreement, dated June 3, 1998, between BFI and First
Chicago Trust Company of New York to provide that neither the merger nor the
merger agreement will cause the rights to become exercisable and for the rights
to expire immediately prior to completion of the merger.
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THE MERGER AGREEMENT
The following is a summary of all the material terms of the merger
agreement. The summary is qualified in its entirety by reference to the merger
agreement, a copy of which is attached to this proxy statement as Appendix A.
STRUCTURE AND EFFECTIVE TIME
The merger agreement provides for the merger of Merger Sub with and into
BFI. BFI will survive the merger and continue to exist after the merger as a
wholly owned subsidiary of Allied Waste. The merger will become effective at the
time a certificate of merger is filed with the Delaware Secretary of State (or
at a later time if agreed in writing by the parties and specified in the
certificate of merger). The parties will file the certificate of merger promptly
after the satisfaction or waiver of all conditions in the merger agreement. We
cannot assure you when, or if, all the conditions to completion of the merger
will be satisfied or waived. See "-- Conditions to the Merger." We expect,
however, to complete the merger in the third quarter of 1999.
MERGER CONSIDERATION
The merger agreement provides that each share of BFI common stock
outstanding immediately prior to the effective time of the merger will be
converted at the effective time of the merger into the right to receive $45.00
in cash from Allied Waste, without interest. All treasury shares, shares owned
by BFI's subsidiaries, Allied Waste or Allied Waste's subsidiaries will be
canceled at the effective time of the merger and no payment will be made for
those shares. If appraisal rights for any BFI shares are perfected by any BFI
stockholders, then those shares will be treated as described under "Appraisal
Rights."
PAYMENT PROCEDURES
Allied Waste will appoint an exchange agent that will make payment of the
merger consideration in exchange for certificates representing shares of BFI
common stock. Allied Waste will deposit sufficient cash with the exchange agent
at the effective time of the merger in order to permit the payment of the merger
consideration. Promptly after the effective time of the merger, the exchange
agent will send BFI stockholders a letter of transmittal and instructions
explaining how to send their stock certificates to the exchange agent. The
exchange agent will mail checks for the appropriate merger consideration, minus
any withholding taxes required by law, to BFI stockholders promptly following
the exchange agent's receipt and processing of BFI stock certificates and
properly completed transmittal documents.
TREATMENT OF BFI STOCK OPTIONS
The merger agreement provides that BFI will terminate BFI's Restated 1990
Stock Option Plan, Restated 1993 Non-Employee Director Stock Plan, Restated 1993
Stock Incentive Plan, Restated 1996 Stock Incentive Plan and 1987 Stock Option
Plan immediately prior to the effective time of the merger without prejudice to
the rights of the holders of BFI stock options awarded pursuant to such plans
and, following that termination, grant no additional BFI stock options under
these option plans.
BFI has agreed to take all actions necessary prior to the effective time of
the merger to provide that, upon the effective time of the merger, each
outstanding option will automatically be canceled and holders of each BFI stock
option will be paid the excess of $45.00 over the exercise price of the BFI
stock option multiplied by the number of shares of BFI common stock subject to
the option, less applicable withholding taxes.
DIRECTORS AND OFFICERS
The merger agreement provides that the directors of Merger Sub immediately
before the effective time of the merger will be the directors of the surviving
corporation. The officers of BFI, together with the persons designated by Allied
Waste prior to the effective time of the merger, will be the officers of the
surviving corporation, subject to the right of the Board of Directors of the
surviving corporation to appoint or replace officers.
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REPRESENTATIONS AND WARRANTIES
The merger agreement contains representations and warranties made by BFI to
Allied Waste, including representations and warranties relating to:
- - due organization, power and standing, and other corporate matters;
- - authorization, execution, delivery and enforceability of the merger agreement;
- - capital structure;
- - subsidiaries;
- - conflicts under charter documents, violations of any instruments or law, and
required consents and approvals;
- - reports and financial statements filed with the Securities and Exchange
Commission (the "SEC") and the accuracy of the information in those documents;
- - litigation;
- - no violation of law;
- - compliance with agreements;
- - tax matters;
- - retirement and other employee benefit plans;
- - labor matters;
- - environmental matters;
- - non-competition agreements;
- - title to assets;
- - receipt of a fairness opinion;
- - brokers' and finders' fees with respect to the merger;
- - absence of changes having a material adverse effect on the business, financial
condition or results of operations of BFI and its subsidiaries taken as a
whole; and
- - absence of undisclosed liabilities.
The merger agreement also contains representations and warranties made by
Allied Waste to BFI, including representations and warranties relating to:
- - due organization, power and standing, and other corporate matters;
- - conflicts under charter documents, violations of any instruments or law, and
required consents and approvals;
- - availability of financing;
- - absence of changes having a material adverse effect on the business, financial
condition or results of operations of Allied Waste and its subsidiaries taken
as a whole through the date of merger agreement;
- - brokers' and finders' fees with respect to the merger;
- - authorization, execution, delivery and enforceability of the merger agreement;
- - ownership of BFI common stock;
- - reports and financial statements filed with the SEC and the accuracy of the
information in those documents; and
- - absence of undisclosed liabilities.
The representations and warranties of each of the parties to the merger
agreement will expire upon completion of the merger.
COVENANTS; CONDUCT OF THE BUSINESS OF BFI PRIOR TO THE MERGER
The BFI Board has agreed, subject to its fiduciary duties, to recommend
that BFI's stockholders vote to approve the merger, and to use its reasonable
best efforts to solicit proxies in favor of the merger.
From the date of the merger agreement through the effective time of the
merger, BFI and its subsidiaries are required to comply with certain
restrictions on their conduct and operations. BFI has agreed (and has agreed to
cause its subsidiaries) to conduct their business in the ordinary and usual
course of business, consistent with past practice, to use all reasonable efforts
to preserve intact their respective business organizations and goodwill, keep
available the services of their respective present officers and key employees,
preserve the goodwill and business relationships with customers and others
having business relationships with
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them and, subject to restrictions imposed by applicable law, confer with one or
more representatives of Allied Waste to report operational matters of
materiality and the general status of ongoing operations.
BFI has also agreed that prior to the effective time of the merger, except
as provided under the merger agreement or with the prior written consent of
Allied Waste, BFI will not and will cause its subsidiaries not to:
(1) amend their respective certificates of incorporation or bylaws or
equivalent constitutional documents;
(2) split, combine or reclassify their outstanding capital stock;
(3) declare, set aside or pay any dividend except for the payment of
regular quarterly dividends on BFI common stock not in excess of $0.19
per share declared and payable at times consistent with past practice;
(4) issue, sell, pledge or dispose of any additional shares of, or any
options, warrants or rights of any kind to acquire any shares of their
capital stock or any debt or equity securities convertible into or
exchangeable for that capital stock;
(5) incur any indebtedness for borrowed money other than borrowings in the
ordinary course of business or under certain existing or proposed
credit facilities up to the existing borrowing limit on the date of
the merger agreement;
(6) redeem, purchase, or acquire any shares of its capital stock or any
options, warrants, or rights to acquire any of its capital stock, or
any security convertible into or exchangeable for its capital stock
other than in connection with the exercise of outstanding BFI options
pursuant to the terms of the BFI option plans;
(7) make any acquisition of any assets or businesses, other than
expenditures for current, fixed or capital assets in the ordinary
course of business;
(8) sell, pledge, dispose of or encumber any assets or businesses other
than sales of businesses or assets disclosed to Allied Waste in
connection with the merger agreement;
(9) acquire or agree to acquire any assets or businesses if that
acquisition or agreement may reasonably be expected to delay the
completion of the merger;
(10) acquire or agree to acquire any assets or businesses if those assets
or businesses are not in industries in which BFI currently operates,
unless those assets or businesses are acquired incidental to an
acquisition of businesses or assets that are in industries in which
BFI currently operates and it is reasonable to acquire such incidental
businesses or assets in connection with that acquisition;
(11) acquire or agree to acquire all or substantially all of the business,
assets, properties or capital stock of any entity with securities
registered under the Securities Act of 1933 or the Securities Exchange
Act of 1934;
(12) enter into or amend any employment, severance, or special pay
arrangement with respect to termination of employment or other similar
arrangements or agreements with any directors, officers or key
employees or with any other persons;
(13) increase the salary or monetary compensation of any person, except for
increases consistent with past practice as reflected in BFI's annual
budget for fiscal 1999 or except pursuant to applicable law or
previously existing contractual arrangements;
(14) adopt, enter into or amend to increase benefits or obligations any
employee benefit arrangement, except in the ordinary course of
business, other than to comply with law or as required by contract;
(15) make expenditures or enter into any binding commitment or contract to
make expenditures, except as included in, or consistent with, BFI's
annual budget for fiscal 1999;
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(16) enter into any contract or commitment providing for the provision of
services (including, but not limited to, waste disposal, waste
hauling, or landfill use) by BFI or any of its subsidiaries that has a
term of more than three years and is reasonably expected to generate
more than $15 million in revenues over its term;
(17) enter into any contract or commitment providing for the purchase of
services by BFI or any of its subsidiaries that has a term of more
than one year and is reasonably expected to involve payments of more
than $1 million over its term; or
(18) make, change or revoke any material tax election unless required by
law or make any agreement or settlement with any taxing authority
regarding any material amount of taxes or that would reasonably be
expected to materially increase the obligations of BFI or the
surviving corporation in the merger to pay taxes in the future.
NO SOLICITATION OF ACQUISITION TRANSACTIONS
The merger agreement provides that BFI and its subsidiaries will not, and
will use reasonable efforts to cause any officer, director or employee of BFI,
or any attorney, accountant, investment banker, financial advisor or other agent
retained by it or any of its subsidiaries not to, solicit, negotiate, encourage
or provide non-public information to facilitate, any proposal to acquire all or
any substantial part of the business, properties or capital stock of BFI,
whether by merger, tender offer, purchase of assets or otherwise (an
"acquisition transaction").
BFI may, prior to receipt of the BFI stockholders' approval of the merger,
furnish non-public information to and negotiate with any person who makes an
unsolicited bona fide written proposal or offer with respect to an acquisition
transaction (an "acquisition proposal") which:
- the BFI Board determines in good faith, after consultation with its
independent financial advisor, could reasonably be expected, if
completed, to result in an acquisition more favorable to BFI stockholders
than the merger with Allied Waste, and
- the BFI Board determines in good faith, after consulting with its outside
legal counsel, it is reasonably necessary for the BFI Board to consider
in order to act in a manner consistent with their fiduciary duties or
that the failure to provide non-public information to or negotiate with
the persons making the acquisition proposal would be reasonably likely to
constitute a breach of the BFI Board's fiduciary duties to BFI
stockholders.
If the BFI Board, in good faith, has determined that an acquisition
proposal that could reasonably be expected to result in a transaction more
favorable to BFI stockholders is reasonably likely to be completed (a "superior
proposal"), the BFI Board may, upon at least two days' prior written notice to
Allied Waste and payment to Allied Waste of a termination fee of $225 million,
resolve to accept or recommend, or enter into agreements relating to, the
superior proposal.
The merger agreement requires BFI to promptly notify Allied Waste after
receipt of any acquisition proposal, indication of interest or request for
non-public information relating to BFI or its subsidiaries in connection with an
acquisition proposal or for access to the properties, books or records of BFI or
any subsidiary by any person or entity that informs the BFI Board or such
subsidiary that it is considering making, or has made, an acquisition proposal.
EMPLOYEE BENEFITS
Allied Waste has agreed to assume and honor, or cause the surviving
corporation in the merger to assume and honor, all BFI employee benefit plans
pursuant to the terms of those plans. However, except as expressly provided by
the merger agreement, Allied Waste has no obligation under the merger agreement
to continue to provide benefits under such plans in respect of periods following
the effective time of the merger and is not prevented by the merger agreement
from terminating such plans.
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BFI and Allied Waste have agreed that, prior to the effective time of the
merger, BFI may take all action necessary to terminate BFI's Deferred
Compensation Plan, Grandfathered Benefit Restoration Plan and Benefit
Restoration Plan and to permit participants in such plans to receive lump sum
payments of their accrued benefits (as determined under the provisions of such
plans as in effect on the date of the merger agreement) under such plans at the
effective time of the merger.
BFI and Allied Waste have agreed that, prior to the effective time of the
merger, BFI may take all action necessary to amend BFI's Retirement Plan to
provide that (1) as of the effective time of the merger, the accrued benefit of
participants in the Retirement Plan is frozen as of such date (including with
respect to the crediting of accruals following the effective time of the merger)
and consistent with the current provisions of the plan, a credit for 1999
accruals is made under the cash balance portion of the plan through the
effective time of the merger and (2) following the effective time of the merger,
no new participants may enter the Retirement Plan; but participants as of the
effective time of the merger will continue to vest in their accrued benefit,
continue to receive annual interest credits under the cash balance portion of
the plan at the rate provided pursuant to the existing terms of the plan and
continue to have compensation considered for purposes of calculation of "Final
Average Compensation" under the non-cash balance portion of the plan (to the
extent so considered as of the date of the merger agreement). The merger
agreement does not prohibit Allied Waste from terminating the Retirement Plan in
compliance with applicable law at any time after the effective time of the
merger.
Allied Waste currently intends, or intends to cause the surviving
corporation in the merger to, provide, for a period of at least one year
following the effective time of the merger, employee benefits and incentive
compensation to active employees of BFI and its subsidiaries employed as of the
effective time of the merger who are not covered by any collective bargaining
agreement ("BFI non-union employees") that are no less favorable in the
aggregate than those provided to similarly situated employees of Allied Waste
and its subsidiaries (excluding, however, severance payments for the employees
described below).
Pursuant to the merger agreement, each BFI officer with an employment
agreement will be deemed to have terminated employment at the effective time of
the merger and will be entitled to receive change in control severance payments
under such officer's employment agreement at the effective time of the merger.
Allied Waste has agreed to provide BFI non-union employees who do not have
employment agreements and who would not otherwise receive greater severance pay
under other BFI severance programs with severance benefits if such employees'
employment is involuntarily terminated without cause (including termination of
employment by reason of "constructive discharge" that, for purposes of the
merger agreement, means a reduction of base salary or wages or forced relocation
of more than 30 miles) during the period commencing upon the effective time of
the merger and ending 12 months after the effective time of the merger. Eligible
employees will be entitled to receive a lump sum of severance pay equal to two
weeks of weekly base salary or wages for each whole year of service with BFI or
its subsidiaries (or may elect to receive such severance pay in installments
over a number of weeks on which the severance pay is based), with minimum
severance pay equal to one week of base salary or wages (for employees with at
least six months of service as of the date of termination) and maximum severance
pay equal to 52 weeks of base salary or wages. Any severance pay to which a BFI
non-union employee is entitled under the severance program will be reduced by
the severance pay the employee receives from any other source.
Allied Waste has also agreed to use reasonable efforts to provide to any
BFI non-union employee whose employment is involuntarily terminated without
cause (including by reason of constructive discharge), during the 12 months
following the effective time of the merger and who is age 50 or older on or
within 30 days following the date of termination, continued medical, dental, and
vision coverage for such employee and his or her dependents from the date of
termination until age 65, at the employee's expense.
Subject to applicable law and to the extent permitted by applicable
insurance policies, Allied Waste has agreed to provide any BFI non-union
employee whose employment is involuntarily terminated without cause (including
by reason of constructive discharge) during the 12 months following the
effective time of the merger and who elects to receive severance pay in
installments under the severance program described above, with medical, dental
and vision coverage for the number of weeks of severance pay to which the
employee is
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entitled, up to a maximum of 52 weeks, at the same cost to the employee as in
effect for actively employed BFI employees.
Allied Waste has also agreed to provide outplacement services to certain
BFI non-union employees.
For purposes of all employee benefit plans maintained by or contributed to
by Allied Waste or its subsidiaries in which BFI non-union employees
participate, Allied Waste will cause each such plan to treat the prior service
with BFI and its subsidiaries of each employee as service rendered to Allied
Waste or its subsidiaries, as the case may be, for purposes of eligibility to
participate, vesting, benefit accrual, and levels of benefits under such plans;
provided that the foregoing will not apply to the extent that its application
would result in duplication of accrual of benefits, or with respect to newly
established plans and programs for which prior service of Allied Waste employees
is not taken into account.
BEST EFFORTS; ANTITRUST MATTERS
Allied Waste and BFI have agreed to use reasonable best efforts to take, or
cause to be taken, all action and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to complete
and make effective the merger, including using reasonable best efforts to obtain
all necessary or appropriate waivers, consents or approvals of third parties
required in order to preserve material contractual relationships of Allied Waste
and BFI and their respective subsidiaries, all necessary or appropriate waivers,
consents and approvals, and SEC "no-action" letters to effect all necessary
registrations, filings, and submissions and to lift any injunction or other
legal bar to the merger (and, in such case, to proceed with the merger as
expeditiously as possible). In addition, subject to the fiduciary duties of the
respective Boards of Directors of BFI and Allied Waste, none of the parties to
the merger agreement will knowingly take or cause to be taken any action which
would reasonably be expected to materially delay or prevent completion of the
merger. Allied Waste has also agreed to use its reasonable best efforts to cause
the satisfaction of the conditions to the receipt of funds pursuant to the
financing commitments obtained in connection with the merger.
The merger agreement requires Allied Waste to offer to take (and if such
offer is accepted, commit to take) all steps that it is capable of taking to
avoid or eliminate impediments under any antitrust, competition, or trade
regulation law that may be asserted by the Federal Trade Commission, the
Department of Justice, any state attorney general or any other governmental
entity with respect to the merger so as to enable the effective time of the
merger to occur prior to September 15, 1999, and to defend through litigation on
the merits any claim asserted in any court by any party, including appeals.
Allied Waste has agreed that it will propose, negotiate, offer to commit
and effect (and if such offer is accepted, commit to and effect), by consent
decree, hold separate order, or otherwise, the sale, divestiture, or disposition
of such assets or businesses of Allied Waste or, effective as of the effective
time of the merger, the surviving corporation in the merger, or their respective
subsidiaries or otherwise offer to take or offer to commit to take any action
that it is capable of taking and, if the offer is accepted, take or commit to
take such action that limits its freedom of action with respect to, or its
ability to retain, any of the businesses, services or assets of Allied Waste,
the surviving corporation in the merger or their respective subsidiaries, in
order to avoid the entry of, or to effect the dissolution of, any injunction,
temporary restraining order or other order in any suit or proceeding, which
would otherwise have the effect of preventing or delaying the effective time of
the merger beyond September 15, 1999.
BFI has agreed that, at the request of Allied Waste, it will agree to
divest, hold separate or otherwise take or commit to take any action that limits
its freedom of action with respect to, or its ability to retain, any of the
businesses, services, or assets of BFI or any of its subsidiaries, provided that
any such action may be conditioned upon the completion of the merger.
If Allied Waste complies with all of its obligations under the merger
agreement with respect to antitrust and competition matters, but there is no
action that Allied Waste or BFI can undertake or offer to undertake that would
eliminate the impediment asserted by the Federal Trade Commission, the
Department of Justice, or any state attorney general or other order in any suit
or proceeding, in order for the effective time of the
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merger to occur prior to September 15, 1999, or, if that date is extended,
December 31, 1999, then, assuming all conditions other than those relating to
such impediment or order have been satisfied or waived, Allied Waste will not be
deemed to have breached its obligations under the merger agreement with respect
to antitrust and competition matters. See "-- Termination Fees."
INDEMNIFICATION
Allied Waste has agreed that the indemnification provisions of the
certificate of incorporation and bylaws of BFI as in effect at the effective
time of the merger will not be amended, repealed or otherwise modified for a
period of six years from the effective time of the merger in any manner that
would adversely affect the rights thereunder of individuals who at the effective
time of the merger, were directors, officers, employees or agents of BFI.
Allied Waste has agreed to cause the surviving corporation in the merger,
to the fullest extent permitted under applicable law, to indemnify and hold
harmless, each present and former director, officer, employee, and agent of BFI
or any of its subsidiaries against any costs or expenses (including attorneys'
fees), damages and liabilities in connection with any actual or threatened claim
or investigation in connection with any action or omission occurring or alleged
to occur prior to the effective time of the merger (including, without
limitation, acts or omissions in connection with such persons serving as an
officer, director or other fiduciary in any entity if such service was at the
request or for the benefit of BFI) or arising out of or pertaining to the
transactions contemplated by the merger agreement.
Allied Waste has agreed that, for a period of six years after the effective
time of the merger, it will cause to be maintained in effect the current
policies of directors' and officers' liability insurance maintained by BFI and
its subsidiaries (provided that Allied Waste may substitute policies of at least
the same coverage and amounts containing terms and conditions that are no less
advantageous to the indemnified parties, and which coverages and amounts will be
no less than the coverages and amounts provided at that time for Allied Waste's
directors and officers) with respect to matters arising on or before the
effective time of the merger.
CONDITIONS TO THE MERGER
The obligations of BFI, Allied Waste and Merger Sub to complete the merger
are subject to the satisfaction of the following conditions:
(1) the merger agreement and the merger have been approved by the holders
of a majority of the shares of BFI common stock;
(2) no provision of any applicable domestic (whether federal, state or
local) or foreign law or regulation and no judgment, injunction, order
or decree of a court or governmental agency or authority of competent
jurisdiction is in effect that has the effect of making the merger or
the financing illegal or otherwise restrains or prohibits the
completion of the merger or the financing (each party having agreed to
use its best efforts, including appeals to higher courts, to have any
judgment, injunction, order or decree lifted), except for any law or
regulation the violation of which would not, singly or in the
aggregate, reasonably be expected to
- have a material adverse effect on the business, financial condition or
results of operations of Allied Waste and its subsidiaries taken as a
whole (after giving effect to the merger),
- result in a criminal violation (other than a misdemeanor the only
penalty for which is a monetary fine), or
- result in Allied Waste or its subsidiaries failing to meet the
standards for licensing, suitability or character set by any foreign,
federal, state or local authority relating to the conduct of Allied
Waste's or BFI's business that (after taking into account the
anticipated impact of such failure to so meet such standards on other
authorities) could reasonably be expected to have a material adverse
effect on the business, financial condition or results of operations
of Allied Waste and its subsidiaries taken as a whole (after giving
effect to the merger); and
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(3) the waiting period applicable to completion of the merger under the HSR
Act has expired or been terminated.
Unless waived by BFI, the obligation of BFI to complete the merger is
subject to the satisfaction of the following additional conditions:
(1) Allied Waste and Merger Sub have performed their agreements contained
in the merger agreement required to be performed on or prior to the
effective time of the merger, and the representations and warranties of
Allied Waste and Merger Sub contained in the merger agreement are true
and correct on and as of the effective time of the merger (except to
the extent that such representations and warranties speak as of an
earlier date), except for such failures to perform or to be true and
correct that would not reasonably be expected to have a material
adverse effect on the business, financial condition or results of
operations of Allied Waste and its subsidiaries taken as a whole;
(2) Allied Waste has delivered a certificate to BFI, in form and substance
reasonably satisfactory to BFI, to the effect that, at the effective
time of the merger, after giving effect to the merger and the related
transactions, Allied Waste and its subsidiaries, taken as a whole, will
not (a) be insolvent, (b) have unreasonably small capital with which to
engage in its business or (c) have incurred or plan to incur debts
beyond its ability to pay as they become absolute and matured; and
(3) BFI has received a solvency letter from an independent appraiser as to
Allied Waste's solvency, in form and substance reasonably satisfactory
to BFI.
Unless waived by Allied Waste and Merger Sub, the obligations of Allied
Waste and Merger Sub to complete the merger are subject to the satisfaction of
the following additional conditions:
(1) BFI has performed its agreements contained in the merger agreement
required to be performed on or prior to the effective time of the
merger, and the representations and warranties of BFI contained in the
merger agreement are true and correct on and as of the effective time
of the merger (except to the extent that such representations and
warranties speak as of an earlier date), except for such failures to
perform and to be true and correct that would not reasonably be
expected to have a material adverse effect on the business, financial
condition or results of operations of BFI and its subsidiaries taken as
a whole;
(2) all statutory approvals required to be obtained in order to permit
completion of the merger under applicable law have been obtained,
except for approvals the failure of which to obtain would not, singly
or in the aggregate,
- reasonably be expected to have a material adverse effect on the
business, financial condition or results of operations of Allied Waste
and its subsidiaries taken as a whole (after giving effect to the
merger),
- result in a criminal violation, other than a misdemeanor the only
penalty for which is a monetary fine, or
- result in Allied Waste or its subsidiaries failing to meet the
standards for licensing, suitability or character set by any foreign,
federal, state or local authority relating to the conduct of business
of Allied Waste or BFI which (after taking into account the
anticipated impact of that failure to so meet such standards on other
authorities) could reasonably be expected to have a material adverse
effect on the business, financial condition or results of operations
of Allied Waste and its subsidiaries taken as a whole (after giving
effect to the merger); and
(3) all consents, approvals or authorizations required to be obtained
pursuant to any contract or permit to which BFI or its subsidiaries are
a party or of which BFI or its subsidiaries are a beneficiary in order
to avoid a material adverse effect on the business, financial condition
or results of operations of Allied Waste and its subsidiaries taken as
a whole (after giving effect to the merger) have been obtained.
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TERMINATION OR AMENDMENT
The merger agreement may be terminated and the merger may be abandoned at
any time prior to the effective time of the merger (notwithstanding any approval
by the stockholders of BFI):
(1) by mutual written consent of BFI and Allied Waste;
(2) by either BFI or Allied Waste if the merger has not been completed by
September 15, 1999, except that date will automatically be extended
until December 31, 1999 if, on September 15, 1999, the waiting period
under the HSR Act has not expired or been terminated or any injunction,
order or decree prohibits or restrains the completion of the merger;
provided, however, that this right to terminate will not be available
to any party where failure to fulfill its obligations under the merger
agreement caused the failure to complete the merger by the applicable
date;
(3) by either BFI or Allied Waste if any judgment, injunction, order or
decree of a court or governmental agency or authority of competent
jurisdiction restrains or prohibits the completion of the merger, and
such judgment, injunction, order or decree has become final and was not
entered at the request of the terminating party;
(4) by either BFI or Allied Waste if there has been a breach by the other
party of any representation, warranty, covenant, or agreement set forth
in the merger agreement which would reasonably be expected to have a
material adverse effect on the business, financial condition or results
of operations of Allied Waste or BFI, as the case may be, and its
respective subsidiaries taken as a whole, or prevent or delay the
completion of the merger beyond the date specified in paragraph (2)
above, and which has not been cured in all material respects within 30
days after written notice of such breach by the terminating party;
(5) by BFI, after giving Allied Waste at least two days' prior written
notice of its intention to terminate the merger agreement and paying a
termination fee of $225 million, if, prior to receipt of the BFI
stockholders' approval of the merger agreement, (a) BFI receives a
superior proposal that it resolves to accept or (b) a tender or
exchange offer is commenced by any person or group for all outstanding
shares of BFI common stock and the BFI Board determines, in good faith
and after consultation with its independent financial advisor, that the
offer could reasonably be expected to be a superior proposal and
resolves to accept that superior proposal or recommend to BFI
stockholders that they tender their shares in that tender or exchange
offer;
(6) by Allied Waste if the BFI Board has (a) failed to recommend, or has
withdrawn, modified or amended in any material respects its approval or
recommendation of the merger or has resolved to do any of the
foregoing, or (b) recommended another acquisition proposal or resolved
to accept a superior proposal or has recommended to BFI stockholders
that they tender their shares in a tender or an exchange offer
commenced by a third party; or
(7) by Allied Waste or BFI, if the stockholders of BFI fail to approve the
merger at the special meeting or any adjournment or postponement
thereof.
TERMINATION FEES
The merger agreement obligates BFI to pay a fee to Allied Waste equal to
$225 million if:
(1) BFI terminates the merger agreement for the reasons described in
paragraph (5) of "-- Termination or Amendment;"
(2) Allied Waste terminates the merger agreement for the reasons described
in paragraph (6) of "-- Termination or Amendment;" or
(3) the merger agreement is terminated for any reason at a time at which
Allied Waste was not in material breach of its obligations contained in
the merger agreement and was entitled to terminate the merger agreement
because BFI stockholders had not approved the merger and, prior to the
time
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of the special meeting, an acquisition proposal had been made, and on or
prior to the nine month anniversary of the termination of the merger
agreement, either:
- BFI or any of its subsidiaries or affiliates enters into an agreement
or letter of intent (or resolves or announces an intention to do so)
with respect to an acquisition transaction involving a person or group
that made an acquisition proposal on or after March 7, 1999 and prior
to the special meeting, and such acquisition transaction is completed;
or
- an acquisition transaction otherwise occurs with any person who made a
proposal with respect to an acquisition transaction no later than 90
days after termination of the merger agreement.
Allied Waste has agreed to pay to BFI a fee equal to $225 million if the
merger agreement is terminated for the reasons described in paragraph (2) of
"-- Termination or Amendment" and at such time:
(1) Allied Waste or its subsidiaries have not received sufficient funds
pursuant to the financing commitments obtained in connection with the
merger agreement to complete the merger;
(2) all conditions to Allied Waste's obligation to complete the merger have
been satisfied, other than conditions relating to the HSR Act or any
law, order, judgment or injunction concerning antitrust or competition
matters; and
(3) BFI is not in breach of any of its representations or obligations set
forth in the merger agreement, except for breaches that did not prevent
Allied Waste from obtaining funds pursuant to the definitive agreement
relating to the debt financing for the merger.
If (1) Allied Waste is not in breach of any of its representations or
obligations set forth in the merger agreement, except for breaches which did not
result in a failure to satisfy the conditions to obtaining funds pursuant to the
definitive agreement relating to the debt financing for the merger, and (2) at
the time the definitive agreement relating to the debt financing for the merger
was executed, Allied Waste was not in breach of any of its representations and
warranties in that agreement with respect to Allied Waste and, to the best of
Allied Waste's knowledge, Allied Waste was not in breach of its representations
and warranties in that agreement with respect to BFI, in either case, except for
breaches that would not prevent Allied Waste from obtaining funds under the
definitive agreement relating to the debt financing for the merger, payment of
the $225 million termination fee by Allied Waste in the circumstances described
above will relieve Allied Waste from all liability arising out of the failure of
the merger to occur on or prior to September 15, 1999 or, if that date is
extended, December 31, 1999. Otherwise, if all of the above requirements for the
payment of a fee by Allied Waste are satisfied, then Allied Waste will be
obligated to pay the $225 million fee, and such fee will be credited against any
amount for which Allied Waste may be held liable in connection with the failure
to complete the merger. Allied Waste will not have any liability to BFI for
Allied Waste's failure to obtain funds pursuant to the definitive agreement
relating to the debt financing for the merger as a result of a breach by BFI of
any of BFI's representations or obligations set forth in the merger agreement.
Allied Waste has also agreed to pay to BFI a fee equal to $225 million if
the merger agreement is terminated for reasons described in paragraph (2) or, to
the extent related to antitrust or competition matters, paragraph (3) of
"-- Termination or Amendment" and at such time:
(1) the waiting period under the HSR Act has not expired or been terminated
or the merger is prohibited or restrained by any injunction, order or
decree relating to antitrust or competition matters; and
(2) all of the other conditions to Allied Waste's obligation to complete
the merger have been satisfied or would be satisfied absent the
occurrence or failure to occur of the events described in paragraph (1)
above except conditions insofar as they relate to the delivery of
officers certificates and conditions that are not (or would not be) so
satisfied as a result of Allied Waste's breach of the merger agreement.
Payment of the $225 million termination fee by Allied Waste in the
circumstances described above will relieve Allied Waste from all liability
arising out of the failure of the merger to occur on or prior to
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September 15, 1999 or, if that date is extended, December 31, 1999, unless
Allied Waste has failed to comply with its obligations under the merger
agreement with respect to antitrust or competition matters. See "-- Best
Efforts; Antitrust Matters."
EXPENSES
The merger agreement provides that all costs and expenses incurred in
connection with the merger agreement and the transactions contemplated thereby
will be paid by the party incurring such expenses, except that those expenses
incurred in connection with printing and filing this proxy statement will be
shared equally by Allied Waste and BFI.
AMENDMENT
Provisions of the merger agreement may be amended or waived prior to the
effective time of the merger if the amendment or waiver is signed by the
respective parties to the merger agreement (and approved by their respective
Boards of Directors) in the case of an amendment, or by the party against whom
the waiver is to be effective in the case of a waiver.
APPRAISAL RIGHTS
Pursuant to Section 262 of the Delaware General Corporation Law (the
"DGCL"), any holder of BFI common stock who does not wish to accept the $45.00
per share merger consideration may dissent from the merger and elect to have the
fair value of such shares of BFI common stock (exclusive of any element of value
arising from the accomplishment or expectation of the merger) judicially
determined by the Delaware Court of Chancery and paid to the stockholder in
cash, together with a fair rate of interest, if any, provided that the
stockholder complies with the provisions of Section 262 of the DGCL. The
following discussion is not a complete statement of the law pertaining to
appraisal rights under the DGCL, and is qualified in its entirety by the full
text of Section 262 of the DGCL, which is attached to this proxy statement as
Appendix C. All references in Section 262 of the DGCL and in this summary to a
"stockholder" are to the record holder of the shares of BFI common stock as to
which appraisal rights are asserted. A person having a beneficial interest in
shares of BFI common stock held of record in the name of another person, such as
a broker or nominee, must act promptly to cause the record holder to follow
properly and in a timely manner the steps summarized below to perfect appraisal
rights. Because of the complexity of the appraisal procedures, BFI believes that
stockholders who consider exercising such rights should seek the advice of
counsel.
Stockholders wishing to exercise the right to dissent from the merger and
seek an appraisal of their shares must do ALL of the following:
- THE STOCKHOLDER MUST NOT VOTE IN FAVOR OF THE MERGER. Because a proxy
which does not contain voting instructions will, unless revoked, be voted
in favor of the merger, a stockholder who votes by proxy and who wishes
to exercise appraisal rights must vote against the merger.
- THE STOCKHOLDER MUST DELIVER TO BFI A WRITTEN DEMAND FOR APPRAISAL BEFORE
THE VOTE ON THE MERGER AGREEMENT AT THE SPECIAL MEETING.
- The stockholder must continuously hold such shares from the date of
making the demand through the effective time of the merger since
appraisal rights will be lost if the shares are transferred before the
effective time of the merger.
- The stockholder must file a petition in the Delaware Court of Chancery
demanding a determination of the fair value of the shares within 120 days
after the effective time of the merger.
Neither voting (in person or by proxy) against, abstaining from voting on
or failing to vote on the proposal to approve the merger agreement will
constitute a written demand for appraisal within the meaning of Section 262 of
the DGCL. The written demand for appraisal must be in addition to and separate
from any such proxy or vote.
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Only a holder of record of shares of BFI common stock issued and
outstanding immediately prior to the effective time of the merger may assert
appraisal rights for the shares of BFI common stock registered in that holder's
name. A demand for appraisal should be executed by or on behalf of the
stockholder of record, fully and correctly, as such stockholder's name appears
on such stock certificates, should specify the stockholder's name and mailing
address, the number of shares of BFI common stock owned and that such
stockholder intends to demand appraisal of such stockholder's BFI common stock.
Stockholders who hold their shares in brokerage accounts or other nominee forms
and who wish to exercise appraisal rights are urged to consult with their
brokers to determine the appropriate procedures for the making of a demand for
appraisal by such a nominee.
A stockholder who elects to exercise appraisal rights pursuant to Section
262 of the DGCL should mail or deliver a written demand to: Edward C. Norwood,
Vice President and Secretary, Browning-Ferris Industries, Inc., 757 N. Eldridge,
Houston, Texas 77079.
If the merger is approved, Allied Waste will give written notice of the
effective time of the merger within 10 days after the effective time of the
merger to each former stockholder of BFI who did not vote in favor of the merger
agreement and who made a written demand for appraisal in accordance with Section
262 of the DGCL. Within 120 days after the effective time of the merger, but not
later, either the surviving corporation or any dissenting stockholder who has
complied with the requirements of Section 262 of the DGCL may file a petition in
the Delaware Court of Chancery demanding a determination of the value of the
shares of BFI common stock held by all dissenting stockholders. Stockholders who
desire to have their shares appraised should initiate any petitions necessary
for the perfection of their appraisal rights within the time periods and in the
manner prescribed in Section 262 of the DGCL.
Under the merger agreement, BFI has agreed to give Allied Waste prompt
notice of any demands for appraisal received by it, withdrawals of such demands,
and any other instruments served in accordance with the DGCL and received by
BFI. Allied Waste will have the opportunity to direct all negotiations and
proceedings with respect to demands for appraisal under the DGCL. BFI will not,
except with the prior written consent of Allied Waste, make any payment with
respect to any demands for appraisal, or offer to settle, or settle, any such
demands.
Within 120 days after the effective time of the merger, any stockholder who
has complied with the provisions of Section 262 of the DGCL to that point in
time will be entitled to receive from the surviving corporation, upon written
request, a statement setting forth the aggregate number of shares not voted in
favor of the merger agreement and with respect to which demands for appraisal
have been received and the aggregate number of holders of such shares. The
surviving corporation must mail such statement to the stockholder within 10 days
of receipt of such request or within 10 days after expiration of the period for
delivery of demands for appraisals under Section 262 of the DGCL, whichever is
later.
If a petition for appraisal is timely filed, the Delaware Court of Chancery
will determine which stockholders are entitled to appraisal rights and
thereafter will determine the fair value of the shares of BFI common stock held
by dissenting stockholders, exclusive of any element of value arising from the
accomplishment or expectation of the merger, but together with a fair rate of
interest, if any, to be paid on the amount determined to be fair value. In
determining such fair value, the Delaware Court of Chancery will take into
account all relevant factors. The Delaware Court of Chancery may determine such
fair value to be more than, less than or equal to the consideration that such
dissenting stockholder would otherwise be entitled to receive pursuant to the
merger agreement. If a petition for appraisal is not timely filed, then the
right to an appraisal will cease. The costs of the appraisal proceeding will be
determined by the Delaware Court of Chancery and taxed against the parties as
the Delaware Court of Chancery determines to be equitable under the
circumstances. Upon the application of any stockholder, the Delaware Court of
Chancery may determine the amount of interest, if any, to be paid upon the value
of the stock of stockholders entitled to such interest. Upon application of a
stockholder, the Delaware Court of Chancery may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorneys' fees and the
fees and expenses of experts, to be charged pro rata against the value of all
shares entitled to appraisal.
41
<PAGE> 47
STOCKHOLDERS SHOULD BE AWARE THAT THE FAIR VALUE OF THEIR SHARES AS
DETERMINED UNDER SECTION 262 OF THE DGCL COULD BE GREATER THAN, THE SAME AS, OR
LESS THAN THE $45.00 PER SHARE MERGER CONSIDERATION. THE GOLDMAN SACHS OPINION
IS NOT AN OPINION AS TO FAIR VALUE UNDER SECTION 262 OF THE DGCL.
Any stockholder who has duly demanded an appraisal in compliance with
Section 262 of the DGCL will not, after the effective time of the merger, be
entitled to vote the shares subject to such demand for any purpose or be
entitled to the payment of dividends or other distributions on those shares
(except dividends or other distributions payable to holders of record of shares
as of a record date prior to the effective time of the merger).
Any stockholder may withdraw a demand for appraisal and accept the merger
consideration by delivering to the surviving corporation a written withdrawal of
such stockholder's demand for appraisal, except that (1) any such attempt to
withdraw made more than 60 days after the effective time of the merger will
require written approval of the surviving corporation and (2) no appraisal
proceeding in the Delaware Court of Chancery will be dismissed as to any
stockholder without the approval of the Delaware Court of Chancery, and such
approval may be conditioned upon such terms as the Delaware Court of Chancery
deems just. If the surviving corporation does not approve a stockholder's
request to withdraw a demand for appraisal when such approval is required or if
the Delaware Court of Chancery does not approve the dismissal of an appraisal
proceeding, the stockholder would be entitled to receive only the appraised
value determined in the appraisal proceeding. If the stockholder fails to
perfect, successfully withdraws or loses the appraisal right, the stockholder's
shares will be converted into the right to receive the merger consideration.
42
<PAGE> 48
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth, as of June 10, 1999, the amount of BFI
common stock beneficially owned by each of its directors, each executive officer
named in the Summary Compensation Table, and all directors and executive
officers as a group:
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED
SOLE VOTING AND OPTIONS OTHER
INVESTMENT EXERCISABLE BENEFICIAL PERCENT OF
NAME POWER(1) WITHIN 60 DAYS OWNERSHIP CLASS
- ---- ------------------- -------------- ---------- ----------
<S> <C> <C> <C> <C>
William D. Ruckelshaus.............. 97,389 66,250 2,655(2) *
Bruce E. Ranck...................... 110,318 770,900 6,481(2) *
J. Gregory Muldoon.................. 54,968 179,000 4,136(2) *
Norman A. Myers..................... 250,038 356,250 4,803(2) *
Jeffrey E. Curtiss.................. 51,835 154,125(3) 3,911(2)(4) *
Rufus Wallingford................... 14,959 83,375(9) 6,201 *
John W. Alden....................... 257 -0- -0- *
Gregory D. Brenneman................ 881 3,125 -0- *
William T. Butler................... 4,384 38,750 -0- *
Gerald Grinstein.................... 2,006 38,750 1,000(5) *
Robert J. Herbold................... 257 -0- -0- *
Harry J. Phillips, Sr. ............. 367,943(6) 402,100 7,478(2)(7) *
Joseph L. Roberts, Jr............... 1,884 38,750 -0- *
Marc J. Shapiro..................... 4,884 11,250 -0- *
Robert M. Teeter.................... 33,884(8) 8,750(8) -0- *
Marina v. N. Whitman................ 3,884 38,750 -0- *
All Executive Officers and Directors
as a Group (20 persons)........... 1,041,666 2,556,200 49,946 2.2%
</TABLE>
- ---------------
* Less than one percent.
(1) Includes restricted shares of BFI common stock. The holder has sole voting
power and no investment power until these restricted shares vest. After
vesting, the holder has sole investment and voting powers.
(2) Represents shares of BFI common stock allocated to the employee through
participation in BFI's Employee Stock Ownership and Savings Plan according
to the latest statement for such plan. These shares can be voted by each
employee, and each employee has investment authority over the shares held in
the employee's account in such plan, except for shares acquired with BFI
matching contributions. In the case of a tender offer, the trustee shall
tender or not tender these shares as directed by each participant.
(3) Includes options to purchase 15,000 shares of BFI common stock that were
transferred by Mr. Curtiss to family trusts.
(4) Includes 2,000 shares of BFI common stock held by spouse in which Mr.
Curtiss claims an indirect ownership.
(5) Shares of BFI common stock held jointly with spouse.
(6) Includes 292,334 shares of BFI common stock held by a limited partnership of
which Mr. Phillips is sole general partner.
(7) Includes 877 shares of BFI common stock held by spouse in which Mr. Phillips
claims an indirect ownership.
(8) All shares of BFI common stock held in a trust of which Mr. Teeter serves as
the trustee.
(9) Includes options to purchase 4,750 shares of BFI common stock that were
transferred by Mr. Wallingford to family members.
43
<PAGE> 49
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information concerning each person
known by BFI to own beneficially more than 5% of the outstanding voting shares
of BFI common stock as of December 31, 1998.
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY PERCENT OF
NAME OF BENEFICIAL OWNER OWNED(1) CLASS
- ------------------------ ------------ ----------
<S> <C> <C>
Fidelity Management and Research Corporation................ 11,358,075 7.1%
87 Devonshire Street
Boston, Massachusetts 02109-3605
Capital Research and Management Company..................... 16,832,500 10.5%
333 South Hope Street
Los Angeles, California 90071-1447
</TABLE>
- ---------------
(1) Information is based on Schedule 13Gs filed with the SEC for December 31,
1998.
44
<PAGE> 50
SELECTED FINANCIAL DATA OF BFI
Our selected historical financial data set forth below for the five years
ended September 30, 1998 has been derived from our audited consolidated
financial statements. The financial data for the six-month periods ended March
31, 1999 and 1998 has been derived from unaudited financial statements. The
unaudited financial statements include all adjustments, consisting of normal
recurring accruals, which we consider necessary for a fair presentation of the
financial positions and the results of operations for these periods. The
financial data should be read in connection with our previously filed financial
statements and related notes. See "Incorporation of Certain Documents by
Reference."
<TABLE>
<CAPTION>
SIX MONTHS
ENDED MARCH 31, FOR THE YEAR ENDED SEPTEMBER 30,
----------------------- --------------------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING STATEMENT DATA:
Revenues........................... $2,078,623 $2,650,459 $4,745,748 $5,782,972 $5,779,277 $5,779,351 $4,314,541
Income (loss) before extraordinary
items and cumulative effects of
changes in accounting
principles....................... $ 138,776 $ 180,101 $ 349,373 $ 283,695 $ (89,172) $ 384,561 $ 283,973
Net income (loss).................. $ 138,776 $ 169,539 $ 338,811 $ 265,214 $ (101,331) $ 384,561 $ 278,710
Income (loss) per share
Diluted --
Income (loss) before
extraordinary items and
cumulative effects of changes
in accounting principles..... $ .86 $ .95 $ 1.93 $ 1.39 $ (0.45) $ 1.92 $ 1.52
Net income (loss) per share........ $ .86 $ .90 $ 1.87 $ 1.30 $ (0.51) $ 1.92 $ 1.49
Cash dividends per common share.... $ .38 $ .38 $ .76 $ .70 $ .68 $ .68 $ .68
SELECTED BALANCE SHEET DATA:
Property and equipment, net........ $2,847,495 $2,705,914 $2,812,221 $3,567,155 $3,920,721 $3,722,292 $3,049,767
Total assets....................... $4,934,165 $4,901,507 $4,999,481 $6,678,292 $7,600,906 $7,460,372 $5,796,955
Long-term debt, net of current
portion.......................... $1,971,009 $1,216,385 $1,792,863 $1,675,162 $2,766,885 $2,410,748 $1,458,629
Common stockholders' equity........ $1,301,935 $1,901,360 $1,413,458 $2,660,763 $2,510,278 $2,741,750 $2,391,680
SUPPLEMENTAL INFORMATION(A):
Income before special charges
(credits), extraordinary items
and cumulative effects of changes
in accounting principles......... $ 154,457 $ 167,223 $ 336,495 $ 332,822 $ 273,014 $ 384,561 $ 283,973
</TABLE>
- ---------------
(A) Amounts provided supplementally are measures of financial performance that
are not in conformity with generally accepted accounting principles because
certain items of income (expense) have been excluded. This supplemental
information has been provided because we understand that such information is
used by certain investors when analyzing our financial condition and
performance.
45
<PAGE> 51
MARKET PRICE OF BFI COMMON STOCK AND DIVIDEND INFORMATION
BFI common stock is traded on the New York Stock Exchange, the Chicago
Stock Exchange, the Pacific Stock Exchange and the London Stock Exchange. The
table below sets forth by fiscal quarter, since the beginning of BFI's fiscal
year ended September 30, 1997, the high and low sales prices of BFI common stock
on the New York Stock Exchange Composite Transactions Tape, as reported in The
Wall Street Journal.
<TABLE>
<CAPTION>
MARKET PRICES CASH
-------------- DIVIDENDS
HIGH LOW PER SHARE
----- ----- ---------
<S> <C> <C> <C>
FISCAL YEAR 1997
First Quarter............................................. $27 5/8 $24 1/8 $0.17
Second Quarter............................................ 32 7/8 25 3/4 0.17
Third Quarter............................................. 35 1/2 26 3/8 0.17
Fourth Quarter............................................ 38 13/16 33 7/8 0.19
FISCAL YEAR 1998
First Quarter............................................. 38 7/8 29 7/16 0.19
Second Quarter............................................ 38 1/8 30 0.19
Third Quarter............................................. 37 1/8 31 1/2 0.19
Fourth Quarter............................................ 38 5/8 30 1/4 0.19
FISCAL YEAR 1999
First Quarter............................................. 36 3/8 28 0.19
Second Quarter............................................ 40 26 1/8 0.19
Third Quarter (through June 11, 1999)..................... 43 38 5/16 0.19
</TABLE>
On March 5, 1999, the last full trading day prior to the public
announcement of the merger agreement, the high and low trading prices of BFI
common stock as reported on the New York Stock Exchange Composite Transactions
Tape were $35 15/16 and $33 3/4, respectively. On June 11, 1999, the last full
trading day prior to the date of this proxy statement, the closing price for BFI
common stock as reported on New York Stock Exchange Composite Transactions Tape
was $42 11/16.
BFI stockholders are encouraged to obtain current market quotations for BFI
common stock.
On June 2, 1999, the BFI Board declared a dividend on BFI common stock of
$0.19 per share payable on July 6, 1999 to holders of record on June 15, 1999.
Under the merger agreement, BFI has agreed that, until the merger is completed
or the merger agreement is otherwise terminated, it will not declare, set aside
or pay any dividend or distribution on BFI common stock, other than regular
quarterly dividends on BFI common stock of $0.19 per share with declaration and
payment dates consistent with past practice.
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP, independent public auditors for BFI for fiscal years
1998 and 1999, has advised BFI that it will have representatives present at the
special meeting. The representatives will have the opportunity to make a
statement if they desire to do so and will be available to respond to
appropriate questions.
STOCKHOLDER PROPOSALS
Any BFI stockholder who wishes to submit a proposal to be considered for
inclusion in the proxy materials relating to the 2000 Annual Meeting of
Stockholders must deliver such proposal to the Secretary of BFI. The proposal
must be received at our executive offices (757 N. Eldridge, Houston, Texas
77079) no later than September 29, 1999. Any BFI stockholder who intends to
present a proposal at the 2000 Annual Meeting of Stockholders without inclusion
of such proposal in our proxy materials must deliver the proposal to us no later
than October 29, 1999. We reserve the right to disregard or take other
appropriate action with respect to
46
<PAGE> 52
any proposal that does not comply with these and other applicable requirements.
If the merger is completed, there will be no 2000 Annual Meeting of
Stockholders.
WHERE YOU CAN FIND MORE INFORMATION
Each of BFI and Allied Waste is subject to the informational requirements
of the Securities Exchange Act of 1934. Each company files reports, proxy
statements and other information with the SEC. You may read and copy such
reports, proxy statements and other information at the SEC's Public Reference
Section at 450 Fifth Street, N.W., Washington, D.C. 20549. You may obtain
information on the operation of the Public Reference Room by calling the SEC at
1-800-SEC-0330. The SEC also maintains an Internet website, located at
http://www.sec.gov, that contains reports, proxy statements and other
information regarding registrants that file electronically with the SEC.
You may also read reports, proxy statements and other information relating
to BFI and Allied Waste at the offices of the New York Stock Exchange at 20
Broad Street, New York, New York 10005.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
BFI hereby incorporates by reference into this proxy statement the
following documents that have been filed with the SEC (File No. 1-6805): (1)
Annual Report on Form 10-K for the year ended September 30, 1998; (2) Quarterly
Reports on Form 10-Q for the periods ended December 31, 1998 and March 31, 1999;
and (3) Current Reports on Form 8-K filed on January 15, 1999 and March 15,
1999.
All documents and reports filed by BFI pursuant to Section 13(a), 13(c),
14, or 15(d) of the Securities Exchange Act of 1934 after the date of this proxy
statement and on or prior to the date of the special meeting are deemed to be
incorporated by reference in this proxy statement from the date of filing of
such documents or reports. Any statement contained in a document incorporated or
deemed to be incorporated by reference in this proxy statement will be deemed to
be modified or superseded for purposes of this proxy statement to the extent
that a statement contained herein or in any other subsequently filed document
which also is or is deemed to be incorporated by reference in this proxy
statement modifies or supersedes such statement. Any statement so modified or
superseded will not be deemed, except as so modified or superseded, to
constitute a part of this proxy statement.
Any person receiving a copy of this proxy statement may obtain, without
charge, upon written or oral request, a copy of any of the documents
incorporated by reference except for the exhibits to such documents (other than
the exhibits expressly incorporated in such documents by reference). Requests
should be directed to: Browning-Ferris Industries, Inc., 757 N. Eldridge,
Houston, Texas 77079, Attention: Assistant Corporate Secretary (telephone number
281-870-8100). A copy will be provided by first class mail or other equally
prompt means within one business day after receipt of your request.
WE HAVE AUTHORIZED NO ONE TO GIVE YOU ANY INFORMATION OR TO MAKE ANY
REPRESENTATION ABOUT THE PROPOSED MERGER OR OUR COMPANY THAT DIFFERS FROM OR
ADDS TO THE INFORMATION CONTAINED IN THIS DOCUMENT OR IN THE DOCUMENTS WE HAVE
PUBLICLY FILED WITH THE SEC. THEREFORE, IF ANYONE SHOULD GIVE YOU ANY DIFFERENT
OR ADDITIONAL INFORMATION, YOU SHOULD NOT RELY ON IT.
THE INFORMATION CONTAINED IN THIS DOCUMENT SPEAKS ONLY AS OF THE DATE
INDICATED ON THE COVER OF THIS DOCUMENT UNLESS THE INFORMATION SPECIFICALLY
INDICATES THAT ANOTHER DATE APPLIES.
47
<PAGE> 53
APPENDIX A
AGREEMENT AND PLAN OF MERGER
DATED AS OF
MARCH 7, 1999
AS AMENDED AND RESTATED ON MAY 21, 1999
AMONG
BROWNING-FERRIS INDUSTRIES, INC.
ALLIED WASTE INDUSTRIES, INC.
AND
AWIN I ACQUISITION CORPORATION
A-1
<PAGE> 54
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE I THE MERGER.................................................. A-4
SECTION 1.01. The Merger.................................... A-4
SECTION 1.02. Conversion of Shares.......................... A-4
SECTION 1.03. Payment of Shares............................. A-5
SECTION 1.04. Stock Options................................. A-6
SECTION 1.05. Dissenting Shares............................. A-6
ARTICLE II THE SURVIVING CORPORATION; DIRECTORS AND OFFICERS........... A-7
SECTION 2.01. Certificate of Incorporation.................. A-7
SECTION 2.02. Bylaws........................................ A-7
SECTION 2.03. Directors and Officers........................ A-7
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER
SUBSIDIARY................................................ A-7
SECTION 3.01. Organization and Qualification................ A-8
SECTION 3.02. Authority; Non-Contravention; Approvals....... A-8
SECTION 3.03. Proxy Statement............................... A-9
SECTION 3.04. Ownership of Company Common Stock............. A-9
SECTION 3.05. Financing..................................... A-9
SECTION 3.06. Reports, Financial Statements, etc. .......... A-9
SECTION 3.07. Brokers and Finders........................... A-10
SECTION 3.08. Absence of Undisclosed Liabilities............ A-10
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY............... A-10
SECTION 4.01. Organization and Qualification................ A-10
SECTION 4.02. Capitalization................................ A-10
SECTION 4.03. Subsidiaries.................................. A-12
SECTION 4.04. Authority; Non-Contravention; Approvals....... A-12
SECTION 4.05. Reports and Financial Statements.............. A-13
SECTION 4.06. Absence of Undisclosed Liabilities............ A-13
SECTION 4.07. Absence of Certain Changes or Events.......... A-14
SECTION 4.08. Litigation.................................... A-14
SECTION 4.09. Proxy Statement............................... A-14
SECTION 4.10. No Violation of Law........................... A-14
SECTION 4.11. Compliance with Agreements.................... A-14
SECTION 4.12. Taxes......................................... A-15
SECTION 4.13. Employee Benefit Plans; ERISA................. A-15
SECTION 4.14. Labor Controversies........................... A-17
SECTION 4.15. Environmental Matters......................... A-17
SECTION 4.16. Non-competition Agreements.................... A-18
SECTION 4.17. Title to Assets............................... A-18
SECTION 4.18. Company Stockholders' Approval................ A-18
SECTION 4.19. Opinion of Financial Advisor.................. A-18
SECTION 4.20. Brokers and Finders........................... A-18
</TABLE>
A-2
<PAGE> 55
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE V COVENANTS................................................... A-19
SECTION 5.01. Conduct of Business by the Company Pending the
Merger.................................................... A-19
SECTION 5.02. Control of the Company's Operations........... A-21
SECTION 5.03. Acquisition Transactions...................... A-22
SECTION 5.04. Access to Information......................... A-22
SECTION 5.05. Notices of Certain Events..................... A-23
SECTION 5.06. Merger Subsidiary............................. A-24
SECTION 5.07. Employee Benefits............................. A-24
SECTION 5.08. Meeting of the Company's Stockholders......... A-26
SECTION 5.09. Proxy Statement............................... A-26
SECTION 5.10. Public Announcements.......................... A-27
SECTION 5.11. Expenses and Fees............................. A-27
SECTION 5.12. Agreement to Cooperate........................ A-28
SECTION 5.13. Directors' and Officers' Indemnification...... A-30
ARTICLE VI CONDITIONS TO THE MERGER.................................... A-31
SECTION 6.01. Conditions to the Obligations of Each Party... A-31
SECTION 6.02. Conditions to Obligation of the Company to
Effect the Merger......................................... A-31
SECTION 6.03. Conditions to Obligations of Parent and
Subsidiary to Effect
the Merger................................ A-32
ARTICLE VII TERMINATION................................................. A-33
SECTION 7.01. Termination................................... A-33
ARTICLE VIII MISCELLANEOUS............................................... A-34
SECTION 8.01. Effect of Termination......................... A-34
SECTION 8.02. Non-Survival of Representations and
Warranties................................................ A-34
SECTION 8.03. Notices....................................... A-34
SECTION 8.04. Interpretation................................ A-35
SECTION 8.05. Miscellaneous................................. A-35
SECTION 8.06. Counterparts.................................. A-35
SECTION 8.07. Amendments; No Waivers........................ A-35
SECTION 8.08. Entire Agreement.............................. A-36
SECTION 8.09. Severability.................................. A-36
SECTION 8.10. Specific Performance.......................... A-36
</TABLE>
A-3
<PAGE> 56
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of March 7, 1999,
as amended and restated on May 21, 1999, among Browning-Ferris Industries, Inc.,
a Delaware corporation (the "Company"), Allied Waste Industries, Inc., a
Delaware corporation ("Parent"), and AWIN I Acquisition Corporation, a Delaware
corporation and a wholly owned subsidiary of Parent ("Merger Subsidiary").
Whereas, Parent, Merger Subsidiary and the Company have entered into that
certain Agreement and Plan of Merger, dated as of March 7, 1999 (the "Original
Agreement") and now desire to amend and restate the Original Agreement in its
entirety as set forth below; and
Whereas, the respective Boards of Directors of Parent, Merger Subsidiary
and the Company have each approved the merger of Merger Subsidiary with and into
the Company on the terms and subject to the conditions set forth in this
Agreement (the "Merger").
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, the
parties hereto agree as follows:
ARTICLE I
THE MERGER
SECTION 1.01. The Merger.
(a) Upon the terms and subject to the conditions hereof, and in accordance
with the relevant provisions of the Delaware General Corporation Law ("Delaware
Law"), Merger Subsidiary shall be merged with and into the Company. Following
the Merger, the Company shall continue as the surviving corporation (the
"Surviving Corporation") and shall continue its existence under the laws of the
State of Delaware, and the separate corporate existence of Merger Subsidiary
shall cease. At the election of Parent, any wholly owned subsidiary of Parent
may be substituted for Merger Subsidiary as a constituent corporation in the
Merger (provided that such election shall not delay the consummation of the
Merger or adversely affect the benefits of the Merger to the Company and its
stockholders). As a condition of such an election, the parties and such
additional subsidiary shall execute an appropriate amendment to this Agreement
in order to reflect such election and the provisions of Section 5.06 shall apply
with respect to such subsidiary instead of Merger Subsidiary.
(b) The Merger shall be consummated by filing with the Secretary of State
of the State of Delaware a certificate of merger (the "Certificate of Merger")
in accordance with Delaware Law. The Merger shall become effective at such time
as the Certificate of Merger is duly filed, or at such other time as Merger
Subsidiary and the Company shall specify in the Certificate of Merger (the time
the Merger becomes effective being the "Effective Time").
(c) The Merger shall have the effect specified under Delaware Law. As of
the Effective Time, the Company shall be a wholly-owned subsidiary of Parent.
SECTION 1.02. Conversion of Shares.
At the Effective Time, by virtue of the Merger and without any action on
the part of Parent, Merger Subsidiary, the Company or the holders of any of the
following securities:
(a) each issued and outstanding share of the Company's Common Stock,
par value $.16 2/3 per share ("Company Common Stock") held by the Company
as treasury stock and each issued and outstanding share of Company Common
Stock owned by any subsidiary of the Company, Parent, Merger Subsidiary or
any other subsidiary of Parent shall be cancelled and retired and shall
cease to exist, and no payment or consideration shall be made with respect
thereto;
(b) each issued and outstanding share of Company Common Stock, other
than (i) shares of Company Common Stock referred to in paragraph (a) above
and (ii) Dissenting Shares (as defined in Section 1.05) shall be converted
into the right to receive an amount in cash, without interest, equal to
A-4
<PAGE> 57
$45.00 (the "Merger Consideration"). At the Effective Time, all such shares
of Company Common Stock shall no longer be outstanding and shall
automatically be cancelled and retired and shall cease to exist, and each
holder of a certificate representing any such shares of Company Common
Stock shall cease to have any rights with respect thereto, except the right
to receive the Merger Consideration, without interest; and
(c) each issued and outstanding share of capital stock of Merger
Subsidiary shall be converted into one fully paid and nonassessable share
of common stock, par value $.16 2/3, of the Surviving Corporation.
SECTION 1.03. Payment of Shares.
(a) Prior to the Effective Time, Parent shall appoint a bank or trust
company reasonably satisfactory to the Company to act as disbursing agent (the
"Disbursing Agent") for the payment of Merger Consideration upon surrender of
certificates representing the shares of Company Common Stock. Parent will enter
into a disbursing agent agreement with the Disbursing Agent, in form and
substance reasonably acceptable to the Company. At or prior to the Effective
Time, Parent shall deposit or cause to be deposited with the Disbursing Agent in
trust for the benefit of the Company's stockholders cash in an aggregate amount
necessary to make the payments pursuant to Section 1.02 to holders of shares of
Company Common Stock (such amounts being hereinafter referred to as the
"Exchange Fund"). The Disbursing Agent shall invest the Exchange Fund, as the
Surviving Corporation directs, in direct obligations of the United States of
America, obligations for which the full faith and credit of the United States of
America is pledged to provide for the payment of all principal and interest or
commercial paper obligations receiving the highest rating from either Moody's
Investors Service, Inc. or Standard & Poor's, a division of The McGraw Hill
Companies, or a combination thereof, provided that, in any such case, no such
instrument shall have a maturity exceeding three months. Any net profit
resulting from, or interest or income produced by, such investments shall be
payable to the Surviving Corporation. The Exchange Fund shall not be used for
any other purpose except as provided in this Agreement.
(b) Promptly after the Effective Time, the Surviving Corporation shall
cause the Disbursing Agent to mail to each person who was a record holder as of
the Effective Time of an outstanding certificate or certificates which
immediately prior to the Effective Time represented shares of Company Common
Stock (the "Certificates"), and whose shares were converted into the right to
receive Merger Consideration pursuant to Section 1.02, a form of letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon proper delivery of the
Certificates to the Disbursing Agent) and instructions for use in effecting the
surrender of the Certificates in exchange for payment of the Merger
Consideration. Upon surrender to the Disbursing Agent of a Certificate, together
with such letter of transmittal duly executed and such other documents as may be
reasonably required by the Disbursing Agent, the holder of such Certificate
shall be paid promptly in exchange therefor cash in an amount equal to the
product of the number of shares of Company Common Stock represented by such
Certificate multiplied by the Merger Consideration, and such Certificate shall
forthwith be canceled. No interest will be paid or accrued on the cash payable
upon the surrender of the Certificates. If payment is to be made to a person
other than the person in whose name the Certificate surrendered is registered,
it shall be a condition of payment that the Certificate so surrendered be
properly endorsed or otherwise be in proper form for transfer and that the
person requesting such payment pay any transfer or other taxes required by
reason of the payment to a person other than the registered holder of the
Certificate surrendered or establish to the satisfaction of the Surviving
Corporation that such tax has been paid or is not applicable. Until surrendered
in accordance with the provisions of this Section 1.03, each Certificate (other
than Certificates representing shares of Company Common Stock owned by any
subsidiary of the Company, Parent, Merger Subsidiary or any other subsidiary of
Parent and shares of Company Common Stock held in the treasury of the Company,
which have been canceled, and Dissenting Shares) shall represent for all
purposes only the right to receive the Merger Consideration in cash multiplied
by the number of shares of Company Common Stock evidenced by such Certificate,
without any interest thereon.
(c) At and after the Effective Time, there shall be no registration of
transfers of shares of Company Common Stock which were outstanding immediately
prior to the Effective Time on the stock transfer books of
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the Surviving Corporation. From and after the Effective Time, the holders of
shares of Company Common Stock outstanding immediately prior to the Effective
Time shall cease to have any rights with respect to such shares of Company
Common Stock except as otherwise provided in this Agreement or by applicable
law. All cash paid upon the surrender of Certificates in accordance with the
terms of this Article I shall be deemed to have been paid in full satisfaction
of all rights pertaining to the shares of Company Common Stock previously
represented by such Certificates. If, after the Effective Time, Certificates are
presented to the Surviving Corporation for any reason, such Certificates shall
be cancelled and exchanged for cash as provided in this Article I. At the close
of business on the day of the Effective Time the stock ledger of the Company
shall be closed.
(d) At any time more than six months after the Effective Time, the
Surviving Corporation shall be entitled to require the Disbursing Agent to
deliver to it any funds which had been made available to the Disbursing Agent
and not disbursed in exchange for Certificates (including, without limitation,
all interest and other income received by the Disbursing Agent in respect of all
such funds). Thereafter, holders of shares of Company Common Stock shall look
only to Parent (subject to the terms of this Agreement, abandoned property,
escheat and other similar laws) as general creditors thereof with respect to any
Merger Consideration that may be payable, without interest, upon due surrender
of the Certificates held by them. If any Certificates shall not have been
surrendered prior to five years after the Effective Time (or immediately prior
to such time on which any payment in respect hereof would otherwise escheat or
become the property of any governmental unit or agency), the payment in respect
of such Certificates shall, to the extent permitted by applicable law, become
the property of the Surviving Corporation, free and clear of all claims or
interest of any person previously entitled thereto. Notwithstanding the
foregoing, none of Parent, the Company, the Surviving Corporation nor the
Disbursing Agent shall be liable to any holder of a share of Company Common
Stock for any Merger Consideration delivered in respect of such share of Company
Common Stock to a public official pursuant to any abandoned property, escheat or
other similar law.
SECTION 1.04. Stock Options.
The Company shall (a) terminate the Company's Restated 1990 Stock Option
Plan, Restated 1993 Non-Employee Director Stock Plan, Restated 1993 Stock
Incentive Plan, Restated 1996 Stock Incentive Plan and 1987 Stock Option Plan
(collectively, the "Company Option Plans") immediately prior to the Effective
Time without prejudice to the rights of the holders of options (the "Options")
awarded pursuant thereto and (b) following such termination grant no additional
Options under the Company Option Plans. Prior to the Effective Time, the Company
will take all actions necessary, including, without limitation, using its
reasonable efforts to obtain any consents necessary or desirable from holders of
Options, to provide that, upon the Effective Time, each outstanding Option shall
be canceled automatically and at the Effective Time, Parent or the Surviving
Corporation shall provide such holder with a lump sum cash payment (less any
applicable withholding) equal to the product of (i) the total number of shares
of Company Common Stock subject to the Option immediately prior to the Effective
Time and (ii) the excess of the Merger Consideration over the exercise price per
share of Company Common Stock subject to such Company Option.
SECTION 1.05. Dissenting Shares.
(a) Notwithstanding anything in this Agreement to the contrary, shares of
Company Common Stock that are held by any record holder who has not voted in
favor of the Merger or consented thereto in writing and who has demanded
appraisal rights in accordance with Section 262 of Delaware Law (the "Dissenting
Shares") shall not be converted into the right to receive the Merger
Consideration but shall become the right to receive such consideration as may be
determined to be due in respect of such Dissenting Shares pursuant to Delaware
Law; provided, however, that any holder of Dissenting Shares who shall have
failed to perfect or shall have withdrawn or lost his rights to appraisal of
such Dissenting Shares, in each case under Delaware Law, shall forfeit the right
to appraisal of such Dissenting Shares, and such Dissenting Shares shall be
deemed to have been converted into the right to receive, as of the Effective
Time, the Merger Consideration without interest. Parent and the Surviving
Corporation shall comply with all of their obligations under Delaware Law with
respect to holders of Dissenting Shares.
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(b) The Company shall give Parent (i) prompt notice of any demands for
appraisal, and any withdrawals of such demands, received by the Company and any
other related instruments served pursuant to Delaware Law and received by the
Company and (ii) the opportunity to direct all negotiations and proceedings with
respect to demands for appraisal under Delaware Law. The Company shall not,
except with the prior written consent of Parent, make any payment with respect
to any demands for appraisal or offer to settle or settle any such demands.
ARTICLE II
THE SURVIVING CORPORATION; DIRECTORS AND OFFICERS
SECTION 2.01. Certificate of Incorporation.
The Restated Certificate of Incorporation of the Company in effect at the
Effective Time shall be the certificate of incorporation of the Surviving
Corporation until amended in accordance with applicable law and the terms of
this Agreement; provided, however, that at the Effective Time, such certificate
shall be amended by virtue of this Agreement as follows:
(i) Article Fourth shall be amended by deleting the existing language
in its entirety and replacing it with the following:
The total number of shares of capital stock which the Corporation
shall be authorized to issue shall be 1,000 shares, $.16 2/3 par
value, of common stock.
(ii) Article Ninth shall be amended by deleting the existing language
in its entirety and replacing it with the following:
Directors shall have terms expiring at the annual meeting of
stockholders. Directors shall continue in office until their
successors are elected or appointed.
(iii) Articles Eleventh, Twelfth and Thirteenth shall be deleted and
Articles Fourteenth and Fifteenth shall be renumbered to become Articles
Eleventh and Twelfth.
SECTION 2.02. Bylaws. The bylaws of Merger Subsidiary in effect at the
Effective Time shall be the bylaws of the Surviving Corporation except that such
bylaws shall include the provisions set forth in Article X of the Company's
bylaws until amended in accordance with applicable law and the terms of this
Agreement.
SECTION 2.03. Directors and Officers.
The directors of Merger Subsidiary immediately prior to the Effective Time
shall be the directors of the Surviving Corporation as of the Effective Time.
The officers of the Company (together with the persons designated by Parent and
notified to the Company in writing at least two business days prior to the
Effective Time) shall be the officers of the Surviving Corporation as of the
Effective Time subject to the right of the Board of Directors of the Surviving
Corporation to appoint or replace officers.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT
AND MERGER SUBSIDIARY
Parent and Merger Subsidiary jointly and severally represent and warrant to
the Company that, except as set forth in the Disclosure Schedule dated as of the
date hereof and signed by an authorized officer of Parent (the "Parent
Disclosure Schedule"), it being agreed that disclosure of any item on the Parent
Disclosure
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Schedule shall be deemed disclosure with respect to all Sections of this
Agreement if the relevance of such item is reasonably apparent from the face of
the Parent Disclosure Schedule:
SECTION 3.01. Organization and Qualification.
Each of Parent and Merger Subsidiary is a corporation duly organized,
validly existing and in good standing under the laws of the state of its
incorporation and has the requisite corporate power and authority to own, lease
and operate its assets and properties and to carry on its business as it is now
being conducted. Each of Parent and Merger Subsidiary is qualified to transact
business and is in good standing in each jurisdiction in which the properties
owned, leased or operated by it or the nature of the business conducted by it
makes such qualification necessary, except where the failure to be so qualified
and in good standing would not reasonably be expected to have a material adverse
effect on the business, financial condition or results of operations of Parent
and its subsidiaries, taken as a whole (a "Parent Material Adverse Effect").
SECTION 3.02. Authority; Non-Contravention; Approvals.
(a) Parent and Merger Subsidiary each have full corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby, including without limitation, the consummation of the
financing of the Merger pursuant to the Financing Commitments (as defined in
Section 3.05) (the "Financing"). This Agreement has been approved by the Boards
of Directors of Parent and Merger Subsidiary and the sole stockholder of Merger
Subsidiary, and no other corporate proceedings on the part of Parent or Merger
Subsidiary are necessary to authorize the execution and delivery of this
Agreement or the consummation by Parent and Merger Subsidiary of the
transactions contemplated hereby, including without limitation, the Financing.
This Agreement has been duly executed and delivered by each of Parent and Merger
Subsidiary and, assuming the due authorization, execution and delivery hereof by
the Company, constitutes a valid and legally binding agreement of each of Parent
and Merger Subsidiary enforceable against each of them in accordance with its
terms, except that such enforcement may be subject to (i) bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting or
relating to enforcement of creditors' rights generally and (ii) general
equitable principles.
(b) The execution, delivery and performance of this Agreement by each of
Parent and Merger Subsidiary and the consummation of the Merger and the
transactions contemplated hereby, including without limitation the Financing, do
not and will not violate, conflict with or result in a breach of any provision
of, or constitute a default (or an event which, with notice or lapse of time or
both, would constitute a default) under, or result in the termination of, or
accelerate the performance required by, or result in a right of termination or
acceleration under, or, other than in the case of the Financing, result in the
creation of any lien, security interest or encumbrance upon any of the
properties or assets of Parent or any of its subsidiaries under any of the
terms, conditions or provisions of (i) the respective certificates of
incorporation or bylaws of Parent or any of its subsidiaries, (ii) any statute,
law, ordinance, rule, regulation, judgment, decree, order, injunction, writ,
permit or license of any court or governmental authority applicable to Parent or
any of its subsidiaries or any of their respective properties or assets,
subject, in the case of consummation, to obtaining (prior to the Effective Time)
the Parent Required Statutory Approvals (as defined in Section 3.02(c)), or
(iii) any note, bond, mortgage, indenture, deed of trust, license, franchise,
permit, concession, contract, lease or other instrument, obligation or agreement
of any kind (each a "Contract" and collectively "Contracts") to which Parent or
any of its subsidiaries is now a party or by which Parent or any of its
subsidiaries or any of their respective properties or assets may be bound or
affected, subject, in the case of consummation, to obtaining (prior to the
Effective Time) consents required from commercial lenders, lessors or other
third parties as specified in Section 3.02(b) of the Parent Disclosure Schedule.
Excluded from the foregoing sentence of this paragraph (b), insofar as it
applies to the terms, conditions or provisions described in clauses (ii) and
(iii) of this paragraph (b), are such violations, conflicts, breaches, defaults,
terminations, accelerations or creations of liens, security interests or
encumbrances that would not reasonably be expected to have a Parent Material
Adverse Effect and would not prevent or materially delay the consummation of the
Merger.
(c) Except for (i) the filings by Parent required by the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), (ii) applicable
filings, if any, with the Securities and Exchange Commission (the "SEC")
pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange
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Act"), (iii) filing of the Certificate of Merger with the Secretary of State of
the State of Delaware in connection with the Merger, (iv) any required filings
with or approvals from authorities of any foreign country or Puerto Rico in
which the Company or its subsidiaries conduct any business or own any assets and
(v) any required filings with or approvals from applicable environmental
authorities, public service commissions and public utility commissions (the
filings and approvals referred to in clauses (i) through (v) are collectively
referred to as the "Parent Required Statutory Approvals"), no declaration,
filing or registration with, or notice to, or authorization, consent or approval
of, any governmental or regulatory body or authority is necessary for the
execution and delivery of this Agreement by Parent or Merger Subsidiary or the
consummation by Parent or Merger Subsidiary of the transactions contemplated
hereby, including without limitation, the Financing, other than such
declarations, filings, registrations, notices, authorizations, consents or
approvals which, if not made or obtained, as the case may be, would not
reasonably be expected to have a Parent Material Adverse Effect and would not
prevent or materially delay the consummation of the Merger.
SECTION 3.03. Proxy Statement.
None of the information to be supplied by Parent or its subsidiaries for
inclusion in any proxy statement or information statement to be distributed in
connection with the Company's meeting of stockholders to vote upon this
Agreement and the transactions contemplated hereby (the "Proxy Statement") will,
at the time of the mailing of the Proxy Statement and any amendments or
supplements thereto, and at the time of the meeting of stockholders of the
Company to be held in connection with the transactions contemplated by this
Agreement, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they are made,
not misleading.
SECTION 3.04. Ownership of Company Common Stock.
Neither Parent nor any of its subsidiaries beneficially owns any shares of
Company Common Stock as of the date hereof.
SECTION 3.05. Financing.
Parent has obtained written commitments (which commitments, as they may be
amended or replaced from time to time in a manner which does not (i) adversely
impact the solvency or viability of the Company after the Effective Time
relative to the impact of financing in accordance with the existing written
commitments, (ii) adversely affect the ability of Parent to consummate the
Merger or (iii) add or adversely modify any conditions to the financing set
forth in the written commitments delivered to the Company prior to the execution
of this Agreement, are referred to herein as the "Financing Commitments") for
the debt and equity financing necessary to consummate the Merger and to pay all
associated costs and expenses (including any refinancing of indebtedness of
Parent or the Company required in connection therewith) and has provided true,
accurate and complete copies of such commitments (and any amendment or
replacement thereof) to the Company.
SECTION 3.06. Reports, Financial Statements, etc.
Since January 1, 1996, through the date of this Agreement, Parent has filed
with the SEC all material forms, statements, reports and documents (including
all exhibits, post-effective amendments and supplements thereto) (the "Parent
SEC Reports") required to be filed by it under each of the Securities Act of
1933, as amended (the "Securities Act"), the Exchange Act and the respective
rules and regulations thereunder, all of which, as amended if applicable,
complied when filed in all material respects with all applicable requirements of
the appropriate act and the rules and regulations thereunder. As of their
respective dates, the Parent SEC Reports did not contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading. The audited consolidated financial
statements and unaudited financial statements of Parent included in Parent's
Annual Report on Form 10-K for the twelve months ended December 31, 1997 and
Parent's Quarterly Reports on Form 10-Q for the quarterly periods ended March
31, June 30 and September 30, 1998 (collectively, the "Parent Financial
Statements") have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis (except as may be indicated therein or
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in the notes thereto) and fairly present in all material respects the financial
position of Parent and its subsidiaries as of the dates thereof and the results
of their operations and changes in financial position for the periods then ended
(subject, in the case of any unaudited interim financial statements, to normal
year-end adjustments). Since the date of the most recent Parent SEC Report that
contains consolidated financial statements of Parent through the date of this
Agreement, there has not been any Parent Material Adverse Effect.
SECTION 3.07. Brokers and Finders.
Except as disclosed in the Parent Disclosure Schedule, Parent has not
entered into any contract, arrangement or understanding with any person or firm
which may result in the obligation of the Company to pay any investment banking
fees, finder's fees, brokerage or agent commissions or other like payments in
connection with the transactions contemplated hereby.
SECTION 3.08. Absence of Undisclosed Liabilities.
Except as disclosed in the Parent SEC Reports or as heretofore disclosed to
the Company in writing with respect to acquisitions or potential transactions or
commitments, to the knowledge of Parent as of the date of this Agreement,
neither Parent nor any of its subsidiaries has incurred since December 31, 1997,
any liabilities or obligations (whether absolute, accrued, contingent or
otherwise) of any nature, except (a) liabilities, obligations or contingencies
(i) which are accrued or reserved against in the Parent Financial Statements or
reflected in the notes thereto or (ii) which were incurred after December 31,
1997 in the ordinary course of business and consistent with past practices, (b)
liabilities, obligations or contingencies which (i) would not reasonably be
expected to have a Parent Material Adverse Effect, or (ii) have been discharged
or paid in full prior to the date hereof, and (c) liabilities, obligations and
contingencies which are of a nature not required to be reflected in the
consolidated financial statements of Parent and its subsidiaries prepared in
accordance with generally accepted accounting principles consistently applied.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Merger Subsidiary that,
except as set forth in the disclosure schedule dated as of the date hereof and
signed by an authorized officer of the Company (the "Company Disclosure
Schedule"), it being agreed that disclosure of any item on the Company
Disclosure Schedule shall be deemed disclosure with respect to all Sections of
this Agreement if the relevance of such item is reasonably apparent from the
face of the Company Disclosure Schedule:
SECTION 4.01. Organization and Qualification.
The Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has the requisite corporate
power and authority to own, lease and operate its assets and properties and to
carry on its business as it is now being conducted. The Company is qualified to
transact business and is in good standing in each jurisdiction in which the
properties owned, leased or operated by it or the nature of the business
conducted by it makes such qualification necessary, except where the failure to
be so qualified and in good standing would not reasonably be expected to have a
material adverse effect on the business, financial condition or results of
operations of the Company and its subsidiaries, taken as a whole (a "Company
Material Adverse Effect"). True, accurate and complete copies of the Company's
Restated Certificate of Incorporation and bylaws, in each case as in effect on
the date hereof, including all amendments thereto, have heretofore been
delivered to Parent.
SECTION 4.02. Capitalization.
(a) The authorized capital stock of the Company consists of 400,000,000
shares of Company Common Stock and 25,000,000 shares of preferred stock
("Company Preferred Stock"). As of March 4, 1999, (i) 156,750,795 shares of
Company Common Stock, including the associated Rights (as defined in Section
4.02(b)), were issued and outstanding, all of which shares of Company Common
Stock were validly
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issued and are fully paid, nonassessable and free of preemptive rights, and no
shares of Company Preferred Stock were issued and outstanding, (ii) 51,977,130
shares of Company Common Stock and no shares of Company Preferred Stock were
held in the treasury of the Company, (iii) 17,688,200 shares of Company Common
Stock were reserved for issuance upon exercise of options issued and outstanding
and 1,250,000 shares of Company Common Stock were reserved for issuance pursuant
to existing awards under the Company's Long Term Incentive Plan (the "LTIP"),
(iv) no shares of Company Common Stock were reserved for issuance upon exercise
of outstanding warrants, including the associated Rights, and (v) 4,000,000
shares of Company Preferred Stock were designated as Series B Junior
Participating Preferred Stock reserved for issuance under the Rights Agreement
(as defined in Section 4.02(b)). Assuming the exercise of all outstanding
options, warrants and rights (other than the Rights) to purchase Company Common
Stock and the vesting of all awards under the LTIP, as of March 4, 1999, there
would be 175,688,995 shares of Company Common Stock issued and outstanding.
Since March 4, 1999, except as permitted by the Agreement, (i) no shares of
capital stock of the Company have been issued except in connection with the
exercise of the instruments referred to in the second sentence of this Section
4.02(a) and except for shares of Company Common Stock required to be issued in
connection with the Company's existing Dividend Reinvestment Plan ("DRP") and
Employee Stock Ownership and Savings Plan (the "401-K Plan") and (ii) no
options, warrants, securities convertible into, or commitments with respect to
the issuance of shares of capital stock of the Company have been issued, granted
or made, except Rights in accordance with the terms of the Rights Agreement.
(b) Except for the Preferred Stock Purchase Rights (the "Rights") issued
pursuant to the Rights Agreement (the "Rights Agreement"), dated as of June 3,
1998, between the Company and First Chicago Trust Company of New York (the
"Rights Agent"), or as set forth in Section 4.02(a), as of the date hereof there
were no outstanding subscriptions, options, calls, contracts, commitments,
understandings, restrictions, arrangements, rights or warrants, including any
right of conversion or exchange under any outstanding security, instrument or
other agreement and also including any rights plan or other anti-takeover
agreement, obligating the Company or any subsidiary of the Company to issue,
deliver or sell, or cause to be issued, delivered or sold, additional shares of
the capital stock of the Company or obligating the Company or any subsidiary of
the Company to grant, extend or enter into any such agreement or commitment.
There are no obligations, contingent or otherwise, of the Company to (i)
repurchase, redeem or otherwise acquire any shares of Company Common Stock or
other capital stock of the Company, or the capital stock or other equity
interests of any subsidiary of the Company except in connection with the
exercise of options pursuant to the terms of the Company Option Plans; or (ii)
(other than advances to subsidiaries in the ordinary course of business) provide
material funds to, or make any material investment in (in the form of a loan,
capital contribution or otherwise), or provide any guarantee with respect to the
obligations of, any subsidiary of the Company or any other person. There are no
outstanding stock appreciation rights or similar derivative securities or rights
of the Company or any of its subsidiaries. There are no bonds, debentures, notes
or other indebtedness of the Company having the right to vote (or convertible
into, or exchangeable for, securities having the right to vote) on any matters
on which stockholders of the Company may vote. Except as disclosed in the
Company SEC Reports or as otherwise contemplated by this Agreement, there are no
voting trusts, irrevocable proxies or other agreements or understandings to
which the Company or any subsidiary of the Company is a party or is bound with
respect to the voting of any shares of capital stock of the Company. The Board
of Directors of the Company has taken all action to amend the Rights Agreement
(subject only to the execution of such amendment by the Rights Agent, which
execution the Company shall cause to take place as promptly as reasonably
practicable following the date of this Agreement) to provide that (i) none of
the Parent and its subsidiaries shall become an "Acquiring Person" and no
"Triggering Event" shall occur as a result of the execution, delivery and
performance of this Agreement and the consummation of the Merger, (ii) no
"Distribution Date" shall occur as a result of the announcement of or the
execution of this Agreement or any of the transactions contemplated hereby and
(iii) the Rights will expire without any further force or effect as of
immediately prior to the consummation of the Merger. Upon execution of the
Rights Agreement by the Rights Agent, the amendment to the Rights Agreement
shall become effective and shall remain in full force and effect until
immediately following the termination of this Agreement in accordance with its
terms.
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The Company has not otherwise amended the Rights Agreement to exempt any person
or entity from the potential application of the Rights Agreement, other than
Parent and its subsidiaries.
(c) The Company has previously made available to Parent complete and
correct copies of the Company Option Plans, including all amendments thereto.
The forms of Options are consistent in all material respects with the terms of
the Company Option Plans. The Company has previously made available to Parent a
complete and correct list setting forth as of December 31, 1998, (i) the number
of Options outstanding and (ii) the weighted average exercise price for all
outstanding Options.
SECTION 4.03. Subsidiaries.
Each direct and indirect subsidiary of the Company is duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation and has the requisite power and authority to own, lease and
operate its assets and properties and to carry on its business as it is now
being conducted and each subsidiary of the Company is qualified to transact
business, and is in good standing, in each jurisdiction in which the properties
owned, leased or operated by it or the nature of the business conducted by it
makes such qualification necessary; except in all cases where the failure to be
so organized, existing, qualified and in good standing would not reasonably be
expected to have a Company Material Adverse Effect. All of the outstanding
shares of capital stock of each subsidiary of the Company are validly issued,
fully paid, nonassessable and free of preemptive rights and are owned directly
or indirectly by the Company free and clear of any liens (other than liens
arising by operation of law), claims, encumbrances, security interests, equities
and options of any nature whatsoever, except that such shares are pledged to
secure the Company's credit facilities. There are no subscriptions, options,
warrants, rights, calls, contracts, voting trusts, proxies or other commitments,
understandings, restrictions or arrangements relating to the issuance, sale,
voting, transfer, ownership or other rights with respect to any shares of
capital stock of any subsidiary of the Company, including any right of
conversion or exchange under any outstanding security, instrument or agreement.
SECTION 4.04. Authority; Non-Contravention; Approvals.
(a) The Company has full corporate power and authority to enter into this
Agreement and, subject to the Company Stockholders' Approval (as defined in
Section 6.01(a)) with respect solely to the Merger, to consummate the
transactions contemplated hereby. This Agreement has been approved by the Board
of Directors of the Company, and no other corporate proceedings on the part of
the Company are necessary to authorize the execution and delivery of this
Agreement or, except for the Company Stockholders' Approval with respect solely
to the Merger, the consummation by the Company of the transactions contemplated
hereby. This Agreement has been duly executed and delivered by the Company, and,
assuming the due authorization, execution and delivery hereof by Parent and
Merger Subsidiary, constitutes a valid and legally binding agreement of the
Company, enforceable against the Company in accordance with its terms, except
that such enforcement may be subject to (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting or relating to
enforcement of creditors' rights generally and (ii) general equitable
principles.
(b) The execution, delivery and performance of this Agreement by the
Company and the consummation of the Merger and the transactions contemplated
hereby do not and will not violate, conflict with or result in a breach of any
provision of, or constitute a default (or an event which, with notice or lapse
of time or both, would constitute a default) under, or result in the termination
of, or accelerate the performance required by, or result in a right of
termination or acceleration under, contractually require any offer to purchase
or any prepayment of any debt, or result in the creation of any lien, security
interest or encumbrance upon any of the properties or assets of the Company or
any of its subsidiaries under any of the terms, conditions or provisions of (i)
the respective certificates of incorporation or bylaws of the Company or any of
its subsidiaries, (ii) any statute, law, ordinance, rule, regulation, judgment,
decree, order, injunction, writ, permit or license of any court or governmental
authority applicable to the Company or any of its subsidiaries or any of their
respective properties or assets, subject, in the case of consummation, to
obtaining (prior to the Effective Time) the Company Required Statutory Approvals
(as defined in Section 4.04(c)) and the Company Stockholders' Approval, or (iii)
any Contract to which the Company or any of its subsidiaries is now a party or
by which the Company or any of its subsidiaries or any of their respective
properties or assets may be bound or affected,
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subject, in the case of consummation, to obtaining (prior to the Effective Time)
consents required from commercial lenders, lessors or other third parties as
specified in Section 4.04(b) of the Company Disclosure Schedule. Excluded from
the foregoing sentence of this paragraph (b), insofar as it applies to the
terms, conditions or provisions described in clauses (ii) and (iii) of this
paragraph (b), are such violations, conflicts, breaches, defaults, terminations,
accelerations or creations of liens, security interests or encumbrances that
would not reasonably be expected to have a Company Material Adverse Effect and
would not prevent or materially delay the consummation of the Merger.
(c) Except for (i) the filings by the Company required by the HSR Act, (ii)
the filing of the Proxy Statement with the SEC pursuant to the Exchange Act,
(iii) the filing of the Certificate of Merger with the Secretary of State of the
State of Delaware in connection with the Merger, (iv) any filings with or
approvals from authorities required solely by virtue of the jurisdictions in
which Parent or its subsidiaries conduct any business or own any assets and (v)
any required filings with or approvals from applicable domestic or foreign
environmental authorities, public service commissions and public utility
commissions (the filings and approvals referred to in clauses (i) through (v)
and those disclosed in Section 4.04(c) of the Company Disclosure Schedule are
collectively referred to as the "Company Required Statutory Approvals"), no
declaration, filing or registration with, or notice to, or authorization,
consent or approval of, any governmental or regulatory body or authority is
necessary for the execution and delivery of this Agreement by the Company or the
consummation by the Company of the transactions contemplated hereby, other than
such declarations, filings, registrations, notices, authorizations, consents or
approvals which, if not made or obtained, as the case may be, would not
reasonably be expected to have a Company Material Adverse Effect and would not
prevent or materially delay the consummation of the Merger.
SECTION 4.05. Reports and Financial Statements.
Since January 1, 1996, the Company has filed with the SEC all material
forms, statements, reports and documents (including all exhibits, post-effective
amendments and supplements thereto) (the "Company SEC Reports") required to be
filed by it under each of the Securities Act, the Exchange Act and the
respective rules and regulations thereunder, all of which, as amended if
applicable, complied when filed in all material respects with all applicable
requirements of the appropriate act and the rules and regulations thereunder. As
of their respective dates, the Company SEC Reports did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading. The audited
consolidated financial statements and unaudited financial statements of the
Company included in the Company's Annual Report on Form 10-K for the twelve
months ended September 30, 1998 and the Company's Quarterly Report on Form 10-Q
for the quarterly period ended December 31, 1998 (collectively, the "Company
Financial Statements") have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis (except as may be indicated
therein or in the notes thereto) and fairly present in all material respects the
financial position of the Company and its subsidiaries as of the dates thereof
and the results of their operations and changes in financial position for the
periods then ended (subject, in the case of any unaudited interim financial
statements, to normal year-end adjustments).
SECTION 4.06. Absence of Undisclosed Liabilities.
Except as disclosed in the Company SEC Reports or as heretofore disclosed
to Parent in writing with respect to acquisitions or potential transactions or
commitments, neither the Company nor any of its subsidiaries had at September
30, 1998, or has incurred since that date and as of the date hereof, any
liabilities or obligations (whether absolute, accrued, contingent or otherwise)
of any nature, except (a) liabilities, obligations or contingencies (i) which
are accrued or reserved against in the Company Financial Statements or reflected
in the notes thereto or (ii) which were incurred after September 30, 1998 in the
ordinary course of business and consistent with past practices, (b) liabilities,
obligations or contingencies which (i) would not reasonably be expected to have
a Company Material Adverse Effect, or (ii) have been discharged or paid in full
prior to the date hereof, and (c) liabilities, obligations and contingencies
which are of a nature not required to be reflected in the consolidated financial
statements of the Company and its subsidiaries prepared in accordance with
generally accepted accounting principles consistently applied.
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SECTION 4.07. Absence of Certain Changes or Events.
Since the date of the most recent Company SEC Report that contains
consolidated financial statements of the Company, there has not been any Company
Material Adverse Effect.
SECTION 4.08. Litigation. Except as referred to in the Company SEC
Reports, there are no claims, suits, actions or proceedings pending or, to the
knowledge of the Company, threatened against, relating to or affecting the
Company or any of its subsidiaries, before any court, governmental department,
commission, agency, instrumentality or authority, or any arbitrator that would
reasonably be expected to have a Company Material Adverse Effect. Except as
referred to in the Company SEC Reports or as may be entered into with Parent's
prior written consent in connection with Section 5.12(b), neither the Company
nor any of its subsidiaries is subject to any judgment, decree, injunction, rule
or order of any court, governmental department, commission, agency,
instrumentality or authority, or any arbitrator which prohibits the consummation
of the transactions contemplated hereby or would reasonably be expected to have
a Company Material Adverse Effect.
SECTION 4.09. Proxy Statement.
None of the information to be supplied by the Company or its subsidiaries
for inclusion in the Proxy Statement will, at the time of the mailing thereof
and any amendments or supplements thereto, and at the time of the meeting of
stockholders of the Company to be held in connection with the transactions
contemplated by this Agreement, contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they are made, not misleading. The Proxy Statement will comply, as of its
mailing date, as to form in all material respects with all applicable laws,
including the provisions of the Exchange Act and the rules and regulations
promulgated thereunder, except that no representation is made by the Company
with respect to information supplied by Parent, Merger Subsidiary or any
stockholder of Parent for inclusion therein.
SECTION 4.10. No Violation of Law.
Except as disclosed in the Company SEC Reports, neither the Company nor any
of its subsidiaries is in violation of or has been given written notice of any
violation of, any law, statute, order, rule, regulation, ordinance or judgment
(including, without limitation, any applicable environmental law, ordinance or
regulation) of any governmental or regulatory body or authority, except for
violations which would not reasonably be expected to have a Company Material
Adverse Effect. Except as disclosed in the Company SEC Reports, as of the date
of this Agreement, to the knowledge of the Company, no investigation or review
by any governmental or regulatory body or authority is pending or threatened,
nor has any governmental or regulatory body or authority indicated an intention
to conduct the same, other than, in each case, those the outcome of which, as
far as reasonably can be foreseen, would not reasonably be expected to have a
Company Material Adverse Effect. The Company and its subsidiaries have all
permits, licenses, franchises, variances, exemptions, orders and other
governmental authorizations, consents and approvals necessary to conduct their
businesses as presently conducted (collectively, the "Company Permits"), except
for permits, licenses, franchises, variances, exemptions, orders,
authorizations, consents and approvals the absence of which would not reasonably
be expected to have a Company Material Adverse Effect. The Company and its
subsidiaries are not in violation of the terms of any Company Permit, except for
delays in filing reports or violations which would not reasonably be expected to
have a Company Material Adverse Effect.
SECTION 4.11. Compliance with Agreements.
Except as disclosed in the Company SEC Reports, the Company and each of its
subsidiaries are not in breach or violation of or in default in the performance
or observance of any term or provision of, and no event has occurred which, with
lapse of time or action by a third party, would result in a default under, (a)
the respective certificates of incorporation, bylaws or similar organizational
instruments of the Company or any of its subsidiaries, or (b) any Contract to
which the Company or any of its subsidiaries is a party or by which any of them
is bound or to which any of their property is subject, other than, in the case
of clause (b) of this
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Section 4.11, breaches, violations and defaults which would not reasonably be
expected to have a Company Material Adverse Effect.
SECTION 4.12. Taxes.
(a) The Company and its subsidiaries have (i) duly filed with the
appropriate governmental authorities all Tax Returns required to be filed by
them, and such Tax Returns are true, correct and complete in all material
respects, and (ii) duly paid in full or reserved in accordance with generally
accepted accounting principles on the Company Financial Statements all Taxes
required to be paid, except, in each case, as would not, individually or in the
aggregate, have a Company Material Adverse Effect. The liabilities and reserves
for Taxes reflected in the Company balance sheet included in the latest Company
SEC Report to cover all Taxes for all periods ending at or prior to the date of
such balance sheet have been determined in accordance with generally accepted
accounting principles, and there is no material liability for Taxes for any
period beginning after such date other than Taxes arising in the ordinary course
of business. There are no material liens for Taxes upon any property or asset of
the Company or any subsidiary thereof, except for liens for Taxes not yet due or
Taxes contested in good faith and reserved against in accordance with generally
accepted accounting principles. There are no unresolved issues of law or fact
arising out of a notice of deficiency, proposed deficiency or assessment from
the Internal Revenue Service (the "IRS") or any other governmental taxing
authority with respect to Taxes of the Company or any of its subsidiaries which
would reasonably be expected to have a Company Material Adverse Effect. Neither
the Company nor its subsidiaries has agreed to an extension of time with respect
to a material Tax deficiency other than extensions which are no longer in
effect. Neither the Company nor any of its subsidiaries is a party to any
agreement providing for the allocation or sharing of material Taxes with any
entity that is not, directly or indirectly, a wholly-owned corporate subsidiary
of the Company other than agreements the consequences of which are fully and
adequately reserved for in the Company Financial Statements.
(b) The Company is not, and will not be as of the Effective Time, a United
States Real Property Holding Corporation within the meaning of Section 897 of
the Internal Revenue Code of 1986, as amended (the "Code"), assuming for this
purpose that the date hereof and the Effective Time constitute "determination
dates" within the meaning of Treas. Reg. sec. 1.897-2(c).
(c) The Company and each of its subsidiaries have withheld or collected and
have paid over to the appropriate governmental entities (or are properly holding
for such payment) all material Taxes required to be collected or withheld.
(d) For purposes of this Agreement, "Tax" (including, with correlative
meaning, the terms "Taxes") includes all federal, state, local and foreign
income, profits, franchise, gross receipts, environmental, customs duty, capital
stock, communications services, severance, stamp, payroll, sales, employment,
unemployment, disability, use, property, withholding, excise, production, value
added, occupancy and other taxes, duties or assessments of any nature
whatsoever, together with all interest, penalties and additions imposed with
respect to such amounts and any interest in respect to such penalties and
additions, and includes any liability for Taxes of another person by contract,
as a transferee or successor, under Treas. Reg. 1.1502-6 or analogous state,
local or foreign law provision or otherwise, and "Tax Return" means any return,
report or similar statement (including attached schedules) required to be filed
with respect to any Tax, including without limitation, any information return,
claim for refund, amended return or declaration of estimated Tax.
SECTION 4.13. Employee Benefit Plans; ERISA.
(a) Except as disclosed in the Company SEC Reports, at the date hereof, the
Company and its subsidiaries do not maintain or contribute to or have any
obligation or liability to or with respect to any material employee benefit
plans, programs, arrangements or practices, including severance plans or
policies and employee benefit plans within the meaning set forth in Section 3(3)
of (the Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
or other similar material arrangements for the provision of benefits (excluding
any "Multi-employer Plan" within the meaning of Section 3(37) of ERISA or a
"Multiple Employer Plan" within the meaning of Section 413(c) of the Code) (such
plans, programs, arrangements or practices of the Company and its subsidiaries
being referred to as the "Company Plans").
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Neither the Company nor any of its subsidiaries maintains or has any material
liability with respect to any Multiple Employer Plan or contributes to or is
obligated to contribute to any Multi-employer Plan. Neither the Company nor any
of its subsidiaries has any obligation to create or contribute to any
additional, material plan, program, arrangement or practice or to amend any such
plan, program, arrangement or practice so as to increase benefits or
contributions thereunder, except as required under the terms of the Company
Plans, under existing collective bargaining agreements or to comply with
applicable law.
(b) Except as disclosed in the Company SEC Reports, (i) there have been no
prohibited transactions within the meaning of Section 406 or 407 of ERISA or
Section 4975 of the Code with respect to any of the Company Plans that could
result in penalties, taxes or liabilities which would reasonably be expected to
have a Company Material Adverse Effect, (ii) except for premiums due, there is
no outstanding liability, whether measured alone or in the aggregate, under
Title IV of ERISA with respect to any of the Company Plans, which would
reasonably be expected to have a Company Material Adverse Effect, (iii) neither
the Pension Benefit Guaranty Corporation nor any plan administrator has
instituted proceedings to terminate any of the Company Plans subject to Title IV
of ERISA other than in a "standard termination" described in Section 4041(b) of
ERISA, (iv) none of the Company Plans has incurred any "accumulated funding
deficiency" (as defined in Section 302 of ERISA and Section 412 of the Code),
whether or not waived, as of the last day of the most recent fiscal year of each
of the Company Plans ended prior to the date of this Agreement, (v) to the best
knowledge of the Company, with respect to Company Plans subject to Title IV of
ERISA, there has been no material change in the funded status of such plans from
the status set forth most recently in the Company SEC Reports, (vi) each of the
Company Plans has been operated and administered in accordance with applicable
laws during the period of time covered by the applicable statute of limitations,
except for failures to comply which would not reasonably be expected to have a
Company Material Adverse Effect, (vii) each of the Company Plans which is
intended to be "qualified" within the meaning of Section 401(a) of the Code has
been determined by the IRS to be so qualified and such determination has not
been modified, revoked or limited by failure to satisfy any condition thereof or
by a subsequent amendment thereto or a failure to amend, except that it may be
necessary to make additional amendments retroactively to maintain the
"qualified" status of such Company Plans, and the period for making any such
necessary retroactive amendments has not expired, (viii) with respect to
Multi-employer Plans, neither the Company nor any of its subsidiaries has made
or suffered a "complete withdrawal" or a "partial withdrawal," as such terms are
respectively defined in Sections 4203, 4204 and 4205 of ERISA and, to the best
knowledge of the Company and its subsidiaries, no event has occurred or is
expected to occur which presents a material risk of a complete or partial
withdrawal under such Sections 4203, 4204 and 4205, (ix) to the knowledge of the
Company and its subsidiaries, there are no pending, threatened or anticipated
claims involving any of the Company Plans other than claims for benefits in the
ordinary course or claims which would not reasonably be expected to have a
Company Material Adverse Effect, (x) except for premiums due, the Company and
its subsidiaries have no current liability under Title IV of ERISA, and the
Company and its subsidiaries do not reasonably anticipate that any such
liability will be asserted against the Company or any of its subsidiaries,
except for liabilities or anticipated liabilities which would not reasonably be
expected to have a Company Material Adverse Effect, and (xi) no act, omission or
transaction (individually or in the aggregate) has occurred with respect to any
Company Plan that has resulted or could result in any liability (direct or
indirect) of the Company or any subsidiary under Sections 409 or 502(c)(1) or
(l) of ERISA or Chapter 43 of Subtitle (A) of the Code, except for liabilities
or anticipated liabilities which would not reasonably be expected to have a
Company Material Adverse Effect.
(c) The Company SEC Reports contain a true and complete summary or list of
or otherwise describe all material employment contracts and other employee
benefit arrangements with "change of control" provisions and all severance
agreements with executive officers.
(d) There are no agreements which will or would be reasonably expected to
provide payments to any officer, employee, stockholder, or highly compensated
individual which will be "parachute payments" under Code Section 280G that are
nondeductible to the Company or subject to tax under Code Section 4999 for which
the Company or any ERISA Affiliate would have withholding liability.
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SECTION 4.14. Labor Controversies.
Except as disclosed in the Company SEC Reports, (a) there are no
significant controversies pending or, to the knowledge of the Company,
threatened between the Company or its subsidiaries and any representatives
(including unions) of any of their employees, and (b) to the knowledge of the
Company, there are no material organizational efforts presently being made
involving any of the presently unorganized employees of the Company or its
subsidiaries, except for such controversies and organizational efforts which
would not reasonably be expected to have a Company Material Adverse Effect.
SECTION 4.15. Environmental Matters.
(a) Except as disclosed in the Company SEC Reports, (i) the Company and its
subsidiaries have conducted their respective businesses in compliance with all
applicable Environmental Laws, including, without limitation, having all
permits, licenses and other approvals and authorizations necessary for the
operation of their respective businesses as presently conducted, (ii) none of
the properties owned by the Company or any of its subsidiaries contain any
Hazardous Substance as a result of any activity of the Company or any of its
subsidiaries in amounts exceeding the levels permitted by applicable
Environmental Laws, (iii) since January 1, 1997, neither the Company nor any of
its subsidiaries has received any notices, demand letters or requests for
information from any Federal, state, local or foreign governmental entity
indicating that the Company or any of its subsidiaries may be in violation of,
or liable under, any Environmental Law in connection with the ownership or
operation of their businesses, (iv) there are no civil, criminal or
administrative actions, suits, demands, claims, hearings, investigations or
proceedings pending or threatened, against the Company or any of its
subsidiaries relating to any violation, or alleged violation, of any
Environmental Law, (v) no Hazardous Substance has been disposed of, released or
transported in violation of any applicable Environmental Law from any properties
owned by the Company or any of its subsidiaries as a result of any activity of
the Company or any of its subsidiaries during the time such properties were
owned, leased or operated by the Company or any of its subsidiaries, and (vi)
neither the Company, its subsidiaries nor any of their respective properties are
subject to any material liabilities or expenditures (fixed or contingent)
relating to any suit, settlement, court order, administrative order, regulatory
requirement, judgment or claim asserted or arising under any Environmental Law,
except for violations of the foregoing clauses (i) through (vi) that would not
reasonably be expected to have a Company Material Adverse Effect.
(b) As used herein, "Environmental Law" means any federal, state, local or
foreign law, statute, ordinance, rule, regulation, code, license, permit,
authorization, approval, consent, legal doctrine, order, judgment, decree,
injunction, requirement or agreement with any governmental entity relating to
(x) the protection, preservation or restoration of the environment (including,
without limitation, air, water vapor, surface water, groundwater, drinking water
supply, surface land, subsurface land, plant and animal life or any other
natural resource) or to human health or safety, or (y) the exposure to, or the
use, storage, recycling, treatment, generation, transportation, processing,
handling, labeling, production, release or disposal of Hazardous Substances, in
each case as amended and as in effect at the Effective Time. The term
"Environmental Law" includes, without limitation, (i) the Federal Comprehensive
Environmental Response Compensation and Liability Act of 1980, the Superfund
Amendments and Reauthorization Act, the Federal Water Pollution Control Act of
1972, the Federal Clean Air Act, the Federal Clean Water Act, the Federal
Resource Conservation and Recovery Act of 1976 (including the Hazardous and
Solid Waste Amendments thereto), the Federal Solid Waste Disposal Act and the
Federal Toxic Substances Control Act, the Federal Insecticide, Fungicide and
Rodenticide Act, and the Federal Occupational Safety and Health Act of 1970,
each as amended and as in effect at the Effective Time, and (ii) any common law
or equitable doctrine (including, without limitation, injunctive relief and tort
doctrines such as negligence, nuisance, trespass and strict liability) that may
impose liability or obligations for injuries or damages due to, or threatened as
a result of, the presence of, effects of or exposure to any Hazardous Substance.
(c) As used herein, "Hazardous Substance" means any substance presently or
hereafter listed, defined, designated or classified as hazardous, toxic,
radioactive, or dangerous, or otherwise regulated, under any Environmental Law.
Hazardous Substance includes any substance to which exposure is regulated by any
government authority or any Environmental Law including, without limitation, any
toxic waste, pollutant,
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contaminant, hazardous substance, toxic substance, hazardous waste, special
waste, industrial substance or petroleum or any derivative or by-product
thereof, radon, radioactive material, asbestos, or asbestos containing material,
urea formaldehyde foam insulation, lead or polychlorinated biphenyls.
SECTION 4.16. Non-competition Agreements.
Except as disclosed in the Company SEC Reports, neither the Company nor any
subsidiary of the Company is a party to any agreement which (i) purports to
restrict or prohibit in any material respect any of them or any corporation
affiliated with any of them from, directly or indirectly, engaging in any
business involving the collection, interim storage, transfer, recovery,
processing, recycling, marketing or disposal of rubbish, garbage, paper, textile
wastes, chemical or hazardous wastes, liquid and other wastes or any other
material business currently engaged in by Parent or the Company, or any
corporations affiliated with either of them, and (ii) would restrict or prohibit
Parent or any subsidiary of the Parent (other than the Company and its
subsidiaries that are currently so restricted or prohibited) from engaging in
such business to the extent that such restriction or prohibition could
reasonably be expected to have a Parent Material Adverse Effect.
SECTION 4.17. Title to Assets.
The Company and each of its subsidiaries has good and valid title in fee
simple to all its real property and good title to all its leasehold interests
and other properties, as reflected in the most recent balance sheet included in
the Company Financial Statements, except for properties and assets that have
been disposed of in the ordinary course of business since the date of such
balance sheet, free and clear of all mortgages, liens, pledges, charges or
encumbrances of any nature whatsoever, except (i) the lien for current taxes,
payments of which are not yet delinquent, (ii) such imperfections in title and
easements and encumbrances, if any, as are not substantial in character, amount
or extent and do not materially detract from the value, or interfere with the
present use of the property subject thereto or affected thereby, or otherwise
materially impair the Company's business operations (in the manner presently
carried on by the Company), or (iii) as disclosed in the Company SEC Reports,
and except for such matters which would not reasonably be expected to have a
Company Material Adverse Effect. All leases under which the Company or any of
its subsidiaries leases any real or personal property are in good standing,
valid and effective in accordance with their respective terms, and there is not,
under any of such leases, any existing default or event which with notice or
lapse of time or both would become a default other than failures to be in good
standing, valid and effective and defaults under such leases which would not
reasonably be expected to have a Company Material Adverse Effect.
SECTION 4.18. Company Stockholders' Approval.
The affirmative vote of stockholders of the Company required for approval
and adoption of this Agreement and the Merger is a majority of the outstanding
shares of Company Common Stock entitled to vote thereon.
SECTION 4.19. Opinion of Financial Advisor.
The Company's financial advisor, Goldman, Sachs & Co. (the "Company
Financial Advisor"), has delivered to the Board of Directors of the Company an
oral opinion, to be confirmed in writing (the "Fairness Opinion") to the effect
that, as of the date of this Agreement, the consideration to be received by the
holders of Company Common Stock in the Merger is fair to such holders from a
financial point of view. Subject to the prior review and consent by the Company
Financial Advisor, the Fairness Opinion shall be included in the Proxy
Statement.
SECTION 4.20. Brokers and Finders.
The Company has not entered into any contract, arrangement or understanding
with any person or firm which may result in the obligation of the Company to pay
any investment banking fees, finder's fees, brokerage or agent commissions or
other like payments in connection with the transactions contemplated hereby,
other than fees payable to the Company Financial Advisor or as disclosed in
Section 4.20 of the Company Disclosure Schedule. An accurate copy of any fee
agreement with the Company Financial Advisor has been provided to Parent.
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ARTICLE V
COVENANTS
SECTION 5.01. Conduct of Business by the Company Pending the Merger.
Except as otherwise contemplated by this Agreement or disclosed in Section
5.01 of the Company Disclosure Schedule, after the date hereof and prior to the
Effective Time or earlier termination of this Agreement, unless Parent shall
otherwise agree in writing, the Company shall, and shall cause its subsidiaries
to:
(a) conduct their respective businesses in the ordinary and usual
course of business and consistent with past practice;
(b) not (i) amend or propose to amend their respective certificates of
incorporation or bylaws or equivalent constitutional documents, (ii) split,
combine or reclassify their outstanding capital stock or (iii) declare, set
aside or pay any dividend or distribution payable in cash, stock, property
or otherwise, except for the payment of dividends or distributions to the
Company or a wholly-owned subsidiary of the Company by a direct or indirect
wholly-owned subsidiary of the Company and regular quarterly dividends on
Company Common Stock not in excess of $0.19 per share declared and payable
at times consistent with past practice (it being understood and agreed that
the record dates for any such quarterly dividends shall be at least 90 days
apart);
(c) not issue, sell, pledge or dispose of, or agree to issue, sell,
pledge or dispose of, any additional shares of, or any options, warrants or
rights of any kind to acquire any shares of their capital stock of any
class or any debt or equity securities convertible into or exchangeable for
such capital stock, except that (i) the Company may issue shares (A) upon
exercise of Options outstanding on the date hereof or hereafter granted in
accordance with the provisions of subclause (iv) of this clause (c) or
pursuant to awards existing as of the date of this Agreement under the LTIP
and (B) in accordance with the DRP and the Company's 401-K Plan as in
effect on the date of this Agreement, (ii) the Company may (with Parent's
prior written consent, which consent shall not be unreasonably withheld)
issue shares of Company Common Stock (or warrants or options to acquire
Company Common Stock) in connection with acquisitions of assets or
businesses pursuant to the proviso of Section 5.01(d), (iii) the Company
may issue shares of Company Common Stock pursuant to earnouts from
previously completed transactions in accordance with the existing terms of
the agreements relating thereto, and (iv) subject to the proviso below, the
Company may grant Options to purchase shares of Company Common Stock in
accordance with the terms of the Company Option Plans to persons who are
not currently directors, officers or employees of the Company or its
subsidiaries and are hired by the Company or its subsidiaries after the
date of this Agreement and such grants are made consistent with past
practice and have an exercise price per share of Company Common Stock no
less than the fair market value of a share of Company Common Stock as of
the date of grant, provided that the number of Options granted pursuant to
this subclause (iv) shall not exceed the number of Options which are
outstanding as of the date of this Agreement and which are thereafter
canceled or forfeited without exercise and (v) the Company may grant
Options and LTIP awards in accordance with the description set forth in
Section 5.01 of the Company Disclosure Schedule;
(d) not (i) incur or become contingently liable with respect to any
indebtedness for borrowed money other than (A) borrowings in the ordinary
course of business (other than pursuant to credit facilities) or borrowings
under the existing credit facilities of the Company or any of its
subsidiaries or borrowings under the credit facilities to be entered into
substantially on the terms set forth in Section 5.01 of the Company
Disclosure Schedule as such facilities may be amended in a manner that does
not have a material adverse effect on the Company (the "Existing Credit
Facilities") up to the existing borrowing limit on the date hereof, (B)
borrowings to refinance existing indebtedness on terms which are reasonably
acceptable to Parent, or (C) borrowings in connection with acquisitions as
set forth in the proviso in this Section 5.01(d), (ii) redeem, purchase,
acquire or offer to purchase or acquire any shares of its capital stock or
any options, warrants or rights to acquire any of its capital stock or any
security convertible into
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or exchangeable for its capital stock other than in connection with the
exercise of outstanding Options pursuant to the terms of the Company Option
Plans, (iii) make any acquisition of any assets or businesses other than
expenditures for current assets in the ordinary course of business and
expenditures for fixed or capital assets in the ordinary course of business
and other than as set forth in the proviso in this Section 5.01(d), (iv)
sell, pledge, dispose of or encumber any assets or businesses other than
(A) sales of businesses or assets disclosed in Section 5.01 of the Company
Disclosure Schedule, (B) pledges or encumbrances pursuant to Existing
Credit Facilities or other permitted borrowings, (C) sales or dispositions
of businesses or assets consented to in writing by Parent (which consent
shall not be unreasonably withheld) or for which consent is not denied
within 24 hours after the Company notifies Parent (such notice to be
delivered during business hours on a business day) in writing that it
desires to effect such sale or disposition, (D) sales of real estate,
assets or facilities for cash consideration (including any debt assumed by
the buyer of such real estate, assets or facilities) of less than $100,000
in each such case and (E) sales or dispositions of businesses or assets as
may be required by applicable law, or (v) except as contemplated by the
following proviso, enter into any binding contract, agreement, commitment
or arrangement with respect to any of the foregoing; provided, however,
that notwithstanding the foregoing, (I) the Company shall not be prohibited
from acquiring any assets or business for cash in one or more transactions
in which the aggregate revenues of such businesses and assets do not exceed
$80 million in the aggregate and the value of the consideration paid (as
determined in accordance with clause II(B)) in each such acquisition
satisfies the internal rate of return criteria of the Company's existing
acquisition policy as disclosed to Parent and (II) the Company shall not be
prohibited from acquiring any assets or businesses or incurring or assuming
indebtedness in connection with acquisitions of assets or businesses so
long as (A) such acquisitions are disclosed in Section 5.01 of the Company
Disclosure Schedule, or (B) the aggregate value (determined at the time of
execution of the agreement pursuant to which such business or asset is
acquired) of consideration paid or payable in connection with any such
acquisition (other than those acquisitions disclosed in Schedule 5.01 of
the Company Disclosure Schedule) including any funded indebtedness assumed
and any Company Common Stock issued with Parent's prior written consent
(which consent shall not be unreasonably withheld) in connection with such
acquisitions (valued for purposes of this limitation at a price per share
equal to the price of the Company Common Stock on the date the agreement in
respect of any such acquisition is entered into) does not exceed 1.5 times
the revenues generated by such business or assets for the preceding twelve
month period for which financial statements are available and also does not
exceed 5.5 times projected earnings before interest, taxes, depreciation
and amortization on a pro forma basis for the twelve month period
immediately following the expected closing date of the acquisition
reflecting reasonably anticipated cost reductions and synergies to be
generated by such business or assets. For purposes of the foregoing, any
contingent, royalty and similar payments made in connection with
acquisitions of businesses or assets shall be included as acquisition
consideration and shall be deemed to have a value equal to their present
value assuming a 8% per annum discount rate and assuming that all amounts
payable for the first five years following consummation of the acquisitions
(but not thereafter) are paid. Notwithstanding anything herein to the
contrary: (A) the Company will not acquire or agree to acquire any assets
or businesses if such acquisition or agreement may reasonably be expected
to delay the consummation of the Merger; (B) the Company will not, and will
cause its subsidiaries not to, acquire or agree to acquire any assets or
businesses if such assets or businesses are not in industries in which the
Company currently operates, unless such assets or businesses are acquired
incidental to an acquisition of businesses or assets that are in industries
in which the Company currently operates and it is reasonable to acquire
such incidental businesses or assets in connection with such acquisition;
and (C) the Company will not, and will cause its subsidiaries not to,
acquire or agree to acquire all or substantially all of the business,
assets, properties or capital stock of any entity with securities
registered under the Securities Act or the Exchange Act;
(e) use all reasonable efforts to preserve intact their respective
business organizations and goodwill, keep available the services of their
respective present officers and key employees, and preserve the goodwill
and business relationships with customers and others having business
relationships with them other than as expressly permitted by the terms of
this Agreement;
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(f) subject to restrictions imposed by applicable law, confer with one
or more representatives of Parent to report operational matters of
materiality and the general status of ongoing operations;
(g) not enter into or amend any employment, severance, special pay
arrangement with respect to termination of employment or other similar
arrangements or agreements with any directors, officers or key employees or
with any other persons, except pursuant to (i) applicable law, (ii)
previously existing contractual arrangements or policies disclosed pursuant
to this Agreement or (iii) employment agreements entered into with a person
who is hired by the Company or one of its subsidiaries to replace an
employee who is terminated or voluntarily resigns and who, at the time of
termination, was party to an employment agreement with the Company or one
of its subsidiaries, provided that such new employment agreement shall be
on terms (including salary and benefits) comparable in all material
respects to the contract covering the terminated employee and shall not
contain a change of control provision and shall not be for a term of more
than one year or provide for severance pay or benefits (other than base
salary and benefits payable if such contract had not been terminated prior
to the expiration of its term).
(h) not increase the salary or monetary compensation of any person
except for increases consistent with past practice as reflected in the
Company's Annual Budget for fiscal 1999 or except pursuant to applicable
law or previously existing contractual arrangements;
(i) not adopt, enter into or amend to increase benefits or obligations
any pension or retirement plan, trust or fund and not adopt, enter into or
amend in any material respect any bonus, profit sharing, compensation,
stock option, deferred compensation, health care, employment or other
employee benefit plan, agreement, trust, fund or arrangement for the
benefit or welfare of any employees or retirees generally, other than in
the ordinary course of business, except (i) as required to comply with
changes in applicable law, (ii) any of the foregoing involving any such
then existing plans, agreements, trusts, funds or arrangements of any
company acquired after the date hereof, or (iii) as required pursuant to an
existing contractual arrangement or agreement;
(j) not make expenditures, including, but not limited to, capital
expenditures, or enter into any binding commitment or contract to make
expenditures, except (i) as included in, or consistent with, the Company's
Annual Budget for fiscal 1999, (ii) for emergency repairs and other
expenditures necessary in light of circumstances not anticipated as of the
date of this Agreement which are necessary to avoid significant disruption
to the Company's business or operations consistent with past practice (and,
if reasonably practicable, after consultation with Parent), (iii) for
repairs and maintenance in the ordinary course of business consistent with
past practice or (iv) as expressly permitted by paragraph (d) of this
Section 5.01;
(k) not enter into any contract or commitment (i) providing for the
provision of services (including, but not limited to, waste disposal, waste
hauling, or landfill use) by the Company or any of its subsidiaries that
has a term of more than three years and which is reasonably expected to
generate more than $15 million in revenues over its term or (ii) providing
for the purchase of services by the Company or any of its subsidiaries that
has a term of more than one year and which is reasonably expected to
involve payments of more than $1 million over its term;
(l) not make, change or revoke any material Tax election unless
required by law or make any agreement or settlement with any taxing
authority regarding any material amount of Taxes or which would reasonably
be expected to materially increase the obligations of the Company or the
Surviving Corporation to pay Taxes in the future.
SECTION 5.02. Control of the Company's Operations.
Nothing contained in this Agreement shall give to Parent, directly or
indirectly, rights to control or direct the Company's operations prior to the
Effective Time. Prior to the Effective Time, the Company shall exercise,
consistent with the terms and conditions of this Agreement, complete control and
supervision of its operations.
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SECTION 5.03. Acquisition Transactions.
(a) After the date hereof and prior to the Effective Time or earlier
termination of this Agreement, the Company shall not, and shall not permit any
of its subsidiaries to, initiate, solicit, negotiate, encourage or provide
confidential information to facilitate, and the Company shall use its reasonable
efforts to cause any officer, director or employee of the Company, or any
attorney, accountant, investment banker, financial advisor or other agent
retained by it or any of its subsidiaries, not to initiate, solicit, negotiate,
encourage or provide non-public or confidential information to facilitate, any
proposal or offer to acquire all or any substantial part of the business,
properties or capital stock of the Company, whether by merger, purchase of
assets, tender offer or otherwise, whether for cash, securities or any other
consideration or combination thereof (any such transactions being referred to
herein as an "Acquisition Transaction").
(b) Notwithstanding the provisions of paragraph (a) above, (i) the Company
may, prior to receipt of the Company Stockholders' Approval, in response to an
unsolicited bona fide written offer or proposal with respect to a potential or
proposed Acquisition Transaction ("Acquisition Proposal") from a corporation,
partnership, person or other entity or group (a "Potential Acquirer") which the
Company's Board of Directors determines, in good faith and after consultation
with its independent financial advisor, could reasonably be expected to result
(if consummated pursuant to its terms) in an Acquisition Transaction more
favorable to the Company's stockholders than the Merger (a "Qualifying
Proposal"), furnish (subject to the execution of a confidentiality agreement
substantially similar to the confidentiality provisions of the Confidentiality
Agreement (as defined in Section 5.04)) confidential or non-public information
to, and negotiate with, such Potential Acquirer if the Board of Directors of the
Company, after consulting with its outside legal counsel, determines in good
faith that consideration of the Acquisition Proposal is reasonably necessary for
the Board of Directors to act in a manner consistent with its fiduciary duties
or that the failure to provide such confidential or non-public information to or
negotiate with such Potential Acquirer would be reasonably likely to constitute
a breach of its fiduciary duties to the Company's stockholders, and, upon
termination of this Agreement in accordance with Section 7.01(v) or (vi) and
after payment to Parent of the fee pursuant to Section 5.11(b), resolve to
accept, or recommend, or enter into agreements relating to, a Qualifying
Proposal as to which the Company's Board of Directors, in good faith, has
determined is reasonably likely to be consummated (such Qualifying Proposal
being a "Superior Proposal") and (ii) the Company's Board of Directors may take
and disclose to the Company's stockholders a position contemplated by Rule 14e-2
under the Exchange Act or otherwise make disclosure required by the federal
securities laws. It is understood and agreed that negotiations and other
activities conducted in accordance with this paragraph (b) shall not constitute
a violation of paragraph (a) of this Section 5.03.
(c) The Company shall promptly notify Parent after receipt of any
Acquisition Proposal, indication of interest or request for non-public
information relating to the Company or its subsidiaries in connection with an
Acquisition Proposal or for access to the properties, books or records of the
Company or any subsidiary by any person or entity that informs the Board of
Directors of the Company or such subsidiary that it is considering making, or
has made, an Acquisition Proposal. Such notice to Parent shall be made orally
and in writing and shall indicate in reasonable detail the identity of the
offeror and the material terms and conditions of such proposal, inquiry or
contact.
(d) After the date hereof and prior to the Effective Time or earlier
termination of this Agreement, the Parent shall promptly notify the Company
after receipt of any proposal or offer to acquire all or any substantial part of
the business, properties or capital stock of Parent, whether by merger, purchase
of assets, tender offer or otherwise, whether for cash, securities or any other
consideration or combination thereof and shall indicate in reasonable detail the
identity of the offeror or person and the material terms and conditions of such
proposal or offer and the financing arrangements, if any, relating thereto.
SECTION 5.04. Access to Information.
Subject to applicable law, the Company and its subsidiaries shall afford to
Parent and Merger Subsidiary and their respective accountants, counsel,
financial advisors, sources of financing and other representatives (the "Parent
Representatives") reasonable access during normal business hours with reasonable
notice throughout the period prior to the Effective Time to all of their
respective properties, books, contracts,
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commitments and records (including, but not limited to, Tax Returns) and, during
such period, shall furnish promptly (i) a copy of each report, schedule and
other document filed or received by any of them pursuant to the requirements of
federal or state securities laws or filed by any of them with the SEC in
connection with the transactions contemplated by this Agreement, and (ii) such
other information concerning its businesses, properties and personnel as Parent
or Merger Subsidiary shall reasonably request and will use reasonable efforts to
obtain the reasonable cooperation of the Company's officers, employees, counsel,
accountants, consultants and financial advisors in connection with the
investigation of the Company by Parent and the Parent Representatives; provided,
however, that no investigation pursuant to this Section 5.04 shall amend or
modify any representations or warranties made herein or the conditions to the
obligations of the respective parties to consummate the Merger. All nonpublic
information provided to, or obtained by, Parent in connection with the
transactions contemplated hereby shall be "Information" for purposes of the
Confidentiality Agreement dated February 24, 1999 between Parent and the Company
(the "Confidentiality Agreement"), provided that (i) Parent, Merger Subsidiary
and the Company may disclose such information as may be necessary in connection
with seeking the Parent Required Statutory Approvals, the Company Required
Statutory Approvals and the Company Stockholders' Approval, and (ii) each of
Parent, Merger Subsidiary and the Company may disclose any information that it
is required by law or judicial or administrative order to disclose.
Notwithstanding the foregoing, the Company shall not be required to provide any
information which it reasonably believes it may not provide to Parent by reason
of applicable law, rules or regulations, which constitutes information protected
by attorney/client privilege, or which the Company or any subsidiary is required
to keep confidential by reason of contract, agreement or understanding with
third parties.
SECTION 5.05. Notices of Certain Events.
(a) The Company shall promptly as reasonably practicable after executive
officers of the Company acquire knowledge thereof, notify Parent of: (i) any
notice or other communication from any person alleging that the consent of such
person (or another person) is or may be required in connection with the
transactions contemplated by this Agreement which consent relates to a material
Contract to which the Company or any of its subsidiaries is a party or the
failure of which to obtain would materially delay consummation of the Merger;
(ii) any notice or other communication from any governmental or regulatory
agency or authority in connection with the transactions contemplated by this
Agreement; and (iii) any actions, suits, claims, investigations or proceedings
commenced or, to the best of its knowledge threatened against, relating to or
involving or otherwise affecting the Company or any of its subsidiaries that, if
pending on the date of this Agreement, would have been required to have been
disclosed pursuant to Sections 4.08 or 4.10 or which relate to the consummation
of the transactions contemplated by this Agreement.
(b) Each of Parent and Merger Subsidiary shall promptly as reasonably
practicable after executive officers of the Parent acquire knowledge thereof,
notify the Company of: (i) any notice or other communication from any person
alleging that the consent of such person (or other person) is or may be required
in connection with the transactions contemplated by this Agreement which consent
relates to a material Contract to which Parent or its subsidiaries are a party
or the failure of which to obtain would materially delay the Merger, (ii) any
notice or other communication from any governmental or regulatory agency or
authority in connection with the transactions contemplated by this Agreement,
and (iii) any actions, suits, claims, investigations or proceedings commenced
or, to the best of its knowledge threatened, against Parent or Merger
Subsidiary, which relate to consummation of the transactions contemplated by
this Agreement.
(c) Subject to the provisions of Section 5.03, each of the Company, Parent
and Merger Subsidiary agrees to give prompt notice to each other of, and to use
commercially reasonable efforts to remedy, (i) the occurrence or failure to
occur of any event which occurrence or failure to occur would be likely to cause
any of its representations or warranties in this Agreement to be untrue or
inaccurate at the Effective Time unless such failure or occurrence would not
have a Company Material Adverse Effect or a Parent Material Adverse Effect, as
the case may be, and (ii) any failure on its part to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder unless such failure or occurrence would not have a Company Material
Adverse Effect or a Parent Material Adverse Effect, as the case may be;
provided, however, that the delivery of any notice pursuant to this Section
5.05(c) shall not limit or otherwise affect the remedies available hereunder to
the party receiving such notice.
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SECTION 5.06. Merger Subsidiary.
Parent will take all action necessary (a) to cause Merger Subsidiary to
perform its obligations under this Agreement and to consummate the Merger on the
terms and conditions set forth in this Agreement and (b) to ensure that, prior
to the Effective Time, Merger Subsidiary shall not conduct any business or make
any investments other than as specifically contemplated by this Agreement, or
incur or guarantee any indebtedness (other than as contemplated by the financing
required for the Merger and related transactions).
SECTION 5.07. Employee Benefits.
(a) Parent shall assume and honor, or shall cause the Surviving Corporation
to assume and honor, all Company Plans pursuant to the terms of the Company
Plans (provided, that, except as expressly provided by this Agreement, Parent
shall have no obligation under this Agreement to continue to provide benefits
thereunder in respect of periods following the Effective Time and nothing herein
shall prevent termination of such plans). Prior to the Effective Time, the
Company may take all action necessary to terminate the Company's Deferred
Compensation Plan, Grandfathered Benefit Restoration Plan and Benefit
Restoration Plan and to permit participants in such plans to receive lump sum
payments of their accrued benefits (as determined under the provisions of the
plan as in effect on the date hereof) under such plans at the Effective Time.
Prior to the Effective Time, the Company shall take all action necessary to
amend the Company's Retirement Plan to provide that (i) as of the Effective
Time, the accrued benefit of participants in the Retirement Plan is frozen as of
such date (including without limitation with respect to the crediting of
accruals following the Effective Time) and consistent with the current
provisions of the plan, a credit for 1999 accruals is made under the cash
balance portion of the plan through the Effective Time and (ii) following the
Effective Time, no individuals shall commence to participate in such plan;
provided, however, that participants as of the Effective Time shall, following
the Effective Time, continue (x) to vest in their accrued benefit, (y) to
receive annual interest credits under the cash balance portion of the plan at
the rate provided pursuant to the existing terms of the plan and (z) to have
compensation considered for purposes of calculation of "Final Average
Compensation" under the "Old Plan Benefit" portion of the plan (to the extent so
considered as of the date hereof). The Company shall, as required by law,
provide participants with notice of the amendments required by this Section
5.07(a). Nothing herein shall prevent Parent, in its sole discretion, from
terminating such plan in compliance with applicable law at any time after the
Effective Time.
(b) Parent acknowledges that for purposes of the Company Plans, the
consummation of the Merger will constitute a "Change in Control" of the Company,
and the Company's Annual Management Incentive Plan and Long-Term Incentive Plan
shall be terminated effective as of the Effective Time, and the Company shall
make payments to participants in accordance with the terms of such plans at the
Effective Time or as soon as reasonably practicable thereafter. The Company
shall take all steps necessary to ensure that no portion of any payments to be
received by any individual on or following the Effective Time (whether pursuant
to this Section 5.07(b), or otherwise) will be eligible for conversion under the
Company's Convertible Annual Incentive Award Plan.
(c) Parent currently intends, or intends to cause the Surviving Corporation
to, provide for a period of at least 1 year following the Effective Time,
employee benefits and incentive compensation to active employees of the Company
and its subsidiaries employed as of the Effective Time who are not covered by
any collective bargaining agreement ("Company Employees") that are no less
favorable in the aggregate than those provided to similarly situated employees
of Parent and its subsidiaries (excluding, however, severance payments for
employees covered by paragraph (d) hereof).
(d) Parent agrees to provide Company Employees who do not have employment
agreements and who would not otherwise receive severance pay upon termination of
employment greater than the severance pay provided under this Section 5.07(d)
with severance benefits if such employee's employment is involuntarily
terminated without cause (including termination of employment by reason of
"Constructive Discharge" which, for purposes of this Agreement, means a
reduction of base salary or wages or forced relocation of more than thirty
miles) during the period commencing upon the Effective Time and ending twelve
months after the Effective Time. The Company may, with the prior consent of
Parent (which consent shall not be unreasonably withheld), establish such
severance plan prior to the Effective Time. The plan to be established pursuant
to
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this Section 5.07(d) shall provide that an eligible Company Employee shall
receive severance pay equal to two weeks of weekly base salary or wages (as in
effect immediately prior to termination) for each whole year of service with the
Company or its subsidiaries, with a minimum amount of severance pay equal to one
week of weekly base salary or wages (so long as such Company Employee has at
least six months of service as of the date of termination) and a maximum amount
of severance pay equal to fifty-two weeks of weekly base salary or wages.
Severance pay to a Company Employee (i) shall be paid, at the election of
Company Employee, either in a lump sum or in installments over a number of weeks
equal to the number of weeks on which the amount of severance pay is based, (ii)
shall be net of withholding taxes, (iii) shall not be included as compensation
in any other employee benefit plan or program unless required by such plan or
program, (iv) shall be payable only upon execution by the Company Employee of a
general release in the favor of Parent, the Company, and their respective
subsidiaries in accordance with the Company's current practices and (v) subject
to clause (iv), shall be paid (or, in the case of installments, commence to be
paid) reasonably promptly after a qualifying termination of employment.
Installments of severance pay shall be paid in accordance with Parent's
customary payroll practices, in respect of similarly situated employees. Any
severance pay to which a Company Employee is entitled hereunder shall be reduced
by the severance pay such Company Employee receives from any other source.
(e) Parent and the Company each hereby acknowledge and agree that (i) at
the Effective Time, each of the executives listed in Section 5.07(e) of the
Company Disclosure Schedule will be deemed to have terminated his or her
employment with the Company under circumstances which entitle such executive to
the severance pay required by the contracts listed in Section 5.07(e) of the
Company Disclosure Schedule; (ii) each such executive will become entitled to
receive the severance pay (and other payments) required by such contracts upon a
termination of employment following a "change of control" at the Effective Time;
and (iii) any severance pay to which such executives are entitled shall be paid
at the Effective Time or as soon as practicable after the Effective Time. The
Company shall, prior to the Effective Time, use its reasonable efforts to take
all action necessary such that each executive to whom this Section 5.07(e)
applies shall be deemed to have consented to the payment of severance pay in
accordance with this Section 5.07(e), notwithstanding any provision to the
contrary in such contracts. The executives listed in Section 5.07(e) of the
Company Disclosure Schedule shall receive the coverage set forth in Section
5.07(f), subject to applicable law and to the extent permitted by applicable
insurance policies.
(f) Parent shall use reasonable efforts to cause any Company Employee (i)
whose employment is involuntarily terminated without cause (including by reason
of Constructive Discharge) during the twelve months following the Effective Time
and (ii) who is age fifty or older on or within thirty days following the date
of termination of employment to be provided with continued medical, dental and
vision coverage for such Company Employee and his or her dependents from the
date of such termination until age sixty-five at such Company Employee's
expense; provided, however, that the obligation of Parent set forth in this
Section 5.07(f)(x) shall cease if the Company Employee becomes eligible for
coverage under any other employee benefit plan providing substantially similar
benefits and (y) shall in any event be subject to applicable law. For Company
Employees with coverage pursuant to both this Section 5.07(f) and Section
5.07(g) coverage required by this Section 5.07(f) shall commence upon
termination of the coverage required by Section 5.07(g).
(g) Subject to applicable law and to the extent permitted by applicable
insurance policies, Parent shall cause any Company Employee (i) whose employment
is involuntarily terminated without cause (including by reason of Constructive
Discharge) during the twelve months following the Effective Time and (ii) who
elects to receive severance pay provided under Section 5.07(d) hereof in
installments, to be provided with medical, dental and vision coverage at the
same cost to such Company Employee as in effect for actively employed Company
Employees, and equal to the number of weeks based on the calculation of
severance pay in Section 5.07(d) hereof, up to a maximum of fifty-two weeks. To
the extent permitted by applicable existing insurance policies of Parent, the
COBRA continuation coverage period shall commence thereafter with coverage at
Company Employee's cost.
(h) Parent shall cause outplacement services to be provided to (i) Company
Employees based in the Houston corporate offices as of the Effective Time whose
employment is involuntarily terminated without
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cause (including by reason of Constructive Discharge) within twelve months
following the Effective Time and (ii) whenever Parent deems the provision of
such services to be desirable, to such other Company Employees whose employment
is terminated as part of a significant concentration of workplace reductions.
Such outplacement services shall be at the Company's expense but the scope and
extent of any such outplacement services shall be as determined by Parent in its
sole discretion (and such scope and extent may depend, in Parent's discretion,
on employment classification and other factors).
(i) For purposes of all employee benefit plans maintained by or contributed
to by the Parent or its subsidiaries in which Company Employees participate,
Parent shall cause each such plan to treat the prior service with the Company
and its subsidiaries of each Company Employee as service rendered to Parent or
its subsidiaries, as the case may be, for purposes of eligibility to
participate, vesting, benefit accrual and levels of benefits under such plans,
provided, that the foregoing shall not apply to the extent that its application
would result in duplication of accrual of benefits or to newly established plans
and programs for which prior service of Parent employees is not taken into
account.
(j) Parent shall (i) waive all limitations as to preexisting conditions,
exclusions and waiting periods with respect to participation and coverage
requirements applicable to the Company Employees under any welfare benefits
plans that such Company Employees may be eligible to participate in after the
Effective Time, whether pursuant to the provisions of this Section 5.07 or
otherwise, except to the extent that any Company Employees were subject to such
preexisting conditions, exclusions and waiting periods under the Company plans,
and (ii) provide each Company Employee with credit for any co-payments and
deductibles paid prior to the Effective Time (in the calendar year of the
Effective Time) in satisfying any applicable deductible or out-of-pocket
requirements under any welfare plans that such employees are eligible to
participate in after the Effective Time.
SECTION 5.08. Meeting of the Company's Stockholders.
The Company shall as promptly as practicable after the date of this
Agreement take all action necessary in accordance with Delaware Law and its
Restated Certificate of Incorporation and bylaws to convene a meeting of the
Company's stockholders (the "Company Stockholders' Meeting") to act on this
Agreement. The Board of Directors of the Company shall, subject to its fiduciary
duties, recommend that the Company's stockholders vote to approve the Merger and
adopt this Agreement, and use its reasonable best efforts to solicit from
stockholders of the Company proxies in favor of the Merger and to take all other
action in its judgment necessary and appropriate to secure the vote of
stockholders required by Delaware Law to effect the Merger.
Between the date hereof and the Effective Time, neither Parent nor any of
its subsidiaries shall acquire, or agree to acquire, whether in the open market
or otherwise, any rights in any equity securities of the Company other than
pursuant to the Merger.
SECTION 5.09. Proxy Statement.
As promptly as practicable after execution of this Agreement, the Company
shall prepare the Proxy Statement, file it with the SEC under the Exchange Act,
and use all reasonable efforts to have the Proxy Statement cleared by the SEC.
Parent, Merger Subsidiary and the Company shall cooperate with each other in the
preparation of the Proxy Statement, and the Company shall notify Parent of the
receipt of any comments of the SEC with respect to the Proxy Statement and of
any requests by the SEC for any amendment or supplement thereto or for
additional information and shall provide to Parent promptly copies of all
correspondence between the Company or any representative of the Company and the
SEC. The Company shall give Parent and its counsel the opportunity to review the
Proxy Statement prior to its being filed with the SEC and shall give Parent and
its counsel the opportunity to review all amendments and supplements to the
Proxy Statement and all responses to requests for additional information and
replies to comments prior to their being filed with, or sent to, the SEC. Each
of the Company, Parent and Merger Subsidiary agrees to use its reasonable best
efforts, after consultation with the other parties hereto to respond promptly to
all such comments of and requests by the SEC. As promptly as practicable after
the Proxy Statement has been cleared by the SEC, the Company shall mail the
Proxy Statement to the stockholders of the Company. Prior to the
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date of approval of the Merger by the Company's stockholders, each of the
Company, Parent and Merger Subsidiary shall correct promptly any information
provided by it to be used specifically in the Proxy Statement that shall have
become false or misleading in any material respect and the Company shall take
all steps necessary to file with the SEC and cleared by the SEC any amendment or
supplement to the Proxy Statement so as to correct the same and to cause the
Proxy Statement as so corrected to be disseminated to the stockholders of the
Company, in each case to the extent required by applicable law.
SECTION 5.10. Public Announcements.
Parent and the Company will consult with each other before issuing any
press release or making any public statement with respect to this Agreement and
the transactions contemplated hereby and, except as may be required by
applicable law or any listing agreement with the NYSE, will not issue any such
press release or make any such public statement prior to such consultation.
SECTION 5.11. Expenses and Fees.
(a) All costs and expenses incurred in connection with this Agreement and
the transactions contemplated hereby shall be paid by the party incurring such
expenses, except that those expenses incurred in connection with printing and
filing the Proxy Statement shall be shared equally by Parent and the Company.
(b) The Company agrees to pay to Parent a fee equal to $225 million if:
(i) the Company terminates this Agreement pursuant to clause (v) or
(vi) of Section 7.01;
(ii) Parent terminates this Agreement pursuant to clause (vii) of
Section 7.01, which fee shall be payable within two business days of such
termination;
(iii) this Agreement is terminated for any reason at a time at which
Parent was not in material breach of its covenants contained in this
Agreement and was entitled to terminate this Agreement pursuant to clause
(viii) of Section 7.01, and (i) prior to the time of the Company
Stockholders' Meeting a proposal by a third party relating to an
Acquisition Transaction had been made, and (ii) on or prior to the nine
month anniversary of the termination of this Agreement (x) the Company or
any of its subsidiaries or affiliates enters into an agreement or letter of
intent (or resolves or announces an intention to do) with respect to an
Acquisition Transaction involving a person, entity or group if such person,
entity, group (or any member of such group, or any affiliate of any of the
foregoing) made a proposal with respect to an Acquisition Transaction on or
after the date hereof and prior to the Company Stockholders' Meeting and
such Acquisition Transaction is consummated or (y) an Acquisition
Transaction shall otherwise occur with any person who shall have made a
proposal with respect to an Acquisition Transaction no later than 90 days
after termination of this Agreement. Such fee shall be payable upon the
first occurrence of any such event.
(c) Parent shall pay to the Company a fee equal to $225 million if this
Agreement is terminated pursuant to clause (ii) of Section 7.01 and at such time
(i) Parent or its subsidiaries have not received funds pursuant to the Financing
sufficient to consummate the Merger and related transactions, (ii) all
conditions to Parent's obligation to consummate the Merger shall have been
satisfied, other than conditions relating to the HSR Act or any law, regulation,
order, judgment, injunction or decree relating to antitrust or competition
matters and except insofar as any condition requires the delivery of officers
certificates, (iii) Parent is not in breach of any of its representations,
warranties, covenants or agreements set forth in this Agreement except for
breaches which did not result in a failure to satisfy the conditions to Parent
obtaining funds pursuant to the definitive agreement relating to the debt
financing for the Merger (the "Definitive Debt Agreement") or to Parent's
obligations to consummate the Merger, (iv) the Company is not in breach of any
of its representations, warranties, covenants or agreements set forth in this
Agreement except for breaches which did not result in a failure to satisfy the
conditions to Parent obtaining funds pursuant to the Definitive Debt Agreement
and (v) at the time the Definitive Debt Agreement was executed, Parent was not
in breach of any of its representations and warranties in such agreement with
respect to Parent and its subsidiaries and, to the best of Parent's knowledge at
such time, Parent was not in breach of Parent's representations and warranties
in such agreement with respect to the Company and its subsidiaries, in either
case, except for breaches which
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would not result in a failure to satisfy the conditions to Parent obtaining
funds pursuant to the Definitive Debt Agreement. Parent shall have no liability
for the failure of Parent to obtain funds pursuant to the Definitive Debt
Agreement and consummate the Merger as a result of a breach by the Company of
any of its covenants, agreements, representations or warranties set forth in
this Agreement. If all of the requirements of the first sentence of this
paragraph (c) for the payment of a fee are satisfied other than that set forth
in clause (iii) or clause (v) of such sentence, then Parent shall be obligated
to pay such $225 million fee (which amount shall be credited against any amount
for which Parent may be held liable in connection with the failure to consummate
the Merger).
(d) Parent agrees to pay to the Company a fee equal to $225 million if this
Agreement is terminated pursuant to clause (ii) of Section 7.01 or clause (iii)
of Section 7.01 (only to the extent such termination under clause (iii) relates
to antitrust or competition matters) and at such time (i) the waiting period
under the HSR Act shall not have expired or been terminated or any injunction,
order or decree relating to antitrust or competition matters shall prohibit or
restrain consummation of the Merger, and (ii) all of the other conditions to
Parent's obligation to consummate the Merger have been satisfied or would be
satisfied absent the occurrence or failure to occur of the events described in
sub-clause (i) of this clause (d), except conditions insofar as they relate to
the delivery of officers certificates and conditions which are not (or would not
be) so satisfied as a result of Parent's breach of this Agreement.
(e) Only one fee aggregating $225 million shall be payable pursuant to
paragraphs (c) and (d) even if the circumstances giving rise to the obligation
to pay a fee exists under both such paragraphs. Such fee shall be payable at the
time Parent so terminates this Agreement or within two business days after the
Company so terminates this Agreement.
SECTION 5.12. Agreement to Cooperate.
(a) Subject to the terms and conditions of this Agreement, including
Section 5.03, each of the parties hereto shall use all reasonable best efforts
to take, or cause to be taken, all action and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement,
including using its reasonable best efforts to obtain all necessary or
appropriate waivers, consents or approvals of third parties required in order to
preserve material contractual relationships of Parent and the Company and their
respective subsidiaries, all necessary or appropriate waivers, consents and
approvals and SEC "no-action" letters to effect all necessary registrations,
filings and submissions and to lift any injunction or other legal bar to the
Merger (and, in such case, to proceed with the Merger as expeditiously as
possible). In addition, subject to the terms and conditions herein provided and
subject to the fiduciary duties of the respective boards of directors of the
Company and Parent, none of the parties hereto shall knowingly take or cause to
be taken any action (including, but not limited to, in the case of Parent, (x)
the incurrence of material debt financing, other than the financing in
connection with the Merger and related transactions and other than debt
financing incurred in the ordinary course of business, and (y) the acquisition
of businesses or assets) which would reasonably be expected to materially delay
or prevent consummation of the Merger. Parent shall use its reasonable best
efforts to cause the satisfaction of the conditions to the receipt of funds
pursuant to the Financing Commitments.
(b) Without limitation of the foregoing, each of Parent and the Company
undertakes and agrees to file as soon as practicable, and in any event prior to
15 days after the date hereof, a Notification and Report Form under the HSR Act
with the United States Federal Trade Commission (the "FTC") and the Antitrust
Division of the United States Department of Justice (the "Antitrust Division").
Each of Parent and the Company shall (i) respond as promptly as practicable to
any inquiries received from the FTC or the Antitrust Division for additional
information or documentation and to all inquiries and requests received from any
State Attorney General or other governmental authority in connection with
antitrust matters, and (ii) not extend any waiting period under the HSR Act or
enter into any agreement with the FTC or the Antitrust Division not to
consummate the transactions contemplated by this Agreement, except with the
prior written consent of the other parties hereto. Parent shall offer to take
(and if such offer is accepted, commit to take) all steps which it is capable of
taking to avoid or eliminate impediments under any antitrust, competition, or
trade regulation law that may be asserted by the FTC, the Antitrust Division,
any State Attorney General or any other
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governmental entity with respect to the Merger so as to enable the Effective
Time to occur prior to September 15, 1999 (the "Outside Date") and shall defend
through litigation on the merits any claim asserted in any court by any party,
including appeals. Without limiting the foregoing, Parent shall propose,
negotiate, offer to commit and effect (and if such offer is accepted, commit to
and effect), by consent decree, hold separate order, or otherwise, the sale,
divestiture or disposition of such assets or businesses of Parent or, effective
as of the Effective Time, the Surviving Corporation, or their respective
subsidiaries or otherwise offer to take or offer to commit to take any action
which it is capable of taking and if the offer is accepted, take or commit to
take such action that limits its freedom of action with respect to, or its
ability to retain, any of the businesses, services or assets of Parent, the
Surviving Corporation or their respective subsidiaries, in order to avoid the
entry of, or to effect the dissolution of, any injunction, temporary restraining
order or other order in any suit or proceeding, which would otherwise have the
effect of preventing or delaying the Effective Time beyond the Outside Date. At
the request of Parent, the Company shall agree to divest, hold separate or
otherwise take or commit to take any action that limits its freedom of action
with respect to, or its ability to retain, any of the businesses, services, or
assets of the Company or any of its subsidiaries, provided that any such action
may be conditioned upon the consummation of the Merger and the transactions
contemplated hereby. Each party shall (i) promptly notify the other party of any
written communication to that party from the FTC, the Antitrust Division, any
State Attorney General or any other governmental entity and, subject to
applicable law, permit the other party to review in advance any proposed written
communication to any of the foregoing; (ii) not agree to participate in any
substantive meeting or discussion with any governmental authority in respect of
any filings, investigation or inquiry concerning this Agreement or the Merger
unless it consults with the other party in advance and, to the extent permitted
by such governmental authority, gives the other party the opportunity to attend
and participate thereat; and (iii) furnish the other party with copies of all
correspondence, filings, and communications (and memoranda setting forth the
substance thereof) between them and their affiliates and their respective
representatives on the one hand, and any government or regulatory authority or
members or their respective staffs on the other hand, with respect to this
Agreement and the Merger. If Parent shall have complied with all of its
obligations under this Section 5.12, but there is no action that Parent or the
Company can undertake or offer to undertake that would eliminate the impediment
asserted by the FTC, Antitrust Division, or State Attorney General or other
order in any suit or proceeding, in order for the Effective Time to occur prior
to the applicable date specified in Section 7.01(ii), assuming all conditions
other than those relating to such impediment or order have been satisfied or
waived, then Parent shall not be deemed to have breached its obligations under
this Section 5.12.
(c) In the event any litigation is commenced by any person or entity
relating to the transactions contemplated by this Agreement, including any
Acquisition Transaction, Parent shall have the right, at its own expense, to
participate therein, and the Company will not settle any such litigation without
the consent of Parent, which consent will not be unreasonably withheld.
(d) In connection with the consummation of the financing contemplated by
the Financing Commitments, at the reasonable request of Parent, the Company (i)
agrees to enter into such agreements, to use reasonable best efforts to deliver
such officers certificates and opinions as are customary in financing of this
type and as are, in the good faith determination of the persons executing such
officers certificates or opinions, accurate, and agrees to pledge, grant
security interests in, and otherwise grant liens on, its assets pursuant to such
agreements as may be reasonably requested, provided that no obligation of the
Company under any such agreement, pledge, or grant shall be effective until the
Effective Time and (ii) will provide to the lenders specified in the Financing
Commitments financial and other information in the Company's possession with
respect to the Merger, make the Company's senior officers available to assist
the lenders specified in the Financing Commitments, and otherwise cooperate in
connection with the consummation of the Financing, it being understood and
agreed that if the Company fails to deliver such accurate officers certificates
and opinions described in sub-clause (i) of this clause (d) and, as a result
thereof, the conditions set forth in Sections 6.01(d) or 6.01(e) are not
satisfied, Parent shall have no liability under this Agreement (including
Section 5.11) for, or for the failure to satisfy, such conditions.
(e) The Company shall, jointly with the banks providing the Financing,
retain a nationally recognized independent evaluation firm reasonably
satisfactory to the Company and the banks providing the debt
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financing to render a solvency letter (the "Solvency Letter") immediately prior
to the Effective Time to the banks and the Company with respect to the solvency
of Parent and its subsidiaries after giving effect to the Merger and the
financing contemplated by the Financing Commitments. Parent and the Company
shall cooperate with any reasonable requests for information by such firm.
(f) Parent shall provide the Company any certificates from Parent relating
to the solvency and adequate capitalization of Parent and Parent's ability to
pay its debts that are given to any banks, other lenders in connection with the
Financing or the independent evaluation firm as may be reasonably requested by
the Company. Any such certificate, opinion or other statement will be provided
to the Company at the time it is provided to such banks or other lenders.
SECTION 5.13. Directors' and Officers' Indemnification.
(a) The indemnification provisions of the certificate of incorporation and
bylaws of the Company as in effect at the Effective Time shall not be amended,
repealed or otherwise modified for a period of six years from the Effective Time
in any manner that would adversely affect the rights thereunder of individuals
who at the Effective Time were directors, officers, employees or agents of the
Company. Parent shall assume, be jointly and severally liable for, and honor,
guaranty and stand surety for, and shall cause the Surviving Corporation to
honor, in accordance with their respective terms each of the covenants contained
in this Section 5.13 without limit as to time.
(b) Without limiting Section 5.13(a), after the Effective Time, each of
Parent and the Surviving Corporation shall, to the fullest extent permitted
under applicable law, indemnify and hold harmless, each present and former
director, officer, employee and agent of the Company or any of its subsidiaries
(each, together with such person's heirs, executors or administrators, an
"Indemnified Party" and collectively, the "Indemnified Parties") against any
costs or expenses (including attorneys' fees), judgments, fines, losses, claims,
damages, liabilities and amounts paid in settlement in connection with any
actual or threatened claim, action, suit, proceeding or investigation, whether
civil, criminal, administrative or investigative, arising out of, relating to or
in connection with any action or omission occurring or alleged to occur prior to
the Effective Time (including, without limitation, acts or omissions in
connection with such persons serving as an officer, director or other fiduciary
in any entity if such service was at the request or for the benefit of the
Company) and the Merger and the other transactions contemplated by this
Agreement or arising out of or pertaining to the transactions contemplated by
this Agreement. In the event of any such actual or threatened claim, action,
suit, proceeding or investigation (whether arising before or after the Effective
Time), (i) the Company or Parent and the Surviving Corporation, as the case may
be, shall pay the reasonable fees and expenses of counsel selected by the
Indemnified Parties, which counsel shall be reasonably satisfactory to the
Parent and the Surviving Corporation, promptly after statements therefor are
received and shall pay all other reasonable expenses in advance of the final
disposition of such action, (ii) the Parent and the Surviving Corporation will
cooperate and use all reasonable efforts to assist in the vigorous defense of
any such matter, and (iii) to the extent any determination is required to be
made with respect to whether an Indemnified Party's conduct complies with the
standards set forth under the Delaware Law and the Parent's or the Surviving
Corporation's respective certificate of incorporation or bylaws, such
determination shall be made by independent legal counsel acceptable to the
Parent or the Surviving Corporation, as the case may be, and the Indemnified
Party; provided, however, that neither Parent nor the Surviving Corporation
shall be liable for any settlement effected without its written consent (which
consent shall not be unreasonably withheld) and, provided further, that if
Parent or the Surviving Corporation advances or pays any amount to any person
under this paragraph (b) and if it shall thereafter be finally determined by a
court of competent jurisdiction that such person was not entitled to be
indemnified hereunder for all or any portion of such amount, to the extent
required by law, such person shall repay such amount or such portion thereof, as
the case may be, to Parent or the Surviving Corporation, as the case may be. The
Indemnified Parties as a group may not retain more than one law firm to
represent them with respect to each matter unless there is, under applicable
standards of professional conduct, a conflict on any significant issue between
the positions of any two or more Indemnified Parties.
(c) In the event the Surviving Corporation or Parent or any of their
successors or assigns (i) consolidates with or merges into any other person and
shall not be the continuing or surviving corporation or entity of such
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consolidation or merger, or (ii) transfers all or substantially all of its
properties and assets to any person, then and in each such case, proper
provisions shall be made so that the successors and assigns of the Surviving
Corporation or Parent shall assume the obligations of the Surviving Corporation
or the Parent, as the case may be, set forth in this Section 5.13.
(d) For a period of six years after the Effective Time, Parent shall cause
to be maintained in effect the current policies of directors' and officers'
liability insurance maintained by the Company and its subsidiaries (provided
that Parent may substitute therefor policies of at least the same coverage and
amounts containing terms and conditions that are no less advantageous to the
Indemnified Parties, and which coverages and amounts shall be no less than the
coverages and amounts provided at that time for Parent's directors and officers)
with respect to matters arising on or before the Effective Time.
(e) Parent shall pay all reasonable expenses, including reasonable
attorneys' fees, that may be incurred by any Indemnified Party in enforcing the
indemnity and other obligations provided in this Section 5.13.
(f) The rights of each Indemnified Party hereunder shall be in addition to,
and not in limitation of, any other rights such Indemnified Party may have under
the charter or bylaws of the Company, any indemnification agreement, under the
Delaware Law or otherwise. The provisions of this Section 5.13 shall survive the
consummation of the Merger and expressly are intended to benefit each of the
Indemnified Parties.
ARTICLE VI
CONDITIONS TO THE MERGER
SECTION 6.01. Conditions to the Obligations of Each Party.
The obligations of the Company, Parent and Merger Subsidiary to consummate
the Merger are subject to the satisfaction of the following conditions:
(a) this Agreement and the Merger shall have been adopted by the
requisite vote of the stockholders of the Company in accordance with
Delaware Law (the "Company Stockholders' Approval");
(b) no provision of any applicable domestic (whether federal, state or
local) or foreign law or regulation and no judgment, injunction, order or
decree of a court or governmental agency or authority of competent
jurisdiction shall be in effect which has the effect of making the Merger
or the Financing illegal or shall otherwise restrain or prohibit the
consummation of the Merger or the Financing (each party agreeing to use its
best efforts, including appeals to higher courts, to have any judgment,
injunction, order or decree lifted), except for any law or regulation the
violation of which would not, singly or in the aggregate, reasonably be
expected to (i) have a Parent Material Adverse Effect (after giving effect
to the Merger), (ii) result in a criminal violation (other than a
misdemeanor the only penalty for which is a monetary fine), or (iii) result
in Parent or its subsidiaries failing to meet the standards for licensing,
suitability or character set by any foreign, federal, state or local
authority relating to the conduct of Parent's or the Company's business
which (after taking into account the anticipated impact of such failure to
so meet such standards on other authorities) could reasonably be expected
to have a Parent Material Adverse Effect (after giving effect to the
Merger); and
(c) the waiting period applicable to consummation of the Merger and
the Financing under the HSR Act shall have expired or been terminated.
SECTION 6.02. Conditions to Obligation of the Company to Effect the Merger.
Unless waived by the Company, the obligation of the Company to effect the
Merger shall be subject to the fulfillment at or prior to the Effective Time of
the following additional conditions:
(a) Parent and Merger Subsidiary shall have performed their agreements
contained in this Agreement required to be performed on or prior to the
Effective Time and the representations and warranties of Parent and Merger
Subsidiary contained in this Agreement shall be true and correct on and
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as of the Effective Time as if made at and as of such date (except to the
extent that such representations and warranties speak as of an earlier
date), except for such failures to perform or to be true and correct that
would not reasonably be expected to have a Parent Material Adverse Effect,
and the Company shall have received a certificate of the Chief Executive
Officer, the President or a Vice President of Parent and of the Chief
Executive Officer, the President or a Vice President of Merger Subsidiary
to that effect.
(b) Parent shall have delivered a certificate to the Company, in form
and substance reasonably satisfactory to the Company, to the effect that,
at the Effective Time, after giving effect to the Merger and the
transactions contemplated hereby, including without limitation, the
Financing, Parent and its subsidiaries, taken as a whole, will not (i) be
insolvent (either because its financial condition is such that the sum of
its debts is greater than the fair value of its assets or because the
present fair saleable value of its assets will be less than the amount
required to pay its probable liability on its debts as they become absolute
and matured), (ii) have unreasonably small capital with which to engage in
its business or (iii) have incurred or plan to incur debts beyond its
ability to pay as they become absolute and matured.
(c) The Company shall have received the Solvency Letter in form and
substance reasonably satisfactory to the Company.
SECTION 6.03. Conditions to Obligations of Parent and Subsidiary to Effect
the Merger.
Unless waived by Parent and Merger Subsidiary, the obligations of Parent
and Merger Subsidiary to effect the Merger shall be subject to the fulfillment
at or prior to the Effective Time of the additional following conditions:
(a) the Company shall have performed its agreements contained in this
Agreement required to be performed on or prior to the Effective Time and
the representations and warranties of the Company contained in this
Agreement shall be true and correct on and as of the Effective Time as if
made at and as of such date (except to the extent that such representations
and warranties speak as of an earlier date), except for such failures to
perform and to be true and correct that would not reasonably be expected to
have a Company Material Adverse Effect, and Parent shall have received a
Certificate of the Chief Executive Officer, the President or a Vice
President of the Company to that effect;
(b) all Parent Statutory Approvals and Company Statutory Approvals
required to be obtained in order to permit consummation of the Merger under
applicable law shall have been obtained, except for any such Parent
Statutory Approvals or Company Statutory Approvals the failure of which to
obtain would not, singly or in the aggregate, reasonably be expected to (i)
have a Parent Material Adverse Effect (after giving effect to the Merger),
(ii) result in a criminal violation (other than a misdemeanor the only
penalty for which is a monetary fine), or (iii) result in Parent or its
subsidiaries failing to meet the standards for licensing, suitability or
character set by any foreign, federal, state or local authority relating to
the conduct of Parent's or the Company's business which (after taking into
account the anticipated impact of such failure to so meet such standards on
other authorities) could reasonably be expected to have a Parent Material
Adverse Effect (after giving effect to the Merger); and
(c) all consents, approvals or authorizations required to be obtained
pursuant to any Contract or permit to which the Company or its subsidiaries
are a party or of which the Company or its subsidiaries are a beneficiary
in order to avoid a Parent Material Adverse Effect (after giving effect to
the Merger) shall have been obtained.
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ARTICLE VII
TERMINATION
SECTION 7.01. Termination.
This Agreement may be terminated and the Merger may be abandoned at any
time prior to the Effective Time (notwithstanding any approval of this Agreement
by the stockholders of the Company):
(i) by mutual written consent of the Company and Parent;
(ii) by either the Company or Parent, if the Merger has not been
consummated by September 15, 1999, provided that such date shall
automatically be extended until December 31, 1999 if, on September 15,
1999, the waiting period under the HSR Act has not expired or been
terminated or any injunction, order or decree shall prohibit or restrain
consummation of the Merger and provided further that the right to terminate
this Agreement under this clause (ii) shall not be available to any party
whose failure to fulfill any of its obligations under this Agreement has
been the cause of or resulted in the failure to consummate the Merger by
such date;
(iii) by either the Company or Parent if any judgment, injunction,
order or decree of a court or governmental agency or authority of competent
jurisdiction shall restrain or prohibit the consummation of the Merger, and
such judgment, injunction, order or decree shall become final and
nonappealable and was not entered at the request of the terminating party;
(iv) by either the Company or Parent, if (x) there has been a breach
by the other party of any representation or warranty contained in this
Agreement which would reasonably be expected to have a Company Material
Adverse Effect or a Parent Material Adverse Effect, as the case may be, or
prevent or delay the consummation of the Merger beyond the date specified
in Section 7.01(ii), and which has not been cured in all material respects
within 30 days after written notice of such breach by the terminating
party, or (y) there has been a breach of any of the covenants or agreements
set forth in this Agreement on the part of the other party, which would
reasonably be expected to have a Parent Material Adverse Effect or a
Company Material Adverse Effect, as the case may be, or prevent or delay
the consummation of the Merger beyond the date specified in Section
7.01(ii), and which breach is not curable or, if curable, is not cured
within 30 days after written notice of such breach is given by the
terminating party to the other party;
(v) by the Company if, prior to receipt of the Company Stockholders'
Approval, the Company receives a Superior Proposal, resolves to accept such
Superior Proposal, and the Company shall have given Parent two days' prior
written notice of its intention to terminate pursuant to this provision;
provided, however, that such termination shall not be effective until such
time as the payment required by Section 5.11(b) shall have been received by
Parent;
(vi) by the Company if, prior to receipt of the Company Stockholders'
Approval, (A) a tender or exchange offer is commenced by a Potential
Acquirer (excluding any affiliate of the Company or any group of which any
affiliate of the Company is a member) for all outstanding shares of Company
Common Stock, (B) the Company's Board of Directors determines, in good
faith and after consultation with an independent financial advisor, that
such offer constitutes a Superior Proposal and resolves to accept such
Superior Proposal or recommend to the stockholders that they tender their
shares in such tender or exchange offer, and (C) the Company shall have
given Parent two days' prior written notice of its intention to terminate
pursuant to this provision; provided, however, that such termination shall
not be effective until such time as the payment required by Section 5.11(b)
shall have been received by Parent;
(vii) by the Parent, if the Board of Directors of the Company shall
have failed to recommend, or shall have withdrawn, modified or amended in
any material respects its approval or recommendation of the Merger or shall
have resolved to do any of the foregoing, or shall have recommended another
Acquisition Proposal or if the Board of Directors of the Company shall have
resolved to accept a Superior Proposal or shall have recommended to the
stockholders of the Company that they tender their shares in
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a tender or an exchange offer commenced by a third party (excluding any
affiliate of Parent or any group of which any affiliate of Parent is a
member); or
(viii) by Parent or the Company if the stockholders of the Company
fail to approve the Merger at a duly held meeting of stockholders called
for such purpose or any adjournment or postponement thereof.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. Effect of Termination.
In the event of termination of this Agreement by either Parent or the
Company pursuant to the provisions of Section 7.01, this Agreement shall
forthwith become void and there shall be no liability or further obligation on
the part of the Company, Parent, Merger Subsidiary or their respective officers
or directors (except as set forth in this Section 8.01, in the second sentence
of Section 5.04 and in Sections 5.11 and 8.05 all of which shall survive the
termination). Nothing in this Section 8.01 shall relieve any party from
liability for any breach of any representation, warranty, covenant or agreement
of such party contained in this Agreement except that payment of the fees
contemplated by Section 5.11(c) (if, at the time of termination of this
Agreement under circumstances giving rise to the obligation to pay a fee
pursuant to such Section 5.11(c), the requirements set forth in clauses (iii)
and (v) of the first sentence of Section 5.11(c) are satisfied) or Section
5.11(d) (unless such failure resulted from Parent's breach of Section 5.12)
shall relieve Parent and Merger Subsidiary from all liability arising out of
failure of the Merger to occur on or prior to the Outside Date (or on or prior
to the last day of any extension thereof).
SECTION 8.02. Non-Survival of Representations and Warranties. No
representations, warranties or agreements in this Agreement or in any instrument
delivered pursuant to this Agreement shall survive the Merger, and after
effectiveness of the Merger neither the Company, Parent, Merger Subsidiary nor
their respective officers or directors shall have any further obligation with
respect thereto except for the agreements contained in Articles I, II and VIII
and Sections 5.07 and 5.13.
SECTION 8.03. Notices.
All notices and other communications hereunder shall be in writing and
shall be deemed given if delivered personally, mailed by registered or certified
mail (return receipt requested) or sent via facsimile to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
If to Parent or Merger Subsidiary, to:
Allied Waste Industries, Inc.
15880 Greenway-Hayden Loop
Suite 100, Scottsdale, AZ 85260
Attention: Steven Helm, Esq.,
Vice President, Legal
Facsimile: (602) 627-2703
with copies to:
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, New York 10004
Attention: Peter Golden, Esq.
Facsimile: (212) 859-4000
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If to the Company, to:
Browning-Ferris Industries, Inc.
757 N. Eldridge
Houston, TX 77075
Attention: Corporate Secretary
Facsimile: (281) 870-7825
with a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019-6150
Attention: Richard D. Katcher, Esq.
Eric S. Robinson, Esq.
Facsimile: (212) 403-2000
SECTION 8.04. Interpretation.
The headings contained in this Agreement are for reference purposes only
and shall not affect in any way the meaning or interpretation of this Agreement.
In this Agreement, unless a contrary intention appears, (i) the words "herein,"
"hereof" and "hereunder" and other words of similar import refer to this
Agreement as a whole and not to any particular Article, Section or other
subdivision, (ii) "knowledge" shall mean actual knowledge of the executive
officers of the Company or Parent, as the case may be, and (iii) reference to
any Article or Section means such Article or Section hereof. No provision of
this Agreement shall be interpreted or construed against any party hereto solely
because such party or its legal representative drafted such provision. For
purposes of determining whether any fact or circumstance involves a material
adverse effect on the results of operations of a party, any special transaction
charges incurred by such party as a result of the consummation of transactions
contemplated by this Agreement shall not be considered.
SECTION 8.05. Miscellaneous.
This Agreement (including the documents and instruments referred to
herein): shall not be assigned by operation of law or otherwise except that
Merger Subsidiary may assign its obligations under this Agreement to any other
wholly-owned subsidiary of Parent subject to the terms of this Agreement. THIS
AGREEMENT SHALL BE GOVERNED IN ALL RESPECTS, INCLUDING VALIDITY, INTERPRETATION
AND EFFECT, BY THE LAWS OF THE STATE OF DELAWARE APPLICABLE TO CONTRACTS
EXECUTED AND TO BE PERFORMED WHOLLY WITHIN SUCH STATE. THE EXCLUSIVE VENUE FOR
THE ADJUDICATION OF ANY DISPUTE OR PROCEEDING ARISING OUT OF THIS AGREEMENT OR
THE PERFORMANCE THEREOF SHALL BE THE COURTS LOCATED IN THE STATE OF DELAWARE AND
THE PARTIES HERETO AND THEIR AFFILIATES EACH CONSENT TO AND HEREBY SUBMIT TO THE
JURISDICTION OF ANY COURT LOCATED IN THE STATE OF DELAWARE.
SECTION 8.06. Counterparts.
This Agreement may be executed in two or more counterparts, each of which
shall be deemed to be an original, but all of which shall constitute one and the
same agreement.
SECTION 8.07. Amendments; No Waivers.
(a) Any provision of this Agreement may be amended or waived prior to the
Effective Time if, and only if, such amendment or waiver is in writing and
signed, in the case of an amendment, by the Company, Parent and Merger
Subsidiary or, in the case of a waiver, by the party against whom the waiver is
to be effective; provided that any waiver or amendment shall be effective
against a party only if the board of directors of such party approves such
waiver or amendment.
(b) No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or
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the exercise of any other right, power or privilege. The rights and remedies
herein provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
SECTION 8.08. Entire Agreement.
This Agreement and the Confidentiality Agreement constitute the entire
agreement between the parties with respect to the subject matter hereof and
supersede all prior agreements, understandings and negotiations, both written
and oral, between the parties with respect to the subject matter of this
Agreement. No representation, inducement, promise, understanding, condition or
warranty not set forth herein has been made or relied upon by either party
hereto. Neither this Agreement nor any provision hereof is intended to confer
upon any person other than the parties hereto any rights or remedies hereunder
except for the provisions of Section 5.13, which are intended for the benefit of
the Company's former and present officers, directors, employees and agents, the
provisions of Articles I and II, which are intended for the benefit of the
Company's stockholders, including holders of Options, the provisions of Section
5.07, which are intended for the benefit of the parties to the agreements or
participants in the plans referred to therein.
SECTION 8.09. Severability.
If any term or other provision of this Agreement is invalid, illegal or
unenforceable, all other provisions of this Agreement shall remain in full force
and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner materially adverse to any
party.
SECTION 8.10. Specific Performance.
The parties hereto agree that irreparable damage would occur in the event
any of the provisions of this Agreement were not to be performed in accordance
with the terms hereof and that the parties shall be entitled to specific
performance of the terms hereof in addition to any other remedies at law or in
equity.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
BROWNING-FERRIS INDUSTRIES, INC.
By: /s/ BRUCE E. RANCK
------------------------------------
Title: President and Chief Executive
Officer
ALLIED WASTE INDUSTRIES, INC.
By: /s/ THOMAS H. VAN WEELDEN
------------------------------------
Title: Chairman and Chief Executive
Officer
AWIN I ACQUISITION CORPORATION
By: /s/ LARRY D. HENK
------------------------------------
Title: President
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[GOLDMAN SACHS LETTERHEAD] APPENDIX B
PERSONAL AND CONFIDENTIAL
- ----------------------------------------
March 7, 1999
Board of Directors
Browning-Ferris Industries, Inc.
757 North Eldridge
Houston, TX 77253
Ladies and Gentlemen:
You have requested our opinion as to the fairness from a financial point of
view to the holders of the outstanding shares of Common Stock, par value
$.16 2/3 per share (the "Shares"), of Browning-Ferris Industries, Inc. (the
"Company") of the $45.00 per Share in cash to be received by such holders
pursuant to the Agreement and Plan of Merger, dated as of March 7, 1999, among
Allied Waste Industries, Inc. ("Allied"), AWIN I Acquisition Corporation, a
wholly-owned subsidiary of Allied, and the Company (the "Agreement").
Goldman, Sachs & Co., as part of its investment banking business, is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements and valuations for estate, corporate and other purposes. We are
familiar with the Company, having provided certain investment banking services
to the Company from time to time, including having acted as managing underwriter
of a public offering in January 1996 of $200,000,000 aggregate principal amount
of 6.10% Senior Notes due January 2003 and $200,000,000 aggregate principal
amount of 6.375% Senior Notes due January 2008, and having acted as its
financial advisor in connection with, and having participated in certain of the
negotiations leading to, the Agreement. We have also provided certain investment
banking services to Allied from time to time, including having acted as managing
underwriter of a public offering in September 1997 of 16,200,000 shares of
Allied common stock ("Allied Shares"), and having acted as managing underwriter
of a public offering in December 1998 of $225,000,000 aggregate principal amount
of 7.375% Notes due January 2004, $600,000,000 aggregate principal amount of
7.625% Notes due January 2006 and $875,000,000 aggregate principal amount of
7.875% Notes due January 2009. In addition, Goldman, Sachs & Co. may provide
investment banking services to Allied and its subsidiaries in the future.
Goldman, Sachs & Co. provides a full range of financial advisory and securities
services and, in the course of its normal trading activities, may from time to
time effect transactions and hold securities, including derivative securities,
of the Company or Allied for its own account and for the accounts of customers.
As of the date hereof, Goldman, Sachs & Co. held long positions of 11,000 Allied
Shares and options to purchase 844,000 Allied Shares and a short position of
options to sell 614,000 Allied Shares against which Goldman, Sachs & Co. was
short 455,760
[GOLDMAN SACHS LETTERHEAD ADDRESSES]
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Browning-Ferris Industries, Inc.
March 7, 1999
Page Two
Allied Shares and $500,000 principal amount of 7.875% Notes due January 2009. As
of the date hereof, Goldman, Sachs & Co. also held a long position of 28,981
Shares against which Goldman, Sachs & Co. was short 32,477 Shares.
In connection with this opinion, we have reviewed, among other things, the
Agreement; Annual Reports to Stockholders and Annual Reports on Form 10-K of the
Company for the five fiscal years ended September 30, 1998; certain interim
reports to stockholders and Quarterly Reports on Form 10-Q of the Company,
certain other communications from the Company to its stockholders; and certain
internal financial analyses and forecasts for the Company prepared by its
management. We also have held discussions with members of the senior management
of the Company regarding its past and current business operations, financial
condition and future prospects. In addition, we have reviewed the reported price
and trading activity for the Shares, compared certain financial and stock market
information for the Company with similar information for certain other companies
the securities of which are publicly traded, reviewed the financial terms of
certain recent business combinations in the waste services industry specifically
and in other industries generally and performed such other studies and analyses
as we considered appropriate.
We have relied upon the accuracy and completeness of all of the financial
and other information reviewed by us and have assumed such accuracy and
completeness for purposes of rendering this opinion. In addition, we have not
made an independent evaluation or appraisal of the assets and liabilities of the
Company or any of its subsidiaries and we have not been furnished with any such
evaluation or appraisal. Our advisory services and the opinion expressed herein
are provided for the information and assistance of the Board of Directors of the
Company in connection with its consideration of the transaction contemplated by
the Agreement and such opinion does not constitute a recommendation as to how
any holder of Shares should vote with respect to such transaction.
Based upon and subject to the foregoing and based upon such other matters
as we consider relevant, it is our opinion that as of the date hereof the $45.00
per Share in cash to be received by the holders of Shares pursuant to the
Agreement is fair from a financial point of view to such holders.
Very truly yours,
/s/ GOLDMAN, SACHS & CO.
- ------------------------------------------
GOLDMAN, SACHS & CO.
B-2
<PAGE> 91
APPENDIX C
SECTION 262 APPRAISAL RIGHTS. -- (a) Any stockholder of a corporation of
this State who holds shares of stock on the date of the making of a demand
pursuant to subsection (d) of this section with respect to such shares, who
continuously holds such shares through the effective date of the merger or
consolidation, who has otherwise complied with subsection (d) of this section
and who has neither voted in favor of the merger or consolidation nor consented
thereto in writing pursuant to Section 228 of this title shall be entitled to an
appraisal by the Court of Chancery of the fair value of the stockholder's shares
of stock under the circumstances described in subsections (b) and (c) of this
section. As used in this section, the word "stockholder" means a holder of
record of stock in a stock corporation and also a member of record of a nonstock
corporation; the words "stock" and "share" mean and include what is ordinarily
meant by those words and also membership or membership interest of a member of a
nonstock corporation; and the words "depository receipt" mean a receipt or other
instrument issued by a depository representing an interest in one or more
shares, or fractions thereof, solely of stock of a corporation, which stock is
deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to Section 251 (other than a merger effected pursuant to
Section 251(g) of this title), Section 252, Section 254, Section 257, Section
258, Section 263 or Section 264 of this title:
(1) Provided, however, that no appraisal rights under this section
shall be available for the shares of any class or series of stock, which
stock, or depository receipts in respect thereof, at the record date fixed
to determine the stockholders entitled to receive notice of and to vote at
the meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no
appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require
for its approval the vote of the stockholders of the surviving corporation
as provided in subsection (f) of Section 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required
by the terms of an agreement of merger or consolidation pursuant to
Sections 251, 252, 254, 257, 258, 263 and 264 of this title to accept for
such stock anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository
receipts in respect thereof, which shares of stock (or depository
receipts in respect thereof) or depository receipts at the effective
date of the merger or consolidation will be either listed on a national
securities exchange or designated as a national market system security
on an interdealer quotation system by the National Association of
Securities Dealers, Inc. or held of record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this
paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under sec. 253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights shall
be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale
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of all or substantially all of the assets of the corporation. If the certificate
of incorporation contains such a provision, the procedures of this section,
including those set forth in subsections (d) and (e) of this section, shall
apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal
rights are provided under this section is to be submitted for approval
at a meeting of stockholders, the corporation, not less than 20 days
prior to the meeting, shall notify each of its stockholders who was such
on the record date for such meeting with respect to shares for which
appraisal rights are available pursuant to subsection (b) or (c) hereof
that appraisal rights are available for any or all of the shares of the
constituent corporations, and shall include in such notice a copy of
this section. Each stockholder electing to demand the appraisal of such
stockholder's shares shall deliver to the corporation, before the taking
of the vote on the merger or consolidation, a written demand for
appraisal of such stockholder's shares. Such demand will be sufficient
if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the
appraisal of such stockholder's shares. A proxy or vote against the
merger or consolidation shall not constitute such a demand. A
stockholder electing to take such action must do so by a separate
written demand as herein provided. Within 10 days after the effective
date of such merger or consolidation, the surviving or resulting
corporation shall notify each stockholder of each constituent
corporation who has complied with this subsection and has not voted in
favor of or consented to the merger or consolidation of the date that
the merger or consolidation has become effective; or
(2) If the merger or consolidation was approved pursuant to sec.
228 or sec. 253 of this title, each constituent corporation, either
before the effective date of the merger or consolidation or within ten
days thereafter, shall notify each of the holders of any class or series
of stock of such constituent corporation who are entitled to appraisal
rights of the approval of the merger or consolidation and that appraisal
rights are available for any or all shares of such class or series of
stock of such constituent corporation, and shall include in such notice
a copy of this section; provided that, if the notice is given on or
after the effective date of the merger or consolidation, such notice
shall be given by the surviving or resulting corporation to all such
holders of any class or series of stock of a constituent corporation
that are entitled to appraisal rights. Such notice may, and, if given on
or after the effective date of the merger or consolidation, shall, also
notify such stockholders of the effective date of the merger or
consolidation. Any stockholder entitled to appraisal rights may, within
twenty days after the date of mailing of such notice, demand in writing
from the surviving or resulting corporation the appraisal of such
holder's shares. Such demand will be sufficient if it reasonably informs
the corporation of the identity of the stockholder and that the
stockholder intends thereby to demand the appraisal of such holder's
shares. If such notice did not notify stockholders of the effective date
of the merger or consolidation, either (i) each such constituent
corporation shall send a second notice before the effective date of the
merger or consolidation notifying each of the holders of any class or
series of stock of such constituent corporation that are entitled to
appraisal rights of the effective date of the merger or consolidation or
(ii) the surviving or resulting corporation shall send such a second
notice to all such holders on or within 10 days after such effective
date; provided, however, that if such second notice is sent more than 20
days following the sending of the first notice, such second notice need
only be sent to each stockholder who is entitled to appraisal rights and
who has demanded appraisal of such holder's shares in accordance with
this subsection. An affidavit of the secretary or assistant secretary or
of the transfer agent of the corporation that is required to give either
notice that such notice has been given shall, in the absence of fraud,
be prima facie evidence of the facts stated therein. For purposes of
determining the stockholders entitled to receive either notice, each
constituent corporation may fix, in advance, a record date that shall be
not more than 10 days prior to the date the notice is given, provided,
that if the notice is given on or after the effective date of the merger
or consolidation, the record date shall be such effective date. If no
record date is fixed and the notice is given prior to the effective
date, the record date shall be the close of business on the day next
preceding the day on which the notice is given.
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(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise entitled to
appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw such stockholder's demand for appraisal and to accept the terms offered
upon the merger or consolidation. Within 120 days after the effective date of
the merger or consolidation, any stockholder who has complied with the
requirements of subsections (a) and (d) hereof, upon written request, shall be
entitled to receive from the corporation surviving the merger or resulting from
the consolidation a statement setting forth the aggregate number of shares not
voted in favor of the merger or consolidation and with respect to which demands
for appraisal have been received and the aggregate number of holders of such
shares. Such written statement shall be mailed to the stockholder within 10 days
after such stockholder's written request for such a statement is received by the
surviving or resulting corporation or within 10 days after expiration of the
period for delivery of demands for appraisal under subsection (d) hereof,
whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by 1 or more publications at
least 1 week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notices by mail and by publication
shall be approved by the Court, and the costs thereof shall be borne by the
surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted
such stockholder's certificates of stock to the Register in Chancery, if such is
required, may participate fully in all proceedings until it is finally
determined that such stockholder is not entitled to appraisal rights under this
section.
(i) The Court shall direct the payment of the fair market value of the
shares, together with interest, if any, by the surviving or resulting
corporation to the stockholders entitled thereto. Interest may be simple or
compound, as the Court may direct. Payment shall be so made to each such
stockholder, in the case of holders of uncertified stock forthwith, and the case
of holders of shares represented by certificates upon the surrender to the
corporation of the certificates representing such stock. The Court's decree may
be enforced as other
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decrees in the Court of Chancery may be enforced, whether such surviving or
resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded appraisal rights as provided in subsection (d) of
this section shall be entitled to vote such stock for any purpose or to receive
payment of dividends or other distributions on the stock (except dividends or
other distributions payable to stockholders of record at a date which is prior
to the effective date of the merger or consolidation); provided, however, that
if no petition for an appraisal shall be filed within the time provided in
subsection (e) of this section, or if such stockholder shall deliver to the
surviving or resulting corporation a written withdrawal of such stockholder's
demand for an appraisal and an acceptance of the merger or consolidation, either
within 60 days after the effective date of the merger or consolidation as
provided in subsection (e) of this section or thereafter with the written
approval of the corporation, then the right of such stockholder to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal proceeding in the Court
of Chancery shall be dismissed as to any stockholder without the approval of the
Court, and such approval may be conditioned upon such terms as the Court deems
just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.
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[FORM OF BFI PROXY CARD]
This Proxy is solicited on behalf of the Board of Directors and will be voted.
The undersigned hereby appoints William D. Ruckelshaus and Edward C. Norwood, or
either of them, proxies with full power of substitution to vote, as designated
below, all shares of common stock which the undersigned is entitled to vote, at
the special meeting of stockholders of Browning-Ferris Industries, Inc. to be
held on July 14, 1999, and any adjournment or postponement thereof. If no
direction is made, this Proxy will be voted FOR Proposal 1.
- --------------------------------------------------------------------------------
BFI'S BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR PROPOSAL 1.
- --------------------------------------------------------------------------------
1. Proposal to approve and adopt the Amended and
Restated Agreement and Plan of Merger among
BFI, Allied Waste Industries, Inc., and AWIN I
Acquisition Corporation, in which each share
of outstanding BFI common stock will be
converted into the right to receive $45.00 in
cash.
<TABLE>
<S> <C> <C>
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
</TABLE>
In their discretion, the proxies are authorized to vote on such other matters as
may properly come before the meeting or any adjournment of the meeting.
Please sign your name here exactly
as it appears hereon. Joint owners
must each sign. When signing as
attorney, executor, administrator,
trustee or guardian, please give
your full title as it appears
hereon. If a corporation, please
sign in full corporate name by
President or other authorized
officer. If a partnership, please
sign in partnership name by
authorized person.
---------------------------------
---------------------------------
Signature(s) Date
- FOLD AND DETACH HERE -
NOW YOU CAN VOTE YOUR SHARES BY TELEPHONE OR INTERNET!
QUICK - EASY - IMMEDIATE - AVAILABLE 24 HOURS A DAY - 7 DAYS A WEEK
Your telephone or Internet vote authorizes the named proxies to vote your shares
in the same manner as if you marked, signed, and returned your proxy card. To
vote by phone or Internet, please follow these easy steps.
TO VOTE BY PHONE
- --------------------------------------------------------------------------------
Call toll free 1-800-[ ] (1-800-[ ]) on a touch tone telephone.
Shareholders residing outside the United States, Canada and Puerto Rico should
call 1-201-324-0377.
Use the Control Number located in the box above, just below the perforation.
Enter the Control Number and pound signs (#) exactly as they appear.
Follow the recorded instructions.
TO VOTE BY INTERNET
- --------------------------------------------------------------------------------
Log onto http://www.vote-by-net.com
Follow the instructions on the screen.
- --------------------------------------------------------------------------------
