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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
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(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [Fee Required]
For the fiscal year ended December 31, 1994, or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [No Fee Required]
For the transition period from to .
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COMMISSION FILE NUMBER 1-9108
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CHAMBERS DEVELOPMENT COMPANY, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 25-1214958
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10700 FRANKSTOWN ROAD
PITTSBURGH, PENNSYLVANIA 15235
(Address of principal executive offices) (Zip Code)
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REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (412) 242-6237
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SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
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NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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COMMON STOCK AMERICAN STOCK EXCHANGE
CLASS A COMMON STOCK AMERICAN STOCK EXCHANGE
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SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE
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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
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. [ X ].
The aggregate market values of Chambers Development Company, Inc. Common
Stock and Class A Common Stock held by non-affiliates as of March 20, 1995, were
approximately $10,783,000 and $168,466,000, respectively. As of March 20, 1995,
15,592,068 shares of the registrant's Common Stock were outstanding and were
held by 531 shareholders of record, and 51,197,059 shares of the registrant's
Class A Common Stock were outstanding and were held by 3,534 shareholders of
record.
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PART I
ITEM 1. BUSINESS.
GENERAL
Chambers Development Company, Inc. ("Chambers" or the "Company") is a
provider of integrated solid waste services in the United States, with
operations or properties at the end of 1994 in selected areas of Florida,
Georgia, Illinois, Maryland, Mississippi, New Jersey, North Carolina, Ohio,
Pennsylvania, South Carolina, Tennessee, Virginia and West Virginia. Major
elements of the business include the operation, management, construction and
engineering of solid waste sanitary landfills, transfer stations, recycling
facilities and related operations. The Company also provides services for the
collection, hauling and recycling of solid waste for municipal, commercial,
industrial and residential customers. The Company presently owns or operates 14
sanitary landfills, one construction and demolition debris landfill and one
medical, special and municipal waste incinerator. The Company's landfills
provide long-term disposal capacity for a majority of its collection and hauling
operations.
In late 1992, the Company began a program to divest certain businesses that
no longer met strategic and performance objectives. In that regard, in 1993 and
1994, the Company sold one landfill, one recycling facility, three transfer
stations and six collection and hauling businesses, including all of its
operations in Rhode Island, Texas, Massachusetts and Indiana, and in 1992 also
sold its security services business.
The Company's waste services operations are subject to various and changing
federal, state and local laws and substantial regulations under these laws by
governmental authorities, including the United States Environmental Protection
Agency (the "EPA") and various state agencies and county and local authorities
acting in conjunction with such federal and state agencies.
Since early 1992, the Company has devoted substantial effort to the
resolution of several significant legal and financial matters, and to shifting
the primary emphasis of its marketing and operations from development of new
disposal capacity to utilization of existing and previously developed capacity.
(See Item 7, "Management's Discussion and Analysis of Financial Condition and
Results of Operations," and Item 3, "Legal Proceedings," for a discussion of
these financial and legal matters.)
In November 1994, the Company entered into an Agreement and Plan of Merger
pursuant to which the Company would become a wholly-owned subsidiary of USA
Waste Services, Inc. ("USA Waste") and each outstanding share of the Company's
Common Stock and Class A Common Stock would be converted into .41667 of a share
of USA Waste's common stock. The merger is subject to a number of conditions,
including obtaining the approval of the stockholders of the Company and of USA
Waste, final settlement of certain pending shareholder litigation and certain
other proceedings involving the Company, and obtaining any necessary regulatory
waivers or approvals. (See "Proposed Merger with USA Waste Services, Inc.")
The Company was formed in 1971 as a Delaware corporation. The Company's
principal executive offices are located at 10700 Frankstown Road, Pittsburgh,
Pennsylvania 15235. Its telephone number is (412) 242-6237.
Unless the context indicates to the contrary, as used in this report the
terms "Chambers" and the "Company" refer to Chambers Development Company, Inc.
and its subsidiaries.
OPERATIONS
Chambers initially provided disposal services to public utilities and
various services to government subdivisions, including recycling, hauling and
sales of coal and steel by-products and the disposal of related wastes. After
developing the ability to engineer and operate disposal sites for the handling
of solid waste in compliance with environmental standards, Chambers expanded its
operations to include disposal of municipal solid waste and later to include
collection, recycling and hauling of commercial and residential waste and the
operation of solid waste transfer stations. Chambers has in past years devoted
considerable resources to the development and construction of landfills.
However, Chambers currently is focusing its efforts on improving
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operating efficiencies, with particular emphasis on increasing the volume of
waste disposed of in its landfills, in order to achieve greater utilization of
those facilities.
Although Chambers' waste services business is described herein as five
separate operations--landfills, transfer stations, collection and hauling,
recycling, and medical waste--these operations are in many respects integrated.
For example, Chambers' landfills generate revenues from third-party disposal and
also support Chambers' local collection and hauling operations; similarly,
Chambers' transfer stations and recycling facilities operate in conjunction with
both the landfill and collection operations.
Landfill Operations. Chambers owns or operates 14 sanitary landfills for
disposal of non-hazardous solid waste and one construction and demolition debris
landfill. Of the sanitary landfills, five are located in Pennsylvania, two each
in South Carolina and Virginia and one each in West Virginia, Maryland, Florida,
Mississippi and Georgia; all except the Mississippi site are either owned by
Chambers or held under long-term lease. The construction and demolition debris
landfill is located in Georgia. Chambers' landfills currently provide disposal
capacity for a majority of its collection and hauling operations. Most of the
landfills are located close to municipal areas served by Chambers' collection
operations or are accessible to transfer facilities where waste is consolidated
into trailers or rail containers to afford efficient transportation from remote
areas to the disposal sites.
Prior to 1992, Chambers' primary emphasis had been upon developing and
constructing new landfills ("greenfield sites"), either independently or in
cooperation with the municipal entity within which the property was located.
Chambers' management believes that the development and construction of new
landfills, while often time-consuming and requiring significant capital
expenditures and related indirect expenses, is usually preferable to the
acquisition of existing landfill sites, so that the environmental risks often
associated with acquired landfills can be avoided. In 1992, Chambers' management
reexamined its strategies in light of its financial condition and, recognizing
that it held permits to construct sufficient disposal capacity to service its
anticipated needs for a substantial period of time, decided to focus Chambers'
efforts on increasing the utilization of its existing landfills. In addition,
Chambers' management recognized that Chambers' ability to independently develop
additional greenfield sites would be limited in the near term as Chambers'
access to the capital markets would be restricted. See Item 7, "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
Landfill Operational Activity. Fees from third-party solid waste collectors
and generators, consisting of landfill tipping fees and in certain instances
subcontracted hauling fees, accounted for approximately 32%, 28% and 23% of
Chambers' revenues in 1994, 1993 and 1992, respectively. Tipping fees are based
on the weight or volume and the type of waste disposed of at the landfills.
While Chambers' landfills are made available to numerous waste generators
and third-party solid waste collectors, Chambers has sought to obtain long-term
contracts principally with governmental entities in order to create a
predictable waste flow to its landfills. In this regard, for example, Chambers
has handled the disposal of the residential municipal solid waste from the City
of Richmond, Virginia, since 1989 (including the operation of two transfer
stations), and from Fort Pierce, Florida, since 1993.
Under an agreement entered into in early 1991 with Bergen County, New
Jersey, during 1993 Chambers transported and disposed of the ash generated by
the Essex County, New Jersey, incinerator, as well as that portion of the Bergen
County solid waste which was not disposed of at the Essex County incinerator. In
March 1994, Chambers commenced performance under a new three-year contract for
the disposal of the municipal solid waste from Bergen County. The contract
provides the county with options for two one-year renewal periods. The Bergen
County contract produced $16.6 million, or 6%, of Chambers' 1994 revenues.
Commencing in 1989, Chambers had also provided disposal and transportation of
solid waste from Union County, New Jersey, under contracts which were
renegotiated in early 1991 and were terminated pursuant to their terms in
December 1993. Chambers had also provided disposal of the municipal solid waste
from Passaic County, New Jersey, from December 1987 until December 1993. See
Item 7, "Management's Discussion and Analysis of Financial Conditions and
Results of Operations," regarding the impact of the expiration of these
contracts.
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Chambers continues to place emphasis on the disposal of special wastes,
which consist of non-hazardous waste materials such as sewage sludges,
contaminated soils, incinerator ash and certain industrial residues. Following a
proposal process initiated by the New York City Department of Environmental
Protection, Chambers commenced service in January 1992 under a six and one-half
year contract to transport and dispose of sewage sludge. In 1994, amounts of
sewage sludge transported and disposed of pursuant to this contract ranged from
0 to 330 tons per day. The sewage sludge is being transported by truck in
intermodal containers designed for leakproof waste transportation to a Chambers
landfill.
Landfill Development and Construction Activity. Chambers has invested
substantial capital to develop landfills with strict environmental controls.
Development activities include site selection and site feasibility studies,
environmental assessments (including hydrological and geological reviews), land
acquisition, engineering and design work for the site as a whole, and the design
and construction of the landfill infrastructure. The infrastructure consists of
roadway or rail access systems, initial clearing and site preparation, leachate
and methane collection and treatment systems, and stormwater and surface water
management systems. A large portion of the infrastructure expenditures with
respect to each site is nonrecurring, required only at the initial phase in
order to prepare the site for the receipt of waste and to support the operation
of the landfill throughout its useful life.
As the operation of a landfill commences, site preparation, including
excavation and the installation of a liner system at the base elevation of the
site, requires significant capital expenditures often exceeding $200,000 per
acre. However, once a particular area of the site has been lined, limited
additional investment is required with respect to overlaying waste on the lined
areas. The daily filling activities normally provide for the sequential deposit
of waste on the base liner system in adjacent areas within the site (typically
referred to as "cells"). The construction of adjacent cells permits the creation
of additional space over previously constructed cells, which provides Chambers
additional airspace to accept waste with limited additional investment. This
technique of overlaying waste materials on areas already lined reduces the
ongoing capital requirements for facilities which are currently operational.
Chambers performs design and construction work in various phases of
landfill development, including excavation and compaction of soils, and
stormwater and surface water management. Chambers has found that performing
portions of its own landfill construction is cost effective in certain
instances. In order to maintain sanitary conditions at the landfills operated by
Chambers, heavy equipment is also used to spread, compact and cover the waste
daily with soil or other approved cover material. All currently required
groundwater monitoring devices and other environmental controls are in place at
all of the sanitary landfills operated by Chambers. Landfill operations are
subject to increasingly strict and costly environmental regulation, and to
numerous uncertainties resulting from legislative, regulatory and local land use
restrictions, as well as increasing public attention and market changes. See
"Regulation" for information concerning evolving environmental laws and
regulations and Item 7, "Management's Discussion and Analysis of Financial
Condition and Results of Operations," for a discussion of related capital
expenditures and constraints on expansion of landfill operations.
Transfer Station Operations. Transfer stations are facilities located in
areas which are not convenient to, or which do not have ready access to, solid
waste disposal sites. Residential and commercial collection vehicles operating
within such areas, including Chambers' vehicles in some cases, discharge their
solid waste loads at these facilities. The waste is then consolidated and loaded
into larger capacity transfer trailers or rail containers for more efficient
transportation to disposal sites, including landfills owned and operated by
Chambers. Transfer station operations accounted for approximately 20%, 19% and
20% of Chambers' revenues for 1994, 1993 and 1992, respectively.
Chambers owns or operates eight solid waste transfer stations, with four in
New Jersey, two in Virginia and one each in Pennsylvania and South Carolina. In
December 1993, Chambers sold its two transfer stations in Morris County, New
Jersey, to the Morris County Municipal Utilities Authority (the "MCMUA") but
continues to operate both transfer stations and provide transportation services
under a contract with the MCMUA until the county's long-term solid waste system
is in operation or December 31, 1996, if later.
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Operations at the transfer stations in Morris County, New Jersey, began in
January 1988, and these facilities have processed an aggregate of approximately
325,000 tons of municipal solid waste annually. Under its contracts with Morris
County, during 1988 through 1994 Chambers operated the transfer stations and
provided long-distance transportation of waste from the transfer stations to
disposal sites. Commencing in January 1995, the contract for disposal of waste
has been awarded to a competitor of Chambers, but Chambers will continue to
operate the transfer stations in 1995 and, provided the county's solid waste
system is not yet in operation, in 1996. Chambers' rates and revenues from the
Morris County transfer station operations are subject to the ratemaking
authority of the New Jersey Department of Environmental Protection. The two
Morris County transfer station operations produced approximately 14% of
Chambers' 1994 revenues; however, revenues attributable to these operations are
expected to decline in 1995.
Collection and Hauling Operations. Waste collection and hauling generally
support Chambers' landfill and transfer station operations, although in certain
areas, operations involve disposal at commercial or municipal landfills. Fees
for collection and hauling services are based on such factors as the type and
frequency of service, the volume or weight of the waste, the type of waste,
disposal costs and the distance traveled.
Collection and hauling for residential, municipal, commercial and
industrial customers accounted for 41%, 47% and 52% of revenues in 1994, 1993
and 1992, respectively, which includes transportation revenues derived from
certain of Chambers' contracts. In the majority of areas, Chambers services
commercial and industrial accounts without the requirement of prior municipal
approval and, as such, competes with other operators and negotiates rates
directly with individual customers. Chambers typically contracts with commercial
customers for collection, hauling and disposal of solid waste for multi-year
periods. In limited areas, Chambers competes for municipally-awarded franchises
which include commercial and industrial accounts. Such contract awards may be in
the form of exclusive or nonexclusive franchises for several years. Residential
and municipal services are performed primarily under exclusive contracts granted
by municipalities on the basis of competitive bids.
The competitive nature of the waste industry, the varying availability of
landfills and disposal capacity, and the financial condition of Chambers are
expected to affect the ability of Chambers to secure and maintain municipal
contracts in the future. See "Regulation" and Item 7, "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources."
In late 1992, Chambers began a program to divest certain businesses that no
longer met strategic and performance objectives, and in March 1993, as an
initial part of that program, sold substantially all of the assets of its
collection, hauling and transfer station operations in Rhode Island,
Massachusetts and Texas. Chambers sold its landfill and collection and hauling
operations in Indiana to USA Waste in September 1993, sold its collection and
hauling operations in Conway, South Carolina, in November 1993, and sold its
Columbus, Georgia, collection and hauling operations in December 1993.
Recycling Operations. Chambers recognizes the importance of recycling
materials recovered from solid waste streams where consistent with viable market
conditions. Chambers has engaged in recycling efforts in order to complement its
range of waste management services. While extensive recycling is likely to
reduce the size of the waste stream available for disposal in Chambers'
landfills, and although the market for recyclables is in many instances
depressed due to an excessive supply of recovered materials, recycling has aided
Chambers' efforts to market its other waste services. Recycling operations
accounted for 3% of revenues in each of the last three years. In August 1994,
Chambers sold its recycling facility in Pennsylvania, and it continues to own
and operate a recycling facility in Virginia.
Medical Waste Operations. Through its subsidiary, Chambers Medical
Technologies, Inc. ("CMTI"), Chambers owns and operates a medical, special and
municipal waste incineration facility in Hampton, South Carolina. The facility
is permitted to incinerate 200 tons per day of medical waste, municipal solid
waste and other approved non-hazardous special wastes. CMTI is implementing a
plan to maximize utilization of the facility in response to changing market
conditions. CMTI is currently focusing its marketing on higher priced, higher
fuel value special wastes such as pharmaceuticals, petrochemicals and scrap
tires. State legislation restricts the facility's permitted incineration
capacity to the greater of (i) 50 tons per day of medical waste or
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(ii) per month, 1/12 of the estimated amount of medical waste generated within
the State of South Carolina within one year. CMTI has undertaken a
constitutional challenge to the state's imposition of the limitation, as well as
to certain provisions of the South Carolina Infectious Waste Management Act and
the regulations promulgated thereunder. At the trial level CMTI was successful
in its challenge to certain fee requirements under the regulations; however,
CMTI was not successful in having the volume limitation ruled unconstitutional.
CMTI has filed a motion for a stay pending appeal of the implementation of the
volume limitation, which stay pending appeal was granted. CMTI accounted for 4%,
3% and 2% of Chambers' revenues for 1994, 1993 and 1992, respectively.
Research and Development. Chambers has explored technologies and related
business opportunities attendant to the disposal and recycling processes,
including but not limited to refuse derived fuel, landfill methane gas recovery
and related systems, and tire reclamation and recycling. Chambers has also
helped to develop, and holds an exclusive license to use, an intermodal
containerized transportation system for the economical and environmentally safe
transportation of solid waste by rail and truck.
COMPETITION
Solid waste management is a very competitive business which requires
substantial investment in labor and capital resources. The sources of
competition vary by locality and by the type of services provided, and originate
from national, regional and local companies. Several national waste management
companies are much larger and have far greater resources than Chambers. Major
competitors in the waste industry include WMX Technologies, Inc. and
Browning-Ferris Industries, Inc., each of which is substantially larger than
Chambers. Chambers also competes with municipalities and commercial facilities
which provide their own waste hauling and disposal services. Disposal operations
compete primarily on the basis of proximity to collection and hauling operations
and on the basis of disposal cost. To acquire new collection contracts and to
retain old ones, Chambers competes on the basis of price, service and disposal
capacity. Chambers anticipates that competition in the disposal business will
increasingly include an emphasis on safeguards with respect to the environment,
and intends to continue its policy of constructing and operating landfills with
high levels of environmental protection and monitoring. Chambers has experienced
competition from incineration and other waste recovery processes. However, it
believes that its landfill operations can complement certain of these processes,
in that landfills serve as receptacles for incinerator ash and nonrecoverable
materials.
Chambers experiences intense competitive pressure on landfill prices in
many markets, partly due to increased landfill capacity in the marketplace and
partly as a result of the rapid use of existing capacity by many older landfills
which currently operate under less stringent standards of environmental
protection than those utilized by Chambers. As a result of revisions to
regulations under Subtitle D of the Resource Conservation and Recovery Act of
1976 ("RCRA") and to state regulations, Chambers expects that more stringent
governmental regulations will be mandated in these markets, with the initial
compliance dates under Subtitle D having become effective in late 1993. See
"Regulation." In the long term, Chambers anticipates that this strengthening of
environmental standards should have a positive effect on its business, because
Chambers has designed and constructed all of its landfills with the intention of
meeting these requirements.
MARKETING
Before entering a new solid waste management market, Chambers evaluates
potential business which would be compatible with current operations. Chambers
establishes new commercial and industrial accounts through direct solicitation.
New municipal business depends on identifying and winning competitive bids.
Price, service and disposal capacity are key factors in developing new business
and retaining customers. Marketing and operational efficiencies are achieved
through Chambers' consolidation of residential and commercial business on a
regional basis.
REGULATION
The operation of landfills, waste incinerators and transfer stations, the
collection and hauling of solid waste and the recycling of solid waste are
subject to various local, state and federal requirements which seek to
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regulate and maintain health, safety, the environment, zoning and land use.
Operating permits are required for waste disposal facilities and certain
collection vehicles. Some of these permits could be subject to modification,
renewal and/or revocation if significant operational and environmental
violations occur. Chambers' operation of landfills subjects it to operational
closure, post-closure, monitoring and site maintenance obligations. Governmental
authorities have the power to enforce compliance with these regulations and to
obtain injunctions and impose fines in the case of violations. While Chambers is
in substantial compliance with regulatory requirements, from time to time in the
ordinary course of its operations, Chambers receives citations or notices from
authorities that such operations may not be in strict specific compliance with
applicable environmental regulations. Upon such receipt, Chambers has made and
will continue to make every effort to resolve amicably and quickly the issues
raised by such citations or notices.
Governmental authorities, including the EPA, various state agencies and
county and local authorities acting in conjunction with such federal and state
agencies, impose restrictions to control or prohibit air and water pollution
and, in most states, Chambers and other operators are required to post bonds or
provide other financial assurances covering closure, monitoring and potential
corrective measures for its landfills. While Chambers is in substantial
compliance with regulatory requirements applicable to its business, if
significant regulatory changes are made it may be required to increase capital
and/or operating expenditures in order to maintain operations or initiate new
operations. Depending on the degree of future regulatory changes, Chambers may
be required to curtail certain operations until a particular problem is
remedied.
The regulatory framework in the solid waste business, particularly as it
relates to the disposal of solid waste, varies substantially from jurisdiction
to jurisdiction, and is changing frequently and becoming increasingly complex in
nearly all locations. As a result, both current operations and development
projects involve certain risks and uncertainties inherent in the industry, as
discussed below. Amendments to current laws and regulations governing Chambers'
operations could have an adverse economic effect on Chambers or require
substantial capital expenditures to comply with such laws and regulations.
In October 1991, the EPA promulgated revisions to regulations under RCRA.
In revisions to regulations under Subtitle D of RCRA, the EPA announced
comprehensive solid waste management standards including location standards,
facility design and operating criteria, closure and post-closure requirements,
financial assurance standards, methane gas and groundwater monitoring, and
corrective action standards which had not been historically required or enforced
at landfills. State standards can be, and in a majority of the states where
Chambers operates already are, more stringent than the federal requirements.
Because some portions of the revisions to regulations under Subtitle D of RCRA
are expected to be phased in over as many as five years, the full impact of the
revisions may not be felt until 1998. Current landfill design and construction
by Chambers has been performed in anticipation of those requirements. More
stringent regulation, while requiring greater expenditures by landfill
operators, is expected to increase opportunities for Chambers and others who
have landfills which comply with these regulations, as noncomplying landfills
will be required to close. The 1988 Pennsylvania regulations, which were similar
in scope to the revisions to regulations under Subtitle D of RCRA, had a
significant adverse impact on the operations of Chambers' Pennsylvania landfills
from 1988 through 1991. However, Chambers does not anticipate significant
disruption of any of its businesses as a result of the promulgation of the
revisions to Subtitle D. Pending development of state standards and evaluation
of those standards by the EPA, Chambers' management believes that most of its
landfills are currently designed and operated in material compliance with those
revisions.
While management believes that the states in which Chambers operates
landfills have revised or will revise their landfill regulations to meet or
exceed the requirements of the revisions to Subtitle D of RCRA, there can be no
assurances that the state regulations will be approved by the EPA. Although
Chambers may require additional capital expenditures to comply with potentially
inconsistent state and federal regulations applicable to the same facility,
management does not believe such inconsistent regulations would have a material
adverse effect on Chambers' operations.
Revisions to health, safety and environmental protection laws will continue
to require Chambers and others in the industry to make substantial expenditures
to construct waste facilities in compliance with such laws. Substantial capital
and operating expenditures to develop landfills and maintain compliance with
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environmental protection regulations are necessary for Chambers and any
participant in the waste industry. These costs are incurred in the ordinary
course of business, but could increase as laws and regulations change. See Item
7, "Management's Discussion and Analysis of Financial Condition and Results of
Operations," for a discussion of anticipated capital expenditures.
Proposed federal legislation and various proposed state laws have included
provisions that would allow states to ban or impose differential fees on
interstate shipments of solid waste. Chambers cannot currently predict whether
such legislation will be enacted and, if enacted, the extent to which it may
affect Chambers' operations.
In addition to potentially costly and restrictive regulations, there are a
number of risks and factors, often having unforeseen ramifications, which could
result in increased costs to Chambers' waste management business or, in some
circumstances, delay or prevent certain operations or planned projects. These
factors include varying degrees of governmental and public opposition to the
siting and operation of landfills, which in many locations can contribute to a
shortage of sites and facilities; increased regulation aimed at reducing
dependence on landfilling and promoting other methods of disposal such as
incineration or recycling; and risks related to potential adverse environmental
effects attributable to landfill operations.
Complex regulatory requirements, together with potential community
opposition (often resulting in litigation), may make it increasingly difficult
to open new landfills or expand existing sites. While Chambers attempts to avail
itself of opportunities to open or expand landfills at reasonable cost, there
can be no assurance regarding the extent to which such opportunities will be
present in the future, nor can there be any assurance in the near term that
Chambers will be able to avail itself of such opportunities without the
generation of additional capital. Nevertheless, Chambers believes that, due to
the receipt during 1990, 1991 and 1992 of permits for landfill sites which had
been under development in prior periods, it now holds permits to construct
sufficient disposal capacity to meet its needs and those of its customers for a
substantial period of time. See Item 7, "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
BONDING AND INSURANCE
Bid and Performance Bonds. In order to submit a bid to a governmental
entity for solid waste collection, hauling and disposal services, Chambers is
usually required to submit bonds, in the form of a bid bond and, upon contract
award, a bond to secure its performance of the contract. Commercial customers
contracting for collection, hauling and solid waste disposal services with
Chambers do not generally require either bid or performance bonds. Over the past
several years, Chambers' bonding requirements have increased as the size and
length of the contracts have increased. It is important for Chambers to bid
successfully on large multi-year contracts to ensure a consistent flow of waste
into its landfills.
Firms that provide such bonds to the solid waste disposal industry are
limited in number. Chambers has in the past relied on, and expects in the future
to rely on, a single outside source for its bid and performance bonding
requirements. Management believes that Chambers' current bid and performance
bond coverage and future capacity is adequate; however, there can be no
assurance that future bonding will be available when required by Chambers.
Closure and Post-Closure Financial Assurances. Most states have enacted
legislation that requires landfill operators and owners to guarantee minimum
financial capabilities to insure that a landfill is properly closed in
accordance with environmental requirements. The form of the guarantee varies
from state to state but generally consists of either trust funds, letters of
credit or surety bonds. Chambers has employed all of these options in various
locations. Management believes that its current financial position is adequate
to meet the closure and post-closure requirements of its current landfills.
However, there is no assurance that Chambers' financial position or the
availability of surety bonds or letters of credit in the future will be adequate
to meet this significant component of Chambers' business.
Insurance. Chambers carries a broad range of insurance coverages which
management considers sufficient to protect the assets and operations of Chambers
that could otherwise be negatively affected in the event of a loss. The
coverages are intended to provide Chambers with comprehensive financial
protection.
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Insurance coverages are currently in effect to protect Chambers from financial
losses resulting from bodily injury, personal injury and property damage,
including but not limited to workers' compensation, comprehensive general
liability, fire and casualty, vehicle and other related coverages. Commercial
excess liability coverage is maintained as well. Chambers has determined that it
is in its best interests to self-insure certain portions of liability and
workers' compensation risks, while in some instances maintaining third-party
coverage to protect against catastrophic loss. Chambers also maintains directors
and officers liability insurance coverage. Because of the litigation arising out
of the change in accounting method announced by Chambers in 1992 and the
subsequent restatement of its prior years' financial statements (see Item 3,
"Legal Proceedings"), Chambers has incurred significantly higher costs with
respect to its directors and officers coverage.
As a result of limited availability in the insurance marketplace as well as
costly premium assessments, Chambers, along with most companies in the waste
industry, has experienced difficulty in obtaining environmental impairment
liability insurance. Chambers will continue to undertake efforts to obtain this
type of insurance coverage if such coverage is commercially available at premium
levels which are reasonable in light of the business and financial risks
involved. Chambers does not believe that the limited availability of
comprehensive environmental impairment liability insurance should have a
material adverse effect upon the operation of its business at this time.
EMPLOYEES
At December 31, 1994, Chambers had approximately 1,440 employees,
approximately 300 of whom were represented by unions under collective bargaining
agreements. Chambers is a party to union contracts at its Monroeville and
Washington locations in Pennsylvania, and at its Morris County, New Jersey,
locations. The employees at the remaining locations of Chambers are not
represented by unions. Chambers has not experienced any work stoppages.
PROPOSED MERGER WITH USA WASTE SERVICES, INC.
The Company has entered into an Amended and Restated Agreement and Plan of
Merger dated as of November 28, 1994 (the "Merger Agreement"), pursuant to which
the Company would become a wholly-owned subsidiary of USA Waste through the
merger of an existing wholly-owned subsidiary of USA Waste with and into
Chambers (the "Merger").
CERTAIN TERMS OF THE MERGER
Exchange Ratio. At the effective time of the Merger, Chambers Acquisition
Corporation ("Acquisition"), a wholly-owned subsidiary of USA Waste, will merge
with and into Chambers, and Chambers will become a wholly-owned subsidiary of
USA Waste. In the Merger, each outstanding share of Chambers Common Stock and
Chambers Class A Common Stock will be converted into .41667 of a share of USA
Waste Common Stock.
Based upon the number of shares of common stock of USA Waste and Chambers,
approximately 50.4 million shares of USA Waste Common Stock will be outstanding
immediately after the Merger, of which approximately 27.8 million shares,
representing 55.2% of the total, will be held by former holders of Chambers
Common Stock and Chambers Class A Common Stock.
Effective Time of the Merger. The Merger will become effective upon the
issuance of a certificate of merger by the Secretary of State of Delaware (the
"Effective Time"). Assuming the requisite shareholder approval of the Merger
Agreement is obtained, it is anticipated that the Effective Time will occur as
soon as practicable following the meetings of the stockholders of Chambers and
USA Waste. If all other conditions to the Merger have not been satisfied prior
to the meetings, however, it is expected that the Merger will occur as soon as
practicable after such conditions have been satisfied or waived.
Indemnification. The Merger Agreement provides that the officers,
directors, employees and agents of Chambers will be indemnified against certain
liabilities and costs, including those arising out of, relating to or
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in connection with any action or omission occurring prior to the Effective Time
or arising out of or pertaining to the transactions contemplated by the Merger
Agreement.
CONDITIONS OF THE MERGER
The Merger is subject to the satisfaction or waiver, where permissible, of
certain conditions, including but not limited to (a) Chambers and USA Waste
receiving opinions from their respective counsel to the effect that no gain or
loss will be recognized by their respective shareholders for federal income tax
purposes as a result of the Merger except for gain or loss attributable to cash
received in lieu of fractional shares; (b) USA Waste receiving a letter from
Coopers & Lybrand L.L.P., independent public accountants, that the Merger will
qualify as a "pooling of interests" for accounting and financial reporting
purposes; (c) the settlement, upon terms and conditions satisfactory to USA
Waste, of certain shareholder and derivative litigation pending against Chambers
and a certain investigation initiated by the Securities and Exchange Commission
(the "SEC") with respect to Chambers' accounting methods and the accuracy of its
financial statements (for a description of the litigation and the SEC
investigation, see Item 3, "Legal Proceedings"); (d) the expiration or
termination of the applicable waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended; and (e) having no injunction or
decree issued by any federal or state court that prevents the Merger (see Item
3, "Legal Proceedings," for a description of three class action lawsuits which
were filed in the State of Delaware seeking such an injunction to prevent
consummation of the Merger).
TERMINATION OF MERGER AGREEMENT
The Merger Agreement may be terminated under certain circumstances,
including (a) with the mutual consent of USA Waste and Chambers or (b) either by
USA Waste or Chambers at any time prior to the consummation of the Merger (i) if
the Merger is not completed by July 31, 1995, for reasons other than delay on
the part of the party requesting termination (the "Terminating Party") or any of
its 5% stockholders or any of their affiliates or associates, (ii) if the Merger
is enjoined by a final, unappealable court order not entered into at the request
or with the support of the Terminating Party or any of its 5% stockholders or
any of their affiliates or associates, (iii) if (x) the Terminating Party
receives an offer from any third party with respect to a merger, sale of
substantial assets or other business combination, (y) the Board of Directors of
the Terminating Party determines, in good faith and after consultation with an
independent financial advisor, that such offer would yield a materially higher
value for the Terminating Party or its stockholders than the Merger and (z) the
other party fails, within ten business days after notice, to match such offer,
(iv) if (x) a tender offer or exchange offer is commenced by a third party for
all of the outstanding shares of the Terminating Party's stock, (y) the Board of
Directors of the Terminating Party determines, in good faith and after
consultation with an independent financial advisor, that such offer would yield
a materially higher value for the Terminating Party or its stockholders than the
Merger, and (z) the other party fails, within ten business days after notice of
such determination and of the terms of the offer, to match such offer, or (v) if
the party other than the Terminating Party (x) fails to perform any material
covenant contained in the Merger Agreement in any material respect and (y) does
not so perform within 30 days after the Terminating Party delivers written
notice of the alleged failure. As of the date of this report, neither Chambers
nor USA Waste has received an acquisition offer of the nature described in
clause (iii) above nor is either party aware of the commencement of a tender
offer or exchange offer of the nature described in clause (iv) above. Under
certain circumstances, USA Waste or Chambers may be required to pay to the other
a fee and to reimburse the other for its expenses upon termination.
FINANCING ARRANGEMENTS
Pursuant to requirements negotiated in connection with the Merger
Agreement, USA Waste and Chambers developed a plan for the financing of certain
of Chambers' obligations, including a $6,800,000 obligation that was due in
January 1995 and $70,000,000 in payments required pursuant to the settlement
agreements with respect to the shareholder litigation (the "Settlement
Agreements"). See Item 3, "Legal Proceedings." The purpose of the financing
plan, the requirements of which were imposed by Chambers as a condition to
proceeding with the negotiation and execution of the Merger Agreement, was to
provide
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Chambers with the ability to fund these payment obligations pending the Merger
and in the event that the parties were subsequently unable or unwilling to
proceed with the Merger. The financing plan was set forth in a letter agreement
executed on December 19, 1994. To provide for the payment of the $6,800,000
obligation, USA Waste agreed (i) to accelerate to January 30, 1995 the payment
of $2,500,000 on certain promissory notes owing by USA Waste to Chambers with
respect to a previous transaction and (ii) to enter into a letter of intent
pursuant to which USA Waste would agree to acquire certain assets from Chambers
and make a deposit of $4,300,000 to be applied against the purchase price for
such assets. These payments were made and a letter of intent was executed
providing for the purchase of certain assets, including a hauling company in
Charlotte, North Carolina, and a landfill and a waste collection facility in
Lake, Mississippi. The letter of intent will expire upon the Merger. In the
event the Merger Agreement is terminated, the closing of the asset purchase will
occur within 75 days after such termination. To provide for the funding of the
initial $25,000,000 settlement payment due upon final approval of the settlement
of the shareholder litigation, USA Waste agreed to make an advance purchase of
airspace rights at certain of Chambers' landfills in the aggregate amount of
$25,000,000. Such payment would be made within 30 days after final court
approval of the Settlement Agreements and expiration of the applicable appeal
period. To provide for the payment of the subsequent $45,000,000 settlement
payment on the shareholder litigation, USA Waste and Chambers have agreed to
negotiate an agreement for the purchase by USA Waste from Chambers of an asset
or group of assets or airspace rights mutually selected by USA Waste and
Chambers and having a fair market value of not less than $45,000,000. Payment of
such amount is required not later than one year from the date of final court
approval of the Settlement Agreements and the expiration of the applicable
appeal period. In the event Chambers completes a refinancing of its current
indebtedness, including amounts due with respect to the shareholder litigation,
USA Waste's obligation to finance the $45,000,000 payment will lapse and USA
Waste will have an option to require Chambers to repurchase, and Chambers will
have an option to require USA Waste to sell, any unused airspace purchased in
advance by USA Waste.
ITEM 2. PROPERTIES.
The principal fixed assets of Chambers consist of real property interests,
real property improvements, and vehicles and equipment. The vehicles and
equipment, which are owned and leased, included, at December 31, 1994,
approximately 430 collection and disposal vehicles, 160 light vehicles, 60
over-the-road tractors and 470 trailers, 80 rail trailers, 120 railcars and 580
rail containers, 67,000 waste collection containers and roll-off boxes, 51,000
recycling collection containers and 430 portable and stationary compactors, in
addition to approximately 300 pieces of heavy equipment used in landfill
construction and operations.
At December 31, 1994, Chambers owned 11,172 acres of land and leased 1,217
acres of land, of which 10,814 acres are or could be used for landfill
operations, 33 acres are used for recycling and transfer station operations and
1,542 acres of real property are or could be used for garages, offices and other
facilities for business operations. Chambers owns and leases facilities where it
provides complete maintenance, repair, fabrication, rebuilding and painting
services for its vehicles and equipment. In connection with the restructuring of
its financing agreements, Chambers has granted security interests in
substantially all of its assets as collateral for Chambers' long-term borrowings
and performance bonds. See Item 7, "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital Resources."
ITEM 3. LEGAL PROCEEDINGS.
Between March 18, 1992 and May 7, 1992, various Chambers shareholders filed
twenty-three actions in the United States District Court for the Western
District of Pennsylvania asserting federal securities fraud claims and pendent
state law claims against Chambers, certain of its officers and directors, its
former auditors, and the underwriters of its securities (the "Federal Class
Action"). The significant part of these actions, as amended and consolidated on
November 4, 1992, under the caption In Re: Chambers Development Company, Inc.
Shareholders Litigation, Civil Action No. 92-0679, and brought on behalf of a
putative class of purchasers of Chambers' securities between March 18, 1988 and
October 20, 1992, is the allegation that the decrease in Chambers' stock price
during the period from Chambers' March 17, 1992 announcement of a change in
accounting method relating to capitalization of certain costs and expenses
through its October 20, 1992
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announcement of a $362 million reduction in retained earnings as of December 31,
1991, as compared to the amount previously reported, and a restatement of its
1990 and 1989 consolidated financial statements, was caused by Chambers'
misrepresentation of its earnings and financial condition. One of the original
twenty-three complaints, Yeager v. Rangos, et al., C.A. No. 92-1081, also
asserts derivative claims on behalf of Chambers (which is named as a nominal
defendant) for breach of fiduciary duty against certain of its officers and
directors and for negligence against its former auditors (the "Federal
Derivative Action").
In addition, three parallel lawsuits have been filed in state courts. Two
derivative actions, asserting waste and mismanagement claims on behalf of
Chambers against certain of its officers and directors, have been filed in the
Delaware Court of Chancery for New Castle County (the "Delaware Derivative
Actions") and are pending under the caption In Re: Chambers Development Company,
Inc. Shareholders Litigation, Consolidated C. A. No. 12508. One purported class
action, alleging state securities law and common law claims, has been filed in
the Court of Common Pleas of Allegheny County, Commonwealth of Pennsylvania,
under the caption Integrated Investments, Inc., et al. v. Chambers Development
Company, Inc., et al., No. G.D. 92-7036 (the "State Class Action" and, together
with the Federal Class Action, the "Class Actions").
The complaints in the Federal and State Class Actions allege that Chambers,
in publicly disseminated materials, intentionally or negligently misstated its
earnings during the class period, thereby deceiving Chambers' shareholders and
others with respect to its growth prospects and profitability. In particular,
the plaintiffs allege that Chambers' earnings were improperly increased by
capitalizing certain costs and expenses in violation of generally accepted
accounting principles, in part through the use of a formula which arbitrarily
allocated indirect costs and expenses to landfill and development activities. In
addition, the plaintiffs allege that Chambers had an inadequate information
system and failed to maintain the records necessary to support the
capitalization of such costs and expenses.
The Federal Class Action claims assert violations of section 10(b) of the
Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder, section
11 of the Securities Act of 1933 and negligent misrepresentation against
Chambers. Claims under sections 12(2) and 20(a) of the Securities Act of 1933
have been asserted against Chambers' officers and directors who are named as
defendants, but not against Chambers. The State Class Action asserts similar
violations of the Pennsylvania securities laws. These actions seek to recover
damages in an unspecified amount which the class members allegedly sustained by
purchasing Chambers' securities at artificially inflated prices, as well as
related relief.
The section 11 claims relate to the sale in April 1989 of 2.85 million
shares of Chambers' Class A Common Stock at $25 per share (equivalent to 5.7
million shares of its Class A Common Stock at $12.50 per share after a
subsequent two-for-one stock split), the issuance in September 1989 of $110
million principal amount of Chambers' 6 3/4% Convertible Subordinated Debentures
Due September 15, 2004 (subsequently converted into Class A Common Stock on or
about September 16, 1991 at $21.125 per share), and the sale in June 1991 of 7
million shares of Chambers' Class A Common Stock at $24.875 per share, and may
be asserted by plaintiffs who, subject to certain conditions, are able to trace
their purchases to these offerings. The section 10(b) fraud and negligent
misrepresentation claims relate to these three offerings and open market
transactions, whether or not the plaintiffs are able to trace their purchases to
a specific offering. Chambers has been advised by its counsel that the
plaintiffs have alleged that the restatement of Chambers' 1990 and 1989
consolidated financial statements is an admission that they were materially
misstated. However, Chambers has also been advised by its counsel that Chambers'
former auditors and former chief financial officer have contended that Chambers'
prior consolidated financial statements were fairly presented in accordance with
generally accepted accounting principles. If a plaintiff were to establish that
Chambers' consolidated financial statements were materially misstated, Chambers
would be liable for statutorily prescribed damages under section 11 (subject to
a causation defense in which Chambers bears the burden of proving that some or
all of the loss resulted from factors other than the misstatement and subject to
the statute of limitations defense) and for damages established by case law
under section 10(b) and the common law claims if that plaintiff were able to
establish the remaining elements of those claims and Chambers had no affirmative
defense.
The Federal Derivative Action and the Delaware Derivative Actions assert,
inter alia, that Chambers' officers and directors committed acts of waste,
mismanagement and breach of fiduciary duty by allegedly
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instituting or approving Chambers' accounting policies relating to
capitalization of certain costs and expenses for the purpose of increasing their
salaries, fees, stock and other benefits. These actions, which seek recovery of
unspecified damages on behalf of Chambers, allege that Chambers has been damaged
because it has become exposed to the risk of an adverse judgment or settlement
in the class actions, that it has incurred and will incur costs to defend the
class actions, and that it has suffered injury to its reputation.
On March 5, 1993, another state court action was filed in the Court of
Common Pleas in Allegheny County, Pennsylvania, under the caption Balaban v.
Rangos, et al. (the "Pennsylvania Derivative Action" and, together with the
Federal and Delaware Derivative Actions, the "Derivative Actions"). This action
asserts derivative claims on behalf of Chambers similar in nature to those
asserted in the Federal and Delaware Derivative Actions.
On November 18, 1994, Chambers and shareholder representatives executed
memoranda of understanding with respect to the settlement and dismissal of the
Class Actions and Derivative Actions. On February 24, 1995, representatives of
the plaintiffs in the Federal Class Action, representatives of the plaintiffs in
the Federal Derivative Action, Chambers and certain individual defendants
entered into a Class Action Stipulation and Agreement of Compromise and
Settlement (the "Class Action Settlement Agreement") and a Derivative Action
Stipulation and Agreement of Compromise and Settlement (the "Derivative Action
Settlement Agreement" and, together with the Class Action Settlement Agreement,
the "Settlement Agreements"), which are the definitive settlement documents for
the Class Actions and the Derivative Actions.
The Class Action Settlement Agreement provides that the sum of $8 million
will be paid by Chambers' directors and officers liability insurance carrier and
the sum of $70 million will be paid by Chambers in two installments following
final court approval of the settlement. The first installment of $25 million,
together with interest calculated from the Settlement Effective Date (as
hereinafter defined) to the date of payment, is to be made no later than the
earlier of (i) 30 days after the Settlement Effective Date or (ii) after the
Settlement Effective Date and two days after the Merger or any comparable
transaction (as defined in the Class Action Settlement Agreement) of Chambers
with any other company has been consummated. The second installment of $45
million, together with interest calculated from the Settlement Effective Date to
the date of payment (the "Second Installment"), is to be made no later than the
earlier of (i) one year after the Settlement Effective Date or (ii) the date
after the Settlement Effective Date and five days after certain refinancing
shall have been obtained by the combined entity resulting from the Merger or a
comparable transaction. "Settlement Effective Date" is defined as that date upon
which (i) the court has finally approved the Class Action settlement after due
notice and hearing, (ii) final judgment dismissing the Class Actions as to the
settling defendants has been entered, (iii) all times for appeal or other direct
attack on the adequacy of the settlement have expired or any such direct attack
shall have been finally rejected, and (iv) all related actions (as defined in
the Class Action Settlement Agreement) have been dismissed with prejudice;
provided, however, that the dismissal of any such related actions may be
conditioned upon the subsequent approval of the settlement and the occurrence of
the Settlement Effective Date. If the Merger or a comparable transaction is
consummated, the total settlement payment will be adjusted by a base increase of
$5 million, which will be adjusted upward or downward by an amount consisting of
$16,000 for each penny above or below $4.50 of Merger consideration received by
Chambers stockholders per share of Chambers Common Stock or Chambers Class A
Common Stock, together with interest from the Settlement Effective Date to the
payment date (the base increase, together with any adjustment thereto,
collectively referred to as the "Adjustment"). Any amount by which the sum of
the Second Installment and the Adjustment exceeds $50.6 million will be paid by
John G. Rangos, Sr., Chairman and Chief Executive Officer of Chambers. The
Adjustment shall be payable no later than the earlier of (i) one year after the
Settlement Effective Date or (ii) five days after certain refinancing shall have
been obtained by the combined entity in the Merger or a comparable transaction.
However, the Adjustment shall be payable only if (i) the Merger or a comparable
transaction shall have been consummated within one year after the Settlement
Effective Date or (ii) the Merger Agreement or an agreement for a comparable
transaction is in effect on the date one year after the Settlement Effective
Date and the Merger or such comparable transaction is consummated thereafter.
John G. Rangos,
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Sr. has also agreed to guarantee Chambers' obligations to make certain payments
in the Class Action settlement in an amount not to exceed $15 million.
The Derivative Action Settlement Agreement provides that the consideration
from the defendants to Chambers shall include the following: (i) payment of the
sum of $2 million from Chambers' directors and officers liability insurance
carrier; (ii) the continued implementation by Chambers, for a period of at least
two years after the effective date of the settlement, of certain corporate
governance measures; (iii) the contribution to Chambers by Synergy Associates of
the headquarters property currently leased to Chambers by Synergy Associates;
and (iv) the $15 million guarantee of John G. Rangos, Sr. with respect to
certain payments to be made by Chambers to the plaintiff class pursuant to the
Class Action settlement.
In addition, in order for the settlements to be effective, certain related
actions, as described in the Settlement Agreements, must be dismissed with
prejudice, including the State Class Action and the Delaware and Pennsylvania
Derivative Actions. These related actions do not include the cases captioned
Option Resource Group, et al. v. Chambers Development Company, et al., and
Southeast Investments v. Chambers Development Co., et al., which are described
below; these matters may still be pending after the Class Action and Derivative
Action settlements.
The Settlement Agreements provide that Chambers and its present and former
officers, directors and employees will receive releases from the plaintiffs.
Under the Settlement Agreements, the plaintiffs' actions continued against
certain defendants other than Chambers. The terms of settlement also include a
right to terminate the settlements based on appeals or opt-outs with respect to
the Class Action. After the Company entered into the Settlement Agreements, the
class and derivative plaintiffs entered into settlements with Grant Thornton,
which previously served as Chambers' accountants. Chambers then entered into an
agreement with the class plaintiffs to settle their claims against a group of
underwriters of certain of Chambers' securities offerings. Chambers agreed to
pay $300,000 to the class plaintiffs to resolve these claims for which the
underwriters sought indemnity from Chambers. The Settlement Agreements provide
for the seeking of bar orders and also have judgment reduction provisions that
are intended to protect Chambers and the settling individual defendants from
claims over by Grant Thornton and the underwriters in the event that their
settlements are not approved by the court or otherwise do not become final. On
March 22, 1995, the court granted preliminary approval of the settlements and
the distribution of notices to Chambers' stockholders and the plaintiff class
members regarding the settlements. The hearing upon the fairness, reasonableness
and adequacy of the proposed settlements has been scheduled for May 19, 1995.
Shortly after Chambers' March 17, 1992 announcement of a change in
accounting policies concerning capitalization, the Commission initiated an
informal investigation with respect to Chambers' accounting method and the
accuracy of its financial statements and into the possibility that persons or
entities had traded in Chambers' securities on the basis of inside information
prior to the announcement. On September 30, 1992, a formal order of
investigation was issued by the Commission with respect to potential violations
by Chambers and others of sections 10(b), 13(a) and 13(b) of the Exchange Act
and various rules promulgated thereunder. Chambers has cooperated with the
investigation through the production of documents and by providing witnesses
pursuant to the Commission's request. Management believes that issues arising
from the Commission's investigation will be resolved in the near term.
The American Stock Exchange and the Chicago Board of Options Exchange are
conducting investigations into trading activity on their respective exchanges in
Chambers' securities and in put options on Chambers' securities prior to the
March 17, 1992 announcement.
On December 4, 1992, Chambers was served with a grand jury subpoena out of
the United States District Court for the Eastern District of New York seeking
production of public filings and reports disseminated to its shareholders,
documents referring to the preparation of its financial statements and other
materials. Chambers has responded to the subpoena by producing documents. The
grand jury investigation is ongoing and it appears to be focusing on issues
similar to those raised by the civil litigation and the Commission investigation
described above.
Chambers is cooperating with each of the investigations referred to in the
three preceding paragraphs.
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On or about March 8, 1993, an action was filed in the United States
District Court for the Western District of Pennsylvania, captioned Option
Resource Group, et al. v. Chambers Development Company, Inc., et al., C.A. No.
93-354. This action was brought by a market maker in Chambers stock and two of
its general partners and asserts federal securities law and common law claims
similar to those alleged in the Class Actions against essentially the same group
of defendants. These plaintiffs allege that, as a result of large amounts of put
options traded on the Chicago Board of Options Exchange between March 13 and
March 18, 1992, they bought Chambers stock and also sold it short to assure
fluidity in the market, resulting in approximately $2.1 million in losses. On
March 19, 1993, another action was filed in the United States District Court for
the Eastern District of Arkansas, captioned Southeast Investments, Inc. v.
Chambers Development Company, Inc., No. MDL-982 (the "Arkansas Action"). This
action was brought by an individual investor which claims to have purchased
Chambers stock on March 20, 1992 in reliance on Chambers' March 17, 1992
announcement and suffered an alleged loss of approximately $75,000 upon the
subsequent sale of the stock. The complaint asserts federal securities law and
common law claims similar to those alleged in the Class Action. Chambers' motion
to the Judicial Panel on Multidistrict Litigation ("MDL") to transfer the
Arkansas Action to the Western District of Pennsylvania was granted by the MDL.
These actions are in discovery and Chambers is vigorously defending these
actions.
On August 31, 1992, Chambers and the Township of Conemaugh, Pennsylvania,
filed an action in the United States District Court for the Western District of
Pennsylvania seeking to enjoin the Passaic County Utilities Authority (the
"Authority") from entering into a long-term disposal contract with a third party
in breach of the Authority's long-term disposal contract with Chambers. The
Authority subsequently filed an action as to the same issues in the Superior
Court of New Jersey in Passaic County. The District Court awarded Chambers
summary judgment on one count of its complaint, thereby directing the Authority
specifically to perform its obligations under its existing contract with
Chambers. However, the District Court in granting summary judgment recognized
that the New Jersey Department of Environmental Protection and Energy ("DEPE")
had ultimate approval authority regarding New Jersey public solid waste disposal
contracts and, therefore, the Authority could proceed with seeking approval from
the DEPE of its agreement with the third party. The DEPE subsequently directed
the Authority to continue to deliver Passaic County's waste to Chambers through
December 11, 1993, and later granted the Authority's request for approval of the
third party agreement. Chambers filed a motion for summary judgment for an award
of damages, but the District Court granted summary judgment to the Authority.
Chambers has filed an appeal of the District Court judgment to the Circuit Court
of Appeals.
In 1990, two actions were filed by the State of West Virginia, seeking to
require Chambers' LCS Landfill in West Virginia to obtain the approval of the
local county commission for continued operation of the landfill and for the
volume of waste which may be disposed of in the landfill, which cases were
consolidated under the caption State of West Virginia ex rel. Hamrick v. LCS
Services, Inc., et al. On July 29, 1993, the Circuit Court of Berkeley County,
West Virginia, issued an order requiring Chambers to obtain the approval of the
Berkeley County Commission in order to continue operation of its LCS Landfill.
On December 16, 1994, the Supreme Court of Appeals of West Virginia affirmed the
lower court's decision in part and reversed that decision in part, holding that
the landfill does not require local county site approval, but continuing the
volume limitation which has applied to the facility since it commenced operation
in 1991.
A declaratory judgment action entitled Morel, et al. v. Chambers Waste
Systems of Florida, Inc. was filed on September 29, 1994 in the Circuit Court of
the Fifteenth Judicial Circuit of Florida in and for Palm Beach County, Florida.
The plaintiffs are seeking a declaration that they are entitled to royalty
payments from Chambers as calculated by a percentage of gross revenues derived
from Chambers' landfill located at Berman Road in Okeechobee County, Florida, as
well as from any landfill that may be sited in the future by Chambers on nearby
property. Chambers has responded by seeking, among other things, a declaration
that any writing or document that the plaintiffs contend such royalty
entitlement is based upon is void, voidable or otherwise of no effect or,
alternatively, that any royalty payments be solely based upon the nearby
property to Chambers' landfill, when a landfill is developed, if ever, on such
property. The outcome of this action is not presently determinable.
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A lawsuit entitled McKenzie, et al. v. Chambers Waste Systems of South
Carolina, Inc., et al. was filed in the South Carolina Court of Common Pleas for
the Fifth Judicial Circuit in June 1992, in which the plaintiffs claimed damages
as the result of an alleged breach of contract and conspiracy with respect to a
parcel of real property. Although the complaint did not quantify the damages,
subsequent answers to interrogatories indicated that the plaintiffs alleged the
damages to be approximately $13,000,000. The lawsuit arose out of a letter of
intent between the plaintiffs and Chambers which was entered into in May 1989.
The letter of intent contemplated a potential purchase by Chambers of certain
real property in South Carolina for use as a landfill, with the purchase price
to be approximately $1,000,000, plus royalties based upon tonnage received after
construction and operation of the landfill. On March 24, 1995, the parties
settled this action, with a payment by Chambers of $95,000 to the plaintiffs.
Since the announcement of the Merger, three cases have been filed in the
Court of Chancery of the State of Delaware in New Castle County against
Chambers, its officers and directors and USA Waste. These cases include Smith v.
Rangos et al., C. A. No. 13906; Krim v. Rangos et al., C. A. No. 13985; and
Adams v. Rangos et al., C. A. No. 13909. Each of these actions relates to the
Merger and seeks substantially similar relief. Accordingly, a consolidation
order was entered by the Court of Chancery on March 1, 1995. The cases have been
consolidated for all purposes under Smith v. Rangos, et al., and the caption of
the consolidated case is In Re Chambers Development Company, Inc. Shareholders
Litigation, Consolidated C. A. No. 13906. The complaint which will govern the
consolidated action is the complaint filed in the Krim action. The Krim
complaint is brought as a purported class action on behalf of the plaintiff and
all similarly situated Chambers security holders, excluding defendants and any
person, firm, corporation or similar entity related to or affiliated with any of
the defendants. The complaint alleges that the individual defendants, inter
alia, engaged in unfair dealing to the detriment of the class; the Merger is
grossly unfair to the members of the class; the members of the class would be
irreparably damaged if the Merger were to be consummated; and the defendants'
conduct constituted a breach of fiduciary and other common law duties allegedly
owed to the putative class. The complaint alleges that the Merger consideration
is inadequate for various reasons and that the individual defendants failed to
maximize shareholder value. The complaint seeks a declaration that the Merger
Agreement was the result of a breach of fiduciary duty by the individual
defendants, aided and abetted by the USA Waste defendants, and is thus unlawful
and unenforceable; an injunction to enjoin defendants from proceeding with the
Merger; an injunction to enjoin defendants from consummating any merger or
combination with a third party absent procedures or processes such as an
auction; an order invalidating certain proxy arrangements; and an order awarding
plaintiff and the class members damages, costs and disbursements, including
reasonable attorneys' and experts' fees. Chambers, USA Waste and the individual
defendants have filed answers denying the charges set forth in the complaint and
intend to contest vigorously those charges.
Due to the increasingly complex regulatory environment and heightened
public awareness of and community sensitivity toward waste management
operations, including particularly the siting or expansion of waste disposal
facilities, Chambers could become involved in a variety of potentially
significant legal proceedings, in addition to other more routine litigation
incidental to its business, including, for example, proceedings relating to
permit applications for proposed facilities, personal injury claims and other
proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of the Company's security holders
during the fourth quarter of the fiscal year covered by this report.
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<PAGE> 17
PART II
ITEM 5. MARKET FOR THE COMPANY'S CLASS A COMMON STOCK AND COMMON STOCK AND
RELATED STOCKHOLDER MATTERS.
The Company's Class A Common Stock (Symbol: CDVA) and Common Stock (Symbol:
CDVB) are listed on the American Stock Exchange ("AMEX"). The table below sets
forth the range of high and low sales prices on the AMEX of the Company's Class
A Common Stock and Common Stock.
<TABLE>
<CAPTION>
CLASS A COMMON STOCK HIGH LOW COMMON STOCK HIGH LOW
-------------------- ---- --- ------------ ---- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1993 1993
First quarter................ $7 1/4 $4 11/16 First quarter.................. $7 3/8 $4 11/16
Second quarter............... 4 13/16 3 1/8 Second quarter................. 5 3 3/16
Third quarter................ 5 3/8 3 3/4 Third quarter.................. 5 1/4 3 11/16
Fourth quarter............... 4 1/2 3 9/16 Fourth quarter................. 4 1/2 3 11/16
1994 1994
First quarter................ $5 1/2 $3 1/2 First quarter.................. $5 1/2 $3 1/2
Second quarter............... 4 1/8 2 Second quarter................. 4 2 1/2
Third quarter................ 2 3/4 1 13/16 Third quarter.................. 2 7/8 2 1/16
Fourth quarter............... 4 1/4 1 13/16 Fourth quarter................. 4 1/4 2
</TABLE>
The sales prices for the Company's Class A Common Stock and Common Stock
were $4.31 and $4.25 per share, respectively, as of the close of business on
March 20, 1995.
There were 3,534 stockholders of record of the Company's Class A Common
Stock and 531 stockholders of record of its Common Stock as of March 20, 1995.
The Company paid a cash dividend of $.01 per share on its Class A Common
Stock on November 14, 1990, and has not paid any dividends since that date. The
Company has not made any commitment to pay cash dividends on either its Class A
Common Stock or its Common Stock. The Company is currently precluded by the
terms of its Credit Facility and Senior Note Agreements from paying dividends to
shareholders, and it is expected that the ability of the Company to make
payments of dividends will be limited for the foreseeable future. (See Item 7,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations.")
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<PAGE> 18
ITEM 6. SELECTED FINANCIAL DATA (DOLLARS IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS).
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
OPERATING STATEMENT DATA(1)
Revenues........................ $257,989 $288,481 $294,310 $249,384 $214,052
Income(loss) from continuing
operations(2)................ (90,244) 8,303 (70,255) (64,482) (35,962)
Income (loss) from continuing
operations per common
share........................ (1.35) .12 (1.05) (1.08) (.66)
BALANCE SHEET DATA
Working capital (deficit)....... $(12,220) $ 30,067 $ 52,631 $142,487 $129,322
Total assets.................... 488,498 533,622 592,790 699,859 516,017
Long-term obligations, less
current maturities........... 211,016 261,803 302,354 359,540 388,264
Stockholders' equity............ 63,932 154,173 145,870 216,456 16,385
<FN>
---------
(1) A $.01 per share cash dividend on the Class A Common Stock was distributed
on November 14, 1990. No cash dividends were paid in the other years
presented.
(2) Includes net unusual charges of $88,263, $55,144 and $16,938 in 1994, 1992
and 1991, respectively, and a net unusual credit of $6,351 in 1993.
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
On March 17, 1992, the Company announced a change in its accounting method with
respect to capitalization of certain costs and expenses which resulted in a
revision of previously announced financial results for the year ended December
31, 1991. Subsequently, on October 20, 1992, the Company announced a restatement
of its previously reported financial results for 1991 and prior years, and a
reduction of $362 million in both earnings originally reported since its
inception and retained earnings at December 31, 1991. As a result, the Company
became a defendant in litigation arising out of these financial statement
revisions, and in 1992 and the first half of 1993 was not in compliance with
certain covenants of its various long-term borrowing agreements.
In response, the Company commenced the restructuring of its principal credit
facilities and surety arrangements and initiated a major restructuring of its
operations which included (i) a program to divest certain businesses that no
longer met strategic and performance objectives, (ii) the abandonment of various
development activities due to increased focus on the utilization of existing
landfill capacity and limited access to capital markets and (iii) the
reorganization (and subsequent downsizing) of its corporate and regional
operations. Since 1992, the Company has incurred substantial expenses related to
these matters and has devoted substantial attention to the defense of the
litigation and the stabilization of its financing. In late 1994, the Company
took two important steps, described below, to resolve these significant legal
and financial matters.
SETTLEMENT OF SHAREHOLDER LITIGATION
As further described in Item 3, "Legal Proceedings," on February 24, 1995,
representatives of the plaintiffs in the Federal Class Action, representatives
of the plaintiffs in the Federal Derivative Action, the Company and certain
individual defendants entered into a Class Action Stipulation and Agreement of
Compromise and Settlement (the "Class Action Settlement Agreement") and a
Derivative Action Stipulation and Agreement of Compromise and Settlement (the
"Derivative Action Settlement Agreement" and, together with the Class Action
Settlement Agreement the "Settlement Agreements"), which are the definitive
settlement documents for the class actions and the derivative actions.
Implementation of the Settlement Agreements is conditioned upon the dismissal,
with prejudice, of all related actions (as defined in the Class Action
Settlement
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<PAGE> 19
Agreement). On March 22, 1995, the court granted preliminary approval of the
settlements and distribution of notices to the Company's stockholders and the
plaintiff class members regarding the settlements. The hearing upon the
fairness, reasonableness and adequacy of the proposed settlements has been
scheduled for May 19, 1995.
The Settlement Agreements provide that the sum of $10 million will be paid by
the Company's directors and officers liability insurance carrier and the sum of
$70 million will be paid by the Company in two installments following final
court approval of the settlements. The first installment of $25 million is to be
paid within thirty days after the settlement effective date (the date upon which
the court has finally approved the settlements of the class actions and
derivative actions referred to above, and all times for appeal have expired or
all appeals have been finally rejected)and the second installment of $45 million
(the "Second Installment") is to be paid one year after the settlement effective
date, subject to possible earlier payments based on the merger and subsequent
refinancing discussed below. If the Merger or a comparable transaction is
consummated, the total settlement payment will be adjusted by a base increase of
$5 million, which will be adjusted upward or downward by an amount consisting of
$16,000 for each penny above or below $4.50 of merger consideration received in
the transaction by the Company's stockholders per share of the Company's Common
Stock and Class A Common Stock, together with interest from the settlement
effective date to the payment date (the base increase, together with any
adjustment thereto, collectively referred to as the "Adjustment"). Based on the
market value of USA Waste Common Stock on March 27, 1995, the adjustment would
be $5.8 million. Any amount by which the sum of the Second Installment and the
Adjustment exceeds $50.6 million will be paid by John G. Rangos, Sr., Chairman
and Chief Executive Officer of the Company. John G. Rangos, Sr. has also agreed
to guarantee the Company's obligations to make certain payments in the Class
Action Settlement in an amount not to exceed $15 million.
Synergy Associates has agreed, under the Derivative Action Settlement Agreement,
to contribute to the Company the headquarters property presently leased by the
Company from Synergy Associates, subject to assumption or discharge by the
Company of an existing mortgage.
The Settlement Agreements will be subject to certain customary conditions,
including court approval, and to the refinancing of the Company's principal
borrowings. The current lending agreements of the Company restrict the Company
from making the settlement payments without the consent of the lending groups.
The terms of the Class Action Settlement Agreement also include a right to
terminate the settlement based on appeals or opt-outs with respect to the
Federal Class Action.
After the Company entered into the Settlement Agreements, the class and
derivative plaintiffs entered into settlements with the Company's former
independent auditors. The Company then entered into an agreement with the class
plaintiffs to settle their claims against a group of underwriters of certain of
the Company's securities offerings. The Company agreed to pay $0.3 million to
the class plaintiffs to resolve these claims for which the underwriters sought
indemnity from the Company.
The Company had recorded in 1992 and 1993, charges for unusual items of $10.9
million and $5.5 million, respectively, for legal and other costs related to the
litigation. In 1994, the Company accrued $85.3 million for the cost of the
settlements and $4.1 million for other litigation related costs. Of that total,
$79.4 million was recorded as a charge to unusual items as a component of other
income (expense) and $10 million to be paid from the proceeds of the Company's
directors and officers liability insurance policy was recorded as a current
asset and is included in accounts receivable-other at December 31, 1994.
While the Company believes the above-mentioned accruals and charges are adequate
to provide for the settlement, certain of these amounts are estimates, and
actual amounts will depend on the outcome of future events. If such estimated
amounts are not adequate, additional charges against income would be made when
such determinations are made.
PROPOSED MERGER WITH USA WASTE SERVICES, INC.
The Company has entered into an Amended and Restated Agreement and Plan of
Merger dated as of November 28, 1994 (the "Merger Agreement"), pursuant to which
the Company would become a wholly-
19
<PAGE> 20
owned subsidiary of USA Waste Services, Inc. ("USA Waste"), through the merger
of an existing wholly-owned subsidiary of USA Waste with and into the Company
(the "Merger"). The Merger Agreement provides, among other things, for each
outstanding share of the Company's Common Stock and Class A Common Stock to be
converted into .41667 of a share of USA Waste's Common Stock. Based upon the
15.7 million shares of the Company's Common Stock and the 51.1 million shares of
its Class A Common Stock outstanding as of March 1, 1995, the Company's
stockholders will collectively be issued approximately 27.8 million shares of
USA Waste's Common Stock, representing approximately 55.2% of the total expected
issued and outstanding shares of USA Waste's Common Stock after the Merger.
The Merger is subject to a number of conditions, including obtaining the
approval of the stockholders of the Company and of USA Waste, final settlement
of the shareholder litigation discussed above and certain other proceedings
involving the Company, and obtaining any necessary regulatory waivers and
approvals. See Item 1, "Business-Proposed Merger with USA Waste Services, Inc."
It is anticipated that the Merger will be completed by June 30, 1995.
FINANCING ARRANGEMENTS WITH USA WASTE
Pursuant to requirements negotiated in connection with the Merger Agreement, USA
Waste and the Company developed a plan for the financing of certain of the
Company's obligations, including a $6.8 million obligation that was due in
January 1995 and $70 million of the $85 million in payments required pursuant to
the Settlement Agreements with respect to the shareholder litigation. The
purpose of the financing plan, the requirements of which were imposed by the
Company as a condition to proceeding with the negotiation and execution of the
Merger Agreement, was to provide the Company with the ability to fund these
payment obligations pending the Merger and in the event that the parties were
subsequently unable or unwilling to proceed with the Merger. The financing plan
was set forth in a letter agreement executed on December 19, 1994. To provide
for the payment of the $6.8 million obligation, USA Waste agreed (i) to
accelerate to January 30, 1995 the payment of $2.5 million on certain promissory
notes owing by USA Waste to the Company with respect to a previous transaction
and (ii) to enter into a letter of intent pursuant to which USA Waste would
agree to acquire certain assets from the Company and make a deposit of $4.3
million to be applied against the purchase price for such assets. These payments
were made and a letter of intent was executed providing for the purchase of
certain assets, including a hauling company in Charlotte, North Carolina, and a
landfill and a waste collection facility in Lake, Mississippi. The letter of
intent will expire upon the Merger. In the event the Merger Agreement is
terminated, the closing of the asset purchase will occur within 75 days after
such termination. To provide for the funding of the initial $25 million
settlement payment due upon final approval of the settlement of the shareholder
litigation, USA Waste agreed to make an advance purchase of airspace rights at
certain of the Company's landfills in the aggregate amount of $25 million. Such
payment would be made within 30 days after final court approval of the
Settlement Agreement and expiration of the applicable appeal period. To provide
for the payment of the subsequent $45 million settlement payment on the
shareholder litigation, USA Waste and the Company have agreed to negotiate an
agreement for the purchase by USA Waste from the Company of an asset or group of
assets or airspace rights mutually selected by USA Waste and the Company and
having a fair market value of not less than $45 million. Payment of such amount
is required not later than one year from the date of final court approval of the
Settlement Agreements and the expiration of the applicable appeal period. In the
event the Company completes a refinancing of its current indebtedness, including
amounts due with respect to the shareholder litigation, USA Waste's obligation
to finance the $45 million payment will lapse and USA Waste will have an option
to require the Company to repurchase, and the Company will have an option to
require USA Waste to sell, any unused airspace purchased in advance by USA
Waste.
CREDIT FACILITIES AND REFINANCING
In July 1993, the Company executed comprehensive amendments to its bank credit
facility (the "Credit Facility") and note purchase agreements under which the
Company issued senior notes (the "Senior Notes"). The amendments to the Credit
Facility and Senior Note agreements (collectively, as amended, the "Amended
Agreements") included revisions to the terms and conditions of the original
agreements and
20
<PAGE> 21
provided for additional terms and conditions with respect to future periods. The
Company's lenders and bonding company were granted security interests in
substantially all of the assets of the Company and an intercreditor agreement
was executed among the Credit Facility banks, the Senior Note holders and the
bonding company with respect to priority of interests in collateral and access
to assets. In November 1994, the Company executed additional amendments (the
"Amendments") to its Credit Facility and Senior Note agreements which included
waivers (with respect to noncompliance of consolidated working capital and
consolidated tangible net worth covenants attributable to the proposed
settlement of the shareholder litigation and financial statement delivery
covenants) and revisions to the terms and conditions of the Amended Agreements,
principally with respect to payment terms and compliance covenants.
The Amendments provide that 90% of the $74.4 million scheduled payments
previously due on July 1, 1995 may be deferred until July 1, 1996, with further
deferral to December 31, 1996, at the Company's option, of up to 75% of the
$95.5 million scheduled payments previously due on October 31, 1995 and December
30, 1995 and all of the $95.5 million scheduled payments due on October 31, 1996
and December 30, 1996. Certain of such scheduled payments due in 1995 and 1996
will be reduced by pro rata payments made prior to the scheduled payment dates.
The non-deferred portion of these scheduled payments will be applied to reduce
Senior Note obligations, industrial revenue bond obligations and letters of
credit issued under the Credit Facility. The Amendments also provide that the
remaining originally scheduled principal payments on the Senior Notes due after
1996 become due on December 31, 1996.
The Amendments require, however, that the Company reduce Senior Note and Credit
Facility obligations by a total of $60 million, primarily through the payment of
the non-deferred portions of the scheduled payments discussed above and other
scheduled payments, between August 31, 1994 and December 31, 1995, of which $20
million was required to be paid by January 31, 1995. Of the $60 million, $23.7
million has been paid to date, with the January 1995 payment requirement having
been satisfied. Portions of the remaining required payments are expected to be
satisfied by currently available funds and operating cash flow; however, in the
absence of the Merger and related refinancing of the Senior Note and Credit
Facility obligations discussed below, the Company will need to refinance the
Senior Note and Credit Facility obligations on a stand-alone basis or complete
significant divestitures to satisfy any remaining payments. Under the
Amendments, the Company is also required to pay to the holders of the Senior
Notes and the Credit Facility banks, the amount by which its daily average
unrestricted cash balance exceeds $40 million for any calendar month, and a
minimum of 50% of the net proceeds from specified divestitures as permitted by
the Amendments, which proceeds will be applied to the $60 million discussed
above.
The Amendments also provide for the issuance to the Senior Note holders and
Credit Facility banks, at nominal consideration, of shares of the Company's
Class A Common Stock in the event the Company has not refinanced the Senior Note
and Credit Facility obligations prior to October 1, 1995. On that date,
additional shares equal to 4% of the Company's then issued and outstanding
common stock would become issuable. Additional shares equal to 4% of the
Company's then issued and outstanding common stock would also become issuable if
the Company has not refinanced prior to April 1, 1996.
The Amendments contain financial covenants which require the Company to maintain
minimum levels of tangible net worth, working capital and quarterly cash flows
from operations. The Amendments also prohibit the incurrence of additional
indebtedness and the payment of cash dividends, and limit annual cash capital
expenditures.
The Company anticipates that the combined company will refinance substantially
all of the indebtedness of Chambers and USA Waste, including the Senior Note and
Credit Facility obligations of Chambers, before or at the time of the Merger.
Upon any refinancing of the Senior Note and Credit Facility obligations, the
Company expects to pay an early redemption premium to the Senior Note holders
(the "Premium") based on the difference between the interest rates on the Senior
Notes and an adjusted rate for U.S. Treasury securities having a similar
maturity. Based on interest rates on U.S. Treasury securities at December 31,
1994, if the refinancing were to occur on June 30, 1995, management's estimate
of the approximate date of the Merger, the Premium would be approximately $7.0
million.
21
<PAGE> 22
The Amendments also require payment of escalating extension fees by the Company
to the Senior Note holders and Credit Facility banks, based upon the principal
amounts outstanding as of the beginning of each calendar quarter, until such
time as the existing debt under these agreements has been retired. Such
extension fees are expected to aggregate approximately $0.7 million through June
30, 1995.
The amounts shown above for the extension fees and the Premium are estimates,
and the final amounts will depend on the date of the refinancing and the actual
principal amounts outstanding under the Senior Notes during that period. The
estimated extension fees and the Premium are being charged to interest expense
through the period ending June 30, 1995. At December 31, 1994, the Company had
accrued a total of $1.2 million related to the Premium. In addition, a fee of
approximately $0.7 million paid upon execution of the Amendments was charged to
interest expense in 1994.
In the event the Merger is not consummated, the Company intends to seek
refinancing for its Senior Note and Credit Facility obligations. It is
anticipated that such refinancing could be completed by September 30, 1995;
however, management of the Company believes that such refinancing would not be
available to the Company on a stand-alone basis without significant dilution to
the stockholders of the Company. If a refinancing were to occur on September 30,
1995, the Premium amount would be approximately $5.5 million. In addition, $0.9
million of additional extension fees would be incurred.
In the event that the Merger is not consummated, the Company would necessarily
undertake a series of actions to provide for liquidity and funding of the
Settlement Agreements. The Company has the ability to abandon the Settlement
Agreements in the absence of funding sufficient to comply with the payment
obligations. However, it is the intention of the Company, should the Merger not
be consummated, to seek a refinancing and to delay the funding of the Settlement
Agreements rather than abandon such agreements.
The Company believes that a refinancing cannot be obtained in the absence of a
settlement of the shareholder litigation. While the Company has, under certain
circumstances, alternate available financing through a funding agreement with
USA Waste in an amount sufficient to satisfy the Company's obligations under the
Settlement Agreements, actual payments under such funding agreement remain
subject to the consent of the Company's current lending group. In the
alternative, the Company could delay the implementation of the shareholder
litigation settlement until refinancing has been obtained.
In the absence of a settlement of the shareholder litigation and a refinancing
of the Senior Note and Credit Facility obligations, the Company would be
compelled to implement an action plan to ensure continuing liquidity. The steps
that would be necessary with respect to liquidity would include a reduction in
discretionary capital expenditures with respect to current transfer station and
methane recovery projects. Capital expenditures for vehicle and heavy equipment
purchases would be reduced to a maintenance level, or otherwise deferred, and
the Company would employ lease financing programs, to the extent available, for
certain equipment, in substitution for capital expenditure programs currently
planned. The Company would also resume and accelerate its divestiture program
with respect to non-core assets and operations. As an additional step, the
Company would endeavor to accelerate remaining tax refunds and to substitute
surety bond programs where permitted, with respect to closure and post-closure
bond requirements, for cash collateral programs presently in place in certain
jurisdictions.
Should the Merger not be consummated, management of the Company believes that
the foregoing plan of action would be adequate to maintain compliance with the
covenants and payment obligations under its Senior Note and Credit Facility
obligations through December 31, 1995, and would provide a sufficient period of
time to achieve a refinancing, which in turn would permit the implementation of
the settlement of the shareholder litigation. As indicated above, the Amendments
provide that deferred payments previously due on July 1, 1995 may be deferred
until July 1, 1996, with other deferred payments becoming due in December 1996,
and with the remaining originally scheduled payments due after 1996 becoming due
on December 31, 1996. With the bulk of the Company's long-term obligations
becoming due in the second half of 1996 under the Amendments, the liquidity of
the Company would be adversely affected if the Merger were not consummated or a
refinancing or modification of the current lending agreements were not achieved
in a timely fashion.
22
<PAGE> 23
CASH FLOW
Cash and cash equivalents decreased to $23.5 million at December 31, 1994, as
compared to $44.6 million and $45.9 million at December 31, 1993 and 1992,
respectively. The Company's working capital decreased to a deficit of $12.2
million at the end of 1994 from a positive $30.1 million and $52.6 million at
the end of 1993 and 1992, respectively. The decrease in working capital
reflects, in part, significant reductions made to the Company's long-term
obligations and increases in current maturities of long-term obligations.
Cash provided by operating activities was $32.1 million in 1994 and $35.9
million in 1993, representing a significant improvement from the $12.1 million
provided in 1992. Included in operating activities were $5.0 million, $17.3
million and $26.2 million of tax refunds for 1994, 1993 and 1992, respectively.
Investing activities include cash proceeds of $3.2 million in 1994, $53.1
million in 1993 and $35.5 million in 1992 realized from the disposition of
assets. In 1993 and 1994, the Company completed a series of asset sales to
various parties in conjunction with its divestiture program and in 1992 sold its
security services business (see Note E to the consolidated financial
statements). Investing activities in 1994 also reflect $17.9 million in net
escrow activity, primarily related to the receipt of $11.3 million in cash from
divestiture proceeds that were held in escrow at the end of 1993.
During 1994 and 1993, capital expenditures totaled $39.8 million and $38.1
million, respectively, a substantial reduction from the $132.8 million used for
capital and acquisition expenditures in 1992. Included in 1992 was $20.9 million
for the acquisition of eight hauling companies and property and permit rights
related to two landfills. In addition, 1992 included a higher level of landfill
construction activity as compared with 1993 and 1994, as a number of landfill
sites previously under development were constructed.
Cash used in financing activities included $35.3 million, $60.7 million and
$55.4 million of principal payments on long-term obligations in 1994, 1993 and
1992, respectively. In addition, 1993 included the receipt of $10.2 million
previously used in 1992 as cash collateral to support certain of the Company's
business activities, which were collateralized in 1993 by letters of credit.
CAPITAL EXPENDITURES
Landfill Expenditures, General. At the beginning of 1986, the Company's
operations were limited to three landfill sites and related collection and
hauling activities. Since that time, the Company has substantially expanded the
number of landfill sites which it has designed, permitted and constructed.
Currently the Company owns or operates 14 sanitary landfills and one
construction and demolition debris landfill, having made the necessary capital
investments since 1986 to establish these landfill sites, and to develop the
related collection, hauling, transfer station and recycling operations.
The Company has expended substantial amounts of capital to establish an
integrated waste services business, from waste collection enterprises to
disposal facilities, to meet the long-term needs of the communities and
customers it services. Historically, the Company has also expended capital to
acquire additional waste services businesses, to fund property and equipment
needs for internal expansion and to develop the infrastructure of its landfills.
The infrastructure expenditures with respect to each site are in major part
nonrecurring, being required at the initial phase at each site in order to
prepare the site for the receipt of waste and to support the operation of the
landfill throughout its useful life. However, the Company will continue to incur
capital expenditures with respect to the construction of cells at existing sites
to accommodate the daily receipt of waste and to ensure its compliance with
environmental and other regulations.
The liquidity of the Company's operations is more heavily influenced by its
landfill operations than by its collection, hauling, transfer station and
recycling operations. The Company's liquidity is adversely affected during
periods of increased construction activity involved in the establishment of new
landfill sites, with revenues commencing only upon opening the sites for the
receipt of waste and the delivery of waste to the sites. Liquidity is improved
following the opening of new sites, to the extent that landfill capital
expenditures for additional cell construction are substantially lower than the
initial construction costs.
23
<PAGE> 24
However, additional cash is required later in the life cycle of a landfill to
fund closure and post-closure costs. Therefore, it is important for the Company
to increase the volume received in each landfill as soon as possible after
commencement of operations.
Management believes that the operations of the existing sites plus a combination
of existing cash and asset sales will support the operational requirements of
the Company, including the construction of additional cells for the receipt of
waste. Funds supporting those sites which the Company has under development have
previously been generated from capital markets and through project financing
from industrial revenue bond sources. Over the past three years, however, the
Company's access to capital markets for purposes of new development has been
restricted. Management believes the proposed Merger with USA Waste will open
capital markets that will enable new landfill development as well as continued
development of existing sites. However, should the proposed Merger not be
consummated, development of additional new landfill sites will be limited.
Historical Capital Expenditures. Construction and development expenditures of
$26.9 million in 1994, $26.7 million in 1993, and $81.1 million in 1992 were
related principally to the various phases of the permitting, design and
construction of new landfill sites and the expansion of existing sites. During
1993, the Company opened a landfill in Amelia County, Virginia. During 1992, the
Company opened landfills in Atlanta, Georgia, and Allegany County, Maryland, and
acquired a landfill in Okeechobee County, Florida, having incurred expenditures
with respect to such sites in 1992 and prior years.
Capital equipment additions of $10.9 million in 1994, $11.0 million in 1993 and
$25.6 million in 1992 include the purchase of equipment for the Company's
intermodal rail transportation system and the lease buyouts of vehicles and
equipment.
Other property and equipment additions of $2.0 million in 1994, $0.4 million in
1993 and $5.2 million in 1992 were made for buildings, building improvements,
furniture and fixtures, computer equipment and other assets.
The Company also invested $20.9 million in the acquisition of waste services
businesses in 1992.
CAPITAL EXPENDITURES, 1995
The Company anticipates that approximately $33 million will be expended in 1995
for construction and development activities. The anticipated capital
expenditures are principally for construction of disposal capacity at existing
landfills. The Company anticipates that it will also spend approximately $10
million for vehicles and equipment during 1995. However, if the Company is
unable to generate the anticipated levels of proceeds from asset sales and cash
flow from operations, or if the proposed Merger with USA Waste is not
consummated, the level of 1995 capital expenditures will be limited.
ENVIRONMENTAL MATTERS
Revisions to regulations under Subtitle D of RCRA, which were promulgated by the
EPA in October 1991, established guidelines for the design, construction and
operation of environmentally sound waste disposal facilities. These revisions
generally became effective in October 1993, other than with respect to
groundwater monitoring requirements which will be phased in over a five-year
period, and financial responsibility requirements which are scheduled to become
effective in April 1995. The Company anticipates that, in the near-term, it will
continue to experience the discount pricing of landfill airspace by competitors,
as facilities that anticipate the cessation of operations seek to maximize the
utilization of current airspace prior to their closure.
More stringent regulation, while requiring greater expenditures, is expected to
increase opportunities for the Company and others who have landfills that comply
with these regulations, as noncomplying landfills have been and will be
required, under the Company's interpretation of current legislation, to cease
operations. The Company expects, however, that certain of the older, less
environmentally secure landfills operated by its competitors will continue to
operate in 1994 and beyond, depressing market prices for solid waste disposal in
the interim.
24
<PAGE> 25
The Company's principal development efforts from 1987 through 1994 have been in
the creation of permitted landfill disposal capacity, with the design, operation
and construction of environmentally sound facilities to serve its customers on a
long-term basis. Since 1987, the Company had advanced its program of site
development, moving from a level of 10 million tons of permitted airspace
capacity in 1987 to 191 million tons of remaining permitted airspace capacity in
1994, which includes 60 million tons of permitted airspace related to two
permitted but undeveloped landfill projects. The strategic direction of the
Company's efforts has been consistent with the industry trend of the closure of
landfill sites which do not provide adequate protection for the environment and
the creation of sound disposal facilities which minimize the risk to the
environment from contamination.
The Company has made every effort to meet the numerous regulatory challenges
facing the waste services industry, and management believes that the Company
will not experience a long-term negative impact from the implementation of the
regulations under Subtitle D of RCRA. Current landfill design and construction
by the Company have been performed in compliance with state regulations and in
anticipation of the federal requirements. The Company's South Carolina landfills
have permit expansion applications pending which will meet the revisions to
Subtitle D of RCRA but currently operate in disposal areas that comply with
current state regulations but which are not in compliance with Subtitle D.
The Company's operation within the environmental services industry also subjects
it to future financial obligations with regard to closure and post-closure
monitoring and site maintenance costs associated with the solid waste landfills
its operates. The Company's engineers estimate such costs based on the technical
requirements of the EPA's Subtitle D regulations and the proposed air emissions
standards under the Clean Air Act, as they are being applied on a state-by-state
basis.
Final closure and post-closure monitoring and site maintenance costs represent
the costs related to cash expenditures to be incurred after a landfill ceases to
accept waste and closes. Such costs include final capping of the site and site
inspections, groundwater monitoring, leachate management, methane gas control
and maintenance costs to be incurred for up to 30 years after the facility
closes. Final closure and post-closure monitoring and site maintenance costs are
estimated to be approximately $140 million at the time all Company landfills
have reached their respective capacity. The accrual for these costs is recorded
as airspace at the respective landfill site is consumed.
In addition, the Company expects to incur other closure costs, principally
related to capping and methane gas control activities, during the operating
lives of the landfill sites. The accrual for these costs is also recorded as
airspace at the respective landfill site is consumed.
As of December 31, 1994, accrued liabilities for all closure and post-closure
monitoring and maintenance costs totaled $25.6 million, of which $1.5 million is
classified as a current liability in the accompanying condensed consolidated
balance sheets. The Company periodically reviews and updates the underlying
assumptions used to determine such estimates and, accordingly, the estimate of
total projected costs is subject to periodic revision and adjustment.
RESULTS OF OPERATIONS
On December 11, 1992, the Company completed the sale of its security services
business. The following discussion excludes the operational activity and results
of the security services business, which has been included in the accompanying
consolidated financial statements as discontinued operations.
25
<PAGE> 26
The following table sets forth the items in the consolidated statements of
operations as a percentage of revenues, and the percentage change in dollar
amounts of the items compared to previous years.
<TABLE>
<CAPTION>
PERCENTAGE
INCREASE (DECREASE)
-------------------
YEAR ENDED DECEMBER 31, 1994 1993
---------------------- COMPARED COMPARED
1994 1993 1992 TO 1993 TO 1992
---- ---- ---- -------- --------
<S> <C> <C> <C> <C> <C>
Revenues........................................ 100% 100% 100% (11)% (2)%
Costs and Expenses
Operating..................................... 70 67 70 (8) (6)
General and administrative.................... 10 8 13 6 (39)
Depreciation and amortization................. 15 14 13 (10) 9
Unusual items--operations..................... 3 (4) 15 -- --
---- ---- ----
Income (Loss) from Operations................... 2 15 (11) -- --
Unusual items--shareholder litigation
settlement and other litigation related
costs......................................... (31) (2) (4) 1,344 (49)
Other income, primarily interest................ 1 1 2 (48) (45)
Interest expense................................ (9) (10) (10) (18) (8)
---- ---- ----
Income (Loss) from Continuing Operations Before
Income Taxes.................................. (37) 4 (23) -- --
Income Tax Provision (Benefit).................. (2) 1 1 -- 21
---- ---- ----
Income (Loss) from Continuing Operations........ (35)% 3% (24)% -- --
==== ==== ====
</TABLE>
REVENUES
The following table sets forth the components of revenue change for each of the
three years in the period ended December 31, 1994:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Price............................................... (3)% (1)% 2%
Volume.............................................. (3) 4 10
Acquisitions........................................ -- -- 6
Divestitures........................................ (5) (5) --
---- ---- ----
Total (11)% (2)% 18%
==== ==== ====
</TABLE>
The following table sets forth revenues of the Company by each of the principal
lines of ongoing business and for divested businesses for each of the three
years in the period ended December 31, 1994 (dollar amounts in thousands):
<TABLE>
<CAPTION>
PERCENTAGE
YEAR ENDED DECEMBER 31, INCREASE (DECREASE)
-------------------------------- --------------------
1994 1993
COMPARED COMPARED
1994 1993 1992 TO 1993 TO 1992
---- ---- ---- -------- --------
<S> <C> <C> <C> <C> <C>
Collection Services..................... $106,206 $122,444 $126,726 (13)% (3)%
Disposal Services (Landfills)........... 83,526 78,992 66,705 6 18
Transfer Stations....................... 50,882 55,316 56,404 (8) (2)
Incinerator............................. 9,589 9,691 6,391 (1) 52
Recycling Services...................... 6,463 6,117 6,214 6 (2)
Divested Businesses..................... 1,323 15,921 31,870 (92) (50)
-------- -------- --------
Total................................... $257,989 $288,481 $294,310 (11) (2)
======== ======== ========
</TABLE>
26
<PAGE> 27
1994. Revenues for 1994 decreased by $30.5 million to $258.0 million from
$288.5 million during 1993, due in part to the sale of businesses as part of the
Company's divestiture program. During 1993 and 1994, the Company sold six
collection and hauling operations, one transfer station, one recycling operation
and one landfill, with a resulting decrease in revenues attributable to those
operations of $14.6 million in 1994 from 1993.
In addition, both collection and disposal revenues for 1994 were reduced as a
result of contract renegotiations and terminations. The Company's previous
contract with Bergen County, New Jersey, to dispose of that county's solid waste
either to a Company landfill or to the Essex County, New Jersey, incinerator
also included the transportation and disposal of ash generated by the Essex
County incinerator. In December 1993, the Company was awarded a new three-year
agreement at a reduced rate from the prior contract for the disposal of the
municipal solid waste from Bergen County, New Jersey, commencing on March 1,
1994. The contract for the transportation and disposal of ash generated by the
Essex County incinerator was awarded to a competitor effective March 16, 1994.
The Company also had provided disposal and transportation of solid waste from
Union County, New Jersey, under contracts which expired in December 1993. In
addition, in October 1993, the New Jersey Department of Environmental Protection
and Energy approved the Passaic County Utilities Authority's contract
redirecting the county's solid waste to a competitor's landfill for a two-year
period commencing on December 1, 1993. As a result, the Company no longer
receives waste under its contract with the Passaic County Utilities Authority.
As a result of these contract renegotiations and terminations, the Company's
1994 revenues related to the New Jersey activities decreased to $16.6 million
from $50.3 million for 1993, and the loss from operations related to these
activities totaled $1.6 million in 1994 as compared to income from operations of
$12.4 million for 1993. Management believes that progress has been made in
replacing a portion of such waste streams, although at lower operating margins
than the terminated contracts, and efforts will continue toward increasing the
Company's customer base and marketing of its special waste programs.
Landfill revenues for 1994 increased by $4.5 million, or 6%, which was primarily
attributable to increased volume at the Company's landfill in Okeechobee County,
Florida, as a result of a transportation and disposal agreement with Reuter
Recycling of Florida, Inc. and new waste volume at the Company's landfill in
Amelia County, Virginia, which opened in May 1993. Landfill revenues were
enhanced by additional special waste volume, which consists of nonhazardous
waste materials such as sewage sludges, contaminated soils, incinerator ash and
certain industrial residues. Due to intense competitive pressures within the
industry, landfill volume growth was partially offset by reduced pricing at
certain of the Company's landfills.
Transfer station revenues decreased $4.4 million during 1994 to $50.9 million
compared to $55.3 million during 1993, due primarily to a rate reduction
resulting from the sale but continued operation of the two Morris County, New
Jersey, transfer stations on December 31, 1993, and partially offset by
increased revenues at the Columbia, South Carolina, and Hunterdon County, New
Jersey transfer stations. The Morris County transfer station operations
generated revenues of $35.6 million, including $4.0 million in revenues deferred
from 1993, and income from operations of $12.2 million in 1994; however, it is
expected to generate annual revenues of approximately $11 million in each of
1995 and 1996, provided that the County's long-term solid waste system is not
yet in operation.
1993. Revenues for 1993 decreased by $5.8 million to $288.5 million from $294.3
million for 1992, principally as a result of the sale of certain businesses as
part of the Company's divestiture program. As discussed below, the Company sold
its two transfer stations in Morris County, New Jersey, on December 31, 1993. In
addition, during 1993 the Company sold six collection and hauling operations,
one transfer station and one landfill, with a resulting decrease in revenues
attributable to those operations of $15.4 million in 1993 from 1992.
Landfill revenues for 1993 increased by $12.3 million, or 18%, which was
primarily attributable to the full period operations and increased waste streams
at the newly constructed landfills in Amelia County, Virginia, Allegany County,
Maryland, and Atlanta, Georgia, and the acquisition of a landfill in Okeechobee
County, Florida, during 1992. Landfill revenues were also enhanced by additional
special waste volumes resulting from the Company's increasing emphasis on the
disposal of special wastes.
27
<PAGE> 28
Revenues for 1993 also reflect a $3.3 million, or 52%, increase in medical and
special waste revenues from the operation of the Hampton County, South Carolina,
incinerator, which also benefited from the Company's increased emphasis on the
special waste market (see "Unusual Items--Operations").
Revenues for 1993 were reduced, however, by a decrease in waste volume from the
Company's New York City sludge contract and a decrease in waste volume from the
Company's New Jersey municipal customers, which redirected portions of their
solid waste to the Essex County, New Jersey, waste-to-energy incinerator and
reduced their solid waste volume as a result of the state's recycling program.
On December 31, 1993, the Company sold its two transfer stations in Morris
County, New Jersey, to the Morris County Municipal Utilities Authority. As part
of the agreement of sale, the Company will continue to operate the transfer
stations and provide transportation services until the county's long-term solid
waste system is in operation or December 31, 1996, if later. The county has an
option to extend the operation and transportation agreement for two six-month
periods beyond 1996, if its long-term solid waste system is not yet operational.
OPERATING COSTS AND EXPENSES
Operating costs and expenses, which decreased by $14.8 million to $179.5 million
from $194.3 million, increased as a percentage of revenues in 1994 to 70% as
compared with 67% in 1993.
During 1993 and 1994, the Company sold certain operations with a resulting
decrease in operating costs and expenses attributable to those operations of
$12.6 million in 1994. In addition, costs for disposal of waste at third-party
landfills and transportation expenses were reduced as a result of continued
emphasis on the utilization of internal disposal capacity and the decrease in
waste volume received by the Company from the Essex County, New Jersey,
incinerator, as previously discussed, and the Company's New York City sludge
contract. Further reductions in operating expenses resulted from lower landfill
closure and post-closure rates resulting from increases to projected airspace
for future expansions of existing landfill sites, partially offset by volume
increases at the Company's landfills.
During 1993, the Company experienced a reduction in costs for disposal of waste
at third-party landfills as compared with 1992. The reduction in these costs,
which reflects the increased emphasis on the utilization of internal disposal
capacity, was, however, partially offset by an increase in community host fees
resulting from the redirection of waste to Company-owned landfills. In addition,
operating costs and expenses for 1993 reflect an increase in subcontract hauling
expense resulting from increased special waste volume at the Hampton County,
South Carolina, incinerator.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses increased as a percentage of revenues to 10%
for 1994 as compared to 8% during 1993, while increasing in dollar amount by
$1.6 million. The dollar increase in 1994 principally reflects a $2.3 million
charge for charitable contributions, offset partially by the continued benefit
of the Company's reorganization efforts in 1992, 1993 and late 1994. Further
reorganization efforts during 1995 are expected to reduce general and
administrative expenses in future periods. In the fourth quarter of 1994, the
Company elected early adoption of Statement of Financial Accounting Standards
No. 116, "Accounting for Contributions Received and Contributions Made." The new
standard requires, among other things, the recognition of the fair value of
contributions made, including unconditional promises to give, in the period in
which the contribution is made or unconditional promise is given. Prior to
adoption, the Company had recognized contributions made or unconditional
promises to give in the period the contribution was paid. On December 29, 1994,
the Company made unconditional promises to contribute $3 million to certain
charitable organizations, payable in annual installments of $0.5 million over
the next six years; accordingly, the Company recorded a charge to general and
administrative expense of $2.3 million, representing the present value of these
obligations.
As anticipated, general and administrative expenses declined in 1993 compared
with 1992, due largely to the full year benefit of the Company's reorganization
efforts. During 1992, management implemented a reorganization of its corporate
and regional staffing levels, having determined that the emphasis on internal
growth through the utilization of disposal capacity for which permits have been
issued would not require the
28
<PAGE> 29
same levels of administrative personnel that existed previously. These reduced
expenses include compensation as well as travel and professional fees.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization increased as a percentage of revenues to 15% in
1994 from 14% in 1993 and 13% in 1992, while decreasing by $4.2 million in 1994
from 1993 and increasing by $3.4 million in 1993 from 1992. The 1994 dollar
decrease reflects the sale of certain of the Company's operations and the effect
of increases to projected airspace resulting from future expansions of existing
landfill sites, partially offset by higher landfill construction cost
amortization associated with volume increases at the Company's landfills. The
increase in 1992 reflects higher landfill construction cost amortization
associated with volume increases at the Company's landfills, partially offset by
the effects of increases to projected airspace resulting from future expansions
of existing landfill sites.
UNUSUAL ITEMS--OPERATIONS
As previously discussed, in 1992 and the first half of 1993, the Company was not
in compliance with certain covenants of its various long-term borrowing
agreements and commenced the restructuring of its principal credit facilities
and surety arrangements. In addition, the Company undertook significant steps to
reorganize its corporate and regional activities. The Company also decided to
divest certain businesses that did not meet strategic and performance objectives
and not to pursue certain development activities.
In 1994, the Company recorded charges of $3.4 million for losses on asset
divestitures including $1.1 million to adjust a prior year estimate of the loss
on divestiture of a hauling, recycling and transfer station operation, and $2.3
million related to the estimated future loss on a municipal contract. Effective
March 1, 1994, the Company was awarded a three-year contract for the
transportation and disposal of municipal solid waste with, at the customer's
option, two one-year extension periods beyond February 28, 1997. The costs of
operating the contract have been greater than originally estimated and, since
inception, the contract has been generating an operating loss. Operational
changes and improvements implemented during 1994 did not sufficiently reduce
operating costs. As a result, the Company has estimated it will incur operating
losses of approximately $2.3 million through the remaining two-year term of the
contract, and the two one-year extension periods, in order to satisfy the
service requirements of the contract and accordingly has accrued such amount. In
1994, the Company also reversed prior year provisions for losses on divestitures
and contractual commitments of $3.6 million, including $2.0 million previously
recorded for expected losses to be incurred on a municipal contract with respect
to which the Company was able to negotiate an early termination and $1.0 million
of excess reserve related to the sale in 1994 of a recycling operation and
certain real estate.
In addition, in 1994 the Company recorded net charges of $8.2 million for asset
impairments and abandoned projects. That amount included a fourth quarter charge
of $7.0 million to reduce the carrying value, as of December 31, 1994, of the
Company's medical, special and municipal waste incinerator facility to its
estimated net realizable value. The amount of the charge was measured as the
difference between the carrying value of long-term assets, principally property,
plant and equipment and intangible assets, and the estimated fair value of the
assets based on the present value of future cash flows discounted at 12%. The
adjustment was based on a review conducted in the fourth quarter which
determined there had been a permanent decline in the value of the facility,
based on the conclusion that the Company could not recover its investment
through future operations, given current and forecasted pricing, waste mix and
capacity trends as well as recently proposed regulations with respect to medical
waste incinerator facilities and general declines in the value of waste
incinerator businesses. During 1994, the Company also reached a favorable
settlement of previously reported litigation related to certain contracts
entered into with respect to the purchase by the Company of a landfill and the
prior purchase of a waste collection and hauling company. The settlement amount
is included as a credit to unusual items and includes receipt by the Company of
$1.2 million in cash and the forgiveness of all remaining non-compete payments
totalling $0.5 million that were to have been paid by the Company to various
individuals in 1994, 1995 and 1996. The remaining charge of $3.0 million
represents changes in prior year estimates for certain asset impairments and
abandoned projects. In addition, the Company recorded a charge of $0.8 million
primarily relating to severance benefits paid to employees terminated as part of
the Company's continued reorganization. With the exception of the $1.2 million
litigation settlement received by
29
<PAGE> 30
the Company and the $0.8 million payment of severance benefits, there was no
cash flow effect to these unusual charges.
During 1993, the Company sold certain businesses as part of its divestiture
program, which resulted in a net gain of $20.7 million. The Company also
recorded charges of $8.7 million for losses on asset divestitures and
contractual commitments including (i) $3.2 million related to the municipal
contract discussed above, (ii) $3.2 million related to the recycling operation
and real estate sold in 1994 and (iii) $2.1 million related to a hauling,
recycling and transfer station held for sale. In addition, the Company reversed
prior year provisions of $6.6 million for losses on divestitures for businesses
that were subsequently retained.
In 1993, the Company also recorded charges of $4.9 million, consisting of $2.0
million for impaired assets and $2.9 million for abandoned projects.
Additionally, there were charges in 1993 of $1.6 million for special directors
and officers insurance premiums and $0.3 million for severance benefits paid to
employees terminated in connection with the corporate and regional
restructuring.
In 1992, the Company recorded a charge of $10.5 million for anticipated losses
on planned asset divestitures and contractual commitments and recorded a charge
of $12.4 million for asset impairments and abandoned projects. There was no cash
flow effect for these unusual charges.
In addition, the Company recorded charges of $10.4 million in 1992 for financing
and professional fees primarily related to the restructuring of its principal
credit facilities and surety arrangements. The Company also recorded a charge of
$7.1 million for special directors and officers insurance premiums as a result
of the shareholder litigation and charges of $3.8 million related to the
reorganization of its corporate and regional operations. The latter charges were
for employee severance, relocation and related transition costs, costs to close
certain facilities and other related costs.
UNUSUAL ITEMS--SHAREHOLDER LITIGATION SETTLEMENT AND OTHER LITIGATION RELATED
COSTS
Other income (expense) includes charges of $79.4 million, $5.5 million and $10.9
million for the years ended December 31, 1994, 1993 and 1992, respectively. The
charge in 1994 consists of $75.3 million for the shareholder litigation
settlement and $4.1 million for legal and other related costs. The charges in
1993 and 1992 are for legal and other costs related to the shareholder
litigation.
OTHER INCOME
Other income, primarily interest, decreased to $1.8 million in 1994 from $3.6
million in 1993 and $6.5 million in 1992, due primarily to the use of funds for
debt reductions and capital expenditures, as well as the reduction in market
interest rates during 1993.
INTEREST EXPENSE
Interest expense decreased to $23.8 million in 1994 from $29.2 million in 1993
and $31.6 million in 1992. Interest expense in each period was less than total
interest charges as a result of interest capitalization related to the Company's
development of landfills. Capitalized interest totaled $3.0 million, $3.5
million and $6.7 million during 1994, 1993 and 1992, respectively. Interest
costs, excluding the effect of capitalized interest, decreased to $26.8 million
during 1994 as compared with $32.6 million in 1993 and $38.3 million in 1992.
The decrease in interest costs is attributable primarily to the reduced level of
debt outstanding.
INCOME TAXES
The income tax benefit for 1994 reflects the effect of a tentative agreement
with the Internal Revenue Service regarding the tax treatment of certain costs
and expenses deducted for financial statement purposes in open tax years and
results from an adjustment to the estimated tax effect of the Company's
financial statement restatement in 1991. The provision for income taxes for 1993
reflects the benefit of estimated temporary differences and includes $0.5
million of additional state income tax related to the gain on sale of the
Company's collection, hauling and landfill operations in Indiana. The provision
for income taxes for 1992 results primarily from limitations imposed on the net
operating loss carrybacks for federal and state income tax purposes. The Company
estimates its tax net operating loss carryforwards at December 31, 1994 to be
approximately $232 million, the majority of which expire in 2007. The potential
benefits of unused tax net
30
<PAGE> 31
operating loss carryforwards have not been recognized in the accompanying
financial statements because management has not concluded that realization of
such benefits is more likely than not.
Effective January 1, 1993, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 109, "Accounting for Income Taxes," using an asset and
liability approach. That statement supersedes SFAS No. 96 which was adopted by
the Company in 1988. There was no effect on the Company's financial statements
upon adoption of the new standard using the cumulative effect method.
31
<PAGE> 32
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Financial Statements:
Consolidated Statements of Operations for the Years Ended December 31, 1994,
1993 and 1992................................................................... 33
Consolidated Balance Sheets, December 31, 1994 and 1993............................ 34
Consolidated Statements of Cash Flows for the Years Ended December 31, 1994,
1993 and 1992................................................................... 36
Consolidated Statements of Stockholders' Equity for the Years Ended December 31,
1994, 1993 and 1992............................................................. 37
Notes to Consolidated Financial Statements......................................... 38
Report of Independent Auditors....................................................... 59
</TABLE>
32
<PAGE> 33
CHAMBERS DEVELOPMENT COMPANY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
REVENUES................................................... $257,989 $288,481 $294,310
COSTS AND EXPENSES
Operating................................................ 179,542 194,355 206,761
General and administrative............................... 24,796 23,210 37,853
Depreciation and amortization............................ 37,568 41,764 38,363
Unusual items--operations................................ 8,863 (11,851) 44,291
-------- -------- --------
Income (Loss) from Operations.............................. 7,220 41,003 (32,958)
OTHER INCOME (EXPENSE)
Unusual items--shareholder litigation settlement and
other litigation related costs........................ (79,400) (5,500) (10,853)
Other income, primarily interest......................... 1,848 3,563 6,509
Interest expense......................................... (23,843) (29,163) (31,628)
-------- -------- --------
Income (Loss) from Continuing Operations Before Income
Taxes.................................................... (94,175) 9,903 (68,930)
Income Tax Provision (Benefit)............................. (3,931) 1,600 1,325
-------- -------- --------
Income (Loss) from Continuing Operations................... (90,244) 8,303 (70,255)
DISCONTINUED OPERATIONS
Loss from operations..................................... -- -- (1,407)
Gain on sale of assets................................... -- -- 939
-------- -------- --------
Net Income (Loss).......................................... $(90,244) $ 8,303 $(70,723)
======== ======== ========
INCOME (LOSS) PER COMMON SHARE
Continuing operations.................................... $ (1.35) $ .12 $ (1.05)
Discontinued operations.................................. -- -- (.01)
-------- -------- --------
Net Income (Loss)........................................ $ (1.35) $ .12 $ (1.06)
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
33
<PAGE> 34
CHAMBERS DEVELOPMENT COMPANY, INC.
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1994 1993
---- ----
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents........................................ $ 23,548 $ 44,553
Accounts receivable
Trade, less allowances of $1,383 and $1,062, respectively..... 28,961 28,573
Other......................................................... 13,673 2,977
Inventories and prepaid expenses................................. 5,281 4,751
Divestiture proceeds and other funds held in escrow.............. 2,210 11,287
Net assets held for sale......................................... 9,298 11,030
Other current assets............................................. 1,795 5,334
--------- ---------
Total current assets............................................... 84,766 108,505
--------- ---------
PROPERTY AND EQUIPMENT
Land, primarily landfill sites................................... 345,900 312,886
Vehicles and equipment........................................... 108,133 107,183
Other............................................................ 24,759 23,290
Construction in progress......................................... 34,391 42,382
--------- ---------
513,183 485,741
Less accumulated depreciation and amortization................... 158,755 128,730
--------- ---------
Property and equipment--net........................................ 354,428 357,011
--------- ---------
OTHER ASSETS
Funds held for escrow requirements and construction.............. 23,506 31,954
Intangible assets................................................ 15,811 21,995
Other............................................................ 9,987 14,157
--------- ---------
Total other assets................................................. 49,304 68,106
--------- ---------
$488,498 $533,622
========= =========
</TABLE>
34
<PAGE> 35
CHAMBERS DEVELOPMENT COMPANY, INC.
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1994 1993
---- ----
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term obligations...................... $ 46,465 $ 29,748
Trade accounts payable........................................... 10,889 9,344
Accrued liabilities.............................................. 34,751 30,709
Deferred revenue................................................. 4,881 8,637
--------- ---------
Total current liabilities.......................................... 96,986 78,438
--------- ---------
LONG-TERM OBLIGATIONS, LESS CURRENT MATURITIES..................... 211,016 261,803
ACCRUED SHAREHOLDER LITIGATION SETTLEMENT.......................... 75,300 --
OTHER NONCURRENT LIABILITIES....................................... 41,264 39,208
COMMITMENTS AND CONTINGENCIES...................................... -- --
STOCKHOLDERS' EQUITY
Preferred Stock--authorized 10,000,000 shares; no par value;
no shares issued.............................................. -- --
Class A Common Stock--authorized 100,000,000 shares; par value
$.50 per share; issued 50,829,559 and 50,742,377 shares,
respectively.................................................. 25,415 25,371
Common Stock--authorized 50,000,000 shares; par value $.50 per
share; convertible into Class A Common Stock; issued
16,329,168 and 16,415,750 shares, respectively................ 8,165 8,208
Additional paid-in capital....................................... 395,121 395,119
Accumulated deficit.............................................. (360,619) (270,375)
--------- ---------
68,082 158,323
Treasury stock, at cost--Class A Common Stock, 400 shares;
Common Stock, 369,200 shares.................................. (4,150) (4,150)
--------- ---------
Total stockholders' equity......................................... 63,932 154,173
--------- ---------
$ 488,498 $ 533,622
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
35
<PAGE> 36
CHAMBERS DEVELOPMENT COMPANY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Income (loss) from continuing operations................ $(90,244) $ 8,303 $ (70,255)
Adjustments to reconcile to net cash provided by
continuing operations
Depreciation and amortization......................... 37,568 41,764 38,363
Unusual items......................................... 88,580 (7,618) 42,112
Deferred income taxes................................. -- -- 12,000
Provision for doubtful accounts....................... 1,447 839 454
Interest earned on escrowed funds..................... (415) (878) (2,844)
Change in assets and liabilities, net of effects of
divestitures
Accounts receivable................................ (11,629) (3,085) 749
Refundable taxes................................... (659) 16,049 12,495
Accounts payable and accrued liabilities........... 1,622 (20,330) (13,608)
Deferred revenue................................... (3,756) (7,169) (9,018)
Other assets and liabilities....................... 8,285 9,476 4,008
Other................................................. 1,349 666 3,578
-------- -------- ---------
Net cash provided by continuing operations.............. 32,148 38,017 18,034
Net cash used in operating activities of discontinued
operations............................................ -- (2,148) (5,885)
-------- -------- ---------
Net cash provided by operating activities............... 32,148 35,869 12,149
-------- -------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures.................................... (39,802) (38,085) (111,869)
Acquisition of businesses............................... -- -- (20,916)
Proceeds from disposition of assets..................... 3,249 48,595 12,575
Purchases of marketable securities...................... -- -- (18,491)
Maturities and sales of marketable securities........... -- -- 68,840
Decrease (increase) in funds held in escrow............. 17,940 (404) 32,933
Other................................................... 1,399 (603) 1,150
Proceeds from sale of discontinued operations........... -- 4,500 22,930
Other net investing activities of discontinued
operations............................................ -- -- (3,258)
-------- -------- ---------
Net cash (used in) provided by investing activities..... (17,214) 14,003 (16,106)
-------- -------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Short-term note payments................................ -- -- (10,000)
Principal payments on long-term obligations............. (35,312) (60,669) (55,388)
Proceeds from issuance of long-term obligations......... -- -- 21,100
Funds provided by (used for) replacement of letters of
credit................................................ -- 10,243 (10,243)
Other................................................... (627) (792) (1,626)
Net financing activities of discontinued operations..... -- -- (506)
-------- -------- ---------
Net cash used in financing activities................... (35,939) (51,218) (56,663)
-------- -------- ---------
Net decrease in cash and cash equivalents............... (21,005) (1,346) (60,620)
Cash and cash equivalents at beginning of year.......... 44,553 45,899 106,519
-------- -------- ---------
Cash and cash equivalents at end of year................ $ 23,548 $ 44,553 $ 45,899
======== ======== =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
36
<PAGE> 37
CHAMBERS DEVELOPMENT COMPANY, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE YEARS ENDED DECEMBER 31, 1994
----------------------------------------------------------
CLASS A ADDITIONAL
COMMON COMMON PAID-IN ACCUMULATED TREASURY
STOCK STOCK CAPITAL DEFICIT STOCK
----- ----- ------- ------- -----
<S> <C> <C> <C> <C> <C>
BALANCE AT JANUARY 1, 1992.................. $25,358 $8,217 $394,986 $(207,955) $(4,150)
Exchange of Common Stock.................... 4 (4) -- -- --
Exercise of stock options................... 4 -- 133 -- --
Net loss.................................... -- -- -- (70,723) --
------- ------ -------- --------- -------
BALANCE AT DECEMBER 31, 1992................ 25,366 8,213 395,119 (278,678) (4,150)
Exchange of Common Stock.................... 5 (5) -- -- --
Net income.................................. -- -- -- 8,303 --
------- ------ -------- --------- -------
BALANCE AT DECEMBER 31, 1993................ 25,371 8,208 395,119 (270,375) (4,150)
Exchange of Common Stock.................... 43 (43) -- -- --
Exercise of stock options................... 1 -- 2 -- --
Net loss.................................... -- -- -- (90,244) --
------- ------ -------- --------- -------
BALANCE AT DECEMBER 31, 1994................ $25,415 $8,165 $395,121 $(360,619) $(4,150)
======= ====== ======== ========= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
37
<PAGE> 38
CHAMBERS DEVELOPMENT COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of Chambers
Development Company, Inc. and its subsidiaries (the "Company"), after
appropriate elimination of intercompany accounts and transactions.
Revenue Recognition
The Company recognizes revenues as services are provided.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand and on deposit and highly liquid
debt instruments purchased with original maturities of three months or less.
Interest Rate Swap Agreements
The Company has used interest rate swap agreements, the last of which expired in
November 1993, to minimize the impact of rate fluctuations on floating interest
rate long-term borrowings. The differential paid or received on interest rate
swap agreements is recognized as an adjustment to interest expense.
Funds Held for Escrow Requirements and Construction
Funds held for escrow requirements and construction consist principally of funds
deposited in connection with landfill closure and post-closure obligations,
insurance escrow deposits and amounts held for landfill construction arising
from industrial revenue financings. Amounts are principally invested in fixed
income securities of federal, state and local governmental entities and
financial institutions. The Company considers its landfill closure, post-closure
and construction escrow investments to be held to maturity. The aggregate fair
value of these investments approximates their amortized cost. Substantially all
of these investments mature within one year. The Company's insurance escrow
funds are invested in pooled investment accounts that hold debt and equity
securities and are considered to be available for sale. The aggregate cost and
market value of those pooled accounts was approximately $11,043,000 and
$11,076,000, respectively, at December 31, 1994.
Inventories
Inventories, consisting of parts and supplies, are stated at the lower of
first-in, first-out cost or market.
Property and Equipment
Landfill sites, including land and related landfill preparation and improvement
costs, are stated at cost. Such costs, which include construction, engineering,
permitting, interest and other costs, are amortized as airspace is consumed.
Also included in the cost of landfill sites are acquisition, engineering and
other costs related to the permitting and development of planned landfills and
proposed expansions of existing landfills, which costs management of the Company
believes are recoverable.
Other items of property and equipment are stated at cost. Depreciation of such
property and equipment is provided over the estimated useful lives of the
assets, on the straight-line method, as follows: buildings--7 to 25 years;
vehicles and equipment--3 to 20 years; and office furniture and fixtures--5
years.
Depreciation and amortization of property and equipment was $32,261,000,
$35,639,000 and $32,088,000 for the years ended December 31, 1994, 1993 and
1992, respectively.
Items of an ordinary maintenance or repair nature are charged directly to
operations, whereas betterments and major expenditures that extend the life of
the asset are capitalized.
38
<PAGE> 39
CHAMBERS DEVELOPMENT COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Intangible Assets
Intangible assets consist principally of the excess of cost over fair value of
the net assets of acquired businesses, which is being amortized on a
straight-line basis over 20 years, and covenants not to compete and customer
contracts and routes of acquired businesses, which are being amortized on a
straight-line basis over periods of up to 10 years. Accumulated amortization of
intangible assets was $18,490,000 and $15,631,000 at December 31, 1994 and 1993,
respectively, excluding $1,279,000 related to assets held for sale at December
31, 1993. The Company assesses whether its goodwill and other intangible assets
are impaired based on the ability of the operation to which they relate to
generate cash flows in amounts adequate to cover the amortization of such
assets. If an impairment is determined, the amount of such impairment is
calculated based on the estimated fair value of the asset.
Environmental Costs and Liabilities
Environmental costs and liabilities primarily include accruals for closure and
post-closure monitoring and site maintenance costs associated with the Company's
landfills. The accruals for these costs are recorded as airspace at the
respective landfill site is consumed. The Company's engineers estimate landfill
site closure and post-closure costs and such estimates are reviewed on a
periodic basis; accordingly, the related accrual rates are subject to periodic
revision and adjustment.
Capitalized Interest
During the years ended December 31, 1994, 1993 and 1992, the interest costs of
continuing operations were $26,809,000, $32,613,000, and $38,349,000
respectively, of which $2,966,000, $3,450,000, and $6,721,000 were capitalized
with respect to landfills and facilities under construction.
Income Taxes
Deferred income taxes are recorded based upon temporary differences between the
financial statement and tax bases of assets and liabilities and net operating
loss carryforwards available for income tax purposes.
Effective January 1, 1993, the Company adopted Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes," using an asset and liability
approach. If it is more likely than not that some portion or all of a deferred
tax asset will not be realized, a valuation allowance is recognized. There was
no effect on the Company's 1993 financial statements upon adoption of the new
standard using the cumulative effect method.
Income (Loss) per Common Share
Income (loss) per common share is computed using the weighted average number of
shares outstanding during the year. Common stock equivalents, which consist of
stock options outstanding, had an antidilutive effect on income (loss) per
common share for each of the years presented and, accordingly, have not been
included in the computation. The weighted average number of common shares
outstanding was 66,789,000 for the year ended December 31, 1994 and 66,788,000
for each of the years ended December 31, 1993 and 1992.
Reclassifications
Certain reclassifications have been made to prior years' financial statements to
conform to 1994 classifications.
39
<PAGE> 40
CHAMBERS DEVELOPMENT COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE B--CHANGE IN ACCOUNTING PRINCIPLE
In the fourth quarter of 1994, the Company elected early adoption of Statement
of Financial Accounting Standards No. 116, "Accounting for Contributions
Received and Contributions Made." The new standard requires, among other things,
the recognition of the fair value of contributions made, including unconditional
promises to give, in the period in which the contribution is made or
unconditional promise is given. Prior to adoption, the Company had recognized
contributions made or unconditional promises to give in the period the
contribution was paid. On December 29, 1994, the Company made unconditional
promises to contribute $3,000,000 to certain charitable organizations, payable
in annual installments of $500,000 over the next six years; accordingly, the
Company has recorded a charge to general and administrative expense of
$2,269,000, representing the present value of these obligations. There was no
cumulative effect as of January 1, 1994 of adopting the new standard.
NOTE C--PROPOSED MERGER
The Company has entered into an Amended and Restated Agreement and Plan of
Merger dated as of November 28, 1994 (the "Merger Agreement"), pursuant to which
the Company would become a wholly-owned subsidiary of USA Waste Services, Inc.
("USA Waste") through the merger of an existing wholly-owned subsidiary of USA
Waste with and into the Company (the "Merger"). The Merger Agreement provides,
among other things, for each outstanding share of the Company's Common Stock and
Class A Common Stock to be converted into .41667 of a share of USA Waste's
Common Stock. Based upon the 15,699,768 shares of the Company's Common Stock and
the 51,089,359 shares of Class A Common Stock outstanding as of March 1, 1995,
the Company's stockholders will collectively be issued approximately 27,829,000
shares of USA Waste's Common Stock, representing approximately 55.2% of the
expected total issued and outstanding shares of USA Waste's Common Stock after
the Merger.
The Merger is subject to a number of conditions, including obtaining the
approval of the stockholders of the Company and of USA Waste, final settlement
of the shareholder litigation discussed in Note D and certain other proceedings
involving the Company, and obtaining any necessary regulatory waivers and
approvals. It is anticipated that the Merger will be completed by June 30, 1995.
NOTE D--SETTLEMENT OF SHAREHOLDER LITIGATION
Between March 18, 1992 and May 7, 1992, various Company shareholders filed
twenty-three actions in the United States District Court for the Western
District of Pennsylvania asserting federal securities fraud claims and pendent
state law claims against the Company, certain of its officers and directors, its
former auditors, and the underwriters of its securities (the "Federal Class
Action"). The significant part of these actions, as amended and consolidated on
November 4, 1992, under the caption In Re: Chambers Development Company, Inc.
Shareholders Litigation, Civil Action No. 92-0679, and brought on behalf of a
putative class of purchasers of the Company's securities between March 18, 1988
and October 20, 1992, is the allegation that the decrease in the Company's stock
price during the period from the Company's March 17, 1992 announcement of a
change in accounting method relating to capitalization of certain costs and
expenses through its October 20, 1992 announcement of a $362,000,000 reduction
in retained earnings as of December 31, 1991, as compared to the amount
previously reported, and a restatement of its 1990 and 1989 consolidated
financial statements, was caused by the Company's misrepresentation of its
earnings and financial condition. One of the original twenty-three complaints,
Yeager v. Rangos, et al., C.A. No. 92-1081, also asserts derivative claims on
behalf of the Company (which is named as a nominal defendant) for breach of
fiduciary duty against certain of its officers and directors and negligence
against its former auditors (the "Federal Derivative Action"). Derivative claims
were also filed in state courts on behalf of the Company (which was named as a
nominal defendant) for breach of fiduciary duty against certain of its officers
and directors and for negligence against its former auditors (the "Related
Actions").
40
<PAGE> 41
CHAMBERS DEVELOPMENT COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
On February 24, 1995, representatives of the plaintiffs in the Federal Class
Action, representatives of the plaintiffs in the Federal Derivative Action, the
Company and certain individual defendants entered into a Class Action
Stipulation and Agreement of Compromise and Settlement (the "Class Action
Settlement Agreement") and a Derivative Action Stipulation and Agreement of
Compromise and Settlement (the "Derivative Action Settlement Agreement" and,
together with the Class Action Settlement Agreement, the "Settlement
Agreements"), which are the definitive settlement documents for the class
actions and the derivative actions described above. Implementation of the
Settlement Agreements is conditioned upon the dismissal, with prejudice, of the
Related Actions referred to above. On March 22, 1995, the court granted
preliminary approval of the settlements and distribution of notices to the
Company's stockholders and the plaintiff class members regarding the
settlements. The hearing upon the fairness, reasonableness and adequacy of the
proposed settlements has been scheduled for May 19, 1995.
The Settlement Agreements provide that the sum of $10,000,000 will be paid by
the Company's directors and officers liability insurance carrier and the sum of
$70,000,000 will be paid by the Company in two installments following final
court approval of the settlements. The first installment of $25,000,000 is to be
paid within thirty days after the settlement effective date (the date upon which
the court has finally approved the settlements of the class actions and
derivative actions described above, and all times for appeal have expired or all
appeals have been finally rejected) and the second installment of $45,000,000
(the "Second Installment") is to be paid one year after the settlement effective
date subject to possible earlier payments based on the Merger and subsequent
refinancing. If the Merger or a comparable transaction is consummated, the total
settlement payment will be adjusted by a base increase of $5,000,000, which will
be adjusted upward or downward by an amount consisting of $16,000 for each penny
above or below $4.50 of merger consideration received in the transaction by the
Company's stockholders per share of the Company's Common Stock and Class A
Common Stock, together with interest from the settlement effective date to the
payment date (the base increase, together with any adjustment thereto,
collectively referred to as the "Adjustment"). Based on the market value of USA
Waste Common Stock on March 27, 1995, the Adjustment would be $5,800,000. Any
amount by which the sum of the Second Installment and the Adjustment exceeds
$50,600,000 will be paid by John G. Rangos, Sr., Chairman and Chief Executive
Officer of the Company. John G. Rangos, Sr. has also agreed to guarantee the
Company's obligations to make certain payments in the Class Action Settlement in
an amount not to exceed $15,000,000.
Synergy Associates has agreed, under the Derivative Action Settlement Agreement,
to contribute to the Company the headquarters property presently leased by the
Company from Synergy Associates, subject to assumption or discharge by the
Company of an existing mortgage.
The Settlement Agreements will be subject to certain conditions, including court
approval, and to the refinancing of the Company's principal borrowings. The
current lending agreements of the Company restrict the Company from making the
settlement payments without the consent of the lending groups. The terms of the
Class Action Settlement Agreement also include a right to terminate the
settlements based on appeals or opt-outs with respect to the Federal Class
Action.
After the Company entered into the Settlement Agreements, the class and
derivative plaintiffs entered into settlements with the Company's former
independent auditors. The Company then entered into an agreement with the class
plaintiffs to settle their claims against a group of underwriters of certain of
the Company's securities offerings. The Company agreed to pay $300,000 to the
class plaintiffs to resolve these claims for which the underwriters sought
indemnity from the Company.
As a result of the foregoing, the Company accrued $85,300,000 for the cost of
the settlements and $4,100,000 for other litigation related costs in 1994. Of
that total, $79,400,000 was recorded as a charge to unusual items as a component
of other income (expense) and $10,000,000 to be paid from the proceeds of the
Company's directors and officers liability insurance policy was recorded as a
current asset and is included in accounts receivable-other at December 31, 1994.
At December 31, 1994, $75,300,000 of the amount accrued for
41
<PAGE> 42
CHAMBERS DEVELOPMENT COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
settlement payments has been classified as a noncurrent liability based on the
expectation that such amount would be funded by long-term financing in
connection with the Merger. The $10,000,000 of settlement payments to be funded
by the proceeds of the Company's directors and officers liability insurance
policy and the $4,100,000 of other litigation related costs are included in
current liabilities at December 31, 1994.
While the Company believes the above-mentioned accruals and charges are adequate
to provide for the settlement and related costs, certain of these amounts are
estimates, and actual amounts will depend on the outcome of future events. If
such estimated amounts are not adequate, additional charges against income would
be made when such determinations are made.
NOTE E--DIVESTITURES AND DISCONTINUED OPERATIONS
DIVESTITURES
In late 1992, the Company initiated a program to divest certain businesses that
did not meet strategic and performance objectives and, in 1993 and 1994,
completed a series of asset sales to various parties. During 1993 the Company
sold one landfill, one transfer station and six collection and hauling
businesses for total proceeds of $39,535,000, consisting of $35,479,000 in cash
and $4,056,000 in notes and other receivables. These sales resulted in net gains
of $21,799,000. The Company also sold land in Georgia for $1,284,000 in cash and
received $996,000 with respect to a development project in California, which
resulted in losses of $964,000 and $134,000, respectively.
Additionally, on December 31, 1993, the Company sold its two transfer stations
in Morris County, New Jersey, to the Morris County Municipal Utilities Authority
("MCMUA") for $9,500,000 in cash, which resulted in a deferred gain of
$3,950,000. Simultaneous with entering into the agreement for the sale of these
transfer stations, the Company and the MCMUA amended the agreement pursuant to
which the Company operates the transfer stations and provides waste disposal
services, reducing the rates charged for such services in 1994. As a result of
the interrelationship of the sale of the transfer stations and the operating and
disposal service agreement, the gain on sale was deferred and recognized in 1994
as services were provided. As part of the agreement of sale, the Company will
continue to operate the transfer stations and provide waste disposal services
until the county's long-term solid waste system is in operation or December 31,
1996, if later.
During 1994 the Company sold a recycling operation, a building and a parcel of
land for a total of $2,089,000 in cash. The losses incurred as a result of these
sales have been charged to the previously established allowance for divestiture
losses.
Approximately $7,623,000 and $24,999,000 of the net proceeds from these
divestitures were applied to reduce long-term obligations of the Company in 1994
and 1993, respectively.
The following are summarized operating results of the businesses that were sold
during 1994 and 1993 which are included in the results of continuing operations.
These results exclude the two transfer stations in Morris County, New Jersey,
that the Company will continue to operate, and the net gain from divestitures of
$20,701,000 included in unusual items--operations for the year ended December
31, 1993 (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Revenues............................................... $1,323 $15,921 $31,870
Income (loss) from operations.......................... (22) 377 (5,426)
</TABLE>
As a result of changes in the Company's assessment of the marketability of one
of its operations intended for divestiture, in the second quarter of 1994 the
Company reclassified $1,309,000 of assets of that operation, net of a related
contract loss reserve, from assets held for sale to their respective balance
sheet classifications. Additionally, in the fourth quarter of 1994, assets of
$1,226,000, related to undeveloped land that is permitted
42
<PAGE> 43
CHAMBERS DEVELOPMENT COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
for use as a transfer station, were reclassified to assets held for sale. The
remaining assets held for sale at December 31, 1994, include an undeveloped
permitted landfill site and certain assets of a hauling and transfer station
operation discussed below.
During March 1995, the Company entered into an asset purchase agreement related
to its hauling, recycling and transfer station operations in Atlantic City, New
Jersey, with Mid-Jersey Disposal, Inc. ("Mid-Jersey"), a wholly-owned subsidiary
of USA Waste, whereby Mid-Jersey agreed to purchase certain assets of this
operation. Terms of the purchase agreement provide for the sale of selected
assets, principally vehicles, equipment and containers, for $727,000, which
approximates their net book value. The asset purchase agreement is subject to
final approval from the New Jersey Department of Environmental Protection
("NJDEP"). In conjunction with the asset purchase agreement, the Company also
entered into a separate management agreement, effective April 1, 1995, whereby
the Company will discontinue operating the facility and Mid-Jersey will manage,
operate and service all facets of the business until the sale takes place, which
will occur after approval is received from the NJDEP. As a result of the
foregoing, in 1994 the Company wrote off certain assets against previously
recorded divestiture loss reserves and recorded an additional divestiture loss
provision of $1,114,000 for the remaining assets of the Atlantic City operation,
which the Company is attempting to sell or lease.
Included in the results of continuing operations are revenues for this hauling,
recycling and transfer operation of $4,222,000, $6,259,000 and $6,551,000 for
the years ended December 31, 1994, 1993 and 1992, respectively. Operating losses
for this operation of $874,000, $857,000 and $690,000 for the respective years
have been incurred and charged to the previously established reserve for
divestiture losses.
The Company had recorded a provision of $10,466,000 in 1992 for estimated losses
on the disposition of certain of its businesses (see Note N). The provision
reflected the expected loss from the disposition of net assets, anticipated
operating losses from the measurement date through the expected dates of
disposal and estimated disposal costs. An aggregate of $2,299,000 in operating
losses incurred by these businesses during 1994 and 1993 and $1,484,000 of
losses on divestitures incurred in 1994 and 1993 have been charged against the
loss reserve. Approximately $3,689,000 was charged to the loss reserve in 1994
and 1993 as a result of writing down assets to their net realizable value.
Accruals of $7,689,000, consisting principally of provisions previously recorded
for expected losses on the disposition of the businesses subsequently retained,
have been reversed and are included in unusual items in 1994 and 1993 (see
Note N).
In 1993, the Company also recorded a provision of $3,194,000 for estimated
losses on the disposition of additional businesses classified as assets held for
sale and in 1994 and 1993 recorded provisions of $1,114,000 and $2,321,000,
respectively, for changes to estimates for losses related to the remaining
assets held for sale.
Net assets held for sale consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1994 1993
---- ----
<S> <C> <C>
Inventories and prepaid expenses........................ $ 96 $ 724
Property and equipment, net............................. 11,222 16,260
Intangibles and other noncurrent assets................. -- 743
------- -------
11,318 17,727
Less allowance for losses............................... 2,020 6,697
------- -------
Net assets held for sale................................ $ 9,298 $11,030
======= =======
</TABLE>
43
<PAGE> 44
CHAMBERS DEVELOPMENT COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DISCONTINUED OPERATIONS
On December 11, 1992, the Company sold substantially all of the assets of its
security services business to Baker Industries, Inc./BPS Guard Services, Inc.
for approximately $27,430,000, of which $22,930,000 was received at closing with
the balance received in 1993.
Operating results of the security services business for the nine months ended
September 30, 1992, which have been classified in the consolidated statements of
operations as discontinued operations, include revenues of $68,079,000 and a
loss from operations of $1,407,000.
NOTE F--BUSINESS COMBINATIONS
In 1991, the Company acquired a medical, special and municipal waste
incineration facility. Included in the original purchase price was a promissory
note of $1,550,000 payable in May 1993 and a $4,000,000 contingent payment, net
of related discounts. At December 31, 1993, such obligations were included in
current maturities of long-term obligations and other noncurrent liabilities,
respectively.
In 1994, the Company settled these obligations by the payment of $2,180,000 to
the sellers. The $3,370,000 excess of the recorded liability over the settlement
has been applied to reduce the net book value of the assets acquired, primarily
property and equipment.
NOTE G--CURRENT ACCRUED LIABILITIES
Current accrued liabilities consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1994 1993
---- ----
<S> <C> <C>
Shareholder litigation settlement........................... $10,000 $ --
Insurance................................................... 4,098 7,308
Legal fees and other litigation related costs............... 3,441 4,239
Taxes, other than income.................................... 2,983 3,979
Other....................................................... 14,229 15,183
------- -------
$34,751 $30,709
======= =======
</TABLE>
44
<PAGE> 45
CHAMBERS DEVELOPMENT COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE H--LONG-TERM OBLIGATIONS
Long-term obligations consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1994 1993
---- ----
<S> <C> <C>
Senior notes, interest at 11.45%, principal payable in periodic
installments, maturing in 1996...................................... $133,501 $152,843
Senior notes, interest at 11.95%, principal payable in periodic
installments, maturing in 1996...................................... 17,929 20,525
Industrial revenue bonds, variable interest rates (5.8% to 6.0% at
December 31, 1994), principal payable in annual installments,
maturing in 2001-2007, collateralized by letters of credit.......... 88,800 95,200
Noninterest-bearing notes, principal payable in annual installments,
maturing in 2002, less unamortized discount of $3,630 and $4,464,
respectively, based on imputed interest rate of 12%................. 7,170 7,686
Other notes payable and equipment loans, various interest rates
(6.0% to 11.5% at December 31, 1994), maturities through 2000,
collateralized by vehicles, equipment and other assets.............. 7,885 12,979
Capital lease obligation on building (see Note I)..................... 2,196 2,318
-------- --------
257,481 291,551
Less current maturities............................................... 46,465 29,748
-------- --------
$211,016 $261,803
======== ========
</TABLE>
The aggregate estimated payments, including scheduled minimum maturities, of
long-term obligations for the five years ending December 31, 1995 through 1999
are: 1995-$46,465,000; 1996-$202,150,000; 1997-$3,480,000; 1998-$1,968,000; and
1999-$1,534,000.
In July 1993, the Company executed comprehensive amendments to its bank credit
facility (the "Credit Facility") and note purchase agreements under which the
Company issued senior notes (the "Senior Notes"). The amendments to the Credit
Facility and Senior Note agreements (collectively, as amended, the "Amended
Agreements") included revisions to the terms and conditions of the original
agreements and provided for additional terms and conditions with respect to
future periods. The Company's lenders and bonding company were granted security
interests in substantially all of the assets of the Company and an intercreditor
agreement was executed among the Credit Facility banks, the Senior Note holders
and the bonding company with respect to priority of interests in collateral and
access to assets. In November 1994, the Company executed additional amendments
(the "Amendments") to its Credit Facility and Senior Note agreements which
included waivers (with respect to noncompliance of consolidated working capital
and consolidated tangible net worth covenants attributable to the proposed
settlement of the shareholder litigation and financial statement delivery
covenants) and revisions to the terms and conditions of the Amended Agreements,
principally with respect to payment terms and compliance covenants.
The Amendments provide that 90% of the $74,421,000 scheduled payments previously
due on July 1, 1995 may be deferred until July 1, 1996, with further deferral to
December 31, 1996, at the Company's option, of up to 75% of the $95,512,000
scheduled payments previously due on October 31, 1995 and December 30, 1995 and
all of the $95,512,000 scheduled payments due on October 31, 1996 and December
30, 1996. Certain of such scheduled payments due in 1995 and 1996 will be
reduced by pro rata payments made prior to the scheduled payment dates. The
non-deferred portion of these scheduled payments will be applied to reduce
Senior Note obligations, industrial revenue bond obligations and letters of
credit issued under the Credit
45
<PAGE> 46
CHAMBERS DEVELOPMENT COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Facility. The Amendments also provide that the remaining originally scheduled
principal payments on the Senior Notes due after 1996 become due on December 31,
1996.
The Amendments require, however, that the Company reduce Senior Note and Credit
Facility obligations by a total of $60,000,000, primarily through the payment of
the non-deferred portions of the scheduled payments discussed above and other
scheduled payments, between August, 31, 1994 and December 31, 1995, of which
$20,000,000 was required to be paid by January 31, 1995. Of the $60,000,000,
$23,671,000 has been paid to date, with the January 1995 payment requirement
having been satisfied. Portions of the remaining required payments are expected
to be satisfied by currently available funds and operating cash flow; however,
in the absence of the Merger and related refinancing of the Senior Note and
Credit Facility obligations discussed below, the Company will need to refinance
the Senior Note and Credit Facility obligations on a stand-alone basis or
complete significant divestitures to satisfy any remaining payments. Under the
Amendments, the Company is also required to pay to the holders of the Senior
Notes and the Credit Facility banks, the amount by which its daily average
unrestricted cash balance exceeds $40,000,000 for any calendar month, and a
minimum of 50% of the net proceeds from specified divestitures as permitted by
the Amendments, which proceeds will be applied to the $60,000,000 discussed
above.
The Amendments also provide for the issuance to the Senior Note holders and
Credit Facility banks, at nominal consideration, of shares of the Company's
Class A Common Stock in the event the Company has not refinanced the Senior Note
and Credit Facility obligations prior to October 1, 1995. On that date,
additional shares equal to 4% of the Company's then issued and outstanding
common stock would become issuable. Additional shares equal to 4% of the
Company's then issued and outstanding common stock would also become issuable if
the Company has not refinanced prior to April 1, 1996.
The Amendments contain financial covenants which require the Company to maintain
minimum levels of tangible net worth, working capital and quarterly cash flows
from operations. The Amendments also prohibit the incurrence of additional
indebtedness and the payment of cash dividends, and limit annual cash capital
expenditures.
The Company anticipates that the combined company will refinance substantially
all of the indebtedness of Chambers and USA Waste, including the Senior Note and
Credit Facility obligations of Chambers, before or at the time of the Merger.
Upon any refinancing of the Senior Note and Credit Facility obligations, the
Company expects to pay an early redemption premium to the Senior Note holders
(the "Premium") based on the difference between the interest rates on the Senior
Notes and an adjusted rate for U.S. Treasury securities having a similar
maturity. Based on interest rates on U.S. Treasury securities at December 31,
1994, if the refinancing were to occur on June 30, 1995, management's estimate
of the approximate date of the Merger, the Premium would be approximately
$6,962,000.
The Amendments also require payment of escalating extension fees by the Company
to the Senior Note holders and Credit Facility banks, based upon the principal
amounts outstanding as of the beginning of each calendar quarter, until such
time as the existing debt under these agreements has been retired. Such
extension fees are expected to aggregate approximately $652,000 through June 30,
1995.
The amounts shown above for the extension fees and the Premium are estimates,
and the final amounts will depend on the date of the refinancing and the actual
principal amounts outstanding under the Senior Notes during that period. The
estimated extension fees and the Premium are being charged to interest expense
through the period ending June 30, 1995. At December 31, 1994, the Company had
accrued a total of $1,245,000 related to the Premium. Such accrual is included
in other noncurrent liabilities as the payment of the obligation is expected to
be funded by long-term financing by the combined company as discussed above. In
addition, a fee of approximately $673,000 paid upon execution of the Amendments
was charged to interest expense in 1994.
46
<PAGE> 47
CHAMBERS DEVELOPMENT COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The Credit Facility at December 31, 1994, provided for letters of credit
supporting Industrial Revenue Bonds (the "IRBs"), performance of landfill
closure and post-closure requirements, insurance and other contracts. Letters of
credit outstanding at December 31, 1994, aggregated $113,080,000, the maximum
amount then issuable under the Credit Facility. The Company pays an annual
commission of 2% on the amount of letters of credit outstanding.
The IRBs outstanding at December 31, 1994, were collateralized by letters of
credit totalling $90,550,000. The terms of the IRBs provide that the Company may
convert them to fixed interest rate obligations prior to the expiration of the
applicable letters of credit, at prevailing market interest rates. The holders
of such IRBs, upon giving notice, may tender them for redemption to the
designated agent who will either remarket the obligations or use the letters of
credit to fund their retirement. In the latter situation, the Company would be
indebted to the Credit Facility banks for the amounts advanced, and the banks
could request cash collateral in the amount thereof.
In the event the Merger is not consummated, the Company intends to seek
refinancing for its Senior Note and Credit Facility obligations. It is
anticipated that such refinancing could be completed by September 30, 1995;
however, management of the Company believes that such refinancing would not be
available to the Company on a stand-alone basis without significant dilution to
the stockholders of the Company. If a refinancing were to occur on September 30,
1995, the Premium amount would be approximately $5,500,000. In addition,
$895,000 in additional extension fees would be incurred.
In the event that the Merger is not consummated, the Company would necessarily
undertake a series of actions to provide for liquidity and funding of the
Settlement Agreements. The Company has the ability to abandon the Settlement
Agreements in the absence of funding sufficient to comply with the payment
obligations. However, it is the intention of the Company, should the Merger not
be consummated, to seek a refinancing and to delay the funding of the Settlement
Agreements rather than abandon such agreements.
The Company believes that a refinancing cannot be obtained in the absence of a
settlement of the shareholder litigation. While the Company has, under certain
circumstances, alternate available financing through a funding agreement with
USA Waste in an amount sufficient to satisfy the Company's obligations under the
Settlement Agreements, actual payments under such funding agreement remain
subject to the consent of the Company's current lending group. In the
alternative, the Company could delay the implementation of the shareholder
litigation settlement until refinancing has been obtained.
In the absence of a settlement of the shareholder litigation and a refinancing
of the Senior Note and Credit Facility obligations, the Company would be
compelled to implement an action plan to ensure continuing liquidity. The steps
that would be necessary with respect to liquidity would include a reduction in
discretionary capital expenditures with respect to current transfer station and
methane recovery projects. Capital expenditures for vehicle and heavy equipment
purchases would be reduced to a maintenance level, or otherwise deferred, and
the Company would employ lease financing programs, to the extent available, for
certain equipment, in substitution for capital expenditure programs currently
planned. The Company would also resume and accelerate its divestiture program
with respect to non-core assets and operations. As an additional step, the
Company would endeavor to accelerate remaining tax refunds and to substitute
surety bond programs where permitted, with respect to closure and post-closure
bond requirements, for cash collateral programs presently in place in certain
jurisdictions.
Should the Merger not be consummated, management of the Company believes that
the foregoing plan of action would be adequate to maintain compliance with the
covenants and payment obligations under its Senior Note and Credit Facility
obligations through December 31, 1995 and would provide a sufficient period of
time to achieve a refinancing, which, in turn would permit the implementation of
the settlement of the shareholder litigation. As indicated above, the Amendments
provide that deferred payments previously due on July 1, 1995 may be deferred
until July 1, 1996, with other deferred payments becoming due in December 1996,
and with
47
<PAGE> 48
CHAMBERS DEVELOPMENT COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
the remaining originally scheduled payments due after 1996 becoming due on
December 31, 1996. With the bulk of the Company's long-term obligations becoming
due in the second half of 1996 under the Amendments, the liquidity of the
Company would be adversely affected if the Merger were not consummated or a
refinancing or modification of the current lending agreements were not achieved
in a timely fashion.
NOTE I--COMMITMENTS
Capital Lease on Building
The Company's headquarters facility is presently leased from the principal
stockholders of the Company under a lease with an initial term expiring in
October 2006 and which has a ten-year renewal option. The agreement provides for
aggregate lease payments of $1,012,000 during 1995, payable monthly, and for
rental increases based on increases in taxes and other costs. The rent may be
adjusted upward for increases in certain costs of the lessor on an annual basis.
As of December 31, 1994, future minimum payments for the initial term of the
lease based on the aforementioned annual lease obligation were $11,140,000,
including $918,000 representing interest and $8,026,000 representing executory
costs. The Company has guaranteed the demand note borrowing by the lessor to
finance the building, which is collateral for such note. The outstanding balance
of the note was $1,945,000 at December 31, 1994. In 1988, the Company prepaid
$752,000 on the lease payments due in the final year of the original lease term;
such prepayment has been deducted in arriving at the above-mentioned future
minimum payments.
As discussed in Note D, pursuant to the terms of the Derivative Action
Settlement Agreement, the Company's headquarters facility will be contributed to
the Company, subject to assumption or discharge by the Company of the demand
note borrowing of the lessor.
Operating Leases
The Company has entered into a number of noncancelable operating leases for
vehicles, equipment, offices and other facilities which expire through 2012.
Lease expense aggregated $7,632,000, $11,020,000 and $12,027,000 during 1994,
1993 and 1992, respectively. The following is a summary of the future minimum
lease payments under operating leases in effect at December 31, 1994 (in
thousands):
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
------------------------
<S> <C>
1995.............................................................. $4,032
1996.............................................................. 2,419
1997.............................................................. 1,269
1998.............................................................. 382
1999.............................................................. 159
Thereafter........................................................ 1,380
------
$9,641
======
</TABLE>
NOTE J--ENVIRONMENTAL COSTS AND LIABILITIES
The Company's operation within the environmental services industry subjects it
to future financial obligations with regard to closure and post-closure
monitoring and site maintenance costs associated with the solid waste landfills
it operates. The Company's engineers estimate such costs based on the technical
requirements of the U.S. Environmental Protection Agency's Subtitle D
regulations and the proposed air emissions standards under the Clean Air Act, as
they are being applied on a state-by-state basis.
Final closure and post-closure monitoring and site maintenance costs represent
the costs related to cash expenditures to be incurred after a landfill ceases to
accept waste and closes. Such costs include final capping of the site and site
inspections, groundwater monitoring, leachate management, methane gas control
and
48
<PAGE> 49
CHAMBERS DEVELOPMENT COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
maintenance costs to be incurred for up to 30 years after the facility closes.
Final closure and post-closure monitoring and site maintenance costs are
estimated to be approximately $140,000,000 at the time all Company landfills
have reached their respective capacity. The accrual for these costs is recorded
as airspace at the respective landfill site is consumed.
In addition, the Company expects to incur other closure costs, principally
related to capping and methane gas control activities, during the operating
lives of the landfill sites. The accrual for these costs is also recorded as
airspace at the respective landfill site is consumed.
Accrued liabilities for all closure and post-closure monitoring and maintenance
costs are as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1994 1993
---- ----
<S> <C> <C>
Current portion, included in accrued liabilities................ $ 1,534 $ 1,858
Noncurrent portion, included in other noncurrent liabilities.... 24,113 18,114
------- -------
$25,647 $19,972
======= =======
</TABLE>
The Company periodically reviews and updates the underlying assumptions used to
determine such estimates and, accordingly, the estimate of total projected costs
is subject to periodic revision and adjustment.
NOTE K--CAPITAL STOCK
The Class A Common Stock is entitled to a noncumulative quarterly dividend
preference of $.003125 per share before any dividend may be paid on the Common
Stock. Additional dividends declared on the Class A Common Stock and the Common
Stock are shared equally on a per share basis. Holders of Class A Common Stock
are entitled to one vote per share, whereas holders of Common Stock have ten
votes per share. Common Stock is convertible into Class A Common Stock at the
option of the holder on a one-for-one basis.
At December 31, 1994, approximately 19,158,000 shares of Class A Common Stock
were reserved for issuance under the Company's stock option plans and for the
conversion of Common Stock.
During the years ended December 31, 1994, 1993 and 1992, 86,582, 10,150 and
8,700 shares, respectively, of the Company's Common Stock were exchanged for an
equal number of shares of Class A Common Stock. In addition, during 1994 and
1992, 600 and 8,366 shares, respectively, of Class A Common Stock were issued
upon the exercise of stock options.
NOTE L--STOCK OPTION PLANS
The Company has two plans under which stock options for the purchase of Class A
Common Stock currently may be granted: the 1993 Stock Incentive Plan (the "1993
Plan") and the 1991 Stock Option Plan for Non-Employee Directors (the
"Directors' Plan"). The 1990 Stock Option Plan for Consultants and Advisors was
terminated on March 16, 1994.
The maximum number of shares of Class A Common stock available for grant under
the 1993 Plan in each calendar year is equal to one percent of the total number
of outstanding shares of Class A Common Stock as of the beginning of the year,
plus any shares then reserved but not subject to grant under the Company's
terminated 1988 Stock Option Plan. Any unused shares available for grant in any
calendar year are carried forward and available for award in succeeding calendar
years.
The 1993 Plan permits the granting to key officers and employees, including
directors who are employees, the following types of awards: (i) stock options
including incentive stock options, (ii) stock appreciation rights, (iii)
restricted stock, (iv) deferred stock, (v) performance awards, (vi) dividend
equivalents and (vii) other
49
<PAGE> 50
CHAMBERS DEVELOPMENT COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
stock-based awards. The type and number of awards to be granted, as well as the
terms, conditions and other provisions applicable to each award, are determined
by the Human Resource Committee of the Board of Directors.
Under the 1993 Plan, the exercise price of stock options granted may be more or
less than the fair market value of the stock on the date of grant, but in no
event may it be less than the par value of the stock. Stock appreciation rights
may be granted, either alone or in tandem with stock options. These rights
entitle the optionee to receive the excess of the fair market value of the stock
on the date of exercise over the grant price which generally may not be less
than the fair market value of the stock on the date of grant.
The Directors' Plan provides for the granting of options for the purchase of a
maximum of 150,000 shares of Class A Common Stock. Under the Directors' Plan,
each person serving as a director and who is not employed by the Company will
automatically be granted options for the purchase of 2,000 shares of stock on
the third business day following each annual stockholders' meeting. In addition,
each nonemployee director at the effective date of the plan was granted options
to purchase 2,000 shares of stock for each year previously served on the
Company's Board of Directors. Options granted under the Directors' Plan become
fully exercisable one year after the date of grant.
Provisions of the 1988 Plan continue with respect to stock options previously
granted. Options outstanding under the 1988 Plan become exercisable (i) in
cumulative annual increments of 25 percent each year, commencing one year after
the date of grant, or (ii) in cumulative annual increments of 50 percent each
year, commencing three years after the date of grant.
Information related to stock options under all plans is as follows (shares in
thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Outstanding at beginning of year..................... 1,622 1,451 876
Granted.............................................. 585 481 751
Cancelled............................................ (269) (310) (168)
Exercised............................................ (1) -- (8)
----------- ----------- ------------
Outstanding at end of year........................... 1,937 1,622 1,451
=========== =========== ============
Exercisable at end of year........................... 779 572 372
Available for future grants at end of year........... 892 934 662
Price range:
Granted......................................... $2.25- 3.88 $ 4.03 $ 4.38
Cancelled....................................... 2.25-17.44 4.38-17.44 4.38-21.19
Exercised....................................... 4.38 -- 12.22-17.44
Outstanding at end of year...................... 2.25-24.63 4.03-24.63 4.38-24.63
</TABLE>
NOTE M--REVENUES FROM MAJOR CUSTOMERS
The Company operates in one industry segment, integrated waste management.
Revenues from the Bergen County Utilities Authority totaled $33,870,000 and
$33,476,000, or 11.7% and 11.4% of revenues from continuing operations, for the
years ended December 31, 1993 and 1992, respectively.
NOTE N--UNUSUAL ITEMS
Unusual Items--Operations
In 1992, the Company became a defendant in shareholder litigation arising out of
financial statement revisions (see Note D) and, as a result of noncompliance
with certain covenants of its various long-term borrowing
50
<PAGE> 51
CHAMBERS DEVELOPMENT COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
agreements, commenced restructuring of its principal credit facilities and
surety arrangements. The Company also initiated a major restructuring of its
operations which included a program to divest certain businesses that no longer
met strategic and performance objectives, the abandonment of various development
activities and the reorganization of its corporate and regional operations. In
1992, 1993 and 1994, the Company has incurred substantial expenses related to
these matters.
In 1994, the Company recorded charges of $3,400,000 for losses on asset
divestitures including $1,114,000 to adjust a prior year estimate of the loss on
divestiture of a hauling, recycling and transfer station operation, and
$2,300,000 related to the estimated future loss on a municipal contract.
Effective March 1, 1994, the Company was awarded a three-year contract for the
transportation and disposal of municipal solid waste with, at the customer's
option, two one-year extension periods beyond February 28, 1997. The costs of
operating the contract have been greater than originally estimated and, since
inception, the contract has been generating an operating loss. Operational
changes and improvements implemented during 1994 did not sufficiently reduce
operating costs. As a result, the Company has estimated it will incur operating
losses of approximately $2,300,000 through the remaining two-year term of the
contract, and the two one-year extension periods, in order to satisfy the
service requirements of the contract and accordingly has accrued such amount. In
1994, the Company also reversed prior year provisions for losses on divestitures
and contractual commitments of $3,565,000, including $2,000,000 previously
recorded for expected losses to be incurred on a municipal contract with respect
to which the Company was able to negotiate an early termination and $1,053,000
of excess reserve related to the sale in 1994 of a recycling operation and
certain real estate.
In addition, in 1994 the Company recorded net charges of $8,237,000 for asset
impairments and abandoned projects. That amount included a fourth quarter charge
of $6,978,000 to reduce the carrying value, as of December 31, 1994, of the
Company's medical, special and municipal waste incinerator facility to its
estimated net realizable value. The amount of the charge was measured as the
difference between the carrying value of long-term assets, principally property,
plant and equipment and intangible assets, and the estimated fair value of the
assets based on the present value of future cash flows discounted at 12%. The
adjustment was based on a review conducted in the fourth quarter which
determined there had been a permanent decline in the value of the facility based
on the conclusion that the Company could not recover its investment through
future operations, given current and forecasted pricing, waste mix and capacity
trends as well as recently proposed regulations with respect to medical waste
incinerator facilities and general declines in the value of waste incinerator
businesses. During 1994, the Company also reached a favorable settlement of
previously reported litigation related to certain contracts entered into with
respect to the purchase by the Company of a landfill and the prior purchase of a
waste collection and hauling company. The settlement amount is included as a
credit to unusual items and includes receipt by the Company of $1,200,000 in
cash and the forgiveness of all remaining non-compete payments totalling
$525,000 that were to have been paid by the Company to various individuals in
1994, 1995 and 1996. The remaining charge of $2,984,000 represents changes in
prior year estimates for certain asset impairments and abandoned projects. In
addition, the Company recorded a charge of $825,000 primarily relating to
severance benefits paid to employees terminated as part of the Company's
continued reorganization. With the exception of the $1,200,000 litigation
settlement received by the Company and the $825,000 payment of severance
benefits, there was no cash flow effect to these unusual charges.
During 1993, the Company sold certain businesses as part of its divestiture
program, which resulted in a net gain of $20,701,000. The Company also recorded
charges of $8,687,000 for losses on asset divestitures and contractual
commitments including (i) $3,172,000 related to the municipal contract discussed
above, (ii) $3,194,000 related to the recycling operation and real estate sold
in 1994 and (iii) $2,140,000 related to a hauling, recycling and transfer
station held for sale. In addition, the Company reversed prior year provisions
of $6,636,000 for losses on divestitures for businesses that were subsequently
retained.
51
<PAGE> 52
CHAMBERS DEVELOPMENT COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
In 1993, the Company also recorded charges of $4,929,000, consisting of
$2,028,000 for impaired assets and $2,901,000 for abandoned projects.
Additionally, there were charges in 1993 of $1,555,000 for special directors and
officers insurance premiums and $315,000 for severance benefits paid to
employees terminated in connection with the corporate and regional
restructuring.
In 1992, the Company recorded a charge of $10,525,000 for anticipated losses on
planned asset divestitures and contractual commitments and recorded a charge of
$12,425,000 for asset impairments and abandoned projects. There was no cash flow
effect for these unusual charges.
In addition, the Company recorded charges of $10,388,000 in 1992 for financing
and professional fees primarily related to the restructuring of its principal
credit facilities and surety arrangements. The Company also recorded a charge of
$7,134,000 for special directors and officers insurance premiums as a result of
the shareholder litigation and charges of $3,819,000 related to the
reorganization of its corporate and regional operations. The latter charges were
for employee severance, relocation and related transition costs, costs to close
certain facilities and other related costs.
UNUSUAL ITEMS--SHAREHOLDER LITIGATION SETTLEMENT AND OTHER LITIGATION RELATED
COSTS
Other income (expense) includes charges of $79,400,000, $5,500,000 and
$10,853,000 for the years ended December 31, 1994, 1993 and 1992, respectively.
The charge in 1994 consists of $75,300,000 for the shareholder litigation
settlement and $4,100,000 for legal and other related costs (see Note D). The
charges in 1993 and 1992 are for legal and other costs related to the
shareholder litigation.
A summary of unusual items is as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Unusual items--operations
Net gains on asset divestitures......................... $ -- $(20,701) $ --
Provision for loss on asset divestitures and contractual
commitments........................................... 3,366 8,687 10,525
Reversal of prior provisions for loss and costs on asset
divestitures and contractual commitments.............. (3,565) (6,636) --
Asset impairments and abandoned projects................ 8,237 4,929 12,425
Financing and professional fees......................... -- -- 10,388
Directors and officers insurance........................ -- 1,555 7,134
Corporate and regional restructuring.................... 825 315 3,819
------- -------- -------
8,863 (11,851) 44,291
Unusual items--shareholder litigation settlement and other
litigation related costs................................... 79,400 5,500 10,853
------- -------- -------
$88,263 $ (6,351) $55,144
======= ======== =======
</TABLE>
52
<PAGE> 53
CHAMBERS DEVELOPMENT COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE O--SUPPLEMENTAL CASH FLOW INFORMATION
Supplemental information related to the consolidated statements of cash flows is
as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Cash paid during the year for:
Income taxes............................................. $ 1,586 $ 563 $ 1,390
Interest (net of amount capitalized)..................... 22,440 29,278 32,252
Noncash investing and financing activities:
Receivables from sales of businesses..................... -- 4,056 4,500
Liabilities incurred or assumed in acquisitions of
businesses............................................. -- -- 8,025
Capital lease obligations................................ 408 -- 776
</TABLE>
NOTE P--INCOME TAXES
The income tax (benefit) provision applicable to continuing operations, consists
of the following (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Current
Federal.................................................. $(4,300) $ -- $(12,000)
State and local.......................................... 648 1,600 1,325
------- ------ --------
(3,652) 1,600 (10,675)
Deferred provision............................................ -- -- 12,000
Utilization of state operating loss carryforwards............. (279) -- --
------- ------ --------
$(3,931) $1,600 $ 1,325
======= ====== ========
</TABLE>
Deferred income taxes result from temporary differences in the timing of
recognition of costs and expenses for tax and financial reporting purposes and
relate principally to the capitalization of costs and expenses for income tax
purposes that were deducted for financial reporting purposes, partially offset
by the use of accelerated depreciation for income tax purposes.
The statute of limitations has expired for the Company's federal income tax
returns for 1987 and prior years. The returns for 1988 through 1992 are
currently under examination by the Internal Revenue Service (IRS). The Company
has reached tentative agreement with the IRS regarding the tax treatment of
certain costs and expenses deducted for financial statement purposes in these
open tax years. That agreement is subject to the approval of the Joint Committee
on Taxation. Based on the tentative agreement with the IRS, the Company
estimates its tax net operating loss carryforwards at December 31, 1994 to be
approximately $232,000,000, the majority of which expire in 2007.
53
<PAGE> 54
CHAMBERS DEVELOPMENT COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Deferred income tax assets and (liabilities) are comprised of the following (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1994 1993
---- ----
<S> <C> <C>
Net operating loss carryforwards..................................... $ 98,030 $ 77,555
Accrued shareholder litigation settlement............................ 28,360 --
Accrued closure reserves............................................. 10,260 8,500
Other (principally asset impairments and losses
from planned asset divestitures)................................... 15,700 6,765
--------- --------
Gross deferred income tax assets..................................... 152,350 92,820
Property, equipment and intangibles assets........................... (11,780) (6,400)
Less valuation allowance............................................. (140,570) (86,420)
--------- --------
Deferred income tax asset, net....................................... $ -- $ --
========= ========
</TABLE>
A reconciliation of the income tax (benefit) provision applicable to continuing
operations computed using the statutory federal income tax rate to the tax
provision shown in the consolidated statements of operations is as follows (in
thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Computed at federal statutory rate.......................... $(33,000) $ 3,500 $(23,400)
Operating losses not utilized............................... 28,520 -- 23,400
Benefit of operating loss carryforwards..................... -- (3,500) --
Prior year tax adjustment................................... (4,300) -- --
State income taxes.......................................... 369 1,600 1,325
Nondeductible expenses...................................... 4,480 -- --
-------- ------- --------
Income tax provision (benefit).............................. $ (3,931) $ 1,600 $ 1,325
======== ======= ========
</TABLE>
NOTE Q--FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions have been used by the Company to estimate
the fair value of each class of financial instrument:
Cash and Cash Equivalents
The fair value approximates the carrying amount due to the short period to
maturity (three months or less) of the instruments.
Funds Held In Escrow
The estimated fair value of financial instruments that reprice or mature in less
than three months approximates the carrying amount due to the short maturity of
the instruments. The fair value of financial instruments with maturities greater
than three months are estimated based on quoted market prices for the same or
similar financial instruments.
Long-Term Obligations
The fair value of the Company's debt maturing within one year approximates the
carrying amount due to the short-term maturities involved.
54
<PAGE> 55
CHAMBERS DEVELOPMENT COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The fair value of the Senior Note obligations approximates the carrying amount
for obligations of similar risk and duration. The interest rates on these notes
were established in December 1992 and remained unchanged when the amendments to
the agreements were executed in July 1993. Interest and periodic fees on these
notes were increased in November 1994.
The fair value of the industrial revenue bonds approximates the carrying amount
as the interest rates on the bonds are reset weekly based on the credit quality
of the letters of credit which collateralize the bonds.
The fair value of the noninterest bearing notes approximates the carrying amount
which represents the discounted value of the notes using an interest rate
considered market for a borrowing of similar credit quality and maturity.
The fair value of other notes payable and equipment loans, excluding capital
leases, is estimated by discounting future cash flows using an interest rate
considered market for borrowings of similar credit quality and maturity.
Letters of Credit
The fair value of letters of credit is based upon the fees paid to obtain the
obligation.
The carrying or notional amounts and estimated fair values of the Company's
financial instruments are as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, 1994 DECEMBER 31, 1993
-------------------- --------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- -------- -------- --------
<S> <C> <C> <C> <C>
BALANCE SHEET INSTRUMENTS
Cash and cash equivalents......................... $ 23,548 $ 23,548 $ 44,553 $ 44,553
Funds held in escrow.............................. 25,716 25,744 43,241 43,231
Long-term obligations (including current
maturities)..................................... 253,306 253,152 286,104 285,853
</TABLE>
<TABLE>
<CAPTION>
NOTIONAL FAIR NOTIONAL FAIR
AMOUNT VALUE AMOUNT VALUE
-------- -------- -------- --------
<S> <C> <C> <C> <C>
OFF BALANCE SHEET INSTRUMENTS
Letters of credit................................. $113,080 $ -- $131,103 $ --
</TABLE>
55
<PAGE> 56
CHAMBERS DEVELOPMENT COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE R--SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
The following information summarizes the Company's quarterly financial results
(in thousands, except per share amounts):
<TABLE>
<CAPTION>
NET
OPERATING NET INCOME
INCOME INCOME (LOSS)
REVENUES (LOSS) (LOSS) PER SHARE
-------- ------ ------ ---------
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1994
First quarter............................... $ 59,766 $ 3,315 $ (1,975) $ (.03)
Second quarter.............................. 68,644 5,696 860 .01
Third quarter............................... 67,136 6,597 (72,719) (1.09)
Fourth quarter.............................. 62,443 (8,388) (16,410) (.24)
-------- ------- -------- ------
$257,989 $ 7,220 $(90,244) $(1.35)
======== ======= ======== ======
YEAR ENDED DECEMBER 31, 1993
First quarter............................... $ 67,687 $ 9,111 $ 1,788 $ .03
Second quarter.............................. 75,878 8,332 1,503 .02
Third quarter............................... 75,274 21,486 9,527 .14
Fourth quarter.............................. 69,642 2,074 (4,515) (.07)
-------- ------- -------- ------
$288,481 $41,003 $ 8,303 $ .12
======== ======= ======== ======
</TABLE>
Certain reclassifications have been made to the 1993 quarterly financial results
previously reported primarily for the reclassification of shareholder litigation
related costs from unusual items--operations to a component of other income
(expense).
Results for 1994 include net charges for unusual items of $74,100,000 and
$14,163,000 for the third and fourth quarters, respectively (see Note N).
Results for 1993 include net credits for unusual items of $4,563,000, $758,000
and $6,532,000 for the first, second and third quarters, respectively, and a net
unusual charge of $5,502,000 for the fourth quarter (see Note N).
NOTE S--COMMITMENTS AND CONTINGENCIES
Employment Agreements
In February 1993, the Company entered into employment agreements with certain of
its key executives that provide such executives with rights to severance
benefits if employment with the Company ceases under specified circumstances in
connection with a "change of control" of the Company such as the Merger. Such
agreements were replaced effective as of February 1995 with agreements
substantially similar to the prior agreements except with respect to certain
termination provisions unrelated to the change of control termination
provisions. If all such rights were to be exercised, the Company would be
obligated to pay a total of approximately $7,635,000 to such executives. The
term of each of these agreements ends on February 2, 1996.
Litigation and Investigations
Shortly after the Company's March 17, 1992 announcement of a change in
accounting policies concerning capitalization, the Securities and Exchange
Commission (the "Commission") initiated an informal investigation with respect
to the Company's accounting method and the accuracy of its financial statements
and into the possibility that persons or entities had traded in the Company's
securities on the basis of inside information
56
<PAGE> 57
CHAMBERS DEVELOPMENT COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
prior to the announcement. On September 30, 1992, a formal order of
investigation was issued by the Commission with respect to potential violations
by the Company and others of sections 10(b), 13(a) and 13(b) of the Securities
Exchange Act of 1934 and various rules promulgated thereunder. The Company has
cooperated with the investigation through the production of documents and by
providing witnesses pursuant to the Commission's request. Management believes
that issues arising from the Commission's investigation will be resolved in the
near term.
The American Stock Exchange and the Chicago Board of Options Exchange are
conducting investigations into trading activity on their respective exchanges in
the Company's securities and in put options on the Company's securities prior to
the March 17, 1992 announcement.
On December 4, 1992, the Company was served with a grand jury subpoena out of
the United States District Court for the Eastern District of New York seeking
production of public filings and reports disseminated to its shareholders,
documents referring to the preparation of its financial statements and other
materials. The Company has responded to the subpoena by producing documents. The
grand jury investigation is ongoing and it appears to be focusing on issues
similar to those raised by the civil litigation discussed in Note D and the
Commission's investigation described above.
The Company is cooperating with each of the investigations referred to in the
three preceding paragraphs.
A declaratory judgement action entitled Morel, et al. v. Chambers Waste Systems
of Florida, Inc., was filed on September 29, 1994 in the Circuit Court of the
Fifteenth Judicial Circuit of Florida in and for Palm Beach County, Florida. The
plaintiffs are seeking a declaration that they are entitled to royalty payments
from the Company as calculated by a percentage of gross revenues derived from
the Company's landfill located at Berman Road in Okeechobee County, Florida, as
well as from any landfill that may be sited in the future by the Company on
nearby property. The Company has responded by seeking, among other things, a
declaration that any writing or document that the plaintiffs contend such
royalty entitlement is based upon is void, voidable or otherwise of no effect
or, alternatively, that any royalty payments be solely based upon the nearby
property to the Company's landfill, when a landfill is developed, if ever, on
such property. The outcome of this action is not presently determinable.
Since the announcement of the Merger, three cases have been filed in the Court
of Chancery of the State of Delaware in New Castle County against the Company,
its officers and directors and USA Waste and Envirofil, Inc. These cases include
Smith v. Rangos et al., C.A. No. 13906, Krim v. Rangos et al., C.A. No. 13985,
and Adams v. Rangos et al., C.A. No. 13909. Each of these actions relates to the
Merger and seeks substantially similar relief. Accordingly, a consolidation
order was entered by the Court of Chancery on March 1, 1995. The cases have been
consolidated for all purposes under Smith v. Rangos, et al., and the caption of
the consolidated case is In Re Chambers Development Company, Inc. Shareholders
Litigation, Consolidated C.A. No. 13906. The complaint which will govern the
consolidated action is the compliant filed in the Krim action. The Krim
complaint is brought as a purported class action on behalf of the plaintiff and
all similarly situated Company security holders, excluding defendants and any
person, firm, corporation or similar entity related to or affiliated with any of
the defendants. The complaint alleges that the individual defendants, inter
alia, engaged in unfair dealing to the detriment of the class; the Merger is
grossly unfair to the members of the class; the members of the class would be
irreparably damaged if the Merger were to be consummated; and the defendants'
conduct constituted a breach of fiduciary and other common law duties allegedly
owed to the putative class. The plaintiff alleges that the Merger consideration
is inadequate for various reasons and that the individual defendants failed to
maximize shareholder value. The complaint seeks a declaration that the Merger
Agreement was the result of a breach of fiduciary duty by the individual
defendants, aided and abetted by the USA Waste defendants, and is thus unlawful
and unenforceable; an injunction to enjoin defendants from proceeding with the
Merger; an injunction to enjoin defendants from consummating any merger or
combination with a third party absent procedures or processes such as an
auction; an order invalidating certain proxy arrangements; and an order awarding
plaintiff and the class members damages, costs and disbursements,
57
<PAGE> 58
CHAMBERS DEVELOPMENT COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
including reasonable attorneys' and experts' fees. The Company, USA Waste and
the individual defendants have filed answers denying the charges set forth in
the Complaint and intend to contest vigorously those charges.
Other lawsuits, claims and proceedings have been or may be instituted or
asserted against the Company from time to time. Although the outcome of these
matters cannot be predicted with certainty, management of the Company believes
that disposition of these lawsuits, claims and proceedings which are pending or
asserted will not have a material adverse effect on the Company's financial
condition or liquidity. Given the Company's level of operating results, future
resolution of these matters may have a material effect on results of operations
for interim and annual periods.
Insurance
The Company self-insures certain of its comprehensive general liability and
workers compensation risks, while maintaining third-party coverage to protect
against catastrophic loss, except for losses arising from pollution and
environmental liabilities which are self-insured. The Company has not incurred
significant fines, penalties or liabilities for pollution or environmental
liabilities at any of its facilities; however, the Company's operating results
could be adversely affected in the future in the event of uninsured losses.
58
<PAGE> 59
REPORT OF INDEPENDENT AUDITORS
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF CHAMBERS DEVELOPMENT COMPANY,
INC.:
We have audited the accompanying consolidated balance sheets of Chambers
Development Company, Inc. and subsidiaries as of December 31, 1994 and 1993, and
the related consolidated statements of operations, stockholders' equity and cash
flows for each of the three years in the period ended December 31, 1994. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Chambers Development Company,
Inc. and subsidiaries as of December 31, 1994 and 1993, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1994 in conformity with generally accepted accounting principles.
As discussed in Note B, the Company changed its method of accounting for
contributions effective January 1, 1994.
Deloitte & Touche LLP
Pittsburgh, Pennsylvania
March 30, 1995
59
<PAGE> 60
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY.
The following table sets forth certain information about the directors of
the Company.
<TABLE>
<CAPTION>
NAME, PRINCIPAL YEAR FIRST
OCCUPATION, AGE ELECTED CERTAIN OTHER INFORMATION
--------------- ------- -------------------------
<S> <C> <C>
JOHN G. RANGOS, SR. (65) 1973 Mr. Rangos has served in his present position
Chairman and Chief since January 1994. Prior thereto, he served as
Executive Officer, President and Chief Executive Officer of the
Chambers Development Company from 1973 to January 1994. Mr. Rangos
Company, Inc. is the father of John G. Rangos, Jr., Vice
Chairman-Administration and Technology, and
Secretary, of the Company, and Alexander W.
Rangos, President and Chief Operating Officer
of the Company.
MICHAEL J. PERETTO (55) 1975 Mr. Peretto served as Vice President-Special
Retired Vice President- Projects of the Company until his retirement in
Special Projects, 1989. He had been employed by the Company since
Chambers Development its founding.
Company, Inc.
ALEXANDER W. RANGOS (34) 1985 Mr. Rangos has served in his present position
President and Chief since January 1994. Prior thereto, he served as
Operating Officer, a field manager from 1981 to 1984, as Manager
Chambers Development of the Southern Region from 1984 to 1985, as
Company, Inc. Executive Vice President-Corporate Development
from 1985 to 1990, and as Executive Vice
President-Operations and Corporate Development
from 1990 to 1994. Mr. Rangos is a son of John
G. Rangos, Sr., Chairman and Chief Executive
Officer of the Company, and the brother of John
G. Rangos, Jr., Vice Chairman-Administration
and Technology, and Secretary, of the Company.
JOHN G. RANGOS, JR. (37) 1985 Mr. Rangos has served in his present position
Vice Chairman- since January 1994. Prior thereto, he served as
Administration and Assistant Manager and Manager of Landfill
Technology, and Secretary, Operations, and Executive Vice
Chambers Development President-Operations until 1990, and Executive
Company, Inc. Vice President-Administration and Technology
from 1990 to 1994. He commenced full-time
employment with the Company in 1978. Mr. Rangos
is a son of John G. Rangos, Sr., Chairman and
Chief Executive Officer of the Company, and the
brother of Alexander W. Rangos, President and
Chief Operating Officer of the Company.
</TABLE>
60
<PAGE> 61
<TABLE>
<CAPTION>
NAME, PRINCIPAL YEAR FIRST
OCCUPATION, AGE ELECTED CERTAIN OTHER INFORMATION
--------------- --------- -------------------------
<S> <C> <C>
WILLIAM E. MOFFETT (64) 1987 Mr. Moffett has served on the Company's Board
Retired Chairman of the of Directors since January 1987. In May 1985,
Board and Chief Executive he retired as President of the Gulf Oil
Officer, Chatham Foundation and as Vice President-Public Affairs
Enterprises, Inc. of Gulf Oil Corporation, having joined Gulf Oil
(real estate development) Corporation in 1969 and served in a number of
and Hazmed, Inc. managerial assignments for that company and its
(environmental services) subsidiaries. Mr. Moffett currently provides
consulting services to the Company in its
public affairs and marketing of special waste
services.
JOHN M. ARTHUR (72) 1989 Mr. Arthur has served on the Company's Board of
Retired Chairman, Directors since February 1989. He served as
Duquesne Light Company Chairman of the Board of Duquesne Light Company
(electric utility) from 1968 until his retirement in September
1987. Mr. Arthur currently provides consulting
services to the Company in the marketing of
special waste services.
JOSEPH G. STOTLEMYER (53) Vice 1990 Mr. Stotlemyer has served in his present
President-Support position since May 1990. Prior thereto, he
Services, served with the Company as Director of
Chambers Development Corporate Security. From 1966 until joining the
Company, Inc. Company in January 1987, Mr. Stotlemyer was
employed by the City of Pittsburgh, Department
of Public Safety.
PETER J. GIBBONS (59) 1993 Mr. Gibbons has served on the Company's Board
Retired Senior Partner, of Directors since August 1993. Prior thereto,
Price Waterhouse he was affiliated with the accounting firm of
(accounting firm) Price Waterhouse from 1961 until his retirement
in 1993.
</TABLE>
The following sets forth information regarding the other executive officers
of the Company:
William Rodgers, Jr. (age 45) joined the Company in September 1991, serving
as Vice President of Corporate Development. Since April 1992, Mr. Rodgers has
served as Chief Financial Officer, having been appointed as Senior Vice
President in January 1994. From 1986 until joining the Company, Mr. Rodgers was
employed by National Intergroup, Inc. as Vice President, General Counsel and
Secretary.
Peter V. Morse (age 48) joined the Company in May 1988 and served as
Corporate Development Project Analyst until January 1989. From February 1989 to
June 1989, he served as Director-Administration and Planning. From July 1989 to
December 1990, he served as Assistant Vice President-Corporate Development and
Planning. From January 1991 until September 1991, he served as Assistant Vice
President-Operations and Corporate Development. From September 1991 to January
1994, he served as Vice President of Operations. Since January 1994 he has
served as Senior Vice President of Marketing and Development.
Edward N. Durand (age 41) joined the Company in September 1986 and has
served as Vice President and General Counsel since that time.
David J. Feals (age 37) joined the Company in November 1992 and has served
as Vice President and Corporate Controller since that time. Since June 1993, he
has also served as Chief Accounting Officer. From August 1989 until joining the
Company, Mr. Feals was employed by Beazer USA, Inc. as its Vice President and
Controller.
Ronald H. Jones (age 44) joined the Company in July 1989 and served as
Assistant Vice President of Finance until November 1990. From December 1990
until June 1992, he served as Director of Corporate Development. From July 1992,
he served as Treasurer, and since January 1994 he has served as Vice President
and Treasurer.
61
<PAGE> 62
Allan D. Pass (age 45) joined the Company in September 1991 and has served
as Vice President of Human Resources since that time. From 1986 until joining
the Company, Dr. Pass was employed by National Behavioral Science Consultants,
as Director.
Lawrence J. Yatch (age 50) joined the Company in October 1991 and served as
Vice President of Special Projects and Government Relations until June 1992.
Since July 1992, he has served as Vice President of Public Affairs. From April
1988 until joining the Company, Mr. Yatch was a partner in the law firm of
Klett, Lieber, Rooney & Schorling.
Jack D. Weertman (age 44) joined the Company in May 1991 and served as
Controller, Southern Region, until August 1991. From September 1991 to January
1994, he served as Regional Vice President of Operations, Southern Region. From
January 1994 until March 1995, he served as Senior Vice President of Operations.
From July 1979 until joining the Company, Mr. Weertman was employed by Waste
Management, Inc. as a Regional Vice President.
ITEM 11. EXECUTIVE COMPENSATION.
The following table sets forth the aggregate remuneration paid or accrued
during the years ended December 31, 1994, 1993 and 1992 for the chief executive
officer and the other four executive officers of the Company (the "Named
Executives") who were most highly compensated during 1994.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION OTHER STOCK
NAME AND PRINCIPAL --------------------- ANNUAL OPTIONS
POSITION YEAR SALARY BONUS(1) COMPENSATION (SHARES)
------------------ ---- ------ -------- ------------ ----------
<S> <C> <C> <C> <C> <C>
John G. Rangos, Sr........................ 1994 $662,000 $ 0 $0 0
Chairman and 1993 662,000 0 0 0
Chief Executive Officer 1992 709,769 0 0 0
Alexander W. Rangos....................... 1994 314,746 0 0 38,700
President and Chief 1993 282,000 0 0 0
Operating Officer 1992 339,144 0 0 0
John G. Rangos, Jr........................ 1994 314,746 0 0 38,700
Vice Chairman- 1993 282,000 0 0 0
Administration and 1992 339,144 0 0 0
Technology, and Secretary
William Rodgers, Jr....................... 1994 245,177 0 0 30,000
Senior Vice President 1993 203,831 65,000 0 30,000
and Chief Financial Officer 1992 188,231 0 0 40,000
Peter V. Morse............................ 1994 217,092 0 0 30,000
Senior Vice President 1993 160,750 0 0 30,000
of Marketing and Development 1992 165,683 0 0 40,000
<FN>
---------
(1) Amount shown represents cash bonus and is included in the year earned.
</TABLE>
62
<PAGE> 63
The following table sets forth information concerning stock options granted
to the Named Executives under the Company's stock option plans during the year
ended December 31, 1994.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
-------------------------------------------------------------- ANNUAL RATES OF
PERCENTAGE OF STOCK PRICE
TOTAL OPTIONS APPRECIATION FOR
STOCK GRANTED TO OPTION TERM
OPTIONS EMPLOYEES EXERCISE PRICE EXPIRATION --------------------
NAME GRANTED (1) IN 1994 (PER SHARE) (2) DATE 5% 10%
---- ----------- ------------- --------------- ---------- --- ---
<S> <C> <C> <C> <C> <C> <C>
John G. Rangos, Sr....... -- -- -- -- -- --
Alexander W. Rangos...... 38,700 6.8% $2.25 9/27/04 $54,800 $138,800
John G. Rangos, Jr....... 38,700 6.8 2.25 9/27/04 54,800 138,800
William Rodgers, Jr...... 30,000 5.3 2.25 9/27/04 42,500 107,600
Peter V. Morse........... 30,000 5.3 2.25 9/27/04 42,500 107,600
<FN>
---------
(1) The options have a maximum term of ten years, subject to earlier termination
in certain events related to termination of employment; and become
exercisable in cumulative annual increments of 25% each year commencing one
year after the date of grant.
(2) The exercise price and tax withholding obligations related to exercises may
be satisfied by the delivery to the Company of cash or previously owned
shares of the Company's Class A Common Stock.
</TABLE>
The following table sets forth information concerning stock options
exercised during the year ended December 31, 1994, and unexercised options at
December 31, 1994, for each of the Named Executives.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR
AND 1994 YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
SHARES VALUE OPTIONS AT IN-THE-MONEY OPTIONS
ACQUIRED REALIZED DECEMBER 31, 1994 AT DECEMBER 31, 1994
UPON UPON ----------------- ---------------------
NAME EXERCISE EXERCISE EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------- -------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
John G. Rangos, Sr.... -- -- -- -- -- --
Alexander W. Rangos... -- -- 100,750 44,950 $0 $62,900
John G. Rangos, Jr.... -- -- 100,750 44,950 0 62,900
William Rodgers,
Jr.................. -- -- 15,500 84,500 0 48,800
Peter V. Morse........ -- -- 26,800 84,500 0 48,800
</TABLE>
Each director who is not an officer or employee of the Company is entitled
to receive an annual director's fee of $24,000. Each director who is a member of
the Human Resources Committee, the Special Litigation Committee or the Audit
Committee receives an additional fee of $3,000 annually for each committee. Each
nonemployee director is entitled to receive options for 2,000 shares per year of
the Company's Class A Common Stock under the Directors' Stock Option Plan. The
options have a 10-year term, become exercisable one year after the date of
grant, and have an option price equal to fair market value on the date of grant.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS.
In February 1993, the Company entered into employment agreements with eight
of its then current key executives, William Rodgers, Jr., Senior Vice President;
Peter V. Morse, Senior Vice President of Marketing and Development; Jack D.
Weertman, former Senior Vice President of Operations; Edward N. Durand, Vice
President and General Counsel; David J. Feals, Vice President and Corporate
Controller; Ronald H. Jones, Vice President and Treasurer; Lawrence J. Yatch,
Vice President of Public Affairs; and Joseph G. Stotlemyer,
63
<PAGE> 64
Vice President of Support Services. These agreements were subsequently replaced
with substantially similar agreements, and the current agreements expire on
February 2, 1996. The agreements provide for the continued employment of such
executives in capacities, and compensation on a basis, commensurate with their
capacities and compensation as of the commencement of the agreements. The
agreements contemplate, further, that in the event the executive's employment is
terminated during such period (a) by the executive because either he has not
been employed in a commensurate capacity or he has not been commensurately
compensated or (b) by the Company other than for just cause, the executive would
be entitled to receive two years of salary and average bonus under the Company's
management incentive compensation plan. The agreements also provide that the
executive shall be entitled to three years of salary and maximum bonus if a
change in control occurs and the executive is not offered employment with the
successor company on essentially commensurate terms.
The following table sets forth the annual compensation provided for in the
employment agreements with the eight key executives referenced above.
<TABLE>
<CAPTION>
EXECUTIVE TERMINATION OF EMPLOYMENT CHANGE IN CONTROL
--------- ------------------------- -----------------
<S> <C> <C>
William Rodgers, Jr............................ $493,333 $1,210,950
Jack D. Weertman*.............................. 450,000 1,210,950
Peter V. Morse................................. 450,000 1,210,950
Edward N. Durand............................... 380,158 1,023,005
Lawrence J. Yatch.............................. 380,000 861,120
David J. Feals................................. 292,140 786,148
Ronald H. Jones................................ 281,406 663,780
Joseph G. Stotlemyer........................... 248,394 668,428
</TABLE>
* As of March 24, 1995, Mr. Weertman was no longer employed by the Company.
The Company also has entered into an employment agreement with one other
executive, Allan D. Pass, Vice President-Human Resources. The agreement with Dr.
Pass provides for a five-year term of employment commencing in September 1991 at
an annual base salary of $175,000; if the agreement is terminated by the Company
without due cause, Dr. Pass is entitled to be paid his base salary through the
remainder of the term.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION.
In their capacities as consultants to the Company, William E. Moffett and
John M. Arthur, who are also members of the Company's Board of Directors,
received $144,000 and $30,000, respectively, for consulting services rendered
during 1994. Mr. Moffett performs consulting services for the Company in public
affairs and marketing of special waste services. Mr. Arthur performs consulting
services for the Company in the marketing of special waste services.
Mr. Arthur and Mr. Moffett are members of the Human Resources Committee of
the Board of Directors and are not current or former officers or employees of
the Company or any of its subsidiaries. Michael J. Peretto is a member of the
Human Resources Committee and served as Vice President-Special Projects of the
Company until his retirement in 1989.
REPORT OF THE HUMAN RESOURCES COMMITTEE
As members of the Human Resources Committee of Chambers Development
Company, Inc. (the "Committee"), it is our duty to review the annual
compensation paid to the Chief Executive Officer and each of the other executive
officers of the Company and to administer the Company's various incentive plans,
including its stock option plan and its management incentive compensation plan.
This report relates to the compensation paid to the Chief Executive Officer and
the other executive officers of the Company during the year ended December 31,
1994.
64
<PAGE> 65
COMPENSATION POLICY AND OBJECTIVES
The compensation policy of the Company, which is endorsed by the Committee,
is that a substantial portion of the annual compensation of each executive
officer is based upon his individual contribution to the Company and the
function for which he is responsible. This is particularly applicable with
respect to the determination of the base salary of executive officers. The
Company has retained the services of Hay Management Consultants ("HMC"), a
compensation consulting firm, to assist the Committee in connection with the
performance of its various duties. The Committee currently evaluates various
factors utilized by HMC in reviewing certain aspects of management's
compensation. Members of the Committee also review compensation surveys provided
by HMC and others. The basis for determining the relative values of the
Company's various executive officers has been and will continue to be a
combination of market pricing to attract and retain talented and dedicated
individuals, the Committee's subjective evaluation of the officers' professional
contributions and the relative internal importance of the position, as ranked
through the HMC job evaluation system, with subjective evaluation and market
pricing being the more dominant influences.
BASE SALARY OF THE CHIEF EXECUTIVE OFFICER
John G. Rangos, Sr.'s base salary for 1994, as Chief Executive Officer, was
based principally upon the Committee's subjective perception of Mr. Rangos,
Sr.'s organizational responsibilities, contributions and experience and the
commitment which Mr. Rangos, Sr. made towards the growth and development of the
Company. Mr. Rangos, Sr.'s base salary for 1992, 1993 and 1994 was approved by
the Committee in November 1991, and was subsequently reduced pursuant to the
Company's salary reduction program described below.
INCENTIVE COMPENSATION FOR EXECUTIVE OFFICERS
Under the Company's management incentive compensation plan for its key
managerial personnel, in which approximately 150 employees are eligible to
participate, bonuses are paid based on each officer's performance and the
performance of the Company. A separate program was established by the Committee
in 1991 with respect to Mr. Rangos, Sr., and is described below.
Currently all of the senior executive officers, other than Mr. Rangos, Sr.,
are eligible to participate in the management incentive compensation plan. The
purpose of the management incentive plan is to:
- Focus key management's efforts on performance which will increase the
value of the Company to its stockholders;
- Align the interests of key management with those of the stockholders;
- Provide a highly competitive short- and long-term incentive and capital
accumulation opportunity;
- Provide a significant retention incentive for selected key managers; and
- Develop a sense of teamwork, participation and partnership at all
organizational levels.
The plan provides for a cash bonus based on the performance of the Company
and the individual during a twelve-month performance cycle. The Company's goals
consist of developmental progress as measured by operating objectives, targeted
levels of return on equity, and total stockholder return (measured by stock
price performance and dividend yield) compared to the total stockholder return
achieved by peer companies.
The Company's performance, for purposes of compensation decisions, is
measured under the management incentive compensation plan against goals
established prior to the start of the year by the Committee and is reviewed and
approved by the Committee. No executive officer received incentive compensation
awards in 1994, other than an award of $5,859 to Ronald H. Jones.
INCENTIVE COMPENSATION FOR THE CHIEF EXECUTIVE OFFICER
Prior to 1991, in determining incentive compensation for John G. Rangos,
Sr. as Chief Executive Officer during 1994, the Committee examined on a
subjective basis the individual performance of Mr. Rangos, Sr.
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<PAGE> 66
and the performance of the Company. In 1991 the Committee established a separate
incentive compensation plan for Mr. Rangos, Sr. which provided for stock and
cash bonuses based on corporate performance goals relating to earnings per share
and return on average equity. This plan provided for an annual potential bonus
of up to 50,000 shares of Common Stock, plus cash equal to all federal, state
and local income taxes due and payable as a result of the distribution of the
shares of stock. Based upon the criteria in this program, John G. Rangos, Sr.
was not paid an incentive compensation award for the years 1993 or 1994.
STOCK OPTION PLANS
The purpose of the Company's 1988 Stock Option Plan and its 1993 Stock
Incentive Plan (collectively the "Plan") is to focus on key individuals who, in
the judgment of the Committee, can be expected to contribute to the management
and growth of the Company. Additionally, in concert with the Company's
compensation philosophy, the purposes of the Plan are to:
- Align the interests of key individuals with those of the stockholders;
- Develop a sense of teamwork, participation and partnership at all
organization levels; and
- Provide a significant retention compensation element.
During 1994, the Committee consulted with the firm of Towers Perrin, Inc.
("TP") in considering stock option grants to each of the executive officers of
the Company under the Plan.
The Committee worked with TP, and TP met with key executives to develop a
comprehensive understanding of current organizational business and compensation
objectives. TP reviewed on an individual-by-individual basis the proposed
awardee's current salary and organizational level in the context of the proposed
award. These levels were then compared to competitive standards based upon TP's
studies and surveys. TP also considered these factors in formulating the basis
for the proposed stock option awards to be used for recruitment and retention
purposes, in conjunction with established individual award guidelines,
organizational responsibility, past practice and, where appropriate,
demonstrated performance. TP additionally reviewed the vesting schedule utilized
for recruitment and retention purposes as contrasted with the vesting schedule
for ongoing Plan award purposes. Finally, TP studied the Plan itself, including
shares reserved for the Plan as a percentage of total outstanding shares and the
proposed awards compared to Institutional Shareholder Services, Inc.'s annual
dilution guidelines.
In October 1993, following consultation with TP, the Company adopted the
use of the Black-Sholes method in the determination of the size of stock option
awards. Officers received stock options which were based on their organizational
responsibilities and positions within the Company. In determining the stock
option grants, the Company utilized a total compensation philosophy and
objectives which took into consideration base salaries, short-term incentives,
long-term incentives and benefits. As part of this integrated approach, it was
agreed that emphasis should be placed upon providing selected individuals with
long-term incentives through the utilization of the Plan.
The Company believes that stock options granted under the 1993 Stock
Incentive Plan qualify as "performance-based compensation" under Section 162(m)
of the Internal Revenue Code and the Company does not currently anticipate that
it will be affected by the limitation under Section 162(m) on deduction of
executive compensation. However, the Company entered into employment contracts
with several key executives prior to the enactment of Section 162(m), and if the
executives received the severance benefits provided under the terms of the
employment contracts, Section 162(m) could be applicable.
1992 SALARY REDUCTION PROGRAM
Effective May 1, 1992, the Company implemented a management salary
reduction program which affected all management employees, including executive
officers who receive a base compensation of $70,000 and above. The Company
believed that all members of management should participate in the Company's
comprehensive cost reduction effort. The management salary reduction program
mandated that all employees with a base salary of over $70,000 be subject to a
10% reduction of salary over $70,000 up to $100,000. Base
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<PAGE> 67
salary between $100,000 and $200,000 was reduced by 15%, and base salary of more
than $200,000 was reduced by 20%. Effective in March 1994, the Committee
authorized the reinstatement of salary levels to their former amounts.
In November 1992, the Company, in its continuing effort to enhance its
competitive capabilities within the market place, made a temporary adjustment in
the administration of compensation guidelines by freezing compensation to
salaried personnel. The temporary compensation policy changes mandated that no
merit increases would be granted to any such employees for a period of one year.
In February 1994, the Committee authorized the resumption of merit increases,
retroactive to December 20, 1993.
HUMAN RESOURCES COMMITTEE
William E. Moffett, Chairman
John M. Arthur
Peter J. Gibbons
Michael J. Peretto
March 29, 1995
COMPANY STOCK PERFORMANCE
The following graph compares the cumulative total returns (assuming
reinvestment of dividends) for the five years ended December 31, 1994 of $100
invested on December 31, 1989 in each of the Company's Class A Common Stock, the
Standard & Poor's 500 Stock Index and the Standard and Poor's Pollution Control
Index.
COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURN
AMONG CHAMBERS CLASS A COMMON STOCK, THE S & P 500 INDEX
AND THE S & P POLLUTION CONTROL INDEX
<TABLE>
<CAPTION>
CHAMBERS S & P
MEASUREMENT PERIOD CLASS A POLLUTION
(FISCAL YEAR COVERED) COMMON STOCK S & P 500 CONTROL
<S> <C> <C> <C>
1989 100 100 100
1990 113 97 89
1991 199 126 105
1992 40 136 105
1993 24 150 77
1994 23 152 80
</TABLE>
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<PAGE> 68
ITEM 12. SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS.
At the close of business on March 20, 1995, the Company had outstanding
15,592,068 shares of its Common Stock at the par value of $.50 per share and
51,197,059 shares of its Class A Common Stock of the par value of $.50 per
share. The holders of such Common Stock and Class A Common Stock are entitled to
ten votes and one vote, respectively, for each share. In accordance with the
Company's Certificate of Incorporation, the holders of shares of Common Stock
and of Class A Common Stock vote together as a single class, except that, at
every meeting of stockholders called for the election of directors, the holders
of shares of Class A Common Stock are entitled to elect one-quarter of the
number of directors to be elected at such meeting or, if one-quarter of such
number of directors is not a whole number, the holders of shares of Class A
Common Stock are entitled to elect the next higher whole number of directors to
be elected at such meeting. The remaining directors are elected by the holders
of shares of Class A Common Stock and of Common Stock, voting together as a
single class. The Certificate of Incorporation and By-Laws of the Company do not
permit cumulative voting in the election of directors, which means that the
holders of more than fifty percent of the shares of Class A Common Stock voted
at the meeting, and the holders of shares of Class A Common Stock and of Common
Stock representing more than fifty percent of the aggregate voting power of all
shares of Class A Common Stock and of Common Stock voted at the meeting,
respectively, can each elect all of the directors to be elected by each such
group, and the holders of shares representing the remainder of the voting power
cannot elect any of the directors to be elected by either such group.
The number of shares of the Company's Class A Common Stock and Common Stock
beneficially owned by each director, each Named Executive and each owner of 5%
or more of a class of stock, and by all directors and executive officers of the
Company as a group, at December 31, 1994, and the percentage of the Company's
outstanding Class A Common Stock and Common Stock so owned, are as follows:
<TABLE>
<CAPTION>
TITLE OF CLASS AND AMOUNT
OF BENEFICIAL OWNERSHIP PERCENTAGE OF CLASS
---------------------------- -------------------
NAME AND ADDRESS CLASS A CLASS A
OF BENEFICIAL OWNER(1) COMMON STOCK COMMON STOCK COMMON STOCK COMMON STOCK
---------------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
John G. Rangos, Sr........... 8,963,120 9,598,120 17.5% 61.6%
John G. Rangos, Jr. (2)(3)... 2,237,940 2,646,040 4.4% 17.0%
Alexander W. Rangos (2)(3)... 2,148,340 2,666,040 4.2% 17.1%
Joseph G. Stotlemyer (4)..... 44,500 14,050 (14) (14)
Michael J. Peretto (5)....... 8,000 2,600 (14) (14)
John M. Arthur (6)........... 13,146 1,000 (14) (14)
William E. Moffett (7)....... 14,000 -- (14) --
Peter J. Gibbons (8)......... 4,000 -- (14) --
William Rodgers, Jr. (9)..... 20,500 3,000 (14) (14)
Peter V. Morse (10).......... 28,700 -- (14) --
All Directors and Executive
Officers as a Group
(16 persons) (11)(12)...... 12,175,080 13,478,850 23.8% 86.4%
John Rangos Development
Corporation, Inc. (2)...... 1,452,000 1,452,000 2.8% 9.3%
Lindner Fund, Inc. (13)...... 4,699,800 -- 9.2% --
<FN>
---------
(1) The address of all beneficial owners is the Company's address at 10700
Frankstown Road, Pittsburgh, Pennsylvania 15235, with the exception of
Lindner Fund, Inc., whose address is 7711 Carondelet Avenue, Box 16900, St.
Louis, Missouri 63105.
(2) The number of shares and percentages shown include the registered holdings
of such person and, in addition, 1,452,000 shares of each class
beneficially owned as a result of ownership of stock of John Rangos
Development Corporation, Inc., the sole stockholders of which are John G.
Rangos, Jr. and Alexander W. Rangos, individually and as trustees for
Jenica A. Rangos. As a result, the same 1,452,000 shares of each class are
included above for each of John Rangos Development Corporation,
</TABLE>
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<PAGE> 69
Inc., John G. Rangos, Jr. and Alexander W. Rangos. John G. Rangos, Jr. and
Alexander W. Rangos are the sons, and Jenica A. Rangos is the daughter, of
John G. Rangos, Sr.
(3) Includes 107,000 shares of Class A Common Stock which may be acquired by
each of John G. Rangos, Jr. and Alexander W. Rangos pursuant to stock
options exercisable currently or within 60 days of this report.
(4) Includes 44,500 shares of Class A Common Stock which may be acquired by
Joseph G. Stotlemyer pursuant to stock options exercisable currently or
within 60 days of this report.
(5) Includes 8,000 shares of Class A Common Stock which may be acquired by
Michael J. Peretto pursuant to stock options exercisable currently or
within 60 days of this report.
(6) Includes 10,000 shares of Class A Common Stock which may be acquired by
John M. Arthur pursuant to stock options exercisable currently or within 60
days of this report.
(7) Includes 14,000 shares of Class A Common Stock which may be acquired by
William E. Moffett pursuant to stock options exercisable currently or
within 60 days of this report.
(8) Includes 4,000 shares of Class A Common Stock which may be acquired by
Peter J. Gibbons pursuant to stock options exercisable currently or within
60 days of this report.
(9) Includes 15,500 shares of Class A Common Stock which may be acquired by
William Rodgers, Jr. pursuant to stock options exercisable currently or
within 60 days of this report.
(10) Includes 28,300 shares of Class A Common Stock which may be acquired by
Peter V. Morse pursuant to stock options exercisable currently or within 60
days of this report.
(11) Includes 1,452,000 shares of each class owned by John Rangos Development
Corporation, Inc.
(12) Includes 457,800 shares of Class A Common Stock which may be acquired
pursuant to stock options exercisable currently or within 60 days of this
report.
(13) Based upon a report on Schedule 13G received by the Company on February 3,
1995. Lindner Fund, Inc. is an investment company.
(14) Less than 1.0%.
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file with the Securities
and Exchange Commission and the American Stock Exchange initial reports of
ownership and reports of changes in ownership of the Common Stock and Class A
Common Stock. Officers, directors and greater than ten-percent shareholders are
required by SEC regulation to furnish the Company with copies of all section
16(a) forms they file. To the Company's knowledge, based solely on review of the
copies of such reports furnished to the Company and written representations that
no other reports were required, during the two fiscal years ended December 31,
1994, all section 16(a) filing requirements applicable to its officers,
directors and greater than ten-percent beneficial owners were complied with.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
On November 14, 1985, John G. Rangos, Sr., John G. Rangos, Jr. and
Alexander W. Rangos, doing business as Synergy Associates, completed the private
placement of a $3,000,000 Allegheny County Industrial Development Variable Rate
Demand Note, initially bearing interest at a floating rate equal to 63% of the
prime interest rate of PNC Bank, to finance the conversion of existing property
into the current headquarters of the Company. The outstanding principal balance
of such note as of November 16, 1994 was $1,945,000. The lender has agreed not
to exercise its right to demand payment before November 1, 1995. Synergy
Associates is directly liable on the instrument, which is secured by the
property, but the Company, as the tenant of the facility, was required by the
lender to guarantee the financing. Under the lease, which was entered into in
December 1986, Synergy Associates passed through to the Company certain federal
income tax credits. Through March 1987, it was determined that the amount of
such tax credits passed through to the Company exceeded $500,000. Because the
amount of these tax credits substantially exceeded the expectations of the
parties at the time the lease was entered into, the Company agreed to modify the
lease to provide to Synergy Associates the option, exercisable at any time, to
have the Company prepay the twentieth year's rent
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<PAGE> 70
in an amount equal to the rent that is due in the year in which the option is
exercised. This option was exercised in April 1988, and the Company made the
aforementioned payment in the amount of approximately $752,000. The lease
provides for a renewal term of ten years, following the expiration of the
initial twenty-year term. This long-term leasing arrangement and guarantee by
the Company of the financing discussed above were approved by a majority of the
disinterested directors of the Company on November 1, 1985. The cost to the
Company as lessee, including the cost of construction paid for by the Company,
is approximately $19.47 per square foot per year, based upon 57,238 square feet
of rented space. Aggregate payments under the lease during 1994 were
approximately $1,018,000. The lease provides for annual rent increases based
upon inflation, increases in insurance costs and real estate taxes, and changes
in the debt service costs to Synergy Associates. Pursuant to the terms of the
settlement agreement executed by counsel to the certain derivative litigation
affecting Chambers (see Item 3, "Legal Proceedings"), the Rangos family has
agreed to cause Synergy Associates to contribute the building, subject to the
existing mortgage, to Chambers, which will result in the extinguishment of
future lease obligations which, as of December 31, 1994, totaled approximately
$11,140,000, including $918,000 representing interest and $8,026,000
representing executory costs. A third party independent appraiser has assigned
such future lease obligations a present value of approximately $8,910,000. In
conjunction with the transfer of the building, Synergy Associates and Chambers
intend to resolve claims made by Synergy Associates for outstanding rental
adjustments.
On July 8, 1993, Chambers entered in a purchase option with John G. Rangos,
Sr., to acquire approximately 68.45 acres of land which are contiguous to
Chambers' Monroeville landfill in Pennsylvania. The option, which extends
through December 31, 1996, and for which Mr. Rangos was paid $87,000, grants to
Chambers the right to purchase the property for $2,982,000, which is the fair
market value indicated by an independent appraisal of the property in June 1993.
Mr. Rangos currently owns an undivided 70% interest in the property and holds an
option to acquire the remaining 30% undivided interest from, among others,
Michael J. Peretto, a director of Chambers, for $894,600. USA Waste has agreed
that at the effective time of the Merger it will cause Chambers to exercise its
right to acquire such property pursuant to the option agreement.
In September 1989, the Board of Directors authorized a program supporting
the purchase of the common stock of the Company by officers, which provided for
a guarantee by the Company of the payment of amounts due pursuant to loans made
by Dollar Bank, Federal Savings Bank, to certain persons then serving as
officers of the Company, William R. Nelson, Edward N. Durand, Frank D.
Hutchinson, Dale O. Nolder, Jr., John J. Cushma and Joseph G. Stotlemyer, and
one of its advisors, Martin G. Hamberger. In August 1990, the Board of Directors
authorized the guarantee by the Company of payments of amounts due pursuant to a
loan made by Dollar Bank to Richard A. Knight. The proceeds of such loans were
mandated to be used by such persons to acquire shares of the common stock of the
Company. The program required that all persons pledge the shares of their stock
as collateral for the Company's guarantee of their loans. Messrs. Hutchinson,
Hamberger, Knight, Nelson and Nolder are no longer employed by the Company. The
Company was released from its guaranty upon the repayment of the loans by
Messrs. Hutchinson and Hamberger. During 1992, the Company acquired from Dollar
Bank the notes owing from Messrs. Knight, Nelson, Durand, Nolder, Cushma and
Stotlemyer, and currently holds the notes from those individuals. The aggregate
amount of such notes is $1,680,000.
Pursuant to the terms of the Merger Agreement, certain of the principal
shareholders of USA Waste and Chambers will enter into a Shareholders Agreement
(the "Shareholders Agreement") at the effective time of the Merger. The
Shareholders Agreement will provide, among other things, for certain matters to
require the approval of a two-thirds vote of the Board of Directors of USA Waste
and for certain members of the Rangos family, principal shareholders of Chambers
("Rangos Shareholders"), to participate in the naming of members of USA Waste's
Board of Directors and Executive Committee. The Shareholders Agreement will
remain in effect until the aggregate number of shares of USA Waste common stock
beneficially held by the Rangos Shareholders and their affiliates is less than
5% of the outstanding shares of USA Waste common stock. Pursuant to the
Shareholders Agreement, USA Waste will agree to use its best efforts to cause
two representatives of the Rangos Shareholders (who initially will be John G.
Rangos, Sr. and Alexander W. Rangos) to be appointed as directors of USA Waste.
In addition, during the term of the Shareholders Agreement, USA Waste and the
Rangos Shareholders will use their best efforts to cause the Board of
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<PAGE> 71
Directors to include at all times (in addition to the two directors designated
by the Rangos Shareholders) four independent directors who are approved by at
least four members of the Executive Committee of the Board of Directors. The
Shareholders Agreement will also provide that USA Waste will use its best
efforts to establish and maintain an Executive Committee of the Board of
Directors consisting of five directors and to cause the Executive Committee to
include the two directors designated by the Rangos Shareholders. It is currently
anticipated that the four directors to be approved by the Executive Committee
will be George L. Ball, Richard J. Heckmann, William E. Moffett, and Peter J.
Gibbons. Following the Merger, John E. Drury will be Chairman of USA Waste,
Donald F. Moorehead, Jr. and John G. Rangos, Sr. will become Vice Chairmen, and
Alexander W. Rangos will become Executive Vice President for Landfill
Development.
After the Merger is consummated, John G. Rangos, Sr., Chairman and Chief
Executive Officer of Chambers, will become a Director and Vice Chairman of USA
Waste. Alexander W. Rangos, President and Chief Operating Officer of Chambers,
will become a Director and Executive Vice President for Landfill Development of
USA Waste for a five-year term at a base salary of $275,000 per year. In
addition, at the Effective Time, USA Waste will enter into a consulting and
non-compete agreement with each of John G. Rangos, Sr. and John G. Rangos, Jr.,
Vice Chairman and Secretary of Chambers, providing for annual compensation of
$450,000 and $250,000, respectively, for a term of five years each.
In February 1993, Chambers entered into employment agreements with certain
of its key executives that provide such executives with rights to severance
benefits if employment with Chambers ceases under specified circumstances in
connection with a "change of control" of Chambers such as the Merger. Such
agreements were replaced effective as of February 1995 with agreements
substantially similar to the prior agreements except with respect to certain
termination provisions unrelated to the change of control termination
provisions. If all such rights were to be exercised, Chambers would be obligated
to pay a total of $7,635,331 to such executives. The term of each of these
agreements ends on February 2, 1996.
Certain executive officers of Chambers hold options to acquire shares of
Chambers Class A Common Stock pursuant to the terms of certain stock option
agreements. Such options will become fully vested and exercisable immediately
upon a "change of control" such as the Merger.
The Merger Agreement provides for indemnification of the officers and
directors of Chambers against all costs or expenses (including reasonable
attorney's fees), judgments, fines, losses, claims, damages, liabilities and
amounts paid in settlement in connection with any claim, action, suit,
proceeding or investigation, whether civil, criminal, administrative, or
investigative, arising out of, relating to, or in connection with any action or
omission occurring prior to the Effective Time (including acts or omissions in
connection with such persons serving as officers, directors or other fiduciaries
in any entity if such service was at the request of Chambers) or arising out of
or pertaining to the transactions contemplated by the Merger Agreement.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a)(1) Financial Statements:
Report of Independent Auditors
Consolidated Statements of Operations for the Years Ended December 31,
1994, 1993 and 1992
Consolidated Balance Sheets, December 31, 1994 and 1993
Consolidated Statements of Cash Flows for the Years Ended December 31,
1994, 1993 and 1992
Consolidated Statements of Stockholders' Equity for the Years Ended
December 31, 1994,
1993 and 1992
Notes to Consolidated Financial Statements
(a)(2) Financial Statement Schedules for the Three Years Ended December 31,
1994:
Report of Independent Auditors
Schedule II Valuation and Qualifying Accounts
All other schedules are omitted because they are not
applicable.
(a)(3) Exhibits:
<TABLE>
<S> <C>
2 Amended and Restated Agreement and Plan of Merger, dated as of November 28, 1994,
by and among USA Waste Services, Inc., Chambers Acquisition Corporation and
Chambers Development Company, Inc.
2(a) Letter Agreement dated December 19, 1994, between USA Waste Services, Inc. and
Chambers Development Company, Inc.
3.1 Certificate of Incorporation of Chambers Development Company, Inc. (Exhibit 3.1
of the Company's Quarterly Report on Form 10-Q for the quarter ended June 30,
1988, is hereby incorporated by reference.)
3.2 By-laws of Chambers Development Company, Inc. (Exhibit 3.2 of the Company's
Annual Report on Form 10-K for the year ended December 31, 1993, is hereby
incorporated by reference.)
10.1 Lease dated December 16, 1953, between the City of Washington and William H.
Martin; Extension Agreement dated September 30, 1973, between the City of
Washington and William H. Martin; Agreement dated March 19, 1981, between William
H. Martin, Inc. and the City of Washington (Exhibit 10.3 of Registration
Statement on Form S-1, Registration No. 33-00085, is hereby incorporated by
reference); Extension Agreement dated February 25, 1988, between the City of
Washington and William H. Martin, Inc. (Exhibit 10.1(a) of the Company's Annual
Report on Form 10-K for the year ended December 31, 1987, is hereby incorporated
by reference.)
10.2 Lease Agreement dated July 1, 1973, between Yolanda Nau and Southern Alleghenies
Disposal Service, Inc. (Exhibit 10.5 of Registration Statement on Form S-1,
Registration No. 33-00085, is hereby incorporated by reference); Assignment of
Lease dated December 24, 1985, from Yolanda Nau to Gary A. Nau, David M. Nau and
James B. Smith. (Exhibit 10.5 of Company's Annual Report on Form 10-K for the
year ended December 31, 1985, is hereby incorporated by reference.)
</TABLE>
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<TABLE>
<S> <C>
10.3 Amended, Modified and Restated Loan Agreement dated as of March 15, 1991, among
Chambers Development Company, Inc., NCNB National Bank of North Carolina, Bank of
New England, N.A., Bank of New York, National City Bank, National Westminster
Bank USA, Bank One, Columbus, N.A., CoreStates Bank, N.A., Sovran Bank, N.A.,
Security Pacific National Bank, PNC Bank and Commerzbank Aktiengesellschaft.
(Exhibit 10.4(c) of the Company's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1991, is hereby incorporated by reference.)
10.3(a) Seventh Amendment and Waiver to Amended, Modified and Restated Loan Amended
Agreement dated as of July 9, 1993, by and among Chambers Development Company,
Inc. and NationsBank of North Carolina, N.A., Bank of New York, National City
Bank, National Westminster Bank USA, Philadelphia National Bank, Commerzbank
Aktiengesellschaft, NationsBank of Virginia, N.A., PNC Bank N.A., Fleet Bank of
Massachusetts, N.A., Michigan National Bank Exhibit 10.3(b) of the Company's
Annual Report on Form 10-K for the year ended December 31, 1992, is hereby
incorporated by reference.)
10.3(b) Eighth Amendment to Amended, Modified and Restated Loan Agreement, dated as of
November 21, 1994, by and among Chambers Development Company, Inc. and
NationsBank of North Carolina, N.A., Bank of New York, National City Bank,
National Westminster Bank USA, Bank of America NT & SA, Bank One, Columbus, N.A.,
Philadelphia National Bank, Commerzbank Aktiengesellschaft, NationsBank of
Virginia, N.A., PNC Bank N.A., Fleet Bank of Massachusetts, N.A. and Michigan
National Bank. (Exhibit 10.3(b) of the Company's Current Report on Form 8-K dated
December 15, 1994, is hereby incorporated by reference.)
10.3(c) Ninth Amendment to Amended, Modified and Restated Loan Agreement, dated as of
November 21, 1994, by and among Chambers Development Company, Inc. and
NationsBank of North Carolina, N.A., Bank of New York, National City Bank,
National Westminster Bank USA, Bank of America NT & SA, Bank One, Columbus, N.A.,
Philadelphia National Bank, Commerzbank Aktiengesellschaft, NationsBank of
Virginia, N.A., PNC Bank N.A., Fleet Bank of Massachusetts, N.A. and Michigan
National Bank. (Exhibit 10.3(c) of the Company's Current Report on Form 8-K dated
December 15, 1994, is hereby incorporated by reference.)
10.4 Indenture between Allegheny County Industrial Development Authority and
Pittsburgh National Bank, as Trustee, and agreed to by John G. Rangos, Sr.,
Alexander W. Rangos and John G. Rangos, Jr., individuals trading as Synergy
Associates, dated as of November 1, 1985; Reimbursement Agreement by and between
John G. Rangos, Sr., John G. Rangos, Jr. and Alexander W. Rangos, trading and
doing business as Synergy Associates, and Dollar Bank, Federal Savings Bank,
dated as of November 1, 1985; and Guaranty and Suretyship Agreement of William H.
Martin, Inc., U.S. Services Corporation, Chambers of Georgia, Inc., Chambers of
South Carolina, Inc., Carrier Engineering, Inc., Security Bureau, Inc., Sandman
Waste Management, Inc., Chambers Development Company, Inc., John G. Rangos, Sr.,
John G. Rangos, Jr., and Alexander W. Rangos, dated as of November 1, 1985.
(Exhibit 10.8 of the Company's Annual Report on Form 10-K for the year ended
December 31, 1985, is hereby incorporated by reference.)
10.5 Lease dated December 29, 1986, between Chambers Development Company, Inc., as
Lessee, and Synergy Associates, as Lessor. (Exhibit 10.10 of Registration
Statement on Form S-1, Registration No. 33-12903, is hereby incorporated by
reference.); Letter dated April 3, 1987, from Chambers Development Company, Inc.
to Synergy Associates, amending the Lease dated December 1986 between such
parties. (Exhibit 10.10(a) of Amendment No. 2 to Registration Statement on Form
S-1, Registration No. 33-14519, is hereby incorporated by incorporated by
reference.); Addendum to Office Lease Agreement dated April 22, 1988, between
Chambers Development Company, Inc., as Lessee, and Synergy Associates, as Lessor.
(Exhibit 10.8(b) of the Company's Annual Report on Form 10-K for the year ended
December 31, 1988, is hereby incorporated by reference.)
</TABLE>
73
<PAGE> 74
<TABLE>
<S> <C>
10.6 Chambers Development Company, Inc. 1988 Stock Option Plan, as amended. (Exhibit
10 of the Company's Registration Statement on Form S-8, Registration No.
33-33788, is hereby incorporated by reference.)
10.7 Chambers Development Company, Inc. 1991 Stock Option Plan for Non-Employee Directors.
(Exhibit A of the Company's 1991 Proxy Statement is hereby incorporated by reference.)
10.8 Chambers Development Company, Inc. 1988 Employee Incentive Plan. (Exhibit 10.13
of the Company's Annual Report on Form 10-K for the year ended December 31, 1987,
is hereby incorporated by reference.)
10.9 Chambers Development Company, Inc. 1993 Stock Incentive Plan. (Exhibit A of the
Company's 1993 Proxy Statement is hereby incorporated by reference.)
10.10(a) Employment Agreement by and between Chambers Development Company, Inc. and
William Rodgers, Jr. dated as of February 3, 1995.
10.10(b) Employment Agreement by and between Chambers Development Company, Inc. and Peter
V. Morse dated as of February 3, 1995.
10.10(c) Employment Agreement by and between Chambers Development Company, Inc. and Jack
D. Weertman dated as of February 3, 1995.
10.10(d) Employment Agreement by and between Chambers Development Company, Inc. and Edward
N. Durand dated as of February 3, 1995.
10.10(e) Employment Agreement by and between Chambers Development Company, Inc. and
Lawrence J. Yatch dated as of February 3, 1995.
10.10(f) Employment Agreement by and between Chambers Development Company, Inc. and David
J. Feals dated as of February 3, 1995.
10.10(g) Employment Agreement by and between Chambers Development Company, Inc. and Ronald
J. Jones dated as of February 3, 1995.
10.10(h) Employment Agreement by and between Chambers Development Company, Inc. and Joseph
G. Stotlemyer dated as of February 3, 1995.
10.10(i) Employment contract by and between Chambers Development Company, Inc. and Allan
Pass dated September 2, 1991. (Exhibit 10.7(a)(x) of the Company's Annual Report
on Form 10-K for the year ended December 31, 1992, is hereby incorporated by
reference.)
10.11 Second Amended and Restated Note Agreement dated as of November 21, 1994, by and
among Chambers Development Company, Inc., New York Life Insurance Company, and
Phoenix Home Mutual Life Insurance Company. (Exhibit 10.10 of the Company's
Current Report on Form 8-K filed December 15, 1994, is hereby incorporated by
reference.)
10.12 Amended and Restated Secured Note Agreement dated as of November 21, 1994, by and
among Chambers Development Company, Inc. and Kemper Investors Life Insurance
Company, Lumbermens Mutual Casualty Company, Federal Kemper Life Assurance
Company, The Equitable Life Assurance Society of the United States, Equitable
Variable Life Insurance Company, IDS Life Insurance Company, IDS Life Insurance
Company of New York, American Enterprise Life Insurance Company, The Mutual Life
Insurance Company of New York, MONY Life Insurance Company of America, MONY
Legacy Life Insurance Company, Monumental Life Insurance Company, AUSA Life
Insurance Company, PFL Life Insurance Company, Bankers United Life Assurance
Company, General Services Life Insurance Company, Aid Association for Lutherans,
Jefferson-Pilot Life Insurance Company, Massachusetts Mutual Life Insurance
Company, American Family Mutual Insurance Company, American Family Life Insurance
Company, The Canada Life Assurance Company, Great-West Life & Annuity Insurance
Company, Fidelity & Guaranty Life Insurance Company, Safeco Life Insurance
Company, Modern Woodmen of America, Pan-American Life Insurance Company, American
Life Casualty Insurance Company and West American Insurance Company. (Exhibit
10.11 of the Company's Current Report on Form 8-K filed December 15, 1994, is
hereby incorporated by reference.)
</TABLE>
74
<PAGE> 75
<TABLE>
<S> <C>
10.13 Agreement of Sale dated as of November 1, 1989, between Industrial Development
Authority of the County of Charles City and Chambers Development of Virginia,
Inc.; Guaranty Agreement dated as of November 1, 1989, by and among Chambers
Development Company, Inc. and Sovran Bank, N.A., as Trustee. (Exhibit 10.16 of
the Company's Annual Report on Form 10-K for the year ended December 31, 1989, is
hereby incorporated by reference.)
10.13(a) First Supplemental Agreement of Sale dated March 1, 1990, between Industrial
Development Authority of the County of Charles City and Chambers Development of
Virginia, Inc. (Exhibit 10.16(a) of the Company's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1990, is hereby incorporated by reference.)
10.13(b) Loan Agreement dated November 1, 1991, between Industrial Development Authority
of the County of Charles City and Chambers Development of Virginia, Inc. (Exhibit
10.13(b) of the Company's Annual Report on Form 10-K for the year ended December
31, 1991, is hereby incorporated by reference.)
10.14 Loan Agreement dated December 1, 1990, between South Carolina Jobs-Economic
Development Authority and Chambers Oakridge Landfill, Inc. (Exhibit 10.17 of the
Company's Annual Report on Form 10-K for the year ended December 31, 1990, is
hereby incorporated by reference.)
10.15 Agreement of Sale dated as of December 1, 1991, between Industrial Development
Authority of Amelia County, Virginia and Chambers Waste Systems of Virginia, Inc.
(Exhibit 10.15 of the Company's Annual Report on Form 10-K for the year ended
December 31, 1991, is hereby incorporated by reference.)
10.16 Contract dated as of February 19, 1991, between Bergen County Utilities Authority
and Chambers Waste Systems of New Jersey, Inc. (Exhibit 10.16 of the Company's
Annual Report on Form 10-K for the year ended December 31, 1991, is hereby
incorporated by reference.)
10.17 Loan Agreement dated March 1, 1992, between Okeechobee County, Florida and
Chambers Waste Systems of Florida, Inc. (Exhibit 10.17 of the Company's Annual
Report on Form 10-K for the year ended December 31, 1991, is hereby incorporated
by reference.)
10.18 Reliance Insurance Company Underwriting and Continuing Indemnity Agreement, dated
as of February 26, 1993, among Chambers Development Company, Inc., certain
subsidiaries of Chambers Development Company, Inc., John G. Rangos, Sr., and
Reliance Insurance Company, Reliance Insurance Company of New York, United
Pacific Insurance Company, United Pacific Insurance Company of New York and
Planet Insurance Company. (Exhibit 10.18 of the Company's Annual Report on Form
10-K for the year ended December 31, 1992, is hereby incorporated by reference.)
10.19 Security Agreement, dated as of February 26, 1993, among Chambers Development
Company, Inc., certain subsidiaries of Chambers Development Company, Inc. and
Reliance Insurance Company, Reliance Insurance Company of New York, United
Pacific Insurance Company, United Pacific Insurance Company of New York and
Planet Insurance Company. (Exhibit 10.19 of the Company's Annual Report on Form
10-K for the year ended December 31, 1992, is hereby incorporated by reference.)
22.1 Subsidiaries of the Company.
23(a) Consent of Independent Auditors.
27.1 Financial Data Schedule.
(b) A report on Form 8-K was filed during the fourth quarter of the fiscal year
covered by this report, on December 15, 1994, reporting upon (i) the entering
into by the registrant of comprehensive amendments to its bank credit facility
and senior note agreements, and (ii) the entering into by the registrant of an
agreement and plan of merger with USA Waste Services, Inc.
</TABLE>
75
<PAGE> 76
SIGNATURES
Pursuant to the requirements of Section 15(d) of the Securities Exchange
Act of 1934, the Company has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
CHAMBERS DEVELOPMENT COMPANY, INC.
JOHN G. RANGOS, SR.
By:
--------------------------------
John G. Rangos, Sr.
Chairman and Chief Executive
Officer
Dated: March 31, 1995
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 Company
and in the capacities and on the dates indicated.
<TABLE>
<C> <S>
JOHN G. RANGOS, SR. March 31, 1995
----------------------------------------------
John G. Rangos, Sr., Director
Chairman and Chief Executive Officer
JOHN G. RANGOS, JR. March 31, 1995
----------------------------------------------
John G. Rangos, Jr., Director
Vice Chairman--Administration and
Technology, and Secretary
ALEXANDER W. RANGOS March 31, 1995
----------------------------------------------
Alexander W. Rangos, Director
President and Chief Operating Officer
WILLIAM RODGERS, JR. March 31, 1995
----------------------------------------------
William Rodgers, Jr.
Senior Vice President and
Chief Financial Officer
JOSEPH G. STOTLEMYER March 31, 1995
----------------------------------------------
Joseph G. Stotlemyer, Director
Vice President--Support Services
DAVID J. FEALS March 31, 1995
----------------------------------------------
David J. Feals
Vice President and Corporate Controller,
and Chief Accounting Officer
MICHAEL J. PERETTO March 31, 1995
----------------------------------------------
Michael J. Peretto, Director
WILLIAM E. MOFFETT March 31, 1995
----------------------------------------------
William E. Moffett, Director
JOHN M. ARTHUR March 31, 1995
----------------------------------------------
John M. Arthur, Director
PETER J. GIBBONS March 31, 1995
----------------------------------------------
Peter J. Gibbons, Director
</TABLE>
76
<PAGE> 77
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Stockholders of Chambers Development Company,
Inc.:
We have audited the consolidated balance sheets of Chambers Development
Company, Inc. and subsidiaries as of December 31, 1994 and 1993, and the related
consolidated statements of operations, stockholders' equity and cash flows for
each of the three years in the period ended December 31, 1994, and have issued
our report thereon dated March 30, 1995; such financial statements and report
are included elsewhere in this Form 10-K. Our audits also included the
consolidated financial statement schedule of Chambers Development Company, Inc.,
listed in Item 14. This consolidated financial statement schedule is the
responsibility of the Company's management. Our responsibility is to express an
opinion based on our audits. In our opinion, such consolidated financial
statement schedule, when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly, in all material
respects, the information set forth therein.
Deloitte & Touche LLP
Pittsburgh, Pennsylvania
March 30, 1995
<PAGE> 78
SCHEDULE II
CHAMBERS DEVELOPMENT COMPANY, INC.
VALUATION AND QUALIFYING ACCOUNTS
THREE YEARS ENDED DECEMBER 31, 1994
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE CHARGED CHARGED BALANCE
BEGINNING TO COSTS TO OTHER END
OF YEAR EXPENSES ACCOUNTS DEDUCTIONS OF YEAR
------- -------- -------- ---------- -------
<S> <C> <C> <C> <C> <C>
1994
Allowance for doubtful accounts $2,825 $1,447 $-- $(1,109)(1) $3,163(2)
------ ------ --- -------- ------
1993
Allowance for doubtful accounts $3,345 $ 932 $-- $(1,452)(1) $2,825(2)
------ ------ --- -------- ------
1992
Allowance for doubtful accounts $1,651 $2,454 $80(3) $ (840)(1) $3,345(2)
------ ------ --- -------- ------
Allowance for unrealized loss
on marketable equitable
securities $ 133 $ -- $-- $ (133)(4) $ --
------ ------ --- -------- ------
<FN>
---------
(1) Uncollectible accounts written off, net of recoveries.
(2) Includes $363 in 1994 and 1993 and $643 in 1992 related to "Accounts
receivable - other" and $1,417 in 1994 and $1,400 in 1993 and 1992 related
to "Other assets - other."
(3) Reclassified from accrued expenses.
(4) Credited to "Other income, primarily interest."
</TABLE>
<PAGE> 79
EXHIBITS
TO
FORM 10-K
OF
CHAMBERS DEVELOPMENT COMPANY, INC.
FOR THE
YEAR ENDED DECEMBER 31, 1994
<PAGE> 80
EXHIBIT INDEX
<TABLE>
<S> <C>
2 Amended and Restated Agreement and Plan of Merger, dated as of December 19, 1994,
by and among USA Waste Services, Inc., Chambers Acquisition Corporation and
Chambers Development Company, Inc.
2(a) Letter Agreement dated December 19, 1994, between USA Waste Services, Inc. and
Chambers Development Company, Inc.
10.10(a) Employment Agreement by and between Chambers Development Company, Inc. and William
Rodgers, Jr. dated as of February 3, 1995.
10.10(b) Employment Agreement by and between Chambers Development Company, Inc. and Peter V.
Morse dated as of February 3, 1995.
10.10(c) Employment Agreement by and between Chambers Development Company, Inc. and Jack D.
Weertman dated as of February 3, 1995.
10.10(d) Employment Agreement by and between Chambers Development Company, Inc. and Edward
N. Durand dated as of February 3, 1995.
10.10(e) Employment Agreement by and between Chambers Development Company, Inc. and Lawrence
J. Yatch dated as of February 3, 1995.
10.10(f) Employment Agreement by and between Chambers Development Company, Inc. and David J.
Feals dated as of February 3, 1995.
10.10(g) Employment Agreement by and between Chambers Development Company, Inc. and Ronald
H. Jones dated as of February 3, 1995.
10.10(h) Employment Agreement by and between Chambers Development Company, Inc. and Joseph
G. Stotlemyer dated as of February 3, 1995.
22.1 Subsidiaries of the Company.
23(a) Consent of Independent Auditors.
27.1 Financial Data Schedule.
</TABLE>
<PAGE> 1
Exhibit (2)
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
DATED AS OF
NOVEMBER 28, 1994
BY AND AMONG
USA WASTE SERVICES, INC.,
CHAMBERS ACQUISITION CORPORATION
AND
CHAMBERS DEVELOPMENT COMPANY, INC.
<PAGE> 2
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER, dated as of
November 28, 1994 (the "Agreement"), by and among USA Waste Services, Inc., an
Oklahoma corporation ("Parent"), Chambers Acquisition Corporation, a Delaware
corporation and a wholly-owned subsidiary of Parent ("Subsidiary"), and
Chambers Development Company, Inc., a Delaware corporation (the "Company").
WHEREAS, Parent, Envirofil, Inc., a Delaware corporation
("Envirofil"), and the Company entered into a merger agreement dated as of
November 28, 1994 (the "Original Merger Agreement") in order to effectuate the
merger of a wholly owned subsidiary of Parent with and into the Company (the
"Merger"), as a result of which the Company will become a wholly owned
subsidiary of Parent;
WHEREAS, Parent, Envirofil and the Company agreed to amend the
Original Merger Agreement and executed an Amendment to Agreement and Plan of
Merger as of December 19, 1994;
WHEREAS, Envirofil subsequently assigned all of its rights under
the Original Merger Agreement to Subsidiary;
WHEREAS, Parent, Subsidiary and the Company intend the Merger to
qualify as a tax-free reorganization under the provisions of Section 368 of the
Internal Revenue Code of 1986, as amended (the "Code"), and the regulations
thereunder; and
WHEREAS, the parties wish to amend and restate the Original Merger
Agreement in its entirety and incorporate the previous amendment and assignment
and to make certain additional amendments.
NOW, THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements contained herein, the
parties hereto, intending to be legally bound, agree as follows:
ARTICLE I
THE MERGER
SECTION 1.1. THE MERGER. Upon the terms and subject to the
conditions of this Agreement, at the Effective Time (as defined in Section 1.2)
in accordance with the Delaware General Corporation Law (the "DGCL"),
Subsidiary shall be merged with and into the Company and the separate existence
of Subsidiary shall thereupon cease. The Company shall be the surviving
corporation in the Merger and is hereinafter sometimes referred to as the
"Surviving Corporation."
<PAGE> 3
SECTION 1.2. EFFECTIVE TIME OF THE MERGER. The Merger shall
become effective at such time (the "Effective Time") as shall be stated in a
Certificate of Merger, in a form mutually acceptable to Parent and the Company,
to be filed with the Secretary of State of the State of Delaware in accordance
with the DGCL (the "Merger Filing"). The Merger Filing shall be made
simultaneously with or as soon as practicable after the closing of the
transactions contemplated by this Agreement in accordance with Section 3.5. The
parties acknowledge that it is their mutual desire and intent to consummate the
Merger as soon as practicable after the date hereof. Accordingly, the parties
shall use all reasonable efforts to consummate, as soon as practicable, the
transactions contemplated by this Agreement in accordance with Section 3.5.
ARTICLE II
THE SURVIVING AND PARENT CORPORATIONS
SECTION 2.1. CERTIFICATE OF INCORPORATION. The Certificate of
Incorporation of Subsidiary as in effect immediately prior to the Effective
Time shall be the Certificate of Incorporation of the Surviving Corporation
after the Effective Time, and thereafter may be amended in accordance with its
terms and as provided in the DGCL.
SECTION 2.2. BY-LAWS. The By-laws of Subsidiary as in effect
immediately prior to the Effective Time shall be the By-laws of the Surviving
Corporation after the Effective Time, and thereafter may be amended in
accordance with their terms and as provided by the Certificate of Incorporation
of the Surviving Corporation and the DGCL.
SECTION 2.3. DIRECTORS.
(a) The Board of Directors of Parent shall take such corporate
action as may be necessary to cause Parent's Board of Directors immediately
following the Effective Time to be composed of five members designated by
the Board of Directors of Parent and four members designated by the Board
of Directors of the Company.
(b) The Board of Directors of Parent shall take such corporate
action immediately prior to the Effective Time as may be necessary to
appoint an Executive Committee of Parent's Board of Directors immediately
following the Effective Time which shall be composed of three members
selected by the Board of Directors of Parent and two members selected by
the Board of Directors of the Company.
SECTION 2.4. OFFICERS. Except as otherwise agreed to by
Parent and the Company, the officers of the Company in office immediately prior
to the Effective Time shall be the officers of the Surviving Corporation, to
serve in accordance with the By-laws of the Surviving Corporation until their
respective successors are duly elected or appointed and qualified.
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<PAGE> 4
ARTICLE III
CONVERSION OF SHARES
SECTION 3.1. CONVERSION OF COMPANY SHARES IN THE MERGER. At
the Effective Time, by virtue of the Merger and without any action on the part
of any holder of any capital stock of the Company:
(a) each share of the Company's Common Stock, par value $.50
per share (the "Regular Common Stock"), and each share of the Company's
Class A Common Stock, par value $.50 per share (the "Class A Common Stock"
and, together with the Regular Common Stock, the "Company Common Stock"),
shall, subject to Sections 3.3 and 3.4, be converted into the right to
receive, without interest, .41667 (the "Exchange Ratio") of a share of the
common stock, par value $.01 per share, of Parent ("Parent Common Stock");
(b) each share of capital stock of the Company, if any, owned
by Parent or any subsidiary of Parent or held in treasury by the Company or
any subsidiary of the Company immediately prior to the Effective Time shall
be cancelled and shall cease to exist from and after the Effective Time;
and
(c) subject to and as more fully provided in Section 7.9, each
unexpired option to purchase Company Common Stock that is outstanding at
the Effective Time, whether or not exercisable, shall automatically and
without any action on the part of the holder thereof be converted into an
option to purchase a number of shares of Parent Common Stock equal to the
number of shares of Company Common Stock that could be purchased under such
option multiplied by the Exchange Ratio, at a price per share of Parent
Common Stock equal to the per share exercise price of such option divided
by the Exchange Ratio.
SECTION 3.2. CONVERSION OF SUBSIDIARY SHARES. At the
Effective Time, by virtue of the Merger and without any action on the part of
Parent as the sole stockholder of Subsidiary, each issued and outstanding share
of common stock, par value $.001 per share, of Subsidiary ("Subsidiary Common
Stock") shall be converted into one share of common stock, par value $.50 per
share, of the Surviving Corporation.
SECTION 3.3. EXCHANGE OF CERTIFICATES. (a) From and after the
Effective Time, each holder of an outstanding certificate which immediately
prior to the Effective Time represented shares of Company Common Stock shall be
entitled to receive in exchange therefor, upon surrender thereof to an exchange
agent reasonably satisfactory to Parent and the Company (the "Exchange Agent"),
a certificate or certificates representing the number of whole shares of Parent
Common Stock to which such holder is entitled pursuant to Section 3.1(a).
Notwithstanding any other provision of this Agreement, (i) until holders or
transferees of certificates theretofore representing shares of Company Common
Stock have surrendered them for exchange as provided herein, no dividends shall
be paid with respect to any shares represented by such certificates and no
payment for fractional shares shall be made and (ii) without regard to when
such certificates representing shares of Company Common Stock are surrendered
for exchange as provided herein, no interest shall be paid on any dividends or
any payment for fractional shares. Upon surrender of a certificate which
immediately prior to the Effective Time represented shares of Company Common
Stock, there shall be paid to the holder of such certificate the amount of any
dividends which theretofore
-3-
<PAGE> 5
became payable, but which were not paid by reason of the foregoing, with
respect to the number of whole shares of Parent Common Stock represented by the
certificate or certificates issued upon such surrender.
(b) If any certificate for shares of Parent Common Stock is to
be issued in a name other than that in which the certificate for shares of
Company Common Stock surrendered in exchange therefor is registered, it
shall be a condition of such exchange that the person requesting such
exchange shall pay any transfer or other taxes required by reason of the
issuance of certificates for such shares of Parent Common Stock in a name
other than that of the registered holder of the certificate surrendered, or
shall establish to the satisfaction of Parent that such tax has been paid
or is not applicable.
(c) Promptly after the Effective Time, Parent shall make
available to the Exchange Agent the certificates representing shares of
Parent Common Stock required to effect the exchanges referred to in
paragraph (a) above and cash for payment of any fractional shares referred
to in Section 3.4.
(d) Promptly after the Effective Time, the Exchange Agent
shall mail to each holder of record of a certificate or certificates that
immediately prior to the Effective Time represented outstanding shares of
Company Common Stock (the "Company Certificates") (i) a form letter of
transmittal (which shall specify that delivery shall be effected, and risk
of loss and title to the Company Certificates shall pass, only upon actual
delivery of the Company Certificates to the Exchange Agent) and (ii)
instructions for use in effecting the surrender of the Company Certificates
in exchange for certificates representing shares of Parent Common Stock.
Upon surrender of Company Certificates for cancellation to the Exchange
Agent, together with a duly executed letter of transmittal and such other
documents as the Exchange Agent shall reasonably require, the holder of
such Company Certificates shall be entitled to receive in exchange therefor
a certificate representing that number of whole shares of Parent Common
Stock into which the shares of Company Common Stock theretofore represented
by the Company Certificates so surrendered shall have been converted
pursuant to the provisions of Section 3.1(a), and the Company Certificates
so surrendered shall forthwith be cancelled. Notwithstanding the
foregoing, neither the Exchange Agent nor any party hereto shall be liable
to a holder of shares of Company Common Stock for any shares of Parent
Common Stock or dividends or distributions thereon delivered to a public
official pursuant to applicable abandoned property, escheat or similar
laws.
(e) Promptly following the date which is nine months after the
Effective Date, the Exchange Agent shall deliver to Parent all cash,
certificates (including any Parent Common Stock) and other documents in its
possession relating to the transactions described in this Agreement, and
the Exchange Agent's duties shall terminate. Thereafter, each holder of a
Company Certificate may surrender such Company Certificate to the Surviving
Corporation and (subject to applicable abandoned property, escheat and
similar laws) receive in exchange therefor the Parent Common Stock, without
any interest thereon. Notwithstanding the foregoing, none of the Exchange
Agent, Parent, Subsidiary, the Company or the Surviving Corporation shall
be liable to a holder of Company Common Stock for any Parent Common Stock
delivered to a public official pursuant to applicable abandoned property,
escheat and similar laws.
(f) In the event any Company Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the
person claiming such Company Certificate to be lost, stolen or destroyed,
the Surviving Corporation shall issue in exchange for such lost, stolen
-4-
<PAGE> 6
or destroyed Company Certificate the Parent Common Stock deliverable in
respect thereof determined in accordance with this Article III. When
authorizing such payment in exchange therefor, the Board of Directors of
the Surviving Corporation may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost, stolen
or destroyed Company Certificate to give the Surviving Corporation such
indemnity as it may reasonably direct as protection against any claim that
may be made against the Surviving Corporation with respect to the Company
Certificate alleged to have been lost, stolen or destroyed.
SECTION 3.4. NO FRACTIONAL SECURITIES. Notwithstanding any
other provision of this Agreement, no certificates or scrip for fractional
shares of Parent Common Stock shall be issued in the Merger and no Parent
Common Stock dividend, stock split or interest shall relate to any fractional
security, and such fractional interests shall not entitle the owner thereof to
vote or to any other rights of a security holder. In lieu of any such
fractional shares, each holder of Company Common Stock who would otherwise have
been entitled to receive a fraction of a share of Parent Common Stock upon
surrender of Company Certificates for exchange pursuant to this Article III
shall be entitled to receive from the Exchange Agent a cash payment equal to
such fraction multiplied by the closing price per share of Parent Common Stock
on the New York Stock Exchange, as reported by the Wall Street Journal, on the
last trading day preceding the Effective Time.
SECTION 3.5. CLOSING. The closing (the "Closing") of the
transactions contemplated by this Agreement shall take place at a location
mutually agreeable to Parent and the Company on the fifth business day
immediately following the date on which the last of the conditions set forth in
Article VIII is fulfilled or waived, or at such other time and place as Parent
and the Company shall agree (the date on which the Closing occurs is referred
to in this Agreement as the "Closing Date").
SECTION 3.6. CLOSING OF THE COMPANY'S TRANSFER BOOKS. At and
after the Effective Time, holders of Company Certificates shall cease to have
any rights as stockholders of the Company, except for the right to receive
shares of Parent Common Stock pursuant to Section 3.3 and the right to receive
cash for payment of fractional shares pursuant to Section 3.4. At the
Effective Time, the stock transfer books of the Company shall be closed and no
transfer of shares of Company Common Stock which were outstanding immediately
prior to the Effective Time shall thereafter be made. If, after the Effective
Time, subject to the terms and conditions of this Agreement, Company
Certificates formerly representing Company Common Stock are presented to the
Surviving Corporation, they shall be cancelled and exchanged for Parent Common
Stock in accordance with this Article III.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF PARENT AND SUBSIDIARY
Parent and Subsidiary each represent and warrant to the Company as follows:
SECTION 4.1. ORGANIZATION AND QUALIFICATION. Each of Parent and
Subsidiary is a corporation duly organized, validly existing and in good
standing under the laws of the state of its incorporation and has the requisite
power and authority to own, lease and operate its assets and properties and to
carry on its business as it is now being conducted. Each of Parent and
Subsidiary is qualified to do business and is in good standing in each
jurisdiction in which the properties owned, leased or operated by it or the
nature
-5-
<PAGE> 7
of the business conducted by it makes such qualification necessary, except
where the failure to be so qualified and in good standing will not, when taken
together with all other such failures, have a material adverse effect on the
business, operations, properties, assets, condition (financial or other),
results of operations or prospects of Parent and its subsidiaries, taken as a
whole. True, accurate and complete copies of each of Parent's and Subsidiary's
Certificates of Incorporation and By-laws, in each case as in effect on the
date hereof, including all amendments thereto, have heretofore been (or, in the
case of Subsidiary, will promptly be) delivered to the Company.
SECTION 4.2. CAPITALIZATION.
(a) The authorized capital stock of Parent consists of (i)
50,000,000 shares of Parent Common Stock, of which 22,575,263 shares were
outstanding as of November 10, 1994, and (ii) 10,000,000 shares of
preferred stock, par value $.01 per share, none of which was issued and
outstanding as of November 21, 1994. All of the issued and outstanding
shares of Parent Common Stock are validly issued and are fully paid,
nonassessable and free of preemptive rights.
(b) The authorized capital stock of Subsidiary consists of
1,000 shares of Subsidiary Common Stock, of which 100 shares are issued and
outstanding, which shares are owned beneficially and of record by Parent.
(c) Except as disclosed in the Parent SEC Reports (as defined
in Section 4.5) or as set forth on Schedule 4.2 attached hereto, as of the
date hereof, there are no outstanding subscriptions, options, calls,
contracts, commitments, understandings, restrictions, arrangements, rights
or warrants, including any right of conversion or exchange under any
outstanding security, instrument or other agreement and also including any
rights plan or other anti-takeover agreement, obligating Parent or any
subsidiary of Parent to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of the capital stock of Parent or
obligating Parent or any subsidiary of Parent to grant, extend or enter
into any such agreement or commitment. There are no voting trusts, proxies
or other agreements or understandings to which Parent or any subsidiary of
Parent is a party or is bound with respect to the voting of any shares of
capital stock of Parent. The shares of Parent Common Stock issued to
stockholders of the Company in the Merger will be at the Effective Time
duly authorized, validly issued, fully paid and nonassessable and free of
preemptive rights.
SECTION 4.3. SUBSIDIARIES. Each direct and indirect corporate
subsidiary of Parent is duly organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation and has the requisite power
and authority to own, lease and operate its assets and properties and to carry
on its business as it is now being conducted. Each subsidiary of Parent is
qualified to do business, and is in good standing, in each jurisdiction in
which the properties owned, leased or operated by it or the nature of the
business conducted by it makes such qualification necessary, except where the
failure to be so qualified and in good standing would not, when taken together
with all such other failures, have a material adverse effect on the business,
operations, properties, assets, condition (financial or other), results of
operations or prospects of Parent and its subsidiaries, taken as a whole. All
of the outstanding shares of capital stock of each corporate subsidiary of
Parent are validly issued, fully paid, nonassessable and free of preemptive
rights, and are owned directly or indirectly by Parent, free and clear of any
liens, claims or encumbrances except that such shares are pledged to secure
Parent's credit facilities. There are no subscriptions, options, warrants,
rights, calls, contracts, voting trusts, proxies or other commitments,
understandings, restrictions or arrangements relating to the issuance, sale,
voting, transfer, ownership or other rights with respect to
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any shares of capital stock of any corporate subsidiary of Parent, including
any right of conversion or exchange under any outstanding security, instrument
or agreement. As used in this Agreement, the term "subsidiary" shall mean,
when used with reference to any person or entity, any corporation, partnership,
joint venture or other entity which such person or entity, directly or
indirectly, controls or of which such person or entity (either acting alone or
together with its other subsidiaries) owns, directly or indirectly, 50% or more
of the stock or other voting interests, the holders of which are entitled to
vote for the election of a majority of the board of directors or any similar
governing body of such corporation, partnership, joint venture or other entity.
Parent does not own any shares of Company Common Stock.
SECTION 4.4. AUTHORITY; NON-CONTRAVENTION; APPROVALS.
(a) Parent and Subsidiary each have full corporate power and
authority to enter into this Agreement and, subject to the Parent
Stockholders' Approval (as defined in Section 7.3(b)) and the Parent
Required Statutory Approvals (as defined in Section 4.4(c)), to consummate
the transactions contemplated hereby. This Agreement has been approved by
the Boards of Directors of Parent and Subsidiary, and no other corporate
proceedings on the part of Parent or Subsidiary are necessary to authorize
the execution and delivery of this Agreement or, except for the Parent
Stockholders' Approval, the consummation by Parent and Subsidiary of the
transactions contemplated hereby. This Agreement has been duly executed
and delivered by each of Parent and Subsidiary, and, assuming the due
authorization, execution and delivery hereof by the Company, constitutes a
valid and legally binding agreement of each of Parent and Subsidiary
enforceable against each of them in accordance with its terms, except that
such enforcement may be subject to (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting or relating to
enforcement of creditors' rights generally and (ii) general equitable
principles. Without limitation of the foregoing, each of the covenants and
obligations of Parent set forth in Sections 6.2, 6.5, 7.3, 7.6, 7.7, 7.8
and 7.11 is valid, legally binding and enforceable notwithstanding the
absence of the Parent Stockholders' Approval.
(b) The execution and delivery of this Agreement by each of
Parent and Subsidiary do not violate, conflict with or result in a breach
of any provision of, or constitute a default (or an event which, with
notice or lapse of time or both, would constitute a default) under, or
result in the termination of, or accelerate the performance required by, or
result in a right of termination or acceleration under, or result in the
creation of any lien, security interest, charge or encumbrance upon any of
the properties or assets of Parent or any of its subsidiaries under any of
the terms, conditions or provisions of (i) the respective charters or
by-laws of Parent or any of its subsidiaries, (ii) any statute, law,
ordinance, rule, regulation, judgment, decree, order, injunction, writ,
permit or license of any court or governmental authority applicable to
Parent or any of its subsidiaries or any of their respective properties or
assets or (iii) any note, bond, mortgage, indenture, deed of trust,
license, franchise, permit, concession, contract, lease or other
instrument, obligation or agreement of any kind to which Parent or any of
its subsidiaries is now a party or by which Parent or any of its
subsidiaries or any of their respective properties or assets may be bound
or affected. The consummation by Parent and Subsidiary of the transactions
contemplated hereby will not result in any violation, conflict, breach,
termination, acceleration or creation of liens under any of the terms,
conditions or provisions described in clauses (i) through (iii) of the
preceding sentence, subject (x) in the case of the terms, conditions or
provisions described in clause (ii) above, to obtaining (prior to the
Effective Time) the Parent Required Statutory Approvals and the Parent
Stockholder's Approval and (y) in the case of the terms, conditions or
provisions described in clause (iii) above, to obtaining (prior to the
Effective Time)
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consents required from commercial lenders, lessors or other third parties.
Excluded from the foregoing sentences of this paragraph (b), insofar as
they apply to the terms, conditions or provisions described in clauses (ii)
and (iii) of the first sentence of this paragraph (b), are such violations,
conflicts, breaches, defaults, terminations, accelerations or creations of
liens, security interests, charges or encumbrances that would not, in the
aggregate, have a material adverse effect on the business, operations,
properties, assets, condition (financial or other), results of operations
or prospects of Parent and its subsidiaries, taken as a whole.
(c) Except for (i) the filings by Parent and the Company
required by the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), (ii) the filing of the Joint Proxy
Statement/Prospectus (as defined in Section 4.9) with the Securities and
Exchange Commission (the "SEC") pursuant to the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and the Securities Act of 1933, as
amended (the "Securities Act"), and the declaration of the effectiveness
thereof by the SEC and filings with various state blue sky authorities,
(iii) the making of the Merger Filing with the Secretary of State of the
State of Delaware in connection with the Merger, and (iv) any required
filings with or approvals from applicable state environmental authorities,
public service commissions and public utility commissions (the filings and
approvals referred to in clauses (i) through (iv) are collectively referred
to as the "Parent Required Statutory Approvals"), no declaration, filing or
registration with, or notice to, or authorization, consent or approval of,
any governmental or regulatory body or authority is necessary for the
execution and delivery of this Agreement by Parent or Subsidiary or the
consummation by Parent or Subsidiary of the transactions contemplated
hereby, other than such declarations, filings, registrations, notices,
authorizations, consents or approvals which, if not made or obtained, as
the case may be, would not, in the aggregate, have a material adverse
effect on the business, operations, properties, assets, condition
(financial or other), results of operations or prospects of Parent and its
subsidiaries, taken as a whole.
SECTION 4.5. REPORTS AND FINANCIAL STATEMENTS. Since December 31,
1990, Parent has filed with the SEC all forms, statements, reports and
documents (including all exhibits, amendments and supplements thereto) required
to be filed by it under each of the Securities Act, the Exchange Act and the
respective rules and regulations thereunder, all of which, as amended if
applicable, complied in all material respects with all applicable requirements
of the appropriate act and the rules and regulations thereunder. Parent has
previously delivered to the Company copies of its (a) Annual Reports on Form
10-K for the fiscal year ended December 31, 1993 and for each of the two
immediately preceding fiscal years, as filed with the SEC, (b) proxy and
information statements relating to (i) all meetings of its stockholders
(whether annual or special) and (ii) actions by written consent in lieu of a
stockholders' meeting from December 31, 1990, until the date hereof, and (c)
all other reports, including quarterly reports, or registration statements
filed by Parent with the SEC since December 31, 1990 (other than Registration
Statements filed on Form S-8) (collectively, the "Parent SEC Reports"). As of
their respective dates, the Parent SEC Reports did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The audited
consolidated financial statements and unaudited interim consolidated financial
statements of Parent included in such reports (collectively, the "Parent
Financial Statements") have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis (except as may be indicated
therein or in the notes thereto) and fairly present the financial position of
Parent and its subsidiaries as of the dates thereof and the results of their
operations and changes in financial position for the periods then ended,
subject, in the case of the unaudited interim financial statements, to normal
year-end and audit adjustments and any other adjustments described therein.
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SECTION 4.6. ABSENCE OF UNDISCLOSED LIABILITIES. Except as disclosed
in the Parent SEC Reports or with respect to acquisitions or potential
transactions or commitments heretofore disclosed to the Company in writing,
neither Parent nor any of its subsidiaries had at September 30, 1994, or has
incurred since that date, any liabilities or obligations (whether absolute,
accrued, contingent or otherwise) of any nature, except (a) liabilities,
obligations or contingencies (i) which are accrued or reserved against in the
Parent Financial Statements or reflected in the notes thereto or (ii) which
were incurred after September 30, 1994 and were incurred in the ordinary course
of business and consistent with past practices, (b) liabilities, obligations or
contingencies which (i) would not, in the aggregate, have a material adverse
effect on the business, operations, properties, assets, condition (financial or
other), results of operations or prospects of Parent and its subsidiaries,
taken as a whole, or (ii) have been discharged or paid in full prior to the
date hereof, (c) liabilities and obligations which are of a nature not required
to be reflected in the consolidated financial statements of Parent and its
subsidiaries prepared in accordance with generally accepted accounting
principles consistently applied and which were incurred in the normal course of
business and (d) that the Company acknowledges that (i) Parent is in the
process of increasing the size of its revolving credit facility with a group of
banks for whom the First National Bank of Boston is acting as agent and (ii)
Parent has disclosed to the Company that certain Home Value Guarantee Agreement
between Parent and Homeowners Association of Prairie Crossing in Lake County,
Illinois.
SECTION 4.7. ABSENCE OF CERTAIN CHANGES OR EVENTS. Since the date of
the most recent Parent SEC Report, there has not been any material adverse
change in the business, operations, properties, assets, liabilities, condition
(financial or other), results of operations or prospects of Parent and its
subsidiaries, taken as a whole.
SECTION 4.8. LITIGATION. Except as disclosed in the Parent SEC Reports
or in Schedule 4.8 attached hereto, there are no claims, suits, actions or
proceedings pending or, to the knowledge of Parent, threatened against,
relating to or affecting Parent or any of its subsidiaries, before any court,
governmental department, commission, agency, instrumentality or authority, or
any arbitrator that seek to restrain or enjoin the consummation of the Merger
or which could reasonably be expected, either alone or in the aggregate with
all such claims, actions or proceedings, to materially and adversely affect the
business, operations, properties, assets, condition (financial or other),
results of operations or prospects of Parent and its subsidiaries, taken as a
whole. Except as set forth in the Parent SEC Reports, neither Parent nor any
of its subsidiaries is subject to any judgment, decree, injunction, rule or
order of any court, governmental department, commission, agency,
instrumentality or authority or any arbitrator which prohibits or restricts the
consummation of the transactions contemplated hereby or would have any material
adverse effect on the business, operations, properties, assets, condition
(financial or other), results of operations or prospects of Parent and its
subsidiaries, taken as a whole.
SECTION 4.9. REGISTRATION STATEMENT AND PROXY STATEMENT. None of the
information to be supplied by Parent or its subsidiaries for inclusion in (a)
the Registration Statement on Form S-4 to be filed under the Securities Act
with the SEC by Parent in connection with the Merger for the purpose of
registering the shares of Parent Common Stock to be issued in the Merger (the
"Registration Statement") or (b) the proxy statement to be distributed in
connection with the Company's and Parent's meetings of their respective
stockholders to vote upon this Agreement and the transactions contemplated
hereby (the "Proxy Statement" and, together with the prospectus included in the
Registration Statement, the "Joint Proxy Statement/Prospectus") will, in the
case of the Proxy Statement or any amendments thereof or supplements thereto,
at the time of the mailing of the Proxy Statement and any amendments or
supplements thereto, and at the time of the meetings of stockholders of the
Company and Parent to be held in connection with the transactions contemplated
by this Agreement, or, in the case of the Registration Statement, as
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amended or supplemented, at the time it becomes effective and at the time of
such meetings of the stockholders of the Company and Parent, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they are made, not misleading. The Joint
Proxy Statement/Prospectus will, as of its effective date, comply as to form in
all material respects with all applicable laws, including the provisions of the
Securities Act and the Exchange Act and the rules and regulations promulgated
thereunder, except that no representation is made by Parent or Subsidiary with
respect to information supplied by the Company or the Majority Stockholders for
inclusion therein.
SECTION 4.10. NO VIOLATION OF LAW. Except as disclosed in the Parent
SEC Reports, neither Parent nor any of its subsidiaries is in violation of, or
has been given notice or been charged with any violation of, any law, statute,
order, rule, regulation, ordinance, or judgment (including, without limitation,
any applicable environmental law, ordinance or regulation) of any governmental
or regulatory body or authority, except for violations which, in the aggregate,
could not reasonably be expected to have a material adverse effect on the
business, operations, properties, assets, condition (financial or other),
results of operations or prospects of Parent and its subsidiaries, taken as a
whole. Except as disclosed in the Parent SEC Reports, as of the date of this
Agreement, to the knowledge of Parent, no investigation or review by any
governmental or regulatory body or authority is pending or threatened, nor has
any governmental or regulatory body or authority indicated an intention to
conduct the same, other than, in each case, those the outcome of which, as far
as reasonably can be foreseen, will not have a material adverse effect on the
business, operations, properties, assets, condition (financial or other),
results of operations or prospects of the Parent and its subsidiaries, taken as
a whole. Parent and its subsidiaries have all permits, licenses, franchises,
variances, exemptions, orders and other governmental authorizations, consents
and approvals necessary to conduct their businesses as presently conducted
(collectively, the "Parent Permits"), except for permits, licenses, franchises,
variances, exemptions, orders, authorizations, consents and approvals the
absence of which, alone or in the aggregate, would not have a material adverse
effect on the business, operations, properties, assets, condition (financial or
other), results of operations or prospects of the Parent and its subsidiaries,
taken as a whole. Parent and its subsidiaries are not in violation of the
terms of any Parent Permit, except for delays in filing reports or violations
which, alone or in the aggregate, would not have a material adverse effect on
the business, operations, properties, assets, condition (financial or other),
results of operations or prospects of the Parent and its subsidiaries, taken as
a whole.
SECTION 4.11. COMPLIANCE WITH AGREEMENTS. Except as disclosed in the
Parent SEC Reports, Parent and each of its subsidiaries are not in breach or
violation of or in default in the performance or observance of any term or
provision of, and no event has occurred which, with lapse of time or action by
a third party, could result in a default under (a) the respective charters,
by-laws or other similar organizational instruments of Parent or any of its
subsidiaries or (b) any contract, commitment, agreement, indenture, mortgage,
loan agreement, note, lease, bond, license, approval or other instrument to
which Parent or any of its subsidiaries is a party or by which any of them is
bound or to which any of their property is subject, which breaches, violations
and defaults, in the case of clause (b) of this Section 4.11, would have, in
the aggregate, a material adverse effect on the business, operations,
properties, assets, condition (financial or other), results of operations or
prospects of Parent and its subsidiaries, taken as a whole.
SECTION 4.12. TAXES.
(a) Parent and its subsidiaries have (i) duly filed with the
appropriate governmental authorities all Tax Returns (as defined in Section
4.12(c)) required to be filed by them for all
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periods ending on or prior to the Effective Time, other than those Tax
Returns the failure of which to file would not have a material adverse
effect on the business, operations, properties, assets, condition
(financial or other), results of operations or prospects of Parent and its
subsidiaries, taken as a whole, and such Tax Returns are true, correct and
complete in all material respects and (ii) duly paid in full or made
adequate provision for the payment of all Taxes (as defined in Section
4.12(b)) for all periods ending at or prior to the Effective Time. The
liabilities and reserves for Taxes reflected in the Parent balance sheet
included in the latest Parent SEC Report are adequate to cover all Taxes
for all periods ending at or prior to the Effective Time and there are no
material liens for Taxes upon any property or assets of Parent or any
subsidiary thereof, except for liens for Taxes not yet due. There are no
unresolved issues of law or fact arising out of a notice of deficiency,
proposed deficiency or assessment from the Internal Revenue Service (the
"IRS") or any other governmental taxing authority with respect to Taxes of
the Parent or any of its subsidiaries which, if decided adversely, singly
or in the aggregate, would have a material adverse effect on the business,
operations, properties, assets, condition (financial or other), results of
operations or prospects of Parent and its subsidiaries, taken as a whole.
Neither Parent nor any of its subsidiaries is a party to any agreement
providing for the allocation or sharing of Taxes with any entity that is
not, directly or indirectly, a wholly-owned corporate subsidiary of Parent
other than agreements the consequences of which are fully and adequately
reserved for in the Parent Financial Statements. Neither Parent nor any of
its corporate subsidiaries has, with regard to any assets or property held,
acquired or to be acquired by any of them, filed a consent to the
application of Section 341(f) of the Code.
(b) For purposes of this Agreement, the term "Taxes" shall
mean all taxes, including, without limitation, income, gross receipts,
excise, property, sales, withholding, social security, occupation, use,
service, service use, license, payroll, franchise, transfer and recording
taxes, fees and charges, windfall profits, severance, customs, import,
export, employment or similar taxes, charges, fees, levies or other
assessments imposed by the United States, or any state, local or foreign
government or subdivision or agency thereof, whether computed on a
separate, consolidated, unitary, combined or any other basis, and such term
shall include any interest, fines, penalties or additional amounts and any
interest in respect of any additions, fines or penalties attributable or
imposed or with respect to any such taxes, charges, fees, levies or other
assessments.
(c) For purposes of this Agreement, the term "Tax Return"
shall mean any return, report or other document or information required to
be supplied to a taxing authority in connection with Taxes.
SECTION 4.13. EMPLOYEE BENEFIT PLANS; ERISA. (a) Except as set forth in
the Parent SEC Reports, at the date hereof, Parent and its subsidiaries do not
maintain or contribute to any material employee benefit plans, programs,
arrangements or practices (such plans, programs, arrangements or practices of
Parent and its subsidiaries being referred to as the "Parent Plans"), including
employee benefit plans within the meaning set forth in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or other
similar material arrangements for the provision of benefits (excluding any
"Multi-employer Plan" within the meaning of Section 3(37) of ERISA or a
"Multiple Employer Plan" within the meaning of Section 413(c) of the Code).
Schedule 4.13 attached hereto lists all Multi-employer Plans and Multiple
Employer Plans which any of Parent or its subsidiaries maintains or to which
any of them makes contributions. Neither Parent nor its subsidiaries has any
obligation to create any additional such plan or to amend any such plan so as
to increase benefits thereunder, except as
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required under the terms of the Parent Plans, under existing collective
bargaining agreements or to comply with applicable law.
(b) Except as disclosed in the Parent SEC Reports, (i) there
have been no prohibited transactions within the meaning of Section 406 or
407 of ERISA or Section 4975 of the Code with respect to any of the Parent
Plans that could result in penalties, taxes or liabilities which, singly or
in the aggregate, could have a material adverse effect on the business,
operations, properties, assets, condition (financial or other), results of
operations or prospects of Parent and its subsidiaries, taken as a whole,
(ii) except for premiums due, there is no outstanding material liability,
whether measured alone or in the aggregate, under Title IV of ERISA with
respect to any of the Parent Plans, (iii) neither the Pension Benefit
Guaranty Corporation nor any plan administrator has instituted proceedings
to terminate any of the Parent Plans subject to Title IV of ERISA other
than in a "standard termination" described in Section 4041(b) of ERISA,
(iv) none of the Parent Plans has incurred any "accumulated funding
deficiency" (as defined in Section 302 of ERISA and Section 412 of the
Code), whether or not waived, as of the last day of the most recent fiscal
year of each of the Parent Plans ended prior to the date of this Agreement,
(v) the current present value of all projected benefit obligations under
each of the Parent Plans which is subject to Title IV of ERISA did not, as
of its latest valuation date, exceed the then current value of the assets
of such plan allocable to such benefit liabilities by more than the amount,
if any, disclosed in the Parent SEC Reports as of September 30, 1994, based
upon reasonable actuarial assumptions currently utilized for such Parent
Plan, (vi) each of the Parent Plans has been operated and administered in
all material respects in accordance with applicable laws during the period
of time covered by the applicable statute of limitations, (vii) each of the
Parent Plans which is intended to be "qualified" within the meaning of
Section 401(a) of the Code has been determined by the Internal Revenue
Service to be so qualified and such determination has not been modified,
revoked or limited by failure to satisfy any condition thereof or by a
subsequent amendment thereto or a failure to amend, except that it may be
necessary to make additional amendments retroactively to maintain the
"qualified" status of such Parent Plans, and the period for making any such
necessary retroactive amendments has not expired, (viii) with respect to
Multi-employer Plans, neither Parent nor any of its subsidiaries has made
or suffered a "complete withdrawal" or a "partial withdrawal," as such
terms are respectively defined in Sections 4203, 4204 and 4205 of ERISA
and, to the best knowledge of Parent and its subsidiaries, no event has
occurred or is expected to occur which presents a material risk of a
complete or partial withdrawal under said Sections 4203, 4204 and 4205,
(ix) to the best knowledge of Parent and its subsidiaries, there are no
material pending, threatened or anticipated claims involving any of the
Parent Plans other than claims for benefits in the ordinary course, and (x)
Parent and its subsidiaries have no current material liability for plan
termination or withdrawal (complete or partial) under Title IV of ERISA
based on any plan to which any entity that would be deemed one employer
with Parent and its subsidiaries under Section 4001 of ERISA or Section 414
of the Code contributed during the period of time covered by the applicable
statute of limitations (a "Parent Controlled Group Plan"), and Parent and
its subsidiaries do not reasonably anticipate that any such liability will
be asserted against Parent or any of its subsidiaries. None of the Parent
Controlled Group Plans has an "accumulated funding deficiency" (as defined
in Section 302 of ERISA and Section 412 of the Code).
(c) The Parent SEC Reports contain a true and complete summary
or list of or otherwise describe all material employment contracts and
other employee benefit arrangements
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with "change of control" or similar provisions and all severance agreements
with executive officers.
SECTION 4.14. LABOR CONTROVERSIES. Except as set forth in the Parent
SEC Reports, (a) there are no significant controversies pending or, to the
knowledge of Parent, threatened between Parent or its subsidiaries and any
representatives of any of their employees, (b) to the knowledge of Parent,
there are no material organizational efforts presently being made involving any
of the presently unorganized employees of Parent and its subsidiaries, (c)
Parent and its subsidiaries have, to the knowledge of Parent, complied in all
material respects with all laws relating to the employment of labor, including,
without limitation, any provisions thereof relating to wages, hours, collective
bargaining, and the payment of social security and similar taxes, and (d) no
person has, to the knowledge of Parent, asserted that Parent or any of its
subsidiaries is liable in any material amount for any arrears of wages or any
taxes or penalties for failure to comply with any of the foregoing, except for
such controversies, organizational efforts, non-compliance and liabilities
which, singly or in the aggregate, could not reasonably be expected to
materially and adversely affect the business, operations, properties, assets,
condition (financial or other), results of operations or prospects of Parent
and its subsidiaries, taken as a whole.
SECTION 4.15. ENVIRONMENTAL MATTERS. (a) Except as set forth in the
Parent SEC Reports, (i) Parent and its subsidiaries have conducted their
respective businesses in compliance with all applicable Environmental Laws,
including, without limitation, having all permits, licenses and other approvals
and authorizations necessary for the operation of their respective businesses
as presently conducted, (ii) none of the properties owned by Parent or any of
its subsidiaries contain any Hazardous Substance as a result of any activity of
Parent or any of its subsidiaries in amounts exceeding the levels permitted by
applicable Environmental Laws, (iii) neither Parent nor any of its subsidiaries
has received any notices, demand letters or requests for information from any
Federal, state, local or foreign governmental entity or third party indicating
that Parent or any of its subsidiaries may be in violation of, or liable under,
any Environmental Law in connection with the ownership or operation of their
businesses, (iv) there are no civil, criminal or administrative actions, suits,
demands, claims, hearings, investigations or proceedings pending or threatened,
against Parent or any of its subsidiaries relating to any violation, or alleged
violation, of any Environmental Law, (v) no reports have been filed, or are
required to be filed, by Parent or any of its subsidiaries concerning the
release of any Hazardous Substance or the threatened or actual violation of any
Environmental Law, (vi) no Hazardous Substance has been disposed of, released
or transported in violation of any applicable Environmental Law from any
properties owned by Parent or any of its subsidiaries as a result of any
activity of Parent or any of its subsidiaries during the time such properties
were owned, leased or operated by Parent or any of its subsidiaries, (vii)
there have been no environmental investigations, studies, audits, tests,
reviews or other analyses regarding compliance or noncompliance with any
applicable Environmental Law conducted by or which are in the possession of
Parent or its subsidiaries relating to the activities of Parent or its
subsidiaries which have not been delivered to the Company prior to the date
hereof, (viii) there are no underground storage tanks on, in or under any
properties owned by Parent and any of its subsidiaries and no underground
storage tanks have been closed or removed from any of such properties during
the time such properties were owned, leased or operated by Parent or any of its
subsidiaries, (ix) there is no asbestos or asbestos containing material present
in any of the properties owned by Parent and its subsidiaries, and no asbestos
has been removed from any of such properties during the time such properties
were owned, leased or operated by Parent or any of its subsidiaries, and (x)
neither Parent, its subsidiaries nor any of their respective properties are
subject to any material liabilities or expenditures (fixed or contingent)
relating to any suit, settlement, court order, administrative order, regulatory
requirement, judgment or claim asserted or arising under any Environmental Law,
except for violations of the foregoing clauses (i) through (x) that, singly or
in the aggregate, would not reasonably
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be expected to have a material adverse effect on the business, operations,
properties, assets, condition (financial or other), results of operations or
prospects of Parent and its subsidiaries considered as one enterprise.
(b) As used herein, "Environmental Law" means any Federal,
state, local or foreign law, statute, ordinance, rule, regulation, code,
license, permit, authorization, approval, consent, legal doctrine, order,
judgment, decree, injunction, requirement or agreement with any
governmental entity relating to (x) the protection, preservation or
restoration of the environment (including, without limitation, air, water
vapor, surface water, groundwater, drinking water supply, surface land,
subsurface land, plant and animal life or any other natural resource) or to
human health or safety or (y) the exposure to, or the use, storage,
recycling, treatment, generation, transportation, processing, handling,
labeling, production, release or disposal of Hazardous Substances, in each
case as amended and as in effect on the Closing Date. The term
Environmental Law includes, without limitation, (i) the Federal
Comprehensive Environmental Response Compensation and Liability Act of
1980, the Superfund Amendments and Reauthorization Act, the Federal Water
Pollution Control Act of 1972, the Federal Clean Air Act, the Federal Clean
Water Act, the Federal Resource Conservation and Recovery Act of 1976
(including the Hazardous and Solid Waste Amendments thereto), the Federal
Solid Waste Disposal and the Federal Toxic Substances Control Act, the
Federal Insecticide, Fungicide and Rodenticide Act, the Federal
Occupational Safety and Health Act of 1970, each as amended and as in
effect on the Closing Date, and (ii) any common law or equitable doctrine
(including, without limitation, injunctive relief and tort doctrines such
as negligence, nuisance, trespass and strict liability) that may impose
liability or obligations for injuries or damages due to, or threatened as a
result of, the presence of, effects of or exposure to any Hazardous
Substance.
(c) As used herein, "Hazardous Substance" means any substance
presently or hereafter listed, defined, designated or classified as
hazardous, toxic, radioactive, or dangerous, or otherwise regulated, under
any Environmental Law. Hazardous Substance includes any substance to which
exposure is regulated by any government authority or any Environmental Law
including, without limitation, any toxic waste, pollutant, contaminant,
hazardous substance, toxic substance, hazardous waste, special waste,
industrial substance or petroleum or any derivative or by-product thereof,
radon, radioactive material, asbestos or asbestos containing material, urea
formaldehyde foam insulation, lead or polychlorinated biphenyls.
SECTION 4.16. NON-COMPETITION AGREEMENTS. Neither Parent nor any
subsidiary of Parent is a party to any agreement which purports to restrict or
prohibit in any material respect any of them from, directly or indirectly,
engaging in any business of rubbish, garbage, paper, textile wastes, chemical
or hazardous wastes, liquid and other waste collection, interim storage,
transfer, recovery, processing, recycling, marketing or disposal or any other
material business currently engaged in by the Parent or the Company, or any
corporations affiliated with either of them. None of Parent's officers,
directors or key employees is a party to any agreement which, by virtue of such
person's relationship with Parent, restricts in any material respect Parent or
any subsidiary of Parent from, directly or indirectly, engaging in any of the
businesses described above.
SECTION 4.17. TITLE TO ASSETS. Parent and each of its subsidiaries has
good and marketable title in fee simple to all its real property and good title
to all its leasehold interests and other properties as reflected in the most
recent balance sheet included in the Parent Financial Statements, except for
such properties and assets that have been disposed of in the ordinary course of
business since the date of such
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balance sheet, free and clear of all mortgages, liens, pledges, charges or
encumbrances of any nature whatsoever, except (i) the lien for current taxes,
payments of which are not yet delinquent, (ii) such imperfections in title and
easements and encumbrances, if any, as are not substantial in character, amount
or extent and do not materially detract from the value or interfere with the
present use of the property subject thereto or affected thereby, or otherwise
materially impair the Parent's business operations (in the manner presently
carried on by the Parent), or (iii) as disclosed in the Parent SEC Reports, and
except for such matters which, singly or in the aggregate, could not reasonably
be expected to materially and adversely affect the business, operations,
properties, assets, condition (financial or other), results of operations or
prospects of Parent and its subsidiaries, taken as a whole. All leases under
which Parent leases any real or personal property are in good standing, valid
and effective in accordance with their respective terms, and there is not,
under any of such leases, any existing default or event which with notice or
lapse of time or both would become a default other than defaults under such
leases which in the aggregate will not materially and adversely affect the
Parent and its subsidiaries, taken as a whole.
SECTION 4.18. PARENT STOCKHOLDERS' APPROVAL. The affirmative vote of
stockholders of Parent required for approval and adoption of this Agreement and
the Merger is a majority of the outstanding shares of Parent Common Stock.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Subsidiary as follows:
SECTION 5.1. ORGANIZATION AND QUALIFICATION. The Company is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and has the requisite corporate power and
authority to own, lease and operate its assets and properties and to carry on
its business as it is now being conducted. The Company is qualified to do
business and is in good standing in each jurisdiction in which the properties
owned, leased or operated by it or the nature of the business conducted by it
makes such qualification necessary, except where the failure to be so qualified
and in good standing will not, when taken together with all other such
failures, have a material adverse effect on the business, operations,
properties, assets, condition (financial or other), results of operations or
prospects of the Company and its subsidiaries, taken as a whole. True,
accurate and complete copies of the Company's Certificate of Incorporation and
By-laws, in each case as in effect on the date hereof, including all amendments
thereto, have heretofore been delivered to Parent.
SECTION 5.2. CAPITALIZATION.
(a) The authorized capital stock of the Company
consists of 50,000,000 shares of Regular Common Stock, 100,000,000 shares
of Class A Common Stock and 10,000,000 shares of preferred stock. As of
November 21, 1994, 15,959,968 shares of Regular Common Stock and 50,829,159
shares of Class A Common Stock were issued and outstanding and no shares of
preferred stock were issued and outstanding. All of such issued and
outstanding shares are validly issued and are fully paid, nonassessable and
free of preemptive rights. No subsidiary of the Company holds any shares
of the capital stock of the Company.
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(b) Except as set forth on Schedule 5.2 attached
hereto, as of the date hereof there were no outstanding
subscriptions, options, calls, contracts, commitments,
understandings, restrictions, arrangements, rights or warrants,
including any right of conversion or exchange under any
outstanding security, instrument or other agreement and also
including any rights plan or other anti-takeover agreement,
obligating the Company or any subsidiary of the Company to issue,
deliver or sell, or cause to be issued, delivered or sold,
additional shares of the capital stock of the Company or
obligating the Company or any subsidiary of the Company to grant,
extend or enter into any such agreement or commitment. There are
no voting trusts, proxies or other agreements or understandings to
which the Company or any subsidiary of the Company is a party or
is bound with respect to the voting of any shares of capital stock
of the Company.
SECTION 5.3. SUBSIDIARIES.
(a) Except as set forth in Schedule 5.3, each direct
and indirect corporate subsidiary of the Company is duly
organized, validly existing and in good standing under the laws of
its jurisdiction of incorporation and has the requisite power and
authority to own, lease and operate its assets and properties and
to carry on its business as it is now being conducted. Each
subsidiary of the Company is qualified to do business, and is in
good standing, in each jurisdiction in which the properties owned,
leased or operated by it or the nature of the business conducted
by it makes such qualification necessary, except where the failure
to be so qualified and in good standing will not, when taken
together with all such other failures, have a material adverse
effect on the business, operations, properties, assets, condition
(financial or other), results of operations or prospects of the
Company and its subsidiaries, taken as a whole. All of the
outstanding shares of capital stock of each corporate subsidiary
of the Company are validly issued, fully paid, nonassessable and
free of preemptive rights and are owned directly or indirectly by
the Company free and clear of any liens, claims, encumbrances,
security interests, equities, charges and options of any nature
whatsoever except as set forth in Schedule 5.3 attached hereto.
There are no subscriptions, options, warrants, rights, calls,
contracts, voting trusts, proxies or other commitments,
understandings, restrictions or arrangements relating to the
issuance, sale, voting, transfer, ownership or other rights with
respect to any shares of capital stock of any corporate subsidiary
of the Company, including any right of conversion or exchange
under any outstanding security, instrument or agreement.
SECTION 5.4. AUTHORITY; NON-CONTRAVENTION; APPROVALS.
(a) The Company has full corporate power and
authority to enter into this Agreement and, subject to the Company
Stockholders' Approval (as defined in Section 7.3(a)) and the
Company Required Statutory Approvals (as defined in Section
5.4(c)), to consummate the transactions contemplated hereby. This
Agreement has been approved by the Board of Directors of the
Company, and no other corporate proceedings on the part of the
Company are necessary to authorize the execution and delivery of
this Agreement or, except for the Company Stockholders' Approval,
the consummation by the Company of the transactions contemplated
hereby. This Agreement has been duly executed and delivered by
the Company, and, assuming the due authorization, execution and
delivery hereof by Parent and Subsidiary, constitutes a valid and
legally binding
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<PAGE> 18
agreement of the Company, enforceable against the Company in
accordance with its terms, except that such enforcement may be
subject to (a) bankruptcy, insolvency, reorganization, moratorium
or other similar laws affecting or relating to enforcement of
creditors' rights generally and (b) general equitable principles.
Without limitation of the foregoing, each of the covenants and
obligations of the Company set forth in Sections 6.1, 6.5, 7.3,
7.6, 7.7, 7.8 and 7.11 is valid, legally binding and enforceable
notwithstanding the absence of the Company Stockholders' Approval.
(b) The execution and delivery of this Agreement by
the Company do not violate, conflict with or result in a breach of
any provision of, or constitute a default (or an event which, with
notice or lapse of time or both, would constitute a default)
under, or result in the termination of, or accelerate the
performance required by, or result in a right of termination or
acceleration under, or result in the creation of any lien,
security interest, charge or encumbrance upon any of the
properties or assets of the Company or any of its subsidiaries
under any of the terms, conditions or provisions of (i) the
respective charters or by-laws of the Company or any of its
subsidiaries, (ii) any statute, law, ordinance, rule, regulation,
judgment, decree, order, injunction, writ, permit or license of
any court or governmental authority applicable to the Company or
any of its subsidiaries or any of their respective properties or
assets, or (iii) any note, bond, mortgage, indenture, deed of
trust, license, franchise, permit, concession, contract, lease or
other instrument, obligation or agreement of any kind to which the
Company or any of its subsidiaries is now a party or by which the
Company or any of its subsidiaries or any of their respective
properties or assets may be bound or affected. The consummation
by the Company of the transactions contemplated hereby will not
result in any violation, conflict, breach, termination,
acceleration or creation of liens under any of the terms,
conditions or provisions described in clauses (i) through (iii) of
the preceding sentence, subject (x) in the case of the terms,
conditions or provisions described in clause (ii) above, to
obtaining (prior to the Effective Time) the Company Required
Statutory Approvals and the Company Stockholder's Approval and (y)
in the case of the terms, conditions or provisions described in
clause (iii) above, to obtaining (prior to the Effective Time)
consents required from commercial lenders, lessors or other third
parties. Excluded from the foregoing sentences of this paragraph
(b), insofar as they apply to the terms, conditions or provisions
described in clauses (ii) and (iii) of the first sentence of this
paragraph (b), are such violations, conflicts, breaches, defaults,
terminations, accelerations or creations of liens, security
interests, charges or encumbrances that would not, in the
aggregate, have a material adverse effect on the business,
operations, properties, assets, condition (financial or other),
results of operations or prospects of the Company and its
subsidiaries, taken as a whole.
(c) Except for (i) the filings by Parent and the
Company required by the HSR Act, (ii) the filing of the Joint
Proxy Statement/Prospectus with the SEC pursuant to the Exchange
Act and the Securities Act and the declaration of the
effectiveness thereof by the SEC and filings with various state
blue sky authorities, (iii) the making of the Merger Filing with
the Secretary of State of the State of Delaware in connection with
the Merger and (iv) any required filings with or approvals from
applicable state environmental authorities, public service
commissions and public utility commissions (the filings and
approvals referred to in clauses (i) through (iv) are collectively
referred to as the "Company Required Statutory Approvals"), no
declaration, filing or registration with,
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<PAGE> 19
or notice to, or authorization, consent or approval of, any governmental or
regulatory body or authority is necessary for the execution and delivery of
this Agreement by the Company or the consummation by the Company of the
transactions contemplated hereby, other than such declarations, filings,
registrations, notices, authorizations, consents or approvals which, if not
made or obtained, as the case may be, would not, in the aggregate, have a
material adverse effect on the business, operations, properties, assets,
condition (financial or other), results of operations or prospects of the
Company and its subsidiaries, taken as a whole.
SECTION 5.5. REPORTS AND FINANCIAL STATEMENTS. Except as set forth on
Schedule 5.5 attached hereto, since December 31, 1990, the Company has filed
with the SEC all material forms, statements, reports and documents (including
all exhibits, amendments and supplements thereto) required to be filed by it
under each of the Securities Act, the Exchange Act and the respective rules and
regulations thereunder, all of which, as amended if applicable, complied in all
material respects with all applicable requirements of the appropriate act and
the rules and regulations thereunder. The Company has previously delivered to
Parent copies of its (a) Annual Reports on Form 10-K for the fiscal year ended
December 31, 1993 and for each of the two immediately preceding fiscal years,
as filed with the SEC, (b) proxy and information statements relating to (i) all
meetings of its stockholders (whether annual or special) and (ii) actions by
written consent in lieu of a stockholders' meeting from December 31, 1990 until
the date hereof, and (c) all other reports, including quarterly reports, or
registration statements filed by the Company with the SEC since December 31,
1990 (other than Registration Statements filed on Form S-8) and (the documents
referred to in clauses (a), (b) and (c) are collectively referred to as the
"Company SEC Reports"). Except as set forth in Schedule 5.5 attached hereto,
as of their respective dates, the Company SEC Reports did not contain any
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading. The audited
consolidated financial statements and unaudited interim consolidated financial
statements of the Company included in such reports (collectively, the "Company
Financial Statements") have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis (except as may be indicated
therein or in the notes thereto) and fairly present the financial position of
the Company and its subsidiaries as of the dates thereof and the results of
their operations and changes in financial position for the periods then ended,
subject, in the case of the unaudited interim financial statements, to normal
year-end and audit adjustments and any other adjustments described therein.
SECTION 5.6. ABSENCE OF UNDISCLOSED LIABILITIES. Except as disclosed
in the Company SEC Reports, neither the Company nor any of its subsidiaries had
at September 30, 1994, or has incurred since that date, any liabilities or
obligations (whether absolute, accrued, contingent or otherwise) of any nature,
except (a) liabilities, obligations or contingencies (i) which are accrued or
reserved against in the Company Financial Statements or reflected in the notes
thereto or (ii) which were incurred after September 30, 1994 and were incurred
in the ordinary course of business and consistent with past practices, (b)
liabilities, obligations or contingencies which (i) would not, in the
aggregate, have a material adverse effect on the business, operations,
properties, assets, condition (financial or other), results of operations or
prospects of the Company and its subsidiaries, taken as a whole, or (ii) have
been discharged or paid in full prior to the date hereof, and (c) liabilities
and obligations which are of a nature not required to be reflected in the
consolidated financial statements of the Company and its subsidiaries prepared
in accordance with generally accepted accounting principles consistently
applied and which were incurred in the normal course of business.
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<PAGE> 20
SECTION 5.7. ABSENCE OF CERTAIN CHANGES OR EVENTS. Since the date of
the most recent Company SEC Report, there has not been any material adverse
change in the business, operations, properties, assets, liabilities, condition
(financial or other), results of operations or prospects of the Company and its
subsidiaries, taken as a whole.
SECTION 5.8. LITIGATION. Except as referred to in the Company SEC
Reports or in Schedule 5.8 attached hereto, there are no claims, suits, actions
or proceedings pending or, to the knowledge of the Company, threatened against,
relating to or affecting the Company or any of its subsidiaries, before any
court, governmental department, commission, agency, instrumentality or
authority, or any arbitrator that seek to restrain the consummation of the
Merger or which could reasonably be expected, either alone or in the aggregate
with all such claims, actions or proceedings, to materially and adversely
affect the business, operations, properties, assets, condition (financial or
other), results of operations or prospects of the Company and its subsidiaries,
taken as a whole. Except as referred to in the Company SEC Reports or in
Schedule 5.8 attached hereto, neither the Company nor any of its subsidiaries
is subject to any judgment, decree, injunction, rule or order of any court,
governmental department, commission, agency, instrumentality or authority, or
any arbitrator which prohibits or restricts the consummation of the
transactions contemplated hereby or would have any material adverse effect on
the business, operations, properties, assets, condition (financial or other),
results of operations or prospects of the Company and its subsidiaries, taken
as a whole. The Company has heretofore delivered to Parent a true and complete
copy of each document identified in Schedule 5.8.
SECTION 5.9. REGISTRATION STATEMENT AND PROXY STATEMENT. None of the
information to be supplied by the Company or its subsidiaries for inclusion in
(a) the Registration Statement or (b) the Proxy Statement will, in the case of
the Proxy Statement or any amendments thereof or supplements thereto, at the
time of the mailing of the Proxy Statement and any amendments or supplements
thereto, and at the time of the meetings of stockholders of the Company and
Parent to be held in connection with the transactions contemplated by this
Agreement or, in the case of the Registration Statement, as amended or
supplemented, at the time it becomes effective and at the time of such meetings
of the stockholders of the Company and Parent, contain any untrue statement of
a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. The Joint Proxy
Statement/Prospectus will comply, as of its effective date, as to form in all
material respects with all applicable laws, including the provisions of the
Securities Act and the Exchange Act and the rules and regulations promulgated
thereunder, except that no representation is made by the Company with respect
to information supplied by Parent or Subsidiary for inclusion therein.
SECTION 5.10. NO VIOLATION OF LAW. Except as disclosed in the Company
SEC Reports or in Schedule 5.8 attached hereto, neither the Company nor any of
its subsidiaries is in violation of or has been given notice or been charged
with any violation of, any law, statute, order, rule, regulation, ordinance or
judgment (including, without limitation, any applicable environmental law,
ordinance or regulation) of any governmental or regulatory body or authority,
except for violations which, in the aggregate, could not reasonably be expected
to have a material adverse effect on the business, operations, properties,
assets, condition (financial or other), results of operations or prospects of
the Company and its subsidiaries, taken as a whole. Except as disclosed in the
Company SEC Reports, as of the date of this Agreement, to the knowledge of the
Company, no investigation or review by any governmental or regulatory body or
authority is pending or threatened, nor has any governmental or regulatory body
or authority indicated an intention to conduct the same, other than, in each
case, those the outcome of which, as far as reasonably can be foreseen, will
not have a material adverse effect on the business, operations, properties,
assets,
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condition (financial or other), results of operations or prospects of the
Company and its subsidiaries taken as a whole. The Company and its
subsidiaries have all permits, licenses, franchises, variances, exemptions,
orders and other governmental authorizations, consents and approvals necessary
to conduct their businesses as presently conducted (collectively, the "Company
Permits"), except for permits, licenses, franchises, variances, exemptions,
orders, authorizations, consents and approvals the absence of which, alone or
in the aggregate, would not have a material adverse effect on the business,
operations, properties, assets, condition (financial or other), results of
operations or prospects of the Company and its subsidiaries, taken as a whole.
The Company and its subsidiaries are not in violation of the terms of any
Company Permit, except for delays in filing reports or violations which, alone
or in the aggregate, would not have a material adverse effect on the business,
operations, properties, assets, condition (financial or other), results of
operations or prospects of the Company and its subsidiaries, taken as a whole.
SECTION 5.11. COMPLIANCE WITH AGREEMENTS. Except as disclosed in the
Company SEC Reports, the Company and each of its subsidiaries are not in breach
or violation of or in default in the performance or observance of any term or
provision of, and no event has occurred which, with lapse of time or action by
a third party, could result in a default under, (a) the respective charters,
by-laws or similar organizational instruments of the Company or any of its
subsidiaries or (b) any contract, commitment, agreement, indenture, mortgage,
loan agreement, note, lease, bond, license, approval or other instrument to
which the Company or any of its subsidiaries is a party or by which any of them
is bound or to which any of their property is subject, which breaches,
violations and defaults, in the case of clause (b) of this Section 5.11, would
have, in the aggregate, a material adverse effect on the business, operations,
properties, assets, condition (financial or other), results of operations or
prospects of the Company and its subsidiaries, taken as a whole.
SECTION 5.12. TAXES. The Company and its subsidiaries have (i) duly
filed with the appropriate governmental authorities all Tax Returns required to
be filed by them for all periods ending on or prior to the Effective Time,
other than those Tax Returns the failure of which to file would not have a
material adverse effect on the business, operations, properties, assets,
condition (financial or other), results of operations or prospects of the
Company and its subsidiaries, taken as a whole, and such Tax Returns are true,
correct and complete in all material respects, and (ii) duly paid in full or
made adequate provision for the payment of all Taxes for all periods ending at
or prior to the Effective Time. The liabilities and reserves for Taxes
reflected in the Company balance sheet included in the latest Company SEC
Report are adequate to cover all Taxes for all periods ending at or prior to
the Effective Time and there are no material liens for Taxes upon any property
or asset of the Company or any subsidiary thereof, except for liens for Taxes
not yet due. There are no unresolved issues of law or fact arising out of a
notice of deficiency, proposed deficiency or assessment from the IRS or any
other governmental taxing authority with respect to Taxes of the Company or any
of its subsidiaries which, if decided adversely, singly or in the aggregate,
would have a material adverse effect on the business, operations, properties,
assets, condition (financial or other), results of operations or prospects of
the Company and its subsidiaries, taken as a whole. Neither the Company nor
any of its subsidiaries is a party to any agreement providing for the
allocation or sharing of Taxes with any entity that is not, directly or
indirectly, a wholly-owned corporate subsidiary of Company. Neither the
Company nor any of its corporate subsidiaries has, with regard to any assets or
property held, acquired or to be acquired by any of them, filed a consent to
the application of Section 341(f) of the Code.
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SECTION 5.13. EMPLOYEE BENEFIT PLANS; ERISA.
(a) Except as set forth in the Company SEC Reports,
at the date hereof, the Company and its subsidiaries do not
maintain or contribute to any material employee benefit plans,
programs, arrangements and practices (such plans, programs,
arrangements and practices of the Company and its subsidiaries
being referred to as the "Company Plans"), including employee
benefit plans within the meaning set forth in Section 3(3) of
ERISA, or other similar material arrangements for the provision of
benefits (excluding any "Multi-employer Plan" within the meaning
of Section 3(37) of ERISA or a "Multiple Employer Plan" within the
meaning of Section 413(c) of the Code). Schedule 5.13(a) attached
hereto lists all Multi-employer Plans and Multiple Employer Plans
which any of the Company or its subsidiaries maintains or to which
any of them makes contributions. Neither the Company nor its
subsidiaries has any obligation to create any additional such plan
or to amend any such plan so as to increase benefits thereunder,
except as required under the terms of the Company Plans, under
existing collective bargaining agreements or to comply with
applicable law.
(b) Except as disclosed in the Company SEC Reports,
(i) there have been no prohibited transactions within the meaning
of Section 406 or 407 of ERISA or Section 4975 of the Code with
respect to any of the Company Plans that could result in
penalties, taxes or liabilities which, singly or in the aggregate,
could have a material adverse effect on the business, operations,
properties, assets, condition (financial or other) results of
operations or prospects of the Company and its subsidiaries, taken
as a whole, (ii) except for premiums due, there is no outstanding
material liability, whether measured alone or in the aggregate,
under Title IV of ERISA with respect to any of the Company Plans,
(iii) neither the Pension Benefit Guaranty Corporation nor any
plan administrator has instituted proceedings to terminate any of
the Company Plans subject to Title IV of ERISA other than in a
"standard termination" described in Section 4041(b) of ERISA, (iv)
none of the Company Plans has incurred any "accumulated funding
deficiency" (as defined in Section 302 of ERISA and Section 412 of
the Code), whether or not waived, as of the last day of the most
recent fiscal year of each of the Company Plans ended prior to the
date of this Agreement, (v) the current present value of all
projected benefit obligations under each of the Company Plans
which is subject to Title IV of ERISA did not, as of its latest
valuation date, exceed the then current value of the assets of
such plan allocable to such benefit liabilities by more than the
amount, if any, disclosed in the Company SEC Reports as of
September 30, 1994, based upon reasonable actuarial assumptions
currently utilized for such Company Plan, (vi) each of the Company
Plans has been operated and administered in all material respects
in accordance with applicable laws during the period of time
covered by the applicable statute of limitations, (vii) each of
the Company Plans which is intended to be "qualified" within the
meaning of Section 401(a) of the Code has been determined by the
Internal Revenue Service to be so qualified and such determination
has not been modified, revoked or limited by failure to satisfy
any condition thereof or by a subsequent amendment thereto or a
failure to amend, except that it may be necessary to make
additional amendments retroactively to maintain the "qualified"
status of such Company Plans, and the period for making any such
necessary retroactive amendments has not expired, (viii) with
respect to Multi-employer Plans, neither the Company nor any of
its subsidiaries has, made or suffered a "complete withdrawal" or
a "partial withdrawal," as such terms are respectively defined in
Sections 4203,4204 and 4205 of ERISA and, to the best knowledge of
the Company and its
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subsidiaries, no event has occurred or is expected to occur which presents
a material risk of a complete or partial withdrawal under said Sections
4203, 4204 and 4205, (ix) to the best knowledge of the Company and its
subsidiaries, there are no material pending, threatened or anticipated
claims involving any of the Company Plans other than claims for benefits in
the ordinary course, and (x) the Company and its subsidiaries have no
current material liability, whether measured alone or in the aggregate, for
plan termination or withdrawal (complete or partial) under Title IV of
ERISA based on any plan to which any entity that would be deemed one
employer with the Company and its subsidiaries under Section 4001 of ERISA
or Section 414 of the Code contributed during the period of time covered by
the applicable statute of limitations (the "Company Controlled Group
Plans"), and the Company and its subsidiaries do not reasonably anticipate
that any such liability will be asserted against the Company or any of its
subsidiaries. None of the Company Controlled Group Plans has an
"accumulated funding deficiency" (as defined in Section 302 of ERISA and
412 of the Code).
(c) The Company SEC Reports contain a true and
complete summary or list of or otherwise describe all material
employment contracts and other employee benefit arrangements with
"change of control" or similar provisions and all severance
agreements with executive officers.
SECTION 5.14. LABOR CONTROVERSIES. Except as set forth in the Company
SEC Reports, (a) there are no significant controversies pending or, to the
knowledge of the Company, threatened between the Company or its subsidiaries
and any representatives of any of their employees, (b) to the knowledge of the
Company, there are no material organizational efforts presently being made
involving any of the presently unorganized employees of the Company or its
subsidiaries, (c) the Company and its subsidiaries have, to the knowledge of
the Company, complied in all material respects with all laws relating to the
employment of labor, including, without limitation, any provisions thereof
relating to wages, hours, collective bargaining, and the payment of social
security and similar taxes, and (d) no person has, to the knowledge of the
Company, asserted that the Company or any of its subsidiaries is liable in any
material amount for any arrears of wages or any taxes or penalties for failure
to comply with any of the foregoing, except for such controversies,
organizational efforts, non-compliance and liabilities which, singly or in the
aggregate, could not reasonably be expected to materially and adversely affect
the business, operations, properties, assets, condition (financial or other),
results of operations or prospects of the Company and its subsidiaries, taken
as a whole.
SECTION 5.15. ENVIRONMENTAL MATTERS. Except as set forth in the Company
SEC Reports, (i) the Company and its subsidiaries have conducted their
respective businesses in compliance with all applicable Environmental Laws,
including, without limitation, having all permits, licenses and other approvals
and authorizations necessary for the operation of their respective businesses
as presently conducted, (ii) none of the properties owned by the Company or any
of its subsidiaries contain any Hazardous Substance as a result of any activity
of the Company or any of its subsidiaries in amounts exceeding the levels
permitted by applicable Environmental Laws, (iii) neither the Company nor any
of its subsidiaries has received any notices, demand letters or requests for
information from any Federal, state, local or foreign governmental entity or
third party indicating that the Company or any of its subsidiaries may be in
violation of, or liable under, any Environmental Law in connection with the
ownership or operation of their businesses, (iv) there are no civil, criminal
or administrative actions, suits, demands, claims, hearings, investigations or
proceedings pending or threatened, against the Company or any of its
subsidiaries relating to any violation, or alleged violation, of any
Environmental Law, (v) no reports have been filed, or are required to be filed,
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by the Company or any of its subsidiaries concerning the release of any
Hazardous Substance or the threatened or actual violation of any Environmental
Law, (vi) no Hazardous Substance has been disposed of, released or transported
in violation of any applicable Environmental Law from any properties owned by
the Company or any of its subsidiaries as a result of any activity of the
Company or any of its subsidiaries during the time such properties were owned,
leased or operated by the Company or any of its subsidiaries, (vii) there have
been no environmental investigations, studies, audits, tests, reviews or other
analyses regarding compliance or noncompliance with any applicable
Environmental Law conducted by or which are in the possession of the Company or
its subsidiaries relating to the activities of the Company or its subsidiaries
which have not been delivered to Parent prior to the date hereof, (viii) there
are no underground storage tanks on, in or under any properties owned by the
Company or any of its subsidiaries and no underground storage tanks have been
closed or removed from any of such properties during the time such properties
were owned, leased or operated by the Company or any of its subsidiaries, (ix)
there is no asbestos or asbestos containing material present in any of the
properties owned by the Company and its subsidiaries, and no asbestos has been
removed from any of such properties during the time such properties were owned,
leased or operated by the Company or any of its subsidiaries, and (x) neither
the Company, its subsidiaries nor any of their respective properties are
subject to any material liabilities or expenditures (fixed or contingent)
relating to any suit, settlement, court order, administrative order, regulatory
requirement, judgment or claim asserted or arising under any Environmental Law,
except for violations of the foregoing clauses (i) through (x) that, singly or
in the aggregate, would not reasonably be expected to have a material adverse
effect on the business, operations, properties, assets, condition (financial or
other), results of operations or prospects of the Company and its subsidiaries
considered as one enterprise.
SECTION 5.16. NON-COMPETITION AGREEMENTS. Neither the Company nor any
subsidiary of the Company is a party to any agreement which purports to
restrict or prohibit in any material respect any of them from, directly or
indirectly, engaging in any business of rubbish, garbage, paper, textile
wastes, chemical or hazardous wastes, liquid and other waste collection,
interim storage, transfer, recovery, processing, recycling, marketing or
disposal or any other material business currently engaged in by the Parent or
the Company, or any corporations affiliated with either of them. None of the
Company's officers, directors or key employees is a party to any agreement
which, by virtue of such person's relationship with the Company, restricts in
any material respect the Company or any subsidiary of the Company from,
directly or indirectly, engaging in any of the businesses described above.
SECTION 5.17. TITLE TO ASSETS. The Company and each of its subsidiaries
has good and marketable title in fee simple to all its real property and good
title to all its leasehold interests and other properties, as reflected in the
most recent balance sheet included in the Company Financial Statements, except
for properties and assets that have been disposed of in the ordinary course of
business since the date of such balance sheet, free and clear of all mortgages,
liens, pledges, charges or encumbrances of any nature whatsoever, except (i)
the lien of current taxes, payments of which are not yet delinquent, (ii) such
imperfections in title and easements and encumbrances, if any, as are not
substantial in character, amount or extent and do not materially detract from
the value, or interfere with the present use of the property subject thereto or
affected thereby, or otherwise materially impair the Company's business
operations (in the manner presently carried on by the Company) or (iii) as
disclosed in the Company SEC Reports, and except for such matters which, singly
or in the aggregate, could not reasonably be expected to materially and
adversely affect the business, operations, properties, assets, condition
(financial or other), results of operations or prospects of the Company and its
subsidiaries, taken as a whole. All leases under which the Company leases any
substantial amount of real or personal property have been delivered to Parent
and are in good standing, valid and effective in accordance with their
respective terms, and there is not, under any of such leases, any existing
default or event which with notice or lapse of time or both would become a
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default other than defaults under such leases which in the aggregate will not
materially and adversely affect the condition of the Company.
SECTION 5.18. COMPANY STOCKHOLDERS' APPROVAL. The affirmative vote of
stockholders of the Company required for approval and adoption of this
Agreement and the Merger is a majority of the votes to which holders of
outstanding shares of Regular Common Stock and Class A Common Stock, voting
together as a single class, are entitled. If all the shares of Company Common
Stock as to which irrevocable proxies have been granted were voted (whether
pursuant to such irrevocable proxies or otherwise) at a meeting of the
Company's stockholders in favor of the approval of this Agreement and the
Merger, such vote would constitute the requisite approval of the Company's
stockholders for the approval and adoption of this Agreement and the Merger
under the DGCL.
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 6.1. CONDUCT OF BUSINESS BY THE COMPANY PENDING THE MERGER.
Except as otherwise contemplated by this Agreement, after the date hereof and
prior to the Closing Date or earlier termination of this Agreement, unless
Parent shall otherwise agree in writing, the Company shall, and shall cause its
subsidiaries, to:
(a) conduct their respective businesses in the ordinary and
usual course of business and consistent with past practice;
(b) not (i) amend or propose to amend their respective
charters or by-laws, (ii) split, combine or reclassify their outstanding
capital stock or (iii) declare, set aside or pay any dividend or
distribution payable in cash, stock, property or otherwise, except for the
payment of dividends or distributions by a wholly-owned subsidiary of the
Company;
(c) not issue, sell, pledge or dispose of, or agree to issue,
sell, pledge or dispose of, any additional shares of, or any options,
warrants or rights of any kind to acquire any shares of their capital stock
of any class or any debt or equity securities convertible into or
exchangeable for such capital stock, except that the Company may issue
shares upon conversion of convertible securities and exercise of options
outstanding on the date hereof;
(d) not (i) incur or become contingently liable with respect
to any indebtedness for borrowed money other than (A) borrowings in the
ordinary course of business or (B) borrowings to refinance existing
indebtedness, (ii) redeem, purchase, acquire or offer to purchase or
acquire any shares of its capital stock or any options, warrants or rights
to acquire any of its capital stock or any security convertible into or
exchangeable for its capital stock, (iii) take any action which would
jeopardize the treatment of the Merger as a pooling of interests under
Opinion No. 16 of the Accounting Principles Board ("APB No. 16"), (iv) take
or fail to take any action which action or failure to take action would
cause the Company or its stockholders (except to the extent that any
stockholders receive cash in lieu of fractional shares) to recognize gain
or loss for federal income tax purposes as a result of the consummation of
the Merger, (v) make any acquisition of any assets or businesses other than
expenditures for fixed or capital assets in the ordinary course of
business, (vi) sell, pledge, dispose of or encumber any assets or
businesses other than sales in
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the ordinary course of business or (vii) enter into any contract,
agreement, commitment or arrangement with respect to any of the foregoing;
(e) use all reasonable efforts to preserve intact their
respective business organizations and goodwill, keep available the services
of their respective present officers and key employees, and preserve the
goodwill and business relationships with customers and others having
business relationships with them and not engage in any action, directly or
indirectly, with the intent to adversely impact the transactions
contemplated by this Agreement;
(f) confer on a regular and frequent basis with one or more
representatives of Parent to report operational matters of materiality and
the general status of ongoing operations;
(g) not enter into or amend any employment, severance, special
pay arrangement with respect to termination of employment or other similar
arrangements or agreements with any directors, officers or key employees,
except in the ordinary course and consistent with past practice; provided,
however, that the Company and its subsidiaries shall in no event enter into
any written employment agreement which provides for an annual base salary
in excess of $125,000 and has a term in excess of one year or enter into or
amend any severance or termination arrangement;
(h) not adopt, enter into or amend any bonus, profit sharing,
compensation, stock option, pension, retirement, deferred compensation,
health care, employment or other employee benefit plan, agreement, trust,
fund or arrangement for the benefit or welfare of any employee or retiree,
except as required to comply with changes in applicable law; and
(i) maintain with financially responsible insurance companies
insurance on its tangible assets and its businesses in such amounts and
against such risks and losses as are consistent with past practice.
SECTION 6.2. CONDUCT OF BUSINESS BY PARENT AND SUBSIDIARY PENDING THE
MERGER. Except as otherwise contemplated by this Agreement, after the date
hereof and prior to the Closing Date or earlier termination of this Agreement,
unless the Company shall otherwise agree in writing, Parent shall, and shall
cause its subsidiaries, to:
(a) conduct their respective businesses in the ordinary and
usual course of business and consistent with past practice;
(b) not (i) amend or propose to amend their respective
charters or by-laws, (ii) split, combine or reclassify (whether by stock
dividend or otherwise) their outstanding capital stock, or (iii) declare,
set aside or pay any dividend or distribution payable in cash, stock,
property or otherwise, except for the payment of dividends or distributions
by a wholly-owned subsidiary of Parent;
(c) not issue, sell, pledge or dispose of, or agree to issue,
sell, pledge or dispose of, any shares of Parent Common Stock, or any
options, warrants or rights of any kind to acquire any shares of their
capital stock of any class or any debt or equity securities convertible
into or exchangeable for such capital stock, except for the issuance and
sale of shares issuable upon conversion of convertible securities and
exercise of options outstanding on the date hereof;
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(d) not (i) incur or become contingently liable with respect
to any indebtedness for borrowed money other than (A) borrowings in the
ordinary course of business or (B) borrowings to refinance existing
indebtedness, (ii) redeem, purchase, acquire or offer to purchase or
acquire any shares of its capital stock or any options, warrants or rights
to acquire any of its capital stock or any security convertible into or
exchangeable for its capital stock, (iii) take any action which would
jeopardize the treatment of the Merger as a pooling of interests under APB
No. 16, (iv) take or fail to take any action which action or failure to
take action would cause Parent or its stockholders (except to the extent
that any stockholders receive cash in lieu of fractional shares) to
recognize gain or loss for federal income tax purposes as a result of the
consummation of the Merger, (v) make any acquisition of any assets or
businesses other than expenditures for fixed or capital assets in the
ordinary course of business, (vi) sell, pledge, dispose of or encumber any
assets or businesses other than sales in the ordinary course of business or
(vii) enter into any contract, agreement, commitment or arrangement with
respect to any of the foregoing;
(e) use all reasonable efforts to preserve intact their
respective business organizations and goodwill, keep available the services
of their respective present officers and key employees, and preserve the
goodwill and business relationships with customers and others having
business relationships with them and not engage in any action, directly or
indirectly, with the intent to adversely impact the transactions
contemplated by this Agreement;
(f) confer on a regular and frequent basis with one or more
representatives of the Company to report operational matters of materiality
and the general status of ongoing operations;
(g) not enter into or amend any employment, severance, special
pay arrangement with respect to termination of employment or other similar
arrangements or agreements with any directors, officers or key employees,
except in the ordinary course and consistent with past practice; provided,
however, that Parent and its subsidiaries shall in no event enter into any
written employment agreement which provides for an annual base salary in
excess of $125,000 and has a term in excess of one year or enter into or
amend any severance or termination arrangement;
(h) not adopt, enter into or amend any bonus, profit sharing,
compensation, stock option, pension, retirement, deferred compensation,
health care, employment or other employee benefit plan, agreement, trust,
fund or arrangement for the benefit or welfare of any employee or retiree,
except as required to comply with changes in applicable law; and
(i) maintain with financially responsible insurance companies
insurance on its tangible assets and its businesses in such amounts and
against such risks and losses as are consistent with past practice.
SECTION 6.3. CONTROL OF THE COMPANY'S OPERATIONS. Nothing contained in
this Agreement shall give to Parent, directly or indirectly, rights to control
or direct the Company's operations prior to the Effective Time. Prior to the
Effective Time, the Company shall exercise, consistent with the terms and
conditions of this Agreement, complete control and supervision of its
operations.
SECTION 6.4. CONTROL OF PARENT'S OPERATIONS. Nothing contained in this
Agreement shall give to the Company, directly or indirectly, rights to control
or direct Parent's operations prior to the Effective Time. Prior to the
Effective Time, Parent shall exercise, consistent with the terms and conditions
of this Agreement, complete control and supervision of its operations.
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SECTION 6.5. ACQUISITION TRANSACTIONS.
(a) After the date hereof and prior to the Effective Time or
earlier termination of this Agreement, neither the Company nor Parent
shall, and shall not permit any of its subsidiaries to, initiate, solicit,
negotiate, encourage or provide confidential information to facilitate, and
each of the Company and Parent shall, and shall cause each of its
subsidiaries to, (i) cause any officer, director or employee of, or any
attorney, accountant or other agent retained by it and (ii) use its
reasonable best efforts to cause any financial advisor or investment banker
retained by it, not to initiate, solicit, negotiate, encourage or provide
non-public or confidential information to facilitate, any proposal or offer
to acquire all or any substantial part of the business and properties of
the Company or Parent or any capital stock of the Company or Parent,
whether by merger, purchase of assets, tender offer or otherwise, whether
for cash, securities or any other consideration or combination thereof (any
such transactions being referred to herein as "Acquisition Transactions").
(b) Notwithstanding the provisions of paragraph (a) above, the
Company or the Parent may, in response to an unsolicited written proposal
with respect to an Acquisition Transaction, which proposal (insofar as it
relates to the consideration to be paid to the Company or its stockholders)
is not subject to a financing condition, furnish (subject to a
confidentiality agreement reasonably acceptable to the Company and Parent)
confidential or non-public information concerning its business, properties
or assets to a financially capable corporation, partnership, person or
other entity or group (a "Potential Acquirer") or negotiate with such
Potential Acquirer if (i) the Company or the Parent, as the case may be,
shall have given not less than five business days' advance written notice
of its intention to do so to the other party, (ii) the board of directors
of the Company or the Parent, as the case may be, is advised by one or more
of its independent financial advisors that providing confidential or
non-public information to the Potential Acquirer is likely to lead to an
Acquisition Transaction on terms that would yield a materially higher value
to the Company's or the Parent's stockholders, as the case may be, than the
Merger and (iii) based upon advice of its independent legal counsel, its
board of directors determines in good faith that there is a significant
risk that the failure to provide such confidential or non-public
information to such Potential Acquirer would constitute a breach of its
fiduciary duty to its stockholders.
(c) In the event either party hereto shall determine to
provide any information or negotiate as described in paragraph (b) above,
or shall receive any offer of the type referred to in paragraph (b) above,
it shall promptly inform the other party hereto that information is to be
provided, that negotiations are to take place or that an offer has been
received and shall furnish to the other party hereto the identity of the
person receiving such information or the proponent of such offer, if
applicable, and, if an offer has been received, a description of the
material terms thereof.
(d) A party hereto may enter into a definitive agreement for
an Acquisition Transaction which meets the requirements set forth above
with a Potential Acquirer with which it is permitted to negotiate pursuant
to paragraph (b) above, but only if (i) the board of directors of such
party shall have duly determined that such Acquisition Transaction would
yield a materially higher value to such party's stockholders than the
Merger and that the execution of such definitive agreement is in the best
interests of such party's stockholders, (ii) at least ten business days
prior to the execution of such definitive agreement, such party shall have
furnished the other
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party hereto with a copy of such definitive agreement and (iii) such other
party shall have failed within such ten-day period to offer to amend the
terms of this Agreement in order that the Merger would yield a value to
such party's stockholders at least equal to the Acquisition Transaction.
In making the determination required by clause (i) above, the board of
directors referred to therein shall consider all relevant considerations
and factors, including, without limitation, the form and value of the
consideration, the extent to which the economic benefits of the Acquisition
Transaction differ from the economic benefits contemplated by this
Agreement, the likelihood that the Potential Acquirer will be able to
obtain financing to consummate the Acquisition Transaction, the proposed
closing date, the certainty of consummation, antitrust issues and closing
conditions.
(e) Each party (i) acknowledges that a breach of any of its
covenants contained in this Section 6.5 will result in irreparable harm to
the other party which will not be compensable in money damages and (ii)
agrees that such covenant shall be specifically enforceable and that
specific performance and injunctive relief shall be a remedy properly
available to the other party for a breach of such covenant.
ARTICLE VII
ADDITIONAL AGREEMENTS
SECTION 7.1. ACCESS TO INFORMATION. (a) The Company and its
subsidiaries shall afford to Parent and Subsidiary and their respective
accountants, counsel, financial advisors and other representatives (the "Parent
Representatives") and Parent and its subsidiaries shall afford to the Company
and its accountants, counsel, financial advisors and other representatives (the
"Company Representatives") full access during normal business hours throughout
the period prior to the Effective Time to all of their respective properties,
books, contracts, commitments and records (including, but not limited to, Tax
Returns) and, during such period, shall furnish promptly to one another (i) a
copy of each report, schedule and other document filed or received by any of
them pursuant to the requirements of federal or state securities laws or filed
by any of them with the SEC in connection with the transactions contemplated by
this Agreement or which may have a material effect on their respective
businesses, properties or personnel and (ii) such other information concerning
their respective businesses, properties and personnel as Parent or Subsidiary
or the Company, as the case may be, shall reasonably request; provided that no
investigation pursuant to this Section 7.1 shall amend or modify any
representations or warranties made herein or the conditions to the obligations
of the respective parties to consummate the Merger. Parent and its
subsidiaries shall hold and shall use their reasonable best efforts to cause
the Parent Representatives to hold, and the Company and its subsidiaries shall
hold and shall use their reasonable best efforts to cause the Company
Representatives to hold, in strict confidence all non-public documents and
information furnished to Parent and Subsidiary or to the Company, as the case
may be, in connection with the transactions contemplated by this Agreement,
except that (i) Parent, Subsidiary and the Company may disclose such
information as may be necessary in connection with seeking the Parent Required
Statutory Approvals and Parent Stockholders' Approval, the Company Required
Statutory Approvals and the Company Stockholders' Approval and (ii) each of
Parent, Subsidiary and the Company may disclose any information that it is
required by law or judicial or administrative order to disclose.
(b) In the event that this Agreement is terminated in
accordance with its terms, each party shall promptly redeliver to the other
all non-public written material provided pursuant to this Section 7.1 and
shall not retain any copies, extracts or other reproductions in whole or in
part of
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such written material. In such event, all documents, memoranda, notes and
other writings prepared by Parent or the Company based on the information
in such material shall be destroyed (and Parent and the Company shall use
their respective reasonable best efforts to cause their advisors and
representatives to similarly destroy their documents, memoranda and notes),
and such destruction (and reasonable best efforts) shall be certified in
writing by an authorized officer supervising such destruction.
(c) The Company shall promptly advise Parent and Parent shall
promptly advise the Company in writing of any change or the occurrence of
any event after the date of this Agreement having, or which, insofar as can
reasonably be foreseen, in the future may have, any material adverse effect
on the business, operations, properties, assets, condition (financial or
other), results of operations or prospects of the Company and its
subsidiaries or Parent and its subsidiaries, as the case may be, taken as a
whole.
SECTION 7.2. REGISTRATION STATEMENT AND PROXY STATEMENT. Parent and
the Company shall file with the SEC as soon as is reasonably practicable after
the date hereof the Joint Proxy Statement/Prospectus and shall use all
reasonable efforts to have the Registration Statement declared effective by the
SEC as promptly as practicable. Parent shall also take any action required to
be taken under applicable state blue sky or securities laws in connection with
the issuance of Parent Common Stock pursuant hereto. Parent and the Company
shall promptly furnish to each other all information, and take such other
actions, as may reasonably be requested in connection with any action by any of
them in connection with the preceding sentence. The information provided and to
be provided by Parent and the Company, respectively, for use in the Joint Proxy
Statement/Prospectus shall be true and correct in all material respects without
omission of any material fact which is required to make such information not
false or misleading as of the date thereof and in light of the circumstances
under which given or made.
SECTION 7.3. STOCKHOLDERS' APPROVALS.
(a) The Company shall, as promptly as practicable, submit this
Agreement and the transactions contemplated hereby for the approval of its
stockholders at a meeting of stockholders and, subject to the fiduciary
duties of the Board of Directors of the Company under applicable law, shall
use its reasonable best efforts to obtain stockholder approval and adoption
(the "Company Stockholders' Approval") of this Agreement and the
transactions contemplated hereby. Such meeting of stockholders shall be
held as soon as practicable following the date upon which the Registration
Statement becomes effective. Subject to the fiduciary duties of the Board
of Directors of the Company under applicable law, the Company shall,
through its Board of Directors, recommend to its stockholders approval of
the transactions contemplated by this Agreement. The Company (i)
acknowledges that a breach of its covenant contained in this Section 7.3(a)
to convene a meeting of its stockholders and call for a vote thereat with
respect to the approval of this Agreement and the Merger will result in
irreparable harm to Parent which will not be compensable in money damages
and (ii) agrees that such covenant shall be specifically enforceable and
that specific performance and injunctive relief shall be a remedy properly
available to Parent for a breach of such covenant.
(b) Parent shall, as promptly as practicable, submit this
Agreement and the transactions contemplated hereby for the approval of its
stockholders at a meeting of stockholders and, subject to the fiduciary
duties of the Board of Directors of Parent under applicable law, shall use
its reasonable best efforts to obtain stockholder approval and adoption
(the "Parent
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Stockholders' Approval") of this Agreement and the transactions
contemplated hereby. Such meeting of stockholders shall be held as soon as
practicable following the date on which the Registration Statement becomes
effective. Parent shall, through its Board of Directors, but subject to
the fiduciary duties of the members thereof, (i) recommend to its
stockholders approval of the transactions contemplated by this Agreement
and (ii) authorize and cause an officer of Parent to vote Parent's shares
of Subsidiary Common Stock for adoption and approval of this Agreement and
the transactions contemplated hereby and shall take all additional actions
as the sole stockholder of Subsidiary necessary to adopt and approve this
Agreement and the transactions contemplated hereby. Parent (i)
acknowledges that a breach of its covenant contained in this Section 7.3(b)
to convene a meeting of its stockholders and call for a vote thereat with
respect to the approval of this Agreement and the Merger will result in
irreparable harm to the Company which will not be compensable in money
damages and (ii) agrees that such covenant shall be specifically
enforceable and that specific performance and injunctive relief shall be a
remedy properly available to the Company for a breach of such covenant.
SECTION 7.4. COMPLIANCE WITH THE SECURITIES ACT. Parent and the
Company shall each use its reasonable best efforts to cause each principal
executive officer, each director and each other person who is an "affiliate,"
as that term is used in paragraphs (c) and (d) of Rule 145 under the Securities
Act, of Parent or the Company, as the case may be, to deliver to Parent and the
Company on or prior to the Effective Time a written agreement (an "Affiliate
Agreement") to the effect that such person will not offer to sell, sell or
otherwise dispose of any shares of Parent Common Stock issued in the Merger,
except, in each case, pursuant to an effective registration statement or in
compliance with Rule 145, as amended from time to time, or in a transaction
which, in the opinion of legal counsel satisfactory to Parent, is exempt from
the registration requirements of the Securities Act and, in any case, until
after the results covering 30 days of post-Merger combined operations of Parent
and the Company have been filed with the SEC, sent to stockholders of Parent or
otherwise publicly issued.
SECTION 7.5. EXCHANGE LISTING. Parent shall use its reasonable best
efforts to effect, at or before the Effective Time, authorization for listing
on the New York Stock Exchange Inc. (the "NYSE"), upon official notice of
issuance, of the shares of Parent Common Stock to be issued pursuant to the
Merger.
SECTION 7.6. EXPENSES AND FEES.
(a) Except as provided in Section 7.6(b) or Section 7.6(c),
all costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such
expenses, except that those expenses incurred in connection with printing
the Joint Proxy Statement/Prospectus shall be shared equally by Parent and
the Company.
(b) The Company agrees to pay to Parent a fee equal to
$28,000,000 plus the reasonable out-of-pocket expenses incurred by Parent
in connection with this Agreement and the transactions contemplated hereby:
(i) if the Company terminates this Agreement pursuant to
clause (v) or (vi) of Section 9.1(a);
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(ii) if (A) either the Company terminates this Agreement
pursuant to clause (i) or (ii) of Section 9.1(a) or Parent terminates this
Agreement pursuant to clause (vii) of Section 9.1(b) and (B) one or more of
the following events shall occur prior to one year after such termination:
(1) the Company is acquired by merger or otherwise by another
person under terms which provide for the Company and/or
its stockholders to receive consideration having a fair
value on the date of the first public announcement of such
merger or other acquisition transaction equal to or
greater than that provided in Section 3.1(a) of this
Agreement;
(2) the Company enters into a merger or other agreement which
contemplates the acquisition of the Company by another
person under terms which provide for the Company and/or
its stockholders to receive consideration having a fair
value on the date of the first public announcement of such
merger or other agreement equal to or greater than that
provided in Section 3.1(a) of this Agreement;
(3) another person acquires or becomes the beneficial owner of
more than 50% of the outstanding shares of Company Common
Stock for consideration having a fair value on the date of
such acquisition greater than that provided in Section
3.1(a) of this Agreement;
(4) another person acquires all or any substantial portion of
the Company's assets under terms which provide for the
Company and/or its stockholders to receive consideration
having a fair value on the date of the first public
announcement of such acquisition transaction equal to or
greater than that provided in Section 3.1(a) of this
Agreement; or
(5) the Company adopts a plan of liquidation relating to all
or a substantial portion of its assets or declares a
distribution to its stockholders of all or a substantial
portion of its assets and in connection therewith the
stockholders receive consideration having a fair value on
the date of the first public announcement of such plan of
liquidation or dividend declaration equal to or greater
than that provided in Section 3.1(a) of this Agreement.
(c) Parent agrees to pay to the Company a fee equal to
$21,000,000 plus the reasonable out-of-pocket expenses incurred by the
Company in connection with this Agreement and the transactions contemplated
hereby if Parent terminates this Agreement pursuant to clause (v) or (vi)
of Section 9.1(b).
SECTION 7.7. AGREEMENT TO COOPERATE.
(a) Subject to the terms and conditions herein provided, each
of the parties hereto shall use all reasonable efforts to take, or cause to
be taken, all action and to do, or cause to be done, all things necessary,
proper or advisable under applicable laws and regulations to consummate and
make effective the transactions contemplated by this Agreement, including
using its reasonable efforts to obtain all necessary or appropriate
waivers, consents and approvals and SEC "no-action" letters to effect all
necessary registrations, filings and submissions and to lift any injunction
or other legal bar to the Merger (and, in such case, to proceed with the
Merger as
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expeditiously as possible), subject, however, to the requisite votes of the
stockholders and boards of directors of the Company and Parent.
(b) Without limitation of the foregoing, each of Parent and
the Company undertakes and agrees to file as soon as practicable after the
date hereof a Notification and Report Form under the HSR Act with the
Federal Trade Commission (the "FTC") and the Antitrust Division of the
Department of Justice (the "Antitrust Division"). Each of Parent and the
Company shall (i) use its reasonable efforts to comply as expeditiously as
possible with all lawful requests of the FTC or the Antitrust Division for
additional information and documents and (ii) not extend any waiting period
under the HSR Act or enter into any agreement with the FTC or the Antitrust
Division not to consummate the transactions contemplated by this Agreement,
except with the prior consent of the other parties hereto.
(c) In the event any litigation is commenced by any person or
entity relating to the transactions contemplated by this Agreement,
including any Acquisition Transaction, Parent shall have the right, at its
own expense, to participate therein, and the Company will not settle any
such litigation without the consent of Parent, which consent will not be
unreasonably withheld.
(d) The Company and Parent approve that certain financing plan
set forth in the letter agreement between the Company and Parent dated
December 19, 1994.
SECTION 7.8. PUBLIC STATEMENTS. The parties shall consult with each
other prior to issuing any press release or any written public statement with
respect to this Agreement or the transactions contemplated hereby and shall not
issue any such press release or written public statement prior to such
consultation.
SECTION 7.9. OPTION PLANS. Prior to the Effective Time, the Company and
Parent shall take such action as may be necessary to cause each unexpired and
unexercised option (each a "Company Option") to be automatically converted at
the Effective Time into an option (each a "Parent Option") to purchase a number
of shares of Parent Common Stock equal to the number of shares of Company
Common Stock that could have been purchased under the Company Option multiplied
by the Exchange Ratio, at a price per share of Parent Common Stock equal to the
option exercise price determined pursuant to the Company Option divided by the
Exchange Ratio and subject to the same terms and conditions as the Company
Option. The date of grant of the substituted Parent Option shall be the date
on which the corresponding Company Option was granted. At the Effective Time,
all references in the stock option agreements to the Company shall be deemed to
refer to Parent. Parent shall assume all of the Company's obligations with
respect to Company Options as so amended and shall, from and after the
Effective Time, make available for issuance upon exercise of the Parent Options
all shares of Parent Common Stock covered thereby and amend its Registration
Statement on Form S-8 to cover the additional shares of Parent Common Stock
subject to Parent Options granted in replacement of Company Options.
SECTION 7.10. EMPLOYEE BENEFITS. Parent acknowledges its intention,
after the Effective Time, that employees of the Company who continue after the
Merger shall be provided with benefits which are no less favorable than those
provided by Parent to its own employees.
SECTION 7.11. NOTIFICATION OF CERTAIN MATTERS. Each of the Company,
Parent and Subsidiary agrees to give prompt notice to each other of, and to use
their respective reasonable best efforts to prevent or promptly remedy, (i) the
occurrence or failure to occur or the impending or threatened occurrence or
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<PAGE> 34
failure to occur, of any event which occurrence or failure to occur would be
likely to cause any of its representations or warranties in this Agreement to
be untrue or inaccurate in any material respect at any time from the date
hereof to the Effective Time and (ii) any material failure on its part to
comply with or satisfy any covenant, condition or agreement to be complied with
or satisfied by it hereunder; provided, however, that the delivery of any
notice pursuant to this Section 7.11 shall not limit or otherwise affect the
remedies available hereunder to the party receiving such notice.
SECTION 7.12. DIRECTORS' AND OFFICERS' INDEMNIFICATION.
(a) After the Effective Time, the Surviving Corporation shall,
to the fullest extent permitted under applicable law, indemnify and hold
harmless, each present and former director, officer, employee and agent of
the Company or any of its subsidiaries (each, together with such person's
heirs, executors or administrators, an "indemnified Party" and
collectively, the "indemnified Parties") against any costs or expenses
(including attorneys fees), judgments, fines, losses, claims, damages,
liabilities and amounts paid in settlement in connection with any claim,
action, suit, proceeding or investigation, whether civil, criminal,
administrative or investigative, arising out of, relating to or in
connection with any action or omission occurring prior to the Effective
Time (including, without limitation, acts or omissions in connection with
such persons serving as an officer, director or other fiduciary in any
entity if such service was at the request or for the benefit of the
Company) or arising out of or pertaining to the transactions contemplated
by this Agreement. In the event of any such claim, action, suit, proceeding
or investigation (whether arising before or after the Effective Time), (i)
the Company or Parent and the Surviving Corporation, as the case may be,
shall pay the reasonable fees and expenses of counsel selected by the
indemnified Parties, which counsel shall be reasonably satisfactory to the
Parent and the Surviving Corporation, promptly after statements therefor
are received, (ii) the Parent and the Surviving Corporation will cooperate
in the defense of any such matter, and (iii) any determination required to
be made with respect to whether an indemnified Party's conduct complies
with the standards set forth under the DGCL and the Parent's or the
Surviving Corporation's respective Certificates of Incorporation or By-Laws
shall be made by independent legal counsel acceptable to the Parent or the
Surviving Corporation, as the case may be, and the indemnified Party;
provided, however, that neither Parent nor the Surviving Corporation shall
be liable for any settlement effected without its written consent (which
consent shall not be unreasonably withheld).
(b) In the event the Surviving Corporation or Parent or any of
their successors or assigns (i) consolidates with or merges into any other
person and shall not be the continuing or surviving corporation or entity
of such consolidation or merger or (ii) transfers all or substantially all
of its properties and assets to any person, then and in each such case,
proper provisions shall be made so that the successors and assigns of the
Surviving Corporation or Parent shall assume the obligations set forth in
this Section 7.12.
SECTION 7.13. CORRECTIONS TO THE JOINT PROXY STATEMENT/PROSPECTUS AND
REGISTRATION STATEMENT. Prior to the date of approval of the Merger by their
respective stockholders, each of the Company, Parent and Subsidiary shall
correct promptly any information provided by it to be used specifically in the
Joint Proxy Statement/Prospectus and Registration Statement that shall have
become false or misleading in any material respect and shall take all steps
necessary to file with the SEC and have declared effective or cleared by the
SEC any amendment or supplement to the Joint Proxy Statement/Prospectus or the
Registration Statement so as to correct the same and to cause the Joint Proxy
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Statement/Prospectus as so corrected to be disseminated to the stockholders of
the Company and Parent, in each case to the extent required by applicable law.
ARTICLE VIII
CONDITIONS
SECTION 8.1. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER.
The respective obligations of each party to effect the Merger shall be subject
to the fulfillment at or prior to the Closing Date of the following conditions:
(a) this Agreement and the transactions contemplated hereby
shall have been approved and adopted by the requisite vote of the
stockholders of the Company and Parent under applicable law and applicable
listing requirements;
(b) the shares of Parent Common Stock issuable in the Merger
shall have been authorized for listing on the NYSE upon official notice of
issuance;
(c) the waiting period applicable to the consummation of the
Merger under the HSR Act shall have expired or been terminated;
(d) the Registration Statement shall have become effective in
accordance with the provisions of the Securities Act, and no stop order
suspending such effectiveness shall have been issued and remain in effect
and no proceeding for that purpose shall have been instituted by the SEC or
any state regulatory authorities;
(e) no preliminary or permanent injunction or other order or
decree by any federal or state court which prevents the consummation of the
Merger shall have been issued and remain in effect (each party agreeing to
use its reasonable efforts to have any such injunction, order or decree
lifted);
(f) no action shall have been taken, and no statute, rule or
regulation shall have been enacted, by any state or federal government or
governmental agency in the United States which would prevent the
consummation of the Merger or make the consummation of the Merger illegal;
(g) all governmental waivers, consents, orders and approvals
legally required for the consummation of the Merger and the transactions
contemplated hereby, and all consents from lenders required to consummate
the Merger, shall have been obtained and be in effect at the Effective
Time; and
(h) Coopers & Lybrand, certified public accountants for
Parent, shall have delivered a letter, dated the Closing Date, addressed to
Parent, in form and substance reasonably satisfactory to Parent and the
Company, stating that the Merger will qualify as a pooling of interests
transaction under APB No. 16.
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SECTION 8.2. CONDITIONS TO OBLIGATION OF THE COMPANY TO EFFECT THE
MERGER. Unless waived by the Company, the obligation of the Company to effect
the Merger shall be subject to the fulfillment at or prior to the Closing Date
of the following additional conditions:
(a) Parent and Subsidiary shall have performed in all material
respects their agreements contained in this Agreement required to be
performed on or prior to the Closing Date and the representations and
warranties of Parent and Subsidiary contained in this Agreement shall be
true and correct in all material respects on and as of the date made and on
and as of the Closing Date as if made at and as of such date, and the
Company shall have received a certificate of the Chairman of the Board and
Chief Executive Officer, the President or a Vice President of Parent and of
the President and Chief Executive Officer or a Vice President of Subsidiary
to that effect;
(b) the Company shall have received an opinion of Sullivan &
Cromwell and/or Thorp, Reed & Armstrong, in form and substance reasonably
satisfactory to the Company, dated the Closing Date, to the effect that the
Company and holders of Company Common Stock (except to the extent any
stockholders receive cash in lieu of fractional shares) will recognize no
gain or loss for federal income tax purposes as a result of consummation of
the Merger;
(c) the Company shall have received an opinion or opinions
from Snell & Smith and/or Andrews & Kurth L.L.P., special counsel to Parent
and Subsidiary, dated the Closing Date, reasonably satisfactory to the
Company and covering the due incorporation of Parent and Subsidiary, the
binding nature of this Agreement, the effectiveness of the Merger, the
validity of the Parent Common Stock to be issued in connection with the
Merger and such other matters as may be reasonably requested by the
Company;
(d) the Company shall have received "comfort" letters in
customary form from Coopers & Lybrand, certified public accountants for
Parent and Subsidiary, dated the date of the Proxy Statement, the effective
date of the Registration Statement and the Closing Date (or such other date
reasonably acceptable to the Company) with respect to certain financial
statements and other financial information included in the Registration
Statement and any subsequent changes in specified balance sheet and income
statement items, including total assets, working capital, total
stockholders' equity, total revenues and the total and per share amounts of
net income;
(e) since the date hereof, there shall have been no changes
that constitute, and no event or events shall have occurred which have
resulted in or constitute, a material adverse change in the business,
operations, properties, assets, condition (financial or other), results of
operations or prospects of Parent and its subsidiaries, taken as a whole;
(f) all governmental waivers, consents, orders, and approvals
legally required for the consummation of the Merger and the transactions
contemplated hereby shall have been obtained and be in effect at the
Closing Date, and no governmental authority shall have promulgated any
statute, rule or regulation which, when taken together with all such
promulgations, would materially impair the value to Parent of the Merger;
and
(g) the Company shall have received from J.P. Morgan
Securities Inc. (or other nationally recognized investment banking firm
reasonably acceptable to Parent) an opinion, dated as of the date on which
the Joint Proxy Statement/Prospectus is first distributed to the
stockholders
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of the Company, to the effect that the consideration to be received by the
stockholders of the Company in the Merger is fair, from a financial point
of view, to the holders of Company Common Stock, and such opinion shall not
have been withdrawn.
SECTION 8.3. CONDITIONS TO OBLIGATIONS OF PARENT AND SUBSIDIARY TO EFFECT
THE MERGER. Unless waived by Parent and Subsidiary, the obligations of Parent
and Subsidiary to effect the Merger shall be subject to the fulfillment at or
prior to the Effective Time of the additional following conditions:
(a) the Company shall have performed in all material respects
its agreements contained in this Agreement required to be performed on or
prior to the Closing Date and the representations and warranties of the
Company contained in this Agreement shall be true and correct in all
material respects on and as of the date made and on and as of the Closing
Date as if made at and as of such date, and Parent shall have received a
Certificate of the President and Chief Executive Officer or of a Vice
President of the Company to that effect;
(b) Parent shall have received an opinion of Andrews & Kurth
L.L.P., in form and substance reasonably satisfactory to Parent, dated the
Closing Date, to the effect that Parent and Subsidiary will recognize no
gain or loss for federal income tax purposes as a result of consummation of
the Merger;
(c) Parent shall have received an opinion or opinions from
Sullivan & Cromwell and/or Thorp, Reed & Armstrong, special counsel to the
Company, dated the Closing Date, reasonably satisfactory to Parent and
covering the due incorporation of the Company, the binding nature of this
Agreement, the effectiveness of the Merger and such other matters as may be
reasonably requested by Parent;
(d) Parent shall have received "comfort" letters from Deloitte
& Touche, certified public accountants for the Company, dated the date of
the Proxy Statement, the effective date of the Registration Statement and
the Closing Date (or such other date reasonably acceptable to Parent) with
respect to certain financial statements and other financial information
included in the Registration Statement in customary form and any subsequent
changes in specified balance sheet and income statement items, including
total assets, working capital, total stockholders' equity, total revenues
and the total and per share amounts of net income;
(e) the Affiliate Agreements required to be delivered to
Parent pursuant to Section 7.4 shall have been furnished as required by
Section 7.4;
(f) since the date hereof, there shall have been no changes
that constitute, and no event or events shall have occurred which have
resulted in or constitute, a material adverse change in the business,
operations, properties, assets, condition (financial or other), results of
operations or prospects of the Company and its subsidiaries, taken as a
whole;
(g) all governmental waivers, consents, orders and approvals
legally required for the consummation of the Merger and the transactions
contemplated hereby shall have been obtained and be in effect at the
Closing Date, and no governmental authority shall have promulgated any
statute, rule or regulation which, when taken together with all such
promulgations, would materially impair the value to Parent of the Merger;
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(h) all the litigation and proceedings described or referred
to in each Memorandum of Understanding identified in Schedule 5.8 shall
have been fully and irrevocably settled, a final, nonappealable order shall
have been entered and all claims, demands and causes of action pertaining
in any way to such litigation or proceedings shall have been fully and
irrevocably released and discharged, all substantially upon the terms and
conditions set forth in such Memoranda of Understanding or otherwise upon
terms and conditions satisfactory to Parent in its sole discretion;
(i) the SEC shall have agreed to a consent order as to the
matter referred to in the letter described in Item 1 of Schedule 5.8 and
Parent shall have determined within fifteen business days after being
notified of the terms and conditions thereof that such consent decree is
satisfactory to Parent in its sole discretion; and
(j) Parent shall have received from Donaldson, Lufkin &
Jenrette Securities Corporation (or other nationally recognized investment
banking firm reasonably acceptable to the Company) an opinion reasonably
acceptable to the Company, dated as of the date on which the Joint Proxy
Statement/Prospectus is first distributed to the shareholders of Parent, to
the effect that the Exchange Ratio is fair, from a financial point of view,
to Parent's stockholders, and such opinion shall not have been withdrawn.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
SECTION 9.1. TERMINATION. This Agreement may be terminated at any time
prior to the Closing Date, whether before or after approval by the stockholders
of the Company or Parent, as follows:
(a) The Company shall have the right to terminate this Agreement:
(i) if, within 21 days after the date of this Agreement, the
Company's Board of Directors:
(A) does not receive from J.P. Morgan Securities Inc.
an opinion to the effect that the consideration to be received by
the stockholders of the Company in the Merger is fair, from a
financial point of view, to the holders of Company Common Stock,
with such limitations and qualifications as are customary in such
opinions;
(B) reasonably determines that the representations
and warranties of Parent and Subsidiary contained in this
Agreement are not true and correct in any material respect on and
as of the date made and on and as of the date of the Board's
determination;
(C) reasonably determines, after consultation with
Deloitte & Touche, certified public accountants for the Company,
and Coopers & Lybrand, certified public accountants for Parent,
that the Merger will not qualify as a pooling of interests
transaction under APB No. 16, provided that the Company is not in
default of the covenant contained in Section 6.1(d)(iii); or
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(D) reasonably determines that the condition set
forth in Section 8.1(g) above will not be satisfied in all
material respects on or prior to the Closing Date;
(ii) if, within 21 days after the date of this Agreement, the
Company and Parent have not reached mutual agreement on the financing plan
contemplated by Section 7.7(d) (the Company agreeing that it will not
unreasonably withhold its approval of any such financing plan and
acknowledging its acceptance of those aspects of such financing plan set
forth in each Memorandum of Understanding referred to in Section 8.3(h));
(iii) if the Merger is not completed by July 31, 1995 otherwise
than account of delay or default on the part of the Company or any of its
5% stockholders or any of their affiliates or associates;
(iv) if the Merger is enjoined by a final, unappealable court
order not entered at the request or with the support of the Company or any
of its 5% stockholders or any of their affiliates or associates;
(v) if (A) the Company receives an offer from any third party
(excluding any affiliate of the Company or any group of which any affiliate
of the Company is a member) with respect to a merger, sale of substantial
assets or other business combination involving the Company, (B) the
Company's Board of Directors determines, in good faith and after
consultation with an independent financial advisor, that such offer would
yield a materially higher value to the Company or its stockholders than the
Merger and (C) Parent fails, within ten business days after Parent is
notified of such determination and of the terms and conditions of such
offer, to make an offer which is substantially equivalent to, or more
favorable than, such offer;
(vi) if (A) a tender/exchange offer is commenced by a third
party (excluding any affiliate of the Company or any group of which any
affiliate of the Company is a member) for all outstanding shares of Company
Common Stock, (B) the Company's Board of Directors determines, in good
faith and after consultation with an independent financial advisor, that
such offer would yield a materially higher value to the Company or its
stockholders than the Merger and (C) Parent fails, within ten business days
after Parent is notified of such determination, to make an offer which is
substantially equivalent to, or more favorable than, such tender/exchange
offer; or
(vii) if Parent (A) fails to perform in any material respect any
of its material covenants in this Agreement and (B) does not cure such
default in all material respects within 30 days after notice of such
default is given to Parent by the Company.
(b) Parent shall have the right to terminate this Agreement:
(i) if, within 21 days after the date of this Agreement,
Parent's Board of Directors:
(A) does not receive from Donaldson, Lufkin &
Jenrette Securities Corporation an opinion to the effect that the
Exchange Ratio is fair, from a financial point of view, to
Parent's stockholders, with such limitations and qualifications as
are customary in such opinions;
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(B) reasonably determines that the representations
and warranties of the Company contained in this Agreement are not
true and correct in any material respect on and as of the date
made and on and as of the date of the Board's determination;
(C) reasonably determines, after consultation with
Deloitte & Touche, certified public accountants for the Company,
and Coopers & Lybrand, certified public accountants for Parent,
that the Merger will not qualify as a pooling of interests
transaction under APB No. 16, provided that Parent is not in
default of the covenant contained in Section 6.2(d)(iii); or
(D) reasonably determines that the condition set
forth in Section 8.1(g) above will not be satisfied in all
material respects on or prior to the Closing Date;
(ii) if, within 21 days after the date of this Agreement, the
Company and Parent have not reached mutual agreement on the financing plan
contemplated by Section 7.7(d) (Parent agreeing that it will not
unreasonably withhold its approval of any such financing plan and
acknowledging its acceptance of those aspects of such financing plan set
forth in each Memorandum of Understanding identified in Schedule 5.8);
(iii) if the Merger is not completed by July 31, 1995 otherwise
than account of delay or default on the part of Parent or any of its 5%
stockholders or any of their affiliates or associates;
(iv) if the Merger is enjoined by a final, unappealable court
order not entered at the request or with the support of Parent or any of
its 5% stockholders or any of their affiliates or associates;
(v) if (A) Parent receives an offer from any third party
(excluding any affiliate of Parent or any group of which any affiliate of
Parent is a member) with respect to a merger, sale of substantial assets or
other business combination involving Parent, (B) Parent's Board of
Directors determines, in good faith and after consultation with an
independent financial advisor, that such offer would yield a materially
higher value to Parent or its stockholders than the Merger and (C) the
Company fails, within ten business days after the Company is notified of
such determination and of the terms and conditions of such offer, to offer
to amend this Agreement in order to make the Merger substantially
equivalent to, or more favorable than, such offer;
(vi) if (A) a tender/exchange offer is commenced by a third
party (excluding any affiliate of Parent or any group of which any
affiliate of Parent is a member) for all outstanding shares of Parent
Common Stock, (B) Parent's Board of Directors determines, in good faith and
after consultation with an independent financial advisor, that such offer
would yield a materially higher value to Parent or its stockholders than
the Merger and (C) the Company fails, within ten business days after the
Company is notified of such determination, to make an offer which is
substantially equivalent to, or more favorable than, such tender/exchange
offer; or
(vii) if the Company (A) fails to perform in any material respect
any of its material covenants in this Agreement and (B) does not cure such
default in all material respects within 30 days after notice of such
default is given to the Company by Parent.
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(c) As used in this Section 9.1, (i) "affiliate" has the meaning
assigned to it in Section 7.4 and (ii) "group" has the meaning set forth in
Section 13(d) of the Exchange Act and the rules and regulations thereunder.
SECTION 9.2. EFFECT OF TERMINATION. In the event of termination of this
Agreement by either Parent or the Company, as provided in Section 9.1, this
Agreement shall forthwith become void and there shall be no further obligation
on the part of the Company, Parent, Subsidiary or their respective officers or
directors (except as set forth in this Section 9.2 and in Sections 7.1, 7.6 and
7.8, all of which shall survive the termination). Nothing in this Section 9.2
shall relieve any party from liability for any breach of this Agreement.
SECTION 9.3. AMENDMENT. This Agreement may not be amended except by
action taken by their respective Boards of Directors or duly authorized
committee thereof and then only by an instrument in writing signed on behalf of
each of the parties hereto and in compliance with applicable law.
SECTION 9.4. WAIVER. At any time prior to the Effective Time, the
parties hereto may (a) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (b) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant thereto and (c) waive compliance with any of the
agreements or conditions contained herein. Any agreement on the part of a
party hereto to any such extension or waiver shall be valid if set forth in an
instrument in writing signed on behalf of such party.
ARTICLE X
GENERAL PROVISIONS
SECTION 10.1. NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties in this Agreement shall not survive the Merger,
and after effectiveness of the Merger neither the Company, Parent, Subsidiary
or their respective officers or directors shall have any further obligation
with respect thereto.
SECTION 10.2. BROKERS. The Company represents and warrants that no
broker, finder or investment banker is entitled to any brokerage, finder's or
other fee (except for the fee payable to the investment banking firm described
in Section 8.2(g)) or commission in connection with the Merger or the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Company. Parent and Subsidiary represent and warrant that no
broker, finder or investment banker is entitled to any brokerage, finder's or
other fee (except for the fee payable to the investment banking firm described
in Section 8.3(j)) or commission in connection with the Merger or the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of Parent or Subsidiary.
SECTION 10.3. NOTICES. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally, mailed
by registered or certified mail (return receipt requested) or sent via
facsimile to the parties at the following addresses (or at such other address
for a party as shall be specified by like notice):
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(a) If to Parent or Subsidiary to:
USA Waste Services, Inc.
5000 Quorum Drive, Suite 300
Dallas, Texas 75240
Attention: Earl DeFrates
with a copy to:
Andrews & Kurth L.L.P.
4200 Texas Commerce Tower
Houston, Texas 77002
Attention: David G. Elkins, Esq.
(b) If to the Company, to:
Chambers Development Company, Inc.
10700 Frankstown Road
Pittsburgh, Pennsylvania 15235
Attention: Alexander W. Rangos
with a copy to:
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
Attention: Richard R. Howe, Esq.
SECTION 10.4. INTERPRETATION. The headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. In this Agreement, unless a contrary
intention appears, (i) the words "herein", "hereof" and "hereunder" and other
words of similar import refer to this Agreement as a whole and not to any
particular Article, Section or other subdivision and (ii) reference to any
Article or Section means such Article or Section hereof. No provision of this
Agreement shall be interpreted or construed against any party hereto solely
because such party or its legal representative drafted such provision.
SECTION 10.5. MISCELLANEOUS. This Agreement (including the documents and
instruments referred to herein) (a) constitutes the entire agreement and
supersedes all other prior agreements and understandings, both written and
oral, among the parties, or any of them, with respect to the subject matter
hereof, (b) is not intended to confer upon any other person any rights or
remedies hereunder, except for rights of indemnified Parties under Section 7.12
and (c) shall not be assigned by operation of law or otherwise, except that
Subsidiary may assign this Agreement to any other wholly-owned subsidiary of
Parent. THIS AGREEMENT SHALL BE GOVERNED IN ALL RESPECTS, INCLUDING VALIDITY,
INTERPRETATION AND EFFECT, BY THE LAWS OF THE STATE OF DELAWARE APPLICABLE TO
CONTRACTS EXECUTED AND TO BE PERFORMED WHOLLY WITHIN SUCH STATE.
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<PAGE> 43
SECTION 10.6. COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed to be an original, but all of
which shall constitute one and the same agreement.
SECTION 10.7. PARTIES IN INTEREST. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto, and except as set forth
in the exception to Section 10.5(b), nothing in this Agreement, express or
implied, is intended to confer upon any other person any rights or remedies of
any nature whatsoever under or by reason of this Agreement.
IN WITNESS WHEREOF, Parent, Subsidiary and the Company have caused this
Agreement to be signed by their respective officers as of the date first
written above.
USA WASTE SERVICES, INC.
By:________________________________________
Name: John E. Drury
Title: Chief Executive Officer
CHAMBERS ACQUISITION CORPORATION
By:________________________________________
Name: Donald F. Moorehead, Jr.
Title: Chairman of the Board
CHAMBERS DEVELOPMENT COMPANY, INC.
By:________________________________________
Name: Alexander W. Rangos
Title: President
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<PAGE> 1
Exhibit 2(A)
December 19, 1994
Chambers Development Company, Inc.
10700 Frankstown Road
Pittsburgh, Pennsylvania 15235
Attention: William Rodgers, Jr.
Re: FINANCING PLAN PURSUANT TO AGREEMENT AND PLAN OF MERGER
Dear Bill:
Pursuant to Section 7.7(d) of the Agreement and Plan of Merger (the
"Merger Agreement"), dated November 28, 1994 to which USA Waste Services,
Inc. ("USA Waste") and Chambers Development Company, Inc. ("Chambers") are
parties, we have discussed with you a plan to address the following items:
(i) the refinancing or rearrangement of a $7 million debt payment
payable by Chambers in January 1995;
(ii) the financing of a $25 million settlement payment payable by
Chambers in or about March 1995; and
(iii) the financing of a $45 million settlement payment payable by
Chambers in or about March 1995.
This letter constitutes the mutually acceptable plan for addressing the
foregoing matters in accordance with the requirements of Section 7.7(d).
1. $7 MILLION DEBT PAYMENT. It is hereby acknowledged that it is the
understanding of the parties that the cash requirement with respect to this
payment is actually $6.8 million. This payment shall be funded through the
following two sources:
(a) USA Waste shall accelerate payment of the outstanding principal
amounts and accrued but unpaid interest under those two certain
promissory notes dated October 1, 1993, payable by USA Waste to
Chambers in the principal amounts of $1.0 million and $1.5
million, respectively, with such accelerated payment to be made
on January 30, 1995; and
(b) USA Waste, upon request by Chambers, will enter into a mutually
acceptable letter of intent for the acquisition of one or more
of those assets identified on Exhibit A hereto, the sale of
which assets has heretofore been approved by the lenders under
Chambers' bank facility and senior note agreements, and with
respect to such letter of intent USA Waste shall make a $4.3
million payment to Chambers on January 30, 1995, with such
payment representing a deposit to be applied to a purchase by
USA Waste of such assets as are designated in the letter of
intent (such deposit to be refunded in full if purchase is not
consummated). The foregoing transaction shall be consummated on
terms and conditions to be negotiated by USA Waste and Chambers
and shall be subject to
<PAGE> 2
the following conditions: (i) the asset purchase would be
consummated pursuant to an asset purchase and sale agreement
containing customary representations and warranties for
transactions of such nature, and the closing of such transaction
shall occur not less than 30 days following the termination of the
Merger Agreement on a date selected by USA Waste, (ii) the value of
the assets to be purchased would have a fair market value of not
less than $4.3 million, as determined by independent appraisal, and
(iii) on the date that the foregoing deposit is made by USA Waste,
Chambers would use its best efforts to grant to USA Waste a first
priority security interest in the assets identified as Exhibit A
pending completion of the asset sale. In the event Chambers is
unable to provide such security, interest it shall obtain the
consent of its lending group to the acceptance of the deposit
pending the consummation of the transaction.
2. $25 MILLION SETTLEMENT PAYMENT. (a) USA Waste and Chambers hereby
agree to enter into an agreement for the advance purchase of airspace rights
by USA Waste at the Chambers sites located in Amelia County, Virginia,
Charles City County, Virginia and Okeechobee County, Florida, in the
approximate amounts of $8.0 million, $8.0 million and $9.0 million,
respectively. USA Waste hereby agrees to make the aggregate advance purchase
price payment in the amount of $25 million after Final Approval as defined in
the Memorandum of Understanding referred to in paragraph 2 of Schedule 5.8
to the Merger Agreement.
(b) The advance purchase price shall be applicable against
disposal fees for municipal solid waste to be delivered by USA
Waste or its assignees for disposal (and for such other types of
waste upon terms and conditions as the parties may reasonably
agree).
(c) Chambers hereby agrees to maintain sufficient airspace at
each of the respective sites to accept such delivery of municipal
solid waste delivered. In the event that Chambers is ever unable to
make available to USA Waste airspace for which USA Waste has
prepaid but has not used, Chambers shall immediately an
unconditionally refund the amounts prepaid for such unused airspace,
plus USA Waste's out-of-pocket expenses associated with providing
such prepayments and consummating the refund.
(d) With respect to the pricing per ton for disposal of
municipal solid waste under the advance purchase agreement, USA
Waste and Chambers shall determine the rates applicable to disposal
costs per ton at each respective site on the basis of 30% discount
to current rates charged by Chambers at each such site.
(e) For purposes of the foregoing disposal rate calculations,
the current rate shall be calculated using the weighted average
revenues per ton of municipal solid waste received by Chambers at
such site for the month immediately preceding the month in which
such deposits of waste are made, determined in accordance with the
monthly operating reports of Chambers and subject to full
verification by USA Waste.
(f) USA Waste will have a period of ten (10) years to utilize
the airspace acquired, but will be limited to the sale or use of no
more than twenty percent (20%) of the initial airspace capacity
acquired in any 12-month period. Further, in no event will USA
Waste be allowed to use or sell more than 10 percent (10%) of the
airspace acquired during the initial 120-day period following the
advance payment.
2
<PAGE> 3
(g) In the event that Chambers completes a refinancing of
its current indebtedness under its bank credit facility, senior
note agreements and amounts due under the Shareholder Litigation
described above, or if a Termination Event (as defined in paragraph
5 below) should occur (i) USA Waste shall have an option within 15
days of such refinancing to require Chambers to repurchase the
unused airspace in an amount equal to the amounts prepaid for such
unused airspace, plus USA Waste's out-of-pocket expenses associated
with providing such prepayments, and (ii) Chambers shall have the
option within 15 days of such refinancing to require USA Waste to
sell such unused airspace to Chambers for an amount equal to the
amounts prepaid for such unused airspace, plus USA Waste's
out-of-pocket expenses associated with providing such prepayments.
(h) The right of USA Waste to use the prepaid airspace shall
constitute an enforceable interest in the sites and shall be
evidenced by an irrevocable license to enter upon and deposit
municipal solid waste at such sites. USA Waste's rights with
respect to the prepaid airspace shall be freely assignable by USA
Waste. Upon the sale of disposition by Chambers of all or any
substantial portion of its interest in any of the sites or upon the
consummation of a merger, sale of substantial assets or other
business combination involving Chambers and a third party other
than USA Waste, Chambers shall immediately refund an amount equal
to the amounts prepaid for such unused airspace, plus USA Waste's
out-of-pocket expenses associated with providing such prepayments.
(i) For purposes of this letter, USA Waste's out-of-pocket
expenses shall include without limitation USA Waste's Cost of
Capital as defined below, plus reasonable legal and other
professional fees and related expenses associated with the
transactions contemplated herein. USA Waste's Cost of Capital is
defined as the prime lending rate, as such rate may vary from time
to time, plus 3%.
3. $45 MILLION SETTLEMENT PAYMENT. With respect to the financing of a
$45 million settlement payment set forth in Section 7.7(d)(iii) of the
Merger Agreement, the parties hereto agree as follows:
(a) USA Waste and Chambers hereby agree to negotiate an
agreement for the purchase by USA Waste from Chambers of an asset or
group of assets or airspace rights mutually selected by USA Waste
and Chambers and having a fair market value determined by
independent appraisal of not less than $45 million.
(b) In the event that Chambers completes a refinancing of its
current indebtedness under its bank credit facility, senior note
agreements and amounts due under the Memoranda of Understanding
referred to in paragraphs 2 and 4 of Schedule 5.8 to the Merger
Agreement, the foregoing obligation to consummate such purchase
under subsection (a) shall lapse and be of no further force and effect.
4. CONSENTS OF LENDERS. To the extent that any of the foregoing
transactions and the application of the proceeds for the intended purposes
require prior approval of Chambers' lenders under its bank credit facility
and senior note agreements, or the prior approval of USA Wastes' lenders,
each respective party shall obtain such consents prior to the consummation
of such transactions, or shall otherwise provide evidence satisfactory that
the particular transaction or application of proceeds
3
<PAGE> 4
contemplated herein will not violate the terms of any loan
agreements or other instruments binding upon the respective parties
or their respective assets.
5. TERMINATION. The obligation of USA Waste to consummate each of
the financing transactions contemplated herein shall be subject to the prior
financing transactions described herein having been completed and the
proceeds having been applied as contemplated. In addition, the obligations
of USA Waste with respect to the transactions contemplated herein shall
terminate upon the occurrence of any of the following events (all of such
events referred to herein as a "Termination Event"): (i) the Merger Agreement
shall have been terminated by Chambers pursuant to Section 9.1(a)(iii) and
the condition set forth in Section 8.2(a) shall have been satisfied; (ii) the
Merger Agreement shall have been terminated by Chambers pursuant to Section
9.1(a)(v) or Section 9.1(a)(vi); (iii) the Merger Agreement shall have been
terminated by USA Waste pursuant to Section 9.1(b)(iii) and the condition set
forth in Section 8.3(a) shall not have been satisfied; (iv) the Merger
Agreement shall have been terminated by USA Waste pursuant to Section
9.1(b)(iii) and Chambers shall have entered into a definitive agreement with
any third party other than USA Waste with respect to a merger, sale of
substantial assets or other business combination; or (v) the Merger Agreement
shall have been terminated by USA Waste pursuant to Section 9.1(b)(iv).
6. MISCELLANEOUS. This letter constitutes an agreement in principle and
the obligations of the parties to fund pursuant to paragraphs 2 and 3 are
subject to execution of the definitive agreements contemplated hereby with
respect to the matters set forth herein and further constitutes the financing
plan contemplated by the Merger Agreement. This agreement shall be further
evidenced by definitive agreement documenting the respective obligations
hereunder. Please indicate your acceptance by execution of a counterpart to
this letter.
Very truly yours,
USA WASTE SERVICES, INC.
By: /s/ Earl E. DeFrates
------------------------------
Name: Earl E. DeFrates
--------------------------
Title: Executive VP & CFO
---------------------------
CHAMBERS DEVELOPMENT COMPANY, INC.
By: /s/ William Rodgers, Jr.
-----------------------------
Name: William Rodgers, Jr.
--------------------------
Title: Senior Vice President & CFO
------------------------------
4
<PAGE> 1
EXHIBIT 10.10(a)
AGREEMENT
THIS AGREEMENT is made by and between Chambers Development Company, Inc.,
a Delaware corporation, with its principal place of business at 10700
Frankstown Road, Pittsburgh, Pennsylvania, and WILLIAM RODGERS, JR., an
individual residing at 415 Woodland Road, Sewickley, Pennsylvania 15143
(hereinafter the "Executive").
WHEREAS, the Executive is a valued employee of the Company whose services
are critical to the successful realization of the Company's current corporate
goals and objectives; and
WHEREAS, the Company has determined that its interests would best be
served by providing an incentive for the Executive to remain in employment with
the Company and to discharge his responsibilities in the best interests of the
Company; and
WHEREAS, the Company has entered into an agreement with the Executive on
February 3, 1993 providing for certain conditions of employment (the "Original
Agreement"); and
WHEREAS, under the Original Agreement, the Company had the option to
extend the term of that agreement; and
WHEREAS, the Company desires, by the entering into of this Agreement and
in lieu of extending the term of the Original Agreement, that as of February 3,
1995, the terms and conditions in this Agreement shall replace those which were
contained in the Original Agreement; and
WHEREAS, it is the intention of the parties that this Agreement shall take
effect following the termination of the Original Agreement.
NOW, THEREFORE, in consideration of the mutual promises contained herein,
and intending to be legally bound, the Company and the Executive agree as
follows:
1. Employment and Term
The Company shall employ the Executive and the Executive shall serve the
Company for a period ending on February 3, 1996. The Company shall have the
right to terminate this Agreement at any time by written notice to the
<PAGE> 2
Executive, provided that the Company satisfies its obligations to the Executive
as described in Paragraph 2 below. Commencing on February 3, 1995 and each
anniversary thereafter, the term of this Agreement shall automatically be
extended for one (1) additional year so that the term of this Agreement shall
continue for a period of Two (2) years from each such anniversary unless the
Company shall have given written notice to the Executive that it does not wish
to extend further the term of this Agreement. There shall be no limit to the
number of permitted extensions to this Agreement, but the Executive
acknowledges that the Company has no obligation to extend this Agreement beyond
its initial expiration of February 3, 1996 or thereafter. The Executive also
acknowledges that under no circumstances shall he be entitled to cumulative
benefits under both of the Original Agreement and this Agreement, but rather
that the provisions of the Original Agreement shall govern the relationship
between the Company and the Employee through February 2, 1995, and the
provisions of this Agreement shall govern such relationship commencing on
February 3, 1995.
2. Termination of Employment and Severance Benefits if There Has Been No
Change of Control.
If no Change of Control has occurred and (i) the Executive's employment
with the Company is involuntarily terminated by the Company during the term of
this Agreement for any reason other than for Just Cause, death or retirement,
or (ii) the Executive's employment with the Company is terminated by the
Executive for Good Reason (other than under Paragraph (1) of the definition of
Good Reason), the Executive shall be entitled to each of the following:
(a) A severance payment (which shall be paid to the Executive
immediately upon his eligible termination of employment) equal to the sum of:
(1) Two (2) times his annual rate of base salary as of the date
of his termination of employment with the Company (but not less than Two (2)
times his annual rate of base salary as of the Effective Date); plus
(2) Two (2) times the average cash bonuses received by the
Executive under the Company's Management Incentive Compensation Plan (or
successor thereto) for the last three (3) calendar years of his employment with
the Company; plus
(3) Any amount forfeited by the Executive under the Company's
Profit Sharing Plan (or any successor or comparable plan thereto) as a result
of such termination; minus
<PAGE> 3
(4) The total amount of any separation or severance pay of any
type paid by the Company in cash to the Executive under any plan, program,
practice or arrangement of the Company (other than under this Agreement) or
under any other agreement between the Executive and the Company.
(b) Continued coverage for the Executive (and his family as to
health plans) after such termination of employment, at no direct cost to the
Executive other than the normal employee's contribution under the Company's
plans, under the Company's life insurance, long-term disability and health
plans (including any dental and vision plans) for the Company's salaried
employees as in effect on the date of such termination of employment (or as
they may be amended from time to time by the Company for all such salaried
employees) for the period ending two (2) years following such termination;
provided, however, that in lieu of such continued coverage, the Company,
in its sole discretion, may make a lump sum cash payment to the Executive,
immediately upon eligible termination of employment, which is equal to the
value of such coverage for the two (2) year period following such
termination.
(c) Outplacement counseling, at no direct cost to the Executive,
with a party mutually agreeable to the Executive and the Company, to begin
within one (1) month from the date of such termination of employment and
continue for a period of eighteen (18) consecutive months.
(d) Notwithstanding any provision in any document or agreement relating
to stock options and stock appreciation rights, any stock options and stock
appreciation rights granted to the Executive under any stock option plan
of the Company shall be fully vested and immediately exercisable in
accordance with the otherwise applicable terms of such stock option plan
immediately upon the Executive's eligible termination of employment and
shall remain fully exercisable for the remainder of the particular option
term, and such vesting shall not be deemed to constitute severance or
separation pay.
3. Termination of Employment and Severance Benefits Following A Change of
Control.
(A) If, following a Change of Control, (i) the Executive's employment
with the Company is involuntarily terminated by the Company during the term of
this Agreement for any reason other than for Just Cause, death or retirement,
or (ii) the Executive's employment with the Company is terminated by the
Employee for Good Reason, the Executive shall be entitled to each of the
following:
<PAGE> 4
(a) A severance payment (which shall be paid to the Executive
immediately upon his eligible termination of employment) equal to the sum of:
(1) 2.99 times his annual rate of base salary as of the
date of his termination of employment with the Company (but not less than 2.99
times his annual rate of base salary as of the Effective Date); plus
(2) 2.99 times the maximum cash bonus as defined by the
Executive's participation level under the Company's Management Inventive
Compensation Plan (or successor thereto) computed as if the highest level of
achievement of performance objectives by the Executive, his function and the
Company had been attained; plus
(3) Any amount forfeited by the Executive under the
Company's Profit Sharing Plan (or any successor or comparable plan thereto) as
a result of such termination; minus
(4) The total amount of any separation or severance pay of any
type paid by the Company in cash to the Executive under any plan, program,
practice or arrangement of the Company (other than under this Agreement) or
under any other agreement between the Executive and the Company.
(b) Continued coverage for the Executive (and his family as to
health plans) after such termination of employment, at no direct cost to the
Executive, under the Company's life insurance, long-term disability and
health plans (including any dental and vision plans) for the Company's
salaried employees as in effect on the date of such termination of
employment (or as they may be amended from time to time by the Company for
all such salaried employees) for the period ending three (3) years
following such termination; provided, however, that in lieu of such
continued coverage, the Company, in its sole discretion, may make a lump
sum cash payment to the Executive, immediately upon eligible termination
of employment, which is equal to the value of such coverage for the three
(3) year period following such termination.
(c) Outplacement counseling, at no direct cost to the Executive, with
a party mutually agreeable to the Executive and the Company, to begin
within one (1) month from the date of such termination of employment and
continue for a period of eighteen (18) consecutive months.
(d) Notwithstanding any provision in any document or agreement relating
to stock options and stock appreciation rights, any stock options and
<PAGE> 5
stock appreciation rights granted to the Executive under any stock option
plan of the Company shall be fully vested and immediately exercisable in
accordance with the otherwise applicable terms of such stock option plan
immediately upon the Executive's eligible termination of employment and
shall remain fully exercisable for the remainder of the particular option
term, and such vesting shall not be deemed to constitute severance or
separation pay.
(B) If, following a Change of Control, the Executive terminates his
employment with the Company for any reason during the sixty (60) day period
beginning on the first anniversary of the Change of Control, the Executive
shall be entitled to each of the following:
(a) A severance payment (which shall be paid to the Executive
immediately upon his eligible termination of employment) equal to the sum of:
(1) Two (2) times his annual rate of base salary as of the date of his
termination of employment with the Company (but not less than two (2) times
his annual rate of base salary as of the Effective Date); plus
(2) Any amount forfeited by the Executive under the Company's Profit
Sharing Plan (or any successor or comparable plan thereto) as a result of
such termination; minus
(3) The total amount of any separation or severance pay of any type
paid by the Company in cash to the Executive under any plan, program,
practice or arrangement of the Company (other than under this Agreement) or
under any other agreement between the Executive and the Company.
(b) Continued coverage for the Executive (and his family as to health
plans) after such termination of employment, at no direct cost to the
Executive, under the Company's life insurance, long-term disability and
health plans (including any dental and vision plans) for the Company's
salaried employees as in effect on the date of such termination of
employment (or as they may be amended from time to time by the Company
for all such salaried employees) for the period ending two (2) years
following such termination; provided, however, that in lieu of such
continued coverage, the Company, in its sole discretion, may make a lump
sum cash payment to the Executive, immediately upon eligible termination
of employment, which is equal to the value of such coverage for the two
(2) year period following such termination.
<PAGE> 6
(c) Outplacement counseling, at no direct cost to the Executive,
with a party mutually agreeable to the Executive and the Company, to begin
within one (1) month from the date of such termination of employment and
continue for a period of eighteen (18) consecutive months.
(d) Notwithstanding any provision in any document or agreement relating
to stock options and stock appreciation rights, any stock options and
stock appreciation rights granted to the Executive under any stock option
plan of the Company shall be fully vested and immediately exercisable in
accordance with the otherwise applicable terms of such stock option plan
immediately upon the Executive's eligible termination of employment and shall
remain fully exercisable for the remainder of the particular option term, and
such vesting shall not be deemed to constitute severance or separation pay.
4. Indebtedness to the Company
Notwithstanding anything to the contrary, if the Executive is indebted
to the Company at the time an amount is payable to the Executive under this
Agreement, said amount shall first be applied to satisfy said indebtedness to
the Company, and any balance remaining after satisfaction of said indebtedness
shall be paid to the Executive pursuant to the applicable provisions of this
Agreement.
5. Tax Gross Up.
(a)(i) In the event that the Executive becomes entitled to payments in
connection with a Change in Control or his termination of employment after a
Change in Control (the "Payments"), then if any of the Payments will be
subject to the tax imposed by Section 4999 of the Internal Revenue Code
("IRC") (the "Excise Tax"), (or any similar tax that may hereafter be
imposed) the Company shall pay to Executive an additional amount (the
"Gross-Up Payment") such that the net amount retained by him, after
deduction of any Excise Tax on the Payments and any Excise Tax upon the
payment provided for by this paragraph, shall be equal to the Payments.
For purposes of determining whether any of the Payments will be subject
to the Excise Tax and the amount of such Excise Tax, (a) any other
payments or benefits received or to be received by Executive in connection
with a change of control or his termination of employment shall be treated
as "parachute payments" within the meaning of Section 280G(b)(2) of the
IRC, and all "excess parachute payments" within the meaning of Section
280G(b)(1) shall be treated as subject to the Excise Tax, unless in the
opinion of tax counsel selected by the Company's independent auditors,
and acceptable
<PAGE> 7
to the Executive, such other payments or benefits (in whole or in part) do
not constitute parachute payments, or such excess parachute payments (in
whole or in part) represent reasonable compensation for services actually
rendered within the meaning of Section 280G(b)(4) of the IRC in excess of
the base amount within the meaning of Section 280G(b)(3) of the IRC, or
are otherwise not subject to the Excise Tax, (b) the amount of the
Payments which shall be treated as subject to the Excise Tax shall be
equal to the lesser of (1) the total amount of the Payments or (2) the
amount of excess parachute payments within the meaning of Section
280G(b)(1) (after applying clause (a), above), and (c) the value of any
non-cash benefits or any deferred payment or benefit, which amounts shall
be determined by the Company's independent auditors in accordance with
the principles of Section 280G(d)(3) and (4) of the IRC.
(ii) A Gross-Up Payment shall be made not later than the fifth
day following the date the Executive becomes subject to payment of excise tax;
provided, however, that if the amounts of such payment cannot be finally
determined on or before such day, the Company shall pay to the Executive on
such day an estimate, as determined in good faith by the Company, of the
minimum amount of such payments and shall pay the remainder of such payment
(together with interest at the rate provided under Section 1274(b)(2)(B) of the
IRC) as soon as the amount can be determined but no later than the thirtieth
day after the date the Executive becomes subject to the payment of excise tax.
In the event the amount of the estimated payment exceeds the amount
subsequently determined to have been due, such excess shall constitute a loan
by the Company to the Executive, payable on the fifth day after demand by the
Company (together with interest at the rate provided in Section 1274(b)(2)(B)
of the IRC).
(b) The Company agrees to calculate the amount of Gross-Up Payment
payable on behalf of the Executive to the Internal Revenue Service in good
faith and in accordance with a reasonable interpretation of the Code as to
the amount of the excise tax which may be imposed on the Executive under Code
Section 4999 with respect to payments made by the Company, and the Executive
agrees to accept such calculation. The Company shall provide the Executive
with notice of the amount of Gross-Up Payment to be made hereunder, which
payments shall be made in a timely manner by the Company. Notwithstanding any
other provision hereof, the Company agrees to indemnify and hold the
Executive harmless from and in respect of any excise tax which may be
imposed on the Executive under Code Section 4999, as well as any interest
or penalties with respect to such excise taxes.
<PAGE> 8
6. Definitions
(a) Change of Control shall mean the occurrence of any of the
following:
(1) The acquisition by any "person" within the meaning of Section
13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934 (the "Exchange
Act"), (but excluding for this purpose a person who holds shares of the capital
stock of the Company representing 25% or more of the aggregate voting power of
the outstanding voting shares of the Company as of the Effective Date) of
"beneficial ownership" within the meaning of Rule 13d-3 promulgated under the
Exchange Act, of twenty five (25%) percent or more of the aggregate voting
power of the outstanding voting shares of the Company.
(2) The individuals who, at the beginning of any period of two (2)
consecutive calendar years, constitute the Board (the "Incumbent Board") cease
for any reason during such two (2) year period to constitute at least a
majority of the Board, provided that any person becoming a director during such
two (2) year period whose election, or nomination or election by the Company's
shareholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall for this purpose be considered as
though such person were a member of the Incumbent Board.
(3) The approval by the stockholders of the Company of a
reorganization, merger or consolidation, in each case, with respect to which
persons who were the stockholders of the Company immediately prior to such
reorganization, merger or consolidation do not, immediately thereafter, own
more than fifty (50%) percent of the aggregate voting power of the outstanding
voting shares of the reorganized, merged or consolidated entity.
(4) A sale, exchange or other disposition of all or
substantially all of the Company's assets to a third party, or the liquidation
or dissolution of the Company.
(b) Company shall mean Chambers Development Company, Inc., and any
successor thereto, direct or indirect, by merger, reorganization,
consolidation, liquidation, purchase of securities, acquisition of assets or
otherwise.
(c) Good Reason shall mean any of the following:
<PAGE> 9
(1) The duties, status or responsibilities of the Executive have been
materially diminished from those he had on the Effective Date, or he has been
assigned duties or responsibilities materially inconsistent with his duties and
responsibilities with the Company prior to the Effective Date;
(2) Any reduction in the Executive's base salary below the highest
rate in effect at or after the Effective Date;
(3) Any failure by the Company to continue the Executive's eligibility
for participation in any bonus, stock option, restricted stock, or other
incentive compensation or executive compensation or benefit plan,
arrangement or program in which he is a participant immediately prior to the
Effective Date on at least as favorable a basis as he was eligible to
participate immediately prior to the Effective Date (or to provide comparable
successor or substitute plans, arrangements or programs if amendment or
termination of the same becomes necessary or advisable); provided, however,
that the Company shall continue to have discretion in its awarding of incentive
compensation to employees, and the failure to make an award of incentive
compensation (as opposed to eligibility) to the Executive shall not constitute
Good Reason.
(4) Any failure by the Company to continue the Executive's
participation in any pension plan or welfare plan within the meaning of
Sections 3(3) and 3(2), respectively, of ERISA and any supplemental and/or
excess plans thereto or any health insurance plan in which he is a participant
immediately prior to the Effective Date on at least as favorable a basis as he
was entitled to participate immediately prior to the Effective Date (or to
provide comparable successor or substitute plans if amendment or termination of
said plans becomes necessary or desirable);
(5) Any failure by the Company to provide the Executive with the
number of paid vacation days to which he is entitled under the Company's then
current vacation policy, procedure or practice;
(6) Any failure by the Company to obtain the express agreement of any
successor of the Company (direct or indirect, by consolidation, liquidation,
purchase of securities, acquisition of assets or otherwise) to assume and
perform all obligations under this Agreement in the same manner and to the same
extent that the Company would have been required to perform if no succession
had taken place.
<PAGE> 10
For purposes of this definition, an isolated, immaterial and inadvertent
action not taken in bad faith by the Company in violation of Paragraph (1),
(2), (3), (4) or (5) of this definition that is remedied by the Company
promptly after receipt of notice thereof given by the Executive shall not be
considered Good Reason for an Executive's termination of employment with the
Company.
(d) Just Cause shall mean, with respect to the Company's termination
of the Executive's employment with the Company, if the termination results
from the Executive's:
(1) Willful and continued failure substantially to perform his
usual duties or to work full time for the Company that is not remedied in a
reasonable period of time after receipt of written notice from the Board of
Directors of the Company;
(2) Willful engagement in conduct that is injurious to the
Company;
(3) Willful engagement in actions that result in, or are
intended to result in, the personal enrichment of the Executive at the expense
of the Company;
(4) Embezzlement of funds of the Company or misappropriation of other
property of the Company; or
(5) Conviction of a felony.
For purposes of this definition, no act or failure to act on the part of
the Executive shall be considered "willful" unless such act or failure to act
was not in good faith and was without reasonable belief that his action or
failure to act was in the best interests of the Company, and no act or failure
to act on the part of the Executive shall be considered "willful" if it is
solely the result of his bad judgment or negligence.
Any termination by the Company of the Executive's employment resulting
from Just Cause shall only be effective upon the decision of both the
Executive's supervisor and the Human Resources Committee of the Board of
Directors of the Company, with the reasons for the termination being
communicated to the Executive.
<PAGE> 11
7. Remedies
The Executive's sole and exclusive remedy in the event of a breach of
this Agreement by the Company shall be, and the Company's liability shall be
limited to, damages equal to the payments and benefits required to be provided
by the Company under this Agreement.
8. Arbitration
Any dispute, controversy or claim arising out of or relating to this
Agreement or to any breach or alleged breach thereof shall, upon the request of
the Executive or the Company, be submitted to and settled by arbitration in the
Commonwealth of Pennsylvania pursuant to the rules then in effect of the
American Arbitration Association (or at any other place or under any other form
of arbitration mutually acceptable to the Executive and the Company). An
arbitration panel shall be selected, consisting of one arbitrator selected by
the Company, one arbitrator selected by the Executive, and a third arbitrator
selected by mutual agreement of the first two arbitrators. Any award rendered
shall be final and conclusive upon the Executive and the Company, and a
judgment may be entered in the highest court, state or federal, having
jurisdiction. The expenses of arbitration shall be paid by the Company, and
attorneys fees shall be addressed as provided in Paragraph 14.
9. Successors
This Agreement shall be binding upon and inure to the benefit of the
Executive and his heirs and estate, and the Company and its successors and
assigns. The Company shall require any successor of the Company (direct or
indirect, by consolidation, liquidation, purchase of securities, acquisition of
assets, or otherwise) to expressly assume this Agreement and to perform all
obligations hereunder in the same manner and to the same extent that the
Company would have been required to perform if no succession had taken place.
10. Assignment
(a) The Executive's rights and interest hereunder shall not be
assignable (in law or equity) or subject to any manner of alienation, sale,
transfer, claims of creditors, pledge, attachment, garnishment, levy,
execution, or encumbrances of any kind, and any attempt to do so shall be
void.
<PAGE> 12
(b) Any assignment of the Company's responsibilities and liability
hereunder shall not relieve the Company of its responsibilities and liability
hereunder.
11. No Funding
The Executive's rights and interest hereunder shall be that of a
general unsecured creditor of the Company, and he shall not have any preferred
claims on, or any beneficial interest in, the assets of the Company.
12. Withholding
All amounts payable hereunder shall be subject to withholding for taxes
(federal, state, and local) to the extent required by applicable law.
13. Obligations Absolute
The Company's obligation to make the payments and arrangements provided
for in this Agreement and to otherwise perform its obligations under this
Agreement shall be absolute and unconditional and, except as specifically
provided in this Agreement, shall not be affected by any circumstances,
including any set-off, counterclaim, recoupment, defense or other claim, right
or action which the Company may have against the Executive or any other person.
Each and every payment made pursuant to this Agreement shall be final, and the
Company shall not seek to recover all or any part of such payment from the
Executive, or from any other person entitled thereto, for any reason
whatsoever. In no event shall the Executive be obligated to seek other
employment or take any other action in mitigation of the amounts payable
pursuant to any provisions of this Agreement.
14. Expenses
The Company shall pay to the fullest extent permitted by law all legal
and other fees and expenses that the Executive may reasonably incur in
connection with any action or contest related to the enforcement, validity or
interpretation of any provision of this Agreement, including actions brought by
the Executive to establish entitlement to payments or benefits hereunder, in
the event that the Executive prevails in whole or in part in the arbitration of
the action. In the event the Executive does not prevail in whole or in part,
then each party shall pay its own legal fees and expenses.
<PAGE> 13
15. Notices
All notices hereunder shall be given in writing and delivered by hand or
by registered or certified mail, or by overnight courier, and addressed to the
respective addresses set forth on the first page of this Agreement, or to such
other address as either party may have furnished to the other in writing in
accordance herewith. Any notice by the Company to the Executive of a
termination of employment for Just Cause, and any notice by the Executive to
the Company of a termination of employment for Good Reason, shall include the
specific provision of this Agreement relied upon for such termination,
reasonable detail of the facts and circumstances claimed to provide for the
termination of employment pursuant to those provision, and the date of
termination of employment, which shall be no earlier than the date of receipt
of such notice and no later than fifteen (15) days thereafter.
16. Other Rights, Plans and Agreements
(a) This Agreement shall not affect the Executive's right to participate
in and receive benefits under any plans, programs, arrangements, policies,
procedures or practices of the Company and shall have no effect on any
other agreement entered into by the Executive and the Company.
(b) Neither this Agreement nor any action taken hereunder shall be
construed as giving the Executive the right to be retained in the
employment of the Company.
17. Severability and Waivers
(a) Any provision of this Agreement prohibited by law shall be
ineffective to the extent of such prohibition without invalidating the
remaining provisions.
(b) The Executive's or the Company's failure to insist upon strict
compliance with any provision of this Agreement shall not be deemed to be a
waiver of such provision. Any waiver of any provision of this Agreement
shall not be deemed to be a waiver of any other provision, and any waiver
of default in any provision of this Agreement shall not be deemed to be a
waiver of any later default.
18. Entire Understanding, Amendment
<PAGE> 14
(a) This Agreement represents the entire understanding of the
Executive and the Company with respect to the matters set forth herein, and
supersedes any prior such agreements including, after February 2, 1995, the
Original Agreement.
(b) Termination, revocation, or amendment of this Agreement shall be
made only in a writing executed by both the Executive and the Company.
19. Governing Law
This Agreement shall be governed by and construed in accordance with the
laws of the Commonwealth of Pennsylvania.
IN WITNESS WHEREOF, the Executive and the Company have executed this
Agreement in duplicate on this ___ day of ________________, 1993.
CHAMBERS DEVELOPMENT COMPANY, INC. EXECUTIVE
By: /s/ John G. Rangos, Jr. /s/ William Rodgers, Jr.
Title: Vice Chairman Administration
and Technology -- Secretary
<PAGE> 1
EXHIBIT 10.10(b)
AGREEMENT
THIS AGREEMENT is made by and between Chambers Development Company, Inc.,
a Delaware corporation, with its principal place of business at 10700
Frankstown Road, Pittsburgh, Pennsylvania, and PETER V. MORSE, an individual
residing at 5016 Belmont Avenue, Bethel Park, Pennsylvania 15102 (hereinafter
the "Executive").
WHEREAS, the Executive is a valued employee of the Company whose services
are critical to the successful realization of the Company's current corporate
goals and objectives; and
WHEREAS, the Company has determined that its interests would best be
served by providing an incentive for the Executive to remain in employment with
the Company and to discharge his responsibilities in the best interests of the
Company; and
WHEREAS, the Company has entered into an agreement with the Executive on
February 3, 1993 providing for certain conditions of employment (the "Original
Agreement"); and
WHEREAS, under the Original Agreement, the Company had the option to
extend the term of that agreement; and
WHEREAS, the Company desires, by the entering into of this Agreement and
in lieu of extending the term of the Original Agreement, that as of February 3,
1995, the terms and conditions in this Agreement shall replace those which were
contained in the Original Agreement; and
WHEREAS, it is the intention of the parties that this Agreement shall take
effect following the termination of the Original Agreement.
NOW, THEREFORE, in consideration of the mutual promises contained herein,
and intending to be legally bound, the Company and the Executive agree as
follows:
1. Employment and Term
The Company shall employ the Executive and the Executive shall serve the
Company for a period ending on February 3, 1996. The Company shall have the
right to terminate this Agreement at any time by written notice to the
<PAGE> 2
Executive, provided that the Company satisfies its obligations to the Executive
as described in Paragraph 2 below. Commencing on February 3, 1995 and each
anniversary thereafter, the term of this Agreement shall automatically be
extended for one (1) additional year so that the term of this Agreement shall
continue for a period of Two (2) years from each such anniversary unless the
Company shall have given written notice to the Executive that it does not wish
to extend further the term of this Agreement. There shall be no limit to the
number of permitted extensions to this Agreement, but the Executive
acknowledges that the Company has no obligation to extend this Agreement beyond
its initial expiration of February 3, 1996 or thereafter. The Executive also
acknowledges that under no circumstances shall he be entitled to cumulative
benefits under both of the Original Agreement and this Agreement, but rather
that the provisions of the Original Agreement shall govern the relationship
between the Company and the Employee through February 2, 1995, and the
provisions of this Agreement shall govern such relationship commencing on
February 3, 1995.
2. Termination of Employment and Severance Benefits if There Has Been No
Change of Control.
If no Change of Control has occurred and (i) the Executive's employment
with the Company is involuntarily terminated by the Company during the term of
this Agreement for any reason other than for Just Cause, death or retirement,
or (ii) the Executive's employment with the Company is terminated by the
Executive for Good Reason (other than under Paragraph (1) of the definition of
Good Reason), the Executive shall be entitled to each of the following:
(a) A severance payment (which shall be paid to the Executive
immediately upon his eligible termination of employment) equal to the sum of:
(1) Two (2) times his annual rate of base salary as of the date
of his termination of employment with the Company (but not less than Two (2)
times his annual rate of base salary as of the Effective Date); plus
(2) Two (2) times the average cash bonuses received by the
Executive under the Company's Management Incentive Compensation Plan (or
successor thereto) for the last three (3) calendar years of his employment with
the Company; plus
(3) Any amount forfeited by the Executive under the Company's
Profit Sharing Plan (or any successor or comparable plan thereto) as a result
of such termination; minus
<PAGE> 3
(4) The total amount of any separation or severance pay of any
type paid by the Company in cash to the Executive under any plan, program,
practice or arrangement of the Company (other than under this Agreement) or
under any other agreement between the Executive and the Company.
(b) Continued coverage for the Executive (and his family as to
health plans) after such termination of employment, at no direct cost to the
Executive other than the normal employee's contribution under the Company's
plans, under the Company's life insurance, long-term disability and health
plans (including any dental and vision plans) for the Company's salaried
employees as in effect on the date of such termination of employment (or as
they may be amended from time to time by the Company for all such salaried
employees) for the period ending two (2) years following such termination;
provided, however, that in lieu of such continued coverage, the Company, in its
sole discretion, may make a lump sum cash payment to the Executive, immediately
upon eligible termination of employment, which is equal to the value of such
coverage for the two (2) year period following such termination.
(c) Outplacement counseling, at no direct cost to the Executive,
with a party mutually agreeable to the Executive and the Company, to begin
within one (1) month from the date of such termination of employment and
continue for a period of eighteen (18) consecutive months.
(d) Notwithstanding any provision in any document or agreement
relating to stock options and stock appreciation rights, any stock options and
stock appreciation rights granted to the Executive under any stock option plan
of the Company shall be fully vested and immediately exercisable in accordance
with the otherwise applicable terms of such stock option plan immediately upon
the Executive's eligible termination of employment and shall remain fully
exercisable for the remainder of the particular option term, and such vesting
shall not be deemed to constitute severance or separation pay.
3. Termination of Employment and Severance Benefits Following A Change of
Control.
(A) If, following a Change of Control, (i) the Executive's employment
with the Company is involuntarily terminated by the Company during the term of
this Agreement for any reason other than for Just Cause, death or retirement,
or (ii) the Executive's employment with the Company is terminated by the
Employee for Good Reason, the Executive shall be entitled to each of the
following:
<PAGE> 4
(a) A severance payment (which shall be paid to the Executive
immediately upon his eligible termination of employment) equal to the sum of:
(1) 2.99 times his annual rate of base salary as of the
date of his termination of employment with the Company (but not less than 2.99
times his annual rate of base salary as of the Effective Date); plus
(2) 2.99 times the maximum cash bonus as defined by the
Executive's participation level under the Company's Management Inventive
Compensation Plan (or successor thereto) computed as if the highest level of
achievement of performance objectives by the Executive, his function and the
Company had been attained; plus
(3) Any amount forfeited by the Executive under the
Company's Profit Sharing Plan (or any successor or comparable plan thereto) as
a result of such termination; minus
(4) The total amount of any separation or severance pay of any
type paid by the Company in cash to the Executive under any plan, program,
practice or arrangement of the Company (other than under this Agreement) or
under any other agreement between the Executive and the Company.
(b) Continued coverage for the Executive (and his family as to
health plans) after such termination of employment, at no direct cost to the
Executive, under the Company's life insurance, long-term disability and health
plans (including any dental and vision plans) for the Company's salaried
employees as in effect on the date of such termination of employment (or as
they may be amended from time to time by the Company for all such salaried
employees) for the period ending three (3) years following such termination;
provided, however, that in lieu of such continued coverage, the Company, in its
sole discretion, may make a lump sum cash payment to the Executive, immediately
upon eligible termination of employment, which is equal to the value of such
coverage for the three (3) year period following such termination.
(c) Outplacement counseling, at no direct cost to the
Executive, with a party mutually agreeable to the Executive and the Company, to
begin within one (1) month from the date of such termination of employment and
continue for a period of eighteen (18) consecutive months.
(d) Notwithstanding any provision in any document or agreement
relating to stock options and stock appreciation rights, any stock options and
<PAGE> 5
stock appreciation rights granted to the Executive under any stock option plan
of the Company shall be fully vested and immediately exercisable in accordance
with the otherwise applicable terms of such stock option plan immediately upon
the Executive's eligible termination of employment and shall remain fully
exercisable for the remainder of the particular option term, and such vesting
shall not be deemed to constitute severance or separation pay.
(B) If, following a Change of Control, the Executive terminates his
employment with the Company for any reason during the sixty (60) day period
beginning on the first anniversary of the Change of Control, the Executive
shall be entitled to each of the following:
(a) A severance payment (which shall be paid to the Executive
immediately upon his eligible termination of employment) equal to the sum of:
(1) Two (2) times his annual rate of base salary as of the
date of his termination of employment with the Company (but not less than two
(2) times his annual rate of base salary as of the Effective Date); plus
(2) Any amount forfeited by the Executive under the
Company's Profit Sharing Plan (or any successor or comparable plan thereto) as
a result of such termination; minus
(3) The total amount of any separation or severance pay of any
type paid by the Company in cash to the Executive under any plan, program,
practice or arrangement of the Company (other than under this Agreement) or
under any other agreement between the Executive and the Company.
(b) Continued coverage for the Executive (and his family as to
health plans) after such termination of employment, at no direct cost to the
Executive, under the Company's life insurance, long-term disability and health
plans (including any dental and vision plans) for the Company's salaried
employees as in effect on the date of such termination of employment (or as
they may be amended from time to time by the Company for all such salaried
employees) for the period ending two (2) years following such termination;
provided, however, that in lieu of such continued coverage, the Company, in its
sole discretion, may make a lump sum cash payment to the Executive, immediately
upon eligible termination of employment, which is equal to the value of such
coverage for the two (2) year period following such termination.
<PAGE> 6
(c) Outplacement counseling, at no direct cost to the Executive,
with a party mutually agreeable to the Executive and the Company, to begin
within one (1) month from the date of such termination of employment and
continue for a period of eighteen (18) consecutive months.
(d) Notwithstanding any provision in any document or
agreement relating to stock options and stock appreciation rights, any stock
options and stock appreciation rights granted to the Executive under any stock
option plan of the Company shall be fully vested and immediately exercisable in
accordance with the otherwise applicable terms of such stock option plan
immediately upon the Executive's eligible termination of employment and shall
remain fully exercisable for the remainder of the particular option term, and
such vesting shall not be deemed to constitute severance or separation pay.
4. Indebtedness to the Company
Notwithstanding anything to the contrary, if the Executive is indebted
to the Company at the time an amount is payable to the Executive under this
Agreement, said amount shall first be applied to satisfy said indebtedness to
the Company, and any balance remaining after satisfaction of said indebtedness
shall be paid to the Executive pursuant to the applicable provisions of this
Agreement.
5. Tax Gross Up.
(a)(i) In the event that the Executive becomes entitled to payments in
connection with a Change in Control or his termination of employment after a
Change in Control (the "Payments"), then if any of the Payments will be subject
to the tax imposed by Section 4999 of the Internal Revenue Code ("IRC") (the
"Excise Tax"), (or any similar tax that may hereafter be imposed) the Company
shall pay to Executive an additional amount (the "Gross-Up Payment") such that
the net amount retained by him, after deduction of any Excise Tax on the
Payments and any Excise Tax upon the payment provided for by this paragraph,
shall be equal to the Payments. For purposes of determining whether any of the
Payments will be subject to the Excise Tax and the amount of such Excise Tax,
(a) any other payments or benefits received or to be received by Executive in
connection with a change of control or his termination of employment shall be
treated as "parachute payments" within the meaning of Section 280G(b)(2) of the
IRC, and all "excess parachute payments" within the meaning of Section
280G(b)(1) shall be treated as subject to the Excise Tax, unless in the opinion
of tax counsel selected by the Company's independent auditors, and acceptable
<PAGE> 7
to the Executive, such other payments or benefits (in whole or in part) do not
constitute parachute payments, or such excess parachute payments (in whole or
in part) represent reasonable compensation for services actually rendered
within the meaning of Section 280G(b)(4) of the IRC in excess of the base
amount within the meaning of Section 280G(b)(3) of the IRC, or are otherwise
not subject to the Excise Tax, (b) the amount of the Payments which shall be
treated as subject to the Excise Tax shall be equal to the lesser of (1) the
total amount of the Payments or (2) the amount of excess parachute payments
within the meaning of Section 280G(b)(1) (after applying clause (a), above),
and (c) the value of any non-cash benefits or any deferred payment or benefit,
which amounts shall be determined by the Company's independent auditors in
accordance with the principles of Section 280G(d)(3) and (4) of the IRC.
(ii) A Gross-Up Payment shall be made not later than the fifth
day following the date the Executive becomes subject to payment of excise tax;
provided, however, that if the amounts of such payment cannot be finally
determined on or before such day, the Company shall pay to the Executive on
such day an estimate, as determined in good faith by the Company, of the
minimum amount of such payments and shall pay the remainder of such payment
(together with interest at the rate provided under Section 1274(b)(2)(B) of the
IRC) as soon as the amount can be determined but no later than the thirtieth
day after the date the Executive becomes subject to the payment of excise tax.
In the event the amount of the estimated payment exceeds the amount
subsequently determined to have been due, such excess shall constitute a loan
by the Company to the Executive, payable on the fifth day after demand by the
Company (together with interest at the rate provided in Section 1274(b)(2)(B)
of the IRC).
(b) The Company agrees to calculate the amount of Gross-Up Payment
payable on behalf of the Executive to the Internal Revenue Service in good
faith and in accordance with a reasonable interpretation of the Code as to the
amount of the excise tax which may be imposed on the Executive under Code
Section 4999 with respect to payments made by the Company, and the Executive
agrees to accept such calculation. The Company shall provide the Executive
with notice of the amount of Gross-Up Payment to be made hereunder, which
payments shall be made in a timely manner by the Company. Notwithstanding any
other provision hereof, the Company agrees to indemnify and hold the Executive
harmless from and in respect of any excise tax which may be imposed on the
Executive under Code Section 4999, as well as any interest or penalties with
respect to such excise taxes.
<PAGE> 8
6. Definitions
(a) Change of Control shall mean the occurrence of any of the
following:
(1) The acquisition by any "person" within the meaning of Section
13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934 (the "Exchange
Act"), (but excluding for this purpose a person who holds shares of the capital
stock of the Company representing 25% or more of the aggregate voting power of
the outstanding voting shares of the Company as of the Effective Date) of
"beneficial ownership" within the meaning of Rule 13d-3 promulgated under the
Exchange Act, of twenty five (25%) percent or more of the aggregate voting
power of the outstanding voting shares of the Company.
(2) The individuals who, at the beginning of any period of two (2)
consecutive calendar years, constitute the Board (the "Incumbent Board") cease
for any reason during such two (2) year period to constitute at least a
majority of the Board, provided that any person becoming a director during such
two (2) year period whose election, or nomination or election by the Company's
shareholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall for this purpose be considered as
though such person were a member of the Incumbent Board.
(3) The approval by the stockholders of the Company of a
reorganization, merger or consolidation, in each case, with respect to which
persons who were the stockholders of the Company immediately prior to such
reorganization, merger or consolidation do not, immediately thereafter, own
more than fifty (50%) percent of the aggregate voting power of the outstanding
voting shares of the reorganized, merged or consolidated entity.
(4) A sale, exchange or other disposition of all or
substantially all of the Company's assets to a third party, or the liquidation
or dissolution of the Company.
(b) Company shall mean Chambers Development Company, Inc., and any
successor thereto, direct or indirect, by merger, reorganization,
consolidation, liquidation, purchase of securities, acquisition of assets or
otherwise.
(c) Good Reason shall mean any of the following:
<PAGE> 9
(1) The duties, status or responsibilities of the Executive have been
materially diminished from those he had on the Effective Date, or he has been
assigned duties or responsibilities materially inconsistent with his duties and
responsibilities with the Company prior to the Effective Date;
(2) Any reduction in the Executive's base salary below the highest
rate in effect at or after the Effective Date;
(3) Any failure by the Company to continue the Executive's
eligibility for participation in any bonus, stock option, restricted stock, or
other incentive compensation or executive compensation or benefit plan,
arrangement or program in which he is a participant immediately prior to the
Effective Date on at least as favorable a basis as he was eligible to
participate immediately prior to the Effective Date (or to provide comparable
successor or substitute plans, arrangements or programs if amendment or
termination of the same becomes necessary or advisable); provided, however,
that the Company shall continue to have discretion in its awarding of incentive
compensation to employees, and the failure to make an award of incentive
compensation (as opposed to eligibility) to the Executive shall not constitute
Good Reason.
(4) Any failure by the Company to continue the Executive's
participation in any pension plan or welfare plan within the meaning of
Sections 3(3) and 3(2), respectively, of ERISA and any supplemental and/or
excess plans thereto or any health insurance plan in which he is a participant
immediately prior to the Effective Date on at least as favorable a basis as he
was entitled to participate immediately prior to the Effective Date (or to
provide comparable successor or substitute plans if amendment or termination of
said plans becomes necessary or desirable);
(5) Any failure by the Company to provide the Executive with the
number of paid vacation days to which he is entitled under the Company's then
current vacation policy, procedure or practice;
(6) Any failure by the Company to obtain the express agreement of any
successor of the Company (direct or indirect, by consolidation, liquidation,
purchase of securities, acquisition of assets or otherwise) to assume and
perform all obligations under this Agreement in the same manner and to the same
extent that the Company would have been required to perform if no succession
had taken place.
<PAGE> 10
For purposes of this definition, an isolated, immaterial and inadvertent
action not taken in bad faith by the Company in violation of Paragraph (1),
(2), (3), (4) or (5) of this definition that is remedied by the Company
promptly after receipt of notice thereof given by the Executive shall not be
considered Good Reason for an Executive's termination of employment with the
Company.
(d) Just Cause shall mean, with respect to the Company's termination
of the Executive's employment with the Company, if the termination results from
the Executive's:
(1) Willful and continued failure substantially to perform his
usual duties or to work full time for the Company that is not remedied in a
reasonable period of time after receipt of written notice from the Board of
Directors of the Company;
(2) Willful engagement in conduct that is injurious to the Company;
(3) Willful engagement in actions that result in, or are intended to
result in, the personal enrichment of the Executive at the expense of
the Company;
(4) Embezzlement of funds of the Company or misappropriation of other
property of the Company; or
(5) Conviction of a felony.
For purposes of this definition, no act or failure to act on the part of
the Executive shall be considered "willful" unless such act or failure to act
was not in good faith and was without reasonable belief that his action or
failure to act was in the best interests of the Company, and no act or failure
to act on the part of the Executive shall be considered "willful" if it is
solely the result of his bad judgment or negligence.
Any termination by the Company of the Executive's employment resulting
from Just Cause shall only be effective upon the decision of both the
Executive's supervisor and the Human Resources Committee of the Board of
Directors of the Company, with the reasons for the termination being
communicated to the Executive.
<PAGE> 11
7. Remedies
The Executive's sole and exclusive remedy in the event of a breach of
this Agreement by the Company shall be, and the Company's liability shall be
limited to, damages equal to the payments and benefits required to be provided
by the Company under this Agreement.
8. Arbitration
Any dispute, controversy or claim arising out of or relating to this
Agreement or to any breach or alleged breach thereof shall, upon the request of
the Executive or the Company, be submitted to and settled by arbitration in the
Commonwealth of Pennsylvania pursuant to the rules then in effect of the
American Arbitration Association (or at any other place or under any other form
of arbitration mutually acceptable to the Executive and the Company). An
arbitration panel shall be selected, consisting of one arbitrator selected by
the Company, one arbitrator selected by the Executive, and a third arbitrator
selected by mutual agreement of the first two arbitrators. Any award rendered
shall be final and conclusive upon the Executive and the Company, and a
judgment may be entered in the highest court, state or federal, having
jurisdiction. The expenses of arbitration shall be paid by the Company, and
attorneys fees shall be addressed as provided in Paragraph 14.
9. Successors
This Agreement shall be binding upon and inure to the benefit of the
Executive and his heirs and estate, and the Company and its successors and
assigns. The Company shall require any successor of the Company (direct or
indirect, by consolidation, liquidation, purchase of securities, acquisition of
assets, or otherwise) to expressly assume this Agreement and to perform all
obligations hereunder in the same manner and to the same extent that the
Company would have been required to perform if no succession had taken place.
10. Assignment
(a) The Executive's rights and interest hereunder shall not be
assignable (in law or equity) or subject to any manner of alienation, sale,
transfer, claims of creditors, pledge, attachment, garnishment, levy,
execution, or encumbrances of any kind, and any attempt to do so shall be void.
<PAGE> 12
(b) Any assignment of the Company's responsibilities and liability
hereunder shall not relieve the Company of its responsibilities and liability
hereunder.
11. No Funding
The Executive's rights and interest hereunder shall be that of a
general unsecured creditor of the Company, and he shall not have any preferred
claims on, or any beneficial interest in, the assets of the Company.
12. Withholding
All amounts payable hereunder shall be subject to withholding for taxes
(federal, state, and local) to the extent required by applicable law.
13. Obligations Absolute
The Company's obligation to make the payments and arrangements provided
for in this Agreement and to otherwise perform its obligations under this
Agreement shall be absolute and unconditional and, except as specifically
provided in this Agreement, shall not be affected by any circumstances,
including any set-off, counterclaim, recoupment, defense or other claim, right
or action which the Company may have against the Executive or any other person.
Each and every payment made pursuant to this Agreement shall be final, and the
Company shall not seek to recover all or any part of such payment from the
Executive, or from any other person entitled thereto, for any reason
whatsoever. In no event shall the Executive be obligated to seek other
employment or take any other action in mitigation of the amounts payable
pursuant to any provisions of this Agreement.
14. Expenses
The Company shall pay to the fullest extent permitted by law all legal
and other fees and expenses that the Executive may reasonably incur in
connection with any action or contest related to the enforcement, validity or
interpretation of any provision of this Agreement, including actions brought by
the Executive to establish entitlement to payments or benefits hereunder, in
the event that the Executive prevails in whole or in part in the arbitration of
the action. In the event the Executive does not prevail in whole or in part,
then each party shall pay its own legal fees and expenses.
<PAGE> 13
15. Notices
All notices hereunder shall be given in writing and delivered by hand or
by registered or certified mail, or by overnight courier, and addressed to the
respective addresses set forth on the first page of this Agreement, or to such
other address as either party may have furnished to the other in writing in
accordance herewith. Any notice by the Company to the Executive of a
termination of employment for Just Cause, and any notice by the Executive to
the Company of a termination of employment for Good Reason, shall include the
specific provision of this Agreement relied upon for such termination,
reasonable detail of the facts and circumstances claimed to provide for the
termination of employment pursuant to those provision, and the date of
termination of employment, which shall be no earlier than the date of receipt
of such notice and no later than fifteen (15) days thereafter.
16. Other Rights, Plans and Agreements
(a) This Agreement shall not affect the Executive's right to
participate in and receive benefits under any plans, programs, arrangements,
policies, procedures or practices of the Company and shall have no effect on
any other agreement entered into by the Executive and the Company.
(b) Neither this Agreement nor any action taken hereunder shall be
construed as giving the Executive the right to be retained in the employment of
the Company.
17. Severability and Waivers
(a) Any provision of this Agreement prohibited by law shall be
ineffective to the extent of such prohibition without invalidating the
remaining provisions.
(b) The Executive's or the Company's failure to insist upon strict
compliance with any provision of this Agreement shall not be deemed to be a
waiver of such provision. Any waiver of any provision of this Agreement shall
not be deemed to be a waiver of any other provision, and any waiver of default
in any provision of this Agreement shall not be deemed to be a waiver of any
later default.
<PAGE> 14
18. Entire Understanding, Amendment
(a) This Agreement represents the entire understanding of the
Executive and the Company with respect to the matters set forth herein, and
supersedes any prior such agreements including, after February 2, 1995, the
Original Agreement.
(b) Termination, revocation, or amendment of this Agreement shall be
made only in a writing executed by both the Executive and the Company.
19. Governing Law
This Agreement shall be governed by and construed in accordance with the
laws of the Commonwealth of Pennsylvania.
IN WITNESS WHEREOF, the Executive and the Company have executed this
Agreement in duplicate on this ___ day of ________________, 1993.
CHAMBERS DEVELOPMENT COMPANY, INC. EXECUTIVE
By: /s/ John G. Rangos, Jr. /s/ Peter V. Morse
Title: Vice Chairman Administration
and Technology - Secretary
<PAGE> 1
EXHIBIT 10.10(c)
AGREEMENT
THIS AGREEMENT is made by and between Chambers Development Company, Inc.,
a Delaware corporation, with its principal place of business at 10700
Frankstown Road, Pittsburgh, Pennsylvania, and JACK D. WEERTMAN, an individual
residing at 3615 Hardwick Court, Douglasville, Georgia 30135 (hereinafter the
"Executive").
WHEREAS, the Executive is a valued employee of the Company whose services
are critical to the successful realization of the Company's current corporate
goals and objectives; and
WHEREAS, the Company has determined that its interests would best be
served by providing an incentive for the Executive to remain in employment with
the Company and to discharge his responsibilities in the best interests of the
Company; and
WHEREAS, the Company has entered into an agreement with the Executive on
February 3, 1993 providing for certain conditions of employment (the "Original
Agreement"); and
WHEREAS, under the Original Agreement, the Company had the option to
extend the term of that agreement; and
WHEREAS, the Company desires, by the entering into of this Agreement and
in lieu of extending the term of the Original Agreement, that as of February 3,
1995, the terms and conditions in this Agreement shall replace those which were
contained in the Original Agreement; and
WHEREAS, it is the intention of the parties that this Agreement shall take
effect following the termination of the Original Agreement.
NOW, THEREFORE, in consideration of the mutual promises contained herein,
and intending to be legally bound, the Company and the Executive agree as
follows:
1. Employment and Term
The Company shall employ the Executive and the Executive shall serve the
Company for a period ending on February 3, 1996. The Company shall have the
right to terminate this Agreement at any time by written notice to the
Executive, provided that the Company satisfies its obligations to the Executive
<PAGE> 2
as described in Paragraph 2 below. Commencing on February 3, 1995 and each
anniversary thereafter, the term of this Agreement shall automatically be
extended for one (1) additional year so that the term of this Agreement shall
continue for a period of Two (2) years from each such anniversary unless the
Company shall have given written notice to the Executive that it does not wish
to extend further the term of this Agreement. There shall be no limit to the
number of permitted extensions to this Agreement, but the Executive
acknowledges that the Company has no obligation to extend this Agreement beyond
its initial expiration of February 3, 1996 or thereafter. The Executive also
acknowledges that under no circumstances shall he be entitled to cumulative
benefits under both of the Original Agreement and this Agreement, but rather
that the provisions of the Original Agreement shall govern the relationship
between the Company and the Employee through February 2, 1995, and the
provisions of this Agreement shall govern such relationship commencing on
February 3, 1995.
2. Termination of Employment and Severance Benefits if There Has Been No
Change of Control.
If no Change of Control has occurred and (i) the Executive's employment
with the Company is involuntarily terminated by the Company during the term of
this Agreement for any reason other than for Just Cause, death or retirement,
or (ii) the Executive's employment with the Company is terminated by the
Executive for Good Reason (other than under Paragraph (1) of the definition of
Good Reason), the Executive shall be entitled to each of the following:
(a) A severance payment (which shall be paid to the Executive
immediately upon his eligible termination of employment) equal to the sum of:
(1) Two (2) times his annual rate of base salary as of the date
of his termination of employment with the Company (but not less than Two (2)
times his annual rate of base salary as of the Effective Date); plus
(2) Two (2) times the average cash bonuses received by the
Executive under the Company's Management Incentive Compensation Plan (or
successor thereto) for the last three (3) calendar years of his employment with
the Company; plus
(3) Any amount forfeited by the Executive under the Company's
Profit Sharing Plan (or any successor or comparable plan thereto) as a result
of such termination; minus
<PAGE> 3
(4) The total amount of any separation or severance pay of any
type paid by the Company in cash to the Executive under any plan, program,
practice or arrangement of the Company (other than under this Agreement) or
under any other agreement between the Executive and the Company.
(b) Continued coverage for the Executive (and his family as to health
plans) after such termination of employment, at no direct cost to the
Executive other than the normal employee's contribution under the Company's
plans, under the Company's life insurance, long-term disability and health
plans (including any dental and vision plans) for the Company's salaried
employees as in effect on the date of such termination of employment (or as
they may be amended from time to time by the Company for all such salaried
employees) for the period ending two (2) years following such termination;
provided, however, that in lieu of such continued coverage, the Company,
in its sole discretion, may make a lump sum cash payment to the Executive,
immediately upon eligible termination of employment, which is equal to the
value of such coverage for the two (2) year period following such
termination.
(c) Outplacement counseling, at no direct cost to the Executive, with
a party mutually agreeable to the Executive and the Company, to begin
within one (1) month from the date of such termination of employment and
continue for a period of eighteen (18) consecutive months.
(d) Notwithstanding any provision in any document or agreement relating
to stock options and stock appreciation rights, any stock options and stock
appreciation rights granted to the Executive under any stock option plan of
the Company shall be fully vested and immediately exercisable in accordance
with the otherwise applicable terms of such stock option plan immediately
upon the Executive's eligible termination of employment and shall remain
fully exercisable for the remainder of the particular option term, and
such vesting shall not be deemed to constitute severance or separation pay.
3. Termination of Employment and Severance Benefits Following A Change of
Control.
(A) If, following a Change of Control, (i) the Executive's employment
with the Company is involuntarily terminated by the Company during the term of
this Agreement for any reason other than for Just Cause, death or retirement,
or (ii) the Executive's employment with the Company is terminated by the
Employee for Good Reason, the Executive shall be entitled to each of the
following:
<PAGE> 4
(a) A severance payment (which shall be paid to the Executive
immediately upon his eligible termination of employment) equal to the sum of:
(1) 2.99 times his annual rate of base salary as of the date of his
termination of employment with the Company (but not less than 2.99 times
his annual rate of base salary as of the Effective Date); plus
(2) 2.99 times the maximum cash bonus as defined by the Executive's
participation level under the Company's Management Inventive Compensation
Plan (or successor thereto) computed as if the highest level of achievement
of performance objectives by the Executive, his function and the Company
had been attained; plus
(3) Any amount forfeited by the Executive under the Company's Profit
Sharing Plan (or any successor or comparable plan thereto) as a result of
such termination; minus
(4) The total amount of any separation or severance pay of any
type paid by the Company in cash to the Executive under any plan, program,
practice or arrangement of the Company (other than under this Agreement) or
under any other agreement between the Executive and the Company.
(b) Continued coverage for the Executive (and his family as to
health plans) after such termination of employment, at no direct cost to the
Executive, under the Company's life insurance, long-term disability and health
plans (including any dental and vision plans) for the Company's salaried
employees as in effect on the date of such termination of employment (or as
they may be amended from time to time by the Company for all such salaried
employees) for the period ending three (3) years following such termination;
provided, however, that in lieu of such continued coverage, the Company, in its
sole discretion, may make a lump sum cash payment to the Executive, immediately
upon eligible termination of employment, which is equal to the value of such
coverage for the three (3) year period following such termination.
(c) Outplacement counseling, at no direct cost to the
Executive, with a party mutually agreeable to the Executive and the Company, to
begin within one (1) month from the date of such termination of employment and
continue for a period of eighteen (18) consecutive months.
(d) Notwithstanding any provision in any document or agreement
relating to stock options and stock appreciation rights, any stock options and
<PAGE> 5
stock appreciation rights granted to the Executive under any stock option plan
of the Company shall be fully vested and immediately exercisable in accordance
with the otherwise applicable terms of such stock option plan immediately upon
the Executive's eligible termination of employment and shall remain fully
exercisable for the remainder of the particular option term, and such vesting
shall not be deemed to constitute severance or separation pay.
(B) If, following a Change of Control, the Executive terminates his
employment with the Company for any reason during the sixty (60) day period
beginning on the first anniversary of the Change of Control, the Executive
shall be entitled to each of the following:
(a) A severance payment (which shall be paid to the Executive
immediately upon his eligible termination of employment) equal to the sum of:
(1) Two (2) times his annual rate of base salary as of the date of his
termination of employment with the Company (but not less than two (2) times
his annual rate of base salary as of the Effective Date); plus
(2) Any amount forfeited by the Executive under the Company's Profit
Sharing Plan (or any successor or comparable plan thereto) as a result of
such termination; minus
(3) The total amount of any separation or severance pay of any
type paid by the Company in cash to the Executive under any plan, program,
practice or arrangement of the Company (other than under this Agreement) or
under any other agreement between the Executive and the Company.
(b) Continued coverage for the Executive (and his family as to health
plans) after such termination of employment, at no direct cost to the
Executive, under the Company's life insurance, long-term disability and
health plans (including any dental and vision plans) for the Company's
salaried employees as in effect on the date of such termination of
employment (or as they may be amended from time to time by the Company
for all such salaried employees) for the period ending two (2) years
following such termination; provided, however, that in lieu of such
continued coverage, the Company, in its sole discretion, may make a lump
sum cash payment to the Executive, immediately upon eligible termination
of employment, which is equal to the value of such coverage for the two
(2) year period following such termination.
<PAGE> 6
(c) Outplacement counseling, at no direct cost to the Executive,
with a party mutually agreeable to the Executive and the Company, to begin
within one (1) month from the date of such termination of employment and
continue for a period of eighteen (18) consecutive months.
(d) Notwithstanding any provision in any document or agreement relating
to stock options and stock appreciation rights, any stock options and
stock appreciation rights granted to the Executive under any stock option
plan of the Company shall be fully vested and immediately exercisable in
accordance with the otherwise applicable terms of such stock option plan
immediately upon the Executive's eligible termination of employment and shall
remain fully exercisable for the remainder of the particular option term, and
such vesting shall not be deemed to constitute severance or separation pay.
4. Indebtedness to the Company
Notwithstanding anything to the contrary, if the Executive is indebted
to the Company at the time an amount is payable to the Executive under this
Agreement, said amount shall first be applied to satisfy said indebtedness to
the Company, and any balance remaining after satisfaction of said indebtedness
shall be paid to the Executive pursuant to the applicable provisions of this
Agreement.
5. Tax Gross Up.
(a)(i) In the event that the Executive becomes entitled to payments in
connection with a Change in Control or his termination of employment after a
Change in Control (the "Payments"), then if any of the Payments will be
subject to the tax imposed by Section 4999 of the Internal Revenue Code
("IRC") (the "Excise Tax"), (or any similar tax that may hereafter be
imposed) the Company shall pay to Executive an additional amount (the
"Gross-Up Payment") such that the net amount retained by him, after
deduction of any Excise Tax on the Payments and any Excise Tax upon the
payment provided for by this paragraph, shall be equal to the Payments.
For purposes of determining whether any of the Payments will be subject
to the Excise Tax and the amount of such Excise Tax, (a) any other
payments or benefits received or to be received by Executive in connection
with a change of control or his termination of employment shall be treated
as "parachute payments" within the meaning of Section 280G(b)(2) of the
IRC, and all "excess parachute payments" within the meaning of Section
280G(b)(1) shall be treated as subject to the Excise Tax, unless in the
opinion of tax counsel selected by the Company's independent auditors,
and acceptable
<PAGE> 7
to the Executive, such other payments or benefits (in whole or in part)
do not constitute parachute payments, or such excess parachute payments
(in whole or in part) represent reasonable compensation for services
actually rendered within the meaning of Section 280G(b)(4) of the IRC
in excess of the base amount within the meaning of Section 280G(b)(3) of
the IRC, or are otherwise not subject to the Excise Tax, (b) the amount
of the Payments which shall be treated as subject to the Excise Tax shall
be equal to the lesser of (1) the total amount of the Payments or (2)
the amount of excess parachute payments within the meaning of Section
280G(b)(1) (after applying clause (a), above), and (c) the value of any
non-cash benefits or any deferred payment or benefit, which amounts shall
be determined by the Company's independent auditors in accordance with
the principles of Section 280G(d)(3) and (4) of the IRC.
(ii) A Gross-Up Payment shall be made not later than the fifth
day following the date the Executive becomes subject to payment of excise tax;
provided, however, that if the amounts of such payment cannot be finally
determined on or before such day, the Company shall pay to the Executive on
such day an estimate, as determined in good faith by the Company, of the
minimum amount of such payments and shall pay the remainder of such payment
(together with interest at the rate provided under Section 1274(b)(2)(B) of the
IRC) as soon as the amount can be determined but no later than the thirtieth
day after the date the Executive becomes subject to the payment of excise tax.
In the event the amount of the estimated payment exceeds the amount
subsequently determined to have been due, such excess shall constitute a loan
by the Company to the Executive, payable on the fifth day after demand by the
Company (together with interest at the rate provided in Section 1274(b)(2)(B)
of the IRC).
(b) The Company agrees to calculate the amount of Gross-Up Payment
payable on behalf of the Executive to the Internal Revenue Service in good
faith and in accordance with a reasonable interpretation of the Code as to the
amount of the excise tax which may be imposed on the Executive under Code
Section 4999 with respect to payments made by the Company, and the Executive
agrees to accept such calculation. The Company shall provide the Executive
with notice of the amount of Gross-Up Payment to be made hereunder, which
payments shall be made in a timely manner by the Company. Notwithstanding any
other provision hereof, the Company agrees to indemnify and hold the Executive
harmless from and in respect of any excise tax which may be imposed on the
Executive under Code Section 4999, as well as any interest or penalties with
respect to such excise taxes.
<PAGE> 8
6. Definitions
(a) Change of Control shall mean the occurrence of any of the
following:
(1) The acquisition by any "person" within the meaning of Section
13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934 (the "Exchange
Act"), (but excluding for this purpose a person who holds shares of the capital
stock of the Company representing 25% or more of the aggregate voting power of
the outstanding voting shares of the Company as of the Effective Date) of
"beneficial ownership" within the meaning of Rule 13d-3 promulgated under the
Exchange Act, of twenty five (25%) percent or more of the aggregate voting
power of the outstanding voting shares of the Company.
(2) The individuals who, at the beginning of any period of two (2)
consecutive calendar years, constitute the Board (the "Incumbent Board") cease
for any reason during such two (2) year period to constitute at least a
majority of the Board, provided that any person becoming a director during such
two (2) year period whose election, or nomination or election by the Company's
shareholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall for this purpose be considered as
though such person were a member of the Incumbent Board.
(3) The approval by the stockholders of the Company of a
reorganization, merger or consolidation, in each case, with respect to which
persons who were the stockholders of the Company immediately prior to such
reorganization, merger or consolidation do not, immediately thereafter, own
more than fifty (50%) percent of the aggregate voting power of the outstanding
voting shares of the reorganized, merged or consolidated entity.
(4) A sale, exchange or other disposition of all or
substantially all of the Company's assets to a third party, or the liquidation
or dissolution of the Company.
(b) Company shall mean Chambers Development Company, Inc., and any
successor thereto, direct or indirect, by merger, reorganization,
consolidation, liquidation, purchase of securities, acquisition of assets or
otherwise.
(c) Good Reason shall mean any of the following:
<PAGE> 9
(1) The duties, status or responsibilities of the Executive have been
materially diminished from those he had on the Effective Date, or he has been
assigned duties or responsibilities materially inconsistent with his duties and
responsibilities with the Company prior to the Effective Date;
(2) Any reduction in the Executive's base salary below the highest rate
in effect at or after the Effective Date;
(3) Any failure by the Company to continue the Executive's
eligibility for participation in any bonus, stock option, restricted stock, or
other incentive compensation or executive compensation or benefit plan,
arrangement or program in which he is a participant immediately prior to the
Effective Date on at least as favorable a basis as he was eligible to
participate immediately prior to the Effective Date (or to provide comparable
successor or substitute plans, arrangements or programs if amendment or
termination of the same becomes necessary or advisable); provided, however,
that the Company shall continue to have discretion in its awarding of incentive
compensation to employees, and the failure to make an award of incentive
compensation (as opposed to eligibility) to the Executive shall not constitute
Good Reason.
(4) Any failure by the Company to continue the Executive's
participation in any pension plan or welfare plan within the meaning of
Sections 3(3) and 3(2), respectively, of ERISA and any supplemental and/or
excess plans thereto or any health insurance plan in which he is a participant
immediately prior to the Effective Date on at least as favorable a basis as he
was entitled to participate immediately prior to the Effective Date (or to
provide comparable successor or substitute plans if amendment or termination of
said plans becomes necessary or desirable);
(5) Any failure by the Company to provide the Executive with the
number of paid vacation days to which he is entitled under the Company's then
current vacation policy, procedure or practice;
(6) Any failure by the Company to obtain the express agreement of any
successor of the Company (direct or indirect, by consolidation, liquidation,
purchase of securities, acquisition of assets or otherwise) to assume and
perform all obligations under this Agreement in the same manner and to the same
extent that the Company would have been required to perform if no succession
had taken place.
<PAGE> 10
For purposes of this definition, an isolated, immaterial and inadvertent
action not taken in bad faith by the Company in violation of Paragraph (1),
(2), (3), (4) or (5) of this definition that is remedied by the Company
promptly after receipt of notice thereof given by the Executive shall not be
considered Good Reason for an Executive's termination of employment with the
Company.
(d) Just Cause shall mean, with respect to the Company's termination of
the Executive's employment with the Company, if the termination results from
the Executive's:
(1) Willful and continued failure substantially to perform his
usual duties or to work full time for the Company that is not remedied in a
reasonable period of time after receipt of written notice from the Board of
Directors of the Company;
(2) Willful engagement in conduct that is injurious to the Company;
(3) Willful engagement in actions that result in, or are intended to
result in, the personal enrichment of the Executive at the expense of the
Company;
(4) Embezzlement of funds of the Company or misappropriation of other
property of the Company; or
(5) Conviction of a felony.
For purposes of this definition, no act or failure to act on the part of
the Executive shall be considered "willful" unless such act or failure to act
was not in good faith and was without reasonable belief that his action or
failure to act was in the best interests of the Company, and no act or failure
to act on the part of the Executive shall be considered "willful" if it is
solely the result of his bad judgment or negligence.
Any termination by the Company of the Executive's employment resulting
from Just Cause shall only be effective upon the decision of both the
Executive's supervisor and the Human Resources Committee of the Board of
Directors of the Company, with the reasons for the termination being
communicated to the Executive.
<PAGE> 11
7. Remedies
The Executive's sole and exclusive remedy in the event of a breach of
this Agreement by the Company shall be, and the Company's liability shall be
limited to, damages equal to the payments and benefits required to be provided
by the Company under this Agreement.
8. Arbitration
Any dispute, controversy or claim arising out of or relating to this
Agreement or to any breach or alleged breach thereof shall, upon the request of
the Executive or the Company, be submitted to and settled by arbitration in the
Commonwealth of Pennsylvania pursuant to the rules then in effect of the
American Arbitration Association (or at any other place or under any other form
of arbitration mutually acceptable to the Executive and the Company). An
arbitration panel shall be selected, consisting of one arbitrator selected by
the Company, one arbitrator selected by the Executive, and a third arbitrator
selected by mutual agreement of the first two arbitrators. Any award rendered
shall be final and conclusive upon the Executive and the Company, and a
judgment may be entered in the highest court, state or federal, having
jurisdiction. The expenses of arbitration shall be paid by the Company, and
attorneys fees shall be addressed as provided in Paragraph 14.
9. Successors
This Agreement shall be binding upon and inure to the benefit of the
Executive and his heirs and estate, and the Company and its successors and
assigns. The Company shall require any successor of the Company (direct or
indirect, by consolidation, liquidation, purchase of securities, acquisition of
assets, or otherwise) to expressly assume this Agreement and to perform all
obligations hereunder in the same manner and to the same extent that the
Company would have been required to perform if no succession had taken place.
10. Assignment
(a) The Executive's rights and interest hereunder shall not be
assignable (in law or equity) or subject to any manner of alienation, sale,
transfer, claims of creditors, pledge, attachment, garnishment, levy,
execution, or encumbrances of any kind, and any attempt to do so shall be
void.
<PAGE> 12
(b) Any assignment of the Company's responsibilities and liability
hereunder shall not relieve the Company of its responsibilities and liability
hereunder.
11. No Funding
The Executive's rights and interest hereunder shall be that of a
general unsecured creditor of the Company, and he shall not have any preferred
claims on, or any beneficial interest in, the assets of the Company.
12. Withholding
All amounts payable hereunder shall be subject to withholding for taxes
(federal, state, and local) to the extent required by applicable law.
13. Obligations Absolute
The Company's obligation to make the payments and arrangements provided
for in this Agreement and to otherwise perform its obligations under this
Agreement shall be absolute and unconditional and, except as specifically
provided in this Agreement, shall not be affected by any circumstances,
including any set-off, counterclaim, recoupment, defense or other claim, right
or action which the Company may have against the Executive or any other person.
Each and every payment made pursuant to this Agreement shall be final, and the
Company shall not seek to recover all or any part of such payment from the
Executive, or from any other person entitled thereto, for any reason
whatsoever. In no event shall the Executive be obligated to seek other
employment or take any other action in mitigation of the amounts payable
pursuant to any provisions of this Agreement.
14. Expenses
The Company shall pay to the fullest extent permitted by law all legal
and other fees and expenses that the Executive may reasonably incur in
connection with any action or contest related to the enforcement, validity or
interpretation of any provision of this Agreement, including actions brought by
the Executive to establish entitlement to payments or benefits hereunder, in
the event that the Executive prevails in whole or in part in the arbitration of
the action. In the event the Executive does not prevail in whole or in part,
then each party shall pay its own legal fees and expenses.
<PAGE> 13
15. Notices
All notices hereunder shall be given in writing and delivered by hand or
by registered or certified mail, or by overnight courier, and addressed to the
respective addresses set forth on the first page of this Agreement, or to such
other address as either party may have furnished to the other in writing in
accordance herewith. Any notice by the Company to the Executive of a
termination of employment for Just Cause, and any notice by the Executive to
the Company of a termination of employment for Good Reason, shall include the
specific provision of this Agreement relied upon for such termination,
reasonable detail of the facts and circumstances claimed to provide for the
termination of employment pursuant to those provision, and the date of
termination of employment, which shall be no earlier than the date of receipt
of such notice and no later than fifteen (15) days thereafter.
16. Other Rights, Plans and Agreements
(a) This Agreement shall not affect the Executive's right to participate
in and receive benefits under any plans, programs, arrangements, policies,
procedures or practices of the Company and shall have no effect on any
other agreement entered into by the Executive and the Company.
(b) Neither this Agreement nor any action taken hereunder shall be
construed as giving the Executive the right to be retained in the
employment of the Company.
17. Severability and Waivers
(a) Any provision of this Agreement prohibited by law shall be
ineffective to the extent of such prohibition without invalidating the
remaining provisions.
(b) The Executive's or the Company's failure to insist upon strict
compliance with any provision of this Agreement shall not be deemed to be a
waiver of such provision. Any waiver of any provision of this Agreement shall
not be deemed to be a waiver of any other provision, and any waiver of
default in any provision of this Agreement shall not be deemed to be a
waiver of any later default.
<PAGE> 14
18. Entire Understanding, Amendment
(a) This Agreement represents the entire understanding of the Executive
and the Company with respect to the matters set forth herein, and
supersedes any prior such agreements including, after February 2, 1995, the
Original Agreement.
(b) Termination, revocation, or amendment of this Agreement shall be
made only in a writing executed by both the Executive and the Company.
19. Governing Law
This Agreement shall be governed by and construed in accordance with the
laws of the Commonwealth of Pennsylvania.
IN WITNESS WHEREOF, the Executive and the Company have executed this
Agreement in duplicate on this ___ day of ________________, 1993.
CHAMBERS DEVELOPMENT COMPANY, INC. EXECUTIVE
By: /s/ John G. Rangos, Jr. /s/ Jack D. Weertman
Title: Vice Chairman Administration
and Technology -- Secretary
<PAGE> 1
EXHIBIT 10.10(d)
AGREEMENT
THIS AGREEMENT is made by and between Chambers Development Company, Inc.,
a Delaware corporation, with its principal place of business at 10700
Frankstown Road, Pittsburgh, Pennsylvania, and EDWARD N. DURAND, an individual
residing at 2100 Jeremy Drive, Monroeville, Pennsylvania 15146 (hereinafter the
"Executive").
WHEREAS, the Executive is a valued employee of the Company whose services
are critical to the successful realization of the Company's current corporate
goals and objectives; and
WHEREAS, the Company has determined that its interests would best be
served by providing an incentive for the Executive to remain in employment with
the Company and to discharge his responsibilities in the best interests of the
Company; and
WHEREAS, the Company has entered into an agreement with the Executive on
February 3, 1993 providing for certain conditions of employment (the "Original
Agreement"); and
WHEREAS, under the Original Agreement, the Company had the option to
extend the term of that agreement; and
WHEREAS, the Company desires, by the entering into of this Agreement and
in lieu of extending the term of the Original Agreement, that as of February 3,
1995, the terms and conditions in this Agreement shall replace those which were
contained in the Original Agreement; and
WHEREAS, it is the intention of the parties that this Agreement shall take
effect following the termination of the Original Agreement.
NOW, THEREFORE, in consideration of the mutual promises contained herein,
and intending to be legally bound, the Company and the Executive agree as
follows:
1. Employment and Term
The Company shall employ the Executive and the Executive shall serve the
Company for a period ending on February 3, 1996. The Company shall have the
right to terminate this Agreement at any time by written notice to the
<PAGE> 2
Executive, provided that the Company satisfies its obligations to the Executive
as described in Paragraph 2 below. Commencing on February 3, 1995 and each
anniversary thereafter, the term of this Agreement shall automatically be
extended for one (1) additional year so that the term of this Agreement shall
continue for a period of Two (2) years from each such anniversary unless the
Company shall have given written notice to the Executive that it does not wish
to extend further the term of this Agreement. There shall be no limit to the
number of permitted extensions to this Agreement, but the Executive
acknowledges that the Company has no obligation to extend this Agreement beyond
its initial expiration of February 3, 1996 or thereafter. The Executive also
acknowledges that under no circumstances shall he be entitled to cumulative
benefits under both of the Original Agreement and this Agreement, but rather
that the provisions of the Original Agreement shall govern the relationship
between the Company and the Employee through February 2, 1995, and the
provisions of this Agreement shall govern such relationship commencing on
February 3, 1995.
2. Termination of Employment and Severance Benefits if There Has Been No
Change of Control.
If no Change of Control has occurred and (i) the Executive's employment
with the Company is involuntarily terminated by the Company during the term of
this Agreement for any reason other than for Just Cause, death or retirement,
or (ii) the Executive's employment with the Company is terminated by the
Executive for Good Reason (other than under Paragraph (1) of the definition of
Good Reason), the Executive shall be entitled to each of the following:
(a) A severance payment (which shall be paid to the Executive
immediately upon his eligible termination of employment) equal to the sum of:
(1) Two (2) times his annual rate of base salary as of the date
of his termination of employment with the Company (but not less than Two (2)
times his annual rate of base salary as of the Effective Date); plus
(2) Two (2) times the average cash bonuses received by the
Executive under the Company's Management Incentive Compensation Plan (or
successor thereto) for the last three (3) calendar years of his employment with
the Company; plus
(3) Any amount forfeited by the Executive under the Company's
Profit Sharing Plan (or any successor or comparable plan thereto) as a result
of such termination; minus
<PAGE> 3
(4) The total amount of any separation or severance pay of any
type paid by the Company in cash to the Executive under any plan, program,
practice or arrangement of the Company (other than under this Agreement) or
under any other agreement between the Executive and the Company.
(b) Continued coverage for the Executive (and his family as to
health plans) after such termination of employment, at no direct cost to the
Executive other than the normal employee's contribution under the Company's
plans, under the Company's life insurance, long-term disability and health
plans (including any dental and vision plans) for the Company's salaried
employees as in effect on the date of such termination of employment (or as
they may be amended from time to time by the Company for all such salaried
employees) for the period ending two (2) years following such termination;
provided, however, that in lieu of such continued coverage, the Company, in its
sole discretion, may make a lump sum cash payment to the Executive, immediately
upon eligible termination of employment, which is equal to the value of such
coverage for the two (2) year period following such termination.
(c) Outplacement counseling, at no direct cost to the Executive,
with a party mutually agreeable to the Executive and the Company, to begin
within one (1) month from the date of such termination of employment and
continue for a period of eighteen (18) consecutive months.
(d) Notwithstanding any provision in any document or agreement
relating to stock options and stock appreciation rights, any stock options and
stock appreciation rights granted to the Executive under any stock option plan
of the Company shall be fully vested and immediately exercisable in accordance
with the otherwise applicable terms of such stock option plan immediately upon
the Executive's eligible termination of employment and shall remain fully
exercisable for the remainder of the particular option term, and such vesting
shall not be deemed to constitute severance or separation pay.
3. Termination of Employment and Severance Benefits Following A Change of
Control.
(A) If, following a Change of Control, (i) the Executive's employment
with the Company is involuntarily terminated by the Company during the term of
this Agreement for any reason other than for Just Cause, death or retirement,
or (ii) the Executive's employment with the Company is terminated by the
Employee for Good Reason, the Executive shall be entitled to each of the
following:
<PAGE> 4
(a) A severance payment (which shall be paid to the Executive
immediately upon his eligible termination of employment) equal to the sum of:
(1) 2.99 times his annual rate of base salary as of the
date of his termination of employment with the Company (but not less than 2.99
times his annual rate of base salary as of the Effective Date); plus
(2) 2.99 times the maximum cash bonus as defined by the
Executive's participation level under the Company's Management Inventive
Compensation Plan (or successor thereto) computed as if the highest level of
achievement of performance objectives by the Executive, his function and the
Company had been attained; plus
(3) Any amount forfeited by the Executive under the Company's Profit
Sharing Plan (or any successor or comparable plan thereto) as a result of such
termination; minus
(4) The total amount of any separation or severance pay of any
type paid by the Company in cash to the Executive under any plan, program,
practice or arrangement of the Company (other than under this Agreement) or
under any other agreement between the Executive and the Company.
(b) Continued coverage for the Executive (and his family as to
health plans) after such termination of employment, at no direct cost to the
Executive, under the Company's life insurance, long-term disability and health
plans (including any dental and vision plans) for the Company's salaried
employees as in effect on the date of such termination of employment (or as
they may be amended from time to time by the Company for all such salaried
employees) for the period ending three (3) years following such termination;
provided, however, that in lieu of such continued coverage, the Company, in its
sole discretion, may make a lump sum cash payment to the Executive, immediately
upon eligible termination of employment, which is equal to the value of such
coverage for the three (3) year period following such termination.
(c) Outplacement counseling, at no direct cost to the Executive, with a
party mutually agreeable to the Executive and the Company, to begin within one
(1) month from the date of such termination of employment and continue for a
period of eighteen (18) consecutive months.
(d) Notwithstanding any provision in any document or agreement
relating to stock options and stock appreciation rights, any stock options and
<PAGE> 5
stock appreciation rights granted to the Executive under any stock option plan
of the Company shall be fully vested and immediately exercisable in accordance
with the otherwise applicable terms of such stock option plan immediately upon
the Executive's eligible termination of employment and shall remain fully
exercisable for the remainder of the particular option term, and such vesting
shall not be deemed to constitute severance or separation pay.
(B) If, following a Change of Control, the Executive terminates his
employment with the Company for any reason during the sixty (60) day period
beginning on the first anniversary of the Change of Control, the Executive
shall be entitled to each of the following:
(a) A severance payment (which shall be paid to the Executive
immediately upon his eligible termination of employment) equal to the sum of:
(1) Two (2) times his annual rate of base salary as of the
date of his termination of employment with the Company (but not less than two
(2) times his annual rate of base salary as of the Effective Date); plus
(2) Any amount forfeited by the Executive under the Company's Profit
Sharing Plan (or any successor or comparable plan thereto) as a result of such
termination; minus
(3) The total amount of any separation or severance pay of any
type paid by the Company in cash to the Executive under any plan, program,
practice or arrangement of the Company (other than under this Agreement) or
under any other agreement between the Executive and the Company.
(b) Continued coverage for the Executive (and his family as to
health plans) after such termination of employment, at no direct cost to the
Executive, under the Company's life insurance, long-term disability and health
plans (including any dental and vision plans) for the Company's salaried
employees as in effect on the date of such termination of employment (or as
they may be amended from time to time by the Company for all such salaried
employees) for the period ending two (2) years following such termination;
provided, however, that in lieu of such continued coverage, the Company, in its
sole discretion, may make a lump sum cash payment to the Executive, immediately
upon eligible termination of employment, which is equal to the value of such
coverage for the two (2) year period following such termination.
<PAGE> 6
(c) Outplacement counseling, at no direct cost to the Executive,
with a party mutually agreeable to the Executive and the Company, to begin
within one (1) month from the date of such termination of employment and
continue for a period of eighteen (18) consecutive months.
(d) Notwithstanding any provision in any document or agreement relating
to stock options and stock appreciation rights, any stock options and stock
appreciation rights granted to the Executive under any stock option plan of
the Company shall be fully vested and immediately exercisable in accordance
with the otherwise applicable terms of such stock option plan immediately upon
the Executive's eligible termination of employment and shall remain fully
exercisable for the remainder of the particular option term, and such vesting
shall not be deemed to constitute severance or separation pay.
4. Indebtedness to the Company
Notwithstanding anything to the contrary, if the Executive is indebted
to the Company at the time an amount is payable to the Executive under this
Agreement, said amount shall first be applied to satisfy said indebtedness to
the Company, and any balance remaining after satisfaction of said indebtedness
shall be paid to the Executive pursuant to the applicable provisions of this
Agreement.
5. Tax Gross Up.
(a)(i) In the event that the Executive becomes entitled to payments in
connection with a Change in Control or his termination of employment after a
Change in Control (the "Payments"), then if any of the Payments will be subject
to the tax imposed by Section 4999 of the Internal Revenue Code ("IRC") (the
"Excise Tax"), (or any similar tax that may hereafter be imposed) the Company
shall pay to Executive an additional amount (the "Gross-Up Payment") such that
the net amount retained by him, after deduction of any Excise Tax on the
Payments and any Excise Tax upon the payment provided for by this paragraph,
shall be equal to the Payments. For purposes of determining whether any of the
Payments will be subject to the Excise Tax and the amount of such Excise Tax,
(a) any other payments or benefits received or to be received by Executive in
connection with a change of control or his termination of employment shall be
treated as "parachute payments" within the meaning of Section 280G(b)(2) of the
IRC, and all "excess parachute payments" within the meaning of Section
280G(b)(1) shall be treated as subject to the Excise Tax, unless in the opinion
of tax counsel selected by the Company's independent auditors, and acceptable
<PAGE> 7
to the Executive, such other payments or benefits (in whole or in part) do not
constitute parachute payments, or such excess parachute payments (in whole or
in part) represent reasonable compensation for services actually rendered
within the meaning of Section 280G(b)(4) of the IRC in excess of the base
amount within the meaning of Section 280G(b)(3) of the IRC, or are otherwise
not subject to the Excise Tax, (b) the amount of the Payments which shall be
treated as subject to the Excise Tax shall be equal to the lesser of (1) the
total amount of the Payments or (2) the amount of excess parachute payments
within the meaning of Section 280G(b)(1) (after applying clause (a), above),
and (c) the value of any non-cash benefits or any deferred payment or benefit,
which amounts shall be determined by the Company's independent auditors in
accordance with the principles of Section 280G(d)(3) and (4) of the IRC.
(ii) A Gross-Up Payment shall be made not later than the fifth
day following the date the Executive becomes subject to payment of excise tax;
provided, however, that if the amounts of such payment cannot be finally
determined on or before such day, the Company shall pay to the Executive on
such day an estimate, as determined in good faith by the Company, of the
minimum amount of such payments and shall pay the remainder of such payment
(together with interest at the rate provided under Section 1274(b)(2)(B) of the
IRC) as soon as the amount can be determined but no later than the thirtieth
day after the date the Executive becomes subject to the payment of excise tax.
In the event the amount of the estimated payment exceeds the amount
subsequently determined to have been due, such excess shall constitute a loan
by the Company to the Executive, payable on the fifth day after demand by the
Company (together with interest at the rate provided in Section 1274(b)(2)(B)
of the IRC).
(b) The Company agrees to calculate the amount of Gross-Up Payment
payable on behalf of the Executive to the Internal Revenue Service in good
faith and in accordance with a reasonable interpretation of the Code as to the
amount of the excise tax which may be imposed on the Executive under Code
Section 4999 with respect to payments made by the Company, and the Executive
agrees to accept such calculation. The Company shall provide the Executive
with notice of the amount of Gross-Up Payment to be made hereunder, which
payments shall be made in a timely manner by the Company. Notwithstanding any
other provision hereof, the Company agrees to indemnify and hold the Executive
harmless from and in respect of any excise tax which may be imposed on the
Executive under Code Section 4999, as well as any interest or penalties with
respect to such excise taxes.
<PAGE> 8
6. Definitions
(a) Change of Control shall mean the occurrence of any of the
following:
(1) The acquisition by any "person" within the meaning of Section
13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934 (the "Exchange
Act"), (but excluding for this purpose a person who holds shares of the capital
stock of the Company representing 25% or more of the aggregate voting power of
the outstanding voting shares of the Company as of the Effective Date) of
"beneficial ownership" within the meaning of Rule 13d-3 promulgated under the
Exchange Act, of twenty five (25%) percent or more of the aggregate voting
power of the outstanding voting shares of the Company.
(2) The individuals who, at the beginning of any period of two (2)
consecutive calendar years, constitute the Board (the "Incumbent Board") cease
for any reason during such two (2) year period to constitute at least a
majority of the Board, provided that any person becoming a director during such
two (2) year period whose election, or nomination or election by the Company's
shareholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall for this purpose be considered as
though such person were a member of the Incumbent Board.
(3) The approval by the stockholders of the Company of a
reorganization, merger or consolidation, in each case, with respect to which
persons who were the stockholders of the Company immediately prior to such
reorganization, merger or consolidation do not, immediately thereafter, own
more than fifty (50%) percent of the aggregate voting power of the outstanding
voting shares of the reorganized, merged or consolidated entity.
(4) A sale, exchange or other disposition of all or substantially all of
the Company's assets to a third party, or the liquidation or dissolution of
the Company.
(b) Company shall mean Chambers Development Company, Inc., and any
successor thereto, direct or indirect, by merger, reorganization,
consolidation, liquidation, purchase of securities, acquisition of assets or
otherwise.
(c) Good Reason shall mean any of the following:
<PAGE> 9
(1) The duties, status or responsibilities of the Executive have been
materially diminished from those he had on the Effective Date, or he has been
assigned duties or responsibilities materially inconsistent with his duties and
responsibilities with the Company prior to the Effective Date;
(2) Any reduction in the Executive's base salary below the highest
rate in effect at or after the Effective Date;
(3) Any failure by the Company to continue the Executive's
eligibility for participation in any bonus, stock option, restricted stock, or
other incentive compensation or executive compensation or benefit plan,
arrangement or program in which he is a participant immediately prior to the
Effective Date on at least as favorable a basis as he was eligible to
participate immediately prior to the Effective Date (or to provide comparable
successor or substitute plans, arrangements or programs if amendment or
termination of the same becomes necessary or advisable); provided, however,
that the Company shall continue to have discretion in its awarding of incentive
compensation to employees, and the failure to make an award of incentive
compensation (as opposed to eligibility) to the Executive shall not constitute
Good Reason.
(4) Any failure by the Company to continue the Executive's
participation in any pension plan or welfare plan within the meaning of
Sections 3(3) and 3(2), respectively, of ERISA and any supplemental and/or
excess plans thereto or any health insurance plan in which he is a participant
immediately prior to the Effective Date on at least as favorable a basis as he
was entitled to participate immediately prior to the Effective Date (or to
provide comparable successor or substitute plans if amendment or termination of
said plans becomes necessary or desirable);
(5) Any failure by the Company to provide the Executive with the
number of paid vacation days to which he is entitled under the Company's then
current vacation policy, procedure or practice;
(6) Any failure by the Company to obtain the express agreement of any
successor of the Company (direct or indirect, by consolidation, liquidation,
purchase of securities, acquisition of assets or otherwise) to assume and
perform all obligations under this Agreement in the same manner and to the same
extent that the Company would have been required to perform if no succession
had taken place.
<PAGE> 10
For purposes of this definition, an isolated, immaterial and inadvertent
action not taken in bad faith by the Company in violation of Paragraph (1),
(2), (3), (4) or (5) of this definition that is remedied by the Company
promptly after receipt of notice thereof given by the Executive shall not be
considered Good Reason for an Executive's termination of employment with the
Company.
(d) Just Cause shall mean, with respect to the Company's termination
of the Executive's employment with the Company, if the termination results from
the Executive's:
(1) Willful and continued failure substantially to perform his
usual duties or to work full time for the Company that is not remedied in a
reasonable period of time after receipt of written notice from the Board of
Directors of the Company;
(2) Willful engagement in conduct that is injurious to the
Company;
(3) Willful engagement in actions that result in, or are
intended to result in, the personal enrichment of the Executive at the expense
of the Company;
(4) Embezzlement of funds of the Company or misappropriation of
other property of the Company; or
(5) Conviction of a felony.
For purposes of this definition, no act or failure to act on the part of
the Executive shall be considered "willful" unless such act or failure to act
was not in good faith and was without reasonable belief that his action or
failure to act was in the best interests of the Company, and no act or failure
to act on the part of the Executive shall be considered "willful" if it is
solely the result of his bad judgment or negligence.
Any termination by the Company of the Executive's employment resulting
from Just Cause shall only be effective upon the decision of both the
Executive's supervisor and the Human Resources Committee of the Board of
Directors of the Company, with the reasons for the termination being
communicated to the Executive.
<PAGE> 11
7. Remedies
The Executive's sole and exclusive remedy in the event of a breach of
this Agreement by the Company shall be, and the Company's liability shall be
limited to, damages equal to the payments and benefits required to be provided
by the Company under this Agreement.
8. Arbitration
Any dispute, controversy or claim arising out of or relating to this
Agreement or to any breach or alleged breach thereof shall, upon the request of
the Executive or the Company, be submitted to and settled by arbitration in the
Commonwealth of Pennsylvania pursuant to the rules then in effect of the
American Arbitration Association (or at any other place or under any other form
of arbitration mutually acceptable to the Executive and the Company). An
arbitration panel shall be selected, consisting of one arbitrator selected by
the Company, one arbitrator selected by the Executive, and a third arbitrator
selected by mutual agreement of the first two arbitrators. Any award rendered
shall be final and conclusive upon the Executive and the Company, and a
judgment may be entered in the highest court, state or federal, having
jurisdiction. The expenses of arbitration shall be paid by the Company, and
attorneys fees shall be addressed as provided in Paragraph 14.
9. Successors
This Agreement shall be binding upon and inure to the benefit of the
Executive and his heirs and estate, and the Company and its successors and
assigns. The Company shall require any successor of the Company (direct or
indirect, by consolidation, liquidation, purchase of securities, acquisition of
assets, or otherwise) to expressly assume this Agreement and to perform all
obligations hereunder in the same manner and to the same extent that the
Company would have been required to perform if no succession had taken place.
10. Assignment
(a) The Executive's rights and interest hereunder shall not be
assignable (in law or equity) or subject to any manner of alienation, sale,
transfer, claims of creditors, pledge, attachment, garnishment, levy,
execution, or encumbrances of any kind, and any attempt to do so shall be void.
<PAGE> 12
(b) Any assignment of the Company's responsibilities and liability
hereunder shall not relieve the Company of its responsibilities and liability
hereunder.
11. No Funding
The Executive's rights and interest hereunder shall be that of a
general unsecured creditor of the Company, and he shall not have any preferred
claims on, or any beneficial interest in, the assets of the Company.
12. Withholding
All amounts payable hereunder shall be subject to withholding for taxes
(federal, state, and local) to the extent required by applicable law.
13. Obligations Absolute
The Company's obligation to make the payments and arrangements provided
for in this Agreement and to otherwise perform its obligations under this
Agreement shall be absolute and unconditional and, except as specifically
provided in this Agreement, shall not be affected by any circumstances,
including any set-off, counterclaim, recoupment, defense or other claim, right
or action which the Company may have against the Executive or any other person.
Each and every payment made pursuant to this Agreement shall be final, and the
Company shall not seek to recover all or any part of such payment from the
Executive, or from any other person entitled thereto, for any reason
whatsoever. In no event shall the Executive be obligated to seek other
employment or take any other action in mitigation of the amounts payable
pursuant to any provisions of this Agreement.
14. Expenses
The Company shall pay to the fullest extent permitted by law all legal
and other fees and expenses that the Executive may reasonably incur in
connection with any action or contest related to the enforcement, validity or
interpretation of any provision of this Agreement, including actions brought by
the Executive to establish entitlement to payments or benefits hereunder, in
the event that the Executive prevails in whole or in part in the arbitration of
the action. In the event the Executive does not prevail in whole or in part,
then each party shall pay its own legal fees and expenses.
<PAGE> 13
15. Notices
All notices hereunder shall be given in writing and delivered by hand or
by registered or certified mail, or by overnight courier, and addressed to the
respective addresses set forth on the first page of this Agreement, or to such
other address as either party may have furnished to the other in writing in
accordance herewith. Any notice by the Company to the Executive of a
termination of employment for Just Cause, and any notice by the Executive to
the Company of a termination of employment for Good Reason, shall include the
specific provision of this Agreement relied upon for such termination,
reasonable detail of the facts and circumstances claimed to provide for the
termination of employment pursuant to those provision, and the date of
termination of employment, which shall be no earlier than the date of receipt
of such notice and no later than fifteen (15) days thereafter.
16. Other Rights, Plans and Agreements
(a) This Agreement shall not affect the Executive's right to
participate in and receive benefits under any plans, programs, arrangements,
policies, procedures or practices of the Company and shall have no effect on
any other agreement entered into by the Executive and the Company.
(b) Neither this Agreement nor any action taken hereunder shall be
construed as giving the Executive the right to be retained in the employment of
the Company.
17. Severability and Waivers
(a) Any provision of this Agreement prohibited by law shall be
ineffective to the extent of such prohibition without invalidating the
remaining provisions.
(b) The Executive's or the Company's failure to insist upon strict
compliance with any provision of this Agreement shall not be deemed to be a
waiver of such provision. Any waiver of any provision of this Agreement shall
not be deemed to be a waiver of any other provision, and any waiver of default
in any provision of this Agreement shall not be deemed to be a waiver of any
later default.
<PAGE> 14
18. Entire Understanding, Amendment
(a) This Agreement represents the entire understanding of the
Executive and the Company with respect to the matters set forth herein, and
supersedes any prior such agreements including, after February 2, 1995, the
Original Agreement.
(b) Termination, revocation, or amendment of this Agreement shall be
made only in a writing executed by both the Executive and the Company.
19. Governing Law
This Agreement shall be governed by and construed in accordance with the
laws of the Commonwealth of Pennsylvania.
IN WITNESS WHEREOF, the Executive and the Company have executed this
Agreement in duplicate on this ___ day of ________________, 1993.
CHAMBERS DEVELOPMENT COMPANY, INC. EXECUTIVE
By: /s/ John G. Rangos, Jr. /s/ Edward N. Durand
Title: Vice Chairman Administration
and Technology - Secretary
<PAGE> 1
EXHIBIT 10.10(e)
AGREEMENT
THIS AGREEMENT is made by and between Chambers Development Company, Inc.,
a Delaware corporation, with its principal place of business at 10700
Frankstown Road, Pittsburgh, Pennsylvania, and LAWRENCE J. YATCH, an individual
residing at 1463 Greystone Drive, Pittsburgh, PA 15206 (hereinafter the
"Executive").
WHEREAS, the Executive is a valued employee of the Company whose services
are critical to the successful realization of the Company's current corporate
goals and objectives; and
WHEREAS, the Company has determined that its interests would best be
served by providing an incentive for the Executive to remain in employment with
the Company and to discharge his responsibilities in the best interests of the
Company; and
WHEREAS, the Company has entered into an agreement with the Executive on
February 3, 1993 providing for certain conditions of employment (the "Original
Agreement"); and
WHEREAS, under the Original Agreement, the Company had the option to
extend the term of that agreement; and
WHEREAS, the Company desires, by the entering into of this Agreement and
in lieu of extending the term of the Original Agreement, that as of February 3,
1995, the terms and conditions in this Agreement shall replace those which were
contained in the Original Agreement; and
WHEREAS, it is the intention of the parties that this Agreement shall take
effect following the termination of the Original Agreement.
NOW, THEREFORE, in consideration of the mutual promises contained herein,
and intending to be legally bound, the Company and the Executive agree as
follows:
1. Employment and Term
The Company shall employ the Executive and the Executive shall serve the
Company for a period ending on February 3, 1996. The Company shall have the
right to terminate this Agreement at any time by written notice to the
Executive, provided that the Company satisfies its obligations to the Executive
<PAGE> 2
as described in Paragraph 2 below. Commencing on February 3, 1995 and each
anniversary thereafter, the term of this Agreement shall automatically be
extended for one (1) additional year so that the term of this Agreement shall
continue for a period of Two (2) years from each such anniversary unless the
Company shall have given written notice to the Executive that it does not wish
to extend further the term of this Agreement. There shall be no limit to the
number of permitted extensions to this Agreement, but the Executive
acknowledges that the Company has no obligation to extend this Agreement beyond
its initial expiration of February 3, 1996 or thereafter. The Executive also
acknowledges that under no circumstances shall he be entitled to cumulative
benefits under both of the Original Agreement and this Agreement, but rather
that the provisions of the Original Agreement shall govern the relationship
between the Company and the Employee through February 2, 1995, and the
provisions of this Agreement shall govern such relationship commencing on
February 3, 1995.
2. Termination of Employment and Severance Benefits if There Has Been No
Change of Control.
If no Change of Control has occurred and (i) the Executive's employment
with the Company is involuntarily terminated by the Company during the term of
this Agreement for any reason other than for Just Cause, death or retirement,
or (ii) the Executive's employment with the Company is terminated by the
Executive for Good Reason (other than under Paragraph (1) of the definition of
Good Reason), the Executive shall be entitled to each of the following:
(a) A severance payment (which shall be paid to the Executive
immediately upon his eligible termination of employment) equal to the sum of:
(1) Two (2) times his annual rate of base salary as of the date
of his termination of employment with the Company (but not less than Two (2)
times his annual rate of base salary as of the Effective Date); plus
(2) Two (2) times the average cash bonuses received by the
Executive under the Company's Management Incentive Compensation Plan (or
successor thereto) for the last three (3) calendar years of his employment with
the Company; plus
(3) Any amount forfeited by the Executive under the Company's
Profit Sharing Plan (or any successor or comparable plan thereto) as a result
of such termination; minus
<PAGE> 3
(4) The total amount of any separation or severance pay of any
type paid by the Company in cash to the Executive under any plan, program,
practice or arrangement of the Company (other than under this Agreement) or
under any other agreement between the Executive and the Company.
(b) Continued coverage for the Executive (and his family as to
health plans) after such termination of employment, at no direct cost to the
Executive other than the normal employee's contribution under the Company's
plans, under the Company's life insurance, long-term disability and health
plans (including any dental and vision plans) for the Company's salaried
employees as in effect on the date of such termination of employment (or as
they may be amended from time to time by the Company for all such salaried
employees) for the period ending two (2) years following such termination;
provided, however, that in lieu of such continued coverage, the Company, in its
sole discretion, may make a lump sum cash payment to the Executive, immediately
upon eligible termination of employment, which is equal to the value of such
coverage for the two (2) year period following such termination.
(c) Outplacement counseling, at no direct cost to the Executive,
with a party mutually agreeable to the Executive and the Company, to begin
within one (1) month from the date of such termination of employment and
continue for a period of eighteen (18) consecutive months.
(d) Notwithstanding any provision in any document or agreement
relating to stock options and stock appreciation rights, any stock options and
stock appreciation rights granted to the Executive under any stock option plan
of the Company shall be fully vested and immediately exercisable in accordance
with the otherwise applicable terms of such stock option plan immediately upon
the Executive's eligible termination of employment and shall remain fully
exercisable for the remainder of the particular option term, and such vesting
shall not be deemed to constitute severance or separation pay.
3. Termination of Employment and Severance Benefits Following A Change of
Control.
(A) If, following a Change of Control, (i) the Executive's employment
with the Company is involuntarily terminated by the Company during the term of
this Agreement for any reason other than for Just Cause, death or retirement,
or (ii) the Executive's employment with the Company is terminated by the
Employee for Good Reason, the Executive shall be entitled to each of the
following:
<PAGE> 4
(a) A severance payment (which shall be paid to the Executive
immediately upon his eligible termination of employment) equal to the sum of:
(1) 2.99 times his annual rate of base salary as of the date of his
termination of employment with the Company (but not less than 2.99 times his
annual rate of base salary as of the Effective Date); plus
(2) 2.99 times the maximum cash bonus as defined by the Executive's
participation level under the Company's Management Inventive Compensation Plan
(or successor thereto) computed as if the highest level of achievement of
performance objectives by the Executive, his function and the Company had been
attained; plus
(3) Any amount forfeited by the Executive under the Company's Profit
Sharing Plan (or any successor or comparable plan thereto) as a result of such
termination; minus
(4) The total amount of any separation or severance pay of any
type paid by the Company in cash to the Executive under any plan, program,
practice or arrangement of the Company (other than under this Agreement) or
under any other agreement between the Executive and the Company.
(b) Continued coverage for the Executive (and his family as to
health plans) after such termination of employment, at no direct cost to the
Executive, under the Company's life insurance, long-term disability and health
plans (including any dental and vision plans) for the Company's salaried
employees as in effect on the date of such termination of employment (or as
they may be amended from time to time by the Company for all such salaried
employees) for the period ending three (3) years following such termination;
provided, however, that in lieu of such continued coverage, the Company, in its
sole discretion, may make a lump sum cash payment to the Executive, immediately
upon eligible termination of employment, which is equal to the value of such
coverage for the three (3) year period following such termination.
(c) Outplacement counseling, at no direct cost to the
Executive, with a party mutually agreeable to the Executive and the Company, to
begin within one (1) month from the date of such termination of employment and
continue for a period of eighteen (18) consecutive months.
(d) Notwithstanding any provision in any document or agreement
relating to stock options and stock appreciation rights, any stock options and
<PAGE> 5
stock appreciation rights granted to the Executive under any stock option plan
of the Company shall be fully vested and immediately exercisable in accordance
with the otherwise applicable terms of such stock option plan immediately upon
the Executive's eligible termination of employment and shall remain fully
exercisable for the remainder of the particular option term, and such vesting
shall not be deemed to constitute severance or separation pay.
(B) If, following a Change of Control, the Executive terminates his
employment with the Company for any reason during the sixty (60) day period
beginning on the first anniversary of the Change of Control, the Executive
shall be entitled to each of the following:
(a) A severance payment (which shall be paid to the Executive
immediately upon his eligible termination of employment) equal to the sum of:
(1) Two (2) times his annual rate of base salary as of the
date of his termination of employment with the Company (but not less than two
(2) times his annual rate of base salary as of the Effective Date); plus
(2) Any amount forfeited by the Executive under the
Company's Profit Sharing Plan (or any successor or comparable plan thereto) as
a result of such termination; minus
(3) The total amount of any separation or severance pay of any
type paid by the Company in cash to the Executive under any plan, program,
practice or arrangement of the Company (other than under this Agreement) or
under any other agreement between the Executive and the Company.
(b) Continued coverage for the Executive (and his family as to
health plans) after such termination of employment, at no direct cost to the
Executive, under the Company's life insurance, long-term disability and health
plans (including any dental and vision plans) for the Company's salaried
employees as in effect on the date of such termination of employment (or as
they may be amended from time to time by the Company for all such salaried
employees) for the period ending two (2) years following such termination;
provided, however, that in lieu of such continued coverage, the Company, in its
sole discretion, may make a lump sum cash payment to the Executive, immediately
upon eligible termination of employment, which is equal to the value of such
coverage for the two (2) year period following such termination.
<PAGE> 6
(c) Outplacement counseling, at no direct cost to the Executive,
with a party mutually agreeable to the Executive and the Company, to begin
within one (1) month from the date of such termination of employment and
continue for a period of eighteen (18) consecutive months.
(d) Notwithstanding any provision in any document or agreement
relating to stock options and stock appreciation rights, any stock options and
stock appreciation rights granted to the Executive under any stock option plan
of the Company shall be fully vested and immediately exercisable in accordance
with the otherwise applicable terms of such stock option plan immediately upon
the Executive's eligible termination of employment and shall remain fully
exercisable for the remainder of the particular option term, and such vesting
shall not be deemed to constitute severance or separation pay.
4. Indebtedness to the Company
Notwithstanding anything to the contrary, if the Executive is indebted
to the Company at the time an amount is payable to the Executive under this
Agreement, said amount shall first be applied to satisfy said indebtedness to
the Company, and any balance remaining after satisfaction of said indebtedness
shall be paid to the Executive pursuant to the applicable provisions of this
Agreement.
5. Tax Gross Up.
(a)(i) In the event that the Executive becomes entitled to payments in
connection with a Change in Control or his termination of employment after a
Change in Control (the "Payments"), then if any of the Payments will be subject
to the tax imposed by Section 4999 of the Internal Revenue Code ("IRC") (the
"Excise Tax"), (or any similar tax that may hereafter be imposed) the Company
shall pay to Executive an additional amount (the "Gross-Up Payment") such that
the net amount retained by him, after deduction of any Excise Tax on the
Payments and any Excise Tax upon the payment provided for by this paragraph,
shall be equal to the Payments. For purposes of determining whether any of the
Payments will be subject to the Excise Tax and the amount of such Excise Tax,
(a) any other payments or benefits received or to be received by Executive in
connection with a change of control or his termination of employment shall be
treated as "parachute payments" within the meaning of Section 280G(b)(2) of the
IRC, and all "excess parachute payments" within the meaning of Section
280G(b)(1) shall be treated as subject to the Excise Tax, unless in the opinion
of tax counsel selected by the Company's independent auditors, and acceptable
<PAGE> 7
to the Executive, such other payments or benefits (in whole or in part) do not
constitute parachute payments, or such excess parachute payments (in whole or
in part) represent reasonable compensation for services actually rendered
within the meaning of Section 280G(b)(4) of the IRC in excess of the base
amount within the meaning of Section 280G(b)(3) of the IRC, or are otherwise
not subject to the Excise Tax, (b) the amount of the Payments which shall be
treated as subject to the Excise Tax shall be equal to the lesser of (1) the
total amount of the Payments or (2) the amount of excess parachute payments
within the meaning of Section 280G(b)(1) (after applying clause (a), above),
and (c) the value of any non-cash benefits or any deferred payment or benefit,
which amounts shall be determined by the Company's independent auditors in
accordance with the principles of Section 280G(d)(3) and (4) of the IRC.
(ii) A Gross-Up Payment shall be made not later than the fifth
day following the date the Executive becomes subject to payment of excise tax;
provided, however, that if the amounts of such payment cannot be finally
determined on or before such day, the Company shall pay to the Executive on
such day an estimate, as determined in good faith by the Company, of the
minimum amount of such payments and shall pay the remainder of such payment
(together with interest at the rate provided under Section 1274(b)(2)(B) of the
IRC) as soon as the amount can be determined but no later than the thirtieth
day after the date the Executive becomes subject to the payment of excise tax.
In the event the amount of the estimated payment exceeds the amount
subsequently determined to have been due, such excess shall constitute a loan
by the Company to the Executive, payable on the fifth day after demand by the
Company (together with interest at the rate provided in Section 1274(b)(2)(B)
of the IRC).
(b) The Company agrees to calculate the amount of Gross-Up Payment
payable on behalf of the Executive to the Internal Revenue Service in good
faith and in accordance with a reasonable interpretation of the Code as to the
amount of the excise tax which may be imposed on the Executive under Code
Section 4999 with respect to payments made by the Company, and the Executive
agrees to accept such calculation. The Company shall provide the Executive
with notice of the amount of Gross-Up Payment to be made hereunder, which
payments shall be made in a timely manner by the Company. Notwithstanding any
other provision hereof, the Company agrees to indemnify and hold the Executive
harmless from and in respect of any excise tax which may be imposed on the
Executive under Code Section 4999, as well as any interest or penalties with
respect to such excise taxes.
<PAGE> 8
6. Definitions
(a) Change of Control shall mean the occurrence of any of the
following:
(1) The acquisition by any "person" within the meaning of Section
13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934 (the "Exchange
Act"), (but excluding for this purpose a person who holds shares of the capital
stock of the Company representing 25% or more of the aggregate voting power of
the outstanding voting shares of the Company as of the Effective Date) of
"beneficial ownership" within the meaning of Rule 13d-3 promulgated under the
Exchange Act, of twenty five (25%) percent or more of the aggregate voting
power of the outstanding voting shares of the Company.
(2) The individuals who, at the beginning of any period of two (2)
consecutive calendar years, constitute the Board (the "Incumbent Board") cease
for any reason during such two (2) year period to constitute at least a
majority of the Board, provided that any person becoming a director during such
two (2) year period whose election, or nomination or election by the Company's
shareholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall for this purpose be considered as
though such person were a member of the Incumbent Board.
(3) The approval by the stockholders of the Company of a
reorganization, merger or consolidation, in each case, with respect to which
persons who were the stockholders of the Company immediately prior to such
reorganization, merger or consolidation do not, immediately thereafter, own
more than fifty (50%) percent of the aggregate voting power of the outstanding
voting shares of the reorganized, merged or consolidated entity.
(4) A sale, exchange or other disposition of all or
substantially all of the Company's assets to a third party, or the liquidation
or dissolution of the Company.
(b) Company shall mean Chambers Development Company, Inc., and any
successor thereto, direct or indirect, by merger, reorganization,
consolidation, liquidation, purchase of securities, acquisition of assets or
otherwise.
(c) Good Reason shall mean any of the following:
<PAGE> 9
(1) The duties, status or responsibilities of the Executive have been
materially diminished from those he had on the Effective Date, or he has been
assigned duties or responsibilities materially inconsistent with his duties and
responsibilities with the Company prior to the Effective Date;
(2) Any reduction in the Executive's base salary below the highest
rate in effect at or after the Effective Date;
(3) Any failure by the Company to continue the Executive's
eligibility for participation in any bonus, stock option, restricted stock, or
other incentive compensation or executive compensation or benefit plan,
arrangement or program in which he is a participant immediately prior to the
Effective Date on at least as favorable a basis as he was eligible to
participate immediately prior to the Effective Date (or to provide comparable
successor or substitute plans, arrangements or programs if amendment or
termination of the same becomes necessary or advisable); provided, however,
that the Company shall continue to have discretion in its awarding of incentive
compensation to employees, and the failure to make an award of incentive
compensation (as opposed to eligibility) to the Executive shall not constitute
Good Reason.
(4) Any failure by the Company to continue the Executive's
participation in any pension plan or welfare plan within the meaning of
Sections 3(3) and 3(2), respectively, of ERISA and any supplemental and/or
excess plans thereto or any health insurance plan in which he is a participant
immediately prior to the Effective Date on at least as favorable a basis as he
was entitled to participate immediately prior to the Effective Date (or to
provide comparable successor or substitute plans if amendment or termination of
said plans becomes necessary or desirable);
(5) Any failure by the Company to provide the Executive with the
number of paid vacation days to which he is entitled under the Company's then
current vacation policy, procedure or practice;
(6) Any failure by the Company to obtain the express agreement of any
successor of the Company (direct or indirect, by consolidation, liquidation,
purchase of securities, acquisition of assets or otherwise) to assume and
perform all obligations under this Agreement in the same manner and to the same
extent that the Company would have been required to perform if no succession
had taken place.
<PAGE> 10
For purposes of this definition, an isolated, immaterial and inadvertent
action not taken in bad faith by the Company in violation of Paragraph (1),
(2), (3), (4) or (5) of this definition that is remedied by the Company
promptly after receipt of notice thereof given by the Executive shall not be
considered Good Reason for an Executive's termination of employment with the
Company.
(d) Just Cause shall mean, with respect to the Company's termination
of the Executive's employment with the Company, if the termination results from
the Executive's:
(1) Willful and continued failure substantially to perform his
usual duties or to work full time for the Company that is not remedied in a
reasonable period of time after receipt of written notice from the Board of
Directors of the Company;
(2) Willful engagement in conduct that is injurious to the Company;
(3) Willful engagement in actions that result in, or are
intended to result in, the personal enrichment of the Executive at the expense
of the Company;
(4) Embezzlement of funds of the Company or misappropriation of
other property of the Company; or
(5) Conviction of a felony.
For purposes of this definition, no act or failure to act on the part of
the Executive shall be considered "willful" unless such act or failure to act
was not in good faith and was without reasonable belief that his action or
failure to act was in the best interests of the Company, and no act or failure
to act on the part of the Executive shall be considered "willful" if it is
solely the result of his bad judgment or negligence.
Any termination by the Company of the Executive's employment resulting
from Just Cause shall only be effective upon the decision of both the
Executive's supervisor and the Human Resources Committee of the Board of
Directors of the Company, with the reasons for the termination being
communicated to the Executive.
<PAGE> 11
7. Remedies
The Executive's sole and exclusive remedy in the event of a breach of
this Agreement by the Company shall be, and the Company's liability shall be
limited to, damages equal to the payments and benefits required to be provided
by the Company under this Agreement.
8. Arbitration
Any dispute, controversy or claim arising out of or relating to this
Agreement or to any breach or alleged breach thereof shall, upon the request of
the Executive or the Company, be submitted to and settled by arbitration in the
Commonwealth of Pennsylvania pursuant to the rules then in effect of the
American Arbitration Association (or at any other place or under any other form
of arbitration mutually acceptable to the Executive and the Company). An
arbitration panel shall be selected, consisting of one arbitrator selected by
the Company, one arbitrator selected by the Executive, and a third arbitrator
selected by mutual agreement of the first two arbitrators. Any award rendered
shall be final and conclusive upon the Executive and the Company, and a
judgment may be entered in the highest court, state or federal, having
jurisdiction. The expenses of arbitration shall be paid by the Company, and
attorneys fees shall be addressed as provided in Paragraph 14.
9. Successors
This Agreement shall be binding upon and inure to the benefit of the
Executive and his heirs and estate, and the Company and its successors and
assigns. The Company shall require any successor of the Company (direct or
indirect, by consolidation, liquidation, purchase of securities, acquisition of
assets, or otherwise) to expressly assume this Agreement and to perform all
obligations hereunder in the same manner and to the same extent that the
Company would have been required to perform if no succession had taken place.
10. Assignment
(a) The Executive's rights and interest hereunder shall not be
assignable (in law or equity) or subject to any manner of alienation, sale,
transfer, claims of creditors, pledge, attachment, garnishment, levy,
execution, or encumbrances of any kind, and any attempt to do so shall be void.
<PAGE> 12
(b) Any assignment of the Company's responsibilities and liability
hereunder shall not relieve the Company of its responsibilities and liability
hereunder.
11. No Funding
The Executive's rights and interest hereunder shall be that of a
general unsecured creditor of the Company, and he shall not have any preferred
claims on, or any beneficial interest in, the assets of the Company.
12. Withholding
All amounts payable hereunder shall be subject to withholding for taxes
(federal, state, and local) to the extent required by applicable law.
13. Obligations Absolute
The Company's obligation to make the payments and arrangements provided
for in this Agreement and to otherwise perform its obligations under this
Agreement shall be absolute and unconditional and, except as specifically
provided in this Agreement, shall not be affected by any circumstances,
including any set-off, counterclaim, recoupment, defense or other claim, right
or action which the Company may have against the Executive or any other person.
Each and every payment made pursuant to this Agreement shall be final, and the
Company shall not seek to recover all or any part of such payment from the
Executive, or from any other person entitled thereto, for any reason
whatsoever. In no event shall the Executive be obligated to seek other
employment or take any other action in mitigation of the amounts payable
pursuant to any provisions of this Agreement.
14. Expenses
The Company shall pay to the fullest extent permitted by law all legal
and other fees and expenses that the Executive may reasonably incur in
connection with any action or contest related to the enforcement, validity or
interpretation of any provision of this Agreement, including actions brought by
the Executive to establish entitlement to payments or benefits hereunder, in
the event that the Executive prevails in whole or in part in the arbitration of
the action. In the event the Executive does not prevail in whole or in part,
then each party shall pay its own legal fees and expenses.
<PAGE> 13
15. Notices
All notices hereunder shall be given in writing and delivered by hand or
by registered or certified mail, or by overnight courier, and addressed to the
respective addresses set forth on the first page of this Agreement, or to such
other address as either party may have furnished to the other in writing in
accordance herewith. Any notice by the Company to the Executive of a
termination of employment for Just Cause, and any notice by the Executive to
the Company of a termination of employment for Good Reason, shall include the
specific provision of this Agreement relied upon for such termination,
reasonable detail of the facts and circumstances claimed to provide for the
termination of employment pursuant to those provision, and the date of
termination of employment, which shall be no earlier than the date of receipt
of such notice and no later than fifteen (15) days thereafter.
16. Other Rights, Plans and Agreements
(a) This Agreement shall not affect the Executive's right to
participate in and receive benefits under any plans, programs, arrangements,
policies, procedures or practices of the Company and shall have no effect on
any other agreement entered into by the Executive and the Company.
(b) Neither this Agreement nor any action taken hereunder shall be
construed as giving the Executive the right to be retained in the employment of
the Company.
17. Severability and Waivers
(a) Any provision of this Agreement prohibited by law shall be
ineffective to the extent of such prohibition without invalidating the
remaining provisions.
(b) The Executive's or the Company's failure to insist upon strict
compliance with any provision of this Agreement shall not be deemed to be a
waiver of such provision. Any waiver of any provision of this Agreement shall
not be deemed to be a waiver of any other provision, and any waiver of default
in any provision of this Agreement shall not be deemed to be a waiver of any
later default.
<PAGE> 14
18. Entire Understanding, Amendment
(a) This Agreement represents the entire understanding of the
Executive and the Company with respect to the matters set forth herein, and
supersedes any prior such agreements including, after February 2, 1995, the
Original Agreement.
(b) Termination, revocation, or amendment of this Agreement shall be
made only in a writing executed by both the Executive and the Company.
19. Governing Law
This Agreement shall be governed by and construed in accordance with the
laws of the Commonwealth of Pennsylvania.
IN WITNESS WHEREOF, the Executive and the Company have executed this
Agreement in duplicate on this ___ day of ________________, 1993.
CHAMBERS DEVELOPMENT COMPANY, INC. EXECUTIVE
By: /s/ John G. Rangos, Jr. /s/ Lawrence J. Yatch
Title: Vice Chairman Administration
and Technology - Secretary
<PAGE> 1
EXHIBIT 10.10(f)
AGREEMENT
THIS AGREEMENT is made by and between Chambers Development Company, Inc.,
a Delaware corporation, with its principal place of business at 10700
Frankstown Road, Pittsburgh, Pennsylvania, and DAVID J. FEALS, an individual
residing at 183 Fireside Drive, McMurray, Pennsylvania 15317 (hereinafter the
"Executive").
WHEREAS, the Executive is a valued employee of the Company whose services
are critical to the successful realization of the Company's current corporate
goals and objectives; and
WHEREAS, the Company has determined that its interests would best be
served by providing an incentive for the Executive to remain in employment with
the Company and to discharge his responsibilities in the best interests of the
Company; and
WHEREAS, the Company has entered into an agreement with the Executive on
February 3, 1993 providing for certain conditions of employment (the "Original
Agreement"); and
WHEREAS, under the Original Agreement, the Company had the option to
extend the term of that agreement; and
WHEREAS, the Company desires, by the entering into of this Agreement and
in lieu of extending the term of the Original Agreement, that as of February 3,
1995, the terms and conditions in this Agreement shall replace those which were
contained in the Original Agreement; and
WHEREAS, it is the intention of the parties that this Agreement shall take
effect following the termination of the Original Agreement.
NOW, THEREFORE, in consideration of the mutual promises contained herein,
and intending to be legally bound, the Company and the Executive agree as
follows:
1. Employment and Term
The Company shall employ the Executive and the Executive shall serve the
Company for a period ending on February 3, 1996. The Company shall have the
right to terminate this Agreement at any time by written notice to the
Executive, provided that the Company satisfies its obligations to the Executive
<PAGE> 2
as described in Paragraph 2 below. Commencing on February 3, 1995 and each
anniversary thereafter, the term of this Agreement shall automatically be
extended for one (1) additional year so that the term of this Agreement shall
continue for a period of Two (2) years from each such anniversary unless the
Company shall have given written notice to the Executive that it does not wish
to extend further the term of this Agreement. There shall be no limit to the
number of permitted extensions to this Agreement, but the Executive
acknowledges that the Company has no obligation to extend this Agreement beyond
its initial expiration of February 3, 1996 or thereafter. The Executive also
acknowledges that under no circumstances shall he be entitled to cumulative
benefits under both of the Original Agreement and this Agreement, but rather
that the provisions of the Original Agreement shall govern the relationship
between the Company and the Employee through February 2, 1995, and the
provisions of this Agreement shall govern such relationship commencing on
February 3, 1995.
2. Termination of Employment and Severance Benefits if There Has Been No
Change of Control.
If no Change of Control has occurred and (i) the Executive's employment
with the Company is involuntarily terminated by the Company during the term of
this Agreement for any reason other than for Just Cause, death or retirement,
or (ii) the Executive's employment with the Company is terminated by the
Executive for Good Reason (other than under Paragraph (1) of the definition of
Good Reason), the Executive shall be entitled to each of the following:
(a) A severance payment (which shall be paid to the Executive
immediately upon his eligible termination of employment) equal to the sum of:
(1) Two (2) times his annual rate of base salary as of the date
of his termination of employment with the Company (but not less than Two (2)
times his annual rate of base salary as of the Effective Date); plus
(2) Two (2) times the average cash bonuses received by the
Executive under the Company's Management Incentive Compensation Plan (or
successor thereto) for the last three (3) calendar years of his employment with
the Company; plus
(3) Any amount forfeited by the Executive under the Company's
Profit Sharing Plan (or any successor or comparable plan thereto) as a result
of such termination; minus
<PAGE> 3
(4) The total amount of any separation or severance pay of any
type paid by the Company in cash to the Executive under any plan, program,
practice or arrangement of the Company (other than under this Agreement) or
under any other agreement between the Executive and the Company.
(b) Continued coverage for the Executive (and his family as to
health plans) after such termination of employment, at no direct cost to the
Executive other than the normal employee's contribution under the Company's
plans, under the Company's life insurance, long-term disability and health
plans (including any dental and vision plans) for the Company's salaried
employees as in effect on the date of such termination of employment (or as
they may be amended from time to time by the Company for all such salaried
employees) for the period ending two (2) years following such termination;
provided, however, that in lieu of such continued coverage, the Company, in its
sole discretion, may make a lump sum cash payment to the Executive, immediately
upon eligible termination of employment, which is equal to the value of such
coverage for the two (2) year period following such termination.
(c) Outplacement counseling, at no direct cost to the Executive,
with a party mutually agreeable to the Executive and the Company, to begin
within one (1) month from the date of such termination of employment and
continue for a period of eighteen (18) consecutive months.
(d) Notwithstanding any provision in any document or agreement
relating to stock options and stock appreciation rights, any stock options and
stock appreciation rights granted to the Executive under any stock option plan
of the Company shall be fully vested and immediately exercisable in accordance
with the otherwise applicable terms of such stock option plan immediately upon
the Executive's eligible termination of employment and shall remain fully
exercisable for the remainder of the particular option term, and such vesting
shall not be deemed to constitute severance or separation pay.
3. Termination of Employment and Severance Benefits Following A Change of
Control.
(A) If, following a Change of Control, (i) the Executive's employment
with the Company is involuntarily terminated by the Company during the term of
this Agreement for any reason other than for Just Cause, death or retirement,
or (ii) the Executive's employment with the Company is terminated by the
Employee for Good Reason, the Executive shall be entitled to each of the
following:
<PAGE> 4
(a) A severance payment (which shall be paid to the Executive
immediately upon his eligible termination of employment) equal to the sum of:
(1) 2.99 times his annual rate of base salary as of the date of his
termination of employment with the Company (but not less than 2.99 times his
annual rate of base salary as of the Effective Date); plus
(2) 2.99 times the maximum cash bonus as defined by the
Executive's participation level under the Company's Management Inventive
Compensation Plan (or successor thereto) computed as if the highest level of
achievement of performance objectives by the Executive, his function and the
Company had been attained; plus
(3) Any amount forfeited by the Executive under the Company's Profit
Sharing Plan (or any successor or comparable plan thereto) as a result of such
termination; minus
(4) The total amount of any separation or severance pay of any
type paid by the Company in cash to the Executive under any plan, program,
practice or arrangement of the Company (other than under this Agreement) or
under any other agreement between the Executive and the Company.
(b) Continued coverage for the Executive (and his family as to
health plans) after such termination of employment, at no direct cost to the
Executive, under the Company's life insurance, long-term disability and health
plans (including any dental and vision plans) for the Company's salaried
employees as in effect on the date of such termination of employment (or as
they may be amended from time to time by the Company for all such salaried
employees) for the period ending three (3) years following such termination;
provided, however, that in lieu of such continued coverage, the Company, in its
sole discretion, may make a lump sum cash payment to the Executive, immediately
upon eligible termination of employment, which is equal to the value of such
coverage for the three (3) year period following such termination.
(c) Outplacement counseling, at no direct cost to the Executive, with a
party mutually agreeable to the Executive and the Company, to begin within one
(1) month from the date of such termination of employment and continue for a
period of eighteen (18) consecutive months.
(d) Notwithstanding any provision in any document or agreement
relating to stock options and stock appreciation rights, any stock options and
<PAGE> 5
stock appreciation rights granted to the Executive under any stock option plan
of the Company shall be fully vested and immediately exercisable in accordance
with the otherwise applicable terms of such stock option plan immediately upon
the Executive's eligible termination of employment and shall remain fully
exercisable for the remainder of the particular option term, and such vesting
shall not be deemed to constitute severance or separation pay.
(B) If, following a Change of Control, the Executive terminates his
employment with the Company for any reason during the sixty (60) day period
beginning on the first anniversary of the Change of Control, the Executive
shall be entitled to each of the following:
(a) A severance payment (which shall be paid to the Executive
immediately upon his eligible termination of employment) equal to the sum of:
(1) Two (2) times his annual rate of base salary as of the
date of his termination of employment with the Company (but not less than two
(2) times his annual rate of base salary as of the Effective Date); plus
(2) Any amount forfeited by the Executive under the Company's Profit
Sharing Plan (or any successor or comparable plan thereto) as a result of such
termination; minus
(3) The total amount of any separation or severance pay of any
type paid by the Company in cash to the Executive under any plan, program,
practice or arrangement of the Company (other than under this Agreement) or
under any other agreement between the Executive and the Company.
(b) Continued coverage for the Executive (and his family as to
health plans) after such termination of employment, at no direct cost to the
Executive, under the Company's life insurance, long-term disability and health
plans (including any dental and vision plans) for the Company's salaried
employees as in effect on the date of such termination of employment (or as
they may be amended from time to time by the Company for all such salaried
employees) for the period ending two (2) years following such termination;
provided, however, that in lieu of such continued coverage, the Company, in its
sole discretion, may make a lump sum cash payment to the Executive, immediately
upon eligible termination of employment, which is equal to the value of such
coverage for the two (2) year period following such termination.
<PAGE> 6
(c) Outplacement counseling, at no direct cost to the Executive,
with a party mutually agreeable to the Executive and the Company, to begin
within one (1) month from the date of such termination of employment and
continue for a period of eighteen (18) consecutive months.
(d) Notwithstanding any provision in any document or agreement relating
to stock options and stock appreciation rights, any stock options and stock
appreciation rights granted to the Executive under any stock option plan of
the Company shall be fully vested and immediately exercisable in accordance
with the otherwise applicable terms of such stock option plan immediately upon
the Executive's eligible termination of employment and shall remain fully
exercisable for the remainder of the particular option term, and such vesting
shall not be deemed to constitute severance or separation pay.
4. Indebtedness to the Company
Notwithstanding anything to the contrary, if the Executive is indebted
to the Company at the time an amount is payable to the Executive under this
Agreement, said amount shall first be applied to satisfy said indebtedness to
the Company, and any balance remaining after satisfaction of said indebtedness
shall be paid to the Executive pursuant to the applicable provisions of this
Agreement.
5. Tax Gross Up.
(a)(i) In the event that the Executive becomes entitled to payments in
connection with a Change in Control or his termination of employment after a
Change in Control (the "Payments"), then if any of the Payments will be subject
to the tax imposed by Section 4999 of the Internal Revenue Code ("IRC") (the
"Excise Tax"), (or any similar tax that may hereafter be imposed) the Company
shall pay to Executive an additional amount (the "Gross-Up Payment") such that
the net amount retained by him, after deduction of any Excise Tax on the
Payments and any Excise Tax upon the payment provided for by this paragraph,
shall be equal to the Payments. For purposes of determining whether any of the
Payments will be subject to the Excise Tax and the amount of such Excise Tax,
(a) any other payments or benefits received or to be received by Executive in
connection with a change of control or his termination of employment shall be
treated as "parachute payments" within the meaning of Section 280G(b)(2) of the
IRC, and all "excess parachute payments" within the meaning of Section
280G(b)(1) shall be treated as subject to the Excise Tax, unless in the opinion
of tax counsel selected by the Company's independent auditors, and acceptable
<PAGE> 7
to the Executive, such other payments or benefits (in whole or in part) do not
constitute parachute payments, or such excess parachute payments (in whole or
in part) represent reasonable compensation for services actually rendered
within the meaning of Section 280G(b)(4) of the IRC in excess of the base
amount within the meaning of Section 280G(b)(3) of the IRC, or are otherwise
not subject to the Excise Tax, (b) the amount of the Payments which shall be
treated as subject to the Excise Tax shall be equal to the lesser of (1) the
total amount of the Payments or (2) the amount of excess parachute payments
within the meaning of Section 280G(b)(1) (after applying clause (a), above),
and (c) the value of any non-cash benefits or any deferred payment or benefit,
which amounts shall be determined by the Company's independent auditors in
accordance with the principles of Section 280G(d)(3) and (4) of the IRC.
(ii) A Gross-Up Payment shall be made not later than the fifth
day following the date the Executive becomes subject to payment of excise tax;
provided, however, that if the amounts of such payment cannot be finally
determined on or before such day, the Company shall pay to the Executive on
such day an estimate, as determined in good faith by the Company, of the
minimum amount of such payments and shall pay the remainder of such payment
(together with interest at the rate provided under Section 1274(b)(2)(B) of the
IRC) as soon as the amount can be determined but no later than the thirtieth
day after the date the Executive becomes subject to the payment of excise tax.
In the event the amount of the estimated payment exceeds the amount
subsequently determined to have been due, such excess shall constitute a loan
by the Company to the Executive, payable on the fifth day after demand by the
Company (together with interest at the rate provided in Section 1274(b)(2)(B)
of the IRC).
(b) The Company agrees to calculate the amount of Gross-Up Payment
payable on behalf of the Executive to the Internal Revenue Service in good
faith and in accordance with a reasonable interpretation of the Code as to the
amount of the excise tax which may be imposed on the Executive under Code
Section 4999 with respect to payments made by the Company, and the Executive
agrees to accept such calculation. The Company shall provide the Executive
with notice of the amount of Gross-Up Payment to be made hereunder, which
payments shall be made in a timely manner by the Company. Notwithstanding any
other provision hereof, the Company agrees to indemnify and hold the Executive
harmless from and in respect of any excise tax which may be imposed on the
Executive under Code Section 4999, as well as any interest or penalties with
respect to such excise taxes.
<PAGE> 8
6. Definitions
(a) Change of Control shall mean the occurrence of any of the
following:
(1) The acquisition by any "person" within the meaning of Section
13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934 (the "Exchange
Act"), (but excluding for this purpose a person who holds shares of the capital
stock of the Company representing 25% or more of the aggregate voting power of
the outstanding voting shares of the Company as of the Effective Date) of
"beneficial ownership" within the meaning of Rule 13d-3 promulgated under the
Exchange Act, of twenty five (25%) percent or more of the aggregate voting
power of the outstanding voting shares of the Company.
(2) The individuals who, at the beginning of any period of two (2)
consecutive calendar years, constitute the Board (the "Incumbent Board") cease
for any reason during such two (2) year period to constitute at least a
majority of the Board, provided that any person becoming a director during such
two (2) year period whose election, or nomination or election by the Company's
shareholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall for this purpose be considered as
though such person were a member of the Incumbent Board.
(3) The approval by the stockholders of the Company of a
reorganization, merger or consolidation, in each case, with respect to which
persons who were the stockholders of the Company immediately prior to such
reorganization, merger or consolidation do not, immediately thereafter, own
more than fifty (50%) percent of the aggregate voting power of the outstanding
voting shares of the reorganized, merged or consolidated entity.
(4) A sale, exchange or other disposition of all or
substantially all of the Company's assets to a third party, or the liquidation
or dissolution of the Company.
(b) Company shall mean Chambers Development Company, Inc., and any
successor thereto, direct or indirect, by merger, reorganization,
consolidation, liquidation, purchase of securities, acquisition of assets or
otherwise.
(c) Good Reason shall mean any of the following:
<PAGE> 9
(1) The duties, status or responsibilities of the Executive have been
materially diminished from those he had on the Effective Date, or he has been
assigned duties or responsibilities materially inconsistent with his duties and
responsibilities with the Company prior to the Effective Date;
(2) Any reduction in the Executive's base salary below the highest
rate in effect at or after the Effective Date;
(3) Any failure by the Company to continue the Executive's
eligibility for participation in any bonus, stock option, restricted stock, or
other incentive compensation or executive compensation or benefit plan,
arrangement or program in which he is a participant immediately prior to the
Effective Date on at least as favorable a basis as he was eligible to
participate immediately prior to the Effective Date (or to provide comparable
successor or substitute plans, arrangements or programs if amendment or
termination of the same becomes necessary or advisable); provided, however,
that the Company shall continue to have discretion in its awarding of incentive
compensation to employees, and the failure to make an award of incentive
compensation (as opposed to eligibility) to the Executive shall not constitute
Good Reason.
(4) Any failure by the Company to continue the Executive's
participation in any pension plan or welfare plan within the meaning of
Sections 3(3) and 3(2), respectively, of ERISA and any supplemental and/or
excess plans thereto or any health insurance plan in which he is a participant
immediately prior to the Effective Date on at least as favorable a basis as he
was entitled to participate immediately prior to the Effective Date (or to
provide comparable successor or substitute plans if amendment or termination of
said plans becomes necessary or desirable);
(5) Any failure by the Company to provide the Executive with the
number of paid vacation days to which he is entitled under the Company's then
current vacation policy, procedure or practice;
(6) Any failure by the Company to obtain the express agreement of any
successor of the Company (direct or indirect, by consolidation, liquidation,
purchase of securities, acquisition of assets or otherwise) to assume and
perform all obligations under this Agreement in the same manner and to the same
extent that the Company would have been required to perform if no succession
had taken place.
<PAGE> 10
For purposes of this definition, an isolated, immaterial and inadvertent
action not taken in bad faith by the Company in violation of Paragraph (1),
(2), (3), (4) or (5) of this definition that is remedied by the Company
promptly after receipt of notice thereof given by the Executive shall not be
considered Good Reason for an Executive's termination of employment with the
Company.
(d) Just Cause shall mean, with respect to the Company's termination
of the Executive's employment with the Company, if the termination results from
the Executive's:
(1) Willful and continued failure substantially to perform his
usual duties or to work full time for the Company that is not remedied in a
reasonable period of time after receipt of written notice from the Board of
Directors of the Company;
(2) Willful engagement in conduct that is injurious to the
Company;
(3) Willful engagement in actions that result in, or are
intended to result in, the personal enrichment of the Executive at the expense
of the Company;
(4) Embezzlement of funds of the Company or misappropriation of
other property of the Company; or
(5) Conviction of a felony.
For purposes of this definition, no act or failure to act on the part of
the Executive shall be considered "willful" unless such act or failure to act
was not in good faith and was without reasonable belief that his action or
failure to act was in the best interests of the Company, and no act or failure
to act on the part of the Executive shall be considered "willful" if it is
solely the result of his bad judgment or negligence.
Any termination by the Company of the Executive's employment resulting
from Just Cause shall only be effective upon the decision of both the
Executive's supervisor and the Human Resources Committee of the Board of
Directors of the Company, with the reasons for the termination being
communicated to the Executive.
<PAGE> 11
7. Remedies
The Executive's sole and exclusive remedy in the event of a breach of
this Agreement by the Company shall be, and the Company's liability shall be
limited to, damages equal to the payments and benefits required to be provided
by the Company under this Agreement.
8. Arbitration
Any dispute, controversy or claim arising out of or relating to this
Agreement or to any breach or alleged breach thereof shall, upon the request of
the Executive or the Company, be submitted to and settled by arbitration in the
Commonwealth of Pennsylvania pursuant to the rules then in effect of the
American Arbitration Association (or at any other place or under any other form
of arbitration mutually acceptable to the Executive and the Company). An
arbitration panel shall be selected, consisting of one arbitrator selected by
the Company, one arbitrator selected by the Executive, and a third arbitrator
selected by mutual agreement of the first two arbitrators. Any award rendered
shall be final and conclusive upon the Executive and the Company, and a
judgment may be entered in the highest court, state or federal, having
jurisdiction. The expenses of arbitration shall be paid by the Company, and
attorneys fees shall be addressed as provided in Paragraph 14.
9. Successors
This Agreement shall be binding upon and inure to the benefit of the
Executive and his heirs and estate, and the Company and its successors and
assigns. The Company shall require any successor of the Company (direct or
indirect, by consolidation, liquidation, purchase of securities, acquisition of
assets, or otherwise) to expressly assume this Agreement and to perform all
obligations hereunder in the same manner and to the same extent that the
Company would have been required to perform if no succession had taken place.
10. Assignment
(a) The Executive's rights and interest hereunder shall not be
assignable (in law or equity) or subject to any manner of alienation, sale,
transfer, claims of creditors, pledge, attachment, garnishment, levy,
execution, or encumbrances of any kind, and any attempt to do so shall be void.
<PAGE> 12
(b) Any assignment of the Company's responsibilities and liability
hereunder shall not relieve the Company of its responsibilities and liability
hereunder.
11. No Funding
The Executive's rights and interest hereunder shall be that of a
general unsecured creditor of the Company, and he shall not have any preferred
claims on, or any beneficial interest in, the assets of the Company.
12. Withholding
All amounts payable hereunder shall be subject to withholding for taxes
(federal, state, and local) to the extent required by applicable law.
13. Obligations Absolute
The Company's obligation to make the payments and arrangements provided
for in this Agreement and to otherwise perform its obligations under this
Agreement shall be absolute and unconditional and, except as specifically
provided in this Agreement, shall not be affected by any circumstances,
including any set-off, counterclaim, recoupment, defense or other claim, right
or action which the Company may have against the Executive or any other person.
Each and every payment made pursuant to this Agreement shall be final, and the
Company shall not seek to recover all or any part of such payment from the
Executive, or from any other person entitled thereto, for any reason
whatsoever. In no event shall the Executive be obligated to seek other
employment or take any other action in mitigation of the amounts payable
pursuant to any provisions of this Agreement.
14. Expenses
The Company shall pay to the fullest extent permitted by law all legal
and other fees and expenses that the Executive may reasonably incur in
connection with any action or contest related to the enforcement, validity or
interpretation of any provision of this Agreement, including actions brought by
the Executive to establish entitlement to payments or benefits hereunder, in
the event that the Executive prevails in whole or in part in the arbitration of
the action. In the event the Executive does not prevail in whole or in part,
then each party shall pay its own legal fees and expenses.
<PAGE> 13
15. Notices
All notices hereunder shall be given in writing and delivered by hand or
by registered or certified mail, or by overnight courier, and addressed to the
respective addresses set forth on the first page of this Agreement, or to such
other address as either party may have furnished to the other in writing in
accordance herewith. Any notice by the Company to the Executive of a
termination of employment for Just Cause, and any notice by the Executive to
the Company of a termination of employment for Good Reason, shall include the
specific provision of this Agreement relied upon for such termination,
reasonable detail of the facts and circumstances claimed to provide for the
termination of employment pursuant to those provision, and the date of
termination of employment, which shall be no earlier than the date of receipt
of such notice and no later than fifteen (15) days thereafter.
16. Other Rights, Plans and Agreements
(a) This Agreement shall not affect the Executive's right to
participate in and receive benefits under any plans, programs, arrangements,
policies, procedures or practices of the Company and shall have no effect on
any other agreement entered into by the Executive and the Company.
(b) Neither this Agreement nor any action taken hereunder shall be
construed as giving the Executive the right to be retained in the employment of
the Company.
17. Severability and Waivers
(a) Any provision of this Agreement prohibited by law shall be
ineffective to the extent of such prohibition without invalidating the
remaining provisions.
(b) The Executive's or the Company's failure to insist upon strict
compliance with any provision of this Agreement shall not be deemed to be a
waiver of such provision. Any waiver of any provision of this Agreement shall
not be deemed to be a waiver of any other provision, and any waiver of default
in any provision of this Agreement shall not be deemed to be a waiver of any
later default.
<PAGE> 14
18. Entire Understanding, Amendment
(a) This Agreement represents the entire understanding of the
Executive and the Company with respect to the matters set forth herein, and
supersedes any prior such agreements including, after February 2, 1995, the
Original Agreement.
(b) Termination, revocation, or amendment of this Agreement shall be
made only in a writing executed by both the Executive and the Company.
19. Governing Law
This Agreement shall be governed by and construed in accordance with the
laws of the Commonwealth of Pennsylvania.
IN WITNESS WHEREOF, the Executive and the Company have executed this
Agreement in duplicate on this ___ day of ________________, 1993.
CHAMBERS DEVELOPMENT COMPANY, INC. EXECUTIVE
By: /s/ John G. Rangos, Jr. /s/ David J. Feals
Title: Vice Chairman Administration
and Technology - Secretary
<PAGE> 1
EXHIBIT 10.10(g)
AGREEMENT
THIS AGREEMENT is made by and between Chambers Development Company, Inc.,
a Delaware corporation, with its principal place of business at 10700
Frankstown Road, Pittsburgh, Pennsylvania, and RONALD H. JONES, an individual
residing at 4583 Nature Trail, Allison Park, Pennsylvania 15101 (hereinafter
the "Executive").
WHEREAS, the Executive is a valued employee of the Company whose services
are critical to the successful realization of the Company's current corporate
goals and objectives; and
WHEREAS, the Company has determined that its interests would best be
served by providing an incentive for the Executive to remain in employment with
the Company and to discharge his responsibilities in the best interests of the
Company; and
WHEREAS, the Company has entered into an agreement with the Executive on
February 3, 1993 providing for certain conditions of employment (the "Original
Agreement"); and
WHEREAS, under the Original Agreement, the Company had the option to
extend the term of that agreement; and
WHEREAS, the Company desires, by the entering into of this Agreement and
in lieu of extending the term of the Original Agreement, that as of February 3,
1995, the terms and conditions in this Agreement shall replace those which were
contained in the Original Agreement; and
WHEREAS, it is the intention of the parties that this Agreement shall take
effect following the termination of the Original Agreement.
NOW, THEREFORE, in consideration of the mutual promises contained herein,
and intending to be legally bound, the Company and the Executive agree as
follows:
1. Employment and Term
The Company shall employ the Executive and the Executive shall serve the
Company for a period ending on February 3, 1996. The Company shall have the
right to terminate this Agreement at any time by written notice to the
<PAGE> 2
Executive, provided that the Company satisfies its obligations to the Executive
as described in Paragraph 2 below. Commencing on February 3, 1995 and each
anniversary thereafter, the term of this Agreement shall automatically be
extended for one (1) additional year so that the term of this Agreement shall
continue for a period of Two (2) years from each such anniversary unless the
Company shall have given written notice to the Executive that it does not wish
to extend further the term of this Agreement. There shall be no limit to the
number of permitted extensions to this Agreement, but the Executive
acknowledges that the Company has no obligation to extend this Agreement beyond
its initial expiration of February 3, 1996 or thereafter. The Executive also
acknowledges that under no circumstances shall he be entitled to cumulative
benefits under both of the Original Agreement and this Agreement, but rather
that the provisions of the Original Agreement shall govern the relationship
between the Company and the Employee through February 2, 1995, and the
provisions of this Agreement shall govern such relationship commencing on
February 3, 1995.
2. Termination of Employment and Severance Benefits if There Has Been No
Change of Control.
If no Change of Control has occurred and (i) the Executive's employment
with the Company is involuntarily terminated by the Company during the term of
this Agreement for any reason other than for Just Cause, death or retirement,
or (ii) the Executive's employment with the Company is terminated by the
Executive for Good Reason (other than under Paragraph (1) of the definition of
Good Reason), the Executive shall be entitled to each of the following:
(a) A severance payment (which shall be paid to the Executive
immediately upon his eligible termination of employment) equal to the sum of:
(1) Two (2) times his annual rate of base salary as of the date
of his termination of employment with the Company (but not less than Two (2)
times his annual rate of base salary as of the Effective Date); plus
(2) Two (2) times the average cash bonuses received by the
Executive under the Company's Management Incentive Compensation Plan (or
successor thereto) for the last three (3) calendar years of his employment with
the Company; plus
(3) Any amount forfeited by the Executive under the Company's
Profit Sharing Plan (or any successor or comparable plan thereto) as a result
of such termination; minus
<PAGE> 3
(4) The total amount of any separation or severance pay of any
type paid by the Company in cash to the Executive under any plan, program,
practice or arrangement of the Company (other than under this Agreement) or
under any other agreement between the Executive and the Company.
(b) Continued coverage for the Executive (and his family as to
health plans) after such termination of employment, at no direct cost to the
Executive other than the normal employee's contribution under the Company's
plans, under the Company's life insurance, long-term disability and health
plans (including any dental and vision plans) for the Company's salaried
employees as in effect on the date of such termination of employment (or as
they may be amended from time to time by the Company for all such salaried
employees) for the period ending two (2) years following such termination;
provided, however, that in lieu of such continued coverage, the Company, in its
sole discretion, may make a lump sum cash payment to the Executive, immediately
upon eligible termination of employment, which is equal to the value of such
coverage for the two (2) year period following such termination.
(c) Outplacement counseling, at no direct cost to the Executive,
with a party mutually agreeable to the Executive and the Company, to begin
within one (1) month from the date of such termination of employment and
continue for a period of eighteen (18) consecutive months.
(d) Notwithstanding any provision in any document or agreement
relating to stock options and stock appreciation rights, any stock options and
stock appreciation rights granted to the Executive under any stock option plan
of the Company shall be fully vested and immediately exercisable in accordance
with the otherwise applicable terms of such stock option plan immediately upon
the Executive's eligible termination of employment and shall remain fully
exercisable for the remainder of the particular option term, and such vesting
shall not be deemed to constitute severance or separation pay.
3. Termination of Employment and Severance Benefits Following A Change of
Control.
(A) If, following a Change of Control, (i) the Executive's employment
with the Company is involuntarily terminated by the Company during the term of
this Agreement for any reason other than for Just Cause, death or retirement,
or (ii) the Executive's employment with the Company is terminated by the
Employee for Good Reason, the Executive shall be entitled to each of the
following:
<PAGE> 4
(a) A severance payment (which shall be paid to the Executive
immediately upon his eligible termination of employment) equal to the sum of:
(1) 2.99 times his annual rate of base salary as of the
date of his termination of employment with the Company (but not less than 2.99
times his annual rate of base salary as of the Effective Date); plus
(2) 2.99 times the maximum cash bonus as defined by the
Executive's participation level under the Company's Management Inventive
Compensation Plan (or successor thereto) computed as if the highest level of
achievement of performance objectives by the Executive, his function and the
Company had been attained; plus
(3) Any amount forfeited by the Executive under the
Company's Profit Sharing Plan (or any successor or comparable plan thereto) as
a result of such termination; minus
(4) The total amount of any separation or severance pay of any
type paid by the Company in cash to the Executive under any plan, program,
practice or arrangement of the Company (other than under this Agreement) or
under any other agreement between the Executive and the Company.
(b) Continued coverage for the Executive (and his family as to
health plans) after such termination of employment, at no direct cost to the
Executive, under the Company's life insurance, long-term disability and health
plans (including any dental and vision plans) for the Company's salaried
employees as in effect on the date of such termination of employment (or as
they may be amended from time to time by the Company for all such salaried
employees) for the period ending three (3) years following such termination;
provided, however, that in lieu of such continued coverage, the Company, in its
sole discretion, may make a lump sum cash payment to the Executive, immediately
upon eligible termination of employment, which is equal to the value of such
coverage for the three (3) year period following such termination.
(c) Outplacement counseling, at no direct cost to the
Executive, with a party mutually agreeable to the Executive and the Company, to
begin within one (1) month from the date of such termination of employment and
continue for a period of eighteen (18) consecutive months.
(d) Notwithstanding any provision in any document or agreement
relating to stock options and stock appreciation rights, any stock options and
<PAGE> 5
stock appreciation rights granted to the Executive under any stock option plan
of the Company shall be fully vested and immediately exercisable in accordance
with the otherwise applicable terms of such stock option plan immediately upon
the Executive's eligible termination of employment and shall remain fully
exercisable for the remainder of the particular option term, and such vesting
shall not be deemed to constitute severance or separation pay.
(B) If, following a Change of Control, the Executive terminates his
employment with the Company for any reason during the sixty (60) day period
beginning on the first anniversary of the Change of Control, the Executive
shall be entitled to each of the following:
(a) A severance payment (which shall be paid to the Executive
immediately upon his eligible termination of employment) equal to the sum of:
(1) Two (2) times his annual rate of base salary as of the
date of his termination of employment with the Company (but not less than two
(2) times his annual rate of base salary as of the Effective Date); plus
(2) Any amount forfeited by the Executive under the Company's Profit
Sharing Plan (or any successor or comparable plan thereto) as a result of such
termination; minus
(3) The total amount of any separation or severance pay of any
type paid by the Company in cash to the Executive under any plan, program,
practice or arrangement of the Company (other than under this Agreement) or
under any other agreement between the Executive and the Company.
(b) Continued coverage for the Executive (and his family as to
health plans) after such termination of employment, at no direct cost to the
Executive, under the Company's life insurance, long-term disability and health
plans (including any dental and vision plans) for the Company's salaried
employees as in effect on the date of such termination of employment (or as
they may be amended from time to time by the Company for all such salaried
employees) for the period ending two (2) years following such termination;
provided, however, that in lieu of such continued coverage, the Company, in its
sole discretion, may make a lump sum cash payment to the Executive, immediately
upon eligible termination of employment, which is equal to the value of such
coverage for the two (2) year period following such termination.
<PAGE> 6
(c) Outplacement counseling, at no direct cost to the Executive,
with a party mutually agreeable to the Executive and the Company, to begin
within one (1) month from the date of such termination of employment and
continue for a period of eighteen (18) consecutive months.
(d) Notwithstanding any provision in any document or agreement relating to
stock options and stock appreciation rights, any stock options and stock
appreciation rights granted to the Executive under any stock option plan of the
Company shall be fully vested and immediately exercisable in accordance with
the otherwise applicable terms of such stock option plan immediately upon the
Executive's eligible termination of employment and shall remain fully
exercisable for the remainder of the particular option term, and such vesting
shall not be deemed to constitute severance or separation pay.
4. Indebtedness to the Company
Notwithstanding anything to the contrary, if the Executive is indebted
to the Company at the time an amount is payable to the Executive under this
Agreement, said amount shall first be applied to satisfy said indebtedness to
the Company, and any balance remaining after satisfaction of said indebtedness
shall be paid to the Executive pursuant to the applicable provisions of this
Agreement.
5. Tax Gross Up.
(a)(i) In the event that the Executive becomes entitled to payments in
connection with a Change in Control or his termination of employment after a
Change in Control (the "Payments"), then if any of the Payments will be subject
to the tax imposed by Section 4999 of the Internal Revenue Code ("IRC") (the
"Excise Tax"), (or any similar tax that may hereafter be imposed) the Company
shall pay to Executive an additional amount (the "Gross-Up Payment") such that
the net amount retained by him, after deduction of any Excise Tax on the
Payments and any Excise Tax upon the payment provided for by this paragraph,
shall be equal to the Payments. For purposes of determining whether any of the
Payments will be subject to the Excise Tax and the amount of such Excise Tax,
(a) any other payments or benefits received or to be received by Executive in
connection with a change of control or his termination of employment shall be
treated as "parachute payments" within the meaning of Section 280G(b)(2) of the
IRC, and all "excess parachute payments" within the meaning of Section
280G(b)(1) shall be treated as subject to the Excise Tax, unless in the opinion
of tax counsel selected by the Company's independent auditors, and acceptable
<PAGE> 7
to the Executive, such other payments or benefits (in whole or in part) do not
constitute parachute payments, or such excess parachute payments (in whole or
in part) represent reasonable compensation for services actually rendered
within the meaning of Section 280G(b)(4) of the IRC in excess of the base
amount within the meaning of Section 280G(b)(3) of the IRC, or are otherwise
not subject to the Excise Tax, (b) the amount of the Payments which shall be
treated as subject to the Excise Tax shall be equal to the lesser of (1) the
total amount of the Payments or (2) the amount of excess parachute payments
within the meaning of Section 280G(b)(1) (after applying clause (a), above),
and (c) the value of any non-cash benefits or any deferred payment or benefit,
which amounts shall be determined by the Company's independent auditors in
accordance with the principles of Section 280G(d)(3) and (4) of the IRC.
(ii) A Gross-Up Payment shall be made not later than the fifth
day following the date the Executive becomes subject to payment of excise tax;
provided, however, that if the amounts of such payment cannot be finally
determined on or before such day, the Company shall pay to the Executive on
such day an estimate, as determined in good faith by the Company, of the
minimum amount of such payments and shall pay the remainder of such payment
(together with interest at the rate provided under Section 1274(b)(2)(B) of the
IRC) as soon as the amount can be determined but no later than the thirtieth
day after the date the Executive becomes subject to the payment of excise tax.
In the event the amount of the estimated payment exceeds the amount
subsequently determined to have been due, such excess shall constitute a loan
by the Company to the Executive, payable on the fifth day after demand by the
Company (together with interest at the rate provided in Section 1274(b)(2)(B)
of the IRC).
(b) The Company agrees to calculate the amount of Gross-Up Payment
payable on behalf of the Executive to the Internal Revenue Service in good
faith and in accordance with a reasonable interpretation of the Code as to the
amount of the excise tax which may be imposed on the Executive under Code
Section 4999 with respect to payments made by the Company, and the Executive
agrees to accept such calculation. The Company shall provide the Executive
with notice of the amount of Gross-Up Payment to be made hereunder, which
payments shall be made in a timely manner by the Company. Notwithstanding any
other provision hereof, the Company agrees to indemnify and hold the Executive
harmless from and in respect of any excise tax which may be imposed on the
Executive under Code Section 4999, as well as any interest or penalties with
respect to such excise taxes.
<PAGE> 8
6. Definitions
(a) Change of Control shall mean the occurrence of any of the
following:
(1) The acquisition by any "person" within the meaning of Section
13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934 (the "Exchange
Act"), (but excluding for this purpose a person who holds shares of the capital
stock of the Company representing 25% or more of the aggregate voting power of
the outstanding voting shares of the Company as of the Effective Date) of
"beneficial ownership" within the meaning of Rule 13d-3 promulgated under the
Exchange Act, of twenty five (25%) percent or more of the aggregate voting
power of the outstanding voting shares of the Company.
(2) The individuals who, at the beginning of any period of two (2)
consecutive calendar years, constitute the Board (the "Incumbent Board") cease
for any reason during such two (2) year period to constitute at least a
majority of the Board, provided that any person becoming a director during such
two (2) year period whose election, or nomination or election by the Company's
shareholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall for this purpose be considered as
though such person were a member of the Incumbent Board.
(3) The approval by the stockholders of the Company of a
reorganization, merger or consolidation, in each case, with respect to which
persons who were the stockholders of the Company immediately prior to such
reorganization, merger or consolidation do not, immediately thereafter, own
more than fifty (50%) percent of the aggregate voting power of the outstanding
voting shares of the reorganized, merged or consolidated entity.
(4) A sale, exchange or other disposition of all or substantially all of
the Company's assets to a third party, or the liquidation or dissolution of the
Company.
(b) Company shall mean Chambers Development Company, Inc., and any
successor thereto, direct or indirect, by merger, reorganization,
consolidation, liquidation, purchase of securities, acquisition of assets or
otherwise.
(c) Good Reason shall mean any of the following:
<PAGE> 9
(1) The duties, status or responsibilities of the Executive have been
materially diminished from those he had on the Effective Date, or he has been
assigned duties or responsibilities materially inconsistent with his duties and
responsibilities with the Company prior to the Effective Date;
(2) Any reduction in the Executive's base salary below the highest
rate in effect at or after the Effective Date;
(3) Any failure by the Company to continue the Executive's
eligibility for participation in any bonus, stock option, restricted stock, or
other incentive compensation or executive compensation or benefit plan,
arrangement or program in which he is a participant immediately prior to the
Effective Date on at least as favorable a basis as he was eligible to
participate immediately prior to the Effective Date (or to provide comparable
successor or substitute plans, arrangements or programs if amendment or
termination of the same becomes necessary or advisable); provided, however,
that the Company shall continue to have discretion in its awarding of incentive
compensation to employees, and the failure to make an award of incentive
compensation (as opposed to eligibility) to the Executive shall not constitute
Good Reason.
(4) Any failure by the Company to continue the Executive's
participation in any pension plan or welfare plan within the meaning of
Sections 3(3) and 3(2), respectively, of ERISA and any supplemental and/or
excess plans thereto or any health insurance plan in which he is a participant
immediately prior to the Effective Date on at least as favorable a basis as he
was entitled to participate immediately prior to the Effective Date (or to
provide comparable successor or substitute plans if amendment or termination of
said plans becomes necessary or desirable);
(5) Any failure by the Company to provide the Executive with the
number of paid vacation days to which he is entitled under the Company's then
current vacation policy, procedure or practice;
(6) Any failure by the Company to obtain the express agreement of any
successor of the Company (direct or indirect, by consolidation, liquidation,
purchase of securities, acquisition of assets or otherwise) to assume and
perform all obligations under this Agreement in the same manner and to the same
extent that the Company would have been required to perform if no succession
had taken place.
<PAGE> 10
For purposes of this definition, an isolated, immaterial and inadvertent
action not taken in bad faith by the Company in violation of Paragraph (1),
(2), (3), (4) or (5) of this definition that is remedied by the Company
promptly after receipt of notice thereof given by the Executive shall not be
considered Good Reason for an Executive's termination of employment with the
Company.
(d) Just Cause shall mean, with respect to the Company's termination
of the Executive's employment with the Company, if the termination results from
the Executive's:
(1) Willful and continued failure substantially to perform his
usual duties or to work full time for the Company that is not remedied in a
reasonable period of time after receipt of written notice from the Board of
Directors of the Company;
(2) Willful engagement in conduct that is injurious to the Company;
(3) Willful engagement in actions that result in, or are
intended to result in, the personal enrichment of the Executive at the expense
of the Company;
(4) Embezzlement of funds of the Company or misappropriation of
other property of the Company; or
(5) Conviction of a felony.
For purposes of this definition, no act or failure to act on the part of
the Executive shall be considered "willful" unless such act or failure to act
was not in good faith and was without reasonable belief that his action or
failure to act was in the best interests of the Company, and no act or failure
to act on the part of the Executive shall be considered "willful" if it is
solely the result of his bad judgment or negligence.
Any termination by the Company of the Executive's employment resulting
from Just Cause shall only be effective upon the decision of both the
Executive's supervisor and the Human Resources Committee of the Board of
Directors of the Company, with the reasons for the termination being
communicated to the Executive.
<PAGE> 11
7. Remedies
The Executive's sole and exclusive remedy in the event of a breach of
this Agreement by the Company shall be, and the Company's liability shall be
limited to, damages equal to the payments and benefits required to be provided
by the Company under this Agreement.
8. Arbitration
Any dispute, controversy or claim arising out of or relating to this
Agreement or to any breach or alleged breach thereof shall, upon the request of
the Executive or the Company, be submitted to and settled by arbitration in the
Commonwealth of Pennsylvania pursuant to the rules then in effect of the
American Arbitration Association (or at any other place or under any other form
of arbitration mutually acceptable to the Executive and the Company). An
arbitration panel shall be selected, consisting of one arbitrator selected by
the Company, one arbitrator selected by the Executive, and a third arbitrator
selected by mutual agreement of the first two arbitrators. Any award rendered
shall be final and conclusive upon the Executive and the Company, and a
judgment may be entered in the highest court, state or federal, having
jurisdiction. The expenses of arbitration shall be paid by the Company, and
attorneys fees shall be addressed as provided in Paragraph 14.
9. Successors
This Agreement shall be binding upon and inure to the benefit of the
Executive and his heirs and estate, and the Company and its successors and
assigns. The Company shall require any successor of the Company (direct or
indirect, by consolidation, liquidation, purchase of securities, acquisition of
assets, or otherwise) to expressly assume this Agreement and to perform all
obligations hereunder in the same manner and to the same extent that the
Company would have been required to perform if no succession had taken place.
10. Assignment
(a) The Executive's rights and interest hereunder shall not be
assignable (in law or equity) or subject to any manner of alienation, sale,
transfer, claims of creditors, pledge, attachment, garnishment, levy,
execution, or encumbrances of any kind, and any attempt to do so shall be void.
<PAGE> 12
(b) Any assignment of the Company's responsibilities and liability
hereunder shall not relieve the Company of its responsibilities and liability
hereunder.
11. No Funding
The Executive's rights and interest hereunder shall be that of a
general unsecured creditor of the Company, and he shall not have any preferred
claims on, or any beneficial interest in, the assets of the Company.
12. Withholding
All amounts payable hereunder shall be subject to withholding for taxes
(federal, state, and local) to the extent required by applicable law.
13. Obligations Absolute
The Company's obligation to make the payments and arrangements provided
for in this Agreement and to otherwise perform its obligations under this
Agreement shall be absolute and unconditional and, except as specifically
provided in this Agreement, shall not be affected by any circumstances,
including any set-off, counterclaim, recoupment, defense or other claim, right
or action which the Company may have against the Executive or any other person.
Each and every payment made pursuant to this Agreement shall be final, and the
Company shall not seek to recover all or any part of such payment from the
Executive, or from any other person entitled thereto, for any reason
whatsoever. In no event shall the Executive be obligated to seek other
employment or take any other action in mitigation of the amounts payable
pursuant to any provisions of this Agreement.
14. Expenses
The Company shall pay to the fullest extent permitted by law all legal
and other fees and expenses that the Executive may reasonably incur in
connection with any action or contest related to the enforcement, validity or
interpretation of any provision of this Agreement, including actions brought by
the Executive to establish entitlement to payments or benefits hereunder, in
the event that the Executive prevails in whole or in part in the arbitration of
the action. In the event the Executive does not prevail in whole or in part,
then each party shall pay its own legal fees and expenses.
<PAGE> 13
15. Notices
All notices hereunder shall be given in writing and delivered by hand or
by registered or certified mail, or by overnight courier, and addressed to the
respective addresses set forth on the first page of this Agreement, or to such
other address as either party may have furnished to the other in writing in
accordance herewith. Any notice by the Company to the Executive of a
termination of employment for Just Cause, and any notice by the Executive to
the Company of a termination of employment for Good Reason, shall include the
specific provision of this Agreement relied upon for such termination,
reasonable detail of the facts and circumstances claimed to provide for the
termination of employment pursuant to those provision, and the date of
termination of employment, which shall be no earlier than the date of receipt
of such notice and no later than fifteen (15) days thereafter.
16. Other Rights, Plans and Agreements
(a) This Agreement shall not affect the Executive's right to
participate in and receive benefits under any plans, programs, arrangements,
policies, procedures or practices of the Company and shall have no effect on
any other agreement entered into by the Executive and the Company.
(b) Neither this Agreement nor any action taken hereunder shall be
construed as giving the Executive the right to be retained in the employment of
the Company.
17. Severability and Waivers
(a) Any provision of this Agreement prohibited by law shall be
ineffective to the extent of such prohibition without invalidating the
remaining provisions.
(b) The Executive's or the Company's failure to insist upon strict
compliance with any provision of this Agreement shall not be deemed to be a
waiver of such provision. Any waiver of any provision of this Agreement shall
not be deemed to be a waiver of any other provision, and any waiver of default
in any provision of this Agreement shall not be deemed to be a waiver of any
later default.
<PAGE> 14
18. Entire Understanding, Amendment
(a) This Agreement represents the entire understanding of the
Executive and the Company with respect to the matters set forth herein, and
supersedes any prior such agreements including, after February 2, 1995, the
Original Agreement.
(b) Termination, revocation, or amendment of this Agreement shall be
made only in a writing executed by both the Executive and the Company.
19. Governing Law
This Agreement shall be governed by and construed in accordance with the
laws of the Commonwealth of Pennsylvania.
IN WITNESS WHEREOF, the Executive and the Company have executed this
Agreement in duplicate on this ___ day of ________________, 1993.
CHAMBERS DEVELOPMENT COMPANY, INC. EXECUTIVE
By: /s/ John G. Rangos, Jr. /s/ Ronald H. Jones
Title: Vice Chairman Administration
and Technology - Secretary
<PAGE> 1
EXHIBIT 10.10(h)
AGREEMENT
THIS AGREEMENT is made by and between Chambers Development Company, Inc.,
a Delaware corporation, with its principal place of business at 10700
Frankstown Road, Pittsburgh, Pennsylvania, and JOSEPH G. STOTLEMYER, an
individual residing at 201 Balver Avenue, Pittsburgh, Pennsylvania 15205
(hereinafter the "Executive").
WHEREAS, the Executive is a valued employee of the Company whose services
are critical to the successful realization of the Company's current corporate
goals and objectives; and
WHEREAS, the Company has determined that its interests would best be
served by providing an incentive for the Executive to remain in employment with
the Company and to discharge his responsibilities in the best interests of the
Company; and
WHEREAS, the Company has entered into an agreement with the Executive on
February 3, 1993 providing for certain conditions of employment (the "Original
Agreement"); and
WHEREAS, under the Original Agreement, the Company had the option to
extend the term of that agreement; and
WHEREAS, the Company desires, by the entering into of this Agreement and
in lieu of extending the term of the Original Agreement, that as of February 3,
1995, the terms and conditions in this Agreement shall replace those which were
contained in the Original Agreement; and
WHEREAS, it is the intention of the parties that this Agreement shall take
effect following the termination of the Original Agreement.
NOW, THEREFORE, in consideration of the mutual promises contained herein,
and intending to be legally bound, the Company and the Executive agree as
follows:
1. Employment and Term
The Company shall employ the Executive and the Executive shall serve the
Company for a period ending on February 3, 1996. The Company shall have the
right to terminate this Agreement at any time by written notice to the
<PAGE> 2
Executive, provided that the Company satisfies its obligations to the Executive
as described in Paragraph 2 below. Commencing on February 3, 1995 and each
anniversary thereafter, the term of this Agreement shall automatically be
extended for one (1) additional year so that the term of this Agreement shall
continue for a period of Two (2) years from each such anniversary unless the
Company shall have given written notice to the Executive that it does not wish
to extend further the term of this Agreement. There shall be no limit to the
number of permitted extensions to this Agreement, but the Executive
acknowledges that the Company has no obligation to extend this Agreement beyond
its initial expiration of February 3, 1996 or thereafter. The Executive also
acknowledges that under no circumstances shall he be entitled to cumulative
benefits under both of the Original Agreement and this Agreement, but rather
that the provisions of the Original Agreement shall govern the relationship
between the Company and the Employee through February 2, 1995, and the
provisions of this Agreement shall govern such relationship commencing on
February 3, 1995.
2. Termination of Employment and Severance Benefits if There Has Been No
Change of Control.
If no Change of Control has occurred and (i) the Executive's employment
with the Company is involuntarily terminated by the Company during the term of
this Agreement for any reason other than for Just Cause, death or retirement,
or (ii) the Executive's employment with the Company is terminated by the
Executive for Good Reason (other than under Paragraph (1) of the definition of
Good Reason), the Executive shall be entitled to each of the following:
(a) A severance payment (which shall be paid to the Executive
immediately upon his eligible termination of employment) equal to the sum of:
(1) Two (2) times his annual rate of base salary as of the date
of his termination of employment with the Company (but not less than Two (2)
times his annual rate of base salary as of the Effective Date); plus
(2) Two (2) times the average cash bonuses received by the
Executive under the Company's Management Incentive Compensation Plan (or
successor thereto) for the last three (3) calendar years of his employment with
the Company; plus
(3) Any amount forfeited by the Executive under the Company's
Profit Sharing Plan (or any successor or comparable plan thereto) as a result
of such termination; minus
<PAGE> 3
(4) The total amount of any separation or severance pay of any
type paid by the Company in cash to the Executive under any plan, program,
practice or arrangement of the Company (other than under this Agreement) or
under any other agreement between the Executive and the Company.
(b) Continued coverage for the Executive (and his family as to
health plans) after such termination of employment, at no direct cost to the
Executive other than the normal employee's contribution under the Company's
plans, under the Company's life insurance, long-term disability and health
plans (including any dental and vision plans) for the Company's salaried
employees as in effect on the date of such termination of employment (or as
they may be amended from time to time by the Company for all such salaried
employees) for the period ending two (2) years following such termination;
provided, however, that in lieu of such continued coverage, the Company, in its
sole discretion, may make a lump sum cash payment to the Executive, immediately
upon eligible termination of employment, which is equal to the value of such
coverage for the two (2) year period following such termination.
(c) Outplacement counseling, at no direct cost to the Executive,
with a party mutually agreeable to the Executive and the Company, to begin
within one (1) month from the date of such termination of employment and
continue for a period of eighteen (18) consecutive months.
(d) Notwithstanding any provision in any document or agreement
relating to stock options and stock appreciation rights, any stock options and
stock appreciation rights granted to the Executive under any stock option plan
of the Company shall be fully vested and immediately exercisable in accordance
with the otherwise applicable terms of such stock option plan immediately upon
the Executive's eligible termination of employment and shall remain fully
exercisable for the remainder of the particular option term, and such vesting
shall not be deemed to constitute severance or separation pay.
3. Termination of Employment and Severance Benefits Following A Change of
Control.
(A) If, following a Change of Control, (i) the Executive's employment
with the Company is involuntarily terminated by the Company during the term of
this Agreement for any reason other than for Just Cause, death or retirement,
or (ii) the Executive's employment with the Company is terminated by the
Employee for Good Reason, the Executive shall be entitled to each of the
following:
<PAGE> 4
(a) A severance payment (which shall be paid to the Executive
immediately upon his eligible termination of employment) equal to the sum of:
(1) 2.99 times his annual rate of base salary as of the
date of his termination of employment with the Company (but not less than 2.99
times his annual rate of base salary as of the Effective Date); plus
(2) 2.99 times the maximum cash bonus as defined by the
Executive's participation level under the Company's Management Inventive
Compensation Plan (or successor thereto) computed as if the highest level of
achievement of performance objectives by the Executive, his function and the
Company had been attained; plus
(3) Any amount forfeited by the Executive under the Company's Profit
Sharing Plan (or any successor or comparable plan thereto) as a result of such
termination; minus
(4) The total amount of any separation or severance pay of any
type paid by the Company in cash to the Executive under any plan, program,
practice or arrangement of the Company (other than under this Agreement) or
under any other agreement between the Executive and the Company.
(b) Continued coverage for the Executive (and his family as to
health plans) after such termination of employment, at no direct cost to the
Executive, under the Company's life insurance, long-term disability and health
plans (including any dental and vision plans) for the Company's salaried
employees as in effect on the date of such termination of employment (or as
they may be amended from time to time by the Company for all such salaried
employees) for the period ending three (3) years following such termination;
provided, however, that in lieu of such continued coverage, the Company, in its
sole discretion, may make a lump sum cash payment to the Executive, immediately
upon eligible termination of employment, which is equal to the value of such
coverage for the three (3) year period following such termination.
(c) Outplacement counseling, at no direct cost to the Executive, with
a party mutually agreeable to the Executive and the Company, to begin within
one (1) month from the date of such termination of employment and continue for
a period of eighteen (18) consecutive months.
(d) Notwithstanding any provision in any document or agreement
relating to stock options and stock appreciation rights, any stock options and
<PAGE> 5
stock appreciation rights granted to the Executive under any stock option plan
of the Company shall be fully vested and immediately exercisable in accordance
with the otherwise applicable terms of such stock option plan immediately upon
the Executive's eligible termination of employment and shall remain fully
exercisable for the remainder of the particular option term, and such vesting
shall not be deemed to constitute severance or separation pay.
(B) If, following a Change of Control, the Executive terminates his
employment with the Company for any reason during the sixty (60) day period
beginning on the first anniversary of the Change of Control, the Executive
shall be entitled to each of the following:
(a) A severance payment (which shall be paid to the Executive
immediately upon his eligible termination of employment) equal to the sum of:
(1) Two (2) times his annual rate of base salary as of the date of his
termination of employment with the Company (but not less than two (2) times his
annual rate of base salary as of the Effective Date); plus
(2) Any amount forfeited by the Executive under the Company's Profit
Sharing Plan (or any successor or comparable plan thereto) as a result of such
termination; minus
(3) The total amount of any separation or severance pay of any
type paid by the Company in cash to the Executive under any plan, program,
practice or arrangement of the Company (other than under this Agreement) or
under any other agreement between the Executive and the Company.
(b) Continued coverage for the Executive (and his family as to
health plans) after such termination of employment, at no direct cost to the
Executive, under the Company's life insurance, long-term disability and health
plans (including any dental and vision plans) for the Company's salaried
employees as in effect on the date of such termination of employment (or as
they may be amended from time to time by the Company for all such salaried
employees) for the period ending two (2) years following such termination;
provided, however, that in lieu of such continued coverage, the Company, in its
sole discretion, may make a lump sum cash payment to the Executive, immediately
upon eligible termination of employment, which is equal to the value of such
coverage for the two (2) year period following such termination.
<PAGE> 6
(c) Outplacement counseling, at no direct cost to the Executive,
with a party mutually agreeable to the Executive and the Company, to begin
within one (1) month from the date of such termination of employment and
continue for a period of eighteen (18) consecutive months.
(d) Notwithstanding any provision in any document or agreement
relating to stock options and stock appreciation rights, any stock options and
stock appreciation rights granted to the Executive under any stock option plan
of the Company shall be fully vested and immediately exercisable in accordance
with the otherwise applicable terms of such stock option plan immediately upon
the Executive's eligible termination of employment and shall remain fully
exercisable for the remainder of the particular option term, and such vesting
shall not be deemed to constitute severance or separation pay.
4. Indebtedness to the Company
Notwithstanding anything to the contrary, if the Executive is indebted
to the Company at the time an amount is payable to the Executive under this
Agreement, said amount shall first be applied to satisfy said indebtedness to
the Company, and any balance remaining after satisfaction of said indebtedness
shall be paid to the Executive pursuant to the applicable provisions of this
Agreement.
5. Tax Gross Up.
(a)(i) In the event that the Executive becomes entitled to payments in
connection with a Change in Control or his termination of employment after a
Change in Control (the "Payments"), then if any of the Payments will be subject
to the tax imposed by Section 4999 of the Internal Revenue Code ("IRC") (the
"Excise Tax"), (or any similar tax that may hereafter be imposed) the Company
shall pay to Executive an additional amount (the "Gross-Up Payment") such that
the net amount retained by him, after deduction of any Excise Tax on the
Payments and any Excise Tax upon the payment provided for by this paragraph,
shall be equal to the Payments. For purposes of determining whether any of the
Payments will be subject to the Excise Tax and the amount of such Excise Tax,
(a) any other payments or benefits received or to be received by Executive in
connection with a change of control or his termination of employment shall be
treated as "parachute payments" within the meaning of Section 280G(b)(2) of the
IRC, and all "excess parachute payments" within the meaning of Section
280G(b)(1) shall be treated as subject to the Excise Tax, unless in the opinion
of tax counsel selected by the Company's independent auditors, and acceptable
<PAGE> 7
to the Executive, such other payments or benefits (in whole or in part) do not
constitute parachute payments, or such excess parachute payments (in whole or
in part) represent reasonable compensation for services actually rendered
within the meaning of Section 280G(b)(4) of the IRC in excess of the base
amount within the meaning of Section 280G(b)(3) of the IRC, or are otherwise
not subject to the Excise Tax, (b) the amount of the Payments which shall be
treated as subject to the Excise Tax shall be equal to the lesser of (1) the
total amount of the Payments or (2) the amount of excess parachute payments
within the meaning of Section 280G(b)(1) (after applying clause (a), above),
and (c) the value of any non-cash benefits or any deferred payment or benefit,
which amounts shall be determined by the Company's independent auditors in
accordance with the principles of Section 280G(d)(3) and (4) of the IRC.
(ii) A Gross-Up Payment shall be made not later than the fifth
day following the date the Executive becomes subject to payment of excise tax;
provided, however, that if the amounts of such payment cannot be finally
determined on or before such day, the Company shall pay to the Executive on
such day an estimate, as determined in good faith by the Company, of the
minimum amount of such payments and shall pay the remainder of such payment
(together with interest at the rate provided under Section 1274(b)(2)(B) of the
IRC) as soon as the amount can be determined but no later than the thirtieth
day after the date the Executive becomes subject to the payment of excise tax.
In the event the amount of the estimated payment exceeds the amount
subsequently determined to have been due, such excess shall constitute a loan
by the Company to the Executive, payable on the fifth day after demand by the
Company (together with interest at the rate provided in Section 1274(b)(2)(B)
of the IRC).
(b) The Company agrees to calculate the amount of Gross-Up Payment
payable on behalf of the Executive to the Internal Revenue Service in good
faith and in accordance with a reasonable interpretation of the Code as to the
amount of the excise tax which may be imposed on the Executive under Code
Section 4999 with respect to payments made by the Company, and the Executive
agrees to accept such calculation. The Company shall provide the Executive
with notice of the amount of Gross-Up Payment to be made hereunder, which
payments shall be made in a timely manner by the Company. Notwithstanding any
other provision hereof, the Company agrees to indemnify and hold the Executive
harmless from and in respect of any excise tax which may be imposed on the
Executive under Code Section 4999, as well as any interest or penalties with
respect to such excise taxes.
<PAGE> 8
6. Definitions
(a) Change of Control shall mean the occurrence of any of the
following:
(1) The acquisition by any "person" within the meaning of Section
13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934 (the "Exchange
Act"), (but excluding for this purpose a person who holds shares of the capital
stock of the Company representing 25% or more of the aggregate voting power of
the outstanding voting shares of the Company as of the Effective Date) of
"beneficial ownership" within the meaning of Rule 13d-3 promulgated under the
Exchange Act, of twenty five (25%) percent or more of the aggregate voting
power of the outstanding voting shares of the Company.
(2) The individuals who, at the beginning of any period of two (2)
consecutive calendar years, constitute the Board (the "Incumbent Board") cease
for any reason during such two (2) year period to constitute at least a
majority of the Board, provided that any person becoming a director during such
two (2) year period whose election, or nomination or election by the Company's
shareholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall for this purpose be considered as
though such person were a member of the Incumbent Board.
(3) The approval by the stockholders of the Company of a
reorganization, merger or consolidation, in each case, with respect to which
persons who were the stockholders of the Company immediately prior to such
reorganization, merger or consolidation do not, immediately thereafter, own
more than fifty (50%) percent of the aggregate voting power of the outstanding
voting shares of the reorganized, merged or consolidated entity.
(4) A sale, exchange or other disposition of all or substantially all
of the Company's assets to a third party, or the liquidation or dissolution of
the Company.
(b) Company shall mean Chambers Development Company, Inc., and any
successor thereto, direct or indirect, by merger, reorganization,
consolidation, liquidation, purchase of securities, acquisition of assets or
otherwise.
(c) Good Reason shall mean any of the following:
<PAGE> 9
(1) The duties, status or responsibilities of the Executive have been
materially diminished from those he had on the Effective Date, or he has been
assigned duties or responsibilities materially inconsistent with his duties and
responsibilities with the Company prior to the Effective Date;
(2) Any reduction in the Executive's base salary below the highest
rate in effect at or after the Effective Date;
(3) Any failure by the Company to continue the Executive's
eligibility for participation in any bonus, stock option, restricted stock, or
other incentive compensation or executive compensation or benefit plan,
arrangement or program in which he is a participant immediately prior to the
Effective Date on at least as favorable a basis as he was eligible to
participate immediately prior to the Effective Date (or to provide comparable
successor or substitute plans, arrangements or programs if amendment or
termination of the same becomes necessary or advisable); provided, however,
that the Company shall continue to have discretion in its awarding of incentive
compensation to employees, and the failure to make an award of incentive
compensation (as opposed to eligibility) to the Executive shall not constitute
Good Reason.
(4) Any failure by the Company to continue the Executive's
participation in any pension plan or welfare plan within the meaning of
Sections 3(3) and 3(2), respectively, of ERISA and any supplemental and/or
excess plans thereto or any health insurance plan in which he is a participant
immediately prior to the Effective Date on at least as favorable a basis as he
was entitled to participate immediately prior to the Effective Date (or to
provide comparable successor or substitute plans if amendment or termination of
said plans becomes necessary or desirable);
(5) Any failure by the Company to provide the Executive with the
number of paid vacation days to which he is entitled under the Company's then
current vacation policy, procedure or practice;
(6) Any failure by the Company to obtain the express agreement of any
successor of the Company (direct or indirect, by consolidation, liquidation,
purchase of securities, acquisition of assets or otherwise) to assume and
perform all obligations under this Agreement in the same manner and to the same
extent that the Company would have been required to perform if no succession
had taken place.
<PAGE> 10
For purposes of this definition, an isolated, immaterial and inadvertent
action not taken in bad faith by the Company in violation of Paragraph (1),
(2), (3), (4) or (5) of this definition that is remedied by the Company
promptly after receipt of notice thereof given by the Executive shall not be
considered Good Reason for an Executive's termination of employment with the
Company.
(d) Just Cause shall mean, with respect to the Company's termination
of the Executive's employment with the Company, if the termination results from
the Executive's:
(1) Willful and continued failure substantially to perform his
usual duties or to work full time for the Company that is not remedied in a
reasonable period of time after receipt of written notice from the Board of
Directors of the Company;
(2) Willful engagement in conduct that is injurious to the Company;
(3) Willful engagement in actions that result in, or are
intended to result in, the personal enrichment of the Executive at the expense
of the Company;
(4) Embezzlement of funds of the Company or misappropriation of
other property of the Company; or
(5) Conviction of a felony.
For purposes of this definition, no act or failure to act on the part of
the Executive shall be considered "willful" unless such act or failure to act
was not in good faith and was without reasonable belief that his action or
failure to act was in the best interests of the Company, and no act or failure
to act on the part of the Executive shall be considered "willful" if it is
solely the result of his bad judgment or negligence.
Any termination by the Company of the Executive's employment resulting
from Just Cause shall only be effective upon the decision of both the
Executive's supervisor and the Human Resources Committee of the Board of
Directors of the Company, with the reasons for the termination being
communicated to the Executive.
<PAGE> 11
7. Remedies
The Executive's sole and exclusive remedy in the event of a breach of
this Agreement by the Company shall be, and the Company's liability shall be
limited to, damages equal to the payments and benefits required to be provided
by the Company under this Agreement.
8. Arbitration
Any dispute, controversy or claim arising out of or relating to this
Agreement or to any breach or alleged breach thereof shall, upon the request of
the Executive or the Company, be submitted to and settled by arbitration in the
Commonwealth of Pennsylvania pursuant to the rules then in effect of the
American Arbitration Association (or at any other place or under any other form
of arbitration mutually acceptable to the Executive and the Company). An
arbitration panel shall be selected, consisting of one arbitrator selected by
the Company, one arbitrator selected by the Executive, and a third arbitrator
selected by mutual agreement of the first two arbitrators. Any award rendered
shall be final and conclusive upon the Executive and the Company, and a
judgment may be entered in the highest court, state or federal, having
jurisdiction. The expenses of arbitration shall be paid by the Company, and
attorneys fees shall be addressed as provided in Paragraph 14.
9. Successors
This Agreement shall be binding upon and inure to the benefit of the
Executive and his heirs and estate, and the Company and its successors and
assigns. The Company shall require any successor of the Company (direct or
indirect, by consolidation, liquidation, purchase of securities, acquisition of
assets, or otherwise) to expressly assume this Agreement and to perform all
obligations hereunder in the same manner and to the same extent that the
Company would have been required to perform if no succession had taken place.
10. Assignment
(a) The Executive's rights and interest hereunder shall not be
assignable (in law or equity) or subject to any manner of alienation, sale,
transfer, claims of creditors, pledge, attachment, garnishment, levy,
execution, or encumbrances of any kind, and any attempt to do so shall be void.
<PAGE> 12
(b) Any assignment of the Company's responsibilities and liability
hereunder shall not relieve the Company of its responsibilities and liability
hereunder.
11. No Funding
The Executive's rights and interest hereunder shall be that of a
general unsecured creditor of the Company, and he shall not have any preferred
claims on, or any beneficial interest in, the assets of the Company.
12. Withholding
All amounts payable hereunder shall be subject to withholding for taxes
(federal, state, and local) to the extent required by applicable law.
13. Obligations Absolute
The Company's obligation to make the payments and arrangements provided
for in this Agreement and to otherwise perform its obligations under this
Agreement shall be absolute and unconditional and, except as specifically
provided in this Agreement, shall not be affected by any circumstances,
including any set-off, counterclaim, recoupment, defense or other claim, right
or action which the Company may have against the Executive or any other person.
Each and every payment made pursuant to this Agreement shall be final, and the
Company shall not seek to recover all or any part of such payment from the
Executive, or from any other person entitled thereto, for any reason
whatsoever. In no event shall the Executive be obligated to seek other
employment or take any other action in mitigation of the amounts payable
pursuant to any provisions of this Agreement.
14. Expenses
The Company shall pay to the fullest extent permitted by law all legal
and other fees and expenses that the Executive may reasonably incur in
connection with any action or contest related to the enforcement, validity or
interpretation of any provision of this Agreement, including actions brought by
the Executive to establish entitlement to payments or benefits hereunder, in
the event that the Executive prevails in whole or in part in the arbitration of
the action. In the event the Executive does not prevail in whole or in part,
then each party shall pay its own legal fees and expenses.
<PAGE> 13
15. Notices
All notices hereunder shall be given in writing and delivered by hand or
by registered or certified mail, or by overnight courier, and addressed to the
respective addresses set forth on the first page of this Agreement, or to such
other address as either party may have furnished to the other in writing in
accordance herewith. Any notice by the Company to the Executive of a
termination of employment for Just Cause, and any notice by the Executive to
the Company of a termination of employment for Good Reason, shall include the
specific provision of this Agreement relied upon for such termination,
reasonable detail of the facts and circumstances claimed to provide for the
termination of employment pursuant to those provision, and the date of
termination of employment, which shall be no earlier than the date of receipt
of such notice and no later than fifteen (15) days thereafter.
16. Other Rights, Plans and Agreements
(a) This Agreement shall not affect the Executive's right to
participate in and receive benefits under any plans, programs, arrangements,
policies, procedures or practices of the Company and shall have no effect on
any other agreement entered into by the Executive and the Company.
(b) Neither this Agreement nor any action taken hereunder shall be
construed as giving the Executive the right to be retained in the employment of
the Company.
17. Severability and Waivers
(a) Any provision of this Agreement prohibited by law shall be
ineffective to the extent of such prohibition without invalidating the
remaining provisions.
(b) The Executive's or the Company's failure to insist upon strict
compliance with any provision of this Agreement shall not be deemed to be a
waiver of such provision. Any waiver of any provision of this Agreement shall
not be deemed to be a waiver of any other provision, and any waiver of default
in any provision of this Agreement shall not be deemed to be a waiver of any
later default.
<PAGE> 14
18. Entire Understanding, Amendment
(a) This Agreement represents the entire understanding of the
Executive and the Company with respect to the matters set forth herein, and
supersedes any prior such agreements including, after February 2, 1995, the
Original Agreement.
(b) Termination, revocation, or amendment of this Agreement shall be
made only in a writing executed by both the Executive and the Company.
19. Governing Law
This Agreement shall be governed by and construed in accordance with the
laws of the Commonwealth of Pennsylvania.
IN WITNESS WHEREOF, the Executive and the Company have executed this
Agreement in duplicate on this ___ day of ________________, 1993.
CHAMBERS DEVELOPMENT COMPANY, INC. EXECUTIVE
By: /s/ John G. Rangos, Jr. /s/ Joseph G. Stotlemyer
Title: Vice Chairman Administration
and Technology - Secretary
<PAGE> 1
EXHIBIT 22.1
SUBSIDIARIES OF CHAMBERS DEVELOPMENT COMPANY, INC.
<TABLE>
<CAPTION>
COMPANY NAME JURISDICTION OF INCORPORATION
<S> <C>
Chambers Clearview Environmental
Landfill, Inc. (9) Mississippi
Chambers Development Europe B.V. (11) Netherlands
Chambers Development of Ohio, Inc. Ohio
Chambers Development of Virginia, Inc. (6) Virginia
Chambers Environmental Systems Hellas S.A. (12) Greece
Chambers Enterprises, Inc. Pennsylvania
Chambers International, Inc. Delaware
Chambers Laurel Highlands Landfill, Inc. (7) Pennsylvania
Chambers Maplewood Landfill, Inc. (6) Virginia
Chambers Medical Technologies, Inc. (2/12/85 Incorporation) Pennsylvania
Chambers Medical Technologies, Inc. (4/26/91 Incorporation) Pennsylvania
Chambers Medical Technologies of
South Carolina, Inc. (8) South Carolina
Chambers New Jersey Land, Inc. (4) New Jersey
Chambers Oakridge Landfill, Inc. (3) South Carolina
Chambers Orange County Landfill, Inc. (13) Florida
Chambers Resources, Inc. Pennsylvania
Chambers Richland County Landfill, Inc. (3) South Carolina
Chambers Services, Inc. Delaware
Chambers Smyrna Landfill,Inc. (2) Georgia
Chambers Waste Systems of California, Inc. California
Chambers Waste Systems of Florida, Inc. Florida
Chambers Waste Systems of Mississippi, Inc. Mississippi
Chambers Waste Systems of New York, Inc. New York
Chambers Waste Systems of North Carolina, Inc. North Carolina
Chambers Waste Systems of Ohio, Inc. Ohio
Chambers Waste Systems of New Jersey, Inc. (4) New Jersey
Chambers Waste Systems of Rhode Island, Inc. Rhode Island
Chambers Waste Systems of South Carolina, Inc. South Carolina
Chambers Waste Systems of Texas, Inc. Texas
Chambers Waste Systems of Virginia, Inc. Virginia
Chambers of Asia, Limited (11) Hong Kong
Chambers of Delaware, Inc. Delaware
Chambers of Georgia, Inc. Georgia
Chambers of Hong Kong Limited (14) Hong Kong
Chambers of Illinois, Inc. Illinois
Chambers of Indiana, Inc. Indiana
Chambers of New Jersey Inc. New Jersey
Chambers of New Jersey Recycling, Inc. (4) New Jersey
<PAGE> 2
Chambers of Maryland, Inc. Maryland
Chambers of Massachusetts, Inc. Massachusetts
Chambers of Mississippi, Inc. (10) Mississippi
Chambers of Pennsylvania, Inc. Pennsylvania
Chambers of Tennessee, Inc. Tennessee
Chambers of West Virginia, Inc. West Virginia
China Harbour-Chambers Environmental
Services, Limited (16) Hong Kong
Dauphin Meadows, Inc. Pennsylvania
The H. Sienknecht Co. (15) Tennessee
LCS Services, Inc. (5) West Virginia
William H. Martin, Inc. Pennsylvania
Morris County Transfer Station, Inc. (4) New Jersey
Rail-It Corporation Illinois
Rail-It Limited Partnership Illinois
Remote Landfill Services, Inc. (15) Tennessee
CDC Services, Inc. (formerly Security Bureau, Inc.) Delaware
Southern Alleghenies Disposal Service, Inc. (1) Pennsylvania
U.S. Services Corporation Pennsylvania
U.S. Utilities Services Corporation (1) Pennsylvania
<FN>
-----------------------------------------------------------------------------
(1) Subsidiary of U.S. Services Corporation
(2) Subsidiary of Chambers of Georgia, Inc.
(3) Subsidiary of Chambers Waste Systems of South Carolina, Inc.
(4) Subsidiary of Chambers of New Jersey Inc.
(5) Subsidiary of Chambers of West Virginia, Inc.
(6) Subsidiary of Chambers Waste Systems of Virginia, Inc.
(7) Subsidiary of Chambers of Pennsylvania, Inc.
(8) Subsidiary of Chambers Medical Technologies, Inc.
(9) Subsidiary of Chambers of Mississippi, Inc.
(10) Subsidiary of Chambers Waste Systems of Mississippi, Inc.
(11) Subsidiary of Chambers International, Inc.
(12) Subsidiary of Chambers Development Europe, B.V.
(13) Subsidiary of Chambers Waste Systems of Florida, Inc.
(14) Subsidiary of Chambers of Asia, Limited
(15) Subsidiary of Chambers of Tennessee, Inc.
(16) 50% Owned by Chambers of Hong Kong, Limited and
50% Owned by China Harbour Environmental Company Limited
</TABLE>
(ALL SUBSIDIARIES are 100% OWNED except as noted)
Business address for all Companies: 10700 Frankstown Road
Pittsburgh, Pennsylvania 15235
<PAGE> 1
EXHIBIT 23(A)
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in Registration Statement Nos.
33-33788 and 33-53175 of Chambers Development Company, Inc. on Form S-8 of our
reports dated March 30, 1995 appearing in this Annual Report on Form 10-K of
Chambers Development Company, Inc. for the year ended December 31, 1994.
Deloitte & Touche LLP
Pittsburgh, Pennsylvania
March 30, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<CASH> 23,548
<SECURITIES> 0
<RECEIVABLES> 42,634
<ALLOWANCES> 1,383
<INVENTORY> 0
<CURRENT-ASSETS> 84,766
<PP&E> 513,183
<DEPRECIATION> 158,755
<TOTAL-ASSETS> 488,498
<CURRENT-LIABILITIES> 96,986
<BONDS> 211,016
<COMMON> 33,580
0
0
<OTHER-SE> 34,502
<TOTAL-LIABILITY-AND-EQUITY> 488,498
<SALES> 257,989
<TOTAL-REVENUES> 257,989
<CGS> 217,110
<TOTAL-COSTS> 217,110
<OTHER-EXPENSES> 8,863
<LOSS-PROVISION> 1,447
<INTEREST-EXPENSE> 23,843
<INCOME-PRETAX> (94,175)
<INCOME-TAX> (3,931)
<INCOME-CONTINUING> (90,244)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (90,244)
<EPS-PRIMARY> (1.35)
<EPS-DILUTED> (1.35)
</TABLE>
