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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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COMMISSION FILE NUMBER: 0-9787
REPUBLIC INDUSTRIES, INC.
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 73-1105145
(State of Incorporation) (IRS Employer Identification No.)
200 EAST LAS OLAS BOULEVARD
SUITE 1400
FT. LAUDERDALE, FLORIDA 33301
(Address of Principal Executive Offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (954) 627-6000
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
COMMON STOCK, PAR VALUE $.01
(Title of Class)
Indicate by check mark whether the Registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
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Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
On March 21, 1996, the registrant had 81,044,571 outstanding shares of
Common Stock, $.01 par value, and at such date, the aggregate market value of
the shares of Common Stock held by non-affiliates of the registrant was
approximately $1,630,879,000.
DOCUMENTS INCORPORATED BY REFERENCE
Part III - Portions of Registrant's Proxy Statement relative to the
1996 Annual Meeting of Stockholders.
Part IV - Portions of previously filed reports and registration
statements.
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INDEX
<TABLE>
<CAPTION>
Page
Number
PART 1.
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<S> <C> <C>
ITEM 1. BUSINESS 3
ITEM 2. PROPERTIES 12
ITEM 3. LEGAL PROCEEDINGS 12
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 14
PART II.
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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS 15
ITEM 6. SELECTED FINANCIAL DATA 16
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 16
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 23
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE 43
PART III.
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ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT 43
ITEM 11. EXECUTIVE COMPENSATION 43
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT 43
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 43
PART IV.
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ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS
ON FORM 8-K 43
</TABLE>
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PART I.
ITEM 1. BUSINESS
INTRODUCTION
Republic Industries, Inc. (the "Company," formerly Republic Waste
Industries, Inc.) is a diversified services company, which, through its
subsidiaries, primarily provides integrated solid waste disposal, collection
and recycling services to public and private sector customers. As of December
31, 1995, the Company owns or operates thirteen solid waste landfills with five
located in Texas, two in California and one each in Florida, Michigan, North
Carolina, South Carolina, Indiana and North Dakota with approximately 1,483
permitted acres and total available permitted disposal capacity of
approximately 59.1 million in-place cubic yards. The Company also currently
provides collection service to over 780,000 residential, commercial and
industrial customers, primarily in areas surrounding its landfill sites noted
above and certain areas of Georgia, Maine, New Hampshire, and Virginia and
throughout Florida. In addition, the Company provides related environmental
services including consulting and analysis, remediation and other technical
services.
The Company, through certain recently acquired businesses, also is
engaged in the electronic security services business, which consists of the
sale, installation and maintenance of electronic security systems for
commercial and residential use as well as the continuous electronic monitoring
of installed security systems. Currently, the Company monitors over 127,000
businesses and residences predominately in Florida and Colorado.
In August 1995, following a special meeting of the Company's
stockholders, the Company appointed a new management team consisting of H.
Wayne Huizenga as Chairman of the Board and Chief Executive Officer, Harris W.
Hudson as President and a Director, Gregory K. Fairbanks as Executive Vice
President and Chief Financial Officer, and John J. Melk as a Director. Michael
G. DeGroote, former Chairman, Chief Executive Officer and President, was named
Vice Chairman of the Board, and Donald E. Koogler resigned as a Director but
remained as Executive Vice President and Chief Operating Officer. This new
management team is implementing an aggressive growth strategy for the Company.
The Company's strategy is to aggressively grow as a diversified
services company by acquiring and integrating existing solid waste collection,
disposal and recycling businesses, and by expanding its recently acquired
electronic security services business by internal growth and by making
additional acquisitions in that industry. Further, the Company currently
anticipates expanding the Company's operations outside of solid waste
management, electronic security services and related lines of business.
Management also plans to augment its growth strategy by expanding its existing
facilities and increasing marketing efforts related to securing additional
long-term contracts and additional volumes at its existing operations. See
"Acquisitions" for a further discussion.
In 1994, the Company discontinued its hazardous waste services
business through the distribution in April 1995 of that business segment to the
Company's stockholders (the "Distribution"). See "Discontinued Operations"
under the heading "Results of Operations" of Management's Discussion and
Analysis of Financial Condition and Results of Operations.
The Company was incorporated in Oklahoma in November 1980 and in
May 1991 changed its state of domicile from Oklahoma to Delaware by means of a
merger. The Company changed its name to Republic Industries, Inc. from Republic
Waste Industries, Inc. on November 28, 1995. The Company's common stock, $.01
par value per share, ("Common Stock") trades on the Nasdaq National Market tier
of the Nasdaq Stock Market ("Nasdaq") under the symbol "RWIN."
ACQUISITIONS
ACQUISITION STRATEGY
The Company will continue its strategy of growing as a diversified
services company by acquiring and integrating existing solid waste companies
and recycling businesses, and electronic security services businesses.
Further, management anticipates making acquisitions to expand the Company's
operations outside of solid waste management, electronic security services and
related lines of business, resulting in a more diversified company. Management
intends to evaluate various types of industries which generally are capital
intensive, fragmented and have relatively high profit margins or substantial
opportunities for growth, seek out strategic acquisition opportunities in such
industries and grow rapidly in such industries through further acquisitions,
consolidation and internal growth.
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In expanding its solid waste operations, management anticipates
focusing on acquiring waste collection companies that are in markets which can
utilize the Company's existing landfill facilities, as well as in markets with
attractive third party disposal fees. The Company also may consider acquiring
landfills with significant permitted disposal capacity and certain levels of
contracted waste volume. In addition, the Company may focus on what it believes
will be the growing number of municipalities seeking to sell landfills, form
joint ventures or offer management contracts to operate landfills in response
to the growing technical and capital resources required by increasingly
stringent federal, state and local regulations.
The Company generally targets acquisitions in markets where it will
be, or the prospects are favorable to increase its market share to become, a
significant provider of integrated waste services in that market. The Company
seeks to acquire companies which have long-term contracts for solid waste
collection and hauling services in high growth markets. However, the Company is
not limited to these target market criteria, and as opportunities are
identified, the Company may acquire solid waste operations throughout North
America.
In expanding its electronic security operations, the Company's
primary goal is to grow its customer base in the residential segment of the
business. The Company will target markets where it will be, or the prospects
are favorable to increase its market share to become, a significant provider of
electronic security services. The Company seeks to acquire security companies
in high growth markets with strong recurring monthly revenues derived from
monitoring services. In addition, the Company will seek to achieve economies of
scale by acquiring security companies with accounts that can be monitored
through the Company's existing central monitoring stations. The Company intends
to retain local management and sales personnel, where appropriate.
The Company uses internal acquisition teams, its contacts in the
solid waste management and electronic security services industries and its
environmental service capabilities to identify, evaluate and acquire waste
management companies and electronic security services businesses in attractive
markets. Acquisition candidates are evaluated by the Company's internal
acquisition teams based on stringent criteria in a comprehensive process which
includes operational, legal and financial due diligence reviews.
RECENT ACQUISITIONS
Acquisitions Completed Subsequent to December 31, 1995. In March
1996, the Company acquired substantially all of the assets of Mid-American
Waste Systems of Georgia, Inc. and affiliates ("Mid-American Georgia") for a
purchase price of approximately $52,000,000. At closing, the Company issued an
aggregate of 1,700,000 shares of Common Stock valued at approximately
$46,750,000 and will settle the remaining balance within 60 days using
additional Common Stock or cash. Mid-American Georgia owns and operates a
landfill, provides solid waste collection and recycling services to commercial,
residential and industrial customers, and operates two transfer stations, in
certain areas of the greater metropolitan Atlanta, Georgia area. The
acquisition of Mid-American Georgia will be accounted for under the purchase
method of accounting.
In February 1996, the Company acquired, in merger transactions, all
of the outstanding shares of capital stock of Incendere, Inc. and certain waste
companies (collectively, "Schaubach") controlled by Dwight C. Schaubach.
Schaubach provides solid waste collection and recycling services to
residential, commercial and industrial customers in southeastern Virginia and
eastern North Carolina and provides transportation of medical waste throughout
the Mid-Atlantic states.
In February 1996, the Company acquired, in merger transactions, all
of the outstanding shares of capital stock of certain electronic security
companies known as Denver Burglar Alarm ("Denver Alarm"). Denver Alarm
provides installation, monitoring and maintenance services to residential and
commercial customers in Denver, Fort Collins, Boulder, Colorado Springs and
Pueblo, Colorado.
The Company issued an aggregate of 2,914,452 shares of Common Stock
for Schaubach and Denver Alarm both of which will be accounted for as pooling of
interests business combinations.
Acquisitions Completed During the Year Ended December 31, 1995. In
November 1995, the Company acquired, in a merger transaction, all of the
outstanding shares of capital stock of certain affiliated companies known as
Scott Security Systems ("Scott"). Scott provides electronic security
monitoring and maintenance to residential accounts in Jacksonville, Orlando
and Tallahassee, Florida,
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as well as other metropolitan areas in the southeastern United States,
including Charlotte, North Carolina, Savannah, Georgia and Nashville,
Tennessee.
In November 1995, the Company acquired, in merger transactions, all
of the outstanding shares of capital stock of Fennell Container Company, Inc.
and affiliates (collectively, "Fennell"). Fennell provides waste collection,
recycling and environmental services to commercial, industrial and residential
customers in and around Charleston and Greenville, South Carolina, and also
owns a landfill which is in the final stages of construction and is scheduled
to begin accepting waste under its new permit in mid-1996.
In November 1995, the Company acquired, in a merger transaction,
all of the outstanding shares of capital stock of Garbage Disposal Service,
Inc. ("GDS"). GDS provides solid waste collection and recycling services for
commercial, residential and industrial customers throughout western North
Carolina.
In November 1995, the Company acquired, in merger transactions, all
of the outstanding shares of capital stock of J.C. Duncan Company, Inc. and
affiliates (collectively, "Duncan"). Duncan provides solid waste collection
and recycling services to approximately 300,000 residential, commercial and
industrial customers in the Dallas-Fort Worth metropolitan area and throughout
west Texas, and also operates two landfills.
In October 1995, the Company acquired, in a merger transaction, all
of the outstanding shares of capital stock of Southland Environmental Services,
Inc. ("Southland"). Southland, through its subsidiaries, provides solid waste
collection services to residential, commercial and industrial customers in and
around Jacksonville, Florida, owns and operates a construction and demolition
landfill, and provides composting and recycling services.
In October 1995, the Company acquired, in a merger transaction, all
of the outstanding shares of capital stock of United Waste Service, Inc.
("United"). United provides solid waste collection, transfer and recycling
services in the Atlanta, Georgia metropolitan area and services both
residential and commercial customers.
In August 1995, the Company acquired, in merger transactions, all
of the outstanding shares of capital stock of Kertz Security Systems, Inc. and
Kertz Security Systems II, Inc. (collectively, "Kertz"). Kertz provides
electronic security monitoring and maintenance to residential and commercial
customers predominantly in the South Florida, Tampa and Orlando areas.
The Company issued an aggregate of 18,127,984 shares of Common
Stock for the acquisitions of Scott, Fennell, GDS, Duncan, Southland, United
and Kertz (collectively, the "Pooled Entities") which were accounted for as
pooling of interests business combinations.
In August 1995, the Company acquired, in merger transactions, all
of the outstanding shares of capital stock of Hudson Management Corporation and
Envirocycle, Inc. (collectively, "HMC") in exchange for an aggregate of
8,000,000 shares of Common Stock. HMC, as the third largest solid waste
management company in Florida, provides solid waste collection and recycling
services to commercial, industrial and residential customers. The acquisition
of HMC has been accounted for under the purchase method of accounting.
See Note 2 of Notes to Consolidated Financial Statements for
further discussion of business combinations.
OPERATIONS
CONTINUING OPERATIONS
Currently, the Company has organized its continuing operations into
two general industry segments: (1) solid waste services and (2) electronic
security services.
SOLID WASTE SERVICES
The Company's solid waste operations primarily consist of
collection, landfill, recycling and related environmental services.
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Collection. The Company's solid waste collection operations are of
two types: industrial and commercial/residential. The Company's strategy is to
acquire collection operations within the service areas of its landfills, such
that the operations can provide a steady stream of solid waste to its
landfills, and in areas with stable, attractive third party disposal fees. The
Company provides collection service to over 780,000 residential, commercial and
industrial customers.
In its industrial collection operations, the Company supplies its
customers with large waste containers known as "roll-off" containers. The
Company collects the roll-off containers on a set schedule, and transports the
waste to a landfill. Services are provided to individual facilities on a
contract basis with terms ranging from a single pickup to a one-year term.
The Company's commercial and residential collection operations
involve the curbside collection of refuse from small containers into collection
vehicles for transport to landfills. Commercial customers generally are
serviced pursuant to individual contracts which are for periods of up to five
years. Residential households generally are serviced pursuant to contracts with
municipal governments for collection in the municipality. The Company's
contracts generally are secured by competitive bids (see " Competition" under
the heading "Operations"). The Company currently provides commercial and
residential collection services in certain areas of California, Florida,
Georgia, Indiana, Maine, New Hampshire, North Carolina, North Dakota, South
Carolina, Virginia and Texas.
Landfills. The Company owns or operates thirteen solid waste
landfills with approximately 1,483 permitted acres and total available
permitted disposal capacity of approximately 59.1 million cubic in-place yards
as of December 31, 1995. The in-place capacity of the Company's landfills is
subject to change based on engineering factors and requirements of regulatory
authorities. Certain of the landfills accept nonhazardous special waste,
including utility ash, asbestos and contaminated soils. The majority of the
Company's landfill revenues are derived from long-term integrated disposal and
collection contracts with industrial customers and municipalities and disposal
contracts with certain third party collection companies. The following table
provides certain information regarding these landfills as of December 31, 1995:
<TABLE>
<CAPTION>
Unused
Total Permitted Permitted
Landfill Name Markets Served Acreage Acreage Acreage
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<S> <C> <C> <C> <C>
Anderson . . . . . . . . . . . . . . . . . . . . Northern California 1,200 150 100
C&T Regional . . . . . . . . . . . . . . . . . . Rio Grande Valley, Texas 194 94 55
Cleveland Container . . . . . . . . . . . . . . . Southwest North Carolina 169 116 86
Republic/CSC . . . . . . . . . . . . . . . . . . North Central Texas 254 254 195
Republic/Imperial . . . . . . . . . . . . . . . . Southern California 160 120 89
Republic/Maloy . . . . . . . . . . . . . . . . . East Central Texas 389 270 204
Taymouth . . . . . . . . . . . . . . . . . . . . Central Michigan 138 43 19
Wabash Valley . . . . . . . . . . . . . . . . . . Northeast Indiana 103 56 16
St. John's . . . . . . . . . . . . . . . . . . . North Central North Dakota 150 40 33
Nine Mile Road . . . . . . . . . . . . . . . . . Northeast Florida 80 25 17
San Angelo . . . . . . . . . . . . . . . . . . . West Texas 283 283 133
Presidio . . . . . . . . . . . . . . . . . . . . West Texas 10 10 6
Pepperhill . . . . . . . . . . . . . . . . . . . Southeast South Carolina 37 22 22
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3,167 1,483 975
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</TABLE>
Each of the Company's existing landfill sites have the potential
for expanded disposal capacity beyond the currently permitted acreage. The
Company monitors the availability of permitted airspace at each of its
landfills and evaluates whether to pursue expansion at a given landfill based
on estimated future waste volumes, remaining capacity and likelihood of
obtaining expansion. Each of the Company's landfills currently has adequate
permitted capacity; however, the Company is currently seeking to expand
permitted capacity at its Wabash Valley and Nine Mile Road landfills in
connection with favorable design modifications.
Recycling. Management believes that recycling has and will
continue to become an increasingly important component of most major market's
solid waste management plans as a result of the public's increasing
environmental
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awareness and expanding federal and state regulations pertaining to waste
recycling. The Company currently provides recycling services through most of
its collection subsidiaries and has six recycling facilities located in
Florida, Georgia, South Carolina and North Carolina. The services provided by
the Company's collection subsidiaries include the curbside collection of
recyclable waste, and the provision of a variety of recycling services,
including the segregated collection of cardboard boxes and construction debris
for resale to paper manufacturers and others. In Florida, Georgia, South
Carolina and North Carolina, the Company receives certain types of commercial
and industrial solid waste, which is sorted at its facilities into recyclable
materials and non-recyclable waste; the recyclable materials are repackaged and
sold to third parties and the non-recyclable waste is disposed of at landfills
or incinerators. The Company also recycles yard waste and timber by-products in
Dallas and Houston, Texas and Jacksonville, Florida by composting these
materials and selling the end product to nurseries, landscape architects and
homeowners for landscape and gardening mulch.
Environmental Services. The Company provides selected
environmental remediation services relating to the cleanup and containment of
actual or threatened releases of hazardous materials into the environment on
both a planned and emergency basis. The Company's solid waste division provides
these services through three subsidiaries, Environmental Specialists, Inc.
("ESI") in Kansas City, Missouri, Laughlin Environmental, Inc. ("Laughlin") in
Houston, Texas and Fenn-Vac, Inc. in North Charleston, South Carolina. ESI and
Fenn-Vac, Inc. are EPA-approved emergency response contractors and provide
hazardous spill cleanup and other special services on a contract basis.
Laughlin provides a broad range of environmental services including remediation
and other technical services.
ELECTRONIC SECURITY SERVICES
The Company, through certain recently acquired businesses, is
engaged in the electronic security services business, which consists of the
sale, installation and maintenance of electronic security systems for
commercial and residential use, as well as the continuous electronic monitoring
of installed security systems. The Company sells and installs modern electronic
devices in its customers' businesses and residences to provide detection of
events, such as intrusion or fire. The Company purchases from various
manufacturers the components of the systems it sells, installs and maintains.
The products and services marketed in the electronic security services industry
by the Company and others range from basic residential systems that provide
entry and fire detection to sophisticated commercial systems incorporating
closed circuit television systems and access control. Detection systems may be
continuously monitored by centralized monitoring stations which are linked to
the customer through telephone lines. The Company operates two central
monitoring stations in Florida and one in Colorado, from which it monitors
over 127,000 businesses and residences predominantly in Florida and Colorado by
local and long distance telephone lines. Upon detecting an intrusion or other
event at a customer's business or residence, the central monitoring station
calls the customer and, if necessary, the local police, fire, ambulance or
other authorities.
DISCONTINUED OPERATIONS
On April 26, 1995, the Company completed the Distribution of its
hazardous waste services segment. The hazardous waste services segment of the
Company's business has been accounted for as a discontinued operation and,
accordingly, the accompanying Consolidated Financial Statements of the Company
for periods presented prior to the Distribution have been retroactively
restated to report separately the net assets and operating results of these
discontinued operations. For further discussion of the Distribution, see
"Discontinued Operations" under the heading "Results of Operations" of
Management's Discussion and Analysis of Financial Condition and Results of
Operations and Note 9 of Notes to Consolidated Financial Statements included
herein.
SALES AND MARKETING
For solid waste services, the Company's sales and marketing
strategy is to provide full service environmental management to its customers.
The Company targets potential customers of all sizes from small quantity
generators to large "Fortune 500" companies, as well as municipalities.
In expanding its electronic security operations, the Company's
primary goal is to grow its customer base in the residential segment of the
business. The Company will target markets where it will be, or the prospects
are favorable to increase its market share to become, a significant provider
of electronic security services.
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The Company believes in providing quality services which will
enable it to maintain high levels of recurring revenue from its customers. The
Company derives its business from a broad customer base which the Company
believes will enable it to experience stable growth. Marketing efforts focus on
continuing and increasing business with existing customers, as well as
attracting new customers.
CUSTOMERS
The Company's sales efforts are directed toward establishing and
maintaining business relationships with residences and businesses in areas in
which the Company operates, which have ongoing requirements for one or more of
the Company's services. During 1995, no one customer individually comprised
more than 10% of the total revenue of the Company.
REGULATION
The collection and disposal of solid waste, operation of landfills
and rendering of related environmental services are subject to federal, state
and local requirements which regulate health, safety, the environment, zoning
and land-use. Operating permits are generally required for landfills and
certain collection vehicles, and these permits are subject to revocation,
modification and renewal. Federal, state and local regulations vary, but
generally govern disposal activities and the location and use of facilities and
also impose restrictions to prohibit or minimize air and water pollution. In
addition, governmental authorities have the power to enforce compliance with
these regulations and to obtain injunctions or impose fines in the case of
violations, including criminal penalties. These regulations are administered by
the EPA and various other federal, state and local environmental, health and
safety agencies and authorities, including the Occupational Safety and Health
Administration of the U.S. Department of Labor.
The Company strives to conduct its operations in compliance with
applicable laws and regulations, but believes that in the existing climate of
heightened legal, political and citizen awareness and concerns, companies in
the waste management and environmental services industry, including the
Company, may be faced with fines and penalties and the need to expend funds for
remedial work and related activities at landfills and other facilities. The
Company has established a reserve to cover any potential fines, penalties and
costs which management believes will be adequate. While such amounts expended
in the past or anticipated to be expended in the future have not had and are
not expected to have a materially adverse effect on the Company's financial
condition or operations, the possibility remains that technological, regulatory
or enforcement developments, the results of environmental studies or other
factors could materially alter this expectation.
The Company's operation of landfills subjects it to certain
operating, monitoring, site maintenance, closure and post-closure obligations.
In order to construct, expand and operate a landfill, one or more construction
or operating permits, as well as zoning approvals, must be obtained. These
operating permits and zoning approvals are difficult and time-consuming to
obtain, and the issuance of such permits and approvals often is opposed by
neighboring landowners and local and national citizens' groups. Once obtained,
the operating permits may be subject to periodic renewal and are subject to
modification and revocation by the issuing agency. In connection with the
Company's acquisition of existing landfills, it often may be necessary to
expend considerable time, effort and money to bring the acquired facilities
into compliance with applicable requirements and to obtain the permits and
approvals necessary to increase their capacity.
Governmental authorities have the power to enforce compliance with
regulations and permit conditions and to obtain injunctions or impose fines in
case of violations. Citizens' groups may also bring suit for alleged
violations. During the ordinary course of its operations, the Company may from
time to time receive citations or notices from such authorities that its
operations are not in compliance with applicable environmental or health or
safety regulations. Upon receipt of such citations or notices, the Company
will work with the authorities to attempt to resolve the issues raised. Failure
to correct the problems to the satisfaction of the authorities could lead to
monetary or criminal penalties, curtailed operations or facility closure.
Federal Regulation. The following summarizes the primary
environmental and safety-related federal statutes of the United States of
America affecting the business of the Company:
(1) The Solid Waste Disposal Act ("SWDA"), as amended by the
Resource Conservation and Recovery Act of 1976, as amended
("RCRA"). SWDA and its implementing regulations establish a
framework for regulating the
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handling, transportation, treatment and disposal of hazardous and
nonhazardous solid wastes. They also require states to develop
programs to ensure the safe disposal of solid wastes in sanitary
landfills.
Subtitle D of RCRA establishes a framework for regulating the
disposal of municipal solid wastes. In the past, the Subtitle D
framework has left the regulation of municipal waste disposal
largely to the states. On October 9, 1991, however, the EPA
promulgated a final rule which imposes minimum federal
comprehensive solid waste management criteria and guidelines,
including location restrictions, facility design and operating
criteria, closure and post-closure requirements, financial
assurance standards, groundwater monitoring requirements and
corrective action standards, many of which have not commonly been
in effect or enforced in connection with municipal solid waste
landfills.
All Subtitle D regulations are now in effect, except for the
financial assurance requirements which the EPA has deferred to
April 1, 1997. All of the Company's planned landfill expansions or
new landfill development projects have been engineered to meet or
exceed Subtitle D requirements. Operating and design criteria for
existing operations have been modified to comply with these new
regulations. Compliance with the Subtitle D regulations has
resulted in increased costs and, may in the future, require
expenditures in addition to other costs normally associated with
the Company's waste management activities.
(2) The Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended ("CERCLA"). CERCLA, among other
things, provides for the cleanup of sites from which there is a
release or threatened release of a hazardous substance into the
environment. CERCLA imposes liability for the costs of cleanup and
for damages to natural resources upon: (a) any person who currently
owns or operates a facility or site from which there is a release or
threatened release of hazardous substances; (b) any person who
owned or operated such a facility or site at the time hazardous
substances were disposed of; (c) any person who by contract,
agreement or otherwise, arranged for the disposal or treatment (or
for transport for disposal or treatment) of hazardous substances
owned or processed by such person at such facility or site and (d)
any person who accepts or accepted hazardous substances for
transport for treatment or disposal at such a facility or site
selected by such person. Under the authority of CERCLA and its
implementing regulations, detailed requirements apply to the manner
and degree of remediation of facilities and sites where hazardous
substances have been or are threatened to be released into the
environment.
Among other things, CERCLA authorizes the federal government
either to remediate sites at which hazardous substances were
disposed of and have been or are threatened to be released into the
environment, or to order (or offer an opportunity to) persons
potentially liable for the cleanup of the hazardous substances to
do so. In addition, CERCLA requires the EPA to establish a National
Priorities List ("NPL") of sites at which hazardous substances have
been or are threatened to be released and which require
investigation or cleanup.
Liability under CERCLA is not dependent upon the intentional
disposal of "hazardous wastes." It can be founded upon the release
or threatened release, even as a result of unintentional and
non-negligent action, of thousands of "hazardous substances,"
including very small quantities of such substances. More than 20%
of the sites on the NPL are solid waste landfills which ostensibly
never received any "hazardous wastes." Thus, even if the Company's
landfills have never received "hazardous wastes" as such, it is
possible that one or more hazardous substances may have come to be
located at its landfills. Because of the extremely broad definition
of "hazardous substances," the same is true of other industrial
properties with which the Company has been, or may become,
associated. If there is a release or threatened release of
hazardous substances from a facility where the Company is an owner
or operator, the Company could be liable under CERCLA for the cost
of cleaning up such hazardous substances at the sites and for
damages to natural resources, even if those substances were
deposited at the Company's facilities before the Company acquired
or operated them. CERCLA liability may also attach to the Company
with regard to non-Company owned or operated facilities where the
Company arranged for disposal or treatment of hazardous substances
at, or transportation of hazardous substances to, such a facility,
or where the Company was the waste transporter who selected such
facility for treatment or disposal of hazardous substances. The
costs of a CERCLA cleanup can be very expensive. Given the
difficulty of obtaining insurance for environmental impairment
liability, such liability could have a material impact on the
Company's business and financial condition. For a further
discussion, see "Liability Insurance and Bonding".
9
<PAGE> 10
(3) The Federal Water Pollution Control Act of 1972 (the
"Clean Water Act"). The Clean Water Act establishes a framework
for regulating the discharge of pollutants from a variety of
sources, including solid waste disposal sites, into streams, rivers
and other waters. Whenever point source runoff from the Company's
landfills is to be discharged into surface waters, the Act requires
the Company to apply for and obtain discharge permits, conduct
sampling and monitoring and, under certain circumstances, reduce
the quantity of pollutants in those discharges. In 1990, the EPA
published new storm water discharge regulations which require
landfills to apply for a storm water discharge permit unless they
are covered under a storm water general permit promulgated by the
agency. The new storm water discharge regulations also require a
permit for certain construction activities, which may affect the
Company's operations. If a landfill or transfer station discharges
wastewater through a sewage system to a publicly-owned treatment
works ("POTW"), the facility must comply with discharge limits
imposed by the POTW. In addition, states may adopt groundwater
protection programs under the Clean Water Act or Safe Drinking
Water Act that could affect solid waste landfills.
(4) The Clean Air Act. The Clean Air Act establishes a
framework for the federal, state and local regulation of the
emission of air pollutants. These regulations may impose emission
limitations and monitoring and reporting requirements on various of
the Company's operations, including landfills and refuse
collection trucks owned by the Company. The Clean Air Act
Amendments, which were enacted into law at the end of 1990,
resulted in the imposition of stringent requirements on many
activities that were previously largely unregulated, such as
emissions of solvents used in small parts in degreasing baths in
the Company's vehicle maintenance shops, as well as imposing more
stringent requirements on, among others, motor vehicle emissions.
On March 12, 1996, the EPA enacted a final rule implementing
standards of performance for new municipal solid waste landfills
and emission guidelines for existing municipal solid waste
landfills. The new rule was enacted to require certain municipal
solid waste landfills to control emissions to the level achievable
by the best demonstrated system of continuous emission reduction.
The new source performance standards established by the final rule
apply to municipal landfills that began construction or
modification, or first began to accept waste, on or after May 30,
1991. The enactment of this new rule will affect the Company's
existing landfill operations, and may result in increased costs at
these facilities.
(5) The Occupational Safety and Health Act of 1970 (the "OSH
Act"). The OSH Act authorizes the Occupational Safety and Health
Administration to promulgate occupational safety and health
standards. Various of these standards, including standards for
notices of hazardous chemicals and the handling of asbestos, apply
to the Company's operations.
State Regulation. Each state in which the Company operates has its
own laws and regulations governing solid waste disposal, water and air
pollution and, in most cases, releases and cleanup of hazardous substances and
liability for such matters. The states also have adopted regulations governing
the design, operation, maintenance and closure of landfills and transfer
stations. The Company's facilities and operations are likely to be subject to
many, if not all, of these types of requirements. In addition, the Company's
collection and landfill operations may be affected by the trend in many states
toward requiring the development of waste reduction and recycling programs. For
example, several states have enacted laws that will require counties to adopt
comprehensive plans to reduce, through waste planning, composting, recycling or
other programs, the volume of solid waste deposited in landfills. Additionally,
laws and regulations restricting the disposal of yard waste in solid waste
landfills have recently been promulgated in several states. Legislative and
regulatory measures to mandate or encourage waste reduction at the source and
waste recycling also are under consideration by Congress and the EPA.
Finally, with regard to its transportation operations, the Company
is subject to the jurisdiction of the Interstate Commerce Commission and is
regulated by the Department of Transportation and by regulatory agencies in
each state. Various states have enacted, or are considering enacting, laws
that restrict the disposal within the state of solid or hazardous wastes
generated outside the state. In May 1994, the Supreme Court ruled that local
flow control ordinances were an impermissible burden to interstate commerce,
and therefore, were unconstitutional. In response to the Supreme Court's
ruling, Congress is attempting to enact a national comprehensive flow control
bill. The national solid waste flow control bill, which was approved by the
Senate in May of 1995, is currently under consideration by the House Commerce
Committee. If the national solid waste flow control bill is enacted, and state
laws restricting the interstate disposal of solid
10
<PAGE> 11
waste are passed and upheld, such legislation could adversely affect the
Company's waste collection, transportation, and treatment and disposal
operations.
"False" Alarm Ordinances. The Company believes that approximately
95% of alarm activations that result in the dispatch of police or fire
department personnel are not emergencies, and thus are "false" alarms.
Recently, a trend has emerged on the part of local governmental authorities to
consider or adopt various measures aimed at reducing the number of "false"
alarms. Such measures include (i) subjecting alarm monitoring companies to
fines or penalties for transmitting "false" alarms, (ii) licensing individual
alarm systems and the revocation of such licenses following a specified number
of "false" alarms, (iii) imposing fines on alarm subscribers for "false"
alarms, (iv) imposing limitations on the number of times the police will
respond to alarms at a particular location after a specified number of "false"
alarms, and/or (v) requiring further verification of an alarm signal before the
police will respond. Enactment of such measures could adversely affect the
Company's electronic security services business and operations.
COMPETITION
Competition in the Solid Waste Industry. The waste management
industry is highly competitive and requires substantial amounts of capital.
Entry into the industry and ongoing operations within the industry require
substantial technical, managerial and financial resources. The solid waste
industry in North America is currently dominated by three solid waste
companies: WMX Technologies, Inc., Browning-Ferris Industries, Inc. and Laidlaw
Inc. Competition in the solid waste industry also comes from a number of
regional solid waste companies. Some of the Company's competitors have
significantly larger operations and greater resources than the Company. In each
of its solid waste market areas, the Company competes for landfill business on
the basis of disposal fees (commonly known as "tipping fees"), geographical
location and quality of operations. The Company's ability to obtain landfill
business may be limited by the fact that some major collection companies also
own or operate landfills to which they send their waste.
Further, alternatives to landfill disposal (such as recycling,
composting and waste-to-energy) are increasingly competing with landfills.
There also has been an increasing trend at the state and local levels to
mandate waste reduction at the source and to prohibit the disposal of certain
types of wastes, such as yard wastes, at landfills. This may result in the
volume of waste going to landfills being reduced in certain areas, which may
affect the Company's ability to operate its landfills at their full capacity
and/or affect the prices that can be charged for landfill disposal services. In
addition, most of the states in which the Company operates landfills have
adopted plans or requirements which set goals for specified percentages of
certain solid waste items to be recycled. To the extent these are not yet in
place, these recycling goals will be phased in over the next few years.
In its collection business, in addition to national and regional
firms and numerous local companies, the Company may compete with those
municipalities that maintain waste collection or disposal operations. These
municipalities may have financial advantages due to the availability of tax
revenues and tax-exempt financing. The Company competes for collection accounts
primarily on the basis of price and the quality of its services. From time to
time, competitors may reduce the price of their services in an effort to expand
market share or to win a competitively bid municipal contract.
Competition in the Electronic Security Services Industry. The
security alarm industry is highly competitive and highly fragmented. The
Company's electronic security services business competes with several large
national companies, as well as smaller regional and local companies, in all of
its operations. Certain of the Company's competitors have greater financial and
other resources than the Company. Furthermore, new competitors are continuing
to enter the industry and the Company may encounter additional competition from
such future industry entrants.
LIABILITY INSURANCE AND BONDING
The nature of the Company's solid waste management business exposes
it to a significant risk of liability for legal damages arising out of its
operations. Such potential liability could involve, for example, claims for
cleanup costs, personal injury, property damage or damage to the environment in
cases where the Company may be held responsible for the escape of harmful
materials; claims of employees, customers or third parties for personal injury
or property damage occurring in the course of the Company's operations; or
claims alleging negligence or professional errors or omissions in the planning
or performance of work. The Company could also be subject to fines and civil
and criminal penalties in connection with alleged violations of regulatory
requirements. Because of the nature and scope of the possible damages,
liabilities imposed in environmental litigation can be significant. Although
the Company strives to operate safely and prudently and has
11
<PAGE> 12
substantial general and automobile liability insurance coverage, no assurance
can be given that the Company will not be exposed to uninsured liabilities
which would have a material adverse effect on its financial condition. The
majority of the Company's solid waste operations have environmental liability
insurance subject to certain limitations and exclusions with limits in excess
of those required by permit regulations; however, there is no assurance that
such limits would be adequate in the event of a major loss, nor is there
assurance that the Company will continue to carry environmental liability
insurance should market conditions in the insurance industry make such coverage
cost prohibitive. The Company carries commercial general liability insurance,
automobile liability insurance, workers' compensation and employer's liability
insurance and umbrella policies to provide excess limits of liability over the
underlying limits contained in the commercial general liability, automobile
liability and employer's liability policies, as well as property insurance.
In the normal course of business, the Company may be required to
post a performance bond or a bank letter of credit in connection with municipal
residential collection contracts, the operation, closure or post-closure of
landfills, certain remediation contracts and certain environmental permits.
Bonds issued by surety companies operate as a financial guarantee of the
Company's performance. To date, the Company has satisfied financial
responsibility requirements for regulatory agencies by making cash deposits,
obtaining bank letters of credit or by obtaining surety bonds.
EMPLOYEES
As of March 1996, the Company employed approximately 4,090 persons,
32 of whom were covered by collective bargaining agreements. The management of
the Company believes that it has good relations with its employees.
SEASONALITY
The Company's solid waste operations can be adversely affected by
extended periods of inclement weather, such as rain or snow, which could delay
the collection and disposal of waste, reduce the volume of waste generated or
delay the expansion of the Company's landfill sites.
GEOGRAPHICAL CONCENTRATION
The existing subscriber base of the Company's electronic security
system business is geographically concentrated in certain metropolitan areas of
Florida and Colorado. Accordingly, their performance may be adversely
affected by regional or local economic conditions, regulation or other factors.
ITEM 2. PROPERTIES
The Company's corporate headquarters are located at 200 East Las
Olas Boulevard, Suite 1400, Fort Lauderdale, Florida in leased premises.
Certain of the property and equipment of the Company and its subsidiaries are
subject to liens securing payment of portions of the Company's and its
subsidiaries' indebtedness. The Company and its subsidiaries also lease certain
of their offices and equipment. See Note 7 of Notes to Consolidated Financial
Statements for additional information with respect to leased properties.
ITEM 3. LEGAL PROCEEDINGS
GENERAL CORPORATE PROCEEDINGS
G.I. Industries, Inc. On May 3, 1991, the Company filed an action
against GI Industries, Inc. ("GI"), Manuel Asadurian, Sr. and Mike Smith in the
United States District Court for the Central District of California (the
"Court"). The Company requested a declaratory judgment that it did not
anticipatorily breach a merger agreement (the "Merger Agreement") between the
Company and GI and that the Merger Agreement had been properly terminated. The
Company also sought to recover $600,000 from GI, plus interest and costs, with
respect to a certain financial guaranty provided by the Company in 1990 for
the benefit of GI. In response to the Company's action, GI filed a
counterclaim alleging that the Company breached the Merger Agreement and that
it had suffered damages in excess of $16,000,000. In August 1993, the Court
rendered a ruling in favor of the Company which GI appealed. In March 1995, the
United States Court of Appeals for the Ninth Circuit at Pasadena, California
(the "Court of Appeals") reversed in part
12
<PAGE> 13
and vacated in part the August 1993 decision and remanded the case for further
proceedings. The Court has commenced proceedings that may lead to a trial on
damages.
Subsequent to the commencement of the Company's litigation in this
matter, GI filed for protection under Chapter 11 of the Bankruptcy Code. The
Company is a secured creditor and anticipates a complete recovery of the
$600,000 it is owed from GI, plus interest and costs.
Western Waste Industries, Inc. Western Waste Industries, Inc.
("Western") filed an action against the Company and others on July 20, 1990 in
the District Court of Harris County, Texas alleging various causes of action
including interference with business relations and is seeking $24,000,000 in
damages. The lawsuit stems from Western's attempts to acquire Best Pak
Disposal, Inc. The case is currently scheduled for trial in May 1996.
The Company is also a party to various other general corporate
legal proceedings which have arisen in the ordinary course of its business.
While the results of these matters, as well as matters described above, cannot
be predicted with certainty, management believes that losses, if any, resulting
from the ultimate resolution of these matters will not have a material adverse
effect on the Company's business or consolidated financial position; however,
unfavorable resolution of each matter individually or in the aggregate could
affect the consolidated results of operations for the quarterly periods in
which they are resolved.
ENVIRONMENTAL MATTERS
Imperial Landfill Filter Waste Issue. In 1992, the Company
received notices from Imperial County, California (the "County") and the
Department of Toxic Substances Control ("DTSC," a department under the
California EPA) which alleged that spent filter elements (the "Filters")
from geothermal power plants which had been deposited at the Company's Imperial
Landfill for approximately five years were classified as hazardous waste under
California environmental regulations. Under United States EPA regulations, the
Filters are not deemed hazardous waste because waste associated with the
production of geothermal energy is exempt from the federal classification of
hazardous waste under 40 CFR Part 261.4(b)(5).
The Company is currently conducting active discussions with all
appropriate California regulatory agencies in order to obtain a variance under
California regulations to reclassify the Filters as a special waste so they may
be left in the landfill. If this occurs, the State, regional and local
regulatory agencies may nevertheless require that the affected area of the
landfill be capped and closed. In the event that the variance is not granted,
remedial measures may be required based on the Filters' classification as a
California hazardous waste. One of those measures could include the removal of
the Filters or the closure of a portion of the landfill.
Management is currently unable to determine (i) whether the waste
will ultimately be classified as hazardous, (ii) if so, what action, if any,
will be required as a result of this issue, or (iii) what liability, if any,
the Company will have as a result of this inquiry. In January 1994, the
Company filed suit in the United States District Court for the Southern
District of California against the known past and present owners and operators
of the geothermal power plants, the Ormesa I, IE, IH and II plants in
Holtville, California, for all losses, fines and expenses the Company incurs
associated with the resolution of this matter, including loss of airspace at
the landfill, alleging claims for (i) CERCLA response costs recovery, (ii)
13
<PAGE> 14
intentional misrepresentation, (iii) negligent misrepresentation, (iv)
negligence, (v) strict liability, (vi) continuing trespass, (vii) nuisance,
(viii) breach of contract and (ix) breach of implied covenant of good faith and
fair dealing. The Company seeks to recover actual expenses and punitive
damages. Discovery in this matter has been stayed until November 1996, at which
time the Company expects to be able to quantify more accurately the level of
damages it has suffered. The Company believes it will prevail, but no amounts
have been accrued for any recovery of damages.
Imperial Landfill Permit. One of the Company's landfills, the
Imperial Landfill, currently exceeds its permitted daily tonnage capacity and
is involved in negotiations with the California Integrated Waste Management
Board regarding expansion of its daily tonnage capacity. Imperial Landfill
received a notice of violation regarding this issue in late 1989 and has since
applied for a modification of its permit to increase the allowed daily tonnage
from 50 tons up to a maximum of 1,000 tons. Temporary written approval has been
given by Imperial County, California and the California Integrated Waste
Management Board for the Company to operate the landfill and for the landfill
to receive in excess of 50 tons per day while the permit modification is being
reviewed.
The Company is also a party to various other environmental
proceedings related to its solid waste services operations which have arisen in
the ordinary course of its business. Although it is possible that losses
exceeding amounts already recorded may be incurred upon the ultimate resolution
of these matters, as well as the matters described above, management believes
that such losses, if any, will not have a material adverse effect on the
Company's business or consolidated financial position; however, unfavorable
resolution of each matter individually or in the aggregate could affect the
consolidated results of operations for the quarterly periods in which they are
resolved.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The following matters were approved by written consent of a
majority of the Company's stockholders in lieu of a special meeting as of
November 28, 1995:
<TABLE>
<CAPTION>
Number of Shares of Common Stock
Matter Granting Written Consent
- ---------------------------------------------------------- --------------------------------------------
<S> <C> <C>
1. Adoption of amendment to the Company's
Certificate of Incorporation to change the
Company's name from Republic Waste
Industries, Inc. to Republic Industries, Inc. 32,190,716
2. Adoption of amendment to the Company's
Certificate of Incorporation to establish
annual terms for members of the Board of
Directors. 32,190,716
3. Adoption of amendments to the Company's
1995 Non-Employee Director Stock Option Plan. 32,190,716
4. Adoption of amendments to previously issued
Director's Warrants to purchase Common Stock. 32,190,716
</TABLE>
14
<PAGE> 15
PART II.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock has been traded on Nasdaq under the
symbol "RWIN" since September 1990. The following table sets forth, for the
periods indicated, the high and low prices for the Common Stock as quoted on
Nasdaq.
<TABLE>
<CAPTION>
Quarter Ended High Low
------------- ----------- ---------
1994:
<S> <C> <C>
March 31 $ 3 9/16 $ 2 3/4
June 30 . . . . . . . . . . . . 3 1/2 2 11/16
September 30 . . . . . . . . . 3 9/16 3
December 31 . . . . . . . . . 4 3 1/4
1995:
March 31 . . . . . . . 4 1/16 3 1/8
June 30 . . . . . . . . . . . 13 5/8 3 3/16
September 30 . . . . . . . . . 26 1/16 13
December 31 . . . . . . . . . 36 1/8 20
</TABLE>
On March 21, 1996, the closing price of Common Stock as reported by
Nasdaq was $29.125 per share. The number of record holders of the Common Stock
as of March 21, 1996, was 2,087.
Effective February 16, 1996, the Company voluntarily delisted the
Common Stock from the Toronto Stock Exchange (the "TSE") due to a lack of
trading volume on the TSE.
Since commencement of operations as a waste management and
environmental services company in December 1989, other than distributions to
former stockholders of acquired companies, the Company has not declared or paid
any cash dividends on its Common Stock and the Board of Directors does not
currently anticipate that the Company will pay cash dividends on its Common
Stock at any time in the foreseeable future.
15
<PAGE> 16
ITEM 6. SELECTED FINANCIAL DATA
The following Selected Financial Data should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results
of Operations", the Company's Consolidated Financial Statements and Notes
thereto and other financial information included elsewhere in this Form 10-K.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------
INCOME STATEMENT DATA: 1995 1994 1993 1992 1991
------ ------ ------ ------ ------
(In thousands, except per share data)
<S> <C> <C> <C> <C>
Revenue . . . . . . . . . . . . . . . . . . . . . $ 260,315 $ 187,111 $154,301 $134,440 $ 117,711
Income (loss) from continuing operations
before income taxes . . . . . . . . . . . . . . $ 36,684 $ 18,271 $ (1,286) $ 9,048 $ 6,055
Income (loss) from continuing operations . . . . $ 23,212 $ 14,432 $ (2,473) $ 6,962 $ 4,167
Earnings (loss) per common and common
equivalent share from continuing operations . . $ 0.35 $ 0.32 $ (0.05) $ 0.16 $ 0.11
Weighted average common and
common equivalent shares . . . . . . . . . . . 65,785 45,545 45,636 44,479 37,373
DECEMBER 31,
--------------------------------------------------------
BALANCE SHEET DATA: 1995 1994 1993 1992 1991
----- ----- ----- ----- -----
(In thousands)
<S> <C> <C> <C> <C> <C>
Working capital (deficiency) . . . . . . . . . . $142,891 $ (7,184) $ 1,226 $ 2,992 $ 14,885
Short-term debt, including current
maturities of long-term debt . . . . . . . . . $ - $ 10,035 $ 9,913 $ 9,222 $ 7,874
Long-term debt, net of current maturities . . . . $ - $ 37,995 $ 41,596 $ 30,086 $ 27,565
Stockholders' equity . . . . . . . . . . . . . . $436,387 $ 109,830 $ 96,305 $ 120,376 $ 119,426
Total assets . . . . . . . . . . . . . . . . . . $542,050 $ 242,365 $ 203,873 $ 190,068 $ 180,394
</TABLE>
See Notes 2, 5, 9 and 10 of Notes to Consolidated Financial
Statements for discussion of business combinations, various equity
transactions, the Distribution of the hazardous waste services segment and
restructuring charges and their effect on comparability of year-to-year data.
See Item 5 "Market for Registrant's Common Equity and Related Stockholder
Matters" for a discussion of the Company's dividend policy.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with Item 6
"Selected Financial Data" and the Company's Consolidated Financial Statements
and the Notes thereto.
BUSINESS COMBINATIONS
The Company's strategy is to aggressively grow its solid waste
services business by acquiring and integrating existing solid waste collection,
disposal and recycling businesses, and to expand its recently acquired
electronic security services business by internal growth and by making
additional acquisitions in that industry. Further, the Company currently
anticipates expanding its operations outside of solid waste management,
electronic security services and related lines of business, resulting in a more
diversified Company. The Company makes its decision to acquire or invest in
businesses based on financial and strategic considerations.
16
<PAGE> 17
Businesses acquired through December 31, 1995 and accounted for under
the pooling of interests method of accounting have been included retroactively
in the financial statements as if the companies had operated as one entity
since inception. Businesses acquired through December 31, 1995 and accounted
for under the purchase method of accounting are included in the financial
statements from the date of acquisition.
ACQUISITIONS COMPLETED DURING THE YEAR ENDED DECEMBER 31, 1995
In August 1995, the Company merged with Kertz, which provides
electronic security monitoring and maintenance predominantly in the South
Florida area. In October 1995, the Company merged with United and Southland.
United provides solid waste collection, transfer and recycling services in the
Atlanta, Georgia metropolitan area, and Southland provides solid waste
collection services in the Northeast Florida area. In November 1995, the
Company merged with Duncan, GDS, Fennell and Scott. Duncan provides solid waste
collection and recycling services in the Dallas-Fort Worth metropolitan area
and throughout west Texas and also operates two landfills. GDS provides solid
waste collection and recycling services throughout western North Carolina.
Fennell is a full-service solid waste management company, providing services in
and around Charleston and Greenville, South Carolina and also owns a landfill.
Scott is an electronic security alarm company, providing monitoring and
maintenance services in Jacksonville, Orlando and Tallahassee, Florida, and
other metropolitan areas in the southeastern United States, including
Charlotte, North Carolina; Savannah, Georgia and Nashville, Tennessee. The
Company issued an aggregate of 18,127,984 shares of Common Stock for the
acquisitions of Kertz, United, Southland, Duncan, GDS, Fennell, and Scott
(collectively, the "Pooled Entities"). The acquisitions of the Pooled Entities
were accounted for under the pooling of interests method of accounting and,
accordingly, the Consolidated Financial Statements have been restated as if the
Company and the Pooled Entities had operated as one entity since inception.
In August 1995, the Company acquired all of the outstanding shares of
capital stock of HMC. The purchase price paid by the Company was approximately
$72,800,000 and consisted of 8,000,000 shares of Common Stock. HMC, as the
third largest solid waste management company in Florida, provides solid waste
collection and recycling services to commercial, industrial and residential
customers. This acquisition, as well as several other minor business
combinations from January 1, 1993 to December 31, 1995, have been accounted for
under the purchase method of accounting.
ACQUISITIONS COMPLETED SUBSEQUENT TO DECEMBER 31, 1995
In March 1996, the Company acquired substantially all of the assets of
Mid-American Georgia for a purchase price of approximately $52,000,000. At
closing, the Company issued an aggregate of 1,700,000 shares of Common Stock
valued at approximately $46,750,000 and will settle the remaining balance
within 60 days using additional Common Stock or cash. Mid-American Georgia
owns and operates a landfill, provides solid waste collection and recycling
services to commercial, residential and industrial customers, and operates two
transfer stations, in certain areas of the greater metropolitan Atlanta,
Georgia area. The acquisition of Mid-American Georgia will be accounted
for under the purchase method of accounting.
In February 1996, the Company acquired, in merger transactions, all of
the outstanding shares of capital stock of Schaubach. Schaubach provides solid
waste collection and recycling services to residential, commercial and
industrial customers in southeastern Virginia and eastern North Carolina and
provides transportation of medical waste throughout the Mid-Atlantic states.
In February 1996, the Company acquired, in merger transactions, all of
the outstanding shares of capital stock of Denver Alarm. Denver Alarm provides
installation, monitoring and maintenance services to residential and commercial
customers in Denver, Fort Collins, Boulder, Colorado Springs and Pueblo,
Colorado.
The Company issued an aggregate of 2,914,452 shares of Common Stock to
acquire Schaubach and Denver Alarm both of which will be accounted for as
pooling of interests business combinations.
For further discussion of the Company's business combinations and
acquisition strategy, see "Acquisitions" under the heading "Item 1. Business"
and Note 2 of Notes to Consolidated Financial Statements.
17
<PAGE> 18
RESULTS OF OPERATIONS
CONTINUING OPERATIONS
In 1994, the Company pursued a plan to exit the hazardous waste
services segment of the environmental industry. The plan provided for the
combination of the Company's hazardous waste services segment, Republic
Environmental Systems, Inc. ("RESI") and the distribution of the stock of RESI
to the Company's stockholders in 1995. The following discussion excludes the
operational activity and results of the hazardous waste services segment of the
Company, which have been included in the accompanying Consolidated Financial
Statements for all periods presented as discontinued operations.
Revenue
The Company's revenue from its collection operations consists of fees
from residential, commercial and industrial customers. The Company's revenue
from landfill operations is comprised primarily of tipping fees charged to
third parties. The Company's revenue from its electronic security services
business results from monitoring contracts for security systems and fees
charged for the sale and installation of such systems.
The following table presents revenue data from the Company's different
industry segments for the years ended December 31:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Solid waste services . . . . . . . . . . . . $226,815 $161,237 $133,711
Electronic security services . . . . . . . . 33,500 25,874 20,590
-------- --------- --------
$260,315 $187,111 $154,301
======== ========= ========
</TABLE>
The increase in revenue from the solid waste services segment for 1995
is primarily a result of the acquisition of HMC and other businesses, as well
as internal growth and increased volume at existing operations. The increase
for 1994 is primarily attributable to internal growth. The increases in
revenue from the electronic security services segment for 1995 and 1994 are
principally a result of an aggressive expansion plan targeted at generating new
monitoring business.
Operating Costs and Expenses
Cost of operations for the Company's collection operations is variable
and includes disposal, labor, fuel and equipment maintenance costs. Landfill
cost of operations includes most daily operating expenses, the legal and
administrative costs of ongoing environmental compliance, costs of capital for
cell development and accruals for closure and post-closure costs. Certain
direct landfill development costs, such as engineering, upgrading, cell
construction and permitting costs, are capitalized and depleted based on
consumed airspace. All indirect landfill development costs, such as executive
salaries, general corporate overhead, public affairs and other corporate
services are expensed as incurred. Cost of operations for the Company's
electronic security services business primarily consists of the labor and
equipment associated with the sale, installation and monitoring of security
systems.
The following table sets forth the Company's total cost of operations
and selling, general and administrative expenses as percentages of total
revenue for the years ended December 31:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Cost of operations . . . . . . . . . . 65% 66% 68%
Selling, general and administrative . . 21% 22% 25%
</TABLE>
Cost of operations was $169,559,000, $123,877,000 and $104,720,000 for
the years ended December 31, 1995, 1994 and 1993, respectively. The increases
are consistent with the increases in revenue for such periods. The decreases in
cost of operations as a percentage of revenue for the years ended December 31,
1995 and 1994 are primarily a result of price increases and the implementation
of cost reduction measures.
18
<PAGE> 19
Selling, general and administrative expenses were $54,133,000,
$41,730,000 and $38,854,000 for the years ended December 31, 1995, 1994 and
1993, respectively. These increases primarily reflect the growth of the
Company's business through the acquisition of HMC and other businesses. The
decreases in selling, general and administrative expenses as a percentage of
revenue for the years ended December 31, 1995 and 1994 are largely due to the
Company's continued commitment to reduce and control such expenses by
implementing efficiencies within the Company's administrative functions.
Restructuring and Unusual Charges
In 1993, the Company recorded restructuring and unusual charges of
$10,040,000 based on the Company's reevaluation of its solid waste operations.
As a result of this reevaluation, the Company decided to terminate certain
contracts, close one of its facilities due to low waste volumes and abandon its
permitting effort at another facility because of limited market opportunity in
that area and delays in the permitting process. The write-off of property and
equipment and accumulated permitting costs associated with these facilities
were included in these restructuring and unusual charges. In addition, the
Company also reevaluated its exposure related to litigation and environmental
matters and provided additional accruals for the costs to defend or settle
certain litigation and environmental matters. For further discussion of the
restructuring and unusual charges, see Note 10 of Notes to Consolidated
Financial Statements.
Interest and Other Income
Interest and other income increased to $5,691,000 in 1995 from
$989,000 in 1994 due to the increase in the Company's cash investments resulting
from the proceeds from sales of Common Stock. For further discussion of the
sales of Common Stock, see "Liquidity and Capital Resources" and Note 5 of
Notes to Consolidated Financial Statements.
Interest Expense
Interest expense was $5,630,000, $4,222,000 and $2,685,000 for the
years ended December 31, 1995, 1994 and 1993, respectively. The increases are
primarily due to higher average outstanding borrowings used to fund internal
growth. All of the Company's outstanding borrowings were repaid during the
latter half of 1995.
Income Taxes
The Company's income tax provision for 1995 and 1994 was partially
offset by certain tax reserve adjustments resulting from tax planning
strategies employed by the Company, such as combining entities to reduce state
income taxes, claiming tax credits not previously claimed, recapturing taxes
previously paid by acquired companies and adjustments for the resolution of tax
matters in amounts more favorable than those originally estimated.
Additionally, the Company's 1994 income tax provision was offset by a decrease
in the valuation allowance related to the expected realization of deferred tax
assets generated as a result of restructuring and unusual charges incurred in
the fourth quarter of 1993. The valuation allowance was recorded in 1993 due
to the uncertainty surrounding the future utilization of such deferred tax
assets. For further discussion of income taxes, see Note 4 of Notes to
Consolidated Financial Statements.
ENVIRONMENTAL AND LANDFILL MATTERS
The Company provides for accrued environmental and landfill costs
which include landfill site closure and post-closure costs. Landfill site
closure and post-closure costs include costs to be incurred for final closure
of the landfills and costs for providing required post-closure monitoring and
maintenance of landfills. These costs are accrued based on consumed airspace.
The Company estimates its future cost requirements for closure and post-closure
monitoring and maintenance for its solid waste facilities based on its
interpretation of the technical standards of the EPA's Subtitle D regulations.
These estimates do not take into account discounts for the present value of
such total estimated costs. Environmental costs are accrued by the Company
through a charge to income in the appropriate period for known and anticipated
environmental liabilities.
The Company periodically reassesses its methods and assumptions used
to estimate such accruals for environmental and landfill costs and adjusts such
accruals accordingly. Such factors considered are changing regulatory
requirements, the
19
<PAGE> 20
effects of inflation, changes in operating climates in the regions in which the
Company's facilities are located and the expectations regarding costs of
securing environmental services.
DISCONTINUED OPERATIONS
In July 1994, the Company announced the contemplation of a plan to
exit the hazardous waste services segment of the environmental industry, and in
October 1994, the Board of Directors authorized management to pursue the plan,
subject to final approval from the Board of Directors and the resolution of
certain legal and financial requirements. The plan provided for the
combination of the Company's hazardous waste services operations in its
wholly-owned subsidiary, RESI, and the distribution of the stock of RESI to the
stockholders of record of the Company.
In February 1995, the Board of Directors approved the plan of
distribution, and on April 26, 1995, the Company's stockholders received one
share of RESI's common stock for every five shares of Common Stock owned of
record on April 21, 1995. The Company has had no direct ownership interest in
RESI since the Distribution. The hazardous waste services segment of the
Company's business has been accounted for as a discontinued operation, and
accordingly, the accompanying Consolidated Financial Statements of the Company
for 1994 and 1993 have been restated to report separately the net assets and
operating results of these discontinued operations. For further discussion of
the Distribution, see Note 9 of Notes to Consolidated Financial Statements.
SEASONALITY
The Company's solid waste operations can be adversely affected by
extended periods of inclement weather, such as rain or snow, which could delay
the collection and disposal of waste, reduce the volume of waste generated or
delay the expansion of the Company's landfill sites. The Company's electronic
security services operations are not materially impacted by seasonality.
LIQUIDITY AND CAPITAL RESOURCES
As previously discussed, the Company will continue to pursue
acquisitions in the solid waste, electronic security services and other
selected industries and anticipates financing acquisitions with the proceeds
from the equity transactions mentioned below as well as through the issuance of
Common Stock. Management believes that the Company currently has sufficient
cash and access to the financial markets to fund current operations and make
acquisitions. However, substantial additional capital may be necessary to
fully implement the Company's aggressive acquisition program. Accordingly, the
Company replaced its existing credit facility in December 1995 with a
substantially larger credit facility of $250,000,000, the proceeds from which
will be used, among other things, to make acquisitions and to expand the
Company's operations. However, there can be no assurance that any additional
financing will be available, or, in the event that it is, that it will be
available in the amounts or terms acceptable to the Company.
CASH FLOWS FROM OPERATING ACTIVITIES
The Company's net cash flows from operating activities increased
slightly during 1995 as a result of an increase in operating cash generated by
its ongoing business. The Company used its operating cash flows during 1995 to
repay existing indebtedness and make capital expenditures. The Company has in
the past made capital expenditures from cash on hand and operating cash flows
and anticipates continuing to do so in 1996.
CASH FLOWS FROM INVESTING ACTIVITIES
The Company made capital expenditures of approximately $48,885,000
during 1995 which included the purchase of new fixed assets, normal replacement
of older property and the expansion of landfill sites. The Company also made
expenditures of approximately $15,980,000 during 1995 related to the expansion
of its electronic security services business through new installations and
acquisitions of subscriber accounts. Management anticipates continuing to make
capital expenditures for new equipment, upgrading existing equipment and
facilities, the construction of new airspace and the installation of new
security systems. The Company expects that these expenditures may increase in
the future due to the internal growth of the Company and business combinations.
20
<PAGE> 21
CASH FLOWS FROM FINANCING ACTIVITIES
In August 1995, the Company issued and sold an aggregate of 8,350,000
shares of Common Stock and warrants to purchase an additional 16,700,000 shares
of Common Stock to Mr. Huizenga, Westbury (Bermuda) Ltd. (a Bermuda corporation
controlled by Michael G. DeGroote), Harris W. Hudson, and certain of their
assigns for an aggregate purchase price of approximately $37,500,000. The
warrants are exercisable at prices ranging from $4.50 to $7.00 per share. In
August 1995, the Company issued and sold an additional 1,000,000 shares of
Common Stock each to Mr. Huizenga and John J. Melk, for $13.25 per share for
aggregate proceeds of approximately $26,500,000.
In July 1995, the Company sold 5,400,000 shares of Common Stock in a
private placement transaction for $13.25 per share resulting in net proceeds of
approximately $69,000,000 after deducting expenses, fees and commissions. In
September 1995, the Company sold 5,000,000 shares of Common Stock in an
additional private placement transaction for $20.25 per share resulting in net
proceeds of approximately $99,000,000.
As a result of these transactions, the Company received approximately
$232,000,000 in cash, a portion of which was used to repay all outstanding
borrowings resulting in no long-term debt outstanding at December 31, 1995.
FINANCIAL CONDITION
The Company believes that its financial condition is very strong and
that it has the financial resources necessary to meet its anticipated financing
needs. In addition to cash provided by operating activities and proceeds from
the sales of Common Stock, the Company has availability under its new credit
facility to fund internal growth and take advantage of acquisition
opportunities.
WORKING CAPITAL
Working capital at December 31, 1995 amounted to $142,891,000 as
compared to a deficit of ($7,184,000) at December 31, 1994. The increase in
working capital is primarily the result of cash proceeds received from the
sales of Common Stock. The Company believes working capital may decline in
1996 to lower levels as additional capital is used for the continued growth and
expansion of the Company's business.
Accounts receivable at December 31, 1995 were $32,780,000 as compared
to $21,610,000 at December 31, 1994. The increase is primarily attributed to
the acquisition of HMC and internal growth within the Company.
Other current assets, which consists primarily of inventory and notes
receivable, were $10,980,000 at December 31, 1995 as compared to $5,043,000 at
December 31, 1994. The increase is due primarily to the acquisition of HMC.
Accounts payable and accrued liabilities were $33,791,000 at December
31, 1995 as compared to $21,452,000 at December 31, 1994. The increase is
primarily due to the acquisition of HMC and the internal growth of the
Company's business.
Deferred revenue consists primarily of proceeds from the factoring of
electronic security monitoring contracts by one of the Company's acquired
security businesses. The use of factoring was discontinued by the Company
subsequent to the date of acquisition. The current portion of deferred revenue
amounted to $23,532,000 at December 31, 1995 as compared to $12,255,000 at
December 31, 1994. The increase is primarily due to new installations of
electronic security devices and related monitoring contracts.
PROPERTY AND EQUIPMENT, NET
Property and equipment, net amounted to $187,461,000 at December 31,
1995 as compared to $134,506,000 at December 31, 1994. The increase is
attributed primarily to the acquisition of HMC and increased capital
expenditures resulting from internal growth and expansion.
21
<PAGE> 22
INVESTMENT IN SUBSCRIBER ACCOUNTS, NET
Investment in subscriber accounts, net represents capitalized direct
labor and material costs associated with the installation of new electronic
security systems and the cost of acquired subscriber accounts. Investment in
subscriber accounts, net increased $17,347,000 during 1995 due to growth in
electronic security system installations and acquisitions of subscriber
accounts.
INTANGIBLE ASSETS, NET
Intangible assets, net increased $84,266,000 during 1995 as a result
of the acquisition of HMC and other businesses during the year.
NET ASSETS OF DISCONTINUED OPERATIONS
Net assets of discontinued operations decreased to zero at December
31, 1995 from $20,292,000 at December 31,1994 due to the spin-off of the
hazardous waste services segment which was consummated in April 1995. For
further discussion of the spin-off, see Note 9 of Notes to Consolidated
Financial Statements.
LONG-TERM DEBT, INCLUDING CURRENT MATURITIES AND NOTES PAYABLE
Long-term debt, including current maturities and notes payable
decreased from $48,030,000 at December 31, 1994 to zero at December 31, 1995
due to the payoff of debt from the cash proceeds of sales of Common Stock.
STOCKHOLDERS' EQUITY
Stockholders' equity increased $326,557,000 during 1995 primarily due
to the sales of Common Stock and the acquisition of HMC and other businesses.
22
<PAGE> 23
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Consolidated Financial Statements
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Certified Public Accountants
24
Consolidated Balance Sheets as of December 31, 1995 and 1994
25
Consolidated Statements of Operations for Each of the Three Years Ended
December 31, 1995 26
Consolidated Statements of Stockholders' Equity for Each of the
Three Years Ended December 31, 1995 27
Consolidated Statements of Cash Flows for Each of the Three Years Ended
December 31, 1995 28
Notes to Consolidated Financial Statements 29
Financial Statement Schedule II, Valuation and Qualifying Accounts and Reserves,
For Each of the Three Years Ended December 31, 1995 45
</TABLE>
23
<PAGE> 24
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Stockholders and Board of Directors of Republic Industries, Inc.:
We have audited the accompanying consolidated balance sheets of
Republic Industries, Inc. (a Delaware corporation, formerly Republic Waste
Industries, Inc.) and subsidiaries as of December 31, 1995 and 1994, and the
related consolidated statements of operations, stockholders' equity and cash
flows for each of the three years in the period ended December 31, 1995. These
consolidated financial statements and the schedule referred to below are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements and the schedule based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Republic
Industries, Inc. and subsidiaries as of December 31, 1995 and 1994, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1995 in conformity with generally accepted
accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the index to
consolidated financial statements is presented for the purpose of complying
with the Securities and Exchange Commission's rules and is not part of the
basic financial statements. This schedule has been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
ARTHUR ANDERSEN LLP
Fort Lauderdale, Florida,
March 26, 1996.
24
<PAGE> 25
REPUBLIC INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
December 31,
-----------------------------
ASSETS 1995 1994
---- ----
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . $ 159,753 $ 10,031
Accounts receivable, less allowance for doubtful accounts of
$1,846 and $1,055, respectively . . . . . . . . . . . . . . . . . 32,780 21,610
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 3,251 2,559
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . 10,980 5,043
---------- ----------
TOTAL CURRENT ASSETS . . . . . . . . . . . . . . . . . . . . 206,764 39,243
Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . 187,461 134,506
Investment in subscriber accounts, net of accumulated amortization
of $11,446 and $6,977, respectively . . . . . . . . . . . . . . . . . . . 41,540 24,193
Intangible assets, net of accumulated amortization of $7,356 and $3,212,
respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99,871 15,605
Net assets of discontinued operations . . . . . . . . . . . . . . . . . . . . - 20,292
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,414 8,526
---------- ----------
TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . . $ 542,050 $ 242,365
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . $ 15,007 $ 11,777
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . 18,784 9,675
Current portion of deferred revenue . . . . . . . . . . . . . . . . 23,532 12,255
Current maturities of long-term debt and notes payable . . . . . . - 10,035
Current portion of accrued environmental and landfill costs . . . . 2,925 1,404
Income taxes payable . . . . . . . . . . . . . . . . . . . . . . . . 3,625 1,281
---------- ----------
TOTAL CURRENT LIABILITIES . . . . . . . . . . . . . . . . . 63,873 46,427
Long-term debt and notes payable, net of current maturities . . . . . . . . . - 37,995
Deferred revenue, net of current portion . . . . . . . . . . . . . . . . . . 18,012 20,353
Accrued environmental and landfill costs, net of current portion . . . . . . 8,386 8,244
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,359 11,510
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,033 8,006
---------- ----------
TOTAL LIABILITIES . . . . . . . . . . . . . . . . . . . . . 105,663 132,535
---------- ----------
COMMITMENTS AND CONTINGENCIES - -
STOCKHOLDERS' EQUITY
Preferred stock, par value $0.01 per share; 5,000,000 shares
authorized; none issued . . . . . . . . . . . . . . . . . . . . . . - -
Common stock, par value $0.01 per share; 350,000,000 and
100,000,000 shares authorized, respectively; 76,056,483 and
45,313,715 issued, respectively . . . . . . . . . . . . . . . . . 760 453
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . 398,485 105,586
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . 37,142 4,464
Notes receivable arising from stock purchase agreements . . . . . . - (673)
---------- ----------
TOTAL STOCKHOLDERS' EQUITY . . . . . . . . . . . . . . . . . 436,387 109,830
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY . . . . . . . . . $ 542,050 $ 242,365
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
25
<PAGE> 26
REPUBLIC INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . $ 260,315 $ 187,111 $ 154,301
Expenses:
Cost of operations . . . . . . . . . . . . . . . . 169,559 123,877 104,720
Selling, general and administrative . . . . . . . 54,133 41,730 38,854
Restructuring and unusual charges . . . . . . . . - - 10,040
----------- ---------- ----------
Operating income . . . . . . . . . . . . . . . . . . . . . 36,623 21,504 687
Interest and other income . . . . . . . . . . . . . . . . . 5,691 989 712
Interest expense . . . . . . . . . . . . . . . . . . . . . (5,630) (4,222) (2,685)
----------- ---------- ----------
Income (loss) from continuing operations before income
taxes . . . . . . . . . . . . . . . . . . . . . . . . . 36,684 18,271 (1,286)
Income tax provision . . . . . . . . . . . . . . . . . . . 13,472 3,839 1,187
----------- ---------- ----------
Income (loss) from continuing operations . . . . . . . . . 23,212 14,432 (2,473)
Discontinued operations:
Income (loss) from discontinued operations, net of
income tax benefit of $193, $0 and $210,
respectively . . . . . . . . . . . . . . . . . . . (293) 2,684 (14,579)
----------- ---------- ----------
Net income (loss) . . . . . . . . . . . . . . . . . . . . . $ 22,919 $ 17,116 $ (17,052)
=========== ========== ==========
Primary earnings (loss) per common and common equivalent
share:
Continuing operations . . . . . . . . . . . . . . $ 0.37 $ 0.32 $ (0.05)
Discontinued operations . . . . . . . . . . . . . - 0.06 (0.32)
----------- ---------- ----------
Net income (loss) . . . . . . . . . . . . . . . . $ 0.37 $ 0.38 $ (0.37)
=========== ========== ==========
Fully diluted earnings (loss) per common and common
equivalent share:
Continuing operations . . . . . . . . . . . . . . $ 0.35 $ 0.32 $ (0.05)
Discontinued operations . . . . . . . . . . . . . - 0.06 (0.32)
----------- ---------- ----------
Net income (loss) . . . . . . . . . . . . . . . . $ 0.35 $ 0.38 $ (0.37)
=========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
26
<PAGE> 27
REPUBLIC INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands)
<TABLE>
Notes
Receivable
Arising
Retained From
Additional Earnings Stock
Common Paid-In (Accumulated Purchase
Stock Capital Deficit) Agreements
--------- ---------- -------------- ------------
<S> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1992 . . . . . . $ 454 $ 102,463 $ 12 ,398 $ (673)
Contributions to capital from pooled
entities . . . . . . . . . . . . . . - 2,890 - -
Distributions to former stockholders
of acquired companies . . . . . . - - (3,078) -
Other . . . . . . . . . . . . . . . . - (679) (418) -
Net loss . . . . . . . . . . . . . . . - - (17,052) -
------ ---------- ----------- --------
BALANCE AT DECEMBER 31, 1993 . . . . . . 454 104,674 (8,150) (673)
Distributions to former stockholders
of acquired companies . . . . . . . - - (4,520) -
Other . . . . . . . . . . . . . . . . (1) 912 18 -
Net income . . . . . . . . . . . . . . - - 17,116
------ ---------- ----------- --------
BALANCE AT DECEMBER 31, 1994 . . . . . . 453 105,586 4,464 (673)
Sales of common stock . . . . . . . . 208 231,823 - -
Stock issued in acquisitions . . . . 86 82,897 - -
Exercise of stock options and -
warrants, including tax benefit
of $4,068 . . . . . . . . . . . . . 14 13,360 -
Payments received on notes . . . . . . - - - 673
Reclassification of additional paid-in
capital to effect the spin-off . . . - (36,305) 36,305 -
Spin-off of Republic Environmental
Systems, Inc. . . . . . . . . . . . - - (23,579) -
Distributions to former stockholders
of acquired companies . . . . . . . - - (3,079) -
Other . . . . . . . . . . . . . . . . (1) 1,124 112 -
Net income . . . . . . . . . . . . . - - 22,919 -
------- ---------- ----------- --------
BALANCE AT DECEMBER 31, 1995 . . . . . $ 760 $ 398,485 $ 37,142 $ -
======= ========== =========== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
27
<PAGE> 28
REPUBLIC INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES OF CONTINUING OPERATIONS:
Income (loss) from continuing operations . . . . . . . . $ 23,212 $ 14,432 $ (2,473)
Adjustments to reconcile income (loss) from continuing
operations to net cash provided by continuing operations:
Restructuring and unusual charges . . . . . . . . . . - - 10,040
Depreciation, depletion and amortization . . . . . . . 20,999 18,130 14,435
Provision for doubtful accounts . . . . . . . . . . 1,204 721 811
Provision for accrued environmental and
landfill costs . . . . . . . . . . . . . . . . . . 400 377 215
Gain on the sale of equipment . . . . . . . . . . . . (347) (285) (148)
Changes in assets and liabilities, net of effects
from business acquisitions:
Accounts receivable . . . . . . . . . . . . . . . . . (5,582) (3,403) (2,765)
Prepaid expenses and other assets . . . . . . . . . . (3,273) (395) (2,307)
Accounts payable and accrued liabilities . . . . . . . (549) 2,263 (52)
Income taxes payable . . . . . . . . . . . . . . . . . 2,326 712 (772)
Deferred revenue and other liabilities . . . . . . . (13,593) (11,040) (2,801)
-------- -------- -------
Net cash provided by continuing operations . . . . . . 24,797 21,512 14,183
-------- -------- -------
CASH USED BY DISCONTINUED OPERATIONS . . . . . . . . . . . (261) (736) (4,360)
-------- -------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Business acquisitions, net of cash acquired . . . . . . (6,962) (4,776) (5,664)
Purchases of property and equipment . . . . . . . . . . (48,885) (21,217) (12,109)
Investment in subscriber accounts . . . . . . . . . . . (15,980) (17,512) (9,569)
Other . . . . . . . . . . . . . . . . . . . . . . . . . - (819) (2,233)
-------- -------- --------
Net cash used in investing activities . . . . . . . . . (71,827) (44,324) (29,575)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Sales of common stock . . . . . . . . . . . . . . . . . . 232,031 - -
Exercise of stock options and warrants . . . . . . . . . 9,306 - -
Capital contribution to Republic Environmental
Systems, Inc. . . . . . . . . . . . . . . . . . . . . . (2,520) - -
Payments of long-term debt and notes payable . . . . . . . (83,344) (16,474) (14,552)
Proceeds from long-term debt and notes payable . . . . . . 24,498 19,453 21,414
Proceeds from financing arrangements . . . . . . . . . . 24,747 27,070 15,473
Distributions to former stockholders of acquired
companies . . . . . . . . . . . . . . . . . . . . . . . (3,079) (4,520) (3,078)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . (4,626) (1,240) 615
--------- -------- --------
Net cash provided by financing activities . . . . . . . . 197,013 24,289 19,872
--------- -------- --------
INCREASE IN CASH AND CASH EQUIVALENTS . . . . . . . . . . . 149,722 741 120
CASH AND CASH EQUIVALENTS:
BEGINNING OF PERIOD . . . . . . . . . . . . . . . . . . 10,031 9,290 9,170
--------- -------- --------
END OF PERIOD . . . . . . . . . . . . . . . . . . . . $ 159,753 $ 10,031 $ 9,290
========= ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
28
<PAGE> 29
REPUBLIC INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(000'S OMITTED IN ALL TABLES EXCEPT PER SHARE AMOUNTS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying consolidated financial statements include the
accounts of Republic Industries, Inc. (formerly Republic Waste Industries,
Inc.) and its wholly-owned subsidiaries ("Republic" or the "Company"). All
significant intercompany accounts and transactions have been eliminated.
In 1994, the Board of Directors authorized management to pursue a plan to
distribute its hazardous waste services segment, Republic Environmental
Systems, Inc. ("RESI"), to Republic stockholders. Accordingly, as
discussed in Note 9, this segment has been accounted for as a discontinued
operation and the accompanying Consolidated Financial Statements for 1994
and 1993 presented herein have been restated to report separately the net
assets and operating results of these discontinued operations.
In order to maintain consistency and comparability between periods
presented, certain amounts have been reclassified from the previously
reported financial statements in order to conform with the financial
statement presentation of the current period.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenue and expenses
during the reporting period. The most significant estimates made in the
preparation of the accompanying Consolidated Financial Statements are
estimated future cost requirements for closure and post-closure monitoring
and maintenance for the Company's solid waste facilities and estimated
customer lives utilized in amortizing the investment in subscriber accounts
with respect to the Company's electronic security services segment.
Although the Company believes its estimates are appropriate, changes in
assumptions utilized in preparing such estimates could cause these
estimates to change in the near term.
The accompanying Consolidated Financial Statements include the
financial position and results of operations of Kertz Security Systems II,
Inc. and Kertz Security Systems, Inc. (collectively, "Kertz"), with which
the Company merged in August 1995; United Waste Service, Inc. ("United")
and Southland Environmental Services, Inc. ("Southland"), with which the
Company merged in October 1995; and J.C. Duncan Company, Inc. and
affiliates ("Duncan"), Garbage Disposal Service, Inc. ("GDS"), Fennell
Container Co., Inc. and affiliates ("Fennell") and Scott Security Systems
and affiliates ("Scott"), with which the Company merged in November 1995.
These transactions were accounted for under the pooling of interests method
of accounting and, accordingly, the accompanying Consolidated Financial
Statements have been restated as if the Company and Kertz, United,
Southland, Duncan, GDS, Fennell and Scott (collectively, the "Pooled
Entities") had operated as one entity since inception. See Note 2 for
further discussion of these transactions.
OTHER CURRENT ASSETS. Other current assets consist primarily of
short-term notes receivable and inventories. Inventories consist
principally of equipment parts, compost materials and supplies and are
valued under a method which approximates the lower of cost (first-in,
first-out) or market. At December 31, 1995 and 1994, other current assets
included inventories of $3,794,000 and $3,360,000, respectively.
PROPERTY AND EQUIPMENT. Property and equipment are recorded at cost.
Expenditures for major additions and improvements are capitalized, while
minor replacements, maintenance and repairs are charged to expense as
incurred. When property is retired or otherwise disposed of, the cost and
accumulated depreciation are removed from the accounts and any resulting
gain or loss is reflected in current operations.
29
<PAGE> 30
REPUBLIC INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
The Company revises the estimated useful lives of property and
equipment acquired through its business acquisitions to conform with its
policies regarding property and equipment. Depreciation is provided over
the estimated useful lives of the assets involved using the straight-line
method. The estimated useful lives are: twenty to forty years for
buildings and improvements, three to fifteen years for vehicles and
equipment and five to ten years for furniture and fixtures.
Landfills are stated at cost and are depleted based on consumed
airspace. Landfill improvements include direct costs incurred to obtain a
landfill permit and direct costs incurred to construct and develop the
site. These costs are depleted based on consumed airspace. No general
and administrative costs are capitalized as landfills and landfill
improvements.
A summary of property and equipment at December 31 is shown below:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Land, landfills and improvements . . . . . . . . . . $ 92,909 $ 84,864
Vehicles and equipment . . . . . . . . . . . . . . . 145,034 95,760
Buildings and improvements . . . . . . . . . . . . . 23,512 16,174
Furniture and fixtures . . . . . . . . . . . . . . . 7,907 6,496
--------- --------
269,362 203,294
Less accumulated depreciation, amortization
and depletion . . . . . . . . . . . . . . . . . . (81,901) (68,788)
--------- --------
$ 187,461 $134,506
========= ========
</TABLE>
INVESTMENT IN SUBSCRIBER ACCOUNTS, NET. Investment in subscriber
accounts, net consists of capitalized direct labor and material costs
associated with new monitoring contracts installed by the Company's electronic
security services business and the cost of acquired subscriber accounts.
The costs are amortized over periods ranging from eight to twelve
years based on the historical customer attrition rates. The amortization
method applies the attrition rate (converted to an estimated useful life) to
the entire net book value of the account base at the beginning of each period
adjusted for additions and divestitures during the period.
INTANGIBLE ASSETS. Intangible assets consist primarily of the cost of
acquired businesses in excess of the fair value of net tangible assets
acquired. The cost in excess of the fair value of net tangible assets is
amortized over the lesser of the estimated life or forty years on a
straight-line basis. Amortization expense related to intangible assets was
$2,241,000, $1,252,000 and $939,000 in 1995, 1994 and 1993, respectively.
The Company continually evaluates whether events and circumstances
have occurred that may warrant revision of the estimated useful life of
intangible assets or whether the remaining balance of intangible assets should
be evaluated for possible impairment. The Company uses an estimate of the
related undiscounted net income over the remaining life of the intangible
assets in measuring their recoverability.
DEFERRED REVENUE. Deferred revenue consists primarily of proceeds from
the factoring of electronic security monitoring contracts by one of the
Company's acquired security businesses. The use of factoring was discontinued
by the Company subsequent to the date of acquisition. Revenue is recognized
over the period services are provided.
30
<PAGE> 31
REPUBLIC INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
ACCRUED ENVIRONMENTAL AND LANDFILL COSTS. Accrued environmental and
landfill costs include landfill site closure and post-closure costs. Landfill
site closure and post-closure costs include costs to be incurred for final
closure of the landfills and costs for providing required post-closure
monitoring and maintenance of landfills. These costs are accrued based on
consumed airspace. Estimated aggregate closure and post-closure costs are to
be fully accrued for these landfills at the time that such facilities cease to
accept waste and are closed. Excluding existing accruals at the end of 1995,
approximately $7,871,000 of such costs are to be expensed over the remaining
lives of these facilities. The Company estimates its future cost requirements
for closure and post-closure monitoring and maintenance for its solid waste
facilities based on its interpretation of the technical standards of the United
States Environmental Protection Agency's Subtitle D regulations. These
estimates do not take into account discounts for the present value of such
total estimated costs. Environmental costs are accrued by the Company through
a charge to income in the appropriate period for known and anticipated
environmental liabilities.
The Company periodically reassesses its method and assumptions used to
estimate such accruals for environmental and landfill costs and adjusts such
accruals accordingly. Such factors considered are changing regulatory
requirements, the effects of inflation, changes in operating climates in the
regions in which the Company's facilities are located and the expectations
regarding costs of securing environmental services.
As discussed in Note 7, the Company is involved in litigation and is
subject to ongoing environmental investigations by certain regulatory agencies,
as well as other claims and disputes that could result in additional litigation
which are in the normal course of business.
REVENUE RECOGNITION. The Company recognizes revenue in the period
services are provided or products are sold.
STATEMENTS OF CASH FLOWS. The Company considers all highly liquid
investments with purchased maturities of three months or less to be cash
equivalents. The effect of non-cash transactions related to business
combinations, as discussed in Note 2, and other non-cash transactions are
excluded from the Statements of Cash Flows.
FAIR VALUE OF FINANCIAL INSTRUMENTS. The book values of cash, trade
accounts receivable, trade accounts payable and financial instruments included
in other current assets and other assets approximate their fair values
principally because of the short-term maturities of these instruments. The
fair value of the Company's long-term debt is estimated based on the current
rates offered to the Company for debt of similar terms and maturities. Under
this method the Company's fair value of long-term debt was not significantly
different than the stated value at December 31, 1995 and 1994.
In the normal course of business, the Company has letters of credit,
performance bonds and other guarantees which are not reflected in the
accompanying Consolidated Balance Sheets. The Company's management believes
that the likelihood of performance under these financial instruments is minimal
and expects no material losses to occur in connection with these financial
instruments.
CONCENTRATIONS OF CREDIT RISK. Concentrations of credit risk with
respect to trade receivables are limited due to the wide variety of customers
and markets in which the Company's services are provided, as well as their
dispersion across many different geographic areas. As a result, at December
31, 1995, the Company does not consider itself to have any significant
concentrations of credit risk.
FUTURE ACCOUNTING PRONOUNCEMENTS. In March 1995, the Financial
Accounting Standards Board issued Statement of Financial Accounting Standards
("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of", which requires adoption in 1996. SFAS
No. 121 establishes accounting standards for the impairment of long-lived
assets, certain identifiable intangibles, and goodwill related to those assets
to be held and used, and for long-lived assets and certain identifiable
intangibles to be disposed. The Company believes the adoption of SFAS No. 121
will not have a material effect on the Company's financial condition or results
of operations. In October 1995, the Financial Accounting Standards Board
issued SFAS No. 123, "Accounting for Stock-Based
31
<PAGE> 32
REPUBLIC INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Compensation", which requires adoption in 1996. SFAS No. 123 requires that the
Company's financial statements include certain disclosures about stock-based
employee compensation arrangements and permits the adoption of a change in
accounting for such arrangements. Changes in accounting for stock-based
compensation are optional and the Company plans to adopt only the disclosure
requirements in 1996.
2. BUSINESS COMBINATIONS
Businesses acquired through December 31, 1995 and accounted for under
the pooling of interests method of accounting have been included retroactively
in the financial statements as if the companies had operated as one entity
since inception. Businesses acquired through December 31, 1995 and accounted
for under the purchase method of accounting are included in the financial
statements from the date of acquisition.
In August 1995, the Company merged with Kertz, which provides
electronic security monitoring and maintenance predominantly in the South
Florida area. In October 1995, the Company merged with United and Southland.
United provides solid waste collection, transfer and recycling services in the
Atlanta, Georgia metropolitan area, and Southland provides solid waste
collection services in the Northeast Florida area. In November 1995, the
Company merged with Duncan, GDS, Fennell and Scott. Duncan provides solid
waste collection and recycling services in the Dallas-Fort Worth metropolitan
area and throughout west Texas and also operates two landfills. GDS provides
solid waste collection and recycling services throughout western North
Carolina. Fennell is a full-service solid waste management company, providing
services in and around Charleston and Greenville, South Carolina and also owns
a landfill. Scott is an electronic security alarm company, providing monitoring
and maintenance services in Jacksonville, Orlando and Tallahassee, Florida, and
other metropolitan areas in the southeastern United States, including
Charlotte, North Carolina; Savannah, Georgia and Nashville, Tennessee. The
Company issued an aggregate of 18,127,984 shares of the Company's common stock,
$.01 par value per share, ("Common Stock") for the acquisitions of the Pooled
Entities. These acquisitions were accounted for under the pooling of
interests method of accounting and, accordingly, the accompanying Consolidated
Financial Statements have been restated for all periods as if the Company and
the Pooled Entities had operated as one entity since inception.
Details of the results of operations of the Company and the Pooled
Entities for the periods prior to the combinations are as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Revenue:
The Company . . . . . . . . . . . . . . . . . . $ 87,167 $ 48,766 $ 41,095
Pooled Entities . . . . . . . . . . . . . . . . 173,148 138,345 113,206
--------- --------- ---------
$ 260,315 $ 187,111 $ 154,301
========= ========= =========
Net income (loss) :
The Company . . . . . . . . . . . . . . . . . . $ 8,794 $ 11,187 $ (18,484)
Pooled Entities . . . . . . . . . . . . . . . . 14,125 5,929 1,432
--------- --------- ---------
$ 22,919 $ 17,116 $ (17,052)
========= ========= =========
</TABLE>
In August 1995, the Company acquired all of the outstanding shares of
capital stock of Hudson Management Corporation and Envirocycle, Inc.
(collectively, "HMC"). The purchase price paid by the Company was
approximately $72,800,000 and consisted of 8,000,000 shares of Common Stock.
HMC, as the third largest solid waste management company in Florida, provides
solid waste collection and recycling services to commercial, industrial and
residential customers. This acquisition, as well as several other minor
business combinations from January 1, 1993 to December 31, 1995, have been
accounted for under the purchase method of accounting.
32
<PAGE> 33
REPUBLIC INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
The Company's unaudited pro froma consolidated results of operations
for the years ended December 31, assuming the acquisition of HMC had occurred
at the beginning of each of the periods presented are as follows:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Revenue . . . . . . . . . . . . . . . . . . . . . . . $ 293,516 $ 235,114
========== ==========
Income from continuing operations before
income taxes . . . . . . . . . . . . . . . . . . . $ 38,058 $ 21,836
========== ==========
Net income . . . . . . . . . . . . . . . . . . . . . $ 24,064 $ 16,642
========== ==========
Fully diluted earnings per common and common
equivalent share . . . . . . . . . . . . . . . . $ 0.34 $ 0.31
========== ==========
Weighted average common and common
equivalent shares . . . . . . . . . . . . . . . . 70,475 53,545
========== ==========
</TABLE>
The unaudited pro forma results of operations are presented for
informational purposes only and may not necessarily reflect the future results
of operations of the Company or what the results of operations would have been
had the Company owned and operated these businesses as of January 1, 1994.
The preliminary purchase price allocation for the HMC acquisition was
as follows:
<TABLE>
<S> <C>
Property and equipment . . . . . . . . . . . . . . . $ 16,910
Intangible assets . . . . . . . . . . . . . . . . . . 71,110
Working capital deficiency . . . . . . . . . . . . . (6,602)
Long-term debt assumed . . . . . . . . . . . . . . . (8,618)
---------
Common stock issued . . . . . . . . . . . . . . . . . $ 72,800
=========
</TABLE>
In February 1996, the Company acquired all of the outstanding capital
stock of certain electronic security companies known as Denver Burglar Alarm
("Denver Alarm"). Denver Alarm is the oldest independent electronic security
alarm company in the United States and provides installation, monitoring and
maintenance services to approximately 27,000 residential and commercial
accounts throughout Colorado.
In February 1996, the Company acquired Incendere, Inc. and certain
waste companies (collectively, "Schaubach") controlled by Dwight C. Schaubach.
Schaubach provides solid waste collection and recycling services to more than
11,000 residential, commercial, and industrial customers in southeastern
Virginia and eastern North Carolina and provides transportation of medical
waste throughout the Mid-Atlantic states for more than 7,000 customers.
The Company issued an aggregate of 2,914,452 shares of Common Stock to
acquire Schaubach and Denver Alarm, both of which will be accounted for as
pooling of interests business combinations.
33
<PAGE> 34
REPUBLIC INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
The Company's unaudited pro forma consolidated results of operations,
assuming the Denver Alarm and Schaubach mergers had been consummated as of
December 31, 1995 are as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------
1995 1994 1993
--------- -------- ---------
<S> <C> <C> <C>
Revenue . . . . . . . . . . . . $295,165 $218,173 $ 182,495
======== ======== =========
Net income (loss) . . . . . . . . . . $ 24,681 $ 19,533 $ (14,910)
======== ======== =========
Fully diluted earnings (loss) per common
and common equivalent share . . . .
$ .36 $ .40 $ (.31)
======== ======== =========
</TABLE>
In March 1996, the Company acquired substantially all of the assets of
Mid-American Waste Systems of Georgia, Inc. and affiliates ("Mid-American
Georgia") for a purchase price of approximately $52,000,000. At closing, the
Company issued an aggregate of 1,700,000 shares of Common Stock valued at
approximately $46,750,000 and will settle the remaining balance within 60 days
using additional Common Stock or cash. Mid-American Georgia owns and operates
a landfill, provides solid waste collection and recycling services to
commercial, residential and industrial customers, and operates two transfer
stations, in certain areas of the greater metropolitan Atlanta, Georgia area.
The acquisition of Mid-American Georgia will be accounted for under the
purchase method of accounting.
3. LONG-TERM DEBT AND NOTES PAYABLE
In connection with the equity investment and private placement
transactions, as discussed in Note 5, the Company received approximately
$232,000,000 in cash, a portion of which was used to repay all outstanding
borrowings.
Long-term debt and notes payable at December 31, 1994 consisted of
the following:
<TABLE>
<S> <C>
Revolving credit facility, secured by the stock of the
Company's subsidiaries, interest at prime or
at a Eurodollar rate plus 1.5%, principal
repaid in 1995 . . . . . . . . . . . . . . . . . . . $ 12,600
Notes to banks and financial institutions, secured by
equipment and other assets, interest ranging
from 6.0% to 12.9%, principal
repaid in 1995 . . . . . . . . . . . . . . . . . . . 28,815
Other notes, secured by equipment and other assets,
interest ranging from 4.0% to 16.93%,
principal repaid in 1995 . . . . . . . . . . . . . . 6,615
---------
$ 48,030
Less current maturities . . . . . . . (10,035)
---------
$ 37,995
=========
</TABLE>
In December 1995, the Company entered into a credit agreement (the
"Credit Agreement") with certain banks pursuant to which such banks have agreed
to advance the Company on an unsecured basis an aggregate of $250,000,000 for a
term of 36 months. Outstanding advances, if any, are payable at the expiration
of the 36-month term. At December 31, 1995, the Company had standby letters of
credit of $5,386,000 which reduce availability under this facility. The Credit
Agreement requires, among other items, that the Company maintain certain
financial ratios and comply with certain financial
34
<PAGE> 35
REPUBLIC INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
covenants. Interest is payable monthly and generally determined using either a
competitive bid feature or a LIBOR based rate. As of December 31, 1995, the
Company was in compliance with all covenants under the Credit Agreement.
The Company made interest payments of approximately $5,428,000,
$4,152,000 and $2,422,000 in 1995, 1994 and 1993, respectively.
4. INCOME TAXES
The Company accounts for income taxes in accordance with SFAS No. 109,
"Accounting for Income Taxes". Accordingly, deferred income taxes have been
provided to show the effect of temporary differences between the recognition of
revenue and expenses for financial and income tax reporting purposes and
between the tax basis of assets and liabilities and their reported amounts in
the financial statements.
The Company files a consolidated federal income tax return which
includes the operations of the Pooled Entities for periods subsequent to the
dates of the acquisitions. The Pooled Entities each file a "short-period"
federal tax return through their respective acquisition dates. Certain of the
Pooled Entities were subchapter S corporations for income tax purposes prior to
their acquisition by the Company. For purposes of these Consolidated Financial
Statements, federal and state income taxes have been provided as if these
companies had filed subchapter C corporation tax returns for the pre-acquisition
periods, and the current income tax expense is reflected as an increase to
additional paid-in capital. The subchapter S corporation status of these
companies was terminated effective with the closing date of the acquisitions.
The components of the income tax provision related to continuing
operations for the years ended December 31 are shown below:
<TABLE>
<CAPTION>
1995 1994 1993
-------- ------- ---------
<S> <C> <C> <C>
Current:
Federal . . . . . . . . . . . . . . . . . . . $ 10,333 $ 3,973 $ 1,664
State . . . . . . . . . . . . . . . . . . . . 944 618 279
-------- ------- -------
11,277 4,591 1,943
Federal deferred . . . . . . . . . . . . . . . . 4,587 2,453 (1,998)
Tax reserve adjustments . . . . . . . . . . . . (2,392) (1,963) -
Change in valuation allowance . . . . . . . . . - (1,242) 1,242
-------- ------- --------
Income tax provision . . . . . . . . . . . . . . $ 13,472 $ 3,839 $ 1,187
======== ======= ========
</TABLE>
Net operating loss carryforwards are recognized under SFAS No. 109
unless it is more likely than not that they will not be realized. In 1993, the
Company recorded a $1,242,000 valuation allowance related to the realization of
deferred tax assets generated as a result of the 1993 restructuring and unusual
charges. This valuation allowance was recorded due to the uncertainty
surrounding the future utilization of such deferred tax assets. In 1994, the
valuation allowance was eliminated based on the expected realization of such
deferred tax assets.
In the years immediately following an acquisition, the Company
provides income taxes at the statutory income tax rate applied to pre-tax
income. As part of its tax planning to reduce effective tax rates and cash
outlays for taxes, the Company employs a number of strategies such as combining
entities to reduce state income taxes, claiming tax credits not previously
claimed and recapturing taxes previously paid by acquired companies. At such
time as these reductions in the Company's deferred tax liabilities are
determined to be realizable, the impact of the reduction is recorded as tax
reserve adjustments in the tax provision.
35
<PAGE> 36
REPUBLIC INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
A reconciliation of the statutory federal income tax rate to the
Company's effective tax rate for the years ended December 31 is shown below:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Statutory federal income tax rate . . . . . . . 35.0% 34.0% 34.0%
Amortization of goodwill . . . . . . . . . . . 1.3 .5 (11.6)
State income taxes, net of federal benefit . . 2.4 3.0 (30.6)
Tax reserve adjustments . . . . . . . . . . . . (2.3) (10.7) 24.9
Change in valuation allowance . . . . . . . . . - (6.2) (151.1)
Other, net . . . . . . . . . . . . . . . . . . .3 0.4 42.1
---- ----- ------
Effective tax rate . . . . . . . . . . . . . 36.7% 21.0% (92.3%)
==== ===== ======
</TABLE>
Components of the net deferred income tax liability at December 31
are shown below:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Deferred income tax liabilities:
Book basis in property over tax basis . . . . . . . . . $23,064 $22,930
Deferred costs . . . . . . . . . . . . . . . . . . . . 8,067 8,954
------- -------
31,131 31,884
------- -------
Deferred income tax assets:
Net operating losses . . . . . . . . . . . . . . . . . (3,837) (5,186)
Deferred revenue . . . . . . . . . . . . . . . . . . . (10,353) (11,240)
Accrued environmental and landfill costs . . . . . . . (2,842) (2,761)
Accruals not currently deductible . . . . . . . . . . . (740) (1,187)
------- -------
(17,772) (20,374)
------- -------
Valuation allowance . . . . . . . . . . . . . . . . . . . . - -
------- -------
Net deferred income tax liability . . . . . . . . . . . . . $13,359 $11,510
======= =======
</TABLE>
At December 31, 1995, the Company had available federal net operating
loss carryforwards of approximately $11,000,000 which begin to expire in the
year 2006.
The Company made income tax payments of approximately $4,839,000,
$2,278,000 and $1,260,000 in 1995, 1994 and 1993, respectively.
5. STOCKHOLDERS' EQUITY
In August 1995, the Company sold an aggregate of 8,350,000 shares of
Common Stock and warrants to purchase an additional 16,700,000 shares of Common
Stock to H. Wayne Huizenga, Westbury (Bermuda) Ltd. (A Bermuda corporation
controlled by Michael G. DeGroote, former Chairman of the Board, President and
Chief Executive Officer of Republic), Harris W. Hudson, and certain of their
assigns for an aggregate purchase price of $37,500,000. Mr. Huizenga is the
Chairman of the Board and Chief Executive Officer of the Company; Mr. DeGroote
is the Vice Chairman of the Board of the Company and Mr. Hudson is President
and a Director of the Company. The warrants are exercisable at prices ranging
from $4.50 to $7.00 per share. In August 1995, the Company issued and sold an
additional 1,000,000 shares of Common Stock each to Mr. Huizenga and John J.
Melk (a Director of the Company) for $13.25 per share for aggregate proceeds
of approximately $26,500,000.
In July 1995, the Company sold 5,400,000 shares of Common Stock in a
private placement transaction for $13.25 per share, resulting in net proceeds
of approximately $69,000,000 after deducting expenses, fees and commissions.
In
36
<PAGE> 37
REPUBLIC INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
September 1995, the Company sold 5,000,000 shares of Common Stock in an
additional private placement transaction for $20.25 per share resulting in net
proceeds of approximately $99,000,000.
As a result of the transactions discussed above, the Company received
approximately $232,000,000 in cash proceeds. The Company used a portion of
these proceeds to repay all outstanding borrowings under its revolving line of
credit facility and the debt of the Pooled Entities.
The Company has 5,000,000 authorized shares of preferred stock, $.01
par value per share, none of which are issued or outstanding. The Board of
Directors has the authority to issue the preferred stock in one or more series
and to establish the rights, preferences and dividends.
6. STOCK OPTIONS AND WARRANTS
The Company has various stock option plans under which shares of
Common Stock may be granted to key employees and directors of the Company.
Options granted under the plans are non-qualified and are granted at a price
equal to the fair market value of the Common Stock at the date of grant.
A summary of stock option and warrant transactions for the years ended
December 31 is as follows:
<TABLE>
<CAPTION>
1995 1994 1993
--------- -------- --------
<S> <C>
Options and warrants outstanding
at beginning of year . . . . . . . . 3,393 3,197 7,427
Granted . . . . . . . . . . . . . . . . . 22,437 376 1,017
Exercised . . . . . . . . . . . . . . . . (1,402) - -
Canceled . . . . . . . . . . . . . . . . (161) (180) (332)
Expired . . . . . . . . . . . . . . . . . - - (4,915)
------- ------ ------
Options and warrants outstanding at
end of year . . . . . . . . . . . . . 24,267 3,393 3,197
======= ====== ======
Average price of options and warrants
exercised . . . . . . . . . . . . . . $ 8.03 $ - $ -
Average price of options and warrants
outstanding at end of year . . . . . $ 9.54 $ 7.60 $ 7.97
Prices of options and warrants $ 2.50 to $ 2.50 to $ 2.50 to
outstanding at end of year . . . . . $ 31.00 $14.50 $14.50
Vested options and warrants at end of
year . . . . . . . . . . . . . . . . 19,519 1,828 1,400
Options available for future grants at
end of year . . . . . . . . . . . . . 2,172 2,849 2,845
</TABLE>
7. COMMITMENTS AND CONTINGENCIES
LEGAL PROCEEDINGS. On May 3, 1991, the Company filed an action
against G.I. Industries, Inc. ("GI"), Manuel Asadurian, Sr. and Mike Smith in
the United States District Court for the Central District of California (the
"Court"). The Company requested a declaratory judgment that it did not
anticipatorily breach a merger agreement (the "Merger Agreement") between the
Company and GI and that the Merger Agreement had been properly terminated. The
Company also sought to recover $600,000 from GI, plus interest and costs, with
respect to a certain financial guaranty provided by the Company in 1990 for the
benefit of GI. In response to the Company's action, GI filed a counterclaim
alleging that the Company breached the Merger Agreement and that it had
suffered damages in excess of $16,000,000. In August 1993, the Court rendered
a ruling in favor of the Company which
37
<PAGE> 38
REPUBLIC INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
GI appealed. In March 1995, the United States Court of Appeals
for the Ninth Circuit (the "Court of Appeals") vacated the August 1993 decision
and remanded the case for further proceedings. The Court has commenced
proceedings that may lead to a trial on damages.
Subsequent to the commencement of the Company's litigation in this
matter, GI filed for protection under Chapter 11 of the Bankruptcy Code. The
Company is a secured creditor and anticipates a complete recovery of the
$600,000 it is owed from GI, plus interest and costs.
Western Waste Industries, Inc. ("Western") filed an action against the
Company and others on July 20, 1990 alleging various causes of action including
interference with business relations and seeks $24,000,000 in damages. The
lawsuit stems from Western's attempts to acquire Best Pak Disposal, Inc. This
case is currently scheduled for trial in May 1996.
The Company's solid waste and environmental services activities are
conducted in the context of a developing and changing statutory and regulatory
framework, aggressive government enforcement and a highly visible political
environment. Governmental regulation of the waste management industry requires
the Company to obtain and retain numerous governmental permits to conduct
various aspects of its operations. These permits are subject to revocation,
modification or denial. The costs and other capital expenditures which may be
required to obtain or retain the applicable permits or comply with applicable
regulations could be significant.
In 1992, the Company received notices from Imperial County, California
(the "County") and the California Department of Toxic Substances Control
("DTSC") that spent filter elements (the "Filters") from geothermal power
plants, which had been deposited at the Company's Imperial Landfill for
approximately five years, were classified as hazardous waste under California
environmental regulations. Under United States EPA regulations, the Filters
are not deemed hazardous waste as they are associated with the production of
geothermal energy.
The Company is currently conducting active discussions with all
appropriate California regulatory agencies in order to obtain a variance under
California regulations to reclassify the Filters as a special waste so they
may be left in the landfill. If this occurs, the State, regional and local
regulatory agencies may nevertheless require that the affected area of the
landfill be capped and closed. In the event that the variance is not granted,
remedial measures may be required based on the Filters' classification as a
California hazardous waste. One of those measures could include the removal
of the Filters or the closure of a portion of the landfill.
Management is currently unable to determine (i) whether the waste will
ultimately be classified as hazardous, (ii) if so, what action, if any, will be
required as a result of this issue or (iii) what liability, if any, the Company
will have as a result of this inquiry. In January 1994, the Company filed suit
against the known past and present owners and operators of the geothermal power
plants for all losses, fines and expenses the Company incurs associated with
the resolution of this matter,
38
<PAGE> 39
REPUBLIC INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
including loss of airspace at the landfill, in the United States District Court
for the Southern District of California, alleging claims for CERCLA response
costs recovery and intentional misrepresentation among other claims. The
Company seeks to recover actual expenses and punitive damages. Discovery in
this mattter has been stayed until November 1996, at which time the Company
expects to be able to quantify more accurately the level of damages it has
suffered. The Company believes it will prevail, but no amounts have been
accrued for any recovery of damages.
While the results of the legal and environmental proceedings described
above and other proceedings which arose in the normal course of business cannot
be predicted with certainty, management believes that losses, if any, resulting
from the ultimate resolution of these matters will not have a material adverse
effect on the Company's results of operations or consolidated financial
position. However, unfavorable resolution of each matter individually or in
the aggregate could affect the consolidated results of operations for the
quarterly periods in which they are resolved.
LEASE COMMITMENTS. The Company and its subsidiaries lease portions of
their premises and certain equipment under various operating lease agreements.
At December 31, 1995, total minimum rental commitments becoming payable under
all operating leases are as follows:
<TABLE>
<S> <C>
1996 . . . . . . . . . . . . . . . . . . . . . . . $ 1,769
1997 . . . . . . . . . . . . . . . . . . . . . . . $ 1,189
1998 . . . . . . . . . . . . . . . . . . . . . . . $ 659
1999 . . . . . . . . . . . . . . . . . . . . . . . $ 384
2000 . . . . . . . . . . . . . . . . . . . . . . . $ 119
Thereafter . . . . . . . . . . . . . . . . . . . . $ 94
</TABLE>
Total rental expense incurred under operating leases was $3,990,000, $3,318,000
and $2,344,000 in 1995, 1994 and 1993, respectively.
8. EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE
Earnings per common and common equivalent share are based on the
combined weighted average number of common shares and common share equivalents
outstanding which include, where appropriate, the assumed exercise or
conversion of warrants and options. In computing earnings per common and
common equivalent share, the Company currently utilizes the modified treasury
stock method and in the prior years used the treasury stock method. When using
the modified treasury stock method, the proceeds from the assumed exercise of
all warrants and options are assumed to be applied to first purchase 20% of the
outstanding common stock, then to reduce outstanding indebtedness and the
remaining proceeds are assumed to be invested in U.S. government securities or
commercial paper.
39
<PAGE> 40
REPUBLIC INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
The computations of weighted average common and common equivalent
shares used in the calculation of primary and fully diluted earnings per share
for the years ended December 31 are presented below :
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- -------
<S> <C> <C> <C>
Primary:
Common shares outstanding . . . . . . . . . . . . . . 76,056 45,314 45,476
Common equivalent shares . . . . . . . . . . . . . . . 26,552 82 160
Weighted average treasury shares purchased . . . . . . (7,101) 149 -
Effect of using weighted average common and common
equivalent shares outstanding . . . . . . . . . . (33,150) - -
------- ------ ------
62,357 45,545 45,636
======= ====== ======
Fully diluted:
Common shares outstanding . . . . . . . . . . . . . . 76,056 45,314 45,476
Common equivalent shares . . . . . . . . . . . . . . . 26,552 82 160
Weighted average treasury shares purchased . . . . . . (3,823) 149 -
Effect of using weighted average common and common
equivalent shares outstanding. . . . . . . . . . . (33,000) - -
------- ------ ------
65,785 45,545 45,636
======= ====== ======
</TABLE>
9. DISCONTINUED OPERATIONS
In 1994, the Company announced the contemplation of a plan to spin-off
RESI, its hazardous waste services segment. This segment of the Company's
business has been accounted for as a discontinued operation and, accordingly,
the Company restated its Consolidated Financial Statements presented prior to
that date to report separately the operating results of these discontinued
operations. In April 1995, Republic stockholders received one share of common
stock of RESI for every five shares of Common Stock of Republic owned on April
21, 1995 in connection with the spin-off of RESI. Approximately 5,400,000 RESI
shares were distributed to Republic stockholders (the "Distribution"). Revenue
of the discontinued operations of RESI was $12,148,000, $46,599,000 and
$61,617,000 in 1995, 1994 and 1993, respectively. The net income (loss) of the
discontinued operations of RESI was ($ 293,000), $2,684,000 and ($14,579,000)
in 1995, 1994 and 1993, respectively.
In connection with the Distribution, the Company entered into a
distribution agreement with RESI which sets forth the terms of the
Distribution. Under this agreement, Republic contributed the intercompany
balance to RESI's equity at the date of the Distribution. In April 1995,
Republic contributed approximately $2,500,000 to RESI to repay RESI's
indebtedness and to provide working capital to RESI. Additionally, the Company
reclassified approximately $36,300,000 to retained earnings from additional
paid-in capital to effect the spin-off under Delaware law. As a result of
these transactions, the Company's equity at the date of the Distribution was
reduced by approximately $23,600,000.
10. RESTRUCTURING AND UNUSUAL CHARGES
In the fourth quarter of 1993, the Company recorded restructuring and
unusual charges of $10,040,000 based on the Company's reevaluation of each of
its solid waste operations. As a result of this reevaluation, the Company
decided to close one of its facilities due to low waste volumes and abandon
its permitting effort at another facility because of limited market opportunity
in that area and delays in the permitting process. In accordance with industry
standards, the Company
40
<PAGE> 41
REPUBLIC INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
provides for closure and post-closure over the life of a facility.
Accordingly, the Company fully provided for these costs on the closed facility.
The provision for closure and post-closure and the write-off of property and
equipment and accumulated permitting costs associated with these facilities
totaled $6,600,000. In conjunction with the reevaluation, the Company also
decided to terminate certain contracts and employees. Costs related to
employee relocations and terminations and other contract terminations totaled
$1,200,000. In addition, the Company also reevaluated its exposure related to
litigation and environmental matters and provided additional accruals
aggregating $2,200,000 for the costs to defend or settle certain litigation and
environmental matters.
11. OPERATIONS BY INDUSTRY SEGMENT
The Company is a diversified services company which primarily provides
integrated solid waste disposal, collection and recycling services to public
and private sector customers through residential, commercial and industrial
service. The Company also is engaged in the electronic security services
business, which consists of the sale, installation and maintenance of
electronic security systems for commercial and residential use as well as the
continuous electronic monitoring of installed security systems.
The following tables present financial information regarding the
Company's different industry segments for the years ended December 31:
<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Revenue:
Solid waste services . . . . . . . . . . . . . $ 226,815 $ 161,237 $ 133,711
Electronic security services . . . . . . . . . 33,500 25,874 20,590
--------- --------- ---------
$ 260,315 $ 187,111 $ 154,301
========= ========= =========
Operating income (loss):
Solid waste services . . . . . . . . . . . . . $ 31,503 $ 22,661 $ 3,376
Electronic security services . . . . . . . . . 5,120 (1,157) (2,689)
--------- --------- ---------
$ 36,623 $ 21,504 $ 687
========= ========= =========
Depreciation, depletion and amortization:
Solid waste services . . . . . . . . . . . . . $ 16,162 $ 14,161 $ 12,229
Electronic security services . . . . . . . . . 4,837 3,969 2,206
--------- --------- ---------
$ 20,999 $ 18,130 $ 14,435
========= ========= =========
Capital expenditures and investment in subscriber accounts:
Solid waste services . . . . . . . . . . . . . $ 47,561 $ 20,592 $ 11,104
Electronic security services . . . . . . . . . 17,304 18,137 10,574
--------- --------- ---------
$ 64,865 $ 38,729 $ 21,678
========= ========= =========
Assets:
Solid waste services . . . . . . . . . . . . . $ 503,308 $ 193,079 $ 172,248
Electronic security services . . . . . . . . . 38,742 28,994 14,753
Net assets of discontinued operations . . . . . - 20,292 16,872
---------- --------- ---------
$ 542,050 $ 242,365 $ 203,873
========== ========= =========
</TABLE>
41
<PAGE> 42
REPUBLIC INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
12. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
The following is an analysis of certain items in the Consolidated
Statements of Operations by quarter for 1995 and 1994.
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Revenue 1995 $ 54,481 $ 60,593 $ 70,133 $ 75,108
1994 $ 42,189 $ 46,483 $ 48,047 $ 50,392
Gross profit 1995 $ 19,203 $ 20,739 $ 21,460 $ 29,354
1994 $ 14,085 $ 14,771 $ 16,731 $ 17,647
Income from continuing 1995 $ 3,794 $ 3,917 $ 4,916 $ 10,585
operations 1994 $ 2,252 $ 3,681 $ 4,459 $ 4,040
Net income 1995 $ 4,302 $ 3,917 $ 4,916 $ 9,784
1994 $ 2,106 $ 4,508 $ 5,447 $ 5,055
Earnings per share from 1995 $ 0.08 $ 0.09 $ 0.07 $ 0.11
continuing operations 1994 $ 0.05 $ 0.08 $ 0.10 $ 0.09
</TABLE>
42
<PAGE> 43
<PAGE> 44
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None
PART III.
The information required by Items 10, 11, 12 and 13 of Part III will
be set forth in the Proxy Statement of the Company relating to the 1996 Annual
Meeting of Stockholders and is incorporated herein by reference.
PART IV.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) (1) Financial Statements of the Company are set forth in Part II,
Item 8.
(2) Financial Statement Schedule II, Valuation and Qualifying
Accounts and Reserves, for each of the three years ended
December 31, 1995 is submitted herewith.
(3) Exhibits - (See the Index to Exhibits included elsewhere herein).
(b) Form 8-K dated October 17, 1995 relating to the Company's merger
with Southland Environmental Services, Inc. and the reporting of
certain financial information for registration statement purposes.
Form 8-K dated October 31, 1995 relating to the Company's Merger
Agreements and pending mergers with Garbage Disposal Service, Inc.,
J.C. Duncan Company, Inc. and its affiliates, and Fennell Container
Co., Inc. and related companies.
Form 8-K/A dated November 30, 1995 reporting the consummation of the
mergers with J.C. Duncan Company, Inc., Garbage Disposal Service,
Inc., Fennell Container Co., Inc. and Scott Security Systems.
Form 8-K dated February 14, 1996 relating to the Company's Merger
Agreements and pending mergers with The Denver Fire Reporter and
Protective Co. and the Schaubach Companies.
Form 8-K/A dated February 27, 1996 reporting the consummation of the
mergers with The Denver Fire Reporter and Protective Co. and the
Schaubach Companies.
43
<PAGE> 45
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
REPUBLIC INDUSTRIES, INC.
By:/s/ H. WAYNE HUIZENGA
-------------------------------
H. Wayne Huizenga
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- -----
<S> <C> <C>
/s/ H. Wayne Huizenga Chairman of the Board and March 28, 1996
- -------------------------------- Chief Executive Officer
H. Wayne Huizenga (Principal Executive Officer)
/s/ Harris W. Hudson President and Director March 28, 1996
- --------------------------------
Harris W. Hudson
/s/ Gregory K. Fairbanks Executive Vice President and March 28, 1996
- -------------------------------- Chief Financial Officer
Gregory K. Fairbanks (Principal Financial Officer)
/s/ Michael R. Carpenter Vice President and Corporate Controller March 28, 1996
- -------------------------------- (Principal Accounting Officer)
Michael R. Carpenter
/s/ Michael G. DeGroote Vice Chairman of the Board March 28, 1996
- --------------------------------
Michael G. DeGroote
/s/ J.P. Bryan Director March 28, 1996
- --------------------------------
J.P. Bryan
/s/ Rick L.Burdick Director March 28, 1996
- --------------------------------
Rick L. Burdick
/s/ John J. Melk Director March 28, 1996
- --------------------------------
John J. Melk
/s/ George D. Johnson, Jr. Director March 28, 1996
- --------------------------------
George D. Johnson, Jr.
</TABLE>
44
<PAGE> 46
REPUBLIC INDUSTRIES, INC.
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
SCHEDULE II
(IN THOUSANDS)
=============================================================================
<TABLE>
<CAPTION>
Balance Balance
at Additions Accounts at End
Beginning Charged to Written of
Classifications of Year Income Off Other(1) Year
--------------- -------------- ------------- ---------------------- ---------
<S> <C> <C> <C> <C> <C>
ALLOWANCE FOR DOUBTFUL ACCOUNTS:
1995 . . . . . . . . . . $ 1,055 $ 1,204 $ (1,034) $ 621 $ 1,846
1994 . . . . . . . . . . $ 1,016 $ 721 $ (686) $ 4 $ 1,055
1993 . . . . . . . . . . $ 904 $ 811 $ (782) $ 83 $ 1,016
</TABLE>
- ---------
(1) Allowance of acquired businesses.
45
<PAGE> 47
EXHIBIT INDEX
Exhibit
No. Description of Exhibit
- ------- ----------------------
2.1* Agreement and Plan of Merger and Reorganization, dated May 30, 1991,
by and between Republic Waste Industries, Inc., an Oklahoma
corporation, and Republic Waste Industries, Inc., a Delaware
corporation (incorporated by reference to Exhibit 3.1 to the
Registrant's Annual Report on Form 10-K for the year ended December
31, 1991).
3.1* First Amended and Restated Certificate of Incorporation of Republic
Waste Industries, Inc., as amended (incorporated by reference to
Exhibit 3.1 to the Registrant's Registration Statement on Form S-3,
No. 33-62489 and to Exhibit 3.2 to the Registrant's Registration
Statement on Form S-3, No. 33-65289).
3.2** Bylaws of Republic Industries, Inc., as amended to date.
10.1* Republic Waste Industries, Inc. 1990 Stock Option and Stock Purchase
Plan (incorporated by reference to Exhibit 10.1(a) to the Registrant's
Registration Statement on Form S-1, No. 33-37191).
10.2* Form of Stock Option Agreement (incorporated by reference to Exhibit
10.1(b) to the Registrant's Registration Statement on Form S-1, No.
33-37191).
10.3* Letter Agreement, dated March 18, 1991, by and among MGD Holdings
Ltd., Republic Waste Industries, Inc., Tom J. Fatjo, Jr., Republic
Investors, Ltd., Investors, Inc., Robert Alpert, First Financial
Environmental Investors, Pete Boyas, James D. Lee, Richard K. Reiling,
William M. DeArman, Frank C. Payton, David C. Payton and Richard
Morton. (incorporated by reference to Exhibit 10.31 to the
Registrant's Annual Report on Form 10-K for the year ended December
31, 1990).
10.4* Warrant to Purchase 1,150,000 Shares of Republic Waste Industries,
Inc. Common Stock issued to MGD Holdings Ltd. (incorporated by
reference to Exhibit 10.18 to the Registrant's Registration Statement
on Form S-1, No. 33-42530).
10.5* Stock Exchange Agreement between Republic Waste Industries, Inc. and
MGD Holdings Ltd. (incorporated by reference to Exhibit 10.22 to the
Registrant's Registration Statement on Form S-1, No. 33-42530).
10.6* Republic Waste Industries, Inc. 1991 Stock Option Plan (incorporated
by reference to Exhibit 10.42 to the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1992).
10.7* Form of Stock Option Agreement (incorporated by reference to Exhibit
10.43 to the Registrant's Annual Report on Form 10-K for the year
ended December 31, 1992).
10.8* Form of Warrant to purchase 300,000 shares of Republic Waste
Industries, Inc. Common Stock, issued to Donald E. Koogler
(incorporated by reference to Exhibit 10.54 to the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1992).
10.9* Agreement of Settlement and Mutual Release by and among Republic Waste
Industries, Inc. and Michael G. DeGroote, Donald E. Koogler, Gary W.
DeGroote, Kevin J. Comeau, Rick L. Burdick, Douglas R. Gowland, Lance
R. Ruud, August C. Schultes, III, Mark S. Alsentzer, Gary J. Ziegler,
Eugene J. Kerins, Edward A. Schultes, Richard J. Schultes, Peter
Schultes, Barbara Schultes ITF Elizabeth Schultes (Minor), Barbara
Schultes ITF Deborah Schultes (Minor) and August C. Schultes, IV,
dated as of January 29, 1994 (incorporated by reference to Exhibit
10.46 to the Registrant's Annual Report on Form 10-K for the year
ended December 31, 1993).
<PAGE> 48
10.10* Form of Warrant to purchase 100,000 shares of Republic Waste
Industries, Inc. Common Stock issued to MGD Holdings Ltd.
(incorporated by reference to Exhibit 10.33 to the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1994).
10.11* Form of Warrant to purchase 50,000 shares of Republic Waste
Industries, Inc. Common Stock issued to J.P. Bryan (incorporated by
reference to Exhibit 10.34 to the Registrant's Annual Report on Form
10-K for the year ended December 31, 1994).
10.12* Form of Warrant to purchase 50,000 shares of Republic Waste
Industries, Inc. Common Stock issued to Rick L. Burdick (incorporated
by reference to Exhibit 10.35 to the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1994).
10.13* Distribution Agreement, dated February 14, 1995, by and between
Republic Waste Industries, Inc. and Republic Environmental Systems,
Inc. (incorporated by reference to Exhibit 10.36 to the Registrant's
Annual Report on Form 10-K for the year ended December 31, 1994).
10.14* Stock Purchase Agreement, dated May 21, 1995, by and between H. Wayne
Huizenga and Republic Waste Industries, Inc. (incorporated by
reference to Exhibit (c)(1) to the Registrant's Current Report on Form
8-K/A, dated July 17, 1995).
10.15* Agreement and Plan of Merger, dated May 21, 1995, by and among
Republic Waste Industries, Inc., Republic Hudson Acquisition
Corporation, Hudson Management Corporation and Harris W. Hudson and
Bonnie J. Hudson (incorporated by reference to Exhibit (c)(2) to the
Registrant's Current Report on Form 8-K/A, dated July 17, 1995).
10.16* Agreement and Plan of Merger, dated May 21, 1995, by and among
Republic Waste Industries, Inc., Republic Hudson Acquisition
Corporation, Envirocycle, Inc. and Harris W. Hudson and Bonnie J.
Hudson (incorporated by reference to Exhibit (c)(3) to the
Registrant's Current Report on Form 8-K/A, dated July 17, 1995).
10.17* Stock Purchase Agreement, dated May 21, 1995, by and between Harris W.
Hudson and Republic Waste Industries, Inc. (incorporated by reference
to Exhibit (c)(4) to the Registrant's Current Report on Form 8-K/A,
dated July 17, 1995).
10.18* Stock Purchase Agreement, dated May 21, 1995, by and between Westbury
(Bermuda) Ltd. and Republic Waste Industries, Inc. (incorporated by
reference to Exhibit (c)(5) to the Registrant's Current Report on Form
8-K/A, dated July 17, 1995).
10.19* Proxy, dated as of May 21, 1995, by MGD Holdings Ltd., in favor of H.
Wayne Huizenga (incorporated by reference to Exhibit (c)(6) to the
Registrant's Current Report on Form 8-K/A, dated July 17, 1995).
10.20* Stockholder Stock Option Agreement, dated as of May 21, 1995, by MGD
Holdings Ltd., in favor of H. Wayne Huizenga (incorporated by
reference to Exhibit (c)(7) to the Registrant's Current Report on Form
8-K/A, dated July 17, 1995).
10.21* First Amendment to Stock Purchase Agreement, dated July 17, 1995, by
and between Republic Waste Industries, Inc. and H. Wayne Huizenga
(incorporated by reference to Exhibit (c)(8) to the Registrant's
Current Report on Form 8-K/A, dated July 17, 1995).
10.22* Republic Waste Industries, Inc. 1995 Employee Stock Option Plan
(incorporated by reference to Exhibit 10.19 to the Registrant's
Registration Statement on Form S-1, No. 33-63209).
10.23* Republic Waste Industries, Inc. 1995 Non-employee Director Stock
Option Plan (incorporated by reference to Exhibit 10.20 to the
Registrant's Registration Statement on Form S-1, No. 33-63209).
<PAGE> 49
10.24* Merger Agreement, dated August 24, 1995, by and among Republic Waste
Industries, Inc., RS Mergersub, Inc., Southland Environmental
Services, Inc., Felix A. Crawford, Individually and as Trustee of the
Felix A. Crawford Revocable Living Trust, and CFP, Ltd. (incorporated
by reference to Exhibit (c)(1) to the Registrant's Current Report on
Form 8-K, dated August 24, 1995).
10.25* Merger Agreement, dated as of August 24, 1995, by and among Republic
Waste Industries, Inc., RKSA, Inc., RKSA II, Inc., Kertz Security
Systems, Inc., Kertz Security System II, Inc., Leon W. Brauser,
Michael Brauser, Robert Brauser and Joel Brauser (incorporated by
reference to Exhibit (c)(2.1) to the Registrant's Current Report on
Form 8-K, dated August 28, 1995).
10.26* First Amendment to Merger Agreement, dated as of October 17, 1995, to
the Merger Agreement, dated August 24, 1995, by and among Republic
Waste Industries, Inc., RS Mergersub, Inc., Southland Environmental
Services, Inc., Felix A. Crawford, Individually and as Trustee of the
Felix A. Crawford Revocable Living Trust, and CFP, Ltd. (incorporated
by reference to Exhibit 2.2 to the Registrant's Current Report on Form
8-K, dated October 17, 1995).
10.27* Merger Agreement, dated as of October 31, 1995, by and among Republic
Waste Industries, Inc., RWI/GDS Mergersub, Inc., Garbage Disposal
Service, Inc., Lee G. Brown and Mina Brown McLean (incorporated by
reference to Exhibit 2.1 to the Registrant's Current Report on Form
8-K, dated October 31, 1995).
10.28* Merger Agreement, dated as of November 11, 1995, by and among
Republic Waste Industries, Inc., RWI/JCD Inc., RWI/Grand Inc.,
RWI/Trashaway Inc., RWI/Tos-It Inc., RWI/WestTex Inc., RWI Pantego I
Inc., RWI/Pantego II Inc., J.C. Duncan Company, Inc., Arlington
Disposal Company, Inc., Grand Prairie Disposal Company, Inc.,
Trashaway Services, Inc., Tos-It Service Company, Inc., Wes Tex Waste
Services, Inc., Pantego Service Company, Pantego I, Inc., Pantego II,
Inc., E & E Truck Leasing, Ltd., EETL I, Inc., EETL II, Inc., Robert
C. Duncan, Janette T. Duncan, Dan R. Duncan, Debra A. Duncan, DeeDee
Duncan Elliot, George Martin Duncan, Melinda Duncan Vince and Robert
C. Duncan as Trustee of the Robert C. Duncan Annuity Trusts Nos. One,
Two, Three and Four (incorporated by reference to Exhibit 2.2 to the
Registrant's Current Report on Form 8-K, dated October 31, 1995).
10.29* Merger Agreement, dated as of November 13, 1995, by and among Republic
Waste Industries, Inc., RI/FCC Mergersub, Inc., RI/FWS Mergersub,
Inc., RI/FV Mergersub, Inc., RI/PD Mergersub, Inc., RI Investment Co.,
Inc., Fennell Waste Systems, Inc., Fennell Container Co., Inc.,
Fenn-Vac, Inc., Pepperhill Development Co., Inc., GF/WWF, Inc., George
W. Fennell, Robert N. Shepard, G. Scott Fennell, S. Allison Fennell,
Debra A. Haschker, James R. Bland, John H. Chapman, Jeffrey A.
Forslund and Leo J. Zolnierowicz (incorporated by reference to Exhibit
2.3 to the Registrant's Current Report on Form 8-K, dated October 31,
1995).
10.30* Merger Agreement, dated as of February 15, 1996, by and among Republic
Industries, Inc., RI/DFRP, Inc., RI/GS Merger Corp., The Denver
Fire Reporter & Protective Co., Guardian Security Services, Inc., and
John Stewart Jackson (incorporated by reference to Exhibit 2.1 to
the Registrant's Current Report on Form 8-K, dated February 14, 1996).
10.31* Reorganization Agreement, dated as of February 14, 1996, by and among
Republic Industries, Inc., RI/Area, Inc., RI/Smith, Inc., Incendere,
Inc., Area Container Services, Inc., Smithton Sanitation Service,
Inc., Dwight C. Schaubach, James D. Schaubach, Emmett K. Moore, Charles
F. Moore and R.D. Cuthrell (incorporated by reference to Exhibit 2.2
to the Registrant's Current Report on Form 8-K, dated February 14,
1996).
10.32** Credit Facilities and Reimbursement Agreement, dated December 19,
1995, by and among Republic Industries, Inc., as Borrower, NationsBank
of Florida, National Association, The First National Bank of Boston,
The Bank of Nova Scotia, The First National Bank of Chicago, SunTrust
Bank, South Florida, National Association, United States National Bank
of Oregon, ABN AMRO Bank, N.V., The Bank of New York, Barnett Bank of
Broward County, N.A., Credit Lyonnais New York Branch, Credit Lyonnais
Cayman Island Branch, and LTCB Trust
<PAGE> 50
Company, as Lenders and NationsBank of Florida, National Association,
as Agent and The First National Bank of Boston, as Co-Agent.
21.1** Subsidiaries of Republic Industries, Inc. as of March 26, 1996.
23.1** Consent of Arthur Andersen LLP.
27.1** Financial Data Schedule (for SEC use only)
* Indicates documents incorporated by reference from the prior filing
indicated.
** Indicates documents filed herewith.
<PAGE> 1
EXHIBIT 3.2
BYLAWS
OF
REPUBLIC INDUSTRIES, INC.
ARTICLE I
Offices
Section 1.1 Registered Office. The registered office of Republic
Industries, Inc., a Delaware corporation (the "Corporation"), shall be located
at Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware 19801.
Section 1.2 Offices. The Corporation may establish or discontinue, from
time to time, such other offices and places of business within or without the
State of Delaware as the Board of Directors deems proper for the conduct of the
Corporation's business.
ARTICLE II
Meetings of Shareholders
Section 2.1 Annual Meeting. An annual meeting of shareholders for the
purpose of electing directors and transacting such other business as may come
before it shall be held at such place, within or without the State of Delaware,
on such date and at such time as shall be designated by the Board of Directors
or the President.
Section 2.2 Special Meetings. Special meetings of shareholders, unless
otherwise prescribed by statute, may be called by the Board of Directors or by
the President. Business transacted at any special meeting of the shareholders
shall be limited to the purposes stated in the notice.
Section 2.3 Notice of Meetings. Written notice of each meeting of
shareholders shall be given to each shareholder of record entitled to vote at
the meeting at the shareholder's address as it appears on the stock books of
the Corporation. The notice shall state the time and the place of the meeting
and shall be given not less than ten (10) nor more than sixty (60) days before
the day of the meeting. If mailed, such notice shall be deemed to be given
when deposited in the United States mail, postage prepaid, directed to the
shareholder at his address as it appears on the records of the Corporation.
In the case of a special meeting, the notice shall state the purpose or
<PAGE> 2
purposes for which the meeting is being called. Whenever notice is required to
be given hereunder, a written waiver of notice signed by the shareholder
entitled to notice, whether before or after the time stated in the notice,
shall be deemed equivalent to notice. Attendance of a person at a meeting
shall constitute a waiver of notice of such meeting except when a person
attends for the express purpose of objecting, at the beginning of the meeting,
to the transaction of any business because the meeting is not lawfully called
or convened.
Section 2.4 Quorum and Adjournment. The presence, in person or by proxy,
of the holders of a majority of the voting power of the outstanding shares of
stock entitled to vote on every matter that is to be voted on, without regard
to class or series, shall constitute a quorum at all meetings of the
shareholders. In the absence of a quorum, the holders of a majority of the
voting power of such shares of stock present in person or by proxy may adjourn
such meeting, from time to time, without notice other than announcement at the
meeting (unless otherwise required by law), until a quorum shall attend. At
any meeting reconvened after such adjournment at which a quorum may be present,
any business may be transacted which might have been transacted at the meeting
as originally called, but only those shareholders entitled to vote at the
meeting as originally called shall be entitled to vote at any reconvened
meeting, unless a new record date for such meeting is fixed.
Section 2.5 Officers at Shareholders' Meetings. The Chairman of the Board
of Directors shall preside at all meetings of shareholders. In his absence,
the chairman shall be elected as the first order of business by the holders of
a majority of the shares of stock in attendance and entitled to vote at the
meeting.
Section 2.6 List of Shareholders Entitled to Vote. At least ten (10) days
before every meeting of shareholders, a complete list of the shareholders
entitled to vote at the meeting, arranged in alphabetical order and showing the
address of each shareholder and the number of shares registered in the name of
each shareholder, shall be prepared by or for the Secretary and shall be open
to the examination of any shareholder for any purpose germane to the meeting,
during ordinary business hours, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or if not so specified, at the place where the meeting is to be held.
Such list shall be available for inspection at the meeting.
Section 2.7 Fixing Date for Shareholders of Record. In order that the
Corporation may identify the shareholders entitled to notice of or to vote at
any meeting of shareholders or any adjournment thereof, or to express consent
to corporate action in writing without a meeting, or entitled to receive
payment of any dividend or other distribution or allotment of any rights, or
entitled to exercise any rights in respect of any change, conversion or
exchange of stock or for the purpose of any other lawful action, the Board of
Directors may fix, in advance, a record date, which shall not be less than
ten (10) days nor more than sixty (60) days before the date of such meeting,
nor more
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<PAGE> 3
than sixty (60) days prior to any other action. If no record date is fixed,
the record date for determining shareholders entitled to notice of or to vote
at a meeting of shareholders shall be at the close of business on the day next
preceding the day on which notice of the meeting is given, or if notice is
waived, at the close of business on the day next preceding the day on which the
meeting is held. The record date for determining shareholders entitled to
express consent to corporate action in writing without a meeting, when no prior
action by the Board of Directors is necessary, shall be the day on which the
first written consent is delivered to the Corporation by delivery to its
registered office in the State of Delaware, its principal place of business or
an officer or agent of the Corporation having custody of the minute books of
the Corporation. The record date for determining shareholders for any other
purpose shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating thereto. A determination of
shareholders of record entitled to notice of or to vote at a meeting of
shareholders shall apply to any adjournment of the meeting; provided, however,
that the Board of Directors may fix a new record date for the adjourned
meeting.
Section 2.8 Voting and Proxies. Subject to the provisions for fixing the
date for shareholders of record:
(a) Each shareholder shall at every meeting of the shareholders be
entitled to one vote for each share of stock held by that shareholder having
voting rights as to the matter being voted upon, except as otherwise specified
in the Certificate of Incorporation.
(b) Each shareholder entitled to vote at a meeting of shareholders or to
express consent or dissent to corporate action in writing without a meeting may
authorize another person or persons to act for that shareholder by proxy, but
no such proxy shall be voted or acted upon after three years from its date,
unless the proxy expressly provides for a longer period.
(c) Each matter properly presented to any meeting of shareholders shall be
decided by the affirmative vote of the holders of a majority of the voting
power of the shares of stock present in person or by proxy and entitled to vote
on the matter.
Section 2.9 Inspectors of Election. The Corporation shall, in advance of
any meeting of shareholders, appoint one or more inspectors of election, who
may be employees of the Corporation, to act at the meeting or any adjournment
thereof and to make a written report thereof. The Corporation may designate
one or more persons as alternate inspectors to replace any inspector who fails
to act. In the event that no inspector so appointed or designated is able to
act at a meeting of shareholders, the person presiding at the meeting shall
appoint one or more inspectors to act at the meeting. Each inspector, before
entering upon the discharge of his or her duties, shall take and sign an oath
to execute faithfully the duties of inspector with strict impartiality and
according to the best of his or her ability. The inspector or inspectors so
appointed
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<PAGE> 4
or designated shall (i) ascertain the number of shares of capital stock of the
Corporation outstanding and the voting power of each such share, (ii)
determine the shares of capital stock of the Corporation represented at the
meeting and the validity of proxies and ballots, (iii) count all votes and
ballots, (iv) determine and retain for a reasonable period a record of the
disposition of any challenges made to any determination by the inspectors, and
(v) certify their determination of the number of shares of capital stock of the
Corporation represented at the meeting and such inspectors' count of all votes
and ballots. Such certification and report shall specify such other
information as may be required by law. In determining the validity and
counting of proxies and ballots cast at any meeting of shareholders of the
Corporation, the inspectors may consider such information as is permitted by
applicable law. No person who is a candidate for an office at an election may
serve as an inspector at such election.
Section 2.10 Conduct of Meetings. The date and time of the opening and
the closing of the polls for each matter upon which the shareholders will vote
at a meeting shall be announced at the meeting by the person presiding over the
meeting. The Board of Directors of the Corporation may adopt by resolution
such rules and regulations for the conduct of the meeting of shareholders as it
shall deem appropriate. Except to the extent inconsistent with such rules and
regulations as adopted by the Board of Directors, the chairman of any meeting
of shareholders shall have the right and authority to prescribe such rules,
regulations and procedures and to do all such acts as, in the judgment of such
chairman, are appropriate for the proper conduct of the meeting. Such rules,
regulations or procedures, whether adopted by the Board of Directors or
prescribed by the chairman of the meeting, may include, without limitation, the
following: (i) the establishment of an agenda or order of business for the
meeting; (ii) rules and procedures for maintaining order at the meeting and the
safety of those present; (iii) limitations on attendance at or participation in
the meeting to shareholders of record of the Corporation, their duly authorized
and constituted proxies or such other persons as the chairman of the meeting
shall determine; (iv) restrictions on entry to the meeting after the time fixed
for the commencement thereof; and (v) limitations on the time allotted to
questions or comments by participants. Unless and to the extent determined by
the Board of Directors or the chairman of the meeting, meetings of shareholders
shall not be required to be held in accordance with the rules of parliamentary
procedure.
Section 2.11 Consent of Shareholders in Lieu of Meeting. Any action that
may be taken at any annual or special meeting of shareholders may be taken
without a meeting, without a prior notice and without a vote, if a consent in
writing, setting forth the action so taken, is signed by the shareholders
having not less than the minimum number of votes that would be necessary to
authorize or take such action at a meeting at which all shares entitled to vote
thereon were present and voted. Prompt notice of the taking of such action
without a meeting by less than unanimous written consent shall be given to each
shareholder who did not consent thereto in writing.
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<PAGE> 5
ARTICLE III
Directors
Section 3.1 Number and Term of Office. The business and affairs of the
Corporation shall be managed by or under the direction of its Board of
Directors. The number of directors that shall constitute the whole Board shall
be fixed from time to time by resolution of the shareholders or the Board of
Directors and shall consist of not more than twelve (12) members. At the
annual meeting of stockholders in 1996 and at each annual meeting of
stockholders thereafter, the respective terms of all of the directors then
serving in office shall expire at the meeting, and successors to the directors
shall be elected to hold office until the next succeeding annual meeting.
Existing directors may be nominated for election each year for a successive
term, in the manner provided in these Bylaws. Each director shall hold office
for the term for which he is elected and qualified or until his successor shall
have been elected and qualified or until his earlier resignation, removal from
office or death. The Board of Directors may from time to time establish
minimum qualifications for eligibility to become a director. Those
qualifications may include, but shall not be limited to, a prerequisite stock
ownership in the Corporation.
Section 3.2 Place of Meetings. Meetings of the Board of Directors may be
held at any place, within or without the State of Delaware, from time to time
as designated by the Chairman of the Board or by the body or person calling
such meeting.
Section 3.3 Annual Meetings. As soon as practicable after each annual
meeting of shareholders and without further notice, the directors elected at
such meeting shall hold the annual meeting of the Board of Directors at the
place at which such meeting of shareholders took place, provided a majority of
the whole Board of Directors is present. If such a majority is not present,
such meeting may be held at any other time or place which may be specified in a
notice given in the manner provided for special meetings of the Board of
Directors or in a waiver of notice thereof.
Section 3.4 Regular Meetings. Regular meetings of the Board of Directors
shall be held at such times as may be determined by the Board of Directors. No
notice shall be required for any regular meeting.
Section 3.5 Special Meetings. Special meetings of the Board of Directors
may be called by the Chairman of the Board, the Chief Executive Officer or the
President. Notice of any special meeting shall be mailed to each director at
that director's residence or usual place of business not later than three (3)
days before the day on which the meeting is to be held, or shall be given to
that director by telegraph, telecopier or other method of electronic
transmission, by overnight express mail service, personally, or by telephone,
not later than twenty-four (24) hours before the time of such meeting. Notice
of any meeting of the Board of Directors need not be given to any director if
that director signs a written waiver thereof either before or after the time
stated therein. Attendance
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of a director at a meeting shall constitute a waiver of notice of such meeting,
except when the director attends the meeting for the express purpose of
objecting, at the beginning of the meeting, to the transaction of any business
because the meeting is not lawfully called or convened.
Section 3.6 Action Without Meeting. Any action required or permitted to be
taken at any meeting of the Board of Directors or of any committee thereof may
be taken without a meeting if all members of the Board of Directors or of such
committee, as the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of the Board of Directors or of such
committee.
Section 3.7 Presiding Officer and Secretary at Meetings. Each meeting of
the Board of Directors shall be presided over by the Chairman of the Board of
Directors, or in his or her absence, by the Vice Chairman of the Board, the
Chief Executive Officer or the President, in that order, and if none is
present, then by such member of the Board of Directors as shall be chosen at
the meeting.
Section 3.8 Quorum. A majority of the total authorized number of directors
shall constitute a quorum for the transaction of business. In the absence of a
quorum, a majority of those present (or if only one be present, then that one)
may adjourn the meeting, without notice other than announcement at the meeting,
until such time as a quorum is present. The vote of a majority of the
directors present at a meeting at which a quorum is present shall be the act of
the Board of Directors.
Section 3.9 Meeting by Telephone. Members of the Board of Directors or of
any committee thereof may participate in a meeting of the Board of Directors or
of such committee by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other. Such participation shall constitute presence in person at such
meeting.
Section 3.10 Compensation. Directors shall receive such compensation and
expense reimbursements for their services as directors or as members of
committees as set by the Board of Directors. Nothing herein contained shall be
construed to preclude any director from serving the Corporation in any other
capacity as an officer, agent or otherwise, and receiving compensation
therefor.
Section 3.11 Resignations. Any director, member of a committee or officer
of the Corporation may resign at any time by giving written notice thereof to
the Chairman of the Board or the President. Such resignation shall be
effective at the time of its receipt, unless a date certain is specified for it
to take effect. Acceptance of any resignation shall not be necessary to make
it effective.
Section 3.12 Removal of Directors. No director may be removed without
cause before the expiration of his or her term of office except by vote of the
shareholders at a
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meeting called for such a purpose.
Section 3.13 Filling of Vacancies. In case of a vacancy created by an
increase in the number of directors or any vacancy created by death, removal,
or resignation, the vacancy or vacancies may be filled either (a) by the Board
of Directors, or (b) by the shareholders. In the case of a director appointed
to fill a vacancy created by an increase in the number of directors, the
director so appointed shall hold office for the term to which his predecessor
was elected or until his successor is elected. In the case of a director
appointed to fill a vacancy created by the death, removal or resignation of a
director, the newly appointed director shall hold office for the term to which
his predecessor was elected or until his successor is elected.
ARTICLE IV
Committees
The Board of Directors may, by resolution passed by a majority of the
whole Board of Directors, designate one or more committees, each such committee
to consist of one or more directors of the Corporation. In the absence or
disqualification of a member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another member of the Board
of Directors to act at the meeting in the place of any such absent or
disqualified member. Any such committee, to the extent provided in such
resolution or resolutions and to the extent permitted by law, shall have and
may exercise all the powers and authority of the Board of Directors in the
management of the business and affairs of the Corporation, and may authorize
the seal of the Corporation to be affixed to all papers which may require it;
but no such committee shall have such power or authority in reference to
amending the Certificate of Incorporation, adopting an agreement of merger or
consolidation under Sections 251 or 252 of the Delaware Corporation Law which
involves the Corporation, recommending to the shareholders the sale, lease, or
exchange of all or substantially all of the Corporation's property and assets,
recommending to the shareholders a dissolution of the Corporation or a
revocation of a dissolution, or amending the Bylaws; and, unless the resolution
expressly so provides, no such committee shall have the power or authority to
declare a dividend, to authorize the issuance of stock or to adopt a
certificate of ownership and merger.
ARTICLE V
The Officers
Section 5.1 Designation. The Corporation shall have such officers with
such titles and duties as set forth in these Bylaws or in a resolution of the
Board of Directors adopted on or after the effective date of these Bylaws.
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<PAGE> 8
Section 5.2 Election and Qualification. The officers of the Corporation
shall be elected by the Board of Directors and, if specifically determined by
the Board of Directors, may consist of a Chairman of the Board, Vice Chairman
of the Board, Chief Executive Officer, President, Chief Operating Officer,
Chief Financial Officer, one or more Vice Presidents, a Secretary, a Treasurer,
one or more Assistant Secretaries and Assistant Treasurers, and such other
officers and agents as the Board of Directors may deem advisable. None of the
officers of the Corporation need be directors.
Section 5.3 Term of Office. Officers shall be chosen in such manner and
shall hold their office for such term as determined by the Board of Directors.
Each officer shall hold office from the time of his or her election and
qualification to the time at which his or her successor is elected and
qualified, or until his or her earlier resignation, removal or death.
Section 5.4 Resignation. Any officer of the Corporation may resign at any
time by giving written notice of such resignation to the Chairman of the Board
of Directors or to the President. Any such resignation shall take effect at
the time specified therein or, if no time be specified, upon receipt thereof by
the Chairman of the Board of Directors or the President. The acceptance of
such resignation shall not be necessary to make it effective.
Section 5.5 Removal. Any officer may be removed at any time, with or
without cause, by the Board of Directors.
Section 5.6 Compensation. The compensation of each officer shall be
determined by the Board of Directors.
Section 5.7 The Chairman and the Vice Chairman of the Board of Directors.
Unless otherwise specifically determined by resolution by the Board of
Directors, the Chairman of the Board and the Vice Chairman of the Board shall
not be officers of the Corporation as such. The Chairman of the Board shall,
subject to the direction and oversight of the Board, oversee the business plans
and policies of the Corporation, and shall oversee the implementation of those
business plans and policies The Chairman shall report to the Board, shall
preside at meetings of the Board of Directors and of its Executive Committee,
and shall have general authority to execute bonds, deeds and contracts in the
name of and on behalf of the Corporation. In the absence or disability of the
Chairman, the Vice Chairman shall be vested with and shall perform all powers
and duties of the Chairman.
Section 5.8 Chief Executive Officer. The Chief Executive Officer shall,
subject to the direction of the Board, establish and implement the business
plans, policies and procedures of the Corporation. The Chief Executive Officer
shall report to the Board, shall preside over meetings of the Board in the
absence of the Chairman or Vice Chairman of the Board, and shall have general
authority to execute bonds, deeds and
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contracts in the name of and on behalf of the Corporation and in general to
exercise all the powers generally appertaining to the Chief Executive Officer
of a corporation.
Section 5.9 President, Chief Operating Officer and Chief Financial
Officer. The President, the Chief Operating Officer and the Chief Financial
Officer shall have such duties as shall be assigned to each from time to time
by the Chairman of the Board, the Chief Executive Officer and by the Board.
During the absence of the Chairman of the Board or the Vice Chairman of the
Board or during their inability to act, the President shall exercise the powers
and shall perform the duties of the Chairman of the Board, subject to the
direction of the Board of Directors.
Section 5.10 Vice President. Each Vice President shall have such powers
and shall perform such duties as shall be assigned to him or her by the Board
of Directors.
Section 5.11 Secretary. The Secretary shall attend meetings of the Board
of Directors and shareholders and record votes and minutes of such proceedings,
subject to the direction of the Chairman; assist in issuing calls for meetings
of shareholders and directors; keep the seal of the Corporation and affix it to
such instruments as may be required from time to time; keep the stock transfer
books and other books and records of the Corporation; act as stock transfer
agent for the Corporation; attest the Corporation's execution of instruments
when requested and appropriate; make such reports to the Board of Directors as
are properly requested; and perform such other duties incident to the office of
Secretary and those that may be otherwise assigned to the Secretary from time
to time by the President or the Chairman of the Board of Directors.
Section 5.12 Treasurer. The Treasurer shall have custody of all corporate
funds and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation. The Treasurer shall
deposit or disburse all moneys and other property in the name and to the credit
of the Corporation as may be designated by the President or the Board of
Directors. The Treasurer shall render to the President and the Board of
Directors at the regular meetings of the Board of Directors, or whenever they
may request it, an account of all his or her transactions as Treasurer and of
the financial condition of the Corporation. The Treasurer shall perform other
duties incident to the office of Treasurer as the President or the Board of
Directors shall from time to time designate.
Section 5.13 Other Officers. Each other officer of the Corporation shall
have such powers and shall perform such duties as shall be assigned to him or
her by the Board of Directors.
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ARTICLE VI
Certificates of Stock,
Transfers of Stock and
Registered Shareholders
Section 6.1 Stock Certificates. The interest of each holder of stock of
the Corporation shall be evidenced by a certificate or certificates signed by
or in the name of the Corporation by the Chairman of the Board of Directors, or
the President or a Vice President, and by the Treasurer or an Assistant
Treasurer, or the Secretary or an Assistant Secretary of the Corporation
certifying the number of shares owned by the holder thereof in the Corporation.
Any of or all of the signatures on the certificate may be a facsimile. If any
officer, transfer agent or registrar who has signed or whose facsimile
signature has been placed upon a certificate shall have ceased to be such
officer, transfer agent or registrar before such certificate is issued, the
certificate may be issued by the Corporation with the same effect as if he/she
were such officer, transfer agent or registrar at the date of issuance.
Section 6.2 Classes/Series of Stock. The Corporation may issue one or
more classes of stock or one or more series of stock within any class thereof,
as stated and expressed in the Certificate of Incorporation or of any amendment
thereto, any or all of which classes may be stock with par value or stock
without par value. The powers, designations, preferences and relative,
participating, optional or other special rights of each class of stock or
series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights shall be set forth in full or summarized on the face
or back of the certificate which the Corporation shall issue to represent such
class or series of stock, provided that, in accordance with the General
Corporation Law of the State of Delaware, in lieu of the foregoing
requirements, there may be set forth on the face or back of the certificate
which the Corporation shall issue to represent such class or series of stock, a
statement that the Corporation will furnish without charge to each shareholder
who so requests the powers, designations, preferences and relative,
participating, optional or other special rights of each class of stock or
series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights.
Section 6.3 Transfer of Stock. Subject to the transfer restrictions
permitted by Section 202 of the General Corporation Law of the State of
Delaware and to stop transfer orders directed in good faith by the Corporation
to any transfer agent to prevent possible violations of federal or state
securities laws, rules or regulations, the shares of stock of the Corporation
shall be transferrable upon its books by the holders thereof in person or by
their duly authorized attorneys or legal representatives, and upon such
transfer the old certificates shall be surrendered to the Corporation by the
delivery thereof to the person in charge of the stock and transfer books and
ledgers, or to such other persons as the directors may designate, by who they
shall be cancelled, and new certificates shall be issued. A record shall be
made of each transfer and whenever a transfer shall be made
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for collateral security, and not absolutely, it shall be so expressed in the
entry of the transfer.
Section 6.4 Holders of Record. Prior to due presentment for registration
of transfer, the Corporation may treat the holder of record of a share of its
stock as the complete owner thereof exclusively entitled to vote, to receive
notifications and otherwise entitled to all the rights and powers of a complete
owner thereof, notwithstanding notice of the contrary.
Section 6.5 Lost, Stolen, Destroyed, or Mutilated Certificates. A new
certificate of stock may be issued to replace a certificate theretofore issued
by the Corporation, alleged to have been lost, stolen, destroyed or mutilated,
and the Board of Directors or the President may require the owner of the lost
or destroyed certificate or his or her legal representatives, to give such sum
as they may direct to indemnify the Corporation against any expense or loss it
may incur on account of the alleged loss of any such certificate.
Section 6.6 Dividends. Subject to the provisions of the Certificate of
Incorporation and applicable law, the directors may, out of funds legally
available therefor at any annual, regular, or special meeting, declare
dividends upon the capital stock of the Corporation as and when they deem
expedient. Dividends may be paid in cash, in property, or in shares of stock
of the Corporation. Before declaring any dividends there may be set apart out
of any funds of the Corporation available for dividends such sum or sums as the
directors from time to time in their discretion deem proper working capital to
serve as a reserve fund to meet contingencies or as equalizing dividends or for
such other purposes as the directors shall deem in the best interest of the
Corporation.
ARTICLE VII
Indemnification of Officers,
Directors, Employees and Agents
Section 7.1 Indemnification Other Than in Action by or in Right of
Corporation. To the fullest extent and in the manner permitted by the laws of
the State of Delaware and specifically as is permitted under Section 145 of
the General Corporation Law of the State of Delaware or its successor or any
other law which may hereafter be enacted granting to a corporation the powers
of indemnification, the Corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative
or investigative, other than an action by or in the right of the Corporation,
by reason of the fact that such person is or was a director or officer of the
Corporation, or is or was serving at the written request of the Corporation as
a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against expenses, including attorneys'
fees, judgments, fines and amounts paid in settlement actually and reasonably
incurred in connection with such action, suit, or proceeding if he
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acted in good faith and in a manner he reasonably believed to be in and not
opposed to the best interests of the Corporation, and with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful. The termination of any action, suit or proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person did not
act in good faith and in a manner which he reasonably believed to be in and
not opposed to the best interests of the Corporation, and with respect to any
criminal action or proceeding, had reasonable cause to believe that his
conduct was unlawful.
Section 7.2 Indemnification in Action by or in Right of Corporation. The
Corporation shall indemnify any person who was or is a party or is threatened
to be made a party to any threatened, pending or completed action or suit by or
in the right of the Corporation to procure a judgment in its favor by reason of
the fact that he is or was a director or officer of the Corporation, or is or
was serving at the written request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against expenses, including attorneys' fees, actually and
reasonably incurred by him in connection with the defense or settlement of
such action or suit if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the Corporation,
except that no indemnification shall be made in respect of any claim, issue or
matter as to which such person shall have been adjudged to be liable to the
Corporation unless and only to the extent that the court in which such action
or suit was brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which the court shall deem proper.
Section 7.3 Further Indemnity. Employees and agents of the Corporation may
be indemnified by the Corporation as authorized by, and upon such terms and
conditions as deemed appropriate by, the Board of Directors. To the extent
that a director, officer, employee or agent of the Corporation has been
successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in Section 7.1 or 7.2 above, or in defense of any claim,
issue or matter therein, he shall be indemnified against expenses, including
attorneys' fees, actually and reasonably incurred by him in connection
therewith.
Section 7.4 Limitations on Indemnity. (a) Any indemnification under the
provision of Section 7.1 or 7.2 above, unless ordered by a court, shall be made
by the Corporation only as authorized in the specific case upon a determination
that indemnification of the director or officer is proper in the circumstances
because he has met the applicable standard of conduct set forth in Section 7.1
or 7.2, as applicable. Such determination shall be made:
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<PAGE> 13
(i) by a majority vote of the directors who were not parties to such
action, suit or proceeding, even though less than a quorum; or
(ii) if there are no such directors, or if such directors so direct, by
independent legal counsel in a written opinion; or
(iii) by the shareholders.
(b) The Corporation shall be required to indemnify a person seeking
indemnification under Section 7.1 or 7.2 hereof in connection with a proceeding
(or part thereof) commenced by such person only if the commencement of such
proceeding (or part thereof) by the person was authorized by the Board of
Directors of the Corporation.
Section 7.5 Advance of Indemnification Expenses. Expenses incurred by an
officer or director in defending a civil or criminal action, suit or proceeding
may be paid by the Corporation in advance of the final disposition of such
action, suit or proceeding as authorized by the Board of Directors in the
specific case upon receipt of an undertaking by or on behalf of such director
or officer to repay such amount if it shall ultimately be determined that he is
not entitled to be indemnified by the Corporation as authorized by the
provisions of this Article VII. Such expenses incurred by other employees and
agents may be so paid upon such terms and conditions, if any, as the Board of
Directors deems appropriate.
Section 7.6 Other Indemnification. The indemnification herein provided
shall not limit the Corporation from providing any other indemnification
permitted by law nor shall it be deemed exclusive of any other rights to which
those seeking indemnification may be entitled under any bylaw, agreement, vote
of shareholders or disinterested directors or otherwise, both as to action in
his or her official capacity and as to action in another capacity while holding
such office, and shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
Section 7.7 Insurance. The Corporation may purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against and
incurred by him or her in any such capacity, or arising out of his or her
status as such, whether or not the Corporation would have the power to
indemnify him or her against such liability under these provisions.
Section 7.8 Other Entities. For the purposes of this section, references
to "the Corporation" shall include, in addition to the resulting corporation,
any constituent corporation (including any constituent of a constituent)
absorbed in a consolidation or
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merger which, if its separate existence had continued, would have had power
and authority to indemnify its directors, officers, and employees or agents so
that any person who is or was a director, officer, employee or agent of such
constituent corporation, or is or was serving at the request of such
constituent corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, shall
stand in the same position under the provision of this section with respect to
the resulting or surviving corporation as he/she would have with respect to
such constituent corporation if its separate existence had continued.
ARTICLE VIII
Miscellaneous
Section 8.1 Fiscal Year. The fiscal year of the Corporation shall be
determined by resolution of the Board of Directors.
Section 8.2 Corporate Seal. The corporate seal shall be in such form as
the Board of Directors may from time to time prescribe and the same may be used
by causing it or a facsimile thereof to be impressed or affixed or in any other
manner reproduced.
Section 8.3 Severability. The invalidity or unenforceability of any
provision hereof shall not affect the validity or enforceability of the
remaining provisions hereof.
ARTICLE IX
Amendment of Bylaws
These Bylaws may be made, altered, or repealed, or new bylaws may be
adopted by the shareholders or the Board of Directors.
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Approval of Directors
The foregoing Bylaws were adopted by the Directors of Republic Industries,
Inc., a Delaware corporation, on the 12th day of February 1996.
-----------------------------
Secretary
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<PAGE> 1
EXHIBIT 10.32
CREDIT FACILITIES
AND
REIMBURSEMENT AGREEMENT
by and among
REPUBLIC INDUSTRIES, INC., as Borrower,
NATIONSBANK OF FLORIDA, NATIONAL ASSOCIATION
THE FIRST NATIONAL BANK OF BOSTON,
THE BANK OF NOVA SCOTIA,
THE FIRST NATIONAL BANK OF CHICAGO,
SUNTRUST BANK, SOUTH FLORIDA, NATIONAL ASSOCIATION,
UNITED STATES NATIONAL BANK OF OREGON,
ABN AMRO BANK N.V.,
THE BANK OF NEW YORK,
BARNETT BANK OF BROWARD COUNTY, N.A.,
CREDIT LYONNAIS NEW YORK BRANCH
CREDIT LYONNAIS CAYMAN ISLAND BRANCH, and
LTCB TRUST COMPANY,
as Lenders
and
NATIONSBANK OF FLORIDA, NATIONAL ASSOCIATION, as Agent
and
THE FIRST NATIONAL BANK OF BOSTON,
as Co-Agent
December 19, 1995
<PAGE> 2
TABLE OF CONTENTS
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ARTICLE I
Definitions and Terms
<S> <C> <C>
1.01 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.02 Use of Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
1.03 Cross References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
1.04 Accounting and Financial Determinations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
1.05 General Provisions Relating to Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE II
The Loans
2.01 Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
2.02 Competitive Bid Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
2.03 Payment of Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
2.04 Payment of Principal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
2.05 Non-Conforming Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
2.06 Borrower's Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
2.07 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
2.08 Pro Rata Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
2.09 Reductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
2.10 Increase and Decrease in Amounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
2.11 Conversions and Elections of Subsequent Interest Periods . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
2.12 Revolving Credit Facility Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
2.13 Deficiency Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
2.14 Adjustments by Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
2.15 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
2.16 Swing Line . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
2.17 Additional Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE III
Letters of Credit
3.01 Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
3.02 Reimbursement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
3.03 Letter of Credit Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
3.04 Administrative Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
ARTICLE IV
Yield Protection and Illegality
4.01 Additional Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
4.02 Suspension of Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
4.03 Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
</TABLE>
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4.04 Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
4.05 Alternate Loan and Lender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
4.06 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
ARTICLE V
Conditions to Making Loans and Issuing
Letters of Credit
5.01 Conditions of Initial Advance and Issuance of Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . 49
5.02 Conditions of Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
5.03 Supplements to Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
ARTICLE VI
Representations and Warranties
6.01 Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
ARTICLE VII
Affirmative Covenants
7.01 Financial Reports, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
7.02 Maintain Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
7.03 Existence, Qualification, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
7.04 Regulations and Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
7.05 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
7.06 True Books . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
7.07 Pay Indebtedness to Lenders and Perform Other Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
7.08 Right of Inspection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
7.09 Observe all Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
7.10 Covenants Extending to Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
7.11 Officer's Knowledge of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
7.12 Suits or Other Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
7.13 Notice of Discharge of Hazardous Material or Environmental Complaint . . . . . . . . . . . . . . . . . . . . . 62
7.14 Environmental Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
7.15 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
7.16 Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
7.17 Continued Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
7.18 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
7.19 New Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
ARTICLE VIII
Negative Covenants
8.01 Indebtedness to Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
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8.02 Consolidated Fixed Charge Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
8.03 Indebtedness to EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
8.04 Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
8.05 Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
8.06 Transfer of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
8.07 Investments; Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
8.08 Merger or Consolidation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
8.09 Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
8.10 Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
8.11 Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
8.12 Dissolution, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
ARTICLE IX
Events of Default and Acceleration
9.01 Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
9.02 Agent to Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
9.03 Cumulative Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
9.04 No Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
9.05 Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
9.06 Allocation of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
ARTICLE X
The Agent
10.01 Appointment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
10.02 Attorneys-in-fact . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
10.03 Limitation on Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
10.04 Reliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
10.05 Notice of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
10.06 No Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
10.07 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
10.08 Lender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
10.09 Resignation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
10.10 Sharing of Payments, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
10.11 One Lender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
ARTICLE XI
Miscellaneous
11.01 Assignments and Participations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
11.02 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
11.03 Setoff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
11.04 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
11.05 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
11.06 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
11.07 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
11.08 WAIVERS BY BORROWER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
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11.09 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
11.10 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
11.11 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
11.12 Headings and References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
11.13 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
11.14 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
11.15 Agreement Controls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
11.16 Usury Savings Clause . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
11.17 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
EXHIBIT A Applicable Commitment Percentages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
EXHIBIT B Form of Assignment and Acceptance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
EXHIBIT C Notice of Appointment (or Revocation) of Authorized Representative . . . . . . . . . . . . . . . . . . . 107
EXHIBIT D Form of Borrowing Notice--Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108
EXHIBIT E Form of Competitive Bid Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110
EXHIBIT F Form of Guaranty Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114
EXHIBIT G Permitted Acquisitions Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133
EXHIBIT H Form of Revolving Credit Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138
EXHIBIT I Interest Rate Selection Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141
EXHIBIT J Form of Competitive Bid Quote Request . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 142
EXHIBIT K Form of Competitive Bid Quote . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 143
EXHIBIT L-1 Form of Opinion of Borrower's Counsel . . . . . . 145
EXHIBIT F-2 Form of Opinion of Guarantors' Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146
EXHIBIT M Compliance Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147
Schedule 1.01 Existing Letters of Credit
Schedule 6.01(d) Subsidiaries and Investments
Schedule 6.01(f) Contingent Liabilities
Schedule 6.01(g) Liens
Schedule 6.01(j) Litigation
Schedule 6.01(p) ERISA Matters
Schedule 6.01(r) Environmental Issues
Schedule 7.05 Existing Insurance
Schedule 8.04 Indebtedness
</TABLE>
iv
<PAGE> 6
CREDIT FACILITIES AND REIMBURSEMENT AGREEMENT
THIS CREDIT FACILITIES AND REIMBURSEMENT AGREEMENT, dated as of
December 19, 1995 (the "Agreement"), is made by and among:
REPUBLIC INDUSTRIES, INC., a Delaware corporation having its principal
place of business in Ft. Lauderdale, Florida (the "Borrower"); and
NATIONSBANK OF FLORIDA, NATIONAL ASSOCIATION, a national banking
association organized and existing under the laws of the United States of
America and having its principal place of business in Miami, Florida
("NationsBank"), THE FIRST NATIONAL BANK OF BOSTON, each other lender signatory
hereto on the Closing Date and each other lender which may hereafter execute
and deliver an instrument of assignment with respect to this Agreement pursuant
to Section 11.01 (hereinafter NationsBank and such other lenders may be
referred to individually as a "Lender" or collectively as the "Lenders"); and
NATIONSBANK OF FLORIDA, NATIONAL ASSOCIATION, in its capacity as agent
for the Lenders (in such capacity, the "Agent"); and
THE FIRST NATIONAL BANK OF BOSTON, in its capacity as co-agent (the
"Co-Agent");
W I T N E S S E T H:
WHEREAS, the Borrower has requested that the Lenders make available to
the Borrower a Revolving Credit Facility, including sublimits for issuance of
letters of credit in amount not exceeding $35,000,000, of up to $250,000,000,
the proceeds of which shall be used to repay certain existing indebtedness of
the Borrower and for general corporate purposes; and
WHEREAS, the Lenders are willing to make available such Revolving
Credit Facility to the Borrower upon the terms and conditions set forth herein;
NOW, THEREFORE, the Borrower, the Lenders, the Agent and the Co-Agent
hereby agree as follows:
<PAGE> 7
ARTICLE I
Definitions and Terms
1.01 Definitions. For the purposes of this Agreement, in addition to
the definitions set forth above, the following terms shall have the respective
meanings set forth below:
"Absolute Rate" has the meaning assigned to such term in
Section 2.02(c)(ii)(C) hereof;
"Advance" means a borrowing under (i) the Revolving Credit
Facility, consisting of the aggregate principal amount of a Base Rate
Loan or a Eurodollar Loan, as the case may be or (ii) the Swing Line
consisting of Base Rate Loans or (iii) the Competitive Bid Facility
consisting of Competitive Bid Loans;
"Affiliate" means a Person (i) which directly or indirectly
through one or more intermediaries controls, or is controlled by, or
is under common control with the Borrower; (ii) which beneficially
owns or holds 5% or more of any class of the outstanding voting stock
(or in the case of a Person which is not a corporation, 5% or more of
the equity interest) of the Borrower; or (iii) 5% or more of any class
of the outstanding voting stock (or in the case of a Person which is
not a corporation, 5% or more of the equity interest) of which is
beneficially owned or held by the Borrower. The term "control" means
the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of a Person,
whether through ownership of voting stock, by contract or otherwise;
"Applicable Commitment Percentage" means, for each Lender with
respect to the Revolving Credit Facility (including its Participations
and its obligations hereunder to NationsBank to acquire
Participations) (each a type of "credit exposure"), a fraction
(expressed as a percentage), (A) the numerator of which shall be the
then amount of such Lender's Revolving Credit Commitment (which
Revolving Credit Commitment for each Lender as of the Effective Date
is as set forth in Exhibit A attached hereto and incorporated herein
by this reference), and (B) the denominator of which shall be,
respectively, the Total Revolving Credit Commitment; provided that
each Applicable Commitment Percentage of each Lender shall be
increased or decreased to reflect any assignments to or by such Lender
effected in accordance with Section 11.01 hereof and any voluntary or
mandatory reductions in such committed amounts;
"Applicable Margin" means for each Eurodollar Loan the interest
on which is computed by reference to the Eurodollar Rate or Base Rate
Loan, the interest on which is computed by
2
<PAGE> 8
reference to the Base Rate, as the case may be, (i) for the period
from the Effective Date through the date of receipt by the Agent of a
Compliance Certificate in respect of the fiscal period of the Borrower
and its Subsidiaries ending December 31, 1995, 5/16% per annum in the
case of a Eurodollar Loan and 0% in the case of a Base Rate Loan, and
(ii) thereafter that percent per annum set forth below, which shall be
(a) determined as of each Determination Date and furnished to the
Agent not later than the time set forth in Section 7.01(a) and (b)
hereof (the "Compliance Date") and (c) applicable from the Compliance
Date until receipt of a Compliance Certificate in respect of a
subsequent fiscal quarter, based upon the ratio of (X) Consolidated
Funded Indebtedness as at the Determination Date to (Y) Consolidated
EBITDA for the Four-Quarter Period of Borrower ended at the
Determination Date, as specified below:
<TABLE>
<CAPTION>
Applicable Margin
-----------------
Funded Indebtedness Eurodollar Base
/EBITDA Ratio Rate Rate
------------------- ---------- ----
<S> <C> <C>
a) Equal to or Greater
than 2.50 to 1.00 but
Less than 3.00 to 1.00 7/8% 1/4%
b) Equal to or Greater than
2.00 to 1.00 but Less
than 2.50 to 1.00 3/4% 0%
c) Equal to or Greater than
1.50 to 1.00 but Less
than 2.00 to 1.00 1/2% 0%
d) Less than 1.50 to 1.00 5/16% 0%
</TABLE>
"Applications and Agreements for Letters of Credit" means,
collectively, the Applications and Agreements for Letters of Credit
executed by the Borrower from time to time and delivered to
NationsBank to support the issuance of Letters of Credit;
"Assignment and Acceptance" shall mean an Assignment and
Acceptance substantially in the form of Exhibit B (with blanks
appropriately filled in) delivered to the Agent in connection with an
assignment of a Lender's interest under this Agreement pursuant to
Section 11.01;
"Authorized Representative" means any of the Chairman, Vice
Chairmen, President, Executive Vice Presidents or Vice Presidents of
the Borrower and, with respect to financial matters, the Treasurer or
Chief Financial Officer of the
3
<PAGE> 9
Borrower or any other person expressly designated by the Board of
Directors of the Borrower (or the appropriate committee thereof) as an
Authorized Representative of the Borrower, as set forth from time to
time in a certificate in the form attached hereto as Exhibit C;
"Base Rate" means the sum of (a) the greater of (i) the Prime
Rate or (ii) the Federal Funds Effective Rate plus one-half of one
percent (1/2%), each change in such Base Rate to be effective as of
the effective date of any change in the Prime Rate or the Federal
Funds Effective Rate giving rise thereto and (b) the Applicable
Margin;
"Base Rate Loan" means a Loan for which the rate of interest
is determined by reference to the Base Rate;
"Board" means the Board of Governors of the Federal Reserve
System (or any successor body);
"Borrower's Account" means a demand deposit account number
3750682241, or any successor account with the Agent, which may be
maintained at one or more offices of the Agent or an agent of the
Agent;
"Borrowing Notice" means the notice delivered by an Authorized
Representative in connection with an Advance under the Revolving
Credit Facility, in the form attached hereto as Exhibit D;
"Business Day" means any day which is not a Saturday, Sunday
or a day on which banks in the States of Florida, North Carolina and
New York are authorized or obligated by law, executive order or
governmental decree to be closed;
"Capital Expenditures" means for any period the sum of
(without duplication) (i) all expenditures (whether paid in cash or
accrued as liabilities) by the Borrower or any Subsidiary during that
period that are for items that would be classified as "property, plant
or equipment" or comparable items on the consolidated balance sheet of
the Borrower, plus (ii) with respect to any Capital Lease entered into
by the Borrower or its Subsidiaries during such period, the present
value of the lease payments due under such Capital Lease over the term
of such Capital Lease applying a discount rate equal to the interest
rate provided in such lease (or in the absence of a stated interest
rate that rate used in the preparation of the financial statements
described in Section 7.01(a) hereof), all determined in accordance
with Generally Accepted Accounting Principles applied on a Consistent
Basis, excluding, however, the amount of any Capital Expenditures paid
for with proceeds of casualty insurance;
4
<PAGE> 10
"Capital Leases" means all leases which have been or should be
capitalized in accordance with Generally Accepted Accounting
Principles as in effect from time to time including Statement No. 13
of the Financial Accounting Standards Board and any successor thereof;
"Closing Date" means the date as of which this Agreement is
executed by the Borrower, the Lenders and the Agent;
"Code" means the Internal Revenue Code of 1986, as amended,
any successor provision or provisions and any regulations promulgated
thereunder;
"Competitive Bid Borrowing" has the meaning assigned to such
term in Section 2.02 hereof;
"Competitive Bid Facility" means the facility described in
Section 2.02 hereof providing for Competitive Bid Loans to the
Borrower;
"Competitive Bid Loan Commitment" means the amount which a
Lender has offered to loan to the Borrower pursuant to a Competitive
Bid Quote by such Lender not to exceed in the aggregate fifty percent
(50%) of the Total Revolving Credit Commitment;
"Competitive Bid Loans" means the Loans bearing interest at an
Absolute Rate or a Eurodollar Competitive Rate provided for in Section
2.02 hereof;
"Competitive Bid Notes" means, collectively, the promissory
notes of the Borrower with respect to Competitive Bid Loans provided
for by Section 2.02 hereof executed and delivered to the Lenders as
provided in Section 2.07(c) substantially in the form attached hereto
as Exhibit E and incorporated herein by reference, with appropriate
insertions as to dates and names of Lenders, and all promissory notes
delivered in substitution or exchange therefor, in each case as the
same shall be amended, modified or supplemented and in effect from
time to time;
"Competitive Bid Quote" means an offer in accordance with
Section 2.02 hereof by a Lender to make a Competitive Bid Loan with
one single specified interest rate;
"Competitive Bid Quote Request" has the meaning assigned to
such term in Section 2.02 hereof;
"Compliance Certificate" means a certificate in the form of
Exhibit M furnished to the Agent and Lenders by the Borrower pursuant
to Section 7.01 hereof;
5
<PAGE> 11
"Consistent Basis" in reference to the application of
Generally Accepted Accounting Principles means the accounting
principles observed in the period referred to are comparable in all
material respects to those applied in the preparation of the audited
financial statements of the Borrower referred to in Section 6.01(f)(i)
hereof;
"Consolidated EBITDA" means, with respect to the Borrower and
its Subsidiaries for any period of computation thereof during such
period, the sum of, without duplication, (i) Consolidated Net Income,
plus (ii) Consolidated Interest Expense during such period, plus (iii)
taxes on income during such period, plus (iv) amortization during such
period, plus (v) depreciation during such period, determined on a
consolidated basis in accordance with Generally Accepted Accounting
Principles applied on a Consistent Basis; provided, however, that with
respect to any Permitted Acquisition which is accounted for as a
"purchase", for the Four-Quarter Period following such acquisition,
the Consolidated EBITDA shall include the results of operations of
the Person or assets so acquired which amounts shall be determined
on an historical pro forma basis in form and substance satisfactory
to the Agent so long as the Borrower has furnished to the Agent
financial information acceptable to the Agent with respect to the
Person or assets which are the subject of such Permitted Acquisition;
"Consolidated Fixed Charge Ratio" means, with respect to the
Borrower and its Subsidiaries for the Four-Quarter Period ending on
the date of computation thereof, the ratio of (a) Consolidated EBITDA
minus dividends of the Borrower and Capital Expenditures of the
Borrower and its Subsidiaries to (b) Consolidated Interest Expense;
"Consolidated Funded Indebtedness" means Funded Indebtedness
of the Borrower and its Subsidiaries, determined on a consolidated
basis;
"Consolidated Indebtedness" means all Indebtedness of the
Borrower and its Subsidiaries, all determined on a consolidated basis;
"Consolidated Interest Expense" means, with respect to any
period of computation thereof, the gross interest expense of the
Borrower and its Subsidiaries, including without limitation (i) the
amortization of debt discounts, (ii) the amortization of all fees
(including, without limitation, fees payable in respect of a Swap
Agreement) payable in connection with the incurrence of Indebtedness
to the extent included in interest expense and (iii) the portion of
any liabilities incurred in connection with Capital Leases allocable
to interest expense, all determined on a consolidated basis in
6
<PAGE> 12
accordance with Generally Accepted Accounting Principles applied on a
Consistent Basis;
"Consolidated Net Income" means, for any period of computation
thereof, the gross revenues from operations of the Borrower and its
Subsidiaries, less all operating and non-operating expenses of the
Borrower and its Subsidiaries including taxes on income, all
determined on a consolidated basis in accordance with Generally
Accepted Accounting Principles applied on a Consistent Basis; but
excluding all non-cash, non-recurring and extraordinary gains or
losses, all as determined in accordance with Generally Accepted
Accounting Principles applied on a Consistent Basis;
"Consolidated Shareholders' Equity" means at any time as of
which the amount thereof is to be determined, the sum of the following
in respect of the Borrower and its Subsidiaries (determined on a
consolidated basis and excluding intercompany items among the Borrower
and its Subsidiaries and any upward adjustment after the Effective
Date due to revaluation of assets): (i) the amount of issued and
outstanding share capital, plus (ii) the amount of additional paid-in
capital and retained income (or, in the case of a deficit, minus the
amount of such deficit), minus (iii) the amount of any foreign
currency translation adjustment which is included in the equity
section of the consolidated balance sheet (whether positive or
negative) minus (iv) the absolute value of any treasury stock and the
absolute value of any stock subscription receivables, as determined in
accordance with Generally Accepted Accounting Principles applied on a
Consistent Basis;
"Consolidated Total Assets" means assets of the Borrower and
its Subsidiaries as determined in accordance with Generally Accepted
Accounting Principles applied on a Consistent Basis;
"Consolidated Total Capitalization" means, as at any time as
of which the amount thereof is to be determined, the sum of
Consolidated Funded Indebtedness plus Consolidated Shareholders'
Equity;
"Contingent Obligation" of any Person means all contingent
liabilities required (or which, upon the creation or incurring
thereof, would be required) to be included in the consolidated
financial statements (including footnotes) of such Person in
accordance with Generally Accepted Accounting Principles applied on a
Consistent Basis, including Statement No. 5 of the Financial
Accounting Standards Board, and any obligation of such Person
guaranteeing or in effect guaranteeing any Indebtedness, dividend or
other obligation of any other Person (the "primary obligor") in any
manner,
7
<PAGE> 13
whether directly or indirectly, including obligations of such Person
however incurred:
(1) to purchase such Indebtedness or other
obligation or any property or assets constituting security
therefor;
(2) to advance or supply funds in any manner (i)
for the purchase or payment of such Indebtedness or other
obligation, or (ii) to maintain a minimum working capital, net
worth or other balance sheet condition or any income statement
condition of the primary obligor;
(3) to grant or convey any lien, security
interest, pledge, charge or other encumbrance on any property
or assets of such Person to secure payment of such
Indebtedness or other obligation;
(4) to lease property or to purchase securities
or other property or services primarily for the purpose of
assuring the owner or holder of such Indebtedness or
obligation of the ability of the primary obligor to make
payment of such Indebtedness or other obligation; or
(5) otherwise to assure the owner of the
Indebtedness or such obligation of the primary obligor against
loss in respect thereof;
with respect to Contingent Obligations (such as litigation, guarantees
and pension plan liabilities), such liabilities shall be computed at
the amount which, in light of all the facts and circumstances existing
at the time, represent the present value of the amount which can
reasonably be expected to become an actual or matured liability;
"Default" means any event or condition which, with the giving
or receipt of notice or lapse of time or both, would constitute an
Event of Default hereunder;
"Determination Date" means the last day of each fiscal
quarterly period of the Borrower.
"Dollars" and the symbol "$" means dollars constituting legal
tender for the payment of public and private debts in the United
States of America;
"Effective Date" means the date all of the conditions set
forth in Section 5.01 have been satisfied;
"Eligible Securities" means the following obligations and any
other obligations previously approved in writing by the Required
Lenders:
8
<PAGE> 14
(a) Government Securities;
(b) the following debt securities of the
following agencies or instrumentalities of the United States
of America if at all times the full faith and credit of the
United States of America is pledged to the full and timely
payment of all interest and principal thereof:
(i) all direct or fully guaranteed obligations
of the United States Treasury; and
(ii) mortgage-backed securities and
participation certificates guaranteed by the
Government National Mortgage Association;
(c) the following obligations of the following
agencies or instrumentalities of the United States of America:
(i) participation certificates and debt
obligations of the Federal Home Loan Mortgage
Corporation;
(ii) consolidated debt obligations, and
obligations secured by a letter of credit, of the
Federal Home Loan Banks; and
(iii) debt obligations and mortgage-backed
securities of the Federal National Mortgage
Association which have not had the interest portion
thereof severed therefrom;
(d) obligations of any corporation organized
under the laws of any state of the United States of America or
under the laws of any other nation, payable in the United
States of America, expressed to mature not later than 92 days
following the date of issuance thereof and rated in an
investment grade rating category by S&P and Moody's;
(e) interest bearing demand or time deposits
issued by NationsBank or certificates of deposit maturing
within one year from the date of acquisition issued by a bank
or trust company organized under the laws of the United States
or of any state thereof having capital surplus and undivided
profits aggregating at least $400,000,000 and being rated A-3
or better by S&P or A or better by Moody's;
(f) Repurchase Agreements;
(g) Pre-Refunded Municipal Obligations;
9
<PAGE> 15
(h) shares of mutual funds which invest in
obligations described in paragraphs (a) through (g) above, the
shares of which mutual funds are at all times rated "AAA" by
S&P; and
(i) asset-backed remarketed certificates of
participation representing a fractional undivided interest in
the assets of a trust, which certificates are rated at least
"A-1" by S&P and "P-1" by Moody's.
Obligations listed in paragraphs (a), (b) and (c) above which
are in book-entry form must be held in a trust account with the
Federal Reserve Bank or with a clearing corporation or chain of
clearing corporations which has an account with the Federal Reserve
Bank;
"Environmental Laws" means, collectively, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as
amended, the Superfund Amendments and Reauthorization Act of 1986, the
Resource Conservation and Recovery Act, the Toxic Substances Control
Act, as amended, the Clean Air Act, as amended, the Clean Water Act,
as amended, any other "Superfund" or "Superlien" law or any other
applicable statute, law, ordinance, code, rule, regulation, order or
decree, of the United States or any foreign nation or any province,
territory, state, protectorate or other political subdivision thereof,
regulating, relating to, or imposing liability or standards of conduct
concerning, any hazardous, toxic or dangerous waste, substance or
material;
"ERISA" means, at any date, the Employee Retirement Income
Security Act of 1974, as amended, and the regulations thereunder, all
as the same shall be in effect at such date;
"Euro Business Day" means a Business Day on which the relevant
international financial markets are open for the transaction of the
business contemplated by this Agreement in London, England and New
York, New York;
"Eurodollar Competitive Rate" means, for the Interest Period
for any Competitive Bid Rate Loan at a Eurodollar Competitive Rate,
the rate of interest per annum determined pursuant to the following
formula:
Interbank Offered Rate
Eurodollar ----------------------
Competitive = 1-Eurodollar Reserve + or - a Margin
Rate Percentage
"Eurodollar Loan" means a Loan for which the rate of interest
is determined by reference to the Eurodollar Rate;
"Eurodollar Reserve Percentage" means, for any day, that
percentage (expressed as a decimal) which is in effect from
10
<PAGE> 16
time to time under Regulation D or any successor regulation, as the
maximum reserve requirement (including, without limitation, any basic,
supplemental, emergency, special, or marginal reserves) applicable
with respect to Eurocurrency liabilities as that term is defined in
Regulation D (or against any other category of liabilities that
includes deposits by reference to which the interest rate of
Eurodollar Loans or Competitive Bid Loans at the Eurodollar
Competitive Rate is determined), whether or not any Lender has any
Eurocurrency liabilities subject to such requirements without benefits
of credits or proration, exceptions or offsets that may be available
from time to time to any Lender. The Eurodollar Revolver Rate and the
Eurodollar Competitive Rate shall be adjusted automatically on and as
of the effective date of any change in the Eurodollar Reserve
Percentage.
"Eurodollar Revolver Rate" means, for the Interest Period for
any Eurodollar Loan, the rate of interest per annum determined
pursuant to the following formula:
Eurodollar Interbank Offered Rate Applicable
Revolver = --------------------------------- + Margin
Rate 1 - Eurodollar Reserve Percentage
"Event of Default" means any of the occurrences set forth as
such in Section 9.01 hereof;
"Existing Letters of Credit" means those Letters of Credit
issued by the Co-Agent and/or NationsBank of South Carolina, N.A.
which are outstanding on the Closing Date and described in Schedule
1.01 attached hereto;
"Facility Fee" means (i) from the Effective Date through the
receipt by the Agent of a Compliance Certificate in respect of the
Borrower and its Subsidiaries ending on December 31, 1995, 3/16% per
annum times the Total Revolving Credit Commitment, and (ii) thereafter
for each period beginning on the date of receipt by the Agent of a
Compliance Certificate in respect of any quarterly fiscal period of
the Borrower and its Subsidiaries ending on or after December 31, 1995
and ending on the date next following receipt by the Agent of a
Compliance Certificate in respect of a subsequent fiscal quarter, that
percent per annum set forth below opposite the ratio of (x)
Consolidated Funded Indebtedness to (y) Consolidated EBITDA for the
Four-Quarter Period ended at the Determination Date times the Total
Revolving Credit Commitment:
11
<PAGE> 17
<TABLE>
<CAPTION>
Funded Indebtedness Facility
to EBITDA Fee
------------------- --------
<S> <C> <C>
(a) Equal to or Greater than 2.50
to 1.00 but Less than 3.00 to
1.00 3/8%
(b) Equal to or Greater than 2.00
to 1.00 but Less than 2.50 to
1.00 1/4%
(c) Equal to or Greater than 1.50
to 1.00 but Less than 2.00 to
1.00 1/4%
(d) Less than 1.50 to 1.00 3/16%
</TABLE>
"Federal Funds Effective Rate" for any day, as used herein,
means the rate per annum (rounded upward to the nearest 1/100 of 1%)
announced by the Federal Reserve Bank of New York (or any successor)
on such day as being the weighted average of the rates on overnight
Federal funds transactions arranged by Federal funds brokers on the
previous trading day, as computed and announced by such Federal
Reserve Bank (or any successor) in substantially the same manner as
such Federal Reserve Bank computes and announces the weighted average
it refers to as the "Federal Funds Effective Rate" as of the date of
this Agreement; provided, if such Federal Reserve Bank (or its
successor) does not announce such rate on any day, the "Federal Funds
Effective Rate" for such day shall be the Federal Funds Effective Rate
for the last day on which such rate was announced;
"Fiscal Year" means the period of the Borrower beginning on
the first day of January of each calendar year and ending on December
31 of such calendar year;
"Four-Quarter Period" means a period of four full consecutive
quarterly periods, taken together as one accounting period;
"Funded Indebtedness" means all indebtedness in respect of
money borrowed, including without limitation all Capital Leases and
the deferred purchase price of any property or asset, evidenced by a
promissory note, bond or similar written obligation for the payment of
money (including, but not limited to, conditional sales or similar
title retention agreements) and undrawn amounts of letters of credit;
"Generally Accepted Accounting Principles" means those
principles of accounting set forth in pronouncements of the Financial
Accounting Standards Board, the American Institute of Certified Public
Accountants or which have other
12
<PAGE> 18
substantial authoritative support and are applicable in the
circumstances as of the date of a report, as such principles are from
time to time supplemented and amended;
"Government Securities" means direct obligations of, or
obligations the timely payment of principal and interest on which are
fully and unconditionally guaranteed by, the United States of America;
"Governmental Authority" shall mean any Federal, state,
municipal, national or other governmental department, commission,
board, bureau, agency or instrumentality or political subdivision
thereof or any entity or officer exercising executive, legislative or
judicial, regulatory or administrative functions of or pertaining to
any government or any court, in each case whether a state of the
United States, the United States or foreign nation, state, province or
other governmental instrumentality;
"Guarantors" means, collectively, (i) all Material
Subsidiaries and (ii) any other Person who shall become a Material
Subsidiary after the Closing Date and shall execute and deliver to the
Agent a Guaranty as provided in Section 7.19 hereof;
"Guaranty" means each Guaranty and Suretyship Agreement of a
Guarantor (whether delivered individually or jointly and severally
with other Guarantors) in favor of the Agent in the form of Exhibit F
guaranteeing in whole or in part the payment of Obligations, as the
same may be amended, modified or supplemented;
"Hazardous Material" means and includes any hazardous, toxic
or dangerous waste, substance or material, the generation, handling,
storage, disposal, treatment or emission of which is subject to any
Environmental Law;
"Indebtedness" means with respect to any Person, without
duplication, all Funded Indebtedness, all indebtedness of such Person
for the acquisition of property, all indebtedness secured by any Lien
on the property of such Person whether or not such indebtedness is
assumed, all liability of such Person by way of endorsements (other
than for collection or deposit in the ordinary course of business),
all Contingent Obligations and other items which in accordance with
Generally Accepted Accounting Principles is classified as a liability
on a balance sheet; but excluding all accounts payable and accruals,
in each case in the ordinary course of business and only so long as
payment therefor is due within one year; provided that in no event
shall the term Indebtedness include partners' capital, surplus and
retained earnings, minority interest in Subsidiaries, lease
obligations (other than pursuant to Capital Leases), reserves for
deferred income
13
<PAGE> 19
taxes and investment credits, other deferred credits and reserves, and
deferred compensation obligations;
"Interbank Offered Rate" means, with respect to any Eurodollar
Loan or any Competitive Bid Loan at a Eurodollar Competitive Rate, for
the Interest Period applicable thereto, the average (rounded upward to
the nearest one-sixteenth (1/16th) of one percent) per annum rate of
interest determined by the office of the Agent or, in the case of a
Competitive Bid Loan, any Lender, then determining such rate (each
such determination to be conclusive and binding) as of two Euro
Business Days prior to the first day of such Interest Period, as the
effective rate at which deposits in immediately available funds in
Dollars are being, have been, or would be offered or quoted by the
Agent or such Lender to major banks in the applicable interbank market
for Eurodollar deposits at any time selected by the Agent during the
Euro Business Day which is the second Euro Business Day immediately
preceding the first day of such Interest Period, for a term comparable
to such Interest Period and in the amount of the Eurodollar Loan or
Competitive Bid Loan at the Eurodollar Competitive Rate. If no such
offers or quotes are generally available for such amount, the Agent or
such Lender shall be entitled to determine the Eurodollar Rate by
estimating in its reasonable judgment the per annum rate (as described
above) that would be applicable if such quote or offers were generally
available;
"Interest Period" (a) for each Eurodollar Loan means a period
commencing on the date such Eurodollar Loan is made or converted and
each subsequent period commencing on the last day of the immediately
preceding Interest Period for such Eurodollar Loan, and ending, at the
Borrower's option, on the date one, two, three or six months
thereafter as notified to the Agent by the Authorized Representative
three (3) Euro Business Days prior to the beginning of such Interest
Period; provided, that,
(i) if the Authorized Representative fails to
notify the Agent of the length of an Interest Period three (3)
Euro Business Days prior to the first day of such Interest
Period, the Loan for which such Interest Period was to be
determined shall be deemed to be a Base Rate Loan bearing
interest at the Base Rate, as of the first day thereof;
(ii) if an Interest Period for a Eurodollar Loan
would end on a day which is not a Euro Business Day such
Interest Period shall be extended to the next Euro Business
Day (unless such extension would cause the applicable Interest
Period to end in the succeeding calendar month, in which case
such Interest Period shall end on the next preceding Euro
Business Day); and
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(iii) on any day, with respect to all Revolving
Credit Loans there shall not be more than ten (10) Interest
Periods in effect on any day;
(b) for each Competitive Bid Loan at an Absolute Rate
means the period commencing on the date of such Loan and ending on
such date as may be mutually agreed upon by the Borrower and the
Lender or Lenders making such Competitive Bid Loan or Loans, as the
case may be, comprising such Competitive Bid Loan; provided that no
Interest Period for a Competitive Bid Loan at an Absolute Rate shall
be for a period of not less than seven nor greater than 90 days;
(c) for each Competitive Bid Loan at a Eurodollar
Competitive Rate means the period commencing on the date such
Competitive Bid Loan is made and ending, at the Borrower's option, on
the date one, two, three or six months thereafter as notified by the
Borrower to such Lender by the Authorized Representative three (3)
Euro Business Days prior to the beginning of such Interest Period
provided that if an Interest Period for such Loan would end on a day
which is not a Euro Business Day, such Interest Period shall be
extended to the next Euro Business Day (unless such extension would
cause the applicable Interest Period to end in the succeeding calendar
month, in which case such Interest Period shall end in the next
preceding Euro Business Day).
"Issuing Bank" or "Issuing Banks" means any of NationsBank
and, in the case of the Existing Letters of Credit only, The First
National Bank of Boston or NationsBank of South Carolina, N.A., as
issuers of Letters of Credit;
"LC Account Agreement" means the LC Account Agreement dated as
of the date hereof between the Borrower and the Agent, as amended or
modified from time to time;
"Lending Office" means, as to each Lender, the Lending Office
of such Lender designated on the signature pages hereof or in an
Assignment and Acceptance or such other office of such Lender (or of
an affiliate of such Lender) as such Lender may from time to time
specify to the Authorized Representative and the Agent as the office
by which its Loans are to be made and maintained;
"Letter of Credit" means (i) a standby letter of credit issued
by NationsBank for the account of the Borrower in favor of a Person
advancing credit or securing an obligation on behalf of the Borrower
and (ii) each of the Existing Letters of Credit;
"Letter of Credit Commitment" means with respect to each
Lender, the obligation of such Lender to acquire Letter of Credit
Participations up to an aggregate stated amount at any
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one time outstanding equal to such Lender's Applicable Commitment
Percentage of the Total Letter of Credit Commitment as the same may be
increased or decreased from time to time pursuant to this Agreement;
"Letter of Credit Facility" means the facility described in
Article III hereof providing for the issuance by NationsBank for the
account of the Borrower of Letters of Credit in an aggregate stated
amount at any time outstanding not exceeding the Total Letter of
Credit Commitment;
"Lien" means any interest in property securing any obligation
owed to, or a claim by, a Person other than the owner of the property,
whether such interest is based on the common law, statute or contract,
and including but not limited to the lien or security interest arising
from a mortgage, encumbrance, pledge, security agreement, conditional
sale or trust receipt or a lease, consignment or bailment for security
purposes. For the purposes of this Agreement, the Borrower and its
Subsidiaries shall be deemed to be the owners of any property which
either of them have acquired or hold subject to a conditional sale
agreement, financing lease, or other arrangement pursuant to which
title to the property has been retained by or vested in some other
Person for security purposes;
"Loan" or "Loans" means any of the Revolving Credit Loans or
Swing Line Loans or Competitive Bid Loans;
"Loan Documents" means this Agreement, the Notes, the
Guaranties, Applications and Agreements for Letters of Credit, the LC
Account Agreement and all other instruments and documents heretofore
or hereafter executed or delivered to and in favor of any Lender or
the Agent in connection with the Loans or the Letters of Credit made,
issued or created under this Agreement as the same may be amended,
modified or supplemented from time to time;
"Material Subsidiary" means any Subsidiary which either (i)
has assets having a book value equal to or greater than ten percent
(10%) of the Consolidated Total Assets, or (ii) has net income equal
to or greater than 10% of the Consolidated Net Income. Borrower and
Guarantors will at all times have aggregate assets and net income
which equal not less than 80% of Consolidated Total Assets and
Consolidated Net Income, respectively;
"Moody's" means Moody's Investors Service, Inc., a Delaware
corporation;
"Multi-employer Plan" means an employee pension benefit plan
covered by Title IV of ERISA and in respect of which the Borrower or
any Subsidiary is an "employer" as described in
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Section 4001(b) of ERISA, which is also a multi-employer plan as
defined in Section 4001(a)(3) of ERISA;
"Notes" means, collectively, the Revolving Credit Notes, the
Swing Line Note and the Competitive Bid Notes which are to be
delivered to the Lenders;
"Obligations" means the obligations, liabilities and
Indebtedness of the Borrower with respect to (i) the principal and
interest on the Loans as evidenced by the Notes, (ii) the
Reimbursement Obligations, (iii) all liabilities of Borrower to any
Lender which arise under a Swap Agreement, and (iv) the payment and
performance of all other obligations, liabilities and Indebtedness of
the Borrower to the Lenders or the Agent hereunder, under any one or
more of the other Loan Documents or with respect to the Loans;
"Quotation Date" has the meaning assigned to such term in
Section 2.02 hereof;
"Outstanding Credit Obligations" means the sum of (i) the
Revolving Credit Debit Balance, (ii) Outstanding Letters of Credit,
(iii) Swing Line Outstanding and (iv) outstanding Competitive Bid
Loans, all as at the date of determination;
"Outstanding Letters of Credit" means all undrawn amounts of
Letters of Credit plus Reimbursement Obligations;
"Participation" means, with respect to any Lender (other than
NationsBank or the Co-Agent, as the case may be), the extension of
credit represented by the participation of such Lender hereunder in
the liability of NationsBank in respect of a Swing Line Loan made or
Letter of Credit issued by NationsBank in accordance with the terms
hereof or the liability of the Co-Agent in respect of Existing Letters
of Credit;
"Permitted Acquisition" means an acquisition of a Person or
the assets of a Person effected with the consent and approval of the
Board of Directors or other applicable governing body of such Person
and the duly obtained approval of such shareholders or other holders
of equity interests in such Person as may be required to be obtained
under applicable law, the charter documents of or any shareholder
agreements or similar agreements pertaining to such Person, which
Person derives the majority of its revenues from service or service
related activities or engages in other business or owns other assets
which support or compliment these service revenues, provided that (i)
after giving effect to such acquisition no Default or Event of Default
exists hereunder and (ii) after giving effect to such acquisition if
the Person or assets so acquired shall either be a Material Subsidiary
or owned by a
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Material Subsidiary, such Subsidiary shall have complied in all
respects with Section 7.19;
"Person" means an individual, partnership, corporation, trust,
unincorporated organization, association, joint venture or a
government or agency or political subdivision thereof;
"Pre-Refunded Municipal Obligations" means obligations of any
state of the United States of America or of any municipal corporation
or other public body organized under the laws of any such state which
are rated, based on the escrow, in the highest investment rating
category by both S&P and Moody's and which have been irrevocably
called for redemption and advance refunded through the deposit in
escrow of Government Securities or other debt securities which are (i)
not callable at the option of the issuer thereof prior to maturity,
(ii) irrevocably pledged solely to the payment of all principal and
interest on such obligations as the same becomes due and (iii) in a
principal amount and bear such rate or rates of interest as shall be
sufficient to pay in full all principal of, interest, and premium, if
any, on such obligations as the same becomes due as verified by a
nationally recognized firm of certified public accountants;
"Prime Rate" means the rate of interest per annum announced
publicly by the Agent as its prime rate from time to time. The Prime
Rate is not necessarily the best or the lowest rate of interest
offered by the Agent;
"Principal Office" means the office of the Agent at
Independence Center, Charlotte, North Carolina 28255, Attention:
Corporate Loan Support or such other office and address as the Agent
may from time to time designate;
"Rate Hedging Obligations" means any and all obligations of
the Borrower, whether absolute or contingent and howsoever and
whensoever created, arising, evidenced or acquired (including all
renewals, extensions and modifications thereof and substitutions
therefor), under (a) any and all agreements, devices or arrangements
designed to protect at least one of the parties thereto from the
fluctuations of interest rates, exchange rates or forward rates
applicable to such party's assets, liabilities or exchange
transactions, including, but not limited to, dollar-denominated or
cross-currency interest rate exchange agreements, forward currency
exchange agreements, interest rate cap or collar protection
agreements, forward rate currency or interest rate options, puts,
warrants and those commonly known as interest rate "swap" agreements;
and (b) any and all cancellations, buybacks, reversals, terminations
or assignments of any of the foregoing;
"Regulation D" means Regulation D of the Board as the same may
be amended or supplemented from time to time;
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"Regulatory Change" means any change effective after the
Effective Date in United States federal or state laws or regulations
(including Regulation D and capital adequacy regulations) or foreign
laws or regulations or the adoption or making after such date of any
interpretations, directives or requests applying to a class of banks,
which includes any of the Lenders, under any United States federal or
state or foreign laws or regulations (whether or not having the force
of law) by any court or governmental or monetary authority charged
with the interpretation or administration thereof or compliance by any
Lender with any request or directive regarding capital adequacy,
including with respect to "highly leveraged transactions," whether or
not having the force of law, whether or not failure to comply
therewith would be unlawful (but if not unlawful, noncompliance with
which would have the effect in the good faith judgment of the affected
Lender of imposing additional administrative or regulatory burdens or
consequences, costs or other adverse effects on such Lenders) and, to
the knowledge of the affected Lender, not published or proposed prior
to the date hereof;
"Reimbursement Obligation" shall mean at any time, the
obligation of the Borrower with respect to any Letter of Credit to
reimburse the Issuing Bank and the Lenders to the extent of their
respective Participations (including by the receipt by the Issuing
Bank of proceeds of Loans pursuant to Section 3.02) for amounts
theretofore paid by the Issuing Bank or the Lenders pursuant to a
drawing under such Letter of Credit;
"Repurchase Agreement" means a repurchase agreement entered
into with any financial institution whose debt obligations or
commercial paper are rated "A" by either of S&P or Moody's or "A-1" by
S&P or "P-1" by Moody's;
"Required Lenders" means, as of any date, Lenders on such date
having Credit Exposures (as defined below) aggregating at least 51% of
the aggregate Credit Exposures of all the Lenders on such date. For
purposes of the preceding sentence, the amount of the "Credit
Exposure" of each Lender shall be equal at all times (a) other than
following the occurrence and during the continuance of an Event of
Default, to its Revolving Credit Commitment, and (b) following the
occurrence and during the continuance of an Event of Default, to the
aggregate principal amount of the Revolving Credit Loans and
Competitive Bid Loans owing to such Lender plus the aggregate
unutilized amounts of such Lender's Revolving Credit Commitment plus
the amount of such Lender's Applicable Commitment Percentage of Swing
Line Loans and Outstanding Letters of Credit and of the Reimbursement
Obligations; provided that, if any Lender shall have failed to pay to
NationsBank its Applicable Commitment Percentage of any Swing Line Loan
or drawing under any Letter of Credit resulting in
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an outstanding Reimbursement Obligation, such Lender's Credit Exposure
attributable to Swing Line Loans, Letters of Credit, Reimbursement
Obligations and the Letter of Credit Commitment shall be deemed to be
held by NationsBank for purposes of this definition;
"Revolving Credit Advance Account" means an account on the
books of the Agent in which
(i) each Advance by the Agent pursuant to Section
2.01(a) shall be debited thereto by recording therein on the
date of such Advance a debit entry in the amount of such
Advance; and
(ii) each payment made to the Agent for credit to
the Revolving Credit Advance Account shall be credited thereto
by recording therein on the date paid to the Agent a credit
entry in the amount of such payment;
"Revolving Credit Commitment" means with respect to each
Lender, the obligation of such Lender to make Loans to the Borrower
and purchase Participations up to an aggregate principal amount at any
one time outstanding equal to such Lender's percentage as set forth on
Exhibit A attached hereto of the Total Revolving Credit Commitment as
the same may be increased or decreased from time to time pursuant to
this Agreement;
"Revolving Credit Debit Balance" means an amount equal to the
excess, if any, of all debit entries over all credit entries recorded
in the Revolving Credit Advance Account of the Agent up to and
including the date of computation;
"Revolving Credit Facility" means the facility described in
Section 2.01(a) hereof providing for Loans to the Borrower by the
Lenders in the aggregate principal amount of the Total Revolving
Credit Commitment less the aggregate amount of Swing Line Outstanding
and Outstanding Letters of Credit and outstanding Competitive Bid
Loans;
"Revolving Credit Loan" means a Loan made pursuant to the
Revolving Credit Facility;
"Revolving Credit Notes" means, collectively, the promissory
notes of the Borrower evidencing Loans executed and delivered to the
Lenders as provided in Section 2.07(a) hereof substantially in the
form attached hereto as Exhibit H, with appropriate insertions as to
amounts, dates and names of Lenders;
"Revolving Credit Termination Date" means (i) December 19,
1998 or (ii) such earlier date of termination of Lenders' obligations
pursuant to Section 9.01 upon the occurrence of an
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Event of Default, or (iii) such date as the Borrower may voluntarily
permanently terminate the Revolving Credit Facility and the
Competitive Bid Facility by payment in full of all Obligations
(including the discharge of all Obligations of NationsBank and the
Lenders with respect to Letters of Credit and Participations and
Competitive Bid Loans);
"S&P" means Standard & Poor's Rating Group, a division of
McGraw-Hill, Inc.;
"Single Employer Plan" means any employee pension benefit plan
covered by Title IV of ERISA and in respect of which the Borrower or
any Subsidiary is an "employer" as described in Section 4001(b) of
ERISA, which is not a Multi-employer Plan;
"Solvent" means, when used with respect to any Person, that at
the time of determination:
(i) the fair value of its assets (both at fair
valuation and at present fair saleable value on an orderly
basis) is in excess of the total amount of its liabilities,
including, without limitation, Contingent Obligations; and
(ii) it is then able and expects to be able to pay
its debts as they mature; and
(iii) it has capital sufficient to carry on its
business as conducted and as proposed to be conducted.
"Subsidiary" means any corporation or other entity in which
more than 50% of its outstanding voting stock or more than 50% of all
equity interests is owned directly or indirectly by the Borrower
and/or by one or more of the Borrower's Subsidiaries;
"Swap Agreement" means one or more agreements with respect to
Indebtedness evidenced by the Notes between the Borrower and another
Person, on terms mutually acceptable to such Borrower and such Person,
which agreements create Rate Hedging Obligations;
"Swing Line" means the revolving line of credit established by
NationsBank in favor of the Borrower pursuant to Section 2.16;
"Swing Line Loans" means Loans made by NationsBank to Borrower
pursuant to Section 2.16;
"Swing Line Note" means the promissory note of the Borrower
evidencing Swing Line Loans executed and delivered to NationsBank as
provided in Section 2.07(c) hereof as the same
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shall be amended, modified or supplemented and in effect from time to
time;
"Swing Line Outstanding" means, as of any date of
determination, the aggregate principal Indebtedness of Borrower on all
Swing Line Loans then outstanding;
"Total Letter of Credit Commitment" means an amount not to
exceed $35,000,000;
"Total Revolving Credit Commitment" means an amount not to
exceed $250,000,000, as reduced from time to time in accordance with
Section 2.09 and Section 2.10, which shall be made available by the
Lenders to the Borrower during the period from the date hereof until
the Revolving Credit Termination Date.
1.02 Use of Defined Terms. Terms for which meanings are provided in
this Agreement shall, unless otherwise defined or the context otherwise
requires, have such meanings when used in the Notes, each Borrowing Notice,
each Compliance Certificate, each Loan Document and each notice and other
communication delivered from time to time in connection with this Agreement or
any instrument hereafter executed pursuant hereto.
1.03 Cross References. Unless otherwise specified, references in
this Agreement and in each Loan Document to any Article or Section are
references to such Article or Section of this Agreement or such Loan Document,
as the case may be, and, unless otherwise specified, references in any Article,
Section or definition to any clause are references to such clause of such
Section, Article or definition.
1.04 Accounting and Financial Determinations. Where the character
or amount of any asset or liability or item of income or expense is required to
be determined, or any accounting computation is required to be made, for the
purpose of this Agreement, such determination or calculation shall, to the
extent applicable, be made in accordance with Generally Accepted Accounting
Principles applied on a Consistent Basis except insofar as:
(a) the Borrower shall have elected (with the concurrence
of its independent public accountant and upon prior written
notification to the Lenders) to adopt more recently promulgated
Generally Accepted Accounting Principles (which election shall
continue to be effective for subsequent years); and
(b) the Agent and the Required Lenders shall have
consented to such election (it being understood that such consent may
be conditioned upon the implementation of such changes to Sections
8.01 through 8.03 as are appropriate to
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reflect such adoption of more recently promulgated Generally Accepted
Accounting Principles and it being further understood that such
consent shall be deemed to have been given upon the implementation of
such changes).
1.05 General Provisions Relating to Definitions. Terms for which
meanings are defined in this Agreement shall apply equally to the singular and
plural forms of the terms defined. Whenever the context may require, any
pronoun shall include the corresponding masculine, feminine and neuter forms.
The term "including" means including, without limiting the generality of any
description preceding such term. Each reference herein to any Person shall
include a reference to such Person's successors and assigns. References to any
instrument defined in this Agreement refer to such instrument as originally
executed or, if subsequently varied, replaced or supplemented from time to
time, as so varied, replaced or supplemented and in effect at the relevant time
of reference thereto.
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ARTICLE II
The Loans
2.01 Commitments
(a) Revolving Credit Commitment. Subject to the terms and conditions
of this Agreement, each Lender severally agrees to make Advances to the
Borrower, from time to time from the Effective Date until the Revolving Credit
Termination Date on a pro rata basis as to the total borrowing requested by the
Borrower under the Revolving Credit Facility on any day determined by its
Applicable Commitment Percentage of the Total Revolving Credit Commitment up to
but not exceeding the Revolving Credit Commitment of such Lender, provided,
however, that the Lenders will not be required and shall have no obligation to
make any Advance (i) so long as a Default or an Event of Default has occurred
and is continuing or (ii) if the Agent has accelerated the maturity of the
Revolving Credit Notes as a result of an Event of Default; provided further,
however, that immediately after giving effect to each such Advance, the
principal amount of Outstanding Credit Obligations shall not exceed the Total
Revolving Credit Commitment. Within such limits, the Borrower may borrow,
repay and reborrow hereunder, on a Business Day in the case of a Base Rate Loan
and on a Euro Business Day in the case of a Eurodollar Loan, from the Effective
Date until, but (as to borrowings and reborrowings) not including, the
Revolving Credit Termination Date; provided, however, that (x) no Eurodollar
Loan that is a Revolving Credit Loan shall be made which has an Interest Period
that extends beyond the Revolving Credit Termination Date and (y) each
Eurodollar Loan may, subject to the provisions of Section 2.11, be repaid only
on the last day of the Interest Period with respect thereto.
(b) Amounts. Except as otherwise permitted by the Lenders from time
to time, the aggregate unpaid principal amount of the Outstanding Credit
Obligations shall not exceed at any time an amount equal to the Total Revolving
Credit Commitment. Each Loan under the Revolving Credit Facility (except as
provided in Section 2.16 hereof as to Swing Line Loans) and each conversion
(under any of the Revolving Credit Facility) under Section 2.11 shall be in a
principal amount of at least $1,000,000, and, if greater than $1,000,000, an
integral multiple of $100,000.
(c) Advances and Rate Selection. (i) An Authorized Representative
shall give the Agent (1) at least three (3) Euro Business Days' irrevocable
telephonic notice of each Eurodollar Loan (whether representing an additional
borrowing hereunder or the conversion of borrowing hereunder from Base Rate
Loans or other Eurodollar Loans to Eurodollar Loans) prior to 10:30 A.M.,
Charlotte, North Carolina time; and (2) irrevocable telephonic notice of each
Base Rate Loan representing an additional borrowing hereunder prior to 10:30
A.M. Charlotte, North Carolina time on the day of such proposed Base Rate Loan.
Each such Borrowing Notice,
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which shall be effective upon receipt by the Agent, shall specify the amount of
the borrowing, the type (Base or Eurodollar) of Loan, the date of borrowing
and, if a Eurodollar Loan, the Interest Period to be used in the computation of
interest. The Authorized Representative shall provide the Agent written
confirmation of each such telephonic notice on the same day by telefacsimile
transmission in the form of a Borrowing Notice, for additional Advances, or in
the form attached hereto as Exhibit I as to selection or conversion of interest
rates as to outstanding Loans, in each case with appropriate insertions, but
failure to provide such confirmation shall not affect the validity of such
telephonic notice. The duration of the initial Interest Period for each Loan
that is a Eurodollar Loan shall be as specified in the initial Borrowing
Notice. The Borrower shall have the option to elect the duration of subsequent
Interest Periods and to convert the Loans (other than Swing Line Loans) in
accordance with Section 2.11 hereof. If the Agent does not receive a notice of
election of duration of an Interest Period or to convert by the time prescribed
hereby and by Section 2.11 hereof, the Borrower shall be deemed to have elected
as to any Revolving Credit Loan, to convert such Loan to (or continue such Loan
as) a Base Rate Loan bearing interest at the Base Rate until the Borrower
notifies the Agent in accordance herewith and with this Section and Section
2.11.
(ii) Notice of receipt of each Borrowing Notice shall be provided
by the Agent to each Lender by telefacsimile with reasonable promptness, but
not later than 1:00 P.M., Charlotte, North Carolina time on the same day as
Agent's receipt of such notice. The Agent shall provide each Lender written
notice of such telephonic confirmation by telefacsimile transmission but
failure to provide such notice shall not affect the validity of such telephonic
notice.
(iii) Not later than 2:00 P.M., Charlotte, North Carolina time on the
date specified for each Advance, each Lender shall, pursuant to the terms and
subject to the conditions of this Agreement, make the amount of the Loan or
Loans to be made by it on such day available to the Agent, by depositing or
transferring the proceeds thereof in immediately available funds at the
Principal Office. The amount so received by the Agent shall, subject to the
terms and conditions of this Agreement, be made available to the Borrower by
delivery of the proceeds thereof to the Borrower's Account or otherwise as
shall be directed in the applicable Borrowing Notice by the Authorized
Representative.
(iv) Notwithstanding the foregoing, if a drawing is made under any
Letter of Credit prior to the Revolving Credit Termination Date which is not
immediately repaid by the Borrower to the Issuing Bank, the Issuing Bank shall
be paid by the Agent without the requirement of notice from the Borrower from
immediately available funds which shall be advanced by NationsBank under the
Swing Line (provided that a Swing Line Loan shall then be available). If a
drawing is presented under any Letter of Credit
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in accordance with the terms thereof and if a Swing Line Loan in the amount of
such draw shall not be available and Borrower shall not immediately reimburse
the Issuing Bank for the amount of such draw or payment, then notice of such
drawing or payment shall be provided promptly by the Issuing Bank to the Agent
and the Agent shall provide notice to each Lender by telephone. If notice to
the Lenders of a drawing under any Letter of Credit is given by the Agent at or
before 12:00 noon Charlotte, North Carolina time on any Business Day, the
Borrower shall be deemed to have requested, and each Lender shall, pursuant to
the conditions of this Agreement, make a Base Rate Loan under the Revolving
Credit Facility in the amount of such Lender's Applicable Commitment Percentage
of such drawing or payment and shall pay such amount to the Agent for the
account of the Issuing Bank at the Principal Office in Dollars and in
immediately available funds before 2:30 P.M. Charlotte, North Carolina time on
the same Business Day. If notice to the Lenders is given by the Agent after
12:00 noon Charlotte, North Carolina time on any Business Day, the Borrower
shall be deemed to have requested, and each Lender shall, pursuant to the terms
and subject to the conditions of this Agreement, make a Base Rate Loan under
the Revolving Credit Facility in the amount of such Lender's Applicable
Commitment Percentage of such drawing or payment and shall pay such amount to
the Agent for the account of the Issuing Bank at the Principal Office in
Dollars and in immediately available funds before 12:00 noon Charlotte, North
Carolina time on the next following Business Day. Such Base Rate Loan shall
continue unless and until the Borrower converts such Base Rate Loan in
accordance with the terms of Section 2.11 hereof.
2.02 Competitive Bid Loans.
(a) In addition to Revolving Credit Loans, at any time
prior to the Revolving Credit Termination Date and provided no Default or Event
of Default exists hereunder, the Borrower may, as set forth in this Section
2.02, request the Lenders to make offers to make Competitive Bid Loans to the
Borrower in Dollars. The Lenders may, but shall have no obligation to, make
such offers and the Borrower may, but shall have no obligation to, accept any
such offers in the manner set forth in this Section 2.02. There may be no more
than ten (10) different Interest Periods for both Revolving Credit Loans and
Competitive Bid Loans outstanding at the same time (for which purpose Interest
Periods for each Eurodollar Loan and each Competitive Bid Loan shall be deemed
to be different Interest Periods even if they are coterminous). The aggregate
principal amount of all outstanding Competitive Bid Loans, together with the
sum of all other Outstanding Credit Obligations, shall not exceed the Total
Revolving Credit Commitment at any time. The aggregate principal amount of all
outstanding Competitive Bid Loans shall not exceed fifty percent (50%) of the
Total Revolving Credit Commitment at any time.
(b) When the Borrower wishes to request offers to make
Competitive Bid Loans, it shall give the Agent and the Lenders
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notice (a "Competitive Bid Quote Request") to be received no later than 11:00
a.m. Charlotte, North Carolina time on (A) the fourth Business Day prior to the
date of borrowing proposed therein, in the case of a Competitive Bid Quote
Request for Competitive Bid Loans at the Eurodollar Competitive Rate or (B) the
Business Day next preceding the date of borrowing proposed therein, in the case
of a Competitive Bid Quote Request for Competitive Bid Loans at the Absolute
Rate (or, in any such case, such other time and date as the Borrower and the
Agent, with the consent of the Required Lenders, may agree). The Borrower may
request offers to make Competitive Bid Loans for up to three (3) different
Interest Periods in a single notice; provided that the request for each
separate Interest Period shall be deemed to be a separate Competitive Bid Quote
Request for a separate borrowing (a "Competitive Bid Borrowing") and there
shall not be outstanding at any one time more than six (6) Competitive Bid
Borrowings. Each such Competitive Bid Quote Request shall be substantially in
the form of Exhibit J attached hereto and incorporated herein by reference and
shall specify as to each Competitive Bid Borrowing:
(i) the proposed date of such borrowing, which shall be
a Business Day;
(ii) the aggregate amount of such Competitive Bid
Borrowing, which shall be at least $1,000,000 (or in increments of
$1,000,000 in excess thereof) but shall not cause the limits specified
in Section 2.02(a) hereof to be violated;
(iii) the duration of the Interest Period applicable
thereto;
(iv) whether the Competitive Bid Quote Request for a
particular Interest Period is seeking quotes for Competitive Bid
Loans at the Absolute Rate or the Eurodollar Competitive Rate; and
(v) the date on which the Competitive Bid Quotes are to
be submitted if it is before the proposed date of borrowing (the date
on which such Competitive Bid Quotes are to be submitted is called the
"Quotation Date").
Except as otherwise provided in this Section 2.02(b), no more than two (2)
Competitive Bid Quote Requests shall be given within five (5) Business Days (or
such other number of days as the Borrower and the Agent, with the consent of
the Required Lenders, may agree) of any other Competitive Bid Quote Request.
(c) (i) Each Lender may submit one or more
Competitive Bid Quotes, each containing an offer to make a Competitive Bid Loan
in response to any Competitive Bid Quote Request; provided that, if the
Borrower's request under Section 2.02(b) hereof specified more than one
Interest Period, such Lender may make a single submission
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containing one or more Competitive Bid Quotes for each such Interest Period.
Each Competitive Bid Quote must be submitted to the Borrower not later than
9:30 a.m. Charlotte, North Carolina time on (A) the third Business Day prior to
the proposed date of borrowing, in the case of a Competitive Bid Quote Request
for Competitive Bid Loans at the Eurodollar Competitive Rate or (B) the
Quotation Date, in the case of a Competitive Bid Quote Request for Competitive
Bid Loans at the Absolute Rate (or, in any such case, such other time and date
as the Borrower and the Agent, with the consent of the Required Lenders, may
agree) provided that if NationsBank is receiving quotes as provided in Section
2.02(g), any Competitive Bid Quote may be submitted by NationsBank (or its
applicable Lending Office) only if NationsBank (or such applicable Lending
Office) notifies the Borrower of the terms of the offer contained therein not
later than 9:15 a.m. Charlotte, North Carolina time on the Quotation Date.
Subject to Articles IV, V and IX hereof, any Competitive Bid Quote so made
shall be irrevocable except with the consent of the Agent given on the
instructions of the Borrower.
(ii) Each Competitive Bid Quote shall be
substantially in the form of Exhibit K attached hereto and incorporated herein
by reference and shall specify:
(A) the proposed date of borrowing and
the Interest Period therefor;
(B) the principal amount of the
Competitive Bid Loan for which each such offer is being made,
which principal amount shall be at least $1,000,000 (or in
increments of $100,000 in excess thereof); provided that the
aggregate principal amount of all Competitive Bid Loans for
which a Lender submits Competitive Bid Quotes may not exceed
the principal amount of the Competitive Bid Borrowing for a
particular Interest Period for which offers were requested;
(C) in the case of a Competitive Bid
Quote for Competitive Bid Loans at an Absolute Rate, the rate
of interest per annum (rounded upwards, if necessary, to the
nearest 1/10,000th of 1%) offered for each such Competitive
Bid Loan (the "Absolute Rate");
(D) in the case of a Competitive Bid
Quote for Competitive Bid Loans at the Eurodollar Competitive
Rate, the Eurodollar Competitive Rate; and
(E) the identity of the quoting Lender.
Unless otherwise agreed by the Agent and the Borrower, no Competitive Bid Quote
shall contain qualifying, conditional or similar language or propose terms
other than or in addition to those set forth in the applicable Competitive Bid
Quote Request
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<PAGE> 34
and, in particular, no Competitive Bid Quote may be conditioned upon acceptance
by the Borrower of all (or some specified minimum) of the principal amount of
the Competitive Bid Loan for which such Competitive Bid Quote is being made.
Any subsequent Competitive Bid Quote submitted by a Lender that amends,
modifies or is otherwise inconsistent with a previous Competitive Bid Quote
submitted by such Lender with respect to the same Competitive Bid Quote Request
shall be disregarded by the Borrower unless such subsequent Competitive Bid
Quote is submitted solely to correct a manifest error in such former
Competitive Bid Quote.
(d) The Borrower shall (A) in the case of a Competetive
Bid Loan at an Absolute Rate, as promptly as practicable after the Competitive
Bid Quote is submitted (but in any event not later than 10:30 a.m. Charlotte,
North Carolina time on the Quotation Date (or such other time and date as the
Borrower and the Agent, with the consent of the Required Lenders, may agree) or
(B) in the case of a Competitive Bid Loan at a Eurodollar Competitive Rate, the
third Business Day prior to the proposed date of borrowing), notify the Agent
and Lenders of (A) the aggregate principal amount of the Competitive Bid
Borrowing for which Competitive Bid Quotes have been received as well as the
ranges of bids submitted for each Interest Period requested, (B) the respective
principal amounts and Absolute Rates or Eurodollar Competitive Rates, as the
case may be, so offered by each Lender (identifying the Lender that made each
Competitive Bid Quote), and (C) its acceptance or nonacceptance of the
Competitive Bid Quotes and the Borrower shall promptly notify each affected
Lender. In the case of acceptance, such notice shall specify the aggregate
principal amount of offers for each Interest Period that are accepted. The
Borrower may accept any Competitive Bid Quote in whole or in part (provided
that any Competitive Bid Quote accepted in part shall be at least $1,000,000 or
in increments of $100,000 in excess thereof); provided that:
(i) the aggregate principal amount of each
Competitive Bid Borrowing may not exceed the applicable amount set
forth in the related Competitive Bid Quote Request;
(ii) the aggregate principal amount of each Competitive
Bid Borrowing shall be at least $5,000,000 (or an increment of
$1,000,000 in excess thereof) but shall not cause the limits specified
in Section 2.02(a) hereof to be violated;
(iii) except as provided below, acceptance of Competitive
Bid Quotes for any Interest Period may be made only in ascending order
of Absolute Rates or Eurodollar Competitive Rates, as the case may be,
beginning with the lowest rate so offered; and
(iv) the Borrower may not accept any Competitive Bid
Quote where such Competitive Bid Quote fails to comply with Section
2.02(c)(ii) hereof or otherwise fails to comply with
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<PAGE> 35
the requirements of this Agreement (including, without limitation,
Section 2.02(a) hereof).
Any of the conditions above notwithstanding, the Borrower may, in its sole
discretion, accept a Competitive Bid Quote that does not contain the lowest
Absolute Rate or Eurodollar Competitive Rates, as the case may be, where
acceptance of the Competitive Bid Quote containing the lowest Absolute Rate or
Eurodollar Competitive Rate, as the case may be, would cause the Outstanding
Credit Obligations of a Lender or Lenders offering the lowest Absolute Rate or
Eurodollar Competitive Rate, as the case may be, to exceed the Total Revolving
Credit Commitment.
If Competitive Bid Quotes are made by two or more Lenders with the
same Absolute Rates or Eurodollar Competitive Rates, as the case may be, for a
greater aggregate principal amount than the amount in respect of which
Competitive Bid Quotes are accepted for the related Interest Period after the
acceptance of all Competitive Bid Quotes, if any, of all lower Absolute Rates
or Eurodollar Competitive Rates, as the case may be, offered by any Lender for
such related Interest Period, the principal amount of Competitive Bid Loans in
respect of which such Competitive Bid Quotes are accepted shall be allocated by
the Borrower among such Lenders as nearly as possible (in amounts of at least
$500,000 or in increments of $100,000 in excess thereof) in proportion to the
aggregate principal amount of such Competitive Bid Quotes. Determinations by
the Borrower of the amounts of Competitive Bid Loans and the lowest bid after
adjustment as provided in Section 2.02(d)(iii) shall be conclusive in the
absence of manifest error.
(e) Any Lender whose offer to make any Competitive Bid
Loan has been accepted shall, not later than 1:00 p.m. Charlotte, North
Carolina time on the date specified for the making of such Loan, make the
amount of such Loan available to the Borrower to the Borrower's Account or
otherwise as shall be directed by the Authorized Representative in Dollars and
in immediately available funds.
(f) From time to time, the Borrower shall furnish such
information to the Agent as the Agent may request relating to the making of
Competitive Bid Loans, including the amounts, interest rates, dates of
borrowings and maturities thereof.
(g) The Borrower may request the Agent to receive the
Competitive Bid Quotes, in which event the Agent shall (A) in the case of a
Competitive Bid Loan at the Absolute Rate, as promptly as practicable after the
Competitive Bid Quote is submitted (but in no event later than 10:00 a.m.,
Charlotte, North Carolina time on the Quotation Date) or (B) in the case of a
Competitive Bid Loan at the Eurodollar Competitive Rate, by 10:00 a.m. New
York, New York time on the date a Competitive Quote is submitted, notify the
Borrower of the terms of any Competitive Bid Quote submitted by a Lender that
is in accordance with Section 2.02(c) hereof. The Agent's
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<PAGE> 36
notice to the Borrower shall specify (A) the aggregate principal amount of the
Competitive Bid Borrowing for which Competitive Bid Quotes have been received
and (B) the respective principal amounts and Absolute Rates or Eurodollar
Competitive Rate, as the case may be, offered by each Lender (identifying the
Lender that made each Competitive Bid Quote). Not later than 10:30 a.m.
Charlotte, North Carolina time on (A) the third Business Day prior to the
proposed date of borrowing, in the case of Competitive Bid Loans at the
Eurodollar Competitive Rate or (B) the Quotation Date (or, in any such case,
such other time and date as the Borrower and the Agent, with the consent of the
Required Lenders, may agree), the Borrower shall notify the Agent of its
acceptance or nonacceptance of the Competitive Bid Quotes so notified to it
(and the failure of the Borrower to give such notice by such time shall
constitute nonacceptance) and the Agent shall promptly notify each affected
Lender. Together with each notice of a request for Competitive Bid Quotes,
which the Borrower requires the Agent to issue pursuant to this paragraph (g),
the Borrower shall pay to the Agent for the account of the Agent a bid
administration fee of $1,500.00.
2.03 Payment of Interest. (a) The Borrower shall pay interest (i)
to the Agent at the Principal Office for the account of each Lender on the
outstanding and unpaid principal amount of each Revolving Credit Loan made by
such Lender for the period commencing on the date of such Loan until such Loan
shall be due at the Eurodollar Rate or the Base Rate, as elected or deemed
elected by the Borrower or otherwise applicable to such Loan as herein
provided, (ii) to the Lender at its Lending Office making each Competitive Bid
Loan, at the applicable Absolute Rate or Eurodollar Competitive Rate, as the
case may be, and (iii) to the Agent in the case of each Swing Line Loan, at the
Base Rate; provided, however, that if any amount shall not be paid when due (at
maturity, by acceleration or otherwise), all amounts outstanding hereunder
shall bear interest thereafter (i) in the case of a Eurodollar Loan, at a rate
of two percent (2%) above the Applicable Eurodollar Rate for such Eurodollar
Loan, (ii) in the case of a Base Rate Loan, at a rate of interest per annum
which shall be two percent (2%) above the Base Rate, and (iii) in the case of a
Competitive Bid Loan, at a rate of interest per annum which shall be two
percent (2%) above the Absolute Rate or Eurodollar Competitive Rate, as the
case may be, for such Competitive Bid Loan, or (in each case) the maximum rate
permitted by applicable law, whichever is lower, from the date such amount was
due and payable until the date such amount is paid in full.
(b) Interest on the outstanding principal balance of each Loan shall
be computed on the basis of (x) in the case of a Eurodollar Loan a year of 360
days and calculated for the actual number of days elapsed and (y) in the case
of a Base Rate Loan, a year of 365-366 days and calculated for the actual
number of days elapsed. Interest on each Loan shall be paid (a) quarterly in
arrears on the last Business Day of each December, March, June or September,
commencing December 31, 1995, on each Base Rate Loan,
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<PAGE> 37
(b) on the last day of the applicable Interest Period for each Eurodollar Loan
and Competitive Bid Loan, but in no event less frequently than at the end of
each three month period and (c) upon payment in full of the principal amount of
such Loan.
2.04 Payment of Principal. The principal amount of the Revolving
Credit Debit Balance and all Swing Line Outstanding shall be due and payable to
the Agent for the benefit of each Lender in full on the Revolving Credit
Termination Date, or earlier as herein expressly provided. The principal
amount of all Competitive Bid Loans shall be due and payable to the Lender
making such Competitive Bid Loan in full on the last day of the Interest Period
therefor, or earlier as herein expressly provided. The principal amount of
Eurodollar Loans and Competitive Bid Loans may only be prepaid at the end of
the applicable Interest Period, unless the Borrower shall pay to the Agent for
the account of the Lenders the amount, if any, required under Section 4.04.
The Borrower shall furnish the Agent telephonic notice of its intention to make
a principal payment (including Competitive Bid Loans) prior to 11:00 A.M.
Charlotte, North Carolina time on the date of such payment. All payments of
principal shall be in the amount of $500,000 or such greater amount which is an
integral multiple of $100,000.
2.05 Non-Conforming Payments. (a) Each payment of principal
(including any prepayment) and payment of interest shall be made to the Agent
at the Principal Office, for the account of each Lender's applicable Lending
Office, in Dollars and in immediately available funds before 12:30 P.M.
Charlotte, North Carolina time on the date such payment is due. The Agent may,
but shall not be obligated to, debit the amount of any such payment which is
not made by such time to any ordinary deposit account, if any, of the Borrower
with the Agent.
(b) The Agent shall deem any payment by or on behalf of the
Borrower hereunder that is not made both (a) in Dollars and in immediately
available funds and (b) prior to 12:30 P.M. Charlotte, North Carolina time on
the date payment is due to be a non-conforming payment. Any such payment shall
not be deemed to be received by the Agent until the time such funds become
available funds. Any non-conforming payment may constitute or become a Default
or Event of Default. The Agent shall give prompt telephonic notice to the
Authorized Representative and each of the Lenders (confirmed in writing) if any
payment is non-conforming. Interest shall continue to accrue on any principal
as to which a non-conforming payment is made until such funds become available
funds (but in no event less than the period from the date of such payment to
the next succeeding Business Day) at the respective rates of interest per annum
specified in Section 2.03(a) in respect of late payments of interest, from the
date such amount was due and payable until the date such amount is paid in full
(but in no event less than the period from the date of such payment to the next
succeeding Business Day).
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(c) In the event that any payment hereunder or under the Notes
becomes due and payable on a day other than a Business Day, then such due date
shall be extended to the next succeeding Business Day; provided that interest
shall continue to accrue during the period of any such extension.
2.06 Borrower's Account. The Borrower shall continuously maintain
the Borrower's Account for the purposes herein contemplated.
2.07 Notes. (a) Revolving Credit Loans made by each Lender, shall
be evidenced by, and be repayable with interest in accordance with the terms
of, the Revolving Credit Note payable to the order of such Lender in the amount
of its Applicable Commitment Percentage of the Total Revolving Credit
Commitment, which Revolving Credit Note shall be dated the Closing Date or such
later date pursuant to an Assignment and Acceptance and shall be duly
completed, executed and delivered by the Borrower.
(b) Competitive Bid Loans made by any Lender shall be evidenced
by, and be repayable with interest in accordance with the terms of, the
Competitive Bid Note payable to the order of such Lender in the amount of 50%
of the Total Revolving Credit Commitment (but the aggregate outstanding
principal amount of Competitive Bid Loans may not at any time exceed fifty
percent (50%) of the Total Revolving Credit Commitment) which shall be dated
the Closing Date or such later date pursuant to an Assignment and Acceptance
and shall be duly completed, executed and delivered by the Borrower.
(c) Swing Line Loans made by NationsBank shall be evidenced by the
Swing Line Note in the principal amount of $10,000,000, and shall be repayable
with interest in accordance with the terms of the Swing Line Note dated the
Closing Date and duly executed and delivered by the Borrower.
2.08 Pro Rata Payments. Except as otherwise provided herein, (a)
each payment and prepayment on account of the principal of and interest on the
Loans (other than Competitive Bid Loans and Swing Line Loans) and the fees
described in Sections 2.12 and 2.13 hereof shall be made to the Agent in the
aggregate amount payable to the Lenders for the account of the Lenders pro rata
based on their Applicable Commitment Percentages, (b) each payment of principal
and interest on the Competitive Bid Loans shall be made to the Agent for the
account of the respective Lender making such Competitive Bid Loan, (c) each
payment of principal and interest on Swing Line Loans shall be made to the
Agent for the account of NationsBank, (d) all payments to be made by the
Borrower for the account of each of the Lenders on account of principal,
interest and fees, shall be made without set-off or counterclaim, and (e) the
Agent will distribute such payments when received to the Lenders as provided
for herein.
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2.09 Reductions. The Borrower shall, by notice from an Authorized
Representative, have the right from time to time (but not more frequently than
twice during each Fiscal Year), upon not less than five (5) Business Days
written notice to the Agent to reduce the Total Revolving Credit Commitment.
The Agent shall give each Lender, within one (1) Business Day, telephonic
notice (confirmed in writing) of such reduction. Each such reduction shall be
in the aggregate amount of $5,000,000 or such greater amount which is in an
integral multiple of $1,000,000, and shall permanently reduce the Total
Revolving Credit Commitment of the Lenders pro rata. No such reduction shall
be permitted that results in the payment of any Eurodollar Loan other than on
the last day of the Interest Period of such Loan unless such prepayment is
accompanied by amounts due, if any, under Section 4.04. Each reduction of the
Total Revolving Credit Commitment shall be accompanied by payment of the
Revolving Credit Notes to the extent that the sum of the Outstanding Credit
Obligations exceeds the Total Revolving Credit Commitment after giving effect
to such reduction, together with accrued and unpaid interest on the amounts
prepaid.
2.10 Increase and Decrease in Amounts. The amount of the Total
Revolving Credit Commitment which shall be available to the Borrower shall be
reduced by the aggregate amount of all Swing Line Outstanding and Outstanding
Letters of Credit and outstanding Competitive Bid Loans.
2.11 Conversions and Elections of Subsequent Interest Periods.
Provided that no Default or Event of Default shall have occurred and be
continuing and subject to the limitations set forth below and in Sections
4.01(b), 4.02 and 4.03 hereof, the Borrower may:
(a) upon notice to the Agent on or before 10:30 A.M. Charlotte,
North Carolina time on any Business Day convert all or a part of Eurodollar
Loans that are Revolving Credit Loans to Base Rate Loans on the last day of the
Interest Period for such Eurodollar Loans; and
(b) on three (3) Euro Business Days' notice to the Agent on or
before 10:30 A.M. Charlotte, North Carolina time:
(i) elect a subsequent Interest Period for all or a
portion of Eurodollar Loans to begin on the last day of the current
Interest Period for such Eurodollar Loans; or
(ii) convert Base Rate Loans (other than Swing Line Loans)
to Eurodollar Loans on any Eurodollar Business Day; and
Notice of any such elections or conversions shall specify the
effective date of such election or conversion and, with respect to Eurodollar
Loans, the Interest Period to be applicable to the Loan as continued or
converted. Each election and conversion pursuant
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to this Section 2.11 shall be subject to the limitations on Eurodollar Loans
set forth in the definition of "Interest Period" herein and in Section 4.01 and
Article IV hereof. All such continuations or conversions of Loans shall be
effected pro rata based on the Applicable Commitment Percentages of the
Lenders.
2.12 Revolving Credit Facility Fee. For the period beginning on the
Effective Date and ending on the Revolving Credit Termination Date (or such
earlier date on which the Revolving Credit Facility has terminated), the
Borrower agrees to pay to the Agent, for the pro rata benefit of the Lenders
based on their Applicable Commitment Percentages of the Revolving Credit
Facility, the Facility Fee. Such payments of fees provided for in this Section
2.12 shall be due in arrears on the last Business Day of each December, March,
June and September beginning December 31, 1995 to and on the Revolving Credit
Termination Date (or such earlier date on which the Revolving Credit Facility
has terminated). Notwithstanding the foregoing, so long as any Lender fails to
make available any portion of its Revolving Credit Commitment when requested,
such Lender shall not be entitled to receive payment of its pro rata share of
such fee until such Lender shall make available such portion. Such fee shall
be calculated on the basis of a year of 365-366 days for the actual number of
days elapsed.
2.13 Deficiency Advances. No Lender shall be responsible for any
default of any other Lender in respect to such other Lender's obligation to
make any Loan hereunder nor shall the Revolving Credit Commitment of any Lender
hereunder be increased as a result of such default of any other Lender.
Without limiting the generality of the foregoing, in the event any Lender shall
fail to advance funds to the Borrower as herein provided, the Agent may in its
discretion, but shall not be obligated to, advance under the applicable Note in
its favor as a Lender all or any portion of such amount or amounts (each, a
"deficiency advance") and shall thereafter be entitled to payments of principal
of and interest on such deficiency advance in the same manner and at the same
interest rate or rates to which such other Lender would have been entitled had
it made such advance under its applicable Note; provided that, upon payment to
the Agent from such other Lender of the entire outstanding amount of each such
deficiency advance, together with accrued and unpaid interest thereon, from the
most recent date or dates interest was paid to the Agent by the Borrower on
each Loan comprising the deficiency advance at the interest rate per annum for
overnight borrowing by the Agent from the Federal Reserve Bank, then such
payment shall be credited against the applicable Note of the Agent in full
payment of such deficiency advance and the Borrower shall be deemed to have
borrowed the amount of such deficiency advance from such other Lender as of the
date such deficiency advance is made.
2.14 Adjustments by Agent. Notwithstanding the construction of "pro
rata" to mean based on the Applicable Commitment
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<PAGE> 41
Percentages and any provisions contained herein for the advancement of funds or
distribution of payments on a pro rata basis, the Agent may, in its discretion,
but shall not be obligated to, adjust downward or upward (but not in excess of
any applicable Revolving Credit Commitment) the principal amount of any Loan to
be made by any Lender to the nearest amount which is evenly divisible by $100,
and make appropriate related adjustment in the distribution of payments of
principal and interest on the Loans.
2.15 Use of Proceeds. The proceeds of the Loans made pursuant to
the Revolving Credit Facility and the Swing Line hereunder shall be used by the
Borrower and its Subsidiaries to finance Capital Expenditures and Permitted
Acquisitions and for other working capital and general corporate needs of the
Borrower and its Subsidiaries.
2.16 Swing Line. Notwithstanding any other provision of this
Agreement to the contrary, in order to administer the Revolving Credit Facility
in an efficient manner and to minimize the transfer of funds between the Agent
and the Lenders, NationsBank shall make available Swing Line Loans to the
Borrower prior to the Revolving Credit Termination Date. NationsBank shall not
make any Swing Line Loan pursuant hereto (i) if the Borrower is not in
compliance with all the conditions to the making of Revolving Credit Loans set
forth in this Agreement, (ii) if after giving effect to such Swing Line Loan,
the Swing Line Outstanding exceeds $10,000,000, or (iii) if after giving effect
to such Swing Line Loan, the sum of the Outstanding Credit Obligations exceed
the Total Revolving Credit Commitment. Loans made pursuant to this Section
2.16 shall be limited to Loans bearing interest at the Base Rate unless
NationsBank and Borrower shall agree otherwise.
(i) On each Business Day, in the absence of contrary
instructions from the Borrower (by telephone confirmed in writing),
NationsBank shall make a Swing Line Loan by funding the Borrower's
Account with NationsBank through credits to such account to the extent
necessary based on the balance in the account on such day in order to
fund that day's presentments for payment against the account. Upon
each Advance, the Borrower shall be indebted to NationsBank in the
amount of the Advance, plus interest thereon, in accordance with the
terms and conditions hereof.
(ii) Not later than 3:00 P.M. (Charlotte, North Carolina
time) on each Business Day on which Advances under the Swing Line are
to be made, NationsBank shall inform the Borrower by telephone of the
amount of such Advances.
(iii) All Advances made by NationsBank under the Swing Line
pursuant to this Section 2.16 outstanding on any day shall bear
interest at the Base Rate unless NationsBank shall agree otherwise.
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<PAGE> 42
(iv) The Borrower and each Lender which is or may become a
party hereto acknowledge that all Swing Line Loans are to be made
solely by NationsBank to the Borrower but that such Lender shall share
the risk of loss with respect to such Advances in an amount equal to
such Lender's Applicable Commitment Percentage of such Swing Line
Loan. Upon demand made by NationsBank, each Lender shall, according
to its Lender's Applicable Commitment Percentage of such Swing Line
Loan, promptly provide to NationsBank its purchase price therefor in
an amount equal to its Participation therein. Any Advance made by a
Lender pursuant to demand of NationsBank of the purchase price of its
Participation shall be deemed a Base Rate Loan ending on the next
following Business Day, which shall be extended automatically until
the Borrower converts such Base Rate Loan in accordance with the terms
of Section 2.11 hereof. The obligation of each Lender to so provide
its purchase price to NationsBank shall be absolute and unconditional
and shall not be affected by the occurrence of a Default or an Event
of Default or any other occurrence or event.
Borrower at its option may request an Advance as a Revolving Credit
Loan pursuant to Section 2.01 in an amount sufficient to repay any or all Swing
Line Loans on any date and the Agent shall upon the receipt of such Advance,
provide to NationsBank the amount necessary to repay such Swing Line Loan or
Loans (which NationsBank shall then apply to such repayment) and credit any
balance of the Revolving Credit Loan in immediately available funds to the
Borrower's Account. The proceeds of such Advances shall be paid to NationsBank
for application to the Swing Line Outstanding and the Lenders shall then be
deemed to have made Revolving Credit Loans in the amount of such Advances. The
Swing Line shall continue to be available until the earlier of (i) occurrence
of a Default or an Event of Default, or (ii) the Revolving Credit Termination
Date.
2.17 Additional Fees. In addition to any fees described above, the
Borrower agrees to pay to the Agent and NationsBank such other fees as may be
agreed to in a separate writing or writings.
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ARTICLE III
Letters of Credit
3.01 Letters of Credit. NationsBank agrees, subject to the terms
and conditions of this Agreement, upon request and for the account of Borrower,
to issue from time to time Letters of Credit upon delivery to NationsBank of an
Application and Agreement for Letter of Credit in form and content acceptable
to NationsBank; provided, that the Outstanding Letters of Credit shall not
exceed the Total Letter of Credit Commitment. No Letter of Credit shall be
issued by NationsBank with an expiry date or payment date occurring subsequent
to the fifth Business Day preceding the Revolving Credit Termination Date.
NationsBank shall not be required to issue any Letter of Credit if the
Outstanding Credit Obligations when added to the face amount of any requested
Letter of Credit exceed the Total Revolving Credit Commitment. The Co-Agent
shall notify the Agent of any extension, amendment or renewal of any Existing
Letter of Credit.
3.02 Reimbursement.
(a) The Borrower hereby unconditionally agrees
immediately to pay to NationsBank on demand at the Principal Office, in the
case of NationsBank and its Lending Office, in the case of the Co-Agent, all
amounts required to pay all drafts drawn or purporting to be drawn under the
Letters of Credit and all reasonable expenses incurred by the Issuing Bank in
connection with the Letters of Credit and in any event and without demand to
place in possession of the Issuing Bank (which shall include Advances under the
Revolving Credit Facility if permitted by Section 2.01 hereof) sufficient funds
to pay all debts and liabilities arising under any Letter of Credit. The
Borrower's obligations to pay the Issuing Bank under this Section 3.02, and the
Issuing Bank's right to receive the same, shall be absolute and unconditional
and shall not be affected by any circumstance whatsoever. The Issuing Bank
agrees to give the Borrower prompt written notice of any request for a draw
under a Letter of Credit. The Issuing Bank may charge any account the Borrower
may have with it for any and all amounts the Issuing Bank pays under a Letter
of Credit, plus charges and reasonable expenses as from time to time agreed to
by the Issuing Bank and the Borrower; provided that to the extent permitted by
Section 2.01(c)(iv), such amounts shall be paid pursuant to Swing Line Loans or
Advances under the Revolving Credit Facility. The Borrower agrees that the
Issuing Bank may, in its sole discretion, accept or pay, as complying with the
terms of any Letter of Credit, any drafts or other documents otherwise in order
which may be signed or issued by an administrator, executor, trustee in
bankruptcy, debtor in possession, assignee for the benefit of creditors,
liquidator, receiver, attorney in fact or other legal representative of a party
who is authorized under such Letter of Credit to draw or issue any drafts or
other documents. The Borrower agrees to pay the Issuing Bank interest on any
amounts not paid when due hereunder at the Base Rate plus two percent (2%), or
the maximum rate permitted by applicable law, if lower.
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(b) In accordance with the provisions of Section 2.01
hereof, the Issuing Bank shall notify the Agent (and shall also notify the
Borrower) of any drawing under any Letter of Credit as promptly as practicable
following the receipt by NationsBank of such drawing.
(c) Each Lender (other than the Issuing Bank) shall
automatically acquire on the date of issuance thereof, a Participation in the
liability of the Issuing Bank in respect of each Letter of Credit in an amount
equal to such Lender's Applicable Commitment Percentage of such liability, and
to the extent that the Borrower is obligated to pay the Issuing Bank under
Section 3.02(a), each Lender (other than the Issuing Bank) shall absolutely,
unconditionally and irrevocably assume, and shall be unconditionally obligated
to pay to the Issuing Bank as hereinafter described, its Applicable Commitment
Percentage of the liability of the Issuing Bank under such Letter of Credit.
Prior to the Revolving Credit Termination Date, each Lender (including the
Issuing Bank in its capacity as a Lender) shall, subject to the terms and
conditions of Article II, make a Revolving Credit Loan bearing interest at the
Base Rate to the Borrower by paying to the Agent for the account of the Issuing
Bank at the Principal Office in Dollars and in immediately available funds, an
amount equal to its Applicable Commitment Percentage of any drawing under a
Letter of Credit, all as described and pursuant to Section 2.01(c)(iv). With
respect to drawings under any of the Letters of Credit, each Lender, upon
receipt from the Agent of notice of a drawing in the manner described in
Section 2.01(c)(iv), shall promptly pay to the Agent for the account of the
Issuing Bank, prior to the applicable time set forth in Section 2.01(c)(iv),
its Applicable Commitment Percentage of such drawing. Simultaneously with the
making of each such payment by a Lender to the Issuing Bank, such Lender shall,
automatically and without any further action on the part of the Issuing Bank or
such Lender, acquire a Participation in an amount equal to such payment
(excluding the portion thereof constituting interest) in the related
Reimbursement Obligation of the Borrower. The Reimbursement Obligations of the
Borrower shall be immediately due and payable whether by Advances made in
accordance with Section 2.01(c)(iv) or otherwise. Each Lender's obligation to
make payment to the Agent for the account of the Issuing Bank pursuant to this
Section 3.02(c), and the right of the Issuing Bank to receive the same, shall
be absolute and unconditional, shall not be affected by any circumstance
whatsoever and shall be made without any offset, abatement, withholding or
reduction whatsoever. If any Lender is obligated to pay but does not pay
amounts to the Agent for the account of the Issuing Bank in full upon such
request as required by this Section 3.02(c), such Lender shall, on demand, pay
to the Agent for the account of the Issuing Bank interest on the unpaid amount
for each day during the period commencing on the date of notice given to such
Lender pursuant to Section 2.01(b) until such Lender pays such amount to the
Agent for the account of the Issuing Bank in full at the interest rate per
annum for overnight borrowing by NationsBank from the Federal Reserve Bank.
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(d) As soon as practical following the issuance of a
Letter of Credit, NationsBank shall notify the Agent, and the Agent shall
notify each Lender, of the date of issuance of such Letter of Credit, the
stated amount and the expiry date of such Letter of Credit. Promptly following
the end of each calendar quarter, NationsBank shall deliver to the Agent, and
the Agent shall deliver to each Lender, a notice describing the aggregate
undrawn amount of all Letters of Credit at the end of such quarter. Upon the
request of any Lender from time to time, NationsBank shall deliver to the
Agent, and the Agent shall deliver to such Lender, any other information
reasonably requested by such Lender with respect to each Outstanding Letter of
Credit.
(e) The issuance by NationsBank of each Letter of Credit
shall, in addition to the conditions precedent set forth in Section 5.01
hereof, be subject to the conditions that such Letter of Credit be in such form
and contain such terms as shall be reasonably satisfactory to NationsBank
consistent with the then current practices and procedures of NationsBank with
respect to similar letters of credit, and the Borrower shall have executed and
delivered such other instruments and agreements relating to such Letters of
Credit as NationsBank shall have reasonably requested consistent with such
practices and procedures. All Letters of Credit shall be issued pursuant to
and subject to the Uniform Customs and Practice for Documentary Credits, 1993
revision, International Chamber of Commerce Publication No. 500 and all
subsequent amendments and revisions thereto.
(f) Without duplication of Section 10.07 hereof, the
Borrower hereby agrees to defend, indemnify and hold harmless the Issuing Bank,
each other Lender and the Agent from and against any and all claims and
damages, losses, liabilities, reasonable costs and expenses which the Issuing
Bank, such other Lender or the Agent may incur (or which may be claimed against
the Issuing Bank, such other Lender or the Agent) by any Person by reason of or
in connection with the issuance or transfer of or payment or failure to pay
under any Letter of Credit; provided that the Borrower shall not be required to
indemnify the Issuing Bank, any other Lender or the Agent for any claims,
damages, losses, liabilities, costs or expenses to the extent, but only to the
extent, (i) caused by the willful misconduct or gross negligence of the party
to be indemnified after final adjudication thereof or (ii) caused by the
failure of the Issuing Bank to pay under any Letter of Credit after the
presentation to it of a request strictly complying with the terms and
conditions of such Letter of Credit, unless such payment is prohibited by any
law, regulation, court order or decree. The provisions of this Section 3.02(f)
shall survive repayment of the Obligations, the occurrence of the Revolving
Credit Termination Date, and expiration or termination of this Agreement.
(g) Without limiting Borrower's rights to raise claims as
set forth in Section 3.02(f) above, the obligation of the Borrower to
immediately reimburse the Issuing Bank for drawings made under Letters of
Credit shall be absolute, unconditional and irrevocable, and shall be performed
strictly in accordance with the
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terms of this Agreement and such Letters of Credit and the related applications
for any Letter of Credit, including, under the following circumstances:
(i) any lack of validity or enforceability of the
Letter of Credit, the obligation supported by the Letter of Credit or any other
agreement or instrument relating thereto (collectively, the "Related
Documents");
(ii) any amendment or waiver of or any consent to
or departure from all or any of the Related Documents;
(iii) the existence of any claim, setoff, defense
(other than the defense of payment in accordance with the terms of this
Agreement) or other rights which the Borrower may have at any time against any
beneficiary or any transferee of a Letter of Credit (or any persons or entities
for whom any such beneficiary or any such transferee may be acting), Agent,
Lenders or any other person or entity, whether in connection with the Loan
Documents, the Related Documents or any unrelated transaction;
(iv) any breach of contract or other dispute
between the Borrower and any beneficiary or any transferee of a Letter of
Credit (or any persons or entities for whom such beneficiary or any such
transferee may be acting), Agent, Lenders or any other Person;
(v) any draft, statement or any other document
presented under the Letter of Credit proving to be forged, fraudulent, invalid
or insufficient in any respect or any statement therein being untrue or
inaccurate in any respect whatsoever;
(vi) any delay, extension of time, renewal,
compromise or other indulgence or modification granted or agreed to by Agent,
with or without notice to or approval by the Borrower in respect of any of
Borrower's Obligations under this Agreement; or
(vii) any other circumstance or happening
whatsoever, whether or not similar to any of the foregoing;
provided, however, that nothing contained herein shall be deemed to release the
Issuing Bank or any other Lender of any liability for actual loss arising as a
result of its gross negligence or willful misconduct or out of the wrongful
dishonor by NationsBank of a proper demand for payment made under and strictly
complying with the terms of any Letter of Credit.
3.03 Letter of Credit Fee. The Borrower agrees to pay (i) to the
Agent, for the pro rata benefit of the Lenders based on their Applicable
Commitment Percentages, a fee on the aggregate amount available to be drawn on
each Outstanding Letter of Credit at a rate equal to the Applicable Margin to
the Eurodollar Rate as in effect from time to time and (ii) to the Issuing
Bank, as issuer of each Letter of Credit, an issuance fee equal to .125% per
annum of the aggregate amount available to be drawn on each Outstanding Letter
of Credit. Such payments of fees provided for in this
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Section 3.03 shall be due with respect to each Letter of Credit quarterly in
arrears on the last day of each December, March, June and September, commencing
on the first such date following the issuance of a Letter of Credit under this
Agreement. Such fees shall be calculated on the basis of a year of 365-366
days for the actual number of days elapsed.
3.04 Administrative Fees. The Borrower shall pay to the Issuing
Bank such administrative fee and other fees, if any, in connection with the
Letters of Credit in such amounts and at such times as the Issuing Bank and the
Borrower shall agree from time to time.
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ARTICLE IV
Yield Protection and Illegality
4.01 Additional Costs. (a) The Borrower shall promptly pay to the
Agent for the account of a Lender from time to time, without duplication, such
amounts as such Lender may determine to be necessary to compensate it for any
costs incurred by such Lender which it determines are attributable to its
making or maintaining any Loan or its obligation to make any Loans, or the
issuance or maintenance by the Issuing Bank of or any other Lender's
Participation in any Letter of Credit issued hereunder, or any reduction in any
amount receivable by such Lender under this Agreement, the Notes or the Letters
of Credit in respect of any of such Loans or such obligation or the Letters of
Credit, including reductions in the rate of return on a Lender's capital (such
increases in costs and reductions in amounts receivable and returns being
herein called "Additional Costs"), resulting from any Regulatory Change which:
(i) changes the basis of taxation of any amounts payable to such Lender under
this Agreement or the Notes in respect of any of such Loans or Letters of
Credit (other than taxes imposed on or measured by the income, revenues or
assets of any Lender); or (ii) imposes or modifies any reserve, special
deposit, or similar requirements relating to any extensions of credit or other
assets of, or any deposits with or other liabilities of, such Lender (other
than any such reserve, deposit or requirement reflected in the Prime Rate, the
Federal Funds Effective Rate or the Eurodollar Rate, in each case computed in
accordance with the respective definitions of such terms set forth in Section
1.01 hereof); or (iii) has or would have the effect of reducing the rate of
return on capital of any such Lender or corporation controlling such Lender to
a level below that which the Lender or corporation controlling such Lender
could have achieved but for such Regulatory Change (taking into consideration
such Lender's or such corporation's policies with respect to capital adequacy);
or (iv) imposes any other condition adversely affecting the Agent or the
Lenders under this Agreement, the Notes or the issuance or maintenance of, or
any Lender's Participation in, the Letters of Credit (or any of such extensions
of credit or liabilities). Each Lender will notify the Authorized
Representative and the Agent of any event occurring after the Effective Date
which would entitle it to compensation pursuant to this Section 4.01(a) as
promptly as practicable after it obtains knowledge thereof and determines to
request such compensation.
(b) Without limiting the effect of the foregoing provisions of
this Section 4.01, in the event that, by reason of any Regulatory Change, any
Lender either (i) incurs Additional Costs based on or measured by the excess
above a specified level of the amount of a category of deposits or other
liabilities of the Lender which includes deposits by reference to which the
interest rate on Eurodollar Loans or Competitive Bid Loans at the Eurodollar
Competitive Rate is determined as provided in this Agreement or a category of
extensions of credit or other assets of any Lender which includes Eurodollar
Loans or Competitive Bid Loans at the
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Eurodollar Competitive Rate (by way of illustration only and not limitation, an
increase in reserve requirements on a Lender's eurodollar deposit liabilities
above a specified dollar amount percentage of its capital) or (ii) becomes
subject to restrictions on the amount of such a category of liabilities or
assets which it may hold, then, if the Lender so elects by notice to the other
Lenders, the obligation hereunder of such Lender to make, and to convert Base
Rate Loans into, Eurodollar Loans that are the subject of such restrictions
shall be suspended until the date such Regulatory Change ceases to be in effect
and the Borrower shall, on the last day(s) of the then current Interest
Period(s) for outstanding Eurodollar Loans convert such Eurodollar Loans into
Base Rate Loans; provided, however, that the suspension of such obligation and
the conversion of any Eurodollar Loans into Base Rate Loans shall apply only to
any Lender who is affected by such restrictions and who has provided such
notice to the other Lenders, and the obligation of the other Lenders to make,
and to convert Base Rate Loans into Eurodollar Loans shall not be affected by
such restrictions. In the event that the obligation of some, but not all of
the Lenders to make, or to convert Base Rate Loans into Eurodollar Loans or
Competitive Bid Loans at the Eurodollar Competitive Rate is suspended, then any
request by the Borrower during the pendency of such suspension for a Eurodollar
Loan or Competitive Bid Loans at the Eurodollar Competitive Rate shall be
deemed a request for such Eurodollar Loan or Competitive Bid Loans at the
Eurodollar Competitive Rate from the Lender(s) not subject to such suspension
and for a Base Rate Loan or Competitive Bid Loan at an Absolute Rate from the
Lender(s) who are subject to such suspension, as to Eurodollar Loans and Base
Rate Loans, in each case in the respective amounts based on the Lenders'
respective Revolving Credit Commitments and Reserve Line Commitments, as
applicable.
(c) Determinations by any Lender for purposes of this Section 4.01
of the effect of any Regulatory Change on its costs of making or maintaining,
or being committed to make, Loans or by NationsBank as issuer of any Letter of
Credit of the effect of any Regulatory Change on its costs in connection with
the issuance or maintenance of, or any other Lender's Participation in, any
Letter of Credit issued hereunder, or on amounts receivable by any Lender in
respect of Loans or Letters of Credit, and of the additional amounts required
to compensate the Lender in respect of any Additional Costs, shall be made on a
reasonable basis taking into account such Lender's reasonable policies as to
the allocation of capital, costs and other items. The Lender requesting such
compensation shall furnish to the Authorized Representative and the Agent an
explanation of the Regulatory Change and calculations, in reasonable detail,
setting forth such Lender's determination of any such Additional Costs.
4.02 Suspension of Loans. Anything herein to the contrary
notwithstanding, if, on or prior to the determination of any interest rate for
any Eurodollar Loan or Competitive Bid Loan at a Eurodollar Competitive Rate
for any Interest Period, the Agent or, with respect to a Competitive Bid Loan
at the Eurodollar
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Competitive Rate, any Lender determines (which determination made on a
reasonable basis shall be conclusive absent manifest error) that:
(a) quotations of interest rates for the relevant
deposits referred to in the definitions of a Eurodollar Revolver Rate
or Eurodollar Competitive Rate in Section 1.01 hereof are not being
provided in the relevant amounts or for the relevant maturities for
purposes of determining the rate of interest for such Eurodollar Loan
or Competitive Bid Loan as provided in this Agreement; or
(b) the relevant rates of interest referred to in the
definition of "Interbank Offered Rate" in Section 1.01 hereof upon the
basis of which the Eurodollar Revolver Rate or Eurodollar Competitive
Rate for such Interest Period is to be determined do not adequately
reflect the cost to the Lenders or in the case of a Competitive Bid
Loan, the Lender making such Loan of making or maintaining such
Eurodollar Loan or Competitive Bid Loan for such Interest Period
(which determination shall be made on a reasonable basis by the Agent
or such Lender, as the case may be, and the Person making such
determination shall furnish the Authorized Representative evidence of
the facts leading to such determination);
then the Agent or Lender, as the case may be, shall give the Authorized
Representative prompt notice thereof, and so long as such condition remains in
effect, the Lenders shall be under no obligation to make Eurodollar Loans or
Competitive Bid Loans or the Eurodollar Competitive Rate that are subject to
such condition, or to convert Loans into Eurodollar Loans, and the Borrower
shall on the last day(s) of the then current Interest Period(s) for outstanding
Eurodollar Loans, as applicable, convert such Eurodollar Loans into another
Eurodollar Loan which is not subject to the same or similar condition, or Base
Rate Loans. The Agent or such Lender, as the case may be, shall give the
Authorized Representative notice describing in reasonable detail any event or
condition described in this Section 4.02 promptly following the determination
by the Agent or such Lender, as the case may be, that the availability of
Eurodollar Loans or Competitive Bid Loans at a Eurodollar Competitive Rate is,
or is to be, suspended as a result thereof.
4.03 Illegality. Notwithstanding any other provision of this
Agreement, in the event that it becomes unlawful for any Lender to honor its
obligation to make or maintain Eurodollar Loans or Competitive Bid Loans at a
Eurodollar Competitive Rate hereunder, then such Lender shall promptly notify
the Borrower thereof (with a copy to the Agent) and such Lender's obligation to
make or continue Eurodollar Loans or Competitive Bid Loans at a Eurodollar
Competitive Rate, or convert Base Rate Loans into Eurodollar Loans, shall be
suspended until such time as such Lender may again make and maintain Eurodollar
Loans or Competitive Bid Loans at a Eurodollar Competitive Rate, and such
Lender's outstanding
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Eurodollar Loans shall be converted into Base Rate Loans in accordance with
Section 2.11 hereof.
4.04 Compensation. The Borrower shall promptly pay to each Lender,
upon the request of such Lender, such amount or amounts as shall be sufficient
(in the reasonable determination of Lender) to compensate it for any loss, cost
or expense incurred by it as a result of:
(a) any payment, prepayment or conversion of a Eurodollar
Loan or Competitive Bid Loans at a Eurodollar Competitive Rate on a
date other than the last day of the Interest Period for such
Eurodollar Loan or Competitive Bid Loans at a Eurodollar Competitive
Rate, including without limitation any conversion required pursuant to
this Article IV; or
(b) any failure by the Borrower to borrow, convert or
prepay a Eurodollar Loan or Competitive Bid Loan at a Eurodollar
Competitive Rate on the date for such borrowing, conversion or
prepayment specified in the relevant Borrowing Notice, Competitive Bid
Quote Request, interest rate selection notice or prepayment notice
under Article II hereof;
such compensation to include, without limitation, an amount equal to the
excess, if any, of (i) the amount of interest which would have accrued on the
principal amount so paid, prepaid or converted or not borrowed for the period
from the date of such payment, prepayment or conversion or failure to borrow or
convert to the last day of the then current Interest Period for such Loan (or,
in the case of a failure to borrow or convert, the Interest Period for such
Loan which would have commenced on the date scheduled for such borrowing or
conversion) at the applicable rate of interest for such Loan provided for
herein over (ii) the Interbank Offered Rate (as reasonably determined by the
Agent or the applicable Lender in the case of a Competitive Bid Loan) for
Dollar deposits of amounts comparable to such principal amount and maturities
comparable to such period. A determination of a Lender as to the amounts
payable pursuant to this Section 4.04 shall be conclusive, provided that such
determinations are made on a reasonable basis. The Lender requesting
compensation under this Section 4.04 shall furnish to the Authorized
Representative and the Agent calculations in reasonable detail setting forth
such Lender's determination of the amount of such compensation.
4.05 Alternate Loan and Lender. In the event any Lender suspends
the making of any Eurodollar Loan pursuant to this Article IV (herein a
"Restricted Lender"), the Restricted Lender's Applicable Commitment Percentage
of any Eurodollar Loan shall bear interest at either the Base Rate or the
Eurodollar Rate for which the suspension does not apply, as selected by
Borrower, until the Restricted Lender once again makes available the applicable
Eurodollar Loan. Notwithstanding the provisions of Section 2.03(b), interest
shall be payable to the Restricted Lender at the time and manner as paid to
those Lenders making available
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Eurodollar Loans. If the obligation of any Lender to make Eurodollar Loans is
suspended, the Borrower may, with respect to such Lender, elect to terminate
this Agreement, and in connection therewith, not to borrow at the Base Rate as
provided above; provided, that the Borrower notifies such Lender through the
Agent of such election at least three Business Days before any date fixed for
such borrowing and (i) repays all of such Lender's outstanding Loans plus all
accrued interest, commitment fees and other amounts owing to, but not
including, the date of repayment at the end of the respective Interest Periods
applicable thereto, and (ii) selects, with the consent of the Agent, which
shall not be unreasonably withheld, an assignee which shall assume all the
rights and obligations of such Lender as to which this Agreement has been
terminated. Upon receipt by the Agent of such notice and the assignment to and
assumption of the Revolving Credit Commitment by a replacement bank, the
Revolving Credit Commitment of such Lender shall terminate.
4.06 Taxes. All payments by the Borrower of principal of, and
interest on, the Loans and all other amounts payable hereunder shall be made
free and clear of and without deduction for any present or future excise, stamp
or other taxes, fees, duties, levies, imposts, charges, deductions,
withholdings or other charges of any nature whatsoever imposed by any taxing
authority, but excluding (i) franchise taxes, (ii) any taxes (other than
withholding taxes) that would not be imposed but for a connection between a
Lender or the Agent and the jurisdiction imposing such taxes (other than a
connection arising solely by virtue of the activities of such Lender or the
Agent pursuant to or in respect of this Agreement or any other Loan Document),
(iii) any withholding taxes payable with respect to payments hereunder or under
any other Loan Document under laws (including, without limitation, any statute,
treaty, ruling, determination or regulation) in effect on the Closing Date,
(iv) any taxes imposed on or measured by any Lender's assets, net income,
receipts or branch profits and (v) any taxes arising after the Closing Date
solely as a result of or attributable to Lender changing its designated lending
office after the date such Lender becomes a party hereto (such non-excluded
items being collectively called "Taxes"). In the event that any withholding or
deduction from any payment to be made by the Borrower hereunder is required in
respect of any Taxes pursuant to any applicable law, rule or regulation, then
the Borrower will
(a) pay directly to the relevant authority the full
amount required to be so withheld or deducted;
(b) promptly forward to the Agent an official receipt or
other documentation satisfactory to the Agent evidencing such payment
to such authority; and
(c) pay to the Agent for the account of the Lender such
additional amount or amounts as is necessary to ensure that the net
amount actually received by each Lender will equal the full amount
such Lender would have received had no such withholding or deduction
been required.
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Prior to the date that any Lender or participant organized under the
laws of a jurisdiction outside the United States becomes a party hereto, such
Person shall deliver to the Borrower and the Agent such certificates, documents
or other evidence, as required by the Code or Treasury Regulations issued
pursuant thereto, properly completed, currently effective and duly executed by
such Lender or participant establishing that such payment is (i) not subject to
United States Federal backup withholding tax and (ii) not subject to United
States Federal withholding tax under the Code because such payment is either
effectively connected with the conduct by such Lender or participant of a trade
or business in the United States or totally exempt from United States Federal
withholding tax by reason of the application of the provisions of a treaty to
which the United States is a party or such Lender is otherwise exempt.
If the Borrower fails to pay any Taxes when due to the appropriate
taxing authority or fails to remit to the Agent, for the account of the
respective Lender, the required receipts or other required documentary
evidence, the Borrower shall indemnify the Lenders for any incremental Taxes,
interest or penalties that may become payable by any Lender as a result of any
such failure. For purposes of this Section 4.06, a distribution hereunder by
the Agent or any Lender to or for the account of any Lender shall be deemed a
payment by the Borrower.
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ARTICLE V
Conditions to Making Loans and Issuing
Letters of Credit
5.01 Conditions of Initial Advance and Issuance of Letters of
Credit. The obligation of the Lenders to make Advances and of NationsBank to
issue Letters of Credit is subject to the conditions precedent that the Agent
shall have received on or before the Effective Date, in form and substance
satisfactory to the Agent and Lenders, the following:
(a) executed originals of each of this Agreement, the
Notes and the other Loan Documents, together with all schedules and
exhibits hereto and thereto;
(b) favorable written opinions of special counsel to the
Borrower and the Guarantors dated the Closing Date, addressed to the
Agent and the Lenders and satisfactory to Smith Helms Mulliss & Moore,
L.L.P., special counsel to the Agent, substantially in the forms of
Exhibit L attached hereto;
(c) resolutions of the boards of directors or other
appropriate governing body (or of the appropriate committee thereof)
of the Borrower and each of the Guarantors certified by its secretary
or assistant secretary or other appropriate official as of the Closing
Date, appointing (in the case of the Borrower) the Authorized
Representative and approving and adopting the Loan Documents to be
executed by such Person, and authorizing the execution and delivery
thereof;
(d) specimen signatures of officers of the Borrower and
each Guarantor executing the Loan Documents on behalf of such Person,
certified by the secretary or assistant secretary or other appropriate
official of the Borrower or such Guarantor, as applicable;
(e) the charter documents or documents of establishment
of the Borrower and each Guarantor certified as of a recent date by
the Secretary of State or other appropriate Governmental Authority of
its jurisdiction of incorporation;
(f) the by-laws of the Borrower and each Guarantor
certified as of the Closing Date as true and correct by the secretary
or assistant secretary of the Person to whom such by-laws relate;
(g) certificates issued as of a recent date by the
Secretary of State or other appropriate Governmental Authority of its
jurisdiction of incorporation as to the due existence and good
standing of the Borrower and each Guarantor therein;
(h) appropriate certificates of qualification to do
business, good standing and, where appropriate, authority to conduct
business under assumed name, issued in respect of the
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Borrower and each Guarantor as of a recent date by the Secretary of
State or other appropriate Governmental Authority of each jurisdiction
in which the failure to be qualified to do business or authorized so
to conduct business could materially adversely affect the business,
operations or conditions, financial or otherwise, of the Borrower or
any Guarantor;
(i) notice of appointment of the initial Authorized
Representative of the Borrower in the form of Exhibit C hereto;
(j) certificate of an Authorized Representative dated the
Effective Date demonstrating compliance with the financial covenants
contained in Sections 8.01 through 8.06 as of the immediately
preceding Determination Date, substantially in the form of Exhibit L
attached hereto;
(k) evidence of insurance required by the Loan Documents;
(l) Borrowing Notice;
(m) all fees payable by the Borrower on the Effective
Date to the Agent, NationsBank and the Lenders; and
(n) such other documents, instruments, certificates and
opinions as the Agent or any Lender may reasonably request on or prior
to the Effective Date in connection with the consummation of the
transactions contemplated hereby.
5.02 Conditions of Loans. The obligations of the Lenders to make
any Loans, and NationsBank to issue Letters of Credit hereunder on or
subsequent to the Effective Date are subject to the satisfaction of the
following conditions:
(a) the Agent shall have received a notice of such
borrowing or request if required by Article II hereof;
(b) the representations and warranties of the Borrower
and the Guarantors, taken as a whole, set forth in Article VI hereof
and in each of the other Loan Documents shall be true and correct in
all material respects on and as of the date of such Advance or
issuance of such Letters of Credit, as the case may be, with the same
effect as though such representations and warranties had been made on
and as of such date, except to the extent that such representations
and warranties expressly relate to an earlier date and except that the
financial statements referred to in Section 6.01(f)(i) shall be deemed
to be those financial statements most recently delivered to the Agent
and the Lenders pursuant to Section 7.01 hereof;
(c) in the case of the issuance of a Letter of Credit,
Borrower shall have executed and delivered to NationsBank an
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Application and Agreement for Letter of Credit in form and content
acceptable to NationsBank together with such other instruments and
documents as it shall request;
(d) at the time of each such Advance, Swing Line Loan or
issuance of each Letter of Credit, as the case may be, and after
giving effect thereto no Default or Event of Default specified in
Article IX hereof, shall have occurred and be continuing;
(e) immediately after giving effect to a Swing Line Loan, the
aggregate Swing Line Outstanding shall not exceed $10,000,000; and
(f) immediately after giving effect to a Loan or Letter
of Credit the aggregate principal balance of all outstanding Loans and
Participations for each Lender and in the aggregate shall not exceed,
respectively, (i) any of such Lender's Revolving Credit Commitment or
Letter of Credit Commitment or (ii) any of the Total Revolving Credit
Commitment or Total Letter of Credit Commitment.
5.03 Supplements to Schedules. The Borrower may, from time to time,
amend or supplement the Schedules to this Agreement by delivering (effective
upon receipt) to the Agent and each Lender a copy of such revised Schedule or
Schedules which shall (i) be dated the date of delivery, (ii) be certified by
an Authorized Representative as true, complete and correct as of such date and
as delivered in replacement for the corresponding Schedule or Schedules
previously in effect, and (iii) show in reasonable detail (by blacklining or
other appropriate graphic means) the changes from each such corresponding
predecessor Schedule. Notwithstanding anything to the contrary contained
herein or in any of the other Loan Documents, in the event that the Required
Lenders determine based upon such revised Schedule (whether individually or in
the aggregate or cumulatively) that there has been a material adverse change
since the Closing Date in the financial condition, business or operations of
the Borrower and its Subsidiaries, taken as a whole, the Lenders shall have no
further obligation to fund additional Advances hereunder.
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ARTICLE VI
Representations and Warranties
6.01 Representations and Warranties. The Borrower represents and
warrants with respect to itself and to its Subsidiaries (which representations
and warranties shall survive the delivery of the documents mentioned herein and
the making of Loans and issuance of Letters of Credit), that:
(a) Organization and Authority.
(i) the Borrower and each Subsidiary is a
corporation duly organized and validly existing under the laws
of the jurisdiction of its incorporation or creation;
(ii) the Borrower and each Subsidiary (x) has the
requisite power and authority to own its properties and assets
and to carry on its business as now being conducted and as
contemplated in the Loan Documents, and (y) is qualified to do
business in every jurisdiction in which failure so to qualify
would have a material adverse effect on the business or
operations of the Borrower or any Subsidiary;
(iii) the Borrower has the power and authority to
execute, deliver and perform this Agreement and the Notes, and
to borrow hereunder, and to execute, deliver and perform each
of the other Loan Documents to which it is a party;
(iv) each Guarantor has the power and authority to
execute, deliver and perform the Guaranty and the other Loan
Documents to which it is a party; and
(v) when executed and delivered, each of the Loan
Documents to which Borrower or any Guarantor is a party will
be the legal, valid and binding obligation or agreement, as
the case may be, of such Borrower or Guarantor, enforceable
against such Borrower or Guarantor in accordance with its
terms, subject to the effect of any applicable bankruptcy,
moratorium, insolvency, reorganization or other similar law
affecting the enforceability of creditors' rights generally
and to the effect of general principles of equity which may
limit the availability of equitable remedies (whether in a
proceeding at law or in equity);
(b) Loan Documents. The execution, delivery and
performance by the Borrower and each Guarantor of each of the Loan
Documents to which the Borrower or a Guarantor is a party:
(i) have been duly authorized by all requisite
corporate action (including any required shareholder
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approval) of the Borrower or Guarantor signatory thereto
required for the lawful execution, delivery and performance
thereof;
(ii) do not violate any provisions of (1)
applicable law, rule or regulation, (2) any order of any court
or other agency of government binding on the Borrower or any
Guarantor, or their respective properties, or (3) the charter
documents, documents of creation or by-laws of Borrower or any
Guarantor;
(iii) will not be in conflict with, result in a
breach of or constitute an event of default, or an event
which, with notice or lapse of time, or both, would constitute
an event of default, under any indenture, agreement or other
instrument to which Borrower or any Guarantor is a party, or
by which the properties or assets of Borrower or any Guarantor
are bound;
(iv) will not result in the creation or imposition
of any Lien, charge or encumbrance of any nature whatsoever
upon any of the properties or assets of Borrower or any
Guarantor.
(c) Solvency. Borrower and each Guarantor are Solvent
after giving effect to the transactions contemplated by this Agreement
and the other Loan Documents.
(d) Subsidiaries and Stockholders. Borrower has no
Subsidiaries other than those Persons listed as Subsidiaries in
Schedule 6.01(d) hereto; Schedule 6.01(d) to this Agreement states as
of the date hereof the authorized and issued capitalization of each
Subsidiary listed thereon, the number of shares or other equity
interests of each class of capital stock or interest issued and
outstanding of each such Subsidiary and the number and/or percentage
of outstanding shares or other equity interest (including options,
warrants and other rights to acquire any interest) of each such class
of capital stock or equity interest owned by Borrower or by any such
Subsidiary; the outstanding shares or other equity interests of each
such Subsidiary have been duly authorized and validly issued and are
fully paid and nonassessable; and Borrower and each such Subsidiary
owns beneficially and of record all the shares and other interests it
is listed as owning in Schedule 6.01(d), free and clear of any Lien.
(e) Ownership Interests. Borrower owns no interest in
any Person having an aggregate book value of $10,000 or more other
than the Persons listed in Schedule 6.01(d) hereto;
(f) Financial Condition. (i) The Borrower has heretofore
furnished to each Lender an audited consolidated balance sheet of the
Borrower and its Subsidiaries as at December 31, 1994 and the notes
thereto and the related consolidated statements of operations, cash
flows, and changes in stockholders' equity for the Fiscal Year then
ended as examined and certified by
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Arthur Andersen L.L.P. and unaudited interim consolidated financial
statements of the Borrower and its Subsidiaries consisting of a
consolidated balance sheet and related consolidated statements of
operations, cash flows, and changes in stockholders' equity, in each
case without notes, for and as of the end of the third fiscal quarter
of the Fiscal Year beginning January 1, 1995, as certified by an
Authorized Representative. Except as set forth therein, such
financial statements (including the notes thereto) present fairly the
financial condition of the Borrower and its Subsidiaries as of the end
of such Fiscal Year and third fiscal quarter and results of their
operations and the changes in their stockholders' equity for the
Fiscal Year and quarter then ended, all in conformity with Generally
Accepted Accounting Principles applied on a Consistent Basis, subject
however, in the case of unaudited interim statements to year end
adjustments;
(ii) since September 30, 1995, there has been no material
adverse change in the condition, financial or otherwise, of the
Borrower and its Subsidiaries or in the businesses, properties and
operations of the Borrower and its Subsidiaries, considered as a
whole, nor have such businesses or properties, taken as a whole, been
materially adversely affected as a result of any fire, explosion,
earthquake, accident, strike, lockout, combination of workers, flood,
embargo or act of God;
(iii) except as set forth in the financial statements
referred to in Section 6.01(f)(i) or in Schedule 6.01(f) or Schedule
6.01(j) attached hereto, neither Borrower nor any Subsidiary has
incurred, other than in the ordinary course of business, any material
indebtedness, obligations, commitments or other liability contingent
or otherwise which remain outstanding or unsatisfied;
(g) Title to Properties. The Borrower and its
Subsidiaries have title to all their respective owned real and
personal properties, subject to no transfer restrictions or Liens of
any kind, except for (x) the transfer restrictions and Liens described
in Schedule 6.01(g) attached hereto, and (y) Liens permitted under
Section 8.05 hereof;
(h) Taxes. The Borrower and its Subsidiaries have filed
or caused to be filed all federal, state, local and foreign tax
returns which are required to be filed by them and except for taxes
and assessments being contested in good faith and against which
reserves satisfactory to the Borrower's independent certified public
accountants have been established, have paid or caused to be paid all
taxes as shown on said returns or on any assessment received by them,
to the extent that such taxes have become due;
(i) Other Agreements. Neither the Borrower nor any
Subsidiary is
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(i) a party to any judgment, order, decree or any
agreement or instrument or subject to restrictions materially
adversely affecting the business, properties or assets,
operation or condition (financial or otherwise) of the
Borrower or of any Subsidiary; or
(ii) in default in the performance, observance or
fulfillment of any of the obligations, covenants or conditions
contained in any agreement or instrument to which the Borrower
or any Subsidiary is a party, which default has, or if not
remedied within any applicable grace period could have, a
material adverse effect on the business, operations or
condition, financial or otherwise, of the Borrower or any
Subsidiary;
(j) Litigation. Except as set forth in Schedule 6.01(j)
attached hereto, there is no action, suit or proceeding at law or in
equity or by or before any governmental instrumentality or agency or
arbitral body pending, or, to the knowledge of the Borrower,
threatened by or against the Borrower or any Subsidiary or affecting
the Borrower or any Subsidiary or any properties or rights of the
Borrower or any Subsidiary, which could reasonably be expected to
materially adversely affect the financial condition, business or
operations of the Borrower or any Subsidiary;
(k) Margin Stock. Neither the Borrower nor any
Subsidiary owns any "margin stock" as such term is defined in
Regulation U, as amended (12 C.F.R. Part 221), of the Board. The
proceeds of the borrowings made pursuant to Article II hereof will be
used by the Borrower and its Subsidiaries only for the purposes set
forth in Section 2.15 hereof. None of such proceeds will be used,
directly or indirectly, for the purpose of purchasing or carrying any
margin stock or for the purpose of reducing or retiring any
Indebtedness which was originally incurred to purchase or carry margin
stock or for any other purpose which might constitute any of the Loans
under this Agreement a "purpose credit" within the meaning of said
Regulation U or Regulation X (12 C.F.R. Part 224) of the Board.
Neither the Borrower nor any agent acting in its behalf has taken or
will take any action which might cause this Agreement or any of the
documents or instruments delivered pursuant hereto to violate any
regulation of the Board or to violate the Securities Exchange Act of
1934, as amended, or the Securities Act of 1933, as amended, or any
state securities laws, in each case as in effect on the date hereof;
(l) Investment Company. Neither the Borrower nor any
Subsidiary is an "investment company," or an "affiliated person" of,
or "promoter" or "principal underwriter" for, an "investment company,"
as such terms are defined in the Investment Company Act of 1940, as
amended (15 U.S.C. Section 80a-1, et seq.). The application of the
proceeds of the Loans and repayment thereof by the Borrower and the
performance by the Borrower of the transactions contemplated by this
Agreement
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will not violate any provision of said Act, or any rule, regulation or
order issued by the Securities and Exchange Commission thereunder, in
each case as in effect on the date hereof;
(m) Patents, Etc. The Borrower and its Subsidiaries own
or have the right to use, under valid license agreements or otherwise,
all material patents, licenses, franchises, trademarks, trademark
rights, trade names, trade name rights, trade secrets and copyrights
necessary to the conduct of their businesses as now conducted, without
known conflict with any patent, license, franchise, trademark, trade
secrets and confidential commercial or proprietary information, trade
name, copyright, rights to trade secrets or other proprietary rights
of any other Person;
(n) No Untrue Statement. Neither this Agreement nor any
other Loan Document or certificate or document executed and delivered
by or on behalf of the Borrower or any Guarantor in accordance with or
pursuant to any Loan Document contains any misrepresentation or untrue
statement of material fact or omits to state a material fact
necessary, in light of the circumstance under which it was made, in
order to make any such representation or statement contained therein
not misleading in any material respect;
(o) No Consents, Etc. Neither the respective businesses
or properties of the Borrower or any Subsidiary, nor any relationship
between the Borrower or any Subsidiary and any other Person, nor any
circumstance in connection with the execution, delivery and
performance of the Loan Documents and the transactions contemplated
hereby is such as to require a consent, approval or authorization of,
or filing, registration or qualification with, any Governmental
Authority or other authority or any other Person on the part of the
Borrower or any Subsidiary as a condition to the execution, delivery
and performance of, or consummation of the transactions contemplated
by, this Agreement or the other Loan Documents or if so, such consent,
approval, authorization, filing, registration or qualification has
been obtained or effected, as the case may be;
(p) Benefit Plans.
(i) None of the employee benefit plans maintained
at any time by the Borrower or any Subsidiary or the trusts created
thereunder has engaged in a prohibited transaction which could subject
any such employee benefit plan or trust to a material tax or penalty
on prohibited transactions imposed under Internal Revenue Code Section
4975 or ERISA;
(ii) None of the employee benefit plans maintained
at any time by the Borrower or any Subsidiary which are employee
pension benefit plans and which are subject to Title IV of ERISA or
the trusts created thereunder has been terminated so as to result in a
material liability of the
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Borrower under ERISA nor has any such employee benefit plan of the
Borrower or any Subsidiary incurred any material liability to the
Pension Benefit Guaranty Corporation established pursuant to ERISA,
other than for required insurance premiums which have been paid or are
not yet due and payable; neither the Borrower nor any Subsidiary has
withdrawn from or caused a partial withdrawal to occur with respect to
any Multi-employer Plan resulting in any assessed and unpaid
withdrawal liability; the Borrower and the Subsidiaries have made or
provided for all contributions to all such employee pension benefit
plans which they maintain and which are required as of the end of the
most recent fiscal year under each such plan; neither the Borrower nor
any Subsidiary has incurred any accumulated funding deficiency with
respect to any such plan, whether or not waived; nor has there been
any reportable event, or other event or condition, which presents a
material risk of termination of any such employee benefit plan by such
Pension Benefit Guaranty Corporation;
(iii) Except as set forth in Schedule 6.01(p), the
present value of all vested accrued benefits under the employee
pension benefit plans which are subject to Title IV of ERISA,
maintained by the Borrower or any Subsidiary, did not, as of the most
recent valuation date for each such plan, exceed the then current
value of the assets of such employee benefit plans allocable to such
benefits;
(iv) The consummation of the Loans and the
issuance of the Letters of Credit provided for in Article II and
Article III will not involve any prohibited transaction under ERISA
which is not subject to a statutory or administrative exemption;
(v) To the best of the Borrower's knowledge, each
employee pension benefit plan subject to Title IV of ERISA, maintained
by the Borrower or any Subsidiary, has been administered in accordance
with its terms in all material respects and is in compliance in all
material respects with all applicable requirements of ERISA and other
applicable laws, regulations and rules;
(vi) There has been no material withdrawal
liability incurred and unpaid with respect to any Multi-employer Plan
to which the Borrower or any Subsidiary is or was a contributor;
(vii) As used in this Agreement, the terms
"employee benefit plan," "employee pension benefit plan," "accumulated
funding deficiency," "reportable event," and "accrued benefits" shall
have the respective meanings assigned to them in ERISA, and the term
"prohibited transaction" shall have the meaning assigned to it in Code
Section 4975 and ERISA;
(viii) Except as set forth in Schedule 6.01(p),
neither the Borrower nor any Subsidiary has any liability not
disclosed on any of the financial statements furnished to the Lenders
pursuant to Section 7.01(f) hereof, contingent or
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otherwise, under any plan or program or the equivalent for unfunded
post-retirement benefits, including pension, medical and death
benefits, which liability would have a material adverse effect on the
financial condition of the Borrower or any Subsidiary.
(q) No Default. There does not exist any Default or
Event of Default hereunder;
(r) Hazardous Materials. Except as set forth in Schedule
6.01(r), the Borrower and each Subsidiary is in compliance with all
applicable Environmental Laws in all material respects and neither the
Borrower nor any Subsidiary has been notified of any action, suit,
proceeding or investigation which calls into question compliance by
the Borrower or any Subsidiary with any Environmental Laws or which
seeks to suspend, revoke or terminate any license, permit or approval
necessary for the generation, handling, storage, treatment or disposal
of any Hazardous Material;
(s) RICO. Neither the Borrower nor any Subsidiary is
engaged in or has engaged in any course of conduct that could subject
any of their respective properties to any Lien, seizure or other
forfeiture under any criminal law, racketeer influenced and corrupt
organizations law, civil or criminal, or other similar laws;
(t) Employment Matters. Except as disclosed on Schedule
6.01(j) hereto, the Borrower and all Subsidiaries are in compliance in
all material respects with all applicable laws, rules and regulations
pertaining to labor or employment matters, including without
limitation those pertaining to wages, hours, occupational safety and
taxation the noncompliance with which might have a material adverse
effect on the business, operations or financial condition of the
Borrower or any Subsidiary (a "Material Adverse Effect") and there is
neither pending nor, to the knowledge of the Borrower, threatened any
litigation, administrative proceeding or investigation, in respect of
such matters, an adverse ruling or determination in which could have a
Material Adverse Effect.
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ARTICLE VII
Affirmative Covenants
Until the Obligations have been paid and satisfied in full and this
Agreement has been terminated in accordance with the terms hereof, unless the
Required Lenders shall otherwise consent in writing, the Borrower will and will
cause each Subsidiary to:
7.01 Financial Reports, Etc. (a) as soon as practical and in any
event within 120 days after the end of each Fiscal Year of the Borrower,
deliver or cause to be delivered to the Agent and each Lender (i) the
consolidated balance sheets of the Borrower and its Subsidiaries, with the
notes thereto, the related consolidated statements of operations, cash flow,
and shareholders' equity and the respective notes thereto for such Fiscal Year,
setting forth comparative financial statements for the preceding Fiscal Year,
all prepared in accordance with Generally Accepted Accounting Principles
applied on a Consistent Basis and containing opinions of Arthur Andersen
L.L.P., or other such independent certified public accountants selected by the
Borrower and approved by the Agent, which are unqualified as to the scope of
the audit performed and as to the "going concern" status of the Borrower; and
(ii) a certificate of an Authorized Representative as to the existence of any
Default or Event of Default and demonstrating compliance with Sections 8.01,
8.02 and 8.03 of this Agreement, which certificate shall be in the form
attached hereto as Exhibit M;
(b) as soon as practical and in any event within 60 days after the
end of each quarterly period (except the last reporting period of the Fiscal
Year), deliver to the Agent and each Lender (i) the consolidated balance sheet
of the Borrower and its Subsidiaries as of the end of such reporting period,
the related consolidated statements of operations, cash flow, and shareholders'
equity for such reporting period and for the period from the beginning of the
Fiscal Year through the end of such reporting period, accompanied by a
certificate of an Authorized Representative to the effect that such financial
statements present fairly the financial position of the Borrower and its
Subsidiaries as of the end of such reporting period and the results of their
operations and the changes in their financial position for such reporting
period, in conformity with the standards set forth in Section 6.01(f)(i) with
respect to interim financials, and (ii) a certificate of an Authorized
Representative as to the existence of any Default or Event of Default and
containing computations for such quarter comparable to that required pursuant
to Section 7.01(a)(ii);
(c) together with each delivery of the financial statements
required by Section 7.01(a)(i) hereof, if the accountants specified in Section
7.01(a)(i) shall have obtained knowledge of a Default or Event of Default in
the fulfillment of the terms and provisions of this Agreement insofar as they
relate to financial statements (which at the date of such statements remains
uncured), deliver to
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the Agent and the Lenders a statement specifying the nature and period of
existence thereof;
(d) promptly upon their becoming available to the Borrower, the
Borrower shall deliver to the Agent and each Lender a copy of (i) all regular
or special reports or effective registration statements which Borrower or any
Subsidiary shall file with the Securities and Exchange Commission (or any
successor thereto) or any securities exchange, (ii) any proxy statement
distributed by the Borrower to its shareholders, bondholders or the financial
community in general, and (iii) any management letter or other report submitted
to the Borrower or any of its Subsidiaries by independent accountants in
connection with any annual, interim or special audit of the Borrower or any of
its Subsidiaries; and
(e) promptly, from time to time, deliver or cause to be delivered
to the Agent and each Lender such other information regarding Borrower's and
each Subsidiary's operations, business affairs and financial condition as the
Agent or such Lender may reasonably request. The Agent and the Lenders are
hereby authorized to deliver a copy of any such financial information delivered
hereunder to the Lenders (or any affiliate of any Lender) or to the Agent, to
any regulatory authority having jurisdiction over any of the Lenders pursuant
to any written request therefor, or, subject to Section 11.01(e) hereof, to any
other Person who shall acquire or consider the acquisition of a participation
interest in or assignment of any Loan or Letter of Credit permitted by this
Agreement.
7.02 Maintain Properties. Maintain all properties necessary to its
operations in good working order and condition (ordinary wear and tear
excepted) and make all needed repairs, replacements and renewals as are
necessary to conduct its business in accordance with customary business
practices.
7.03 Existence, Qualification, Etc. Do or cause to be done all
things necessary to preserve and keep in full force and effect its existence
and all material rights and franchises, trade names, trademarks and permits,
except to the extent conveyed in connection with a transaction permitted under
Section 8.06 hereof, and maintain its license or qualification to do business
as a foreign corporation and good standing in each jurisdiction in which its
ownership or lease of property or the nature of its business makes such license
or qualification necessary.
7.04 Regulations and Taxes. Comply with all statutes and
governmental regulations and pay all taxes, assessments, governmental charges,
claims for labor, supplies, rent and any other obligation which, if unpaid,
might become a Lien against any of its properties except liabilities being
contested in good faith and against which adequate reserves have been
established.
7.05 Insurance. (i) Keep all of its insurable properties adequately
insured at all times with responsible insurance carriers against loss or damage
by fire and other hazards as are customarily
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insured against by similar businesses owning such properties similarly
situated, (ii) maintain general public liability insurance at all times with
responsible insurance carriers against liability on account of damage to
persons and property having such limits, deductibles, exclusions and
co-insurance and other provisions providing no less coverage than that
specified in Schedule 7.05 attached hereto, such insurance policies to be in
form satisfactory to the Agent, and (iii) maintain insurance under all
applicable workers' compensation laws (or in the alternative, maintain required
reserves if self-insured for workers' compensation purposes).
7.06 True Books. Keep true books of record and account in which full,
true and correct entries will be made of all of its dealings and transactions
in accordance with customary business practices, and set up on its books such
reserves as may be required by Generally Accepted Accounting Principles with
respect to doubtful accounts and all taxes, assessments, charges, levies and
claims and with respect to its business in general, and include such reserves
in interim as well as year-end financial statements.
7.07 Pay Indebtedness to Lenders and Perform Other Covenants. (a)
Make full and timely payment of the principal of and interest on the Notes and
all other Obligations whether now existing or hereafter arising; and (b) duly
comply with all the terms and covenants contained in all Loan Documents and
other instruments and documents given to the Agent or the Lenders pursuant
hereto or thereto.
7.08 Right of Inspection. Permit any Person designated by any Lender
or the Agent at the Lender's or Agent's expense, as the case may be, to visit
and inspect any of the properties, corporate books and financial reports of the
Borrower and its Subsidiaries, and to discuss their respective affairs,
finances and accounts with their principal officers and independent certified
public accountants, all at reasonable times, at reasonable intervals and with
reasonable prior notice.
7.09 Observe all Laws. Conform to and duly observe in all material
respects all laws, rules and regulations and all other valid requirements of
any regulatory or governmental authority with respect to the conduct of its
business the non-compliance with which might have a material adverse effect.
7.10 Covenants Extending to Subsidiaries. Cause each of its
Subsidiaries to do with respect to itself, its business and its assets, each of
the things required of the Borrower in Sections 7.02 through 7.09, inclusive.
7.11 Officer's Knowledge of Default. Upon the Borrower obtaining
knowledge of any Default or Event of Default hereunder or under any other
obligation of the Borrower or any Subsidiary, cause an Authorized
Representative to promptly notify the Agent of the nature thereof, the period
of existence thereof, and what action the Borrower proposes to take with
respect thereto.
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7.12 Suits or Other Proceedings. Upon the Borrower obtaining
knowledge of any litigation or other proceedings being instituted against the
Borrower or any Subsidiary, or any attachment, levy, execution or other process
being instituted against any assets of the Borrower or any Subsidiary, in an
aggregate amount greater than [$250,000] not otherwise covered by insurance,
promptly deliver to the Agent written notice thereof stating the nature and
status of such litigation, dispute, proceeding, levy, execution or other
process.
7.13 Notice of Discharge of Hazardous Material or Environmental
Complaint. Promptly provide to the Agent true, accurate and complete copies of
any and all notices, complaints, orders, directives, claims, or citations
received by the Borrower or any Subsidiary relating to any material (a)
violation or alleged violation by the Borrower or any Subsidiary of any
applicable Environmental Laws or OSHA; (b) release or threatened release by the
Borrower or any Subsidiary of any Hazardous Material, except where occurring
legally; or (c) liability or alleged liability of the Borrower or any
Subsidiary for the costs of cleaning up, removing, remediating or responding to
a release of Hazardous Materials.
7.14 Environmental Compliance. If the Borrower or any Subsidiary
shall receive notice from any Governmental Authority that the Borrower or any
Subsidiary has violated any applicable Environmental Laws, the Borrower shall
promptly (and in any event within the time period permitted by the applicable
Governmental Authority) remove or remedy, or cause the applicable Subsidiary to
remove or remedy, such violation.
7.15 Further Assurances. At its cost and expense, upon request of
the Agent, duly execute and deliver or cause to be duly executed and delivered,
to the Agent such further instruments, documents, certificates, agreements,
financing and continuation statements, and do and cause to be done such further
acts that may be reasonably necessary or advisable in the reasonable opinion of
the Agent to carry out more effectively the provisions and purposes of this
Agreement and the other Loan Documents.
7.16 Benefit Plans. Comply in all material respects with all
requirements of ERISA applicable to it and furnish to the Agent as soon as
possible and in any event (i) within thirty (30) days after the Borrower knows
or has reason to know that any reportable event with respect to any employee
benefit plan maintained by the Borrower or any Subsidiary which could give rise
to termination or the imposition of any material tax or penalty has occurred,
written statement of an Authorized Representative describing in reasonable
detail such reportable event and any action which the Borrower or applicable
Subsidiary proposes to take with respect thereto, together with a copy of the
notice of such reportable event given to the Pension Benefit Guaranty
Corporation or a statement that said notice will be filed with the annual
report of the United States Department of Labor with respect to such plan if
such filing has been authorized, (ii) promptly after receipt thereof, a copy of
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any notice that the Borrower or any Subsidiary may receive from the Pension
Benefit Guaranty Corporation relating to the intention of the Pension Benefit
Guaranty Corporation to terminate any employee benefit plan or plans of the
Borrower or any Subsidiary or to appoint a trustee to administer any such plan,
and (iii) within 10 days after a filing with the Pension Benefit Guaranty
Corporation pursuant to Section 412(n) of the Code of a notice of failure to
make a required installment or other payment with respect to a plan, a
certificate of an Authorized Representative setting forth details as to such
failure and the action that the Borrower or its affected Subsidiary, as
applicable, proposes to take with respect thereto, together with a copy of such
notice given to the Pension Benefit Guaranty Corporation.
7.17 Continued Operations. Continue at all times (i) to conduct its
business and engage principally in the same or complementary line or lines of
business substantially as heretofore conducted (subject to the right to dispose
of assets in transactions permitted under Section 8.06 hereof and to make
Permitted Acquisitions), and (ii) preserve, protect and maintain free from
Liens (other than Liens permitted under Section 8.05 hereof) its material
patents, copyrights, licenses, trademarks, trademark rights, trade names, trade
name rights, trade secrets and know-how necessary or useful in the conduct of
its operations.
7.18 Use of Proceeds. Use the proceeds of the Loans solely for the
purposes specified in Section 2.15 hereof.
7.19 New Subsidiaries. Within thirty (30) days of (a) any
Subsidiary becoming a Material Subsidiary and (b) the acquisition or creation
of any Material Subsidiary, or upon any previously existing Subsidiary becoming
a Material Subsidiary, cause to be delivered to the Agent for the benefit of
the Lenders each of the following:
(i) a guarantee agreement executed by such Subsidiary in
the form previously delivered by the Guarantors to the Agent, with
appropriate insertions of identifying information and such other
changes to which the Agent may consent in its discretion;
(ii) an opinion of counsel to such Material Subsidiary
dated as of the date of delivery of the guarantee agreement
provided in the foregoing clause (i) and addressed to the Agent and
the Lenders, in form and substance reasonably acceptable to the Agent
(which opinion may include assumptions and qualifications of similar
effect to those contained in the opinions of counsel delivered
pursuant to Section 5.01 hereof), to the effect that:
(A) such Material Subsidiary is duly organized,
validly existing and in good standing in the jurisdiction of
its organization, has the requisite power and authority to own
its properties and conduct its business as then owned and then
proposed to be conducted and is
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duly qualified to transact business and is in good standing as
a foreign corporation in each other jurisdiction in which the
character of the properties owned or leased, or the business
carried on by it, requires such qualification; and
(B) the execution, delivery and performance of
the guarantee agreement described in clause (i) of this
Section 7.19 to which such Material Subsidiary is a signatory
have been duly authorized by all requisite corporate action
(including any required shareholder or partner approval), such
agreements have been duly executed and delivered and
constitute valid and binding obligations of such Material
Subsidiary, enforceable against such Subsidiary in accordance
with its terms, subject to the effect of any applicable
bankruptcy, moratorium, insolvency, reorganization or other
similar law affecting the enforceability of creditors' rights
generally and to the effect of general principles of equity
which may limit the availability of equitable remedies
(whether in a proceeding at law or in equity); and
(iii) current copies of the charter documents, including any
bylaws of such Material Subsidiary, minutes of duly called and
conducted meetings (or duly effected consent actions) of the Board of
Directors, or appropriate committees thereof (and, if required by such
charter documents, bylaws or by applicable laws, of the shareholders
or partners) of such Subsidiary authorizing the actions and the
execution and delivery of documents described in clause (i) of this
Section 7.19 and evidence satisfactory to the Agent (confirmation of
the receipt of which will be provided by the Agent to the Lenders)
that such Material Subsidiary is Solvent as of such date and after
giving effect to the guaranty.
7.20 Additional Guarantors. If at any time the Borrower and
Guarantors, on a consolidated basis (excluding all intercompany obligations),
(i) own less than 80% of Consolidated Total Assets, or (ii) generate less than
80% of Consolidated Net Income, the Borrower shall immediately cause additional
Subsidiaries to become Guarantors by complying in all respects with Section
7.19 hereof or cause to be transferred to the Borrower or the existing
Guarantors, or both, additional assets of Subsidiaries so that after giving
effect to either or both of the foregoing, the Borrower and Guarantors
collectively own and generate not less than 80% of Consolidated Total Assets
and Consolidated Net Income, respectively.
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ARTICLE VIII
Negative Covenants
Until the Obligations have been paid and satisfied in full and this
Agreement has been terminated in accordance with the terms hereof, unless the
Required Lenders shall otherwise consent in writing, the Borrower will not, nor
will it permit any Subsidiary to:
8.01 Indebtedness to Capitalization. Permit at any time the ratio
of Consolidated Funded Indebtedness to Consolidated Total Capitalization to be
greater than .40 to 1.00.
8.02 Consolidated Fixed Charge Ratio. Permit at any time the
Consolidated Fixed Charge Ratio to be less than 1.50 to 1.00.
8.03 Indebtedness to EBITDA. Permit at any time the ratio of
Consolidated Funded Indebtedness at the date of determination to Consolidated
EBITDA for the Four-Quarter Period most recently ended to be greater than 3.00
to 1.00.
8.04 Indebtedness. Incur, create, assume or permit to exist any
Indebtedness, howsoever evidenced, except
(i) Indebtedness existing as of the date hereof and as
set forth in Schedule 8.04 attached hereto and incorporated herein by
reference;
(ii) Indebtedness owed the Agent or the Lenders in
connection with this Agreement or any Swap Agreement;
(iii) the endorsement of negotiable instruments for deposit
or collection or similar transactions in the ordinary course of
business;
(iv) secured Indebtedness in an aggregate outstanding
amount not to exceed at any time five percent (5%) of Consolidated
Total Capitalization;
(v) unsecured Indebtedness.
8.05 Liens. Incur, create or permit to exist any pledge, Lien,
charge or other encumbrance of any nature whatsoever with respect to any
property or assets now owned or hereafter acquired by the Borrower or any of
its Subsidiaries, other than
(i) Liens existing as of the date hereof and as set forth
in Schedule 6.01(g) attached hereto;
(ii) Liens imposed by law for taxes, assessments or
charges of any Governmental Authority for claims not yet due or which
are being contested in good faith by appropriate proceedings
diligently pursued and with respect to which adequate reserves or
other appropriate provisions are being
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maintained in accordance with Generally Accepted Accounting
Principles;
(iii) Liens on property securing Indebtedness permitted under
Section 8.04(iv); and
(iv) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, materialmen and other Liens imposed by law or
created in the ordinary course of business and in existence less than
120 days from the date of creation thereof for amounts not yet due or
which are being contested in good faith by appropriate proceedings and
with respect to which adequate reserves or other appropriate
provisions are being maintained in accordance with Generally Accepted
Accounting Principles;
(v) Liens incurred or deposits made in the ordinary
course of business (including, without limitation, surety bonds and
appeal bonds) in connection with workers' compensation, unemployment
insurance and other types of social security benefits or to secure the
performance of tenders, bids, leases, contracts (other than for the
repayment of Indebtedness), statutory obligations and other similar
obligations or arising as a result of progress payments under
government contracts; and
(vi) easements (including, without limitation, reciprocal
easement agreements and utility agreements), rights-of-way, covenants,
consents, reservations, encroachments, variations and zoning and other
restrictions, charges or encumbrances (whether or not recorded), which
do not interfere materially with the ordinary conduct of the business
of the Borrower or any Subsidiary and which do not materially detract
from the value of the property to which they attach or materially
impair the use thereof to the Borrower or any Subsidiary.
8.06 Transfer of Assets. Sell, lease, transfer or otherwise dispose
of property, plant and equipment of Borrower or any Subsidiary which have a
book value or sales price in excess of 10% of Consolidated Total Assets during
any Fiscal Year or 20% of Consolidated Total Assets during the term of this
Agreement.
8.07 Investments; Acquisitions. Purchase, own, invest in or
otherwise acquire, directly or indirectly, any stock or other securities or all
or substantially all of the assets, or make or permit to exist any interest
whatsoever in any other Person or permit to exist any loans or advances to any
Person; provided, Borrower and its Subsidiaries may maintain investments or
invest in or acquire
(i) Eligible Securities;
(ii) all or substantially all of the stock or other equity
interests, or all or substantially all of the assets of another Person
(or a line of business or division of such
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other Person) constituting a Permitted Acquisition; provided, however,
that if the Person or the assets so acquired on a pro forma historical
basis as at the date of the acquisition or for the Four-Quarter Period
most recently ended preceding the date of acquisition owned assets or
generated income, which when consolidated with the assets and income
of the Borrower and its Subsidiaries, constitute ten percent (10%) or
more of Consolidated Total Assets or Consolidated Net Income, then the
Borrower shall furnish to the Agent and the Lenders prior to
completing such acquisition a certificate in the form of Exhibit G
attached hereto containing information required therein demonstrating
that on a historical pro forma basis that after giving effect to such
acquisition no Default or Event of Default exists hereunder.
(iii) investments existing as of the date hereof and as set
forth in Schedule 6.01(d) attached hereto;
(iv) accounts receivable arising and trade credit granted
in the ordinary course of business and any securities received in
satisfaction or partial satisfaction thereof in connection with
accounts of financially troubled Persons to the extent reasonably
necessary in order to prevent or limit loss; and
(v) loans and advances to and investments in Subsidiaries who
are Guarantors; and
(vi) loans and advances to and investments in Persons
other than Guarantors in an aggregate outstanding amount not exceeding
at any time fifteen percent (15%) of Consolidated Shareholders'
Equity.
8.08 Merger or Consolidation. Other than as permitted under Section
8.07(ii) hereof (a) consolidate with or merge into any other Person, or (b)
permit any other Person to merge into it, or (c) liquidate, wind-up or dissolve
or sell, transfer or lease or otherwise dispose of all or a substantial part of
its assets (other than sales in the ordinary course of business); provided,
however, (i) any Subsidiary of the Borrower may merge or transfer all or
substantially all of its assets into or consolidate with any wholly-owned
Subsidiary of the Borrower, (ii) any Person may merge with the Borrower if the
Borrower shall be the survivor thereof and such merger shall not cause, create
or result in the occurrence of any Default or Event of Default hereunder.
8.09 Transactions with Affiliates. Other than transactions permitted
under Section 8.08 hereof, enter into any transaction after the date hereof,
including, without limitation, the purchase, sale, leasing or exchange of
property, real or personal, or the rendering of any service, with any Affiliate
of the Borrower, except (a) that such Persons may render services to the
Borrower or its Subsidiaries for compensation at the same rates generally paid
by Persons engaged in the same or similar businesses for the same or similar
services and (b) in the ordinary course of and pursuant to the reasonable
requirements of the Borrower's (or any
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Subsidiary's) business consistent with past practice of the Borrower and its
Subsidiaries and upon fair and reasonable terms no less favorable to the
Borrower (or any Subsidiary) than would be obtained in a comparable
arm's-length transaction with a Person not an Affiliate.
8.10 Benefit Plans. With respect to all employee pension benefit
plans maintained by the Borrower or any Subsidiary:
(i) terminate any of such employee pension benefit plans
so as to incur any liability to the Pension Benefit Guaranty
Corporation established pursuant to ERISA;
(ii) allow or suffer to exist any prohibited transaction
involving any of such employee pension benefit plans or any trust
created thereunder which would subject the Borrower or a Subsidiary to
a tax or penalty or other liability on prohibited transactions imposed
under Internal Revenue Code Section 4975 or ERISA;
(iii) fail to pay to any such employee pension benefit plan
any contribution which it is obligated to pay under the terms of such
plan;
(iv) except as set forth in Schedule 6.01(p), allow or
suffer to exist any accumulated funding deficiency, whether or not
waived, with respect to any such employee pension benefit plan;
(v) allow or suffer to exist any occurrence of a
reportable event or any other event or condition, which presents a
material risk of termination by the Pension Benefit Guaranty
Corporation of any such employee pension benefit plan that is a Single
Employer Plan, which termination could result in any liability to the
Pension Benefit Guaranty Corporation; or
(vi) incur any material withdrawal liability with respect
to any Multi-employer Plan.
8.11 Fiscal Year. Change the Borrower's Fiscal Year without prior
notification to the Agent.
8.12 Dissolution, etc. Wind up, liquidate or dissolve (voluntarily
or involuntarily) or commence or suffer any proceedings seeking any such winding
up, liquidation or dissolution, except in connection with the merger or
consolidation of Subsidiaries into each other or into the Borrower permitted
pursuant to Section 8.08.
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ARTICLE IX
Events of Default and Acceleration
9.01 Events of Default. If any one or more of the following events
(herein called "Events of Default") shall occur for any reason whatsoever (and
whether such occurrence shall be voluntary or involuntary or come about or be
effected by operation of law or pursuant to or in compliance with any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body), that is to say:
(a) if default shall be made in the due and punctual payment
of the principal of any Loan or Reimbursement Obligation, when and as
the same shall be due and payable whether pursuant to any provision of
Article II or Article III hereof, at maturity, by acceleration or
otherwise; or
(b) if default shall be made in the due and punctual payment
of any amount of interest on any Loan or of any fees or other amounts
payable to the Lenders, the Agent or NationsBank under the Loan
Documents on the date on which the same shall be due and payable and
such failure to pay shall continue for a period of three days; or
(c) if default shall be made in the performance or observance
of any covenant set forth in Sections 7.06, 7.07(a), 7.11, 7.19 or
Article VIII hereof;
(d) if a default shall be made in the performance or
observance of, or shall occur under, any covenant, agreement or
provision contained in this Agreement or the Notes (other than as
described in clauses (a), (b) or (c) above) and such default shall
continue for 30 or more days after the earlier of receipt of notice of
such default by the Authorized Representative from the Agent or the
Borrower becomes aware of such default, or if a default shall be made
in the performance or observance of, or shall occur under, any
covenant, agreement or provision contained in any of the other Loan
Documents (beyond any applicable grace period, if any, contained
therein) or in any instrument or document evidencing or creating any
obligation or guaranty in favor of the Agent or the Lenders or
delivered to the Agent or the Lenders in connection with or pursuant
to this Agreement or any of the Obligations, or if any Loan Document
ceases to be in full force and effect (other than by reason of any
action by the Agent), or if without the written consent of the Agent
and the Lenders, this Agreement or any other Loan Document shall be
disaffirmed or shall terminate, be terminable or be terminated or
become void or unenforceable for any reason whatsoever (other than in
accordance with its terms in the absence of default or by reason of
any action by the Agent or any Lender); or
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(e) if a default shall occur, which is not waived, (i) in the
payment of any principal, interest, premium or other amounts with
respect to any Indebtedness (other than the Loans) of the Borrower or
of any Subsidiary in an amount not less than $1,000,000 in the
aggregate outstanding, or (ii) in the performance, observance or
fulfillment of any term or covenant contained in any agreement or
instrument under or pursuant to which any such Indebtedness may have
been issued, created, assumed, guaranteed or secured by the Borrower
or any Subsidiary, and such default shall continue for more than the
period of grace, if any, therein specified, or if such default shall
permit the holder of any such Indebtedness to accelerate the maturity
thereof; provided, however, that if the Borrower is contesting the
payment amount on any such Indebtedness or the date such payment is
due in good faith and the Borrower establishes reserves on its books
if required by and in accordance with Generally Accepted Accounting
Principles applied on a Consistent Basis, then such nonpayment, in and
of itself, shall not, absent an acceleration of such Indebtedness
constitute an Event of Default; or
(f) if any representation, warranty or other statement of
fact contained herein or any other Loan Document or in any writing,
certificate, report or statement at any time furnished to the Agent or
any Lender by or on behalf of the Borrower or any Guarantor pursuant
to or in connection with this Agreement or the other Loan Documents,
or otherwise, shall be false or misleading in any material respect
when given or made or deemed given or made; or
(g) if the Borrower or any Subsidiary shall be unable to pay
its debts generally as they become due; file a petition to take
advantage of any insolvency, reorganization, bankruptcy, receivership
or similar law, domestic or foreign; make an assignment for the
benefit of its creditors; commence a proceeding for the appointment of
a receiver, trustee, liquidator or conservator of itself or of the
whole or any substantial part of its property; file a petition or
answer seeking reorganization or arrangement or similar relief under
the federal bankruptcy laws or any other applicable law or statute,
federal, state or foreign; or
(h) if a court of competent jurisdiction shall enter an
order, judgment or decree appointing a custodian, receiver, trustee,
liquidator or conservator of the Borrower or any Subsidiary or of the
whole or any substantial part of its properties and such order,
judgment or decree continues unstayed and in effect for a period of
sixty (60) days, or approve a petition filed against the Borrower or
any Subsidiary seeking reorganization or arrangement or similar relief
under the federal bankruptcy laws or any other applicable law or
statute of the United States of America or any state or foreign
country, province or other political subdivision, which petition is
not dismissed within sixty (60) days; or if, under the provisions of
any other law for the
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relief or aid of debtors, a court of competent jurisdiction shall
assume custody or control of the Borrower or any Subsidiary or of the
whole or any substantial part of its properties, which control is not
relinquished within sixty (60) days; or if there is commenced against
the Borrower or any Subsidiary any proceeding or petition seeking
reorganization, arrangement or similar relief under the federal
bankruptcy laws or any other applicable law or statute of the United
States of America or any state or foreign country, province or other
political subdivision which proceeding or petition remains undismissed
for a period of thirty (30) days; or if the Borrower or any Subsidiary
takes any action to indicate its consent to or approval of any such
proceeding or petition; or
(i) if (i) any judgment where the amount not covered by
insurance (or the amount as to which the insurer denies liability) is
in excess of $250,000 is rendered against the Borrower or any
Subsidiary, or (ii) there is any attachment, injunction or execution
against any of the Borrower's or any Subsidiary's properties for any
amount in excess of $250,000; and such judgment, attachment,
injunction or execution remains unpaid, unstayed, undischarged,
unbonded or undismissed for a period of thirty (30) days; or
(j) if the Borrower or any Subsidiary shall, other than as
permitted under Section 8.08 hereof or in the ordinary course of
business (as determined by past practices), suspend (other than for a
period not to exceed twenty (20) days by reason of force majeure) all
or any part of its operations material to the conduct of the business
of the Borrower or such Subsidiary, taken as a whole; or
(k) if (i) the Borrower or any Subsidiary shall engage in any
prohibited transaction (as described in Section 8.10(ii) hereof),
which is not subject to a statutory or administrative exemption,
involving any employee pension benefit plan of the Borrower or any
Subsidiary, (ii) any accumulated funding deficiency (as referred to in
Section 8.10(iv) hereof), whether or not waived, shall exist with
respect to any Single Employer Plan, (iii) a reportable event (as
referred to in Section 8.10(v) hereof) (other than a reportable event
for which the statutory notice requirement to the Pension Benefit
Guaranty Corporation has been waived by regulation) shall occur with
respect to, or proceedings shall commence to have a trustee appointed,
or a trustee shall be appointed to administer or to terminate, any
Single Employer Plan, which reportable event or institution or
proceedings is, in the reasonable opinion of the Required Lenders,
likely to result in the termination of such Single Employer Plan for
purposes of Title IV of ERISA, and in the case of such a reportable
event, the continuance of such reportable event shall be unremedied
for sixty (60) days after notice of such reportable event pursuant to
Section 4043(a), (c) or (d) of ERISA is given, as the case may be,
(iv) any Single Employer
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Plan shall terminate for purposes of Title IV of ERISA, and such
termination results in a material liability of the Borrower or any
Subsidiary to such Single Employer Plan or the Pension Benefit
Guaranty Corporation, (v) the Borrower or any Subsidiary shall
withdraw from a Multi-employer Plan for purposes of Title IV of ERISA,
and, as a result of any such withdrawal, the Borrower or any
Subsidiary shall incur material withdrawal liability to such
Multi-employer Plan, or (vi) any other event or condition shall occur
or exist; and in each case in clauses (i) through (vi) of this Section
9.01(k), such event or condition, together with all other such events
or conditions, if any, could subject the Borrower or any Subsidiary to
any tax, penalty or other liabilities, and in each such case the event
or condition is not remedied to the satisfaction of the Required
Lenders within ninety (90) days after the earlier of (i) receipt of
notice of such event or condition by the Authorized Representative
from the Agent or (ii) the Borrower becomes aware of such event or
condition; or
(l) if any Person or group of Persons acting in concert
other than the owners of more than 35% of the outstanding voting
securities of the Borrower as of the Effective Date having voting
rights in the election of directors, shall own or control, directly or
indirectly, more than 35% of the outstanding securities (on a fully
diluted basis and taking into account any voting securities or
contract rights exercisable, exchangeable or convertible into equity
securities) of the Borrower having voting rights in the election of
directors; or
(m) the replacement or resignation (other than by reason
of death, illness or incapacity), within any two-year period, of a
majority of the members of the Board of Directors of the Borrower (the
"Board") or a change in the size of the Board, within any two-year
period, which results in members of the Board who were in office at
the beginning of such two-year period constituting less than a
majority of the members of the Board (unless such replacement,
resignation or change in size of the Board shall have been effected or
initiated by a majority of the members of the Board in office at the
beginning of such two-year period);
then, and in any such event and at any time thereafter, if such Event of
Default or any other Event of Default shall have not been waived,
(A) either or both of the following actions may be
taken: (i) the Agent may, and at the direction of the
Required Lenders shall, declare any obligation of the Lenders
to make further Loans or issue Letters of Credit terminated,
whereupon the obligation of each Lender to make further Loans
or issue Letters of Credit, hereunder shall terminate
immediately, and (ii) the Agent shall at the direction of the
Required Lenders, at their option, declare by notice to the
Borrower any or all of the Obligations to be immediately due
and payable, and the
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same, including all interest accrued thereon and all other
obligations of the Borrower to the Agent and the Lenders,
shall forthwith become immediately due and payable without
presentment, demand, protest, notice or other formality of any
kind, all of which are hereby expressly waived, anything
contained herein or in any instrument evidencing the
Obligations to the contrary notwithstanding; provided,
however, that notwithstanding the above, if there shall occur
an Event of Default under clause (g) or (h) above, then the
obligation of the Lenders to lend and issue Letters of Credit
hereunder shall automatically terminate and any and all of the
Obligations shall be immediately due and payable without the
necessity of any action by the Agent or the Required Lenders
or notice to the Agent or the Lenders;
(B) The Borrower shall, upon demand of the Agent
or the Required Lenders, deposit cash with the Agent in
accordance with the LC Account Agreement in an amount equal to
the amount of any Letters of Credit remaining undrawn or
unpaid, as collateral security for the repayment of any future
drawings or payments under such Letters of Credit and the
Borrower shall forthwith deposit and pay such amounts and such
amounts shall be held by the Agent pursuant to the terms of
the applicable Application and Agreement for Letter of Credit;
(C) the Agent and the Lenders shall have all of the
rights and remedies available under the Loan Documents or
under any applicable law.
9.02 Agent to Act. In case any one or more Events of Default shall
occur and not have been waived, the Agent may, and at the direction of the
Required Lenders shall, proceed to protect and enforce their rights or remedies
either by suit in equity or by action at law, or both, whether for the specific
performance of any covenant, agreement or other provision contained herein or
in any other Loan Document, or to enforce the payment of the Obligations or any
other legal or equitable right or remedy.
9.03 Cumulative Rights. No right or remedy herein conferred upon
the Lenders or the Agent is intended to be exclusive of any other rights or
remedies contained herein or in any other Loan Document, and every such right
or remedy shall be cumulative and shall be in addition to every other such
right or remedy contained herein and therein or now or hereafter existing at
law or in equity or by statute, or otherwise.
9.04 No Waiver. No course of dealing between the Borrower and any
Lender or the Agent or any failure or delay on the part of any Lender or the
Agent in exercising any rights or remedies under any Loan Document or otherwise
available to it shall operate as a waiver of any rights or remedies and no
single or partial exercise of any rights or remedies shall operate as a waiver
or preclude the
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exercise of any other rights or remedies hereunder or of the same right or
remedy on a future occasion.
9.05 Default. The Agent and the Lenders shall have no right to
accelerate any of the Loans upon, or to institute any action or proceeding
before any court to realize upon collateral as a result of, the occurrence of
any Default which shall not also constitute an Event of Default; provided,
however, nothing contained in this sentence shall in any respect impair or
adversely affect the right, power and authority of the Agent and the Lenders
(i) to take any action expressly required or permitted to be taken under the
Loan Documents upon the occurrence of any Default (and including any action or
proceeding which the Agent may determine to be necessary or appropriate in
furtherance of any such expressly authorized action) and (ii) to take any
action provided under the Loan Documents or otherwise available by statute, at
law or in equity upon the occurrence of any Default.
9.06 Allocation of Proceeds. If an Event of Default has
occurred and not been waived, and the maturity of the Notes has been
accelerated pursuant to Article IX hereof, all payments received by the Agent
hereunder, in respect of any principal of or interest on the Obligations or any
other amounts payable by the Borrower hereunder (other than amounts deposited
with the Agent pursuant to Section 9.01(B) which shall be applied first to
payment of draws under Letters of Credit) shall be applied by the Agent in the
following order:
(i) amounts due to NationsBank and the Lenders pursuant to
Sections 2.12, 2.16, 3.02(f), 3.03, 11.05 and 11.11 hereof;
(ii) amounts due to (A) NationsBank pursuant to Section 3.04
hereof, and (B) to NationsBank and/or the Agent pursuant to Section 2.17
hereof;
(iii) payments of interest on Loans, to be applied for the
ratable benefit of the Lenders;
(iv) payments of principal on Loans, to be applied for the
ratable benefit of the Lenders;
(v) payment of cash amounts to the Agent in respect of
Outstanding Letters of Credit pursuant to Section 9.01(B) hereof;
(vi) payment of Obligations owed a Lender or Lenders pursuant
to Swap Agreements on a pro rata basis according to amounts owed;
(vii) payments of all other amounts due under this Agreement, if
any, to be applied for the ratable benefit of the Lenders; and
(viii) any surplus remaining after application as provided for
herein, to the Borrower or otherwise as may be required by applicable law.
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ARTICLE X
The Agent
10.01 Appointment. Each Lender (including NationsBank in its
capacity as maker of Swing Line Loans and as issuer of the Letters of Credit)
hereby irrevocably designates and appoints NationsBank as the Agent of the
Lenders under this Agreement, and each of the Lenders hereby irrevocably
authorizes NationsBank as the Agent for such Lender, to take such action on its
behalf under the provisions of this Agreement and the other Loan Documents and
to exercise such powers as are expressly delegated to the Agent by the terms of
this Agreement, together with such other powers as are reasonably incidental
thereto. The Agent shall not have any duties or responsibilities, except those
expressly set forth herein, or any fiduciary relationship with any of the
Lenders, and no implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into this Agreement or otherwise exist
against the Agent.
10.02 Attorneys-in-fact. The Agent may execute any of its duties
under this Agreement by or through agents or attorneys-in-fact and shall be
entitled to advice of counsel concerning all matters pertaining to such duties.
The Agent shall not be responsible to the Lenders for the negligence, gross
negligence or willful misconduct of any agents or attorneys-in-fact selected by
it with reasonable care.
10.03 Limitation on Liability. Neither the Agent nor any of its
officers, directors, employees, agents or attorneys-in-fact shall be liable to
the Lenders for any action lawfully taken or omitted to be taken by it or them
under or in connection with this Agreement except for its or their own gross
negligence or willful misconduct. Neither the Agent nor any of its affiliates
shall be responsible in any manner to any of the Lenders for any recitals,
statements, representations or warranties made by the Borrower or any of its
Subsidiaries, or any officer or representative thereof contained in this
Agreement or in any of the other Loan Documents, or in any certificate, report,
statement or other document referred to or provided for in or received by the
Agent under or in connection with this Agreement, or for the value, validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement or
any of the other Loan Documents, or for any failure of the Borrower to perform
its obligations thereunder, or for any recitals, statements, representations or
warranties made, or for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of any collateral. The Agent shall not be under
any obligation to any of the Lenders to ascertain or to inquire as to the
observance or performance of any of the terms, covenants or conditions of this
Agreement or any of the other Loan Documents on the part of the Borrower or to
inspect the properties, books or records of the Borrower or its Subsidiaries.
10.04 Reliance. The Agent shall be entitled to rely, and shall be
fully protected in relying, upon any Note, writing,
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resolution, notice, consent certificate, affidavit, letter, cablegram,
telegram, telecopy or telex message, statement, order or other document or
conversation believed by it to be genuine and correct and to have been signed,
sent or made by the proper Person or Persons and upon advice and statements of
legal counsel (including, without limitation, counsel to the Borrower),
independent accountants and other experts selected by the Agent. The Agent may
deem and treat the payee of any Note as the owner thereof for all purposes
unless an Assignment and Acceptance shall have been filed with and accepted by
the Agent. The Agent shall be fully justified in failing or refusing to take
any action under this Agreement unless it shall first receive advice or
concurrence of the Lenders or the Required Lenders as provided in this
Agreement or it shall first be indemnified to its satisfaction by the Lenders
against any and all liability and expense which may be incurred by it by reason
of taking or continuing to take any such action. The Agent shall in all cases
be fully protected in acting, or in refraining from acting, under this
Agreement in accordance with a request of the Required Lenders, and such
request and any action taken or failure to act pursuant thereto shall be
binding upon all the Lenders and all present and future holders of the Notes.
10.05 Notice of Default. The Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default
hereunder unless the Agent has received notice from a Lender, the Authorized
Representative or the Borrower referring to this Agreement, describing such
Default or Event of Default and stating that such notice is a "notice of
default". In the event that the Agent receives such a notice, the Agent shall
promptly give notice thereof to the Lenders. The Agent shall take such action
with respect to such Default or Event of Default as shall be reasonably
directed by the Required Lenders; provided that, unless and until the Agent
shall have received such directions, the Agent may (but shall not be obligated
to) take such action, or refrain from taking such action, with respect to such
Event of Default as it shall deem advisable in the best interests of the
Lenders.
10.06 No Representations. Each Lender expressly acknowledges that
neither the Agent nor any of its affiliates has made any representations or
warranties to it and that no act by the Agent hereafter taken, including any
review of the affairs of the Borrower or any of its Subsidiaries, shall be
deemed to constitute any representation or warranty by the Agent to any Lender.
Each Lender represents to the Agent that it has, independently and without
reliance upon the Agent or any other Lender, and based on such documents and
information as it has deemed appropriate, made its own appraisal of and
investigation into the financial condition, creditworthiness, affairs, status
and nature of the Borrower and its Subsidiaries and made its own decision to
enter into this Agreement. Each Lender also represents that it will,
independently and without reliance upon the Agent or any other Lender, and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit analysis, appraisals and decisions in
taking or not taking action
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under this Agreement and to make such investigation as it deems necessary to
inform itself as to the status and affairs, financial or otherwise, of the
Borrower and its Subsidiaries. Except for notices, reports and other documents
expressly required to be furnished to the Lenders by the Agent hereunder, the
Agent shall not have any duty or responsibility to provide any Lender with any
credit or other information concerning the affairs, financial condition or
business of the Borrower or any of its Subsidiaries which may come into the
possession of the Agent or any of its affiliates.
10.07 Indemnification. The Lenders agree to indemnify the Agent in
its capacity as such (to the extent not reimbursed by the Borrower and without
limiting any obligations of the Borrower or any Subsidiary so to do), including
its employees, directors, officers and agents, ratably according to the
respective principal amount of the Notes held by them (or, if no Notes are
outstanding, ratably in accordance with their respective Applicable Commitment
Percentages as then in effect) from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever which may at any
time (including without limitation at any time following the payment of the
Notes) be imposed on, incurred by or asserted against the Agent, including its
employees, directors, officers and agents, in any way relating to or arising
out of this Agreement or any other document contemplated by or referred to
herein or the transactions contemplated hereby or any action taken or omitted
by the Agent under or in connection with any of the foregoing; provided that no
Lender shall be liable for the payment of any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting from the Agent's gross negligence or
willful misconduct. The agreements in this subsection shall survive the
payment of the Obligations and the termination of this Agreement.
10.08 Lender. The Agent and its affiliates may make loans to, accept
deposits from and generally engage in any kind of business with the Borrower
and its Subsidiaries as though it were not the Agent hereunder. With respect
to its Loans made or renewed by it and any Note issued to it, the Agent shall
have the same rights and powers under this Agreement as any Lender and may
exercise the same as though it were not the Agent, and the terms "Lender" and
"Lenders" shall, unless the context otherwise indicates, include the Agent in
its individual capacity.
10.09 Resignation. If the Agent shall resign as Agent under this
Agreement, then the Required Lenders may appoint, with the consent, so long as
there shall not have occurred and be continuing a Default or Event of Default,
of the Borrower, which consent shall not be unreasonably withheld, a successor
Agent for the Lenders, which successor Agent shall be a commercial bank
organized under the laws of the United States or any state thereof, having a
combined surplus and capital of not less than $500,000,000, whereupon such
successor Agent shall succeed to the rights, powers
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and duties of the former Agent and the obligations of the former Agent shall be
terminated and canceled, without any other or further act or deed on the part
of such former Agent or any of the parties to this Agreement; provided,
however, that the former Agent's resignation shall not become effective until
such successor Agent has been appointed and has succeeded of record to all
right, title and interest in any collateral held by the Agent; provided,
further, that if the Required Lenders and, if applicable, the Borrower cannot
agree as to a successor Agent within ninety (90) days after such resignation,
the Agent shall appoint a successor Agent which satisfies the criteria set
forth above in this Section 10.09 for a successor Agent and the parties hereto
agree to execute whatever documents are necessary to effect such action under
this Agreement or any other document executed pursuant to this Agreement;
provided, however that in such event all provisions of this Agreement and the
Loan Documents, shall remain in full force and effect. After any retiring
Agent's resignation hereunder as Agent, the provisions of this Article X shall
inure to its benefit as to any actions taken or omitted to be taken by it while
it was Agent under this Agreement.
10.10 Sharing of Payments, etc. Each Lender agrees that if it shall,
through the exercise of a right of banker's lien, set-off, counterclaim or
otherwise, obtain payment with respect to its Obligations (other than pursuant
to Article IV) which results in its receiving more than its pro rata share of
the aggregate payments with respect to all of the Obligations (other than any
payment pursuant to Article IV), then (A) such Lender shall be deemed to have
simultaneously purchased from the other Lenders a share in their Obligations so
that the amount of the Obligations held by each of the Lenders shall be pro
rata and (B) such other adjustments shall be made from time to time as shall be
equitable to insure that the Lenders share such payments ratably; provided,
however, that for purposes of this Section 10.10 the term "pro rata" shall be
determined with respect to both the Revolving Credit Commitment of each Lender
and to the Total Revolving Credit Commitment after subtraction in each case of
amounts, if any, by which any such Lender has not funded its share of the
outstanding Revolving Credit Loans and Reimbursement Obligations. If all or
any portion of any such excess payment is thereafter recovered from the Lender
which received the same, the purchase provided in this Section 10.10 shall be
rescinded to the extent of such recovery, without interest. The Borrower
expressly consents to the foregoing arrangements and agrees that each Lender so
purchasing a portion of the other Lenders' Obligations may exercise all rights
of payment (including, without limitation, all rights of set-off, banker's lien
or counterclaim) with respect to such portion as fully as if such Lender were
the direct holder of such portion.
10.11 One Lender. Notwithstanding anything to the contrary contained
herein or in any of the Loan Documents, if at any time NationsBank shall be the
sole Lender, all references to and rights, powers and privileges exercisable by
the "Agent" shall be deemed to refer to NationsBank.
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ARTICLE XI
Miscellaneous
11.01 Assignments and Participations.
(a) At any time after the Effective Date each Lender may, with the
prior consent of the Agent and the Borrower, which consents shall not be
unreasonably withheld (it being understood that consent may be withheld by the
Borrower if such assignment would subject the Borrower to the payment of any
additional amounts pursuant to the provisions of Section 4.06 hereof), assign
to one or more banks or financial institutions all or a portion of its rights
and obligations under this Agreement (including, without limitation, all or a
portion of any Note payable to its order); provided, that (i) each such
assignment shall be of a constant, and not a varying, percentage of all of the
assigning Lender's rights and obligations (including Loans and Participations
but excluding outstanding Competitive Bid Loans) under this Agreement, (ii) for
each assignment involving the issuance and transfer of a Note, the assigning
Lender shall execute an Assignment and Acceptance and the Borrower hereby
consents to execute a replacement Note or Notes to give effect to the
assignment, (iii) the minimum Revolving Credit Commitment which shall be
assigned is $10,000,000 (together with which the assigning Lender's applicable
portion of Participations and the Letter of Credit Commitment shall also be
assigned), except that one Lender may make an assignment to another Lender in
minimum amounts of $1,000,000, (iv) such assignee shall have an office located
in the United States, and (v) an assignment (other than an assignment of 100%
of its interest) by NationsBank shall not include any portion of the Swing Line
or obligation to issue Letters of Credit. Upon such execution, delivery,
approval and acceptance, from and after the effective date specified in each
Assignment and Acceptance, (x) the assignee thereunder shall be a party hereto
and, to the extent that rights and obligations hereunder or under such Note
have been assigned or negotiated to it pursuant to such Assignment and
Acceptance have the rights and obligations of a Lender hereunder and a holder
of such Notes and (y) the assignor thereunder shall, to the extent that rights
and obligations hereunder or under such Notes have been assigned or negotiated
by it pursuant to such Assignment and Acceptance, relinquish its rights and be
released from that portion of its Obligations under this Agreement applicable
to the rights so assigned; provided that such assignor shall not be released
from liability to the Borrower for any acts or omissions of such assignor prior
to such assignment. Any Lender who makes an assignment shall pay to the Agent
a one-time administrative fee of $2,500.00 which fee shall not be reimbursed by
the Borrower.
(b) By executing and delivering an Assignment and Acceptance, the
Lender assignor thereunder and the assignee thereunder confirm to and agree
with each other and the other parties hereto as follows: (i) the assignment
made under such Assignment and Acceptance is made under such Assignment and
Acceptance without recourse; (ii) such assigning Lender makes no representation
or warranty and assumes no responsibility with respect to the
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financial condition of the Borrower or any Subsidiary or the performance or
observance by the Borrower or any Subsidiary of any of its obligations under
any Loan Document or any other instrument or document furnished pursuant
hereto; (iii) such assignee confirms that it has received a copy of this
Agreement, together with copies of the financial statements delivered pursuant
to Section 6.01(f) or Section 7.01, as the case may be, and such other Loan
Documents and other documents and information as it has deemed appropriate to
make its own credit analysis and decision to enter into such Assignment and
Acceptance; (iv) such assignee will, independently and without reliance upon
the Agent, such assigning Lender or any other Lender and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under this
Agreement; (v) such assignee appoints and authorizes the Agent to take such
action as agent on its behalf and to exercise such powers under this Agreement,
the Notes and the other Loan Documents as are delegated to the Agent by the
terms hereof and thereof, together with such powers as are reasonably
incidental thereto; and (vi) such assignee agrees that it will perform in
accordance with their terms all of the obligations which by the terms of this
Agreement are required to be performed by it as a Lender and a holder of such
Notes.
(c) The Agent shall maintain at its address referred to herein a
copy of each Assignment and Acceptance delivered to and accepted by it.
(d) Upon its receipt of an Assignment and Acceptance executed by
an assigning Lender, the Agent shall give prompt notice thereof to Borrower.
(e) Each Lender may sell participations at its expense without the
consent of Borrower or Agent, to one or more banks or other entities as to all
or a portion of its rights and obligations under this Agreement; provided, that
(i) such Lender's obligations under this Agreement shall remain unchanged, (ii)
such Lender shall remain solely responsible to the other parties hereto for the
performance of such obligations, (iii) such Lender shall remain the holder of
any Notes issued to it for the purpose of this Agreement, (iv) such
participations shall be in a minimum amount of $1,000,000 and, in the case of a
participation in the Revolving Credit Facility, shall include an allocable
portion of such Lender's Participation, and (v) Borrower, the Agent and the
other Lenders shall continue to deal solely and directly with such Lender in
connection with such Lender's rights and obligations under this Agreement and
with regard to any and all payments to be made under this Agreement; provided,
that the participation agreement between a Lender and its participants may
provide that such Lender will obtain the approval of such participant prior to
such Lender's agreeing to any amendment or waiver of any provisions of this
Agreement which would (A) extend the maturity of any Note, (B) reduce the
interest rate hereunder, (C) increase the Revolving Credit Commitment of the
Lender granting the participation other than as permitted by Section 2.10 or
(D) release any Guarantor, and (vi) the sale of any such participations which
require Borrower to file a registration statement with the United States
Securities and
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Exchange Commission or under the securities regulations or laws of any state
shall not be permitted.
11.02 Notices. All notices shall be in writing, except as to
telephonic notices expressly permitted or required herein, and written notices
shall be delivered by hand delivery, telegram, telex, telefacsimile, overnight
courier or certified or registered mail. Any notice shall be conclusively
deemed to have been received by any party hereto and be effective on the day on
which delivered to such party (against (except as to telephonic or
telefacsimile notice) receipt therefor or, in the case of telex, verification
by return) at the address set forth below or such other address as such party
shall specify to the other parties in writing, or if sent prepaid by certified
or registered mail return receipt requested on the third Business Day after the
day on which mailed, addressed to such party at said address:
(a) if to the Borrower:
Republic Industries, Inc.
200 E. Las Olas Boulevard
Suite 1400
Ft. Lauderdale, Florida 33301
Attention: Richard L. Handley
Telephone: (954) 627-6018
Telefacsimile: (954) 779-3884
(b) if to the Agent:
NationsBank of Florida, National Association
100 S.E. Second Street, 14th Floor
Miami, Florida 33131
Attention: Corporate Banking Department
Telephone: (305) 533-2428
Telefacsimile: (305) 533-2437
with a copy to:
NationsBank of Florida, National Association
One Independence Center
101 North Tryon Street
NC1-001-15-04
Charlotte, North Carolina 28255
Attention: Sharon Kendrick
Telephone: (704) 386-5000
Telefacsimile: (704) 386-9923
(c) if to NationsBank in its capacity as issuer of the
Letters of Credit:
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NationsBank of Florida, National Association
NationsBank Corporate Center
100 North Tryon Street
Charlotte, North Carolina 28255
Attention: Letter of Credit Department
Telephone: (704) 386-____
Telefacsimile: (704) 386-____
(d) if to the Lenders:
At the addresses set forth on the signature pages
hereof and on the signature page of each Assignment
and Acceptance.
11.03 Setoff. The Borrower agrees that the Agent and each Lender
shall have a Lien for all the Obligations of the Borrower upon all deposits or
deposit accounts, of any kind, or any interest in any deposits or deposit
accounts thereof, now or hereafter pledged, mortgaged, transferred or assigned
to the Agent or such Lender or otherwise in the possession or control of the
Agent or such Lender (other than for safekeeping) for any purpose for the
account or benefit of the Borrower and including any balance of any deposit
account or of any credit of the Borrower with the Agent or such Lender, whether
now existing or hereafter established, hereby authorizing the Agent and each
Lender at any time or times with or without prior notice to apply such balances
or any part thereof to such of the Obligations of the Borrower to the Lenders
then past due and in such amounts as they may elect, and whether or not the
collateral or the responsibility of other Persons primarily, secondarily or
otherwise liable may be deemed adequate. For the purposes of this paragraph,
all remittances and property shall be deemed to be in the possession of the
Agent or such Lender as soon as the same may be put in transit to it by mail or
carrier or by other bailee.
11.04 Survival. All covenants, agreements, representations and
warranties made herein shall survive the making by the Lenders of the Loans and
the expiration of the Letters of Credit and the execution and delivery to the
Lenders of this Agreement and the Notes and shall continue in full force and
effect so long as any of the Obligations remain outstanding or any Lender has
any commitment hereunder. Whenever in this Agreement, any of the parties
hereto is referred to, such reference shall be deemed to include the successors
and permitted assigns of such party and all covenants, provisions and
agreements by or on behalf of the Borrower which are contained in this
Agreement, the Notes and the other Loan Documents shall inure to the benefit of
the successors and permitted assigns of the Lenders or any of them.
11.05 Expenses. The Borrower agrees (a) to pay or reimburse
the Agent for all its reasonable and customary out-of-pocket costs and expenses
incurred in connection with the preparation, negotiation and execution of, and
any amendment, supplement or modification to, this Agreement or any of the other
Loan Documents (including travel expenses relating to closing), and the
consummation of the transactions contemplated hereby and thereby,
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including, without limitation, the reasonable and customary fees and
disbursements of counsel to the Agent, (b) to pay or reimburse the Agent and
the Lenders for all their reasonable costs and expenses incurred in connection
with the enforcement (only from and after the occurrence of a Default or Event
of Default) or preservation of any rights under this Agreement and the other
Loan Documents, including without limitation, the reasonable fees and
disbursements of their counsel and any payments in indemnification or otherwise
payable by the Lenders to the Agent pursuant to the Loan Documents, (c) to pay,
indemnify and hold the Agent and the Lenders harmless from any and all
recording and filing fees and any and all liabilities with respect to, or
resulting from any failure to pay or delay in paying, documentary, stamp,
excise and other similar taxes, if any, which may be payable or determined to
be payable in connection with the execution and delivery of this Agreement or
any other Loan Documents, or consummation of any amendment, supplement or
modification of, or any waiver or consent under or in respect of, this
Agreement or any other Loan Documents, and (d) to pay, indemnify, and hold the
Agent and the Lenders harmless from and against any and all other liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever with respect to the
execution, delivery, enforcement, performance and administration of this
Agreement and the other Loan Documents or in any respect relating to the
transactions contemplated hereby or thereby, (all the foregoing, collectively,
the "Indemnified Liabilities"); provided, however, that the Borrower shall have
no obligation hereunder with respect to Indemnified Liabilities arising from
(i) the willful misconduct or gross negligence of or the willful breach of the
Loan Documents by the party seeking indemnification but only after final the
adjudication of willful misconduct, gross negligence or breach of Loan
Documents by such Person, (ii) legal proceedings commenced against the Agent or
any Lender by any security holder or creditor thereof arising out of and based
upon rights afforded any such security holder or creditor solely in its
capacity as such, (iii) any taxes imposed upon the Agent or any Lender other
than the documentary, stamp, excise and similar taxes described in clause (c)
above or any tax resulting from any Regulatory Change, which tax would be
payable to Lenders by Borrower pursuant to Article IV hereof, or (iv) taxes
imposed and costs and expenses incurred as a result of a transfer or assignment
of any Note, participation or assignment of a portion of its rights. The
agreements in this subsection shall survive repayment of the Notes and all
other Obligations hereunder. The reimbursement obligations of Borrower
contained in this paragraph also do not include the obligation to reimburse
Lender or the Agent for any expenses and fees incurred in any dispute between
the Lenders and or the Agent arising out of the Loans.
11.06 Amendments. No amendment, modification or waiver of any
provision of this Agreement or any of the Loan Documents and no consent by the
Lenders to any departure therefrom by the Borrower shall be effective unless
such amendment, modification or waiver shall be in writing and signed by the
Borrower and the Agent, but only upon having received the written consent of
the Required Lenders, and the same shall then be effective only for the period
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and on the conditions and for the specific instances and purposes specified in
such writing; provided, however, that, no such amendment, modification or
waiver
(i) which changes, extends or waives any provision of Section
10.10 or this Section 11.06, the amount of or the due date of any
scheduled installment of or the rate of interest payable on any
Obligation or the amount of the Total Revolving Credit Commitment,
fees, changes the definition of Required Lenders, which permits an
assignment by Borrower of its Obligations hereunder, which reduces the
required consent of Lenders provided hereunder, which increases,
decreases or extends the Revolving Credit Maturity Date or the
Revolving Credit Commitment of any Lender or which increases or
extends the Letter of Credit Facility or which waives any condition to
the making of any Loan shall be effective unless in writing and signed
by each of the Lenders; provided, however, the Required Lenders may in
their sole discretion waive any Default or Event of Default (other
than any Event of Default under Section 9.01(a), (b), (g) or (h) which
shall require the agreement of each Lender);
(ii) which releases a Guarantor shall be effective unless with
the written consent of each of the Lenders; or
(iii) which affects the rights, privileges, immunities or
indemnities of the Agent shall be effective unless in writing and
signed by the Agent.
Notwithstanding any provision of the other Loan Documents to the contrary, as
between the Agent and the Lenders, execution by the Agent shall not be deemed
conclusive evidence that the Agent has obtained the written consent of the
Required Lenders. No notice to or demand on the Borrower in any case shall
entitle the Borrower to any other or further notice or demand in similar or
other circumstances, except as otherwise expressly provided herein. No delay
or omission on any Lender's or the Agent's part in exercising any right, remedy
or option shall operate as a waiver of such or any other right, remedy or
option or of any Default or Event of Default.
11.07 Counterparts. This Agreement may be executed in any number
of counterparts, each of which when so executed and delivered shall be deemed an
original, and it shall not be necessary in making proof of this Agreement to
produce or account for more than one such fully-executed counterpart.
11.08 WAIVERS BY BORROWER. IN ANY LITIGATION IN ANY COURT WITH
RESPECT TO, IN CONNECTION WITH, OR ARISING OUT OF THIS AGREEMENT, THE LOANS,
ANY OF THE NOTES, ANY OF THE OTHER LOAN DOCUMENTS, THE OBLIGATIONS, OR ANY
INSTRUMENT OR DOCUMENT DELIVERED PURSUANT TO THIS AGREEMENT OR THE OTHER LOAN
DOCUMENTS, OR THE VALIDITY, PROTECTION, INTERPRETATION, COLLECTION OR
ENFORCEMENT THEREOF, OR ANY OTHER CLAIM OR DISPUTE HOWSOEVER ARISING BETWEEN
THE BORROWER AND THE LENDERS OR THE AGENT, THE BORROWER AND EACH LENDER AND THE
AGENT HEREBY WAIVE, TO THE EXTENT PERMITTED BY
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APPLICABLE LAW, TRIAL BY JURY IN CONNECTION WITH ANY SUCH LITIGATION.
11.09 Termination. The termination of this Agreement shall not
affect any rights of the Borrower, the Lenders or the Agent or any obligation
of the Borrower, the Lenders or the Agent, arising prior to the effective date
of such termination, and the provisions hereof shall continue to be fully
operative until all transactions entered into or rights created or obligations
incurred prior to such termination have been fully disposed of, concluded or
liquidated and the Obligations arising prior to or after such termination have
been irrevocably paid in full. The rights granted to the Agent for the benefit
of the Lenders hereunder and under the other Loan Documents shall continue in
full force and effect, notwithstanding the termination of this Agreement, until
all of the Obligations have been paid in full after the termination hereof
(other than Obligations in the nature of continuing indemnities or expense
reimbursement obligations not yet due and payable) or the Borrower has
furnished the Lenders and the Agent with an indemnification satisfactory to the
Agent and each Lender with respect thereto. All representations, warranties,
covenants, waivers and agreements contained herein shall survive termination
hereof until payment in full of the Obligations unless otherwise provided
herein. Notwithstanding the foregoing, if after receipt of any payment
pursuant to the Loan Documents of all or any part of the Obligations, any
Lender is for any reason compelled to surrender such payment to any Person
because such payment is determined to be void or voidable as a preference,
impermissible setoff, a diversion of trust funds or for any other reason, this
Agreement shall continue in full force and the Borrower shall be liable to, and
shall indemnify and hold such Lender harmless for, the amount of such payment
surrendered until such Lender shall have been finally and irrevocably paid in
full. The provisions of the foregoing sentence shall be and remain effective
notwithstanding any contrary action which may have been taken by the Lenders in
reliance upon such payment, and any such contrary action so taken shall be
without prejudice to the Lenders' rights under this Agreement and shall be
deemed to have been conditioned upon such payment having become final and
irrevocable.
11.10 Governing Law. ALL DOCUMENTS EXECUTED PURSUANT TO THE
TRANSACTIONS CONTEMPLATED HEREIN, INCLUDING, WITHOUT LIMITATION, THIS AGREEMENT
AND EACH OF THE LOAN DOCUMENTS SHALL BE DEEMED TO BE CONTRACTS MADE UNDER, AND
FOR ALL PURPOSES SHALL BE CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS AND
JUDICIAL DECISIONS OF THE STATE OF FLORIDA. THE BORROWER HEREBY SUBMITS TO THE
JURISDICTION AND VENUE OF THE STATE AND FEDERAL COURTS OF FLORIDA FOR THE
PURPOSES OF RESOLVING DISPUTES HEREUNDER OR FOR THE PURPOSES OF COLLECTION.
11.11 Indemnification. (a) In consideration of the execution and
delivery of this Agreement by the Agent and each Lender and the extension of
the Letter of Credit Commitments, the Swing Line and Revolving Credit
Commitments, the Borrower hereby indemnifies, exonerates and holds the Agent
and each Lender and each of their respective officers, directors, employees and
agents
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(collectively, the "Indemnified Parties") free and harmless from and against
any and all actions, causes of action, suits, losses, costs, liabilities and
damages, and expenses incurred in connection therewith (irrespective of whether
any such Indemnified Party is a party to the action for which indemnification
hereunder is sought), including reasonable attorneys' fees and disbursements
(collectively, the "Indemnified Liabilities"), incurred by the Indemnified
Parties or any of them as a result of, or arising out of, or relating to any
transaction financed or to be financed in whole or in part, directly or
indirectly, with the proceeds of any Loan or supported by any Letter of Credit,
except for any such Indemnified Liabilities arising for the account of a
particular Indemnified Party by reason of the final adjudication of bad faith,
gross negligence or willful misconduct with respect to such Indemnified Party
or an officer, director, employee or agent of such Indemnified Party, and if
and to the extent that the foregoing undertaking may be unenforceable for any
reason, the Borrower hereby agrees to make the maximum contribution to the
payment and satisfaction of each of the Indemnified Liabilities which is
permissible under applicable law. The provisions of this Section 11.11(a)
shall survive repayment of the Obligations, the occurrence of the Revolving
Credit Termination Date, and expiration or termination of this Agreement.
(b) If a claim is to be made by a party entitled to indemnification
under this Section 11.11 or Section 7.15 against the indemnifying party, the
party entitled to such indemnification shall give written notice to the
indemnifying party promptly after the party entitled to indemnification
receives actual notice of any claim, action, suit, loss, cost, liability,
damage or expense incurred or instituted for which the indemnification is
sought. If requested by Borrower in writing, and so long as no Default or
Event of Default shall have occurred and be continuing, such indemnitee shall
contest at the expense of the Borrower the validity, applicability and/or
amount of such suit, action, or cause of action to the extent such contest may
be conducted in good faith on legally supportable grounds. If any lawsuit or
enforcement action is filed against any party entitled to the benefit of
indemnity under this Section 11.11, written notice thereof shall be given to
the indemnifying party as soon as practicable (and in any event within 20 days
after the service of the citation or summons). Notwithstanding the foregoing,
the failure so to notify the indemnifying party as provided in this Section
will relieve indemnifying party from liability hereunder only if and to the
extent that such failure results in the forfeiture by the indemnifying party of
any substantive rights or defenses. After such notice, if the indemnifying
party shall acknowledge in writing to the Indemnified Party that the
indemnifying party shall be obligated under the terms of its indemnity
hereunder in connection with such lawsuit or action, then, so long as no
Default or Event of Default shall occur and be continuing, the indemnifying
party shall be entitled, if it so elects, to take control of the defense and
investigation of such lawsuit or action and to employ and engage counsel of its
own choice reasonably acceptable to the Indemnified Party to handle and defend
the same, at the indemnifying party's cost, risk and
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<PAGE> 93
expense, provided, however, that the indemnifying party and its counsel shall
proceed with diligence and in good faith with respect thereto. If (i) the
engagement of such counsel by the indemnifying party would present a conflict
of interest which would prevent such counsel from effectively defending such
action on behalf of the Indemnified Party, (ii) the defendants in, or targets
of, any such lawsuit or action include both the Indemnified Party and
indemnifying party, and the Indemnified Party reasonably concludes that there
may be legal defenses available to it that are different from or in addition to
those available to the indemnifying party, (iii) the indemnifying party fails
to assume the defense of the lawsuit or action or to employ counsel reasonably
satisfactory to such Indemnified Party, in either case in a timely manner, or
(iv) a Default or Event of Default shall occur and be continuing, then such
Indemnified Party may employ separate counsel to represent or defend it in any
such action or proceeding and the indemnifying party will pay the fees and
disbursements of such counsel, provided, however, that each indemnitee shall
endeavor, but shall not be obligated, in connection with any matter covered by
this Section 11.11 which also involves other indemnities, to use reasonable
efforts to avoid unnecessary duplication of efforts by counsel for all
indemnities and provided further, that in no event shall the Borrower be liable
for the fees and expenses of more than one separate firm for the Indemnified
Parties. The Indemnified Party shall cooperate (with all out of pocket costs
and expenses associated therewith to be paid by the indemnifying party) in all
reasonable respects with the indemnifying party and such attorneys in the
investigation, trial and defense of such lawsuit or action and any appeal
arising therefrom; provided, however, that the Indemnified Party may, at its
own cost (except as set forth in, and in accordance with, the foregoing
sentence), participate in the investigation, trial and defense of such lawsuit
or action and any appeal arising therefrom. If the indemnifying party has
acknowledged to the Indemnified Party its obligation to indemnify hereunder,
the Indemnified Party, so long as no Default or Event of Default shall have
occurred and be continuing, shall not settle such lawsuit or enforcement action
without the prior written consent of the indemnifying party and, if the
indemnifying party has not so acknowledged its obligation, the Indemnified
Party shall not settle such lawsuit or enforcement action without giving 20
days' prior written notice of such settlement and its terms to the indemnifying
party.
11.12 Headings and References. The headings of the Articles and
Sections of this Agreement are inserted for convenience of reference only and
are not intended to be a part of, or to affect the meaning or interpretation of
this Agreement. Words such as "hereof", "hereunder", "herein" and words of
similar import shall refer to this Agreement in its entirety and not to any
particular Section or provisions hereof, unless so expressly specified. As
used herein, the singular shall include the plural, and the masculine shall
include the feminine or a neutral gender, and vice versa, whenever the context
requires.
11.13 Severability. If any provision of this Agreement or the other
Loan Documents shall be determined to be illegal or
88
<PAGE> 94
invalid as to one or more of the parties hereto, then such provision shall
remain in effect with respect to all parties, if any, as to whom such provision
is neither illegal nor invalid, and in any event all other provisions hereof
shall remain effective and binding on the parties hereto.
11.14 Entire Agreement. This Agreement, together with the other Loan
Documents, constitutes the entire agreement between the parties with respect to
the subject matter hereof and supersedes all previous proposals, negotiations,
representations, commitments and other communications between or among the
parties, both oral and written, with respect thereto.
11.15 Agreement Controls. In the event that any term of any of the
Loan Documents other than this Agreement conflicts with any term of this
Agreement, the terms and provisions of this Agreement shall control.
11.16 Usury Savings Clause. Notwithstanding any other provision
herein, the aggregate interest rate charged under any of the Notes, including
all charges or fees in connection therewith deemed in the nature of interest
under Florida law, shall not exceed the Highest Lawful Rate (as such term is
defined below). If the rate of interest (determined without regard to the
preceding sentence) under this Agreement at any time exceeds the Highest Lawful
Rate (as defined below), the outstanding amount of the Loans made hereunder
shall bear interest at the Highest Lawful Rate until the total amount of
interest due hereunder equals the amount of interest which would have been due
hereunder if the stated rates of interest set forth in this Agreement had at
all times been in effect. In addition, if when the Loans made hereunder are
repaid in full the total interest due hereunder (taking into account the
increase provided for above) is less than the total amount of interest which
would have been due hereunder if the stated rates of interest set forth in this
Agreement had at all times been in effect, then to the extent permitted by law,
the Borrower shall pay to the Agent an amount equal to the difference between
the amount of interest paid and the amount of interest which would have been
paid if the Highest Lawful rate had at all times been in effect.
Notwithstanding the foregoing, it is the intention of the Lenders and the
Borrower to conform strictly to any applicable usury laws. Accordingly, if any
Lender contracts for, charges, or receives any consideration which constitutes
interest in excess of the Highest Lawful rate, then any such excess shall be
canceled automatically and, if previously paid, shall at such Lender's option
be applied to the outstanding amount of the Loans made hereunder or be refunded
to the Borrower. As used in this paragraph, the term "Highest Lawful Rate"
means the maximum lawful interest rate, if any, that at any time or from time
to time may be contracted for, charged, or received under the laws applicable
to such Lender which are presently in effect or, to the extent allowed by law,
under such applicable laws which may hereafter be in effect and which allow a
higher maximum nonusurious interest rate than applicable laws now allow.
89
<PAGE> 95
11.17 Confidentiality. Except as provided in Section 7.01(e) hereof,
the Lenders shall hold all non-public information obtained pursuant to the
requirements of this Agreement in accordance with their customary procedures
for handling confidential information of this nature but may, in any event,
make disclosures reasonably required in connection with the contemplated
transfer or assignment of any of the Loans or participations or as required or
requested by any legal process or applicable regulatory agency or to its
attorneys or accountants in the ordinary course of business; provided that,
unless specifically prohibited by applicable law or court order, each Lender
shall use all reasonable efforts to notify the Borrower of any request under
legal process by any governmental agency or representative thereof for
disclosure of such information unless prohibited by such legal process but the
failure to notify Borrower shall not affect the Borrower's obligations to make
payment to the Lenders hereunder and under the Notes.
90
<PAGE> 96
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be made, executed and delivered by their duly authorized officers as of the day
and year first above written.
REPUBLIC INDUSTRIES, INC.
WITNESS:
By:
---------------------------------
Name: Richard L. Handley
Title: Senior Vice President &
- ------------------------ Chief Legal Counsel
- ------------------------
91
<PAGE> 1
EXHIBIT 21.1
REPUBLIC INDUSTRIES, INC.
SUBSIDIARIES AS OF MARCH 26, 1996
<TABLE>
<CAPTION>
Subsidiary(1) State of Incorporation Additional Business Names
- ---------- ---------------------- -------------------------
<S> <C> <C>
Republic Waste Management Co. (2) Delaware None
Hudson Management Florida None
Corporation(3)
The Denver Fire Reporter & Colorado Denver Burglar Alarm, Inc.
Protective Co. Denver Burglar Alarm Company
Denver Burglar Alarm Products, Inc.
</TABLE>
- ------------
(1) Omits 41 and 23 direct subsidiaries of Republic Industries, Inc. operating
in the United States in the solid waste and electronic security services
industries, respectively.
(2) Omits 24 direct subsidiaries operating in the United States in the solid
waste industry.
(3) Omits 9 direct subsidiaries operating in the United States in the solid
waste industry.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
As independent certified public accountants, we hereby consent to the
incorporation of our reports included (or incorporated by reference) in this
Form 10-K, into the previously filed Registration Statements of Republic
Industries, Inc. On Forms S-3 (Registration Nos. 33-61649, 33-62489, 33-63735,
33-65289, and 333-01757) and S-8 (Registration No. 33-93742).
ARTHUR ANDERSEN LLP
Fort Lauderdale, Florida,
March 26, 1996.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 159,753
<SECURITIES> 0
<RECEIVABLES> 34,626
<ALLOWANCES> 1,846
<INVENTORY> 0
<CURRENT-ASSETS> 206,764
<PP&E> 269,362
<DEPRECIATION> 81,901
<TOTAL-ASSETS> 542,050
<CURRENT-LIABILITIES> 63,873
<BONDS> 0
0
0
<COMMON> 760
<OTHER-SE> 435,627
<TOTAL-LIABILITY-AND-EQUITY> 542,050
<SALES> 260,315
<TOTAL-REVENUES> 260,315
<CGS> 169,559
<TOTAL-COSTS> 169,559
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,630
<INCOME-PRETAX> 36,684
<INCOME-TAX> 13,472
<INCOME-CONTINUING> 23,212
<DISCONTINUED> (293)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 22,919
<EPS-PRIMARY> .37
<EPS-DILUTED> .35
</TABLE>