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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended February 28, 1997 or
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[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 1-11016
ALLWASTE, INC.
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 74-2427167
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
5151 SAN FELIPE, SUITE 1600
HOUSTON, TEXAS 77056-3609
(Address of Principal Executive Offices) (Zip Code)
(713) 623-8777
(Registrant's Telephone Number, Including Area Code)
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 .
--- ---
The number of shares of Common Stock of the Registrant, par value $.01
per share, outstanding at April 9, 1997 was 37,481,244.
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REPORT INDEX
<TABLE>
<CAPTION>
PART AND ITEM NO. PAGE NO.
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<S> <C>
PART I - Financial Information
Item 1 - Financial Statements
General Information ........................................................... 1
Condensed Consolidated Balance Sheets as of February 28, 1997 (unaudited)
and August 31, 1996 ....................................................... 2
Condensed Consolidated Statements of Operations for the Six and Three Months
Ended February 28, 1997 and February 29, 1996 (unaudited) .................. 3
Condensed Consolidated Statements of Cash Flows for the Six Months
Ended February 28, 1997 and February 29, 1996 (unaudited) .................. 4
Notes to Condensed Consolidated Financial Statements (unaudited) .............. 5
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations ........................................ 8
PART II - Other Information
Item 2 - Changes in Securities ................................................ 13
Item 4 - Submission of Matters to a Vote of Security Holders .................. 13
Item 6 - Exhibits and Reports on Form 8-K ..................................... 14
</TABLE>
<PAGE> 3
PART I, ITEM 1 - FINANCIAL INFORMATION
GENERAL INFORMATION
The condensed consolidated financial statements herein have been
prepared by the Company without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission (the "SEC"). As applicable under such
regulations, certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. The Company believes that the
presentation and disclosures herein are adequate to make the information not
misleading, and the financial statements reflect all elimination entries and
normal adjustments which are necessary for a fair statement of the results for
the six and three months ended February 28, 1997 and February 29, 1996.
Operating results for interim periods are not necessarily indicative of
the results for full years. It is suggested that these condensed consolidated
financial statements be read in conjunction with the consolidated financial
statements for the fiscal year ended August 31, 1996 and the related notes
thereto included in the Company's Annual Report on Form 10-K filed with the
SEC.
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ALLWASTE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
February 28, August 31,
1997 1996
------------ ----------
(Unaudited) (Audited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 995 $ 2,436
Receivables, net 75,297 75,114
Prepaid expenses 7,272 3,796
Deferred income taxes and other assets 9,448 11,170
--------- ---------
Total current assets 93,012 92,516
--------- ---------
INVESTMENTS 17,034 11,030
PROPERTY AND EQUIPMENT, at cost 248,924 248,280
Less -- Accumulated depreciation (125,975) (119,307)
--------- ---------
122,949 128,973
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GOODWILL, net of accumulated amortization 86,145 88,032
NOTES RECEIVABLE 12,248 13,517
OTHER ASSETS 3,190 3,119
--------- ---------
Total assets $ 334,578 $ 337,187
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 18,354 $ 19,250
Accrued liabilities:
Income taxes payable 457 5,383
Other 36,607 42,892
Current maturities of long-term and convertible subordinated debt 9,992 6,249
--------- ---------
Total current liabilities 65,410 73,774
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LONG-TERM DEBT, net of current maturities 98,066 87,971
CONVERTIBLE SUBORDINATED DEBT, net of current maturities 32,339 33,924
DEFERRED INCOME TAXES AND OTHER LIABILITIES 12,463 10,572
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Common Stock 399 398
Additional paid-in capital 56,090 55,699
Retained earnings 87,540 84,163
--------- ---------
144,029 140,260
Less:
Treasury Stock (17,091) (8,561)
Unearned compensation related to outstanding restricted Common Stock (638) (753)
--------- ---------
Total shareholders' equity 126,300 130,946
--------- ---------
Total liabilities and shareholders' equity $ 334,578 $ 337,187
========= =========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
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ALLWASTE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
For the Six Months Ended For the Three Months Ended
------------------------- --------------------------
February 28, February 29, February 28, February 29,
1997 1996 1997 1996
------------ ------------ ------------ -------------
<S> <C> <C> <C> <C>
REVENUES $ 190,018 $ 188,076 $ 89,111 $ 88,278
COST OF OPERATIONS 142,454 141,664 68,003 69,451
--------- --------- --------- ---------
Gross profit 47,564 46,412 21,108 18,827
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 37,006 40,341 17,869 19,552
INTEREST EXPENSE (4,760) (4,821) (2,425) (2,410)
INTEREST INCOME 480 493 220 234
OTHER INCOME (EXPENSE), net 843 728 839 528
--------- --------- --------- ---------
Income (loss) from continuing operations before
income tax provision and minority interest 7,121 2,471 1,873 (2,373)
INCOME TAX BENEFIT (PROVISION) (3,240) (1,137) (826) 994
MINORITY INTEREST, net of taxes (101) 24 (122) 22
--------- --------- --------- ---------
Income (loss) from continuing operations 3,780 1,358 925 (1,357)
Discontinued Operations
Gain on sale of glass recycling operations,
net of applicable income taxes -- 3,764 -- --
--------- --------- --------- ---------
Net income (loss) $ 3,780 $ 5,122 $ 925 $ (1,357)
========= ========= ========= =========
NET INCOME (LOSS) PER COMMON SHARE:
Continuing operations $ .10 $ .03 $ .03 $ (.03)
Discontinued operations -- .10 -- --
--------- --------- --------- ---------
Net income (loss) per common share $ .10 $ .13 $ .03 $ (.03)
========= ========= ========= =========
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 37,049 39,361 36,613 39,237
========= ========= ========= =========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
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ALLWASTE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED, IN THOUSANDS)
<TABLE>
<CAPTION>
For the Six Months Ended
------------------------
February 28, February 29,
1997 1996
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 3,780 $ 5,122
Reconciliation of net income to cash provided by operating activities:
Depreciation 13,886 14,221
Amortization 1,482 1,440
Gain on sale of glass recycling operations -- (3,764)
(Gain) loss on sale of property and equipment 367 (556)
Amortization of unearned compensation - restricted stock 115 48
Change in assets and liabilities, net of effect of acquisitions
accounted for as purchases:
Receivables, net (213) 3,741
Prepaid expenses and other current assets (1,754) (649)
Notes receivable and other assets 950 116
Accounts payable and accrued liabilities (11,574) (14,558)
Deferred income taxes and other liabilities 1,856 (918)
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Cash provided by operating activities 8,895 4,243
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CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of glass recycling operations -- 41,500
Additions to property and equipment (10,426) (19,462)
Purchase of long-term investment (6,004) (2,619)
Proceeds from sale of property and equipment 2,840 1,714
Payments for acquisitions accounted for as purchases, net of
cash acquired -- (1,034)
-------- --------
Cash provided by (used in) investing activities (13,590) 20,099
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuances of Common Stock 438 424
Net increase (decrease) in revolving credit facility 10,220 (22,185)
Net increase (decrease) in other long term borrowings 2,085 (930)
Purchases of convertible subordinated debentures (17) --
Increases in Treasury Stock (9,068) (2,800)
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Cash provided by (used in) financing activities 3,658 (25,491)
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EFFECT OF EXCHANGE RATE CHANGES (404) (255)
-------- --------
DECREASE IN CASH AND CASH EQUIVALENTS (1,441) (1,404)
CASH AND CASH EQUIVALENTS, beginning of period 2,436 4,029
-------- --------
CASH AND CASH EQUIVALENTS, end of period $ 995 $ 2,625
======== ========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
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ALLWASTE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) Significant Accounting Policies --
The condensed consolidated financial statements include the accounts of
Allwaste, Inc. and its subsidiaries (the "Company"). There have been no
significant changes in the accounting policies of the Company during the
periods presented. For a description of these policies, see Note 1 of Notes to
Consolidated Financial Statements in the Company's Annual Report on Form 10-K
for the fiscal year ended August 31, 1996. Certain prior period amounts have
been reclassified to conform with the current period presentation.
(2) Acquisitions and Investments --
On January 31, 1997, the Company exercised warrants to purchase
additional shares of the Safe Seal Company, Inc. ("Safe Seal"). Consideration
for this increase in the investment from 10% to 36.5% included three
subordinated notes totaling $3.3 million and cash of $0.6 million. The Company
now owns 2,252,079 shares of common stock and 20,000 shares of redeemable Class
A preferred stock of Safe Seal for a total investment of $6.6 million. The
Company is in the process of determining the excess of its investment over the
fair market value of the underlying assets. Neither the excess of investment
over the fair market value of assets nor the corresponding amortization will be
material to the consolidated financial statements. The Company appropriately
changed its method of accounting for the investment from the cost method to the
equity method. The effect of this change on the Company's prior periods is
immaterial and accordingly has not been restated. The Company also guarantees
$14.8 million of indebtedness for Safe Seal and its affiliates.
(3) Income Taxes --
With respect to continuing operations, income tax provisions for interim
periods are estimated based on projections of the annual effective tax rates.
Certain assumptions have been made in this regard in estimating the effective
tax rate for fiscal 1997, the outcome of which may not be resolved until the
end of the fiscal year. The effective tax rate of 46% for the six months ended
February 28, 1997 reflects the estimated U.S. federal and state income taxes
and foreign taxes on the earnings of the Company's foreign subsidiaries.
Deferred tax assets and liabilities are determined based on the
estimated future tax effects of differences between the financial statement and
tax bases of assets and liabilities. On the accompanying Condensed Consolidated
Balance Sheets, deferred tax assets and liabilities are netted within each tax
jurisdiction. The following table sets forth the gross deferred tax assets
(liabilities) recorded (in thousands):
<TABLE>
<CAPTION>
February 28, August 31,
1997 1996
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<S> <C> <C>
Current deferred tax assets $ 7,894 $ 8,681
Non-current deferred tax assets 3,448 3,383
Valuation allowance (1,230) (1,230)
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Total deferred tax assets 10,112 10,834
-------- --------
Non-current deferred tax liabilities $(15,113) $(13,238)
-------- --------
Net deferred tax liabilities $ (5,001) $ (2,404)
======== ========
</TABLE>
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The components of the net deferred tax assets (liabilities) are as
follows (in thousands):
<TABLE>
<CAPTION>
February 28, August 31,
1997 1996
------------ ----------
<S> <C> <C>
Depreciation and amortization $(17,256) $(15,753)
Financial reserves and accruals
not yet deductible 12,255 13,349
-------- --------
Total $ (5,001) $ (2,404)
======== ========
</TABLE>
4) Net Income (Loss) Per Common Share --
Net income (loss) per common share has been computed based on the
weighted average number of shares of Common Stock and Common Stock equivalents
outstanding. The calculation of fully-diluted net income per common share is
not materially different from the primary calculation. The following table
presents the primary weighted average number of shares outstanding for the six
and three months ended February 28, 1997 and February 29, 1996 (in thousands).
<TABLE>
<CAPTION>
For the Six Months Ended For the Three Months Ended
------------------------- --------------------------
February 28, February 29, February 28, February 29,
1997 1996 1997 1996
------------ ------------ ------------ -------------
<S> <C> <C> <C> <C>
Common shares outstanding, beginning
of fiscal period 39,799 39,609 39,799 39,609
Weighted average number of common shares
outstanding:
Stock options, treasury stock method 219 95 370 --
Purchased companies -- 24 -- 25
Exercise of stock options 12 78 22 117
Treasury stock and other, net (2,981) (445) (3,578) (514)
------ ------ ------ ------
Total weighted average common shares
outstanding 37,049 39,361 36,613 39,237
====== ====== ====== ======
</TABLE>
(5) Long-Term Debt --
The Company's long-term debt consists of a revolving credit agreement
with a group of banks. The agreement, as last amended in January 1997, provides
for an unsecured $160 million revolving line of credit to the Company through
January 31, 1999, at which time any outstanding borrowings convert to a term
loan due in equal quarterly installments through January 31, 2003. At April 9,
1997, after utilizing $32.4 million of the credit facility for letters of
credit to secure certain insurance obligations and performance bonds, available
borrowing capacity under this agreement was $30.3 million. Management believes
that the Company is in compliance with all applicable covenants under the
revolving credit agreement as of February 28, 1997. Borrowing availability is
subject to the Company maintaining certain minimum financial ratios as set
forth in the agreement.
(6) Incentive Plans --
On October 26, 1995, the Company's Board of Directors adopted a limited
single-purpose incentive plan for certain key employees. Pursuant to this plan,
each participating key employee that purchased shares of the Company's Common
Stock, based on a designated percentage of his annual salary, was granted a
number of shares of restricted Common Stock equal to two times the number of
the shares purchased and an option to purchase a number of shares of Common
Stock equal to four times the number of shares purchased. Shares of Common
Stock issued under this incentive plan were treasury shares. At February 28,
1997, 206,826 shares of restricted Common Stock and options to purchase 423,464
shares of Common Stock had been granted in
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<PAGE> 9
connection with this incentive plan. The Company does not contemplate that any
additional restricted shares will be issued under the incentive plan or that
any options to purchase shares of Common Stock will be granted in connection
with the plan.
The value of restricted shares awarded under this incentive plan through
February 28, 1997 was $0.9 million. These amounts were recorded as unearned
compensation related to outstanding restricted stock and are shown as a
separate component of Shareholders' Equity. Unearned compensation is being
amortized to expense over a four-year vesting period and amounted to $0.2
million and $0.1 million for the six and three months ended February 28, 1997,
respectively.
Effective September 1, 1996, in connection with the implementation of
the Economic Value Added ("EVA(R)") integrated management system, the
Compensation Committee of the Board of Directors approved the adoption of the
Allwaste EVA Incentive Compensation Plan (the "EVA Plan"). The EVA Plan governs
incentive compensation available to the Company's executive officers and other
key employees. Under the EVA Plan, eligible participants are entitled to
receive incentive payments based on their meeting or exceeding certain
thresholds as established by the Compensation Committee in the case of
executive management and by executive management in the case of other
participants. A portion of each fiscal years awards (generally, one-third)
carry forward to the following year and are added to incentive awards earned
for that fiscal year.
(7) Discontinued Operations --
In September 1995, the Company sold its glass recycling operations to
Strategic Holdings, Inc. ("SHI"), a company formed by Equus II, Incorporated
("Equus"). In October 1996, the Company and Equus finalized an agreement with
respect to certain post-closing issues which were unresolved on the date of the
sales transaction. The total consideration, as adjusted, was $56.1 million,
including $41.5 million in cash, $8.0 million of redeemable Series A preferred
stock redeemable beginning in 2002, and a $6.6 million subordinated note
receivable due in 2002. The redeemable Series A preferred stock dividend is
$.065 per share for the period prior to September 1, 1996 and $.06 per share
thereafter. The subordinated note receivable interest rate is 11% for the
period prior to September 1, 1996 and 10.5% thereafter. The agreement also
provided that all dividends and interest due prior to August 31, 1997 will not
be paid when due, but "paid in kind" in the form of two 8.036% subordinated
notes issued September 30, 1996 and June 30, 1997 in the amounts of $1.3
million and $0.9 million, respectively. Principal on these two notes will be
due on November 30, 2002. At February 28, 1997, the Company had accrued $0.8
million for dividends and $1.1 million for interest which is reflected in other
income (expense) in the accompanying Consolidated Statements of Operations. The
Company also received warrants to purchase shares of SHI common stock,
providing the Company the right to own up to approximately 33% of the
outstanding stock of SHI. The Company may receive additional consideration in
the form of an adjustment to the purchase price in the event that Equus'
internal rate of return, as defined, exceeds certain predetermined targets. The
amount of such additional consideration, if any, is not presently determinable.
The Company recorded a gain on the sale of its glass recycling operations of
$3.8 million, net of applicable income taxes of $1.6 million, in the first
quarter of fiscal 1996.
(8) Subsequent Events --
On March 6, 1997, the Company announced that a definitive agreement had
been reached to merge with Philip Environmental Inc. ("Philip"). The Agreement
is subject to stockholder approval, regulatory approvals and certain other
conditions. Upon receiving such approvals and the satisfaction of such
conditions, the Company will become an indirect wholly-owned subsidiary of
Philip. Under the terms of the agreement, each share of Allwaste Common Stock
will be exchanged for 0.611 shares of Philip common stock.
Subsequent to February 28, 1997, the Company has issued 79,904 shares of
its Common Stock and 959,277 shares of treasury stock in exchange for $7.6
million of convertible subordinated notes which were issued as partial
consideration to former owners of certain acquired businesses. In addition, the
Company has issued 267,538 shares of its Common Stock on exercise of certain
stock options.
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<PAGE> 10
ALLWASTE, INC. AND SUBSIDIARIES
PART I, ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
For supplemental information, it is suggested that "Management's
Discussion and Analysis of Financial Condition and Results of Operations" be
read in conjunction with the corresponding section included in the Company's
Annual Report on Form 10-K for the fiscal year ended August 31, 1996.
Additionally, certain prior period amounts have been reclassified to conform
with the current period presentation.
RESULTS OF OPERATIONS
Allwaste, Inc. provides integrated industrial and environmental services
and acts as an outsourcing provider of on-site facility processes and services,
primarily in the United States, Canada, Mexico, and Austria. With the
completion of the sale of the Company's glass recycling operations in September
1995, the Company combined the prior industry segments of environmental
services and container services into a single industrial services operation.
Net income (loss) from continuing operations for the six and three months
ended February 28, 1997 was $3.8 million and $0.9 million, respectively,
compared with $1.4 million and ($1.4) million, respectively, for the same
periods in fiscal 1996. Net income (loss) per common share from continuing
operations was $.10 and $.03 for the six and three month periods ended February
28, 1997, respectively, and $.03 and ($.03), respectively, for the same prior
year periods.
The Company's revenues for the six and three months ended February 28,
1997 increased to $190.0 million and $89.1 million, respectively, compared with
$188.1 million and $88.3 million, respectively, in the six and three months
ended February 29, 1996. The increases of 1% were predominately internally
generated. The Company's revenue growth was 4% for the six and three months
ended February 28, 1997, excluding certain less profitable scaffolding and
transportation services which were sold or purposefully downsized. The Company's
excavation/remediation activities benefited from a continued increase in pulp
and paper and quarry work through the second quarter of fiscal 1997. Increased
demand for services provided to the Canadian and United States auto industries,
increased demand for container services and continuing increased demand for the
Company's services by the offshore oil and gas exploration industry in the Gulf
of Mexico area also contributed to this growth. As part of its AllQuest program,
the Company has focused on developing new outsourcing and co-sourcing
opportunities which created revenue increases in the six and three month periods
ended February 28, 1997 of $2.4 million and $1.0 million, respectively. These
revenue increases were predominately offset by decreases in revenue generated by
the Company's operations that service the Pacific and Gulf coast refining and
petrochemical industries, which continue to be affected by indefinitely
postponed significant project work.
Gross operating profit increased to $47.6 million and $21.1 million,
respectively, in the six and three months ended February 28, 1997, from $46.4
million and $18.8 million, respectively, in the six and three months ended
February 29, 1996. Gross operating profit, as a percentage of revenues,
remained constant at 25% for the first six months of fiscal 1997 compared with
the same prior year period and increased 3% to 24% in the second quarter of
fiscal 1997 compared to the second quarter of fiscal 1996. The Company
experienced increases in gross profit in a majority of its industry sectors.
This improvement was generally attributable to the implementation of cost
reduction initiatives adopted in the first half of fiscal 1996. This plan
focused on improvement of profitability, the creation of shareholder value and
enhanced efforts to provide more cost-effective, value-added service to the
Company's large industrial customer base. The Company's container services line
particularly benefited from its cost reduction initiatives implemented in the
second quarter of fiscal 1996. Gross operating profit, as a percentage of
revenues, was also improved by the contraction and/or divestiture of lower
margin businesses subsequent to the second quarter of fiscal 1996.
Selling, general and administrative ("SG&A") expenses, as a percentage of
revenues, decreased 2% to 19% in the six months ended and 2% to 20% in the three
months ended February 28, 1997. SG&A expenditures decreased by $3.3 million and
$1.7 million for the six and three months ended February 28, 1997, respectively,
compared with the same periods in fiscal 1996. A significant portion of the
improvement was attributable to the cost reduction initiatives adopted in the
first half of fiscal 1996. The Company incurred severance costs related to this
plan of $1.1 million in the first half of 1996. Excluding the effect of these
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<PAGE> 11
severance costs, SG&A expenditures decreased by $2.1 million in the first half
of fiscal 1997 and by $1.1 million in the second quarter of fiscal 1997
compared with the same prior year periods.
Interest expense remained constant at $4.8 million and $2.4 million in
the six and three months ended February 28, 1997, respectively, compared with
the same periods in fiscal 1996.
Interest income and other income (expense) net was $1.3 million and $1.1
million in the six and three months ended February 28, 1997, respectively,
compared with $1.2 million and $0.8 million in the six and three months ended
February 29, 1996, respectively. The income was primarily related to interest
and dividends of $0.4 million earned on the subordinated note receivable and
the preferred stock acquired in the sale of the Company's glass recycling
operations and the favorable settlement of a lawsuit relating to a previously
divested business offset by losses recognized on sales of property and
equipment.
The Company's effective income tax rates for the six months ended
February 28, 1997 and February 29, 1996 were 46%. The effective tax rate was
higher than the statutory federal rate of 35% primarily due to the effect of
the nondeductibility of a portion of meal and entertainment expenses, the
nondeductible amortization of a portion of the Company's goodwill, state income
taxes and Canadian earnings which are taxed at a higher statutory rate.
LIQUIDITY AND CAPITAL RESOURCES
At the end of the second quarter of fiscal 1996, the Company embarked on a
program to more strategically manage its capital resources. The program
culminated in the implementation of the Economic Value Added ("EVA(R)")
integrated management system in September 1996. The Company's EVA management
system recognizes enhanced capital management through a cost of capital charge
in its measurement of operating results.
Net cash provided by the Company's operating activities was $8.9 million
during the six months ended February 28, 1997, compared with $4.2 million for
the same prior year period. Overall, the improvement in cash provided by
operating activities was due to the increase in net income from continuing
operations and from a continuing focus on working capital management. For the
six months ended February 28, 1997, the Company had net income of $3.8 million,
which included $15.4 million in depreciation and amortization. For the same
period in fiscal 1996, net income was $5.1 million, which included $15.7
million in depreciation and amortization and a gain on the sale of the
Company's glass recycling operation of $3.8 million in the first quarter of
fiscal 1996.
Net working capital was $27.6 million at February 28, 1997 compared with
$28.6 million at February 29, 1996. The Company's current ratio was 1.4 to 1
at February 28, 1997 and February 29, 1996.
The Company used cash of $13.6 million in investing activities in the six
months ended February 28, 1997, compared with cash of $20.1 million provided in
the six months ended February 29, 1996. This use of cash was primarily
attributable to capital expenditures of $10.4 million compared with $19.5
million of capital expenditures in the same prior year period. The Company was
able to reduce its capital spending in the first half of fiscal 1997 primarily
due to increased monitoring of equipment utilization, transfers of
underutilized owned equipment from lower volume, lower margin locations to
higher volume, higher margin locations and the use of short-term equipment
rentals. Expenditures for the remainder of fiscal 1997 are anticipated to be
approximately $10.5 million. The Company's fiscal 1997 capital expenditure
program will be funded from cash flows from operating activities.
The Company paid $2.6 million in the first quarter of 1996 to acquire a
10% interest in The Safe Seal Company, Inc. ("Safe Seal") which specializes in
valve repair and leak sealing. The Company increased its investment by an
additional $3.9 million in the second quarter of fiscal 1997, which consisted of
$0.6 million of cash and $3.3 million of subordinated notes, which increased its
interest in Safe Seal to 36.5%. The Company paid $1.7 million in the first
quarter of fiscal 1997 for an additional cash investment in the Company's
previously owned glass recycling operation.
In the six months ended February 28, 1997, the Company provided cash from
financing activities of $3.7 million, compared with cash used of $25.5 million
in the same prior year period. The Company's total short-term and long-term
debt increased by $12.3 million to $140.4 million at February 28, 1997 from
$128.1 million at August 31, 1996. Included in the aforementioned long-term
debt, the Company's revolving credit facility increased by $10.2 million to
$98.0 million at February 28, 1997 from $87.8 million at August 31, 1996.
Significant factors contributing to these
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<PAGE> 12
increases included a large tax payment attributable to the sale in fiscal 1995
of the Company's glass recycling division, $7.7 million used to repurchase
shares of the Company's Common Stock, the issuance of $3.3 million in
subordinated notes and $0.6 million in cash used to increase the Company's
interest in Safe Seal.
In July 1995, the Board of Directors authorized the Company to
repurchase, over a two year period, up to 5,000,000 shares of the Company's
Common Stock, either on the open market or in privately negotiated
transactions. During the six months ended February 28, 1997, the Company spent
$7.7 million to repurchase 1,649,500 shares of its Common Stock at an average
cost of $4.67 per share. Subsequent to February 28, 1997, the Company has
repurchased no additional shares of its Common Stock. As of February 28, 1997,
3,725,400 shares of Common Stock had been repurchased under the plan at an
average cost of $4.54 per share.
The Company's long-term debt consists of a revolving credit agreement
with a group of banks. The agreement, as last amended in January 1997, provides
for an unsecured $160 million revolving line of credit to the Company through
January 31, 1999, at which time any outstanding borrowings convert to a term
loan due in equal quarterly installments through January 31, 2003. At April 9,
1997, after utilizing $32.3 million of the credit facility for letters of
credit to secure certain insurance obligations and performance bonds, available
borrowing capacity under this agreement was $30.3 million. Borrowing
availability is subject to the Company maintaining certain minimum financial
ratios as set forth in the agreement. The Company believes that its cash flow
provided by operating activities and available funds under its revolving credit
agreement are adequate to fund its financing needs.
Management believes it has adequate capital resources available from
internally generated funds and from the Company's revolving credit agreement to
meet anticipated working capital needs, planned capital expenditures and to take
advantage of new opportunities requiring capital.
ENVIRONMENTAL PROCEEDINGS
In November 1996, the West Virginia Division of Environmental Protection
(the "West Virginia DEP") issued a draft consent order against one of the
Company's subsidiaries, which order seeks to impose an aggregate of
approximately $229,000 in fines against the Company relating to a
transportation-related spill in West Virginia in November 1995. The Company
voluntarily remediated this spill in December 1995. The draft consent order
alleges that in remediating the spill, the Company did not comply with certain
technical West Virginia DEP remediation regulations relating to recordkeeping
and generator requirements. The Company believes that the West Virginia DEP
remediation regulations cited by the West Virginia DEP as the basis of this
draft consent order are not relevant in the context of an emergency spill
response. Therefore, the Company believes that it may be able to successfully
negotiate the imposition by the West Virginia DEP of significantly lower
penalties in the final consent order. The Company is actively negotiating the
draft consent order with the West Virginia DEP and does not believe that the
final consent order will have a material adverse effect on the Company's
results of operations or financial position.
FLUCTUATIONS IN RESULTS OF OPERATIONS
Certain customers have varying levels of demand for the Company's
services based on the time of the year. Most of the Company's service lines
tend to be slowest in the winter (the Company's second fiscal quarter) and
summer (the Company's fourth fiscal quarter) months. Services provided to
electric utility customers are typically performed in the fall and spring when
demand for electricity is reduced and maintenance work can be performed more
efficiently. Likewise, services provided to refining and petrochemical
customers tend to be greater in the fall and spring when most planned
turnarounds at customer plants occur. In addition, the Company's acquisition
program can affect not only future results and rates of growth but also
previously reported results because of restatements if acquisitions are
accounted for as poolings-of-interests.
The impact of inflation on the Company has been minimal.
-10-
<PAGE> 13
OUTLOOK FOR 1997
On March 6, 1997, the Company announced that a definitive agreement had
been reached to merge with Philip Environmental Inc. ("Philip"). The Agreement
is subject to stockholder approval, regulatory approvals and certain other
conditions. Upon receiving such approvals and the satisfaction of such
conditions, the Company will become an indirect wholly-owned subsidiary of
Philip. Under the terms of the agreement, each share of Allwaste Common Stock
will be exchanged for 0.611 shares of Philip common stock.
The Company has clearly defined the industrial customer as the focus of
its business strategy. The Company's fiscal 1996 sale of its glass recycling
operations has allowed it to narrow its focus on providing services to the
industrial customer and provide additional capital for expansion of this core
business and developing opportunities independently or through partnering
arrangements in the areas of water and wastewater management, energy services,
contract labor services and, through its investment in The Safe Seal Company,
Inc., leak sealing and valve restoration services. The Company will continue to
evaluate its complement of services offered and allocate capital accordingly.
The Company has historically focused on achieving growth through
acquisitions; however, in recent years, the Company has placed added emphasis
on increased internal growth. Although the Company will continue to focus on
internal growth, it does intend to evaluate acquisitions that fit its strategic
goals. The Company has focused on realizing increased internal growth primarily
by developing new outsourcing and co-sourcing opportunities with its customers
and expanding the number of service lines offered to customers by each of its
operating locations, providing solution-oriented and preventive services that
focus on improving customer efficiency and profitability, transferring
technology and knowledge among the Company's various operating locations,
implementing national marketing programs that target major industries served by
the Company, introducing services in new geographic areas and developing
services that address environmental concerns associated with new products. The
Company's ALLIES(R) program stresses collaboration between the Company and its
customers by focusing on creating flexible and innovative solutions to a
customer's problems and emphasizing the Company's services as an
economically-efficient outsourcing alternative that can maximize a customer's
competitive role in the emerging global market.
The Company is also focusing on cost control and gross margin expansion
through fiscal 1997. The Company intends to implement selected price increases
when market conditions permit and as a by-product of value-added selling
efforts. The Company anticipates savings resulting from the cost reduction in
fiscal 1996 and ongoing cost-reduction initiatives to positively affect its
results of operations in fiscal 1997.
A significant amount of the Company's revenues from its services are
generated on an as needed basis or from irregularly scheduled customer
turnarounds, outages and shutdowns. Although the Company may be chosen as the
vendor of choice, turnarounds, outages and shutdowns may, at the election of
the customers, be deferred or canceled without penalty. The Company is also
affected by business cycles experienced by its industrial customer bases and by
changes in environmental laws and regulations or by changes in the
interpretation or enforcement of such laws and regulations. The Company's
customers have a significant capacity in the short-term to defer industrial
cleaning, maintenance and disposal services. Deferrals can occur either due to
a reduction in maintenance or capital funds, customer budget restraints or,
conversely, increased demand for a customer's products that make it impractical
to perform cleaning and maintenance on anticipated schedules. These factors
make it difficult to predict, from quarter to quarter, the demand for the
Company's services.
NEW FINANCIAL ACCOUNTING STANDARDS
In March 1995, the Financial Accounting Standards Board issued SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of" which is effective for years beginning after December
15, 1995 (fiscal 1997 for the Company). This statement established criteria for
recognizing, measuring and disclosing impairments of long-lived assets,
identifiable intangibles and goodwill. The Company has adopted SFAS No. 121
effective in fiscal year 1997. Management does not expect that the adoption
will have a material effect on the Company's financial position or results of
operations.
In October 1995, the Financial Accounting Standards Board issued SFAS No.
123, "Accounting for Stock-Based Compensation" which is effective for years
beginning after December 15, 1995 (fiscal 1997 for the Company). This statement
allows entities to choose between a new fair value based method of accounting
for employee stock options or
-11-
<PAGE> 14
similar equity instruments and the current intrinsic value-based method of
accounting prescribed by Accounting Principles Board Opinion No. 25. Entities
electing to remain with the accounting in APB Opinion No. 25 must make pro
forma disclosures of net income and earnings per share as if the fair value
method of accounting had been applied. The Company expects to continue
accounting for employee stock options and similar equity instruments in
accordance with APB Opinion No. 25. The pro forma effect for fiscal 1996 has
not yet been determined.
In February 1997, the Financial Standards Accounting Board issued SFAS
No. 128, "Earnings per Share" which is effective for years ending after
December 15, 1997 (fiscal 1998 for the Company). This statement specifies the
computation, presentation, and disclosure requirements for earnings per share
("EPS") for entities with publicly held common stock or potential common stock
in order to simplify the computation of EPS and to make the U.S. standards
comparable to international EPS standards. The Company will adopt SFAS No. 128
in the first quarter of fiscal 1998. Upon adoption, all prior period earnings
per share data presented must be restated to conform with the new statement.
Management does not expect that the adoption will have a material effect on the
Company's EPS calculation.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
Certain sections of this Report, specifically the section captioned
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," may include "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995 relating to management's
current expectations regarding the future results of operations or financial
condition of the Company. These forward-looking statements may be identified by
the use of forward-looking terminology such as "may," "will," "believe,"
"anticipate," "should," or comparable terms or the negative thereof. These
statements are based solely on data currently available, which data is subject
to change as a result of changes in conditions and should not therefore be
viewed as assurance regarding the Company's future performance. These
statements involve risks and uncertainties that could cause the actual results
to differ materially from those described in the statements. In addition to the
risks and uncertainties specifically described in the section captioned
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Outlook for 1997," these forward-looking statements may also be
affected by the following risks and uncertainties: the effect of economic and
market conditions; the impact of costs, insurance recoveries and governmental,
judicial and other third party interpretation and determination in connection
with legal and environmental proceedings; and the impact of current, pending or
future legislation or regulations (collectively, the "Cautionary Statements").
Although the Company believes that the expectations reflected in any
forward-looking statements contained herein are reasonable, it can give no
assurance that such expectations will prove to have been correct. All
subsequent written and oral forward looking statements attributable to the
Company or persons acting on its behalf are expressly qualified in their
entirety by the Cautionary Statements contained herein.
-12-
<PAGE> 15
ALLWASTE, INC. AND SUBSIDIARIES
PART II
ITEM 2 - CHANGES IN SECURITIES
The Company did not sell any unregistered securities during the second
quarter of fiscal 1997.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On January 17, 1997, the Company held its annual meeting of stockholders.
At the meeting, the stockholders voted on the following matters:
To elect three Class I directors of the Company to hold office until the
third succeeding annual meeting of stockholders after their election (the 2000
Annual Meeting) or until their successors have been duly elected and qualified.
The proposal received the affirmative vote required for approval. The
number of votes cast for, against and withheld, as well as the number of
abstentions and broker non-votes, as to the proposal were as follows:
<TABLE>
<CAPTION>
Affirmative Negative Votes Broker
Proposal Votes Votes Abstentions Withheld Non-Votes
- -------- ----------- -------- ----------- -------- ---------
1. Election of Directors
<S> <C> <C> <C> <C> <C>
Michael A. Baker 29,688,353 N/A N/A 724,237 None
R. L. Nelson, Jr. 29,642,303 N/A N/A 770,287 None
Frank A. Rossi 29,678,353 N/A N/A 737,237 None
</TABLE>
In addition to the three directors listed in Proposal 1 who were elected
at the 1997 Annual Meeting, the following directors' terms of office continued
after the meeting and will continue through the annual meeting of stockholders
as indicated:
<TABLE>
<CAPTION>
Term through
Name Annual Meeting of
---- -----------------
<S> <C>
Robert L. Knauss 1998
T. Michael Young 1998
Robert M. Chiste 1998
Thomas J. Tierney 1999
William E. Haynes 1999
John U. Clarke 1999
</TABLE>
-13-
<PAGE> 16
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
Exhibit
No. Description
--- -----------
3.1 -- Amended and Restated Certificate of Incorporation of
Allwaste, Inc. ("Allwaste"), effective February 22, 1990.
(Exhibit 3.1 to the Allwaste Quarterly Report on Form 10-Q (File
No. 0-15217) for the fiscal quarter ended February 28, 1990 is
hereby incorporated by reference.)
3.2 -- Corrected Bylaws of Allwaste (Exhibit 3.2 to the Allwaste
Annual Report on Form 10-K (File No. 1-11008) for the fiscal
year ended August 31, 1992, filed November 27, 1992 (the "1992
10-K"), is hereby incorporated by reference.)
3.3 -- Certificate of Designation of Series One Junior Participating
Preferred Stock of Allwaste, Inc., effective November 19, 1996.
(Exhibit 3.3 to the Allwaste Annual Report on Form 10-K for the
fiscal year ended August 31, 1996 (the "1996 10-K") is hereby
incorporated by reference.)
4.1 -- Specimen Common Stock certificate (Exhibit 4.1 to the
Allwaste Quarterly Report on Form 10-Q (File No. 1-11016) for
the fiscal quarter ended February 29, 1996 (the "February 10-Q")
is hereby incorporated by reference.)
4.2 -- Specimen debenture certificate (Exhibit 4.2 to the 1992 10-K
is hereby incorporated by reference.)
4.3 -- Form of Indenture between Allwaste and Texas Commerce Trust
Company of New York dated June 1, 1989, relating to certain
debentures of Allwaste. (Exhibit 4.1 to the Allwaste Quarterly
Report on Form 10-Q (File No. 0-15217) for the fiscal quarter
ended May 31, 1989 is hereby incorporated by reference.)
4.4 -- Stockholder Rights Agreement dated August 5, 1996, between
Allwaste and American Stock Transfer & Trust Company as Rights
Agent. (Exhibit 1 to the Allwaste, Inc. Registration Statement
on Form 8-A, filed November 14, 1996, is hereby incorporated by
reference.)
10.1 -- Employment Agreement dated October 23, 1986, between R.L.
Nelson, Jr. and Allwaste. (Exhibit 10.1 to the Allwaste Annual
Report on Form 10-K (File No. 1-11008) for the fiscal year ended
August 31, 1994, filed November 29, 1994 (the "1994 10-K"), is
hereby incorporated by reference.)
10.2 -- Employment Agreement dated October 17, 1994, between Robert
M. Chiste and Allwaste. (Exhibit 10.6 to the 1994 10-K is hereby
incorporated by reference.)
10.3 -- Allwaste Amended and Restated 1989 Replacement Non-Qualified
Stock Option Plan. (Exhibit A to the Allwaste proxy statement
relating to its 1995 annual meeting of stockholders, filed
December 20, 1994, is hereby incorporated by reference.)
10.4 -- Allwaste, Inc. Target 2000: One, Two, Four Plan. (Exhibit
10.4 to the Allwaste Quarterly Report on Form 10-Q (File No.
1-11008) for the fiscal quarter ended February 29, 1996 (the
"February 10-Q") is hereby incorporated by reference.)
10.5 -- Allwaste Employee Retirement Plan. (Exhibit 4.3 to the
Post-Effective Amendment No. 1 to Registration Statement on Form
S-8 (File No. 33-37684), filed August 7, 1995, is hereby
incorporated by reference.)
-14-
<PAGE> 17
10.6 -- Credit Agreement dated as of November 30, 1993, as amended,
by and among Allwaste, the financial institutions signatory
thereto, and Texas Commerce Bank National Association, a
national banking association, as Agent. (Exhibit 10.10 to the
1994 10-K is hereby incorporated by reference.)
10.7 -- Agreement and First Amendment to Credit Agreement dated
January 21, 1994, by and among Allwaste, the financial
institutions signatory thereto, and Texas Commerce Bank National
Association, a national banking association, as Agent. (Exhibit
10.7 to the February 10-Q is hereby incorporated by reference.)
10.8 -- Agreement and Second Amendment to Credit Agreement dated
March 20, 1994, by and among Allwaste, the financial
institutions signatory thereto, and Texas Commerce Bank National
Association, a national banking association, as Agent. (Exhibit
10.8 to the February 10-Q is hereby incorporated by reference.)
10.9 -- Agreement and Third Amendment to Credit Agreement dated May
31, 1994, by and among Allwaste, the financial institutions
signatory thereto, and Texas Commerce Bank National Association,
a national banking association, as Agent. (Exhibit 10.9 to the
February 10-Q is hereby incorporated by reference.)
10.10 -- Agreement and Fourth Amendment to Credit Agreement dated
October 18, 1994, by and among Allwaste, the financial
institutions signatory thereto, and Texas Commerce Bank National
Association, a national banking association, as Agent. (Exhibit
10.10 to the February 10-Q is hereby incorporated by reference.)
10.11 -- Agreement and Fifth Amendment to Credit Agreement dated
August 31, 1995, by and among Allwaste, the financial
institutions signatory thereto, and Texas Commerce Bank National
Association, a national banking association, as Agent. (Exhibit
10.11 to the February 10-Q is hereby incorporated by reference.)
10.12 -- First Amendment to Employment Agreement dated as of October
26, 1995, between Robert M. Chiste and Allwaste. (Exhibit 10.6
to the Allwaste Annual Report on Form 10-K (File No. 1-11016)
for the fiscal year ended August 31, 1995, filed November 30,
1995 (the "1995 Form 10-K"), is hereby incorporated by
reference.)
10.13 -- Agreement and Sixth Amendment to Credit Agreement dated
February 29, 1996, by and among Allwaste, the financial
institutions signatory thereto, and Texas Commerce Bank National
Association, a national banking association, as Agent. (Exhibit
10.13 to the Allwaste Quarterly Report on Form 10-Q (File No.
1-11016) for the fiscal quarter ended May 31, 1996 (the "May
10-Q") is hereby incorporated by reference.)
10.14 -- Agreement and Seventh Amendment to Credit Agreement dated
August 1, 1996, by and among Allwaste, the financial
institutions signatory thereto, and Texas Commerce Bank National
Association, a national banking association, as Agent. (Exhibit
10.14 to the 1996 10-K is hereby incorporated by reference.)
10.15 -- First Amendment to Employment Agreement dated November 11,
1996, between R. L. Nelson, Jr. and Allwaste. (Exhibit 10.15 to
the 1996 10-K is hereby incorporated by reference.)
10.16 -- Second Amendment to Employment Agreement dated October 25,
1996, between Robert M. Chiste and Allwaste. (Exhibit 10.16 to
the 1996 10-K is hereby incorporated by reference.)
10.17 -- First Amendment to Employment Agreement dated November 11,
1996, between William L. Fiedler and Allwaste. (Exhibit 10.17 to
the 1996 10-K is hereby incorporated by reference.)
-15-
<PAGE> 18
10.18 -- Employment Agreement dated November 11, 1996, between David
E. Fanta and Allwaste. (Exhibit 10.18 to the 1996 10-K is hereby
incorporated by reference.)
10.19 -- Employment Agreement dated November 11, 1996, between T.
Wayne Wren, Jr. and Allwaste. (Exhibit 10.19 to the 1996 10-K is
hereby incorporated by reference.)
10.20 -- Employment Agreement dated November 11, 1996, between James
E. Rief and Allwaste. (Exhibit 10.20 to the 1996 10-K is hereby
incorporated by reference.)
10.21 -- Employment Agreement dated November 11, 1996, between
Michael W. Ramirez and Allwaste. (Exhibit 10.21 to the 1996 10-K
is hereby incorporated by reference.)
10.22 -- Executive Severance Agreement dated November 11, 1996,
between R. L. Nelson, Jr. and Allwaste. (Exhibit 10.22 to the
1996 10-K is hereby incorporated by reference.)
10.23 -- Executive Severance Agreement dated November 11, 1996,
between Robert M. Chiste and Allwaste. (Exhibit 10.23 to the
1996 10-K is hereby incorporated by reference.)
10.24 -- Executive Severance Agreement dated November 11, 1996,
between David E. Fanta and Allwaste. (Exhibit 10.24 to the 1996
10-K is hereby incorporated by reference.)
10.25 -- Executive Severance Agreement dated November 11, 1996,
between T. Wayne Wren, Jr. and Allwaste. (Exhibit 10.25 to the
1996 10-K is hereby incorporated by reference.)
10.26 -- Executive Severance Agreement dated November 11, 1996,
between James E. Rief and Allwaste. (Exhibit 10.26 to the 1996
10-K is hereby incorporated by reference.)
10.27 -- Executive Severance Agreement dated November 11, 1996,
between William L. Fiedler and Allwaste. (Exhibit 10.27 to the
1996 10-K is hereby incorporated by reference.)
10.28 -- Executive Severance Agreement dated November 11, 1996,
between Michael W. Ramirez and Allwaste. (Exhibit 10.28 to the
1996 10-K is hereby incorporated by reference.)
10.29 -- 1996 Interim Management Bonus Plan. (Exhibit 10.29 to the
1996 10-K is hereby incorporated by reference.)
10.30 -- Third Amendment to Employment Agreement dated November 11,
1996, between Robert M. Chiste and Allwaste. (Exhibit 10.30 to
the 1996 10-K is hereby incorporated by reference.)
10.31 -- Allwaste EVA Incentive Compensation Plan. (Exhibit 10.31 to
the 1996 10-K is hereby incorporated by reference.)
10.32 -- Agreement and Eighth Amendment to Credit Agreement dated
December 1, 1996, by and among Allwaste, the financial
institutions signatory thereto, and Texas Commerce Bank National
Association, a national banking association, as Agent. (Filed
herewith.)
10.33 -- Non-Employee Director Restricted Stock Plan. (Filed herewith.)
10.34 -- Interim Deferred Compensation Plan. (Filed herewith.)
27.1 -- Financial Data Schedule. (Filed herewith.)
(b) Reports on Form 8-K.
Allwaste, Inc. (the "Company") Current Report on Form 8-K dated March 6,
1997, filed April 4, 1997, related to the proposed merger of Philip/Atlas
Merger Corp., an indirect wholly-owned subsidiary of Philip Environmental Inc.
and the Company.
-16-
<PAGE> 19
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant, Allwaste, Inc., has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
ALLWASTE, INC.
Dated: April 11, 1997 By:
----------------------------------
T. Wayne Wren, Jr.
Senior Vice President - Chief
Financial Officer and Treasurer
-17-
<PAGE> 20
INDEX TO EXHIBITS
-----------------
EXHIBIT
NUMBER DESCRIPTION
------ -----------
10.32 -- Agreement and Eighth Amendment to Credit Agreement dated
December 1, 1996, by and among Allwaste, the financial
institutions signatory thereto, and Texas Commerce Bank National
Association, a national banking association, as Agent. (Filed
herewith.)
10.33 -- Non-Employee Director Restricted Stock Plan. (Filed herewith.)
10.34 -- Interim Deferred Compensation Plan. (Filed herewith.)
27.1 -- Financial Data Schedule. (Filed herewith.)
<PAGE> 1
EXHIBIT-10.32
AGREEMENT AND EIGHTH AMENDMENT TO CREDIT AGREEMENT
(December 1, 1996)
THIS AGREEMENT AND EIGHTH AMENDMENT TO CREDIT AGREEMENT (this
"Amendment") is made and entered into as of December 1, 1996 by and among
ALLWASTE, INC. (the "Company"), a Delaware corporation, EACH OF THE FINANCIAL
INSTITUTIONS SIGNATORY HERETO (individually, a "Bank" and collectively, the
"Banks"), TEXAS COMMERCE BANK NATIONAL ASSOCIATION ("TCB"), a national banking
association acting as agent for the Banks (in such capacity, together with its
successors in such capacity, the "Agent"), and NATIONSBANK OF TEXAS, N A., a
national banking association, as co-agent under the Credit Agreement (as
defined hereinafter) (in such capacity, the "Co-Agent").
RECITALS:
A. The Company, the Agent and the Banks have entered into a Credit
Agreement dated as of November 30, 1993 (which such Credit Agreement, as the
same may have heretofore been amended, modified, supplemented and restated from
time to time, is hereinafter called the "Credit Agreement").
B. The Company, the Agent, the Co-Agent and the Banks now desire to amend
the Credit Agreement in certain respects as provided hereinbelow.
AGREEMENTS:
NOW, THEREFORE, in consideration of the premises and the mutual
agreements, representations and warranties herein set forth, and for other good
and valuable consideration, the receipt and sufficiency of which are
acknowledged, the parties hereto do hereby agree as follows:
1. Limitation on Investments Amended. Section 6.7(j) of the Credit
Agreement is hereby amended by deleting the amount "$15,000,000" where it
appears therein and substituting therefor the amount "$20,000,000."
2. Delivery of Certificates of Existence, Good Standing, Etc. With
respect to each Guarantor, the Company hereby agrees to deliver to the Agent,
within thirty (30) days after the date hereof, certificates from the
appropriate public officials of each of the states where such Guarantor is
incorporated and conducts its business as to the continued existence, good
standing and authority to do business in those states.
3. Conditions. No part of this Amendment shall become effective until
the Company shall have delivered (or shall have caused to be delivered) to the
Agent each of the following, in Proper Form:
<PAGE> 2
(a) a certificate from the Secretary of State or other appropriate
public official of the State of Delaware as to the continued existence and good
standing of the Company in the State of Delaware;
(b) a certificate from the Secretary of State or other appropriate
public official of the State of Texas as to the qualification of the Company to
do business in the State of Texas;
(c) a certificate from the Office of the Comptroller of the State
of Texas as to the good standing of the Company in the State of Texas;
(d) a legal opinion from the general counsel for the Company and
the Current Guarantors acceptable to the Agent in its sole and absolute
discretion;
(e) certificates dated as of the date hereof of the Secretary or
any Assistant Secretary of the Company and each of the Guarantors as of the
date hereof, and such other documents and information as the Banks may request;
(f) a Consent, in Proper Form, executed by of all of the
Guarantors to the execution and delivery of this Amendment and such other
related matters as the Banks may reasonably require;
(g) a Notice of Entire Agreement and Release of Claims executed by
the Company and each of the Guarantors as of the date hereof, and
(h) the amendment fee payable to each Bank as provided in Section
2.16 of the Credit Agreement.
4. Representations True; No Default. The Company represents and warrants
that the representations and warranties contained in Section 4 of the
Credit Agreement and in the other Loan Documents are true and correct in all
material respects on and as of the date hereof as though made on and as of such
date. The Company hereby certifies that no Default or Event of Default under
the Credit Agreement or any of the other Loan Documents has occurred and is
continuing as of the date hereof.
5. Ratification. Except as expressly amended hereby, the Credit Agreement
and the other Loan Documents shall remain in full force and effect. In the
event of any conflict between this Amendment and the Credit Agreement or any of
the other Loan Documents (or any earlier modification of any of them), this
Amendment shall control. The Credit Agreement, as hereby amended, and all
rights and powers created thereby or thereunder and under the other Loan
Documents are in all respects ratified and confirmed and remain in full force
and effect.
<PAGE> 3
6. Definitions and References. Terms used herein which are defined in
the Credit Agreement or in the other Loan Documents shall have the meanings
therein ascribed to them. The term "Credit Agreement" as used in the Credit
Agreement, the other Loan Documents or any other instrument, document or
writing furnished to the Agent, the Co-Agent or any of the Banks by the
Company shall mean the Credit Agreement as hereby amended.
7. Miscellaneous. This Amendment (a) shall be binding upon and inure to
the benefit of the Company, the Banks, the Agent, the Co-Agent and their
respective successors, assigns, receivers and trustees (provided, however, that
the Company shall not assign its rights hereunder without the prior written
consent of the Agent); (b) may be modified or amended only by a writing signed
by each party; (c) SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF TEXAS AND THE UNITED STATES OF AMERICA; (d) may be
executed in several counterparts, and by the parties hereto on separate
counterparts, and each counterpart, when so executed and delivered, shall
constitute an original agreement, and all such separate counterparts shall
constitute but one and the same agreement; and (e) together with the other Loan
Documents, embodies the entire agreement and understanding between the parties
with respect to the subject matter hereof and supersedes all prior agreements,
consents and understandings relating to such subject matter. The headings
herein shall be accorded no significance in interpreting this Amendment.
IN WITNESS WHEREOF, the Company, the Banks, the Agent and the Co-Agent
have caused this Amendment to be signed by their respective duly authorized
officers, effective as of the date which first appears hereinabove.
ALLWASTE, INC.,
a Delaware corporation
By:
------------------------------
T. Wayne Wren, Senior Vice
President
ATTEST:
William L. Fiedler, Secretary
Attachments:
<PAGE> 4
Schedule I - Non-guaranteeing Subsidiaries
and Dormant Subsidiaries
<PAGE> 5
TEXAS COMMERCE BANK NATIONAL
ASSOCIATION, a national
banking association,
as a Bank and as Agent
By:
-----------------------------------
Richard L. Esdorn
Senior Vice President
<PAGE> 6
NATIONSBANK OF TEXAS, N.A.,
a national banking association,
as a Bank and as Co-Agent
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
<PAGE> 7
BANK OF AMERICA TEXAS, N.A.,
a national banking association
By:
--------------------------------
Victor N. Tekell, Vice President
<PAGE> 8
WELLS FARGO BANK (TEXAS),
NATIONAL ASSOCIATION (successor in
interest by merger to First Interstate
Bank of Texas, N.A.), a national banking
association
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
<PAGE> 9
THE BANK OF NOVA SCOTIA
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
<PAGE> 10
COMERICA BANK - TEXAS,
a Texas banking association
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
<PAGE> 11
LTCB TRUST COMPANY, a New York
Trust Company
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
<PAGE> 12
ABN AMRO BANK N.V., HOUSTON
AGENCY
By:
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Name:
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Title:
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By:
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Name:
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Title:
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EXHIBIT 10.33
ALLWASTE, INC.
NON-EMPLOYEE DIRECTOR RESTRICTED STOCK PLAN
ARTICLE I
PURPOSE
Allwaste, Inc. (the "Company") is dependent for the successful conduct
of its business on the initiative, effort and judgment of its directors. This
Non-Employee Director Restricted Stock Plan is intended to promote the
interests of the Company by providing the Board of Directors of the Company
with an incentive to increase the value of the Company's Common Stock.
ARTICLE II
DEFINITIONS
As used in the Plan, the following definitions apply to the terms
indicated below:
(a) "AWARD" shall mean a grant of Restricted Stock on an annual basis pursuant
to the terms of this Plan.
(b) "BOARD OF DIRECTORS" shall mean the Board of Directors of the Company.
(c) "COMMON STOCK" shall mean the Company's common stock, $.01 par value per
share.
(d) "FAIR MARKET VALUE" of a share of Common Stock shall mean the closing
sales price as reported on the New York Stock Exchange.
(e) "PARTICIPANT" shall mean a non-employee member of the Board of Directors
of the Company who is eligible to participate in the Plan.
(f) "PLAN" shall mean the Allwaste, Inc. Non-Employee Director Restricted
Stock Plan, as it is amended from time to time.
(g) "RESTRICTED PERIOD" shall mean the period of time for the purpose of
determining when restrictions are in effect with respect to the Restricted
Stock awarded under the Plan.
(h) "RESTRICTED STOCK" shall mean a share of Common Stock that is granted
pursuant to this Plan and that is subject to the restrictions set forth in this
Plan for so long as such restrictions continue to apply to such shares.
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ARTICLE III
EFFECTIVE DATE
The Plan shall become effective on approval by the Board of Directors
of the Company.
ARTICLE IV
ADMINISTRATION
The Plan shall be administered by the Board of Directors. The Board
of Directors shall have full authority, in its discretion, to (i) determine
which individuals are eligible to receive an Award (subject to the provisions
of Article VI), (ii) determine the number of shares to be subject to such Award
(subject to the provisions of Article VII), and (iii) determine the applicable
Restricted Periods (subject to the provisions of Article VIII). The Board of
Directors shall have such additional powers as are delegated to it by the other
provisions of the Plan. Subject to the express provisions of the Plan, this
shall include the power to construe the Plan and the respective agreements
executed thereunder, to prescribe rules and regulations relating to the Plan,
and to determine the terms, restrictions and provisions of the agreement
applicable to each Award, and to make all other determinations necessary or
advisable for administering the Plan. The Board of Directors may correct any
defect or supply any omission or reconcile any inconsistency in the Plan or in
any agreement relating to an Award in the manner and to the extent it shall
deem expedient to carry it into effect. The Board of Directors may delegate to
other persons the responsibility of performing ministerial acts in furtherance
of the Plan's purposes. The determinations of the Board of Directors on the
matters referred to in this Article shall be final and binding on all parties.
ARTICLE V
SHARES SUBJECT TO THE PLAN
The Board of Directors shall annually grant Awards to any director
determined by it to be eligible for participation in the Plan in accordance
with the provisions of Article VI hereof. Subject to Article IX hereof, the
aggregate number of shares of Restricted Stock that may be issued under the
Plan shall not exceed 500,000 shares. Shares shall be deemed to have been
issued under the Plan only to the extent actually issued and delivered pursuant
to an Award. To the extent that an Award lapses or the rights of the
Participant terminate, any shares of Restricted Stock subject to such Award
shall again be available for the grant of an Award. The stock to be offered
pursuant to the grant of an Award may be authorized but unissued Common Stock
or Common Stock previously issued and outstanding and reacquired by the
Company.
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ARTICLE VI
ELIGIBILITY
Awards may be granted only to persons who, at the time of the grant,
are non-employee directors of the Company. An Award may be granted on more
than one occasion to the same person.
ARTICLE VII
GRANT OF AWARDS
Each Participant shall receive an annual Award on the second trading
day in September equal to that number of shares of Restricted Stock whose Fair
Market Value on the first trading day in September equals $15,000. Any
fractional shares resulting from such an Award shall be rounded up to the
nearest whole share.
ARTICLE VIII
TERMS OF AWARDS
The restrictions shall lapse with respect to 25% of the shares of
Restricted Stock granted in an Award on the anniversary date one year after the
date of the Award. The restrictions shall lapse with respect to an additional
25% of the shares of Restricted Stock granted in an Award on the anniversary
date two years after the date of the Award. The restrictions shall lapse with
respect to an additional 25% of the shares of Restricted Stock granted in an
Award on the anniversary date three years after the date of the Award. The
restrictions shall lapse with respect to the final 25% of the shares of
Restricted Stock granted in an Award on the anniversary date four years after
the date of the Award.
Notwithstanding anything in this Plan to the contrary, on a Change in
Control (as defined below) any and all restrictions on Restricted Stock shall
immediately lapse. For the purposes of this Plan, Change in Control shall
mean:
(a) The acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act)
of 30% or more of either (1) the then outstanding shares of Common Stock of the
Company (the "Outstanding Company Common Stock") or (2) the combined voting
power of the then outstanding voting securities of the Company entitled to vote
generally in the election of directors (the "Outstanding Company Voting
Securities"); provided, however, that the following acquisitions shall not
constitute a Change in Control: (i) any acquisition directly from the Company
(excluding an acquisition by virtue of the exercise of a conversion privilege),
(ii) any acquisition by
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the Company, (iii) any acquisition by any employee benefit plan(s) (or related
trust(s)) sponsored or maintained by the Company or any corporation controlled
by the Company, or (iv) any acquisition by any corporation pursuant to a
reorganization, merger or consolidation, if, immediately following such
reorganization, merger or consolidation, the conditions described in clauses
(1), (2) and (3) of subsection (c) below are satisfied; or
(b) Individuals who, as of the date hereof, constitute
the entire Board of Directors of the Company (the "Incumbent Board") cease for
any reason to constitute at least a majority of the Board of Directors of the
Company; provided however, that any individual becoming a director subsequent
to the date hereof whose election, or nomination for election by the Company's
stockholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of either (1) an actual or threatened election contest (as such terms
are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act),
or an actual or threatened solicitation of proxies or consents by or on behalf
of a Person other than the Board of Directors of the Company or (2) a plan or
agreement to replace a majority of the members of the Board of Directors of the
Company then comprising the Incumbent Board; or
(c) Approval by the stockholders of the Company of a
reorganization, merger or consolidation, in each case unless, immediately
following such reorganization, merger or consolidation, (1) more than 60% of,
respectively, the then outstanding shares of common stock of the corporation
resulting from such reorganization, merger or consolidation (including, without
limitation, a corporation which as a result of such transaction owns the
Company through one or more subsidiaries) and the combined voting power of the
then outstanding voting securities of such corporation entitled to vote
generally in the election of directors is then beneficially owned, directly or
indirectly, by all or substantially all of the individuals and entities who
were the beneficial owners, respectively, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities immediately prior to such
reorganization, merger or consolidation in substantially the same proportions
as their ownership immediately prior to such reorganization, merger or
consolidation, of the Outstanding Company Common Stock and Outstanding Company
Voting Securities, as the case may be, (2) no Person (excluding the Company,
any employee benefit plan(s) (or related trusts)) of the Company and/or its
subsidiaries or any Person beneficially owning, immediately prior to such
reorganization, merger or consolidation, directly or indirectly, 30% or more of
the Outstanding Company Common Stock or Outstanding Company Voting Securities,
as the case may be, beneficially owns, directly or indirectly, 30% or more of,
respectively, the then outstanding shares of common stock of the corporation
resulting from such reorganization, merger or consolidation or the combined
voting power of the then outstanding voting securities of such corporation
entitled to vote generally in the election of directors, and (3) at least a
majority of the members of the board of directors of the corporation resulting
from such reorganization, merger or consolidation were members of the Incumbent
Board at the time of the execution of the initial agreement providing for such
reorganization, merger or consolidation; or
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(d) Approval by the stockholders of the Company of (1) a
complete liquidation or dissolution of the Company or (2) the sale or other
disposition of all or substantially all of the assets of the Company, other
than to a corporation, with respect to which immediately following such sale or
other disposition, (A) more than 60% of, respectively, the then outstanding
shares of common stock of such corporation and the combined voting power of the
then outstanding voting securities of such corporation entitled to vote
generally in the election of directors is then beneficially owned, directly or
indirectly, by all or substantially all of the individuals and entities who
were the beneficial owners, respectively, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities immediately prior to such sale
or other disposition in substantially the same proportion as their ownership,
immediately prior to such sale or other disposition, of the Outstanding Company
Common Stock and Outstanding Company Voting Securities, as the case may be, (B)
no Person (excluding the Company and any employee benefit plan (or related
trust) of the Company and/or its subsidiaries or such corporation and any
Person beneficially owning, immediately prior to such sale or other
disposition, directly or indirectly, 30% or more of the Outstanding Company
Stock or Outstanding Company Voting Securities, as the case may be,
beneficially owns, directly or indirectly, 30% or more of, respectively, the
then outstanding shares of common stock of such corporation or the combined
voting power of the then outstanding voting securities of such corporation
entitled to vote generally in the election of directors, and (C) at least a
majority of the members of the board of directors of such corporation were
members of the Incumbent Board at the time of the execution of the initial
agreement or action of the Board providing for such sale or other disposition
of assets of the Company.
Restricted Stock granted pursuant to an Award shall be represented by
stock certificates in the name of the Participant. The Participant shall have
the right to receive dividends during the Restriction Period, to vote shares of
Restricted Stock subject thereto and to enjoy all other stockholder rights,
except that (i) the Participant shall not be entitled to delivery of the stock
certificates until the Restricted Period shall have expired, (ii) the Company
shall retain custody of the stock certificates during the Restricted Period,
(iii) the Participant may not sell, transfer, pledge, exchange, hypothecate or
otherwise dispose of the shares of Restricted Stock during the Restricted
Period, and (iv) a breach by the Participant of the terms and conditions
established by the Board of Directors pursuant to the Award shall cause a
forfeiture of the Award. At the time of such Award, the Board of Directors
may, in its sole discretion, prescribe additional terms, conditions or
restrictions relating to the Award. At the time of an Award, the Participant
shall enter into an agreement with the Company, in a form specified by the
Board of Directors, agreeing to the terms and conditions of the Award and any
other matters as the Board of Directors shall in its sole discretion determine.
A Participant shall not be required to make any payment for Restricted
Stock received pursuant to an Award, except to the extent otherwise required by
law or the Board of Directors. The Board of Directors may, in its discretion,
grant an Award under this Plan in exchange for the surrender or cancellation of
options granted under another plan of the Company.
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ARTICLE IX
CORPORATE CHANGES
Awards and any agreements evidencing such Awards shall be subject to
adjustment by the Board of Directors at its discretion as to the number of
shares of Common Stock or other matters relating to such Awards in the event of
changes in the outstanding Common Stock by reason of stock dividends, stock
splits, recapitalizations, reorganizations, mergers, consolidations,
combinations, exchanges or other relevant changes in capitalization occurring
after the date of the grant of any such Awards. In the event of any such
change in the outstanding Common Stock, the aggregate number of shares
available under the Plan may be appropriately adjusted by the Board of
Directors, whose determination shall be conclusive.
Except as expressly provided in the Plan, no Participant shall have
any rights by reason of any subdivision or consolidation of shares of stock of
any class, the payment of any dividend, any increase or decrease in the number
of shares of stock of any class or any dissolution, liquidation, merger or
consolidation of the Company or any other corporation. Except as expressly
provided in the Plan, no issuance by the Company of shares of stock of any
class, or securities convertible into shares of stock of any class, shall
affect, and no adjustment by reason thereof shall be made with respect to, the
number of shares of Restricted Stock.
ARTICLE X
AMENDMENTS
The Board of Directors may amend the Plan at any time; provided that
it may not, without the approval of any affected Participant, amend the Plan to
materially decrease benefits to a Participant with respect to an Award.
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ARTICLE XI
TRANSFERS ON DEATH
On the death of a Participant, outstanding Awards made to such
Participant under the Plan may be held only by the executors or administrators
of the Participant's estate or by any person or persons who shall have acquired
such right by will or by the laws of descent and distribution. No transfer by
will or the laws of descent and distribution of any shares of Restricted Stock
shall be effective to bind the Company unless the Board of Directors shall have
been furnished with (a) written notice thereof and with a copy of the will
and/or such evidence as the Board of Directors may deem necessary to establish
the validity of the transfer and (b) an agreement by the transferee to comply
with all the terms and conditions of the Award that are or would have been
applicable to the Participant.
ARTICLE XII
MISCELLANEOUS
Neither the adoption of the Plan nor any action of the Board of
Directors shall be deemed to give any person a right to an Award or any other
rights hereunder except as may be evidenced by an Award duly executed on behalf
of the Company, and then only to the extent and on the terms and conditions
expressly set forth therein.
The Company shall be under no obligation to effect the registration
pursuant to the Securities Act of any shares of Common Stock to be issued
hereunder or to effect similar compliance under any state laws.
Notwithstanding anything herein to the contrary, the Company shall not be
obligated to cause to be issued or delivered any certificates evidencing shares
of Common Stock pursuant to the Plan unless and until the Company is advised by
its counsel that the issuance and delivery of such certificates is in
compliance with all applicable laws, regulations of governmental authority and
the requirements of any securities exchange on which shares of Common Stock are
traded. The Board of Directors may require, as a condition of the issuance and
delivery of certificates evidencing shares of Common Stock pursuant to the
terms hereof, that the recipient of such shares make such covenants, agreements
and representations, and that such certificates bear such legends, as the Board
of Directors, in its sole discretion, deems necessary or desirable.
Whenever shares of Common Stock are to be issued with respect to a
share of Restricted Stock, the Company shall have the right to require the
Participant to remit to the Company in cash an amount sufficient to satisfy
federal, state and local withholding tax requirements, if any, attributable to
such occurrence prior to the delivery of any certificate or certificates for
such shares. In lieu of remitting cash to the Company to satisfy these
withholding obligations, the Participant may (i) request that the Company
deliver the certificate representing such shares to the Participant's
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broker so that a portion of such shares may be sold to pay such taxes or (ii)
request that the Company redeem a portion of such shares for the payment of
such tax obligations, which redemption will be made solely in the discretion of
the Company. In the event that the Company elects not to redeem a portion of
such shares, the Participant must either remit cash to the Company for such tax
requirements or remit sale proceeds from a portion of such shares as provided
in subparagraph (i) in the foregoing sentence.
Nothing contained in the Plan shall confer on any person any right
with respect to service as a director of the Company.
The Company shall not be obligated to issue any shares of Restricted
Stock until there has been compliance with such laws and regulations as the
Company may deem applicable. No fractional shares of Restricted Stock shall be
delivered.
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EXHIBIT 10.34
ALLWASTE, INC.
INTERIM DEFERRED COMPENSATION PLAN
1. PURPOSE.
(a) This Allwaste, Inc. Interim Deferred Compensation Plan (the
"Plan") is intended to provide an incentive to members of the Company's
Management Council for individual and Company performance and to allow deferral
of certain bonus amounts by members of the Company's Management Council, which
is a select group of management or highly compensated employees, pursuant to
the Allwaste, Inc. Interim Management Bonus Plan for fiscal 1996.
(b) This Plan is intended to qualify for exemptions under Title I
of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")
provided for unfunded plans that are maintained primarily for the purpose of
providing deferred compensation for a select group of management or highly
compensated employees.
2. DEFINITIONS.
As used in the Plan, the following definitions apply to the terms
indicated below:
(a) "Administrative Committee" shall mean the committee appointed
by the Board of Directors of the Company designated to administer the Plan as
provided in Section 8 below.
(b) "Board of Directors" shall mean the Board of Directors of
Allwaste, Inc.
(c) "Bonus" shall mean the award payable with respect to fiscal
1996 under the Company's Interim Management Bonus Plan.
(d) "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
(e) "Common Stock" shall mean the Company's common stock, $0.01
par value per share.
(f) "Company" shall mean Allwaste, Inc., a Delaware corporation,
and each of its subsidiaries and successors.
(g) "Deferred Award" shall mean the deferral of a Participant's
entire Bonus.
(h) "Deferred Portion" shall mean 50% of the amount of a
Participant's Bonus that exceeded $5,000.
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(i) "Exchange Act" shall mean the Securities and Exchange Act of
1934, as amended from time to time.
(j) "Management Council" shall mean the Company's 18 member
management council (which includes all of the executive officers of the
Company).
(k) "Participant" shall mean a member of the Company's Management
Council as set forth on Schedule 1 hereto.
(l) "Plan" shall mean this Allwaste, Inc. Interim Deferred
Compensation Plan.
(m) "Restricted Stock" shall mean a share of Common Stock that is
granted pursuant to the terms of Section 3 hereof.
3. DEFERRED BONUS.
A Participant may elect in writing on a form provided by the Company
or Administrative Committee to defer receipt of all or a portion of such
Participant's Bonus prior to the date the Participant's Bonus is payable and
ascertainable under the terms of the Allwaste, Inc. Interim Management Bonus
Plan. Specifically, a Participant may choose one of the following three
options:
(a) Elect not to participate in this Plan, which will result in
the Deferred Portion being paid in cash to the Participant in November 1997; or
(b) Elect to defer the Deferred Portion until January 1, 1998 and
receive shares of Restricted Stock in lieu of cash, such number of shares being
equal to the amount of the Deferred Portion, divided by the closing price of
the Common Stock on the date of approval of this Plan, plus 10%; or
(c) Elect to defer the Deferred Award until January 1, 1998 and
receive shares of Restricted Stock in lieu of cash, such number of shares being
equal to the amount of the Deferred Award, divided by the closing price of the
Common Stock on the date of approval of this Plan, plus 20%.
Once an election is made under this Section 3, such election shall be
irrevocable. The Board of Directors or the Administrative Committee shall
notify a Participant of his or her right to participate in this Plan.
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4. RESTRICTED STOCK.
(a) Vesting. Upon the election by a Participant pursuant to
Section 3(b) or 3(c) above, the Company shall grant to the Participant shares
of Restricted Stock, which such grant shall be evidenced by an agreement in
substantially the form attached hereto as Exhibit A. Each grant of Restricted
Stock shall vest in full on January 1, 1998.
(b) Restrictions on Transfer Prior to Vesting. Except for
transfers resulting by operation of the laws of descent and distribution, prior
to the vesting of a share of Restricted Stock, no transfer of a Participant's
rights with respect to such share, whether voluntary or involuntary, by
operation of law or otherwise, shall vest the transferee with any interest or
right in or with respect to such share, but immediately upon any attempt to
transfer such rights, such share and all of the rights related thereto, shall
be forfeited by the Participant and the transfer shall be of no force or
effect.
(c) Issuance of Certificates. Reasonably promptly after the
election by the Participant under Section 3 with respect to shares of
Restricted Stock, the Company shall cause to be issued a stock certificate,
registered in the name of the Participant to whom such shares were granted,
evidencing such shares; provided, that the Company shall not cause to be issued
such a stock certificate unless it has received a stock power duly endorsed in
blank with respect to such shares. Each such stock certificate shall bear the
following legend:
The transferability of this certificate and the shares of stock
represented hereby are subject to the restrictions, terms and
conditions (including forfeiture and restrictions against transfer)
contained in the Allwaste, Inc. Interim Deferred Compensation Plan and
an agreement entered into between the registered owner of such shares
and Allwaste, Inc. A copy of the Plan and the agreement are on file
in the office of the secretary of Allwaste, Inc., 5151 San Felipe,
Suite 1600, Houston, Texas 77056.
Such legend shall not be removed from the certificate evidencing such shares
until such shares vest pursuant to the terms hereof. Each certificate issued
pursuant to this Section, together with the stock powers relating to the shares
of Restricted Stock evidenced by such certificate, shall be held by the
Company. The Company shall issue to the Participant a receipt evidencing the
certificates held by it which are registered in the name of the Participant.
(d) Consequences on Vesting. On the vesting of a share of
Restricted Stock pursuant to the terms hereof, the restrictions of Section 4(a)
shall cease to apply to such share. Reasonably promptly after a share of
Restricted Stock vests pursuant to the terms hereof, the Company shall cause to
be issued and delivered to the Participant to whom such shares were granted a
certificate evidencing such shares, free of the legend set forth in Section
4(c) hereof, together with any other
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property of the Participant held by the Company pursuant to Section 4(c)
hereof; provided, however, that such delivery shall be effective for all
purposes when the Company shall have deposited such certificate and other
property in the United States mail, addressed to the Participant.
(e) Effect of Voluntary Termination or Termination of Employment
For Cause. In the event of a Participant's voluntary termination of employment
or termination of employment for cause, as determined by the Company or
Administrative Committee in its sole discretion, by the Company, all shares of
Restricted Stock granted to such Participant that have not vested as of the
date of such termination shall immediately be forfeited.
(f) Effect of Involuntary Termination of Employment Without Cause
or Change in Control of the Company. In the event of the involuntary
termination of a Participant's employment by the Company without cause or a
Change in Control of the Company, all restrictions relating to the shares of
Restricted Stock granted to such Participant shall lapse as of the date of
termination. For these purposes, death and disability, as determined by the
Company or the Administrative Committee in its sole discretion, will each be
considered an event of involuntary termination of employment without cause.
For the purposes of this Plan, Change in Control shall mean:
(a) The acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange
Act (a "Person") of beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of 30% or more of either (1)
the then outstanding shares of Common Stock of the Company (the
"Outstanding Company Common Stock") or (2) the combined voting power
of the then outstanding voting securities of the Company entitled to
vote generally in the election of directors (the "Outstanding Company
Voting Securities"); provided, however, that the following
acquisitions shall not constitute a Change in Control: (i) any
acquisition directly from the Company (excluding an acquisition by
virtue of the exercise of a conversion privilege), (ii) any
acquisition by the Company, (iii) any acquisition by any employee
benefit plan(s) (or related trust(s)) sponsored or maintained by the
Company or any corporation controlled by the Company, or (iv) any
acquisition by any corporation pursuant to a reorganization, merger or
consolidation, if, immediately following such reorganization, merger
or consolidation, the conditions described in clauses (1), (2) and (3)
of subsection (c) below are satisfied; or
(b) Individuals who, as of the date hereof, constitute
the entire Board of Directors of the Company (the "Incumbent Board")
cease for any reason to constitute at least a majority of the Board of
Directors of the Company; provided however, that any individual
becoming a director subsequent to the date hereof whose election, or
nomination for election by the Company's stockholders, was approved by
a vote of at
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least a majority of the directors then comprising the Incumbent Board
shall be considered as though such individual were a member of the
Incumbent Board, but excluding, for this purpose, any such individual
whose initial assumption of office occurs as a result of either (1) an
actual or threatened election contest (as such terms are used in Rule
14a-11 of Regulation 14A promulgated under the Exchange Act), or an
actual or threatened solicitation of proxies or consents by or on
behalf of a Person other than the Board of Directors of the Company or
(2) a plan or agreement to replace a majority of the members of the
Board of Directors of the Company then comprising the Incumbent Board;
or
(c) Approval by the stockholders of the Company of a
reorganization, merger or consolidation, in each case unless,
immediately following such reorganization, merger or consolidation,
(1) more than 60% of, respectively, the then outstanding shares of
common stock of the corporation resulting from such reorganization,
merger or consolidation (including, without limitation, a corporation
which as a result of such transaction owns the Company through one or
more subsidiaries) and the combined voting power of the then
outstanding voting securities of such corporation entitled to vote
generally in the election of directors is then beneficially owned,
directly or indirectly, by all or substantially all of the individuals
and entities who were the beneficial owners, respectively, of the
Outstanding Company Common Stock and Outstanding Company Voting
Securities immediately prior to such reorganization, merger or
consolidation in substantially the same proportions as their ownership
immediately prior to such reorganization, merger or consolidation, of
the Outstanding Company Common Stock and Outstanding Company Voting
Securities, as the case may be, (2) no Person (excluding the Company,
any employee benefit plan(s) (or related trusts)) of the Company
and/or its subsidiaries or any Person beneficially owning, immediately
prior to such reorganization, merger or consolidation, directly or
indirectly, 30% or more of the Outstanding Company Common Stock or
Outstanding Company Voting Securities, as the case may be,
beneficially owns, directly or indirectly, 30% or more of,
respectively, the then outstanding shares of common stock of the
corporation resulting from such reorganization, merger or
consolidation or the combined voting power of the then outstanding
voting securities of such corporation entitled to vote generally in
the election of directors, and (3) at least a majority of the members
of the board of directors of the corporation resulting from such
reorganization, merger or consolidation were members of the Incumbent
Board at the time of the execution of the initial agreement providing
for such reorganization, merger or consolidation; or
(d) Approval by the stockholders of the Company of (1) a
complete liquidation or dissolution of the Company or (2) the sale or
other disposition of all or substantially all of the assets of the
Company, other than to a corporation, with respect to which
immediately following such sale or other disposition, (A) more than
60% of, respectively, the then outstanding shares of common stock of
such corporation and the combined
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voting power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of directors is
then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities immediately prior to
such sale or other disposition in substantially the same proportion as
their ownership, immediately prior to such sale or other disposition,
of the Outstanding Company Common Stock and Outstanding Company Voting
Securities, as the case may be, (B) no Person (excluding the Company
and any employee benefit plan (or related trust) of the Company and/or
its subsidiaries or such corporation and any Person beneficially
owning, immediately prior to such sale or other disposition, directly
or indirectly, 30% or more of the Outstanding Company Stock or
Outstanding Company Voting Securities, as the case may be,
beneficially owns, directly or indirectly, 30% or more of,
respectively, the then outstanding shares of common stock of such
corporation or the combined voting power of the then outstanding
voting securities of such corporation entitled to vote generally in
the election of directors, and (C) at least a majority of the members
of the board of directors of such corporation were members of the
Incumbent Board at the time of the execution of the initial agreement
or action of the Board providing for such sale or other disposition of
assets of the Company.
(g) Company Liability and Participant Rights. The liabilities of
the Company and the rights of the Participants under this Plan shall be those
of a debtor and creditor, respectively, and no obligations shall be deemed to
be secured by any pledge or other encumbrances on any property of the Company.
The Company's obligations under this Plan with respect to each Participant
shall constitute a liability of the Company to the Participant. Nothing herein
shall be deemed to create a trust of any kind between the Company and a
Participant or other person and no special fund will be established or any
other segregation of assets will be made to assure the Company's obligations.
No Participant or any other person shall have any interest in any particular
asset of the Company.
5. ADJUSTMENT ON CHANGES IN COMMON STOCK.
(a) Outstanding Restricted Stock. Unless the Board of Directors
in its absolute discretion otherwise determines, if a Participant receives any
securities or other property (including dividends paid in cash), with respect
to a share of Restricted Stock that has not vested as of the date of such
event, as a result of any dividend, stock split, recapitalization, merger,
consolidation, combination, exchange of shares or otherwise, such securities or
other property will not vest until such share of Restricted Stock vests and
shall be held by the Company pursuant to Section 4(c) hereof.
The Board of Directors may, in its absolute discretion, adjust any
grant of shares of Restricted Stock to reflect any dividend, stock split,
recapitalization, merger, consolidation,
6
<PAGE> 7
combination, exchange of shares or similar corporate change as the Board of
Directors may deem appropriate to prevent the enlargement or dilution of rights
of participants under the grant.
(b) No Other Rights. Except as expressly provided in the Plan, no
Participant shall have any rights by reason of any subdivision or consolidation
of shares of stock of any class, the payment of any dividend, any increase or
decrease in the number of shares of stock of any class or any dissolution,
liquidation, merger or consolidation of the Company or any other corporation.
Except as expressly provided in the Plan, no issuance by the Company of shares
of stock of any class, or securities convertible into shares of stock of any
class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number of shares of Restricted Stock.
6. RIGHTS AS A STOCKHOLDER.
No person shall have any rights as a stockholder with respect to any
shares of Common Stock covered by or relating to any grant of Restricted Stock
granted pursuant to this Plan until the date of the issuance of a stock
certificate with respect to such shares. Except as otherwise expressly
provided in Section 5 hereof, no adjustment to any Restricted Stock shall be
made for dividends or other rights for which the record date occurs prior to
the date such stock certificate is issued.
7. SECURITIES MATTERS.
The Company shall be under no obligation to effect the registration
pursuant to the Securities Act of 1933, as amended, of any shares of Common
Stock to be issued hereunder or to effect similar compliance under any state
laws. Notwithstanding anything herein to the contrary, the Company shall not
be obligated to cause to be issued or delivered any certificates evidencing
shares of Common Stock pursuant to the Plan unless and until the Company is
advised by its counsel that the issuance and delivery of such certificates is
in compliance with all applicable laws, regulations of governmental authority
and the requirements of any securities exchange on which shares of Common Stock
are traded. The Board of Directors may require, as a condition of the issuance
and delivery of certificates evidencing shares of Common Stock pursuant to the
terms hereof, that the recipient of such shares make such covenants, agreements
and representations, and that such certificates bear such legends, as the Board
of Directors, in its sole discretion, deems necessary or desirable.
8. ADMINISTRATIVE COMMITTEE.
(a) Appointment and Membership. The members of the Administrative
Committee shall serve until resignation, death or removal by the Board of
Directors. Any member of the Administrative Committee may resign at any time
by mailing written notice of such resignation
7
<PAGE> 8
to the Board of Directors. Any member of the Administrative Committee may be
removed by the Board of Directors with or without cause. Vacancies in the
Administrative Committee arising by resignation, death, removal or otherwise
shall be filled by such persons as may be appointed by the Board of Directors.
(b) Rights, Powers and Authority. The Administrative Committee
shall be responsible for the general supervision of the administration of the
Plan according to the terms and provisions of the Plan and shall have all
powers necessary to accomplish such purposes, including but not limited to, the
right, power, authority and discretion:
(1) To adopt rules and regulations for the administration
of the Plan;
(2) To construe and interpret all terms, provisions,
conditions and limitations of the Plan;
(3) To select the employees to participate in the Plan
unless such power of selection is vested elsewhere by the Company;
(4) To determine all matters relating to the
administration of the Plan (including the promulgation of forms and procedures
to Participants with respect to the payment of benefits, filing claims for
benefits under this Plan and adequate written notices of any denial of such
claims and an opportunity for a review of any such denial); and
(5) To maintain the Plan in compliance with applicable
legal requirements.
The Administrative Committee may delegate any of its powers or responsibilities
to any one or more of its members.
(c) Procedures. The Administrative Committee shall establish
appropriate procedures to conduct its operations and to carry out its rights
and duties under the Plan. These procedures shall cover meetings, quorums and
voting.
(d) Compensation and Expenses. The members of the Administrative
Committee shall serve without compensation for their services, but all expenses
of the Administrative Committee and all other expenses incurred in
administering the Plan shall be paid by the Company.
(e) Indemnification. The Company shall indemnify the members of
the Administrative Committee against the reasonable expenses, including
attorneys' fees, actually and necessarily incurred by them in connection with
the defense of any action, suit or proceeding, or in connection with any appeal
thereto, to which they or any of them may be a party by reason
8
<PAGE> 9
of any action taken or failure to act under or in connection with the Plan and
against all amounts paid by them in settlement thereof (provided such
settlement is approved by independent legal counsel selected by the Company)
and against all amounts paid by them in satisfaction of a judgment in any such
action, suit or proceeding, except in relation to matters as to which it shall
be adjudged in such action, suit or proceeding that such Administrative
Committee member is liable for fraud, deliberate dishonesty or willful
misconduct in the performance of his or her duties; provided that within 60
days after the institution of any such action, suit or proceeding an
Administrative Committee member has offered in writing to allow the Company, at
its own expense, to handle and defend any such action, suit or proceeding.
9. WITHHOLDING TAXES.
Whenever shares of Common Stock are to be issued on the occurrence of
the vesting with respect to shares of Restricted Stock, the Company shall have
the right to require the Participant to remit to the Company in cash an amount
sufficient to satisfy federal, state and local withholding tax requirements, if
any, attributable to such occurrence prior to the delivery of any certificate
or certificates for such shares. In lieu of remitting cash to the Company to
satisfy these withholding obligations, the Participant may (i) request that the
Company deliver the certificate representing such shares to the Participant's
broker so that a portion of such shares may be sold to pay such taxes, or (ii)
request that the Company redeem a portion of such shares for the payment of
such tax obligations, which redemption will be made solely in the discretion of
the Company. In the event that the Company elects not to redeem a portion of
such shares, the participant must either remit cash to the Company or such tax
requirements or remit sale proceeds from a portion of such shares as provided
in subparagraph (i) in the foregoing sentence.
10. AMENDMENT AND TERMINATION OF THE PLAN.
The Board of Directors in its sole discretion may at any time suspend
or terminate the Plan or revise or amend it in any respect whatsoever.
11. TRANSFERS ON DEATH.
On the death of a Participant, outstanding Restricted Stock grants
made to such Participant under the Plan may be held only by the executors or
administrators of the Participant's estate or by any person or persons who
shall have acquired such right by will or by the laws of descent and
distribution. No transfer by will or the laws of descent and distribution of
any shares of Restricted Stock shall be effective to bind the Company unless
the Board of Directors shall have been furnished with (a) written notice
thereof and with a copy of the will and/or such evidence as the Board of
Directors may deem necessary to establish the validity of the transfer and (b)
an agreement by the transferee to comply with all the terms and conditions of
the Restricted Stock award that are or would have been applicable to the
Participant and to be
9
<PAGE> 10
bound by the acknowledgments made by the Participant in connection with the
grant of the shares of Restricted Stock.
12. EXPENSES AND RECEIPTS.
The expenses of the Plan shall be paid by the Company. Any proceeds
received by the Company in connection with any Restricted Stock will be used
for general corporate purposes.
13. FAILURE TO COMPLY.
In addition to the remedies of the Company elsewhere provided for
herein, failure by a Participant to comply with any of the terms and conditions
of the Plan or the agreement executed by such Participant evidencing a
Restricted Stock grant, unless such failure is remedied by such Participant
within ten days after having been notified of such failure by the Board of
Directors, shall be grounds for the cancellation and forfeiture of such award,
in whole or in part as the Board of Directors, in its absolute discretion, may
determine.
14. EFFECTIVE DATE AND TERM OF PLAN.
The Plan was adopted by the Board of Directors on October 25, 1996.
The applicable provisions of the Plan shall remain in effect until the last
grant of Restricted Stock made under the Plan vests in full unless otherwise
amended pursuant to Section 10 of the Plan.
15. PLAN DOES NOT AFFECT RIGHTS OF EMPLOYEE.
Nothing contained in this Plan shall be deemed to give any Participant
the right to be retained in the employment of the Company or to interfere with
the rights of the Company to discharge any Participant at any time.
10
<PAGE> 11
16. SETOFFS.
To the fullest extent permitted by law, any amounts owed by a
Participant to the Company may be deducted by the Company from the value of the
shares of Restricted Stock issued to a Participant hereunder.
17. APPLICABLE LAW.
The terms and provisions of the Plan shall be construed in accordance
with the laws of the State of Texas, except to the extent preempted by ERISA or
other federal law.
18. SUCCESSORS.
The Plan shall be binding upon the Company and its successors and
assigns, in accordance with its terms.
19. ERISA CLAIMS PROCEDURES.
Within 60 days after a Participant retires or benefits otherwise
become payable under this Plan, the Administrative Committee shall give notice
in writing to the Participant, stating the amount of the Plan benefit (if any)
to which the person is entitled. If such person disagrees with the
Administrative Committee's determination, such person shall file with the
Administrative Committee, in writing and sent by registered or certified mail,
a claim for Plan benefits. If no claim is received by the Administrative
Committee within 60 days after such person receives notification of his or her
entitlement (if any) to a Plan benefit from the Administrative Committee, no
such claim shall be permitted and the Administrative Committee's determination
shall be final. In the event such a claim is filed, the Administrative
Committee shall exercise its best efforts to act upon such claim within 60 days
after its receipt. If such claim is denied, in all or in part, the
Administrative Committee shall give notice in writing, by mail, of such denial
to the claimant, setting forth (i) the specific reasons for such denial; (ii)
specific reference to pertinent Plan provisions on which the denial is based;
(iii) a description of any additional material or information necessary for the
claimant to perfect the claim and an explanation of why such material or
information is necessary; and (iv) advice to the effect that the claimant may
request a full review of such claim by filing with the Administrative
Committee, within 60 days after receipt by the claimant of the Administrative
Committee's initial denial of the claim, a request for such review. In the
event such request is submitted, the Administrative Committee shall review the
claim within 60 days and the claimant shall be given written notice of the
result of such review. Such notice shall include specific reasons for the
decision.
ALLWASTE, INC.
By: /s/ Robert M. Chiste
-------------------------------
Robert M. Chiste
President and CEO
11
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