<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (date of earliest event reported): August 26, 1997
USA WASTE SERVICES, INC.
(Exact name of registrant as specified in its charter)
COMMISSION FILE NUMBER 1-12154
DELAWARE 73-1309529
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1001 FANNIN, SUITE 4000
HOUSTON, TEXAS 77002
(Address of principal executive offices) (Zip Code)
(713) 512-6200
(Registrant's telephone number, including area code)
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
Pursuant to the Agreement and Plan of Merger, dated as of April 13,
1997, as amended August 26, 1997 (the "Merger Agreement"), by and among USA
Waste Services, Inc. ("USA Waste"), Riviera Acquisition Corporation, a wholly
owned subsidiary of USA Waste ("Acquisition"), and United Waste Systems, Inc.
("United"), the merger of Acquisition with and into United became effective on
August 26, 1997, whereupon United became a wholly owned subsidiary of USA Waste
(the "Merger"). United's common stock, par value $0.001 per share ("United
Common Stock"), is no longer transferable, and certificates evidencing shares of
United Common Stock represent only the right to receive, without interest,
shares of USA Waste Common Stock, par value $0.01 per share ("USA Waste Common
Stock"), in accordance with the provisions of the Merger Agreement. The holders
of shares of United Common Stock ("United Stockholders") are entitled to receive
1.075 (the "Exchange Ratio") shares of USA Waste Common Stock for each share of
United Common Stock held, or an aggregate of approximately 52 million shares of
USA Waste Common Stock. The Stockholders of USA Waste (the "USA Waste
Stockholders") and the United Stockholders approved the Merger on August 26,
1997. The Exchange Ratio was determined through negotiations between the
managements of USA Waste and United and was approved by their respective boards
of directors. Cash will be paid in lieu of fractional shares of USA Waste
Common Stock on the basis of $41.10 per share. Pursuant to the Merger Agreement,
no interest will be paid or accrued on the consideration paid in the Merger. The
Merger was accounted for as a pooling of interests. In addition, in connection
with the Merger, USA Waste assumed approximately $325 million in United debt.
United owns and operates nonhazardous waste disposal, treatment, collection,
transfer and recycling businesses and complimentary operations throughout the
United States. As of June 30, 1997, United operated 39 disposal and treatment
facilities, 78 transfer stations and 80 collection operations.
Also in connection with the Merger, USA Waste also announced the
addition of two new members to its Board of Directors, Richard D. Kinder,
Chairman and CEO of Kinder Morgan Energy Partners, L.P. and former President
and COO of Enron Corporation, and Jerome B. York, Vice Chairman of Tracinda
Corporation and former Senior Vice President and CFO of IBM Corporation.
ITEM 5. OTHER PARTIES
On August 7, 1997, USA Waste replaced its existing line of credit
facility with a $2.0 billion senior revolving credit facility (the "Credit
Facility") with a consortium of banks including Bank of America Illinois and
Morgan Guaranty Trust Company. The Credit Facility is for a term of five years
and will also be available for standby letters of credit of up to $650 million.
Loans under the Credit Facility bear interest at either a base rate or a rate
based on the Eurodollar rate plus a spread not to exceed 0.575% per annum,
which spread is initially set at 0.2375% per annum. The Credit facility
requires a facility fee, initially set at 0.1125% per annum, not to exceed
0.30% per annum on the entire available credit facility. No principal
reductions are required during the entire term of the agreement. USA Waste
plans to use the funds available under the Credit Facility to refinance
existing bank loans and Letters of credit, to fund additional acquisitions and
to provide working capital for the Company's business.
On August 26, 1997, USA Waste executed a Supplemental Indenture (the
"Supplemental Indenture") by and among USA Waste, United and Bankers Trust
Company with respect to United's 4 1/2% Convertible Subordinated Notes due June
1, 2001 (the "Convertible Debentures"). The Supplemental Indenture amended the
original indenture, dated June 5, 1996 (the "Indenture"), by providing that the
Convertible Debentures would be convertible into shares of USA Waste Common
Stock.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) FINANCIAL STATEMENTS OF THE BUSINESS ACQUIRED
The following financial statements and notes thereto of United Waste
Systems, Inc. are included herein:
o United Waste Systems, Inc. Condensed Consolidated Balance Sheets
(unaudited) as of June 30, 1997 and December 31, 1996.
o United Waste Systems, Inc. Condensed Consolidated Statements of
Operations (unaudited) for the three and six months ended June 30,
1997 and 1996.
o United Waste Systems, Inc. Condensed Consolidated Statement of
Stockholders' Equity (unaudited) for the six months ended June 30,
1997.
o United Waste Systems, Inc. Condensed Consolidated Statements of Cash
Flows for the six months ended June 30, 1997 and 1996.
o United Waste Systems, Inc. Notes to Condensed Consolidated
Financial Statements (unaudited).
o Report of Independent Auditors.
o United Waste Systems, Inc. Consolidated Balance Sheets as of
December 31, 1996 and 1995.
o United Waste Systems, Inc. Consolidated Statements of Operations
for the three years in the period ended December 31, 1996.
o United Waste Systems, Inc. Consolidated Statements of
Stockholders' Equity for the three years in the period ended
December 31, 1996.
o United Waste Systems, Inc. Consolidated Statements of Cash Flows
for the three years in the period ended December 31, 1996.
o United Waste Systems, Inc. Notes to Consolidated Financial
Statements.
<PAGE> 3
UNITED WASTE SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
June 30 December 31
1997 1996
--------------------- ---------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 25,823,244 $ 2,567,854
Accounts receivable, net of
allowance for doubtful accounts
of $4,898,000 in 1997 and
$3,076,000 in 1996 68,824,043 54,963,664
Prepaid expenses and other current
assets 29,170,740 29,989,310
--------------------- ---------------------
Total current assets 123,818,027 87,520,828
Property and equipment, net
of accumulated depreciation of
$136,429,000 in 1997 and
$94,407,000 in 1996 438,171,464 387,980,224
Intangible assets, net 338,309,380 286,851,677
Other assets 40,968,086 38,688,965
--------------------- ---------------------
$ 941,266,957 $ 801,041,694
===================== =====================
Current liabilities:
Current portion of long-term debt
and nonrecourse bonds $ 6,561,743 $ 5,064,413
Accounts payable 25,448,174 23,923,298
Deferred revenue 13,958,658 12,189,998
Due to seller 5,087,733 4,258,016
Short-term accrued landfill costs 4,745,575 4,648,923
Current portion of capital lease
obligations 476,676 846,528
Accrued expenses 24,997,006 15,572,292
Other current liabilities 13,892,939 9,196,178
--------------------- ---------------------
Total current liabilities 95,168,504 75,699,646
Long-term debt, less current portion 265,252,535 302,704,119
Obligations under capital leases, less
current portion 141,197 373,296
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
<PAGE> 4
UNITED WASTE SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS - CON'T
(UNAUDITED)
<TABLE>
<CAPTION>
June 30 December 31
1997 1996
------------ ------------
<S> <C> <C>
Nonrecourse sewage facility revenue bonds,
less current portion 8,500,000 8,900,000
Accrued landfill costs 48,259,951 44,878,800
Other long-term liabilities 14,525,536 13,137,811
Deferred income taxes 39,326,427 36,634,609
Commitments and contingencies
Stockholders' equity: Common stock, $.001 par value, 75,000,000 in 1997 and
1996 shares authorized; 44,569,287 in 1997 and 39,089,553 in 1996 shares
issued and outstanding 44,569 39,090
Additional paid-in capital 374,084,722 248,973,700
Retained earnings 95,963,516 69,700,623
------------ ------------
Total stockholders' equity 470,092,807 318,713,413
------------ ------------
$941,266,957 $801,041,694
============ ============
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
<PAGE> 5
UNITED WASTE SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
June 30 June 30
------------------------------ ------------------------------
1997 1996 1997 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues $ 216,619,407 $ 151,838,019 $ 121,039,879 $ 82,257,521
Cost of operations 136,199,914 96,479,784 74,337,620 51,025,442
Selling, general
and administrative
expense 33,295,326 24,778,093 18,093,586 13,368,408
------------- ------------- ------------- -------------
Income from
operations 47,124,167 30,580,142 28,608,673 17,863,671
Interest expense 7,898,849 7,206,432 3,758,322 3,797,745
Other expense
(income), net (1,584,695) 1,767,682 (922,961) 1,906,916
------------- ------------- ------------- -------------
Income before provision
for income taxes 40,810,013 21,606,028 25,773,312 12,159,010
Provision for income
taxes 16,961,046 8,739,293 10,759,207 5,069,859
------------- ------------- ------------- -------------
Net income $ 23,848,967 $ 12,866,735 $ 15,014,105 $ 7,089,151
============= ============= ============= =============
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
<PAGE> 6
UNITED WASTE SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - CON'T
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
June 30 June 30
------------------- ------------------
1997 1996 1997 1996
-------- ------- ------- -------
<S> <C> <C> <C> <C>
Primary earnings per
common share and
common equivalent
share $ .54 $ .33 $ .33 $ .18
======== ====== ====== =======
Fully diluted
earnings per
common share and
common equivalent
share $ .53 $ .32
======== ======
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
<PAGE> 7
UNITED WASTE SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
Common Stock
-------------------------
Number Additional
of Paid-in Retained
Shares Amount Capital Earnings
---------- ------- ------------ -----------
<S> <C> <C> <C> <C>
Balance,
December 31, 1996 39,089,553 $39,090 $248,973,700 $69,700,623
Pooling-of-interests 1,752,549 1,752 388,314 527,359
Exercise of common
stock warrants
and options 164,150 164 3,995,630
Issuance of
common stock 3,563,035 3,563 122,461,987
Pro forma tax
adjustment 319,803
Subchapter S
distributions of
pooled entities (168,145)
Reclassification of
Subchapter S accumulated
earnings to paid-in
capital (1,734,909) 1,734,909
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
<PAGE> 8
UNITED WASTE SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY - CON'T
(UNAUDITED)
<TABLE>
<CAPTION>
Common Stock
-------------------------
Number Additional
of Paid-in Retained
Shares Amount Capital Earnings
---------- ------- ------------ -----------
<S> <C> <C> <C> <C>
Net income 23,848,967
---------- ------- ------------ -----------
Balance,
June 30, 1997 44,569,287 $44,569 $374,084,722 $95,963,516
========== ======= ============ ===========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
<PAGE> 9
UNITED WASTE SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
June 30
------------------------------
1997 1996
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 23,848,967 $ 12,866,735
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 23,380,878 17,744,758
Deferred income taxes 5,134,491 2,077,749
Gain on sale of assets (647,564) (126,445)
Pro forma tax adjustment 319,803 (133,034)
Changes in operating assets and liabilities:
Accounts receivable (8,660,503) (3,891,052)
Other assets 2,401,049 (1,039,894)
Accounts payable 1,076,250 (141,944)
Accrued landfill costs (1,566,614) 4,811
Other liabilities 5,228,200 7,999,962
------------- -------------
Net cash provided by operating
activities 50,514,957 35,361,646
Cash flows from investing activities:
Purchases of property and equipment (26,263,896) (21,204,295)
Proceeds from sale of assets 1,372,028 120,941
Restricted investments, net (held to
maturity) 907,196 1,501,540
Payments of contingent purchase price (1,548,291) (2,009,671)
Payments of capitalized project costs (1,797,498) (655,519)
Purchases of other companies,
net of cash acquired (73,943,865) (63,354,449)
------------- -------------
Net cash used in investing activities (101,274,326) (85,601,453)
Cash flows from financing activities:
Due to sellers (231,836) (5,201,439)
Proceeds from debt 17,300,000 182,772,812
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
<PAGE> 10
UNITED WASTE SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - CON'T
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
June 30
------------------------------
1997 1996
------------- -------------
<S> <C> <C>
Repayments of debt (65,222,174) (79,053,858)
Repayments of capital lease
obligations (601,951) (1,550,971)
Payments of financing costs (4,737,000)
Proceeds from exercise of common
stock warrants and options 3,995,794 15,302,757
Net proceeds from issuance
of common stock 118,943,071
Subchapter S distributions
of pooled entities (168,145) (1,704,621)
------------- -------------
Net cash from financing activities 74,014,759 105,827,680
------------- -------------
Increase in cash and
cash equivalents 23,255,390 55,587,873
Cash and cash equivalents at
beginning of period 2,567,854 6,721,849
------------- -------------
Cash and cash equivalents at
end of period $ 25,823,244 $ 62,309,722
============= =============
Supplemental disclosure of cash flow
information:
Cash paid during the period for interest,
net of amounts capitalized $ 7,439,086 $ 6,031,573
============= =============
Net cash (received) paid during the
period for income taxes $ (1,345,230) $ 3,259,570
============= =============
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
<PAGE> 11
UNITED WASTE SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - CON'T
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
June 30
----------------------------
1997 1996
------------ ------------
<S> <C> <C>
Supplemental schedule of noncash investing
and financing activities:
The Company acquired the net assets
and assumed certain liabilities of
other companies as follows:
Fair value of net assets acquired:
Property and equipment $ 26,270,128 $ 30,318,792
Other assets, net of cash acquired 65,634,145 50,378,809
Less liabilities assumed (10,249,845) (12,902,755)
Less amounts due to seller (3,561,553) (3,170,578)
Less amounts paid in common stock (3,522,479) 1,144,983)
Less deposits and capitalized project
costs paid in prior periods (626,531) (124,836)
------------ ------------
Net cash paid $ 73,943,865 $ 63,354,449
============ ============
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
<PAGE> 12
UNITED WASTE SYSTEMS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1997 and 1996
NOTE 1 - BASIS OF PRESENTATION
The Condensed Consolidated Financial Statements of United Waste Systems,
Inc. and its subsidiaries (the "Company") included herein are unaudited and, in
the opinion of management, such financial statements reflect all adjustments,
consisting only of normal recurring adjustments, necessary to a fair statement
of the results of the interim periods presented. Interim financial statements
do not require all disclosures normally presented in year-end financial
statements, and, accordingly, certain disclosures have been omitted. The
Condensed Consolidated Financial Statements included herein should be read in
conjunction with the Company's Consolidated Financial Statements and related
Notes thereto included in the Company's Annual Report on Form 10-K for the year
ended December 31, 1996.
The Company's Condensed Consolidated Statements of Operations and
Statement of Cash Flows for 1996 have been restated to include the accounts of
certain acquisitions completed in 1996, that were accounted for as
pooling-of-interests. See Note 2.
The Company entered into an Agreement and Plan of Merger (the "Merger
Agreement"), dated as of April 13, 1997 with USA Waste Services, Inc. ("USA
Waste") a Delaware corporation, and Riviera Acquisition Corporation, a Delaware
corporation and a wholly-owned subsidiary of USA Waste ("Sub"). Subject to the
terms and conditions of the Merger Agreement, the Sub will merge with and into
the Company (the "Merger"), and each share of common stock of the Company will
be converted into 1.075 shares of common stock of USA Waste. The Merger is
conditioned upon, among other things, approval by shareholders of the Company
and USA Waste, and expiration or termination of the waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976.
In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, Earnings per Share ("SFAS 128"), which is required to be
adopted on December 31, 1997. At that time, the Company will be required to
change the method currently used to compute earnings per share and to restate
all prior periods. Under the new requirements for calculating earnings per
share, basic earnings per share will exclude the dilutive effect of the
Company's stock options and warrants. Implementation of SFAS 128 is expected to
result in basic earnings per share for the six months ended June 30, 1997 and
1996 of $.57 and $.35, respectively, and diluted earnings per share for such
periods of $.53 and $.33, respectively, and basic earnings per share for the
three months ended June 30, 1997 and 1996 of $.35 and $.19, respectively, and
diluted earnings per share for such periods of $.32 and $.18, respectively.
In October 1996, the Accounting Standards Executive Committee of the
American Institute of Certified Public Accountants issued Statement of Position
No. 96-1 ("SOP 96-1"), Environmental Remediation Liabilities. SOP 96-1 provides
authoritative guidance on the recognition, measurement, display and disclosure
of environmental remediation liabilities. SOP 96-1 also contains a discussion
of major federal legislation relating to environmental remediation and
pollution prevention and control. The adoption of SOP 96-1 did not have a
material effect on the Company's financial position and results of operations.
<PAGE> 13
NOTE 2 - ACQUISITIONS
The table below provides a summary description of completed acquisitions
(not including acquisitions described below that were accounted for as
pooling-of-interests) during the six months ended June 30, 1997:
<TABLE>
<CAPTION>
Type of Operation Number Acquired
- ----------------- ---------------
<S> <C>
Landfill 2(1)
Collection companies 37(2)
Transfer stations 7(3)
</TABLE>
- ----------------
(1) The landfills are located in Illinois and Nebraska.
(2) The collection companies (including 26 tuck-in acquisitions) are located in
Arizona, California, Illinois, Iowa, Kentucky, Maine, Massachusetts, Minnesota,
New Mexico, North Dakota, Pennsylvania, Rhode Island, Vermont, and Wisconsin.
(3) The transfer stations are located in California, Kentucky, Minnesota and
Wisconsin.
The above acquisitions have been accounted for as purchases and,
accordingly, the results of their operations have been included in the
Company's Condensed Consolidated Financial Statements from their respective
acquisition dates.
The following table summarizes, on an unaudited pro forma basis, the
combined results of operations of the Company for the six months ended June 30,
1997 and 1996 as though (i) the acquisitions summarized above (excluding
certain thereof that were not material individually or in the aggregate) which
were consummated in the six months ended June 30, 1997, were made on January 1,
1997, in the case of the results for the six months ended June 30, 1997, and
(ii) each acquisition which was consummated during the period of January 1,
1996 to June 30, 1997 as described above and in Note 3 to the Notes to
Consolidated Financial Statements included in the Company's 1996 Annual Report
on Form 10-K (excluding certain thereof that were not material individually or
in the aggregate), was made on January 1, 1996, in the case of the results for
the six months ended June 30, 1996.
<TABLE>
<CAPTION>
Six Months Ended
June 30
---------------------------------
1997 1996
--------------- ---------------
<S> <C> <C>
Revenues $ 226,188,143 $ 184,393,110
Net income 23,992,604 14,152,411
Primary earnings
per common share and common
equivalent share .54 .36
Fully diluted earnings
per common share and common
equivalent share .53 .36
</TABLE>
<PAGE> 14
The unaudited pro forma results are based upon certain assumptions and
estimates which are subject to change. These results are not necessarily
indicative of the actual results of operations that might have occurred, nor
are they necessarily indicative of expected results in the future.
During April, May and June 1997, the Company issued 1,368,077 shares of its
common stock for the acquisition of six solid waste management companies. These
transactions were accounted for as pooling-of-interests; however these
acquisitions were not material to the Company's consolidated operations and
financial position and, therefore, the first quarter of 1997 and the 1996
Condensed Consolidated Financial Statements have not been restated.
During February and March 1997, the Company issued 384,472 shares of its
Common Stock for the acquisitions of five solid waste management companies.
These transactions were accounted for as pooling-of-interests; however, these
acquisitions were not material to the Company's consolidated operations and
financial position and, therefore, the 1996 Condensed Consolidated Financial
Statements have not been restated.
On June 28, 1996, the Company issued 730,765 shares of its Common Stock for
all of the outstanding shares of common stock of Salinas Disposal Service,
Inc., Rural Dispos-All Service, Inc. and Madison Lane Properties, Inc. (the
"Salinas Companies"), a group of affiliated companies that comprise an
integrated solid waste management company. This transaction has been accounted
for as a pooling-of-interests and, accordingly, the Condensed Consolidated
Financial Statements have been restated for the three months ended March 31,
1996 to include the accounts of the Salinas Companies.
During September 1996, the Company issued 579,857 shares of its Common Stock
for the acquisition of three solid waste management companies (the "Pooled
Companies"). These transactions were accounted for as pooling-of-interests and,
accordingly, the Condensed Consolidated Financial Statements have been restated
for the three and six months ended June 30, 1996 to include the accounts of the
Pooled Companies.
During December 1996, the Company issued 178,701 shares of its Common Stock
for the acquisition of two solid waste management companies. These transactions
were accounted for as pooling-of-interests; however, these acquisitions were
not material to the Company's consolidated operations and financial position
and, therefore, the 1996 Condensed Consolidated Financial Statements have not
been restated.
NOTE 3 - CONTINGENCIES
While the Company carries a wide range of insurance coverage for the
protection of the Company's assets and operations, the Company does not carry
insurance coverage for environmental liability, except as described in the
following sentence. The Company's insurance coverage for environmental
liability is limited to (i) contractor pollution liability insurance that
relates to certain environmental services provided by the Company and (ii)
certain other pollution liability insurance which is the equivalent to
self-insurance because under the terms thereof the Company is required to fully
reimburse the
<PAGE> 15
insurance company for any paid claims. In the event uninsured losses occur, the
Company's net income and financial position could be materially adversely
affected.
On May 26, 1995, the Company sued Robert Foley and Matthew Parzych in the
United States District Court for the District of Connecticut, Case No.
3:95-CV-985. The defendants sold stock in certain Massachusetts corporations to
the Company under an agreement dated April 1, 1992 (the "1992 agreement"). In
the suit the Company seeks approximately $1,115,000 in cash and securities from
an escrow account and additional amounts from defendants by reason of indemnity
provisions contained in the 1992 agreement and confirmed in an agreement dated
January 28, 1994 (the "1994 agreement"). The defendants have counterclaimed
against the Company and its chief executive officer, seeking to invalidate the
1994 agreement primarily for alleged lack of consideration and economic duress,
and to receive alleged damages and costs. The counterclaims for damages are
primarily for alleged misrepresentations by the Company in connection with the
1992 agreement, and were asserted by defendants notwithstanding provisions in
the 1994 agreement which generally released the Company from all claims. The
Company moved to summarily dismiss the counterclaims. On March 31, 1997, the
Court granted the Company's motion in part and denied it in part. The Company
intends vigorously to pursue its claims in this action and to defend against
the remaining counterclaims. In the opinion of management, this claim should
not materially affect the financial position or operating results of the
Company.
In June 1996, Dale Lynch, Dennis Lynch and D.L. Lynch sued the Company, its
chief executive officer and a subsidiary of the Company in the Circuit Court of
Whitley County, Kentucky (Index No. 96 CI 00355). The subsidiary purchased the
Tri-County landfill from the plaintiffs in 1991. The suit primarily seeks
compensatory and punitive damages for alleged breach of contract and for
allegedly fraudulent representations in connection with this purchase. The
Company has filed a counterclaim for breach of warranties and fraud. The
Company has also sought indemnification for breach of warranties. In January
1997, the plaintiffs filed an amended complaint, which seeks relief similar to
that of their original complaint. The Company filed a Motion to Dismiss seven
of the eight counts in the complaint, including the fraud count. The Company
has served discovery requests and deposition notices on plaintiffs and intends
to vigorously defend against plaintiffs' claims and prosecute its counterclaim.
In the opinion of management, this suit should not materially affect the
financial position or operating results of the Company.
In July 1996 the Company filed suit against H.A.M. Sanitary Landfill, Inc. and
its shareholders. The suit is now pending in the Circuit Court for Monroe
County, West Virginia, Civil Action No. 96-C-51. The Company, among other
things, seeks to recover $1.8 million in advances which the Company made in
connection with an agreement, since terminated, to purchase the H.A.M. Sanitary
Landfill in West Virginia from the defendants, and to recover certain machinery
and equipment with an aggregate replacement value of approximately $150,000.
The defendants in September 1996 filed a counterclaim against the Company and a
subsidiary which seeks compensatory and punitive damages for claims of alleged
breach of contract, breach of fiduciary duty under an alleged joint venture,
unjust enrichment and fraud. The Company will vigorously prosecute its claim
and defend against the counterclaim. In the opinion of management, the
counterclaim should not materially affect the financial position or operating
results of the Company.
On April 17, 1997, a purported class action on behalf of the public
shareholders of the Company entitled Schipper v. United Waste et al., Civil
Action No. 15664-NC, was filed in the Court of Chancery of the State of
Delaware against the Company and each of the members
<PAGE> 16
of the Company's Board of Directors asserting, among other things, that
defendants breached their fiduciary duties to stockholders of the Company in
negotiating the Merger Agreement and in engaging in certain related alleged
acts and omissions. The complaint seeks, among other things, injunctive and
other equitable relief against consummation of the Merger, and damages and
costs in an unspecified amount. The Company believes the claim is without
merit.
On June 25, 1997, Richard and Martin Zielinski (the "Claimants") filed a demand
for arbitration against Connecticut Valley Sanitary Waste Disposal, Inc.
("CVSWD"), a subsidiary of United Waste. The Claimants seek approximately
$8,600,000, plus treble damages, based on CVSWD's alleged breaches of
obligations under a lease and Massachusetts law in relation to the operation of
CVSWD's Chicopee, Massachusetts landfill. CVWSD disagrees with Claimants'
contentions and intends to vigorously defend against this claim. CVSWD will be
filing a counter-demand for arbitration, based on the Claimants' breaches of
the lease and Massachusetts law. It is too early to predict the outcome of the
arbitration.
The Company accrues the costs for closure and post-closure monitoring over the
life of its owned landfills and will pay out these costs over the next thirty
years. Major components of these costs include closure cap construction,
leachate treatment and groundwater monitoring. The Company accrues these costs
utilizing engineering estimates based on current governmental regulations
regarding closure requirements. The Company estimates that the aggregate
liability for the closure, post-closure and remediation costs of its landfills
owned at June 30, 1997 will be approximately $71.8 million. At June 30, 1997,
the Company has approximately $53.0 million of these costs accrued and,
therefore, has accrued approximately 73.8% of its estimated total costs to
date.
The Company monitors the availability of airspace at each of its landfills and
the need to obtain permit modifications for approvals for expansion in order to
continue operating these landfills. In order to develop and operate a landfill,
a composting facility or transfer station, or other solid waste management
facility, the Company typically must go through several governmental review
processes and obtain one or more permits and often zoning or other land use
approvals. Once obtained, operating permits generally must be periodically
renewed and are subject to modification and revocation by the issuing agency.
There can be no assurance that the Company will succeed in obtaining these
permits, permit modifications or approvals.
<PAGE> 17
REPORT OF INDEPENDENT AUDITORS
Board of Directors
United Waste Systems, Inc.
We have audited the accompanying consolidated balance sheets of United Waste
Systems, Inc. as of December 31, 1996 and 1995 and the related consolidated
statements of operations, stockholders' equity, and cash flows for each of the
three years in the period ended December 31, 1996. These financial statements
are the responsibility of the management of United Waste Systems, Inc. Our
responsibility is to express an opinion on these financial statements based on
our audits. We did not audit the 1994 financial statements of the Carmel
Marina Companies, wholly-owned subsidiaries, which statements reflect total
revenues constituting 15% in 1994 of the related consolidated totals. Those
statements were audited by other auditors, whose report has been furnished to
us and our opinion, insofar as it relates to data included for the Carmel
Marina Companies, is based solely on the report of the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits and the report of other
auditors provide a reasonable basis for our opinion.
In our opinion, based on our audits and, for 1994, the report of other
auditors, the financial statements referred to above present fairly, in all
material respects, the consolidated financial position of United Waste Systems,
Inc. at December 31, 1996 and 1995, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
MetroPark, New Jersey
February 21, 1997,
except for Note 13, as
to which the date is
March 25, 1997
<PAGE> 18
UNITED WASTE SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31
-----------------------------
1996 1995
------------- ------------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,567,854 $ 6,721,849
Accounts receivable, net of
allowance for doubtful accounts
of $3,076,000 in 1996 and
$2,249,000 in 1995 54,963,664 38,522,126
Prepaid expenses and
other current assets 29,989,310 14,198,544
------------ ------------
Total current assets 87,520,828 59,442,519
Property and equipment, net
of accumulated depreciation of
$94,407,414 in 1996 and
$58,866,599 in 1995 387,980,224 289,378,346
Intangible assets, net 286,851,677 171,739,197
Other assets 38,688,965 20,008,399
------------ ------------
$801,041,694 $540,568,461
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt
and nonrecourse bonds $ 5,064,413 $ 5,644,096
Accounts payable 23,923,298 18,031,701
Deferred revenue 12,189,998 8,291,415
Due to seller 4,258,016 6,465,720
Short-term accrued landfill costs 4,648,923 6,524,024
Current portion of capital lease
obligations 846,528 1,383,576
Accrued expenses 15,572,292 11,143,769
Other current liabilities 9,196,178 5,933,633
------------ ------------
Total current liabilities 75,699,646 63,417,934
Long-term debt, less current portion 302,704,119 156,193,971
Obligations under capital leases, less
current portion 373,296 4,687,554
Nonrecourse sewage facility revenue
bonds, less current portion 8,900,000 9,400,000
Accrued landfill costs, less
current portion 44,878,800 27,663,907
Other long-term liabilities 13,137,811 3,056,578
Deferred income taxes 36,634,609 33,885,306
Commitments and contingencies
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE> 19
UNITED WASTE SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31
-----------------------------
1996 1995
------------ ------------
<S> <C> <C>
Stockholders' equity:
Preferred stock, $.001
par value, 5,000,000 shares
authorized; none outstanding
Common stock, $.001 par value,
75,000,000 shares authorized;
39,089,553 in 1996 and
17,578,550 in 1995 shares
issued and outstanding 39,090 17,579
Additional paid-in capital 248,973,700 200,267,630
Retained earnings 69,700,623 41,978,002
------------ ------------
Total stockholders' equity 318,713,413 242,263,211
------------ ------------
$801,041,694 $540,568,461
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE> 20
UNITED WASTE SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year ended December
--------------------------------------------------
1996 1995 1994
------------- ------------- -------------
<S> <C> <C> <C>
Revenues $ 335,743,175 $ 228,376,762 $ 146,042,523
Cost of operations 206,786,205 140,813,834 88,611,515
Selling, general and
administrative expense 53,106,485 34,841,125 22,526,867
------------- ------------- -------------
Income from operations 75,850,485 52,721,803 34,904,141
Interest expense 14,949,746 10,061,290 6,424,630
Other expense
(income), net 251,661 (948,830) (474,211)
------------- ------------- -------------
Income before provision
for pro forma
income taxes 60,649,078 43,609,343 28,953,722
Provision for
income taxes 25,256,286 15,320,898 7,944,023
------------- ------------- -------------
Pro forma net income 35,392,792 28,288,445 21,009,699
Net deductions from pro
forma income available
to common stockholders -- 372,501 1,275,180
------------- ------------- -------------
Pro forma income
available to
common stockholders $ 35,392,792 $ 27,915,944 $ 19,734,519
============= ============= =============
Pro forma primary earnings
per common share and
common equivalent
share $ .89 $ .82 $ .76
============= ============= =============
Pro forma fully diluted
earnings per common
share and common
equivalent share $ .88 $ .81 $ .72
============= ============= =============
Pro forma tax
adjustments 363,280 1,458,361 2,064,773
------------- ------------- -------------
Pro forma net income 35,029,512 26,830,084 18,944,926
Net deductions from
pro forma income
available to common
shareholders -- 372,501 1,275,180
------------- ------------- -------------
Pro forma net income
available to common
shareholders $ 35,029,512 $ 26,457,583 $ 17,669,746
============= ============= =============
Pro forma primary
earnings per common
share and common
equivalent share $ .88 $ .77 $ .68
============= ============= =============
Pro forma fully diluted
earnings per common
share and common
equivalent share $ .87 $ .77 $ .65
============= ============= =============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE> 21
UNITED WASTE SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Preferred Stock Common Stock
--------------------------- ----------------------------
Number Number Additional
of of Paid-in Retained
Shares Amount Shares Amount Capital Earnings
--------- ----------- ---------- ------------ -------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December
31, 1993 1,797,581 $ 1,798 11,514,060 $ 11,514 $ 83,935,580 $ 4,535,071
Issuance of
common stock 763,578 764 15,279,707
Exercise of
common stock
warrants and
options 568,394 569 7,311,162
Conversion of 8%
convertible
preferred
stock (854,152) (854) 780,563 780 44
Preferred stock
dividends (1,275,180)
Contributed capital 590,667
Subchapter S
distributions
of pooled
entities (3,413,997)
Net income 21,009,699
--------- ----------- ---------- ------------ -------------- ------------
Balance, December
31, 1994 943,429 944 13,626,595 13,627 107,117,160 20,855,593
Issuance of
common stock 2,469,299 2,469 79,684,075
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
<PAGE> 22
UNITED WASTE SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - Continued
<TABLE>
<CAPTION>
Preferred Stock Common Stock
--------------------------- ----------------------------
Number Number Additional
of of Paid-in Retained
Shares Amount Shares Amount Capital Earnings
--------- ----------- ---------- ------------ -------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Exercise of
common stock
warrants and
options 529,582 530 8,145,726
Conversion of 8%
convertible
preferred stock (943,429) (944) 862,105 862 82
Conversion of
convertible debt 90,969 91 2,660,752
Preferred stock
dividends (372,501)
Subchapter S
distributions
of pooled
entities (4,133,700)
Net income 28,288,445
Reclassification of
subchapter S
accumulated
earnings to
paid-in capital 2,659,835 (2,659,835)
--------- ----------- ---------- ------------ ----------- ------------
Balance, December 31,
1995 17,578,550 17,579 200,267,630 41,978,002
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
<PAGE> 23
UNITED WASTE SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - Continued
<TABLE>
<CAPTION>
Preferred Stock Common Stock
--------------------------- ----------------------------
Number Number Additional
of of Paid-in Retained
Shares Amount Shares Amount Capital Earnings
--------- ----------- ---------- ------------ -------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Two-for-one stock
split 18,238,718 18,238 (18,238)
Poolings-of-
interests 758,558 759 422,967 (4,781,320)
Adjustment to
conform fiscal
year of pooled
entities (506,803)
Exercise of
common stock
warrants and
options 2,468,630 2,469 43,335,486
Issuance of common
stock 45,097 45 3,823,807
Subchapter S
distributions of
pooled entities (1,240,000)
Net income 35,392,792
Reclassification
of Subchapter S
accumulated
earnings to paid-in
capital 1,142,048 (1,142,048)
--------- ----------- ---------- ------------ -------------- ------------
Balance, December 31,
1996 -- $ -- 39,089,553 $ 39,090 $ 248,973,700 $ 69,700,623
========= =========== ========== ============ ============== ============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
<PAGE> 24
UNITED WASTE SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year ended December 31
------------------------------------------------
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 35,392,792 $ 28,288,445 $ 21,009,699
Adjustments to reconcile
pro forma net income to
net cash provided
by operating activities:
Depreciation and
amortization 37,875,896 24,308,227 14,247,906
Deferred income
taxes 10,057,369 3,859,374 1,871,425
Gain on sale of
assets (929,661) (174,767) (25,618)
Changes in operating assets
and liabilities:
Accounts
receivable (5,332,538) (2,446,181) (6,076,126)
Other assets 1,614,204 (3,874,321) (163,365)
Accounts payable 1,994,813 (882,447) 4,870,279
Accrued landfill
costs (5,525,390) 34,893 (1,849,037)
Other
liabilities 3,045,562 7,277,122 3,536,541
------------ ------------ ------------
Net cash provided by
operating
activities 78,193,047 56,390,345 37,421,704
Cash flows from investing
activities:
Purchases of property
and equipment (55,317,981) (39,189,791) (22,562,624)
Proceeds from sale
of assets 3,071,440 280,290 285,243
Restricted investments, net
(held to maturity) (8,151,482) (7,954,428) (186,741)
Payments of capitalized
project costs (1,244,535) (1,279,671) (2,305,851)
Payments of contingent
purchase price (3,752,072) (2,337,751) (6,262,879)
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
<PAGE> 25
UNITED WASTE SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS - continued
<TABLE>
<CAPTION>
Year ended December 31
--------------------------------------------------
1996 1995 1994
------------- ------------- ------------
<S> <C> <C> <C>
Purchases of other companies,
net of cash acquired (157,092,207) (159,062,810) (27,331,361)
------------- ------------- ------------
Net cash used in
investing activities (222,486,837) (209,544,161) (58,364,213)
Cash flows from financing
activities:
Dividends on preferred
stock (372,501) (1,275,180)
Proceeds from debt 225,130,225 278,281,793 40,839,022
Repayments of debt (94,638,687) (185,233,930) (32,977,036)
Repayments of capital lease
obligations (3,456,053) (614,686) (1,570,971)
Net proceeds from issuance
of common stock 66,072,051 15,280,471
Proceeds from exercise
of common stock warrants
and options 26,652,798 8,146,256 6,296,716
Payment of financing costs (5,437,000) (2,684,074) (582,483)
Due to sellers (6,871,488) (2,185,751) (317,498)
Notes receivable (1,104,505)
Contributed capital of
pooled entities 590,667
Subchapter S distributions
of pooled entities (1,240,000) (4,133,700) (3,413,997)
------------- ------------- ------------
Net cash provided by
financing activities 140,139,795 157,275,458 21,765,206
------------- ------------- ------------
(Decrease) increase in cash
and cash equivalents (4,153,995) 4,121,642 822,697
Cash and cash equivalents
at beginning of year 6,721,849 2,600,207 1,777,510
------------- ------------- ------------
Cash and cash equivalents
at end of year $ 2,567,854 $ 6,721,849 $ 2,600,207
============= ============= ============
Supplemental disclosure of cash flow information:
Cash paid during the year
for interest, net of
amounts capitalized $ 13,328,310 $ 8,337,161 $ 5,970,394
============= ============= ============
Cash paid during the year
for income taxes $ 5,644,573 $ 10,362,953 $ 3,426,391
============= ============= ============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
<PAGE> 26
UNITED WASTE SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS - continued
<TABLE>
<CAPTION>
Year ended December 31
---------------------------------------------------
1996 1995 1994
-------------- -------------- -------------
<S> <C> <C> <C>
Supplemental schedule of
noncash investing and
financing activities:
The Company acquired the
net assets and assumed
certain liabilities of
other companies as follows:
Fair value of net assets acquired:
Property and equipment $ 51,505,429 $ 121,210,509 $ 14,795,348
Other assets, net of cash
acquired 138,909,867 129,422,285 22,425,750
Less liabilities assumed (24,603,268) (67,813,389) (9,227,426)
Less amounts due to
seller (4,671,023) (7,965,999) (594,483)
Less amounts paid in common
stock (3,823,852) (13,333,150)
Less deposits and
capitalized project costs
paid in
prior periods (224,946) (2,457,446) (67,828)
-------------- -------------- -------------
Net cash paid $ 157,092,207 $ 159,062,810 $ 27,331,361
============== ============== ============
Equipment financed by capital
lease obligations $ 777,867 $ 167,370
Conversion of convertible
preferred stock 10,377,719 9,395,672
Conversion of convertible
debt 2,660,843
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
<PAGE> 27
UNITED WASTE SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996, 1995 and 1994
NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION
United Waste Systems, Inc. and its subsidiaries ("United" or "the
Company") own, operate, acquire and develop nonhazardous solid waste landfills,
collection operations and other related environmental services in selected
markets in the United States.
The accompanying Consolidated Financial Statements include the
accounts of the Company and its wholly-owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated. The accompanying
Consolidated Financial Statements have been restated to include accounts of
certain acquisitions accounted for as poolings-of-interests (see Note 3).
All per share data of the Company for all periods included in the
Consolidated Financial Statements and related Notes to Consolidated Financial
Statements and all share data in the Notes to Consolidated Financial Statements
have been adjusted to reflect a two-for-one stock split in the form of a 100%
stock dividend that became effective in June 1996 (see Note 9).
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash Equivalents: The Company considers all highly liquid instruments
with a maturity of three months or less when purchased to be cash equivalents.
Property and Equipment: Property and equipment are recorded at cost
and depreciated over their estimated useful lives using the straight-line
method. The estimated useful life ranges for property and equipment are as
follows:
<TABLE>
<CAPTION>
Range of
Estimated
Useful Lives
-------------
<S> <C>
Buildings and improvements 25 - 30 years
Vehicles and equipment 7 - 10 years
Furniture, fixtures and
office equipment 5 - 10 years
</TABLE>
Amortization of assets recorded under capital leases is included in
depreciation expense. The Company's sludge composting facility is being
depreciated over the original contract period of 20 years. Landfill and
landfill improvement costs are amortized based upon total units of airspace
filled during the year in relation to estimated permitted airspace capacity.
Land held for future development is excluded from amortization.
Engineering and legal fees paid to third parties incurred to obtain a
disposal facility permit are capitalized as landfill costs and amortized over
the estimated related airspace capacity. These costs are not amortized until
the permit is obtained and the disposal facility is ready for its intended use.
If the permit is denied, these costs are charged to expense.
Other Assets: Other assets consist primarily of deposits for, or
advances to, pending or prospective acquisitions and restricted cash and cash
equivalents which are collateral for letters of credit and bonds and restricted
debt service and construction funds. Restricted cash and cash equivalents are
$11,480,003 at December 31, 1996 and $8,366,000 at December 31, 1995.
<PAGE> 28
In connection with the Company's Tax Exempt Bonds (see Note 6),
restricted cash and cash equivalents in escrow total $5,590,000 at December 31,
1995. At December 31, 1996, all funds have been expended.
Concentrations of Credit Risk: Financial instruments that potentially
subject the Company to concentrations of credit risk consist primarily of cash
investments and accounts receivable. The Company places its cash investments
with high quality financial institutions. Concentrations of credit risk with
respect to accounts receivable are limited because a large number of
geographically diverse customers make up the Company's customer base. No single
group or customer represents greater than 10% of total accounts receivable. The
Company controls credit risk through credit approvals, credit limits, and
monitoring procedures.
Accrued Landfill Costs: Landfill site closure and post-closure cost
liabilities are accrued for the Company's owned landfills based on engineering
estimates of total units of airspace filled during the year and the total
closure and post-closure costs to be incurred by the Company. Such liabilities
are not discounted or reduced by possible recoveries from third parties.
Revenue Recognition: Landfill revenues are recorded at the date of
actual waste disposal. Revenues received prior to services being performed are
deferred and are recognized over the service period.
Income Taxes: The Company uses the liability method in accounting for
income taxes. Under this method, deferred tax assets and liabilities are
determined based on the differences between financial reporting and tax basis
of assets and liabilities and are measured using the enacted tax rates and laws
that are expected to be in effect when the differences are expected to reverse.
Impact of Recently Issued Accounting Standards: In March 1995, the
Financial Accounting Standards Board issued Statement No. 121, Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed of
("SFAS No. 121"), which requires impairment losses to be recorded on long-lived
assets used in operations when indicators of impairment are present and the
undiscounted cash flows estimated to be generated by those assets are less than
the assets' carrying amount. SFAS No. 121 also addresses the accounting for
long-lived assets that are expected to be disposed of. SFAS No. 121 is
effective for the Company's fiscal year ended December 31, 1996. The adoption
of this Statement did not have a material effect on the Company's financial
position or results of operations.
In October 1996, the Accounting Standards Executive Committee of the
American Institute of Certified Public Accountants issued Statement of Position
No. 96-1 ("SOP 96-1"), Environmental Remediation Liabilities. SOP 96-1 provides
authoritative guidance on the recognition, measurement, display and disclosure
of environmental remediation liabilities. SOP 96-1 also contains a discussion
of major federal legislation relating to environmental remediation and
pollution prevention and control. SOP 96-1 is effective for fiscal years
beginning after December 15, 1996. Although such costs are not presently
determinable, adoption of SOP 96-1 is not expected to have a material effect on
the Company's financial position and results of operations (See Note 12).
<PAGE> 29
Use of Estimates: The preparation of the Consolidated Financial
Statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the amounts reported
in the Consolidated Financial Statements and accompanying notes. These
estimates and assumptions principally affect the Company's accruals for
landfill costs and accounts receivable reserve, the amortization periods for
intangible assets and landfill and landfill improvement costs. Actual results
could differ from those estimates.
Stock-Based Compensation: The Company accounts for its stock
compensation arrangements under the provisions of APB Opinion No. 25,
"Accounting for Stock Issued to Employees." Since the stock options are granted
by the Company at the fair value of the shares at the date of grant, no
compensation expense is recognized in the Consolidated Financial Statements
(see Note 9).
NOTE 3 - ACQUISITIONS
On June 28, 1996, the Company issued 730,765 shares of its Common
Stock for all of the outstanding shares of common stock of Salinas Disposal
Service, Inc., Rural Dispos-All Service, Inc. and Madison Lane Properties, Inc.
(the "Salinas Companies"), a group of affiliated companies that comprise an
integrated solid waste management company. This transaction has been accounted
for as a pooling-of-interests and, accordingly, the Consolidated Financial
Statements have been restated for all periods presented to include the accounts
of the Salinas Companies.
On September 29, 1995, the Company issued 2,252,946 shares of its
Common Stock for all of the outstanding shares of common stock of Carmel Marina
Corporation, Neal Road Landfill Corporation, Jolon Road Landfill Corporation,
Cal Sanitation Services, Inc., Portable Site Services, Inc. and certain real
estate assets (the "Carmel Marina Companies"), a group of affiliated companies
that comprise an integrated solid waste management company. This transaction
has been accounted for as a pooling-of-interests and, accordingly, the
Consolidated Financial Statements have been restated for all periods presented
to include the accounts of the Carmel Marina Companies.
Separate revenue and pro forma net income of United the Carmel Marina
Companies and the Salinas Companies prior to the respective combinations are as
follows:
<TABLE>
<CAPTION>
Carmel
Marina Salinas
United(1) Companies Companies Combined
------------- ------------ ----------- -------------
<S> <C> <C> <C> <C>
Year ended
December 31,
1995
Revenues $ 211,790,224 $ 16,586,538 $ 228,376,762
Pro forma net
income 25,987,769 842,315 26,830,084
Year ended
December 31,
1994
Revenues 106,551,057 $ 21,977,708 17,513,758 146,042,523
Pro forma net
income 15,557,488 1,509,387 1,878,051 18,944,926
</TABLE>
---------------
(1) The data with respect to United for the year ended December 31, 1994,
is prior to restatement for the acquisitions of the Carmel Marina
Companies and the Salinas Companies. The data with respect to United
for the year ended December 31, 1995, is after restatement for the
acquisition of the Carmel Marina Companies, but prior to restatement
for the acquisition of the Salinas Companies.
<PAGE> 30
During September 1996, the Company issued 579,857 shares of its Common
Stock for the acquisition of three solid waste management companies. During
December 1996, the Company issued 178,701 shares of its Common Stock for the
acquisition of two solid waste management companies. These transactions were
accounted for as poolings-of-interests; however, these acquisitions were not
material to the Company's consolidated operations and financial position and,
therefore, the accompanying 1995 and 1994 Consolidated Financial Statements
have not been restated.
The acquisitions discussed below have been accounted for as purchases
and, accordingly, the results of their operations have been included in the
Company's results of operations from their respective acquisition dates. The
purchase prices have been allocated to the assets acquired and liabilities
assumed based on their respective fair values at their respective acquisition
dates. Contingent purchase price is capitalized when earned and amortized over
the remaining life of the related asset.
During December 1996, the Company purchased outstanding stock and
certain assets of the I-5 Companies, which are comprised of two landfill
operating contracts, one collection company and two transfer stations. The
consideration was comprised of $21,000,000 in cash and certain additional
assumed liabilities.
During January 1996, the Company purchased all of the outstanding
stock of Commercial Disposal Co., Inc. which is comprised of a collection
company and two transfer stations. The aggregate consideration was $16,126,500
in cash.
The total initial consideration for other acquisitions that the
Company made in 1996 was approximately $119,466,000 in cash, approximately
$1,390,000 in seller notes, 109,673 shares of the Company's Common Stock,
warrants to purchase 65,000 shares of the Company's Common Stock and contingent
consideration not to exceed $15,950,000.
During September 1995, the Company purchased the outstanding stock and
certain assets of the Partyka Resource Companies, which comprise two solid
waste landfills and collection operations. The aggregate initial consideration
was $36,424,609 in cash, $6 million in seller notes and 184,200 shares of the
Company's Common Stock. Contingent royalty payments of $5.95 per ton are due
for each ton received at the landfills commencing October 1995 (subject to a
cap of $10,577,773).
During September 1995, the Company purchased all of the outstanding
stock of the Zenith Kremer Companies, which are comprised of a collection
company and two transfer station permits. The aggregate consideration was
$19,158,320 in cash.
<PAGE> 31
During February 1995, the Company purchased all of the outstanding
stock of Waste Systems Corporation and certain assets of WasteCo, Inc., which
together are comprised of a solid waste landfill and collection operations. The
aggregate initial consideration was $12,326,396 in cash and 280,000 shares of
the Company's Common Stock. Contingent royalty payments of $1.15 per ton are
due for each ton received at the landfill (not to exceed $8 million in
aggregate). An additional contingent purchase payment of $750,000 was paid in
1996 upon receipt of a permit modification increasing daily and annual tonnage
limits that may be accepted by the landfill, and an additional contingent
purchase payment of $1,000,000 was paid in 1996 upon the receipt of another
permit modification from required regulatory agencies authorizing additional
landfill capacity.
The total initial consideration for other acquisitions that the
Company made in 1995 was approximately $91,200,000 in cash, approximately
$5,900,000 in seller notes, 464,398 shares of the Company's Common Stock and
contingent consideration not to exceed $19,200,000.
During August 1994, the Company purchased all of the outstanding stock
of Pete's Disposal Service, Inc., a collection company that provides solid
waste collection services. The aggregate initial consideration was $4,800,000
in cash. Contingent consideration of $347,896 in cash was paid in January 1995
related to certain contractual obligations for billing retentions.
During June 1994, the Company purchased all of the outstanding stock
of PRTR, Inc., a company that operates a transfer station. The aggregate
initial consideration was $4,225,846 in cash. Contingent royalty payments of $1
per ton (subject to $.75 increases on the fifth and tenth anniversary dates of
the transaction) for each ton received in excess of 100 tons per day are
payable quarterly (subject to a cap of $125,000 per year and $1,300,000 in
aggregate).
During April 1994, the Company purchased substantially all of the
assets of Orlando Trucking, Inc., a collection company. The aggregate initial
consideration was $3,970,000 in cash.
During March 1994, the Company purchased all of the outstanding stock
of Kent Industrial Services, Inc., a collection company. The aggregate initial
consideration was $5,000,000 in cash.
During January 1994, the Company purchased all of the outstanding
stock of Harland's Sanitary Landfill, Inc. and purchased substantially all of
the assets of Harland's Disposal Service, Inc. These companies are comprised of
solid waste landfill and collection operations. The initial aggregate purchase
price was $4,170,000 in cash. Contingent royalty payments of $1.50 per ton
commence on the ninth anniversary of the transaction.
The total consideration for other acquisitions that the Company made
in 1994 was $2,652,291 in cash and $1,363,000 in seller notes.
The Company has not completed its valuation of certain of its 1996
purchases and the purchase price allocations are subject to change when
additional information concerning asset and liability valuations are completed.
The following table summarizes, on an unaudited pro forma basis, the
combined results of operations of the Company for the years ended December 31,
<PAGE> 32
1996 and 1995 as though each acquisition described above (excluding certain of
such acquisitions that were not material individually or in the aggregate) was
made on January 1, 1995.
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Revenues $360,469,429 $322,428,781
Pro forma net income 34,960,904 28,169,023
Pro forma primary earnings
per common and common
equivalent share $.88 $.81
Pro forma fully diluted earnings
per common and common
equivalent share $.87 $.80
</TABLE>
The unaudited pro forma results are based upon certain assumptions and
estimates which are subject to change. These results are not necessarily
indicative of the actual results of operations that might have occurred, nor
are they necessarily indicative of expected results in the future.
NOTE 4 - PROPERTY AND EQUIPMENT
A summary of property and equipment is as follows:
<TABLE>
<CAPTION>
December 31
--------------------------------
1996 1995
------------- -------------
<S> <C> <C>
Landfills $ 224,413,867 $ 181,685,044
Land and improvements 22,350,398 14,529,438
Buildings and improvements 34,713,450 22,626,762
Sludge composting facility 11,675,853 11,675,853
Vehicles and equipment 160,422,300 102,582,170
Furniture, fixtures and
office equipment 5,381,978 3,243,833
Construction in progress 23,429,792 11,901,845
------------- -------------
482,387,638 348,244,945
Less accumulated depreciation and
amortization (94,407,414) (58,866,599)
------------- -------------
Net property and equipment $ 387,980,224 $ 289,378,346
============= =============
</TABLE>
Landfill amortization totaled $11,176,704, $6,986,922 and $3,573,196
for the years ended December 31, 1996, 1995 and 1994, respectively.
Depreciation expense totaled $18,009,022, $9,971,936 and $5,447,329 for the
years ended December 31, 1996, 1995 and 1994, respectively.
The Company capitalizes interest as a component of the cost of
property and equipment for construction projects that take considerable time
and expenditures. Interest capitalized, primarily related to landfill cell
construction, in 1996, 1995 and 1994 amounted to $1,682,000, $1,349,000 and
$722,000, respectively.
NOTE 5 - INTANGIBLE ASSETS
Intangible assets consist of the excess of cost over the value of
identifiable net assets of businesses acquired and other intangible assets.
Excess of cost over value of identifiable net assets of businesses acquired are
being amortized on a straight line basis over forty years while other
intangible assets are being amortized on a straight line basis for periods
ranging from three to ten years.
<PAGE> 33
<TABLE>
<CAPTION>
December 31
--------------------------------
1996 1995
------------- -------------
<S> <C> <C>
Excess of cost over value of
identifiable net assets of
businesses acquired $ 293,462,083 $ 171,957,922
Other intangible assets 8,621,997 8,520,001
------------- -------------
302,084,080 180,477,923
Less accumulated amortization (15,232,403) (8,738,726)
------------- -------------
Intangible assets, net $ 286,851,677 $ 171,739,197
============= =============
</TABLE>
The Company continually evaluates the value and future benefits of its
intangibles. The Company assesses recoverability from future operations using
income from operations of the related acquired business as a measure. Under
this approach, the carrying value would be reduced if it becomes probable that
the Company's best estimate for expected future cash flows of the related
business would be less than the carrying amount of the intangible over the
remaining amortization period. For the three year period ended December 31,
1996, there were no adjustments to the carrying amounts of intangibles
resulting from these evaluations.
NOTE 6 - LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
December 31
--------------------------------
1996 1995
------------- -------------
<S> <C> <C>
Credit Facility $ 31,450,000 $ 41,800,000
Convertible Subordinated Notes
at 4 1/2% per annum, due
June 1, 2001, convertible
to Common Stock at $32.50
per share 150,000,000
Senior secured notes, interest
payment semi-annually, at 7.67%
per annum, annual principal
payments beginning September 1999,
due September 2005 75,000,000 75,000,000
Tax exempt bonds, monthly interest
payments at variable rates
(4.25% and 5.15% at December 31,
1996 and 1995, respectively),
due April 2010 22,500,000 22,500,000
Promissory note, quarterly interest
payments, at 8% per annum, due
September 2001 6,000,000 6,000,000
Subordinated promissory notes,
monthly interest payments at 8 1/2%
per annum due April 2000 3,000,000 3,000,000
Other (interest rates ranging from
3.07% to 14.7%) 19,418,532 13,238,067
------------- -------------
307,368,532 161,538,067
Less current portion (4,664,413) (5,344,096)
------------- -------------
$ 302,704,119 $ 156,193,971
============= =============
</TABLE>
The Company's credit facility was amended in December 1996 to, among
other
<PAGE> 34
things, eliminate certain covenants and lower borrowing costs. The credit
facility as so amended (the "Credit Facility") provides for a $190 million,
three year, secured revolving credit facility due December 1999. Outstanding
loans under the Credit Facility bear interest at a rate per annum equal to the
Eurodollar Rate (Reserve Adjusted) (as defined in the loan agreement providing
for the Credit Facility) applicable to each interest period plus 0.625% to
1.25% per annum or the Alternate Reference Rate (as defined) from time to time
in effect. At December 31, 1996 and 1995, the weighted average interest rate
was 6.98% and 7.15%, respectively. The Credit Facility also allows the Company
to obtain up to $90 million in letters of credit. The aggregate amount that the
Company is permitted to borrow under the Credit Facility is reduced by the
aggregate face amount of all outstanding letters of credit issued thereunder.
The Credit Facility is secured by the stock of the Company's subsidiaries,
restricts the Company from granting other liens on its assets (subject to
certain limited exceptions), and requires the Company to comply with certain
covenants including, but not limited to, maintenance of certain financial
ratios, limitations on additional indebtedness, limitations on capital
expenditures and a prohibition on the Company's payment of cash dividends on
its Common Stock. The Credit Facility also currently requires that the consent
of the lenders be obtained in order for the Company to make an acquisition that
provides for an aggregate cash purchase price of $50 million or more. In
addition, the Credit Facility prohibits the Company from using more than $15
million of its cash to secure closure and post-closure obligations that the
Company may have relating to its landfills (see Note 13).
In June 1996, the Company issued $150 million principal amount of
4-1/2% Convertible Subordinated Notes due June 1, 2001 (the "Convertible
Notes"). The Convertible Notes bear interest at a fixed rate of 4-1/2% per
annum, payable semi-annually. The Convertible Notes are convertible into Common
Stock of the Company at a conversion price of $32.50 per share. The Convertible
Notes are unsecured obligations of United Waste Systems, Inc. and are
subordinated to all existing and future Senior Indebtedness (as defined in the
indenture relating to the Convertible Notes) of United Waste Systems, Inc. and
are effectively subordinated to all indebtedness and other liabilities of the
subsidiaries of the Company.
In April 1995, $22.5 million in principal amount of Variable Rate
Demand Limited Obligation Revenue Bonds (the "Tax Exempt Bonds") were issued
for the benefit of the Company by a corporate body organized under the laws of
the State of Michigan. The Tax Exempt Bonds mature on April 1, 2010 and bear
interest at a variable rate unless the Company elects a fixed rate in
accordance with the terms of the Tax Exempt Bonds. If a variable rate is in
effect, this rate is set periodically at a level (not to exceed 12% per annum)
that would enable the Tax Exempt Bonds to be resold at a price equal to their
principal amount plus all accrued interest thereon.
In September 1995, the Company issued $75 million in Senior Secured
Notes due September 1, 2005 (the "Notes"). The Notes bear interest at a fixed
rate of 7.67% per annum; interest is payable semi-annually and annual principal
payments in the amount of $10.7 million are due beginning September 1999. The
Notes are secured pari passu with the Credit Facility and any event of default
under the Credit Facility also constitutes an event of default under the Notes.
The Notes require the Company to comply with certain covenants including, but
not limited to, maintenance of certain financial ratios, limitation on
additional indebtedness and prohibition on the Company's payment of cash
dividends on any of its capital stock.
<PAGE> 35
Maturities of the Company's long-term debt for each of the next five
years at December 31, 1996 are as follows:
<TABLE>
<S> <C>
1997 $ 4,664,413
1998 5,564,456
1999 52,167,791
2000 11,406,981
2001 17,200,242
Thereafter 216,364,649
</TABLE>
NOTE 7 - NONRECOURSE SEWAGE FACILITY REVENUE BONDS
The Company's nonrecourse sewage facility revenue bonds (the "Revenue
Bonds") are obligations of a wholly-owned subsidiary of the Company and are
collateralized solely by the subsidiary's interest in a sludge composting
facility, revenue derived from such facility and by certain bond funds held in
trust. The Revenue Bonds are nonrecourse and, therefore, the subsidiary and its
affiliates, including, but not limited to, United Waste Systems, Inc. and
subsidiaries, are not liable for any payment due on the Revenue Bonds, nor any
claim based on, or in respect to, the Revenue Bond's indenture. Annual
principal payments on the Revenue Bonds range from $400,000 to $1,100,000
through 2010 at final maturity and interest is payable semi-annually at a fixed
rate of 9.25% per annum.
NOTE 8 - INCOME TAXES
Certain of the companies acquired by United in transactions accounted
for as poolings-of-interests (see Note 3) had elected to be treated as
Subchapter S Corporations or partnerships prior to being acquired. In general,
the income or loss of a Subchapter S Corporation or partnership is passed
through to its owners rather than being subjected to taxes at the entity level.
Pro forma net income or loss reflects a provision for income taxes on a pro
forma basis for all periods presented as if all such companies were liable for
federal and state income taxes as taxable corporate entities for all periods
presented.
<PAGE> 36
The provision for historic and pro forma federal and state income
taxes is as follows:
<TABLE>
<CAPTION>
December 31
---------------------------------------------
1996 1995 1994
------------ ----------- -----------
<S> <C> <C> <C>
Historical income taxes:
Current State $ 3,135,854 $ 1,546,649 $ 546,230
Current Federal 12,063,062 10,228,961 5,575,607
Deferred State 1,607,625 660,890 181,636
Deferred Federal 8,449,744 3,198,484 1,640,550
(Benefit) for deferred
taxes of Subchapter S
Corporation at time
of pooling (314,086)
------------ ----------- -----------
$ 25,256,285 $15,320,898 $ 7,944,023
Pro forma tax adjustment: ============ =========== ===========
State 78,744 310,142 450,095
Federal 284,537 1,148,219 1,614,678
------------ ----------- -----------
$ 363,281 $ 1,458,361 $ 2,064,773
============ =========== ===========
$ 25,619,566 $16,779,259 $10,008,796
</TABLE>
A reconciliation of the provision for pro forma income taxes and the
amount computed by applying the statutory federal income tax rates of 35% for
1996, 1995 and 1994 to income before taxes is as follows:
<TABLE>
<CAPTION>
December 31
------------------------------------------------
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Computed tax at statutory
tax rate $ 21,227,177 $ 15,263,270 $ 10,133,803
Increase (decrease)
in taxes:
Change in valuation
allowance (270,480) (35,978) (472,306)
Nondeductible expense
(primarily intangibles) 1,613,019 992,663 230,994
State income taxes, net
of federal tax benefit 3,134,444 1,636,493 658,546
Income of Subchapter S
Corporations (363,280) (1,458,361) (2,064,773)
(Benefit) for deferred
taxes of Subchapter S
Corporation at
time of pooling (314,086)
Other (84,594) (763,103) (542,241)
------------ ------------ ------------
$ 25,619,566 $ 16,779,259 $ 10,008,796
============ ============ ============
$ 25,256,286 $ 15,320,898 $ 7,944,023
</TABLE>
<PAGE> 37
The components of deferred income tax liabilities and assets are as follows:
<TABLE>
<CAPTION>
December 31
-----------------------------
1996 1995
------------ -----------
<S> <C> <C>
Deferred income tax
liabilities:
Property, equipment
and intangibles $ 47,972,712 $42,593,903
============ ===========
Deferred income
tax assets:
Accounts receivable
allowance 770,304 921,905
Accrued liabilities 6,961,902 1,861,550
Closure reserves 10,405,684 8,090,566
Net operating loss
carryforwards 2,047,551 1,131,158
Other 64,004
------------ -----------
Total deferred income
tax assets 20,185,441 12,069,183
Valuation allowance (270,480)
------------ -----------
$ 20,185,441 $11,798,703
============ ===========
</TABLE>
The Company recognized certain tax benefits related to its stock
option plan in the amount of $16,682,688 and $1,754,177 in 1996 and 1995,
respectively. At December 31, 1996, these benefits were recorded as income
taxes receivable, which is reflected in the balance sheet as an increase in
prepaid expenses and other current assets, and an increase in additional
paid-in capital. At December 31, 1995, these benefits were recorded as a
reduction of income taxes payable, and reflected in the balance sheet as a
reduction in accrued expenses and other current liabilities, and an increase in
additional paid-in capital.
The Company has net short-term deferred tax assets in the amount of
$8,847,338 and $2,842,000, at December 31, 1996 and 1995, respectively, which
are reported in the balance sheet in prepaid expenses and other current assets.
At December 31, 1996, the Company has net operating loss carryforwards
("NOLs") of $14,111,425 for federal and $17,504,221 for state income tax
purposes that expire in years 1997 through 2011. A portion of the NOLs resulted
from the Company's acquisitions discussed in Note 3 and such NOLs are limited
to the future taxable earnings of their related acquired businesses. At
December 31, 1996, the Company has refundable income taxes in the amount of
$9,591,911. This consists of $4,739,903 representing a carryback of losses and
$4,852,008 representing federal and state payments for future liabilities.
NOTE 9 - CAPITAL STOCK
Common Stock: On May 30, 1996, the stockholders of the Company
approved an amendment to the Company's Certificate of Incorporation that
increased the authorized shares of Common Stock of the Company to 75,000,000
shares. On March 12, 1996, the Board of Directors approved a two-for-one stock
split of the Company's Common Stock to be effected in the form of a 100% stock
dividend. Such stock split was effected by the distribution on June 18, 1996,
of a dividend of one share of the Company's Common Stock in respect of each
share of Common Stock that was outstanding on June 7, 1996, the record date
established for such distribution. All agreements concerning stock options,
convertible securities and other commitments payable in shares of the Company's
Common Stock were amended pursuant to their own terms to provide for the
issuance of two shares of Common Stock for every one share that was issuable
prior to the stock split.
<PAGE> 38
At December 31, 1996, approximately 9,176,552 shares of Common Stock
are reserved for the exercise of warrants, options and the conversion of
certain debt.
Preferred Stock: The Company's board of directors has the authority to
designate 5,000,000 shares of $.001 par value preferred stock in series, to
establish as to each series the designation and number of shares to be issued
and the rights, preferences, privileges and restrictions of the shares of each
series, and to determine the voting powers, if any, of such shares. At December
31, 1996, the Company's Board of Directors had designated 3,440,990 shares, of
which 336,621 shares are available for future issuance.
Common Stock Options and Warrants: During July 1992, the Company
adopted the 1992 Stock Option Plan for the grant of incentive stock options and
non-statutory stock options. The aggregate number of shares of Common Stock
which may be subject to options granted under the plan may not exceed
5,900,000, subject to adjustment under certain circumstances. The exercise
price, subject to certain minimums, vesting periods and other conditions
applicable to each option granted, are generally determined by two
disinterested directors on the Compensation Committee of the Board of
Directors.
Also during July 1992, the Company adopted a 1992 Disinterested
Director Stock Option Plan for the grant of non-statutory options for certain
directors of the Company. The plan provides for a fixed number of options to be
issued annually for each participant with exercise prices at current market
value and these options vest immediately.
The Company has various other stock option plans for employees other
than officers or directors. These plans have terms similar to those of the
Company's 1992 Stock Option Plan.
During 1996, the Company granted 1,983,368 stock options with a
weighted-average exercise price of $26.92 per share. During 1996, 2,562,698
options (with a weighted-average exercise price per share of $10.06) were
exercised and 17,829 options (with a weighted-average exercise price per share
of $13.97) were forfeited. The weighted-average grant date fair value of
options granted during 1996 was $6.52 per share.
At December 31, 1996, 3,588,091 options to purchase shares of the
Company's Common Stock were outstanding. The weighted average exercise price
per share of such options was $19.91. Such options had exercise prices ranging
from $5.06 to $36.25 per share. Of such options, 816,018 provided for an
exercise price per share in the range of $5.06 to $10.00 (the weighted average
exercise price and weighted average remaining life of the options in this range
being $8.08 and 6.9 years, respectively); 1,107,158 provided for an exercise
price per share in the range of $10.01 to $20.00 (the weighted average exercise
price and weighted average remaining life of the options in this range being
$16.48 and 8.6 years, respectively); and 1,664,915 provided for an exercise
price per share in the range of $20.01 to $36.25 (the weighted average exercise
price and weighted average remaining life of the options in this range being
$27.98 and 9.7 years, respectively).
At December 31, 1996, 1,424,954 of the Company's outstanding options
were exercisable. The weighted average exercise price per share of such
exercisable options was $17.89. Of such options, 479,682 provided for an
exercise price per
<PAGE> 39
share in the range of $5.06 to $10.00 (the weighted average exercise price of
the options in this range being $7.78); 360,995 provided for an exercise price
per share in the range of $10.01 to $20.00 (the weighted average exercise price
per share of the options in this range being $15.65); and 584,277 provided for
an exercise price per share in the range of $20.01 to $36.25 (the weighted
average exercise price of the options in this range being $27.58).
At December 31, 1996, the Company had 973,076 stock purchase warrants
outstanding with an exercise price per share ranging from $2.61 to $34.75, all
of which were currently exercisable. Such warrants expire through the year
2006.
At December 31, 1995, the Company had 4,185,250 stock options
outstanding with exercise prices per share ranging from $5.06 to $19.00, with a
weighted-average exercise price of $10.69 of which 3,063,584 options were
exercisable. During 1995, 447,140 stock options were exercised with exercise
prices per share ranging from $5.25 to $17.19. Also at December 31, 1995, the
Company had 1,247,328 stock purchase warrants outstanding with exercise prices
per share ranging from $2.61 to $12.50, all of which were currently
exercisable, and expire through the year 2002.
At December 31, 1994, the Company had 3,235,242 stock options
outstanding with exercise prices per share ranging from $5.06 to $12.00. During
1994, 672,844 stock options were exercised with exercise prices per share
ranging from $4.05 to $9.00. Also at December 31, 1994, the Company had
1,631,214 stock purchase warrants outstanding with exercise prices per share
ranging from $.03 to $7.71, all of which were currently exercisable, and such
warrants expire through the year 2002.
The Company applies Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" in accounting for stock-based
employee compensation arrangements whereby no compensation cost related to
stock options is deducted in determining net income. Had compensation cost for
the Company's stock option plans been determined pursuant to Financial
Accounting Standards Board Statement No. 123 ("SFAS No. 123"), "Accounting for
Stock-Based Compensation," the Company's pro forma net income and earnings per
share would have differed. The Black-Scholes option pricing model estimates
fair value of options using subjective assumptions which can materially effect
fair value estimates and, therefore, do not necessarily provide a single
measure of fair value of options. Using the Black-Scholes option pricing model
for all options granted after December 31, 1994 and a risk-free interest rate
of 5.75%, a volatility factor for the market price of the Company's Common
Stock of .315 and a weighted-average expected life of options of approximately
three years, the Company's pro forma net income, primary pro forma earnings per
share and fully-diluted pro forma earnings per share would have been
$32,338,165, $.81 and $.81, respectively, for 1996 and,$26,008,749, $.75 and
$.75 respectively, for 1995. For purposes of these pro forma disclosures, the
estimated fair value of options is amortized over the options' vesting period.
Since the number of options granted and their fair value may vary significantly
from year to year, the pro forma compensation expense in future years may be
materially different.
<PAGE> 40
NOTE 10 - EARNINGS PER SHARE
Primary and fully diluted earnings per common share for the year ended
December 31, 1996 have been computed based upon weighted average equivalent
shares outstanding of 39,943,715 and 42,913,825, respectively.
Primary and fully diluted earnings per common share for the year ended
December 31, 1995 have been computed based upon weighted average equivalent
shares outstanding of 34,693,501 and 34,898,801, respectively.
Primary and fully diluted earnings per common share for the year ended
December 31, 1994 have been computed based upon weighted average equivalent
shares outstanding of 26,076,421 and 29,153,689, respectively. Primary earnings
per share was calculated after giving effect to net deductions from income
available to common stockholders of $1,275,180 related to dividends on
preferred stock.
NOTE 11 - FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company in
estimating the fair value disclosures for financial instruments:
Cash and cash equivalents: The carrying amount reported in the balance
sheet for cash and cash equivalents approximates fair value.
Restricted cash: The $11,480,003 carrying amount reported in the
balance sheet included in other assets for restricted cash and cash equivalents
approximates fair value.
Long and short-term debt: The carrying amount of the Company's
borrowings under its revolving credit agreement approximates fair value. The
Convertible Notes traded at 115% of face value at December 31, 1996 and
therefore the $150 million face amount of the Convertible Notes have a fair
value of $173 million. The fair values of the other long and short-term debt
are estimated based on the Company's incremental borrowing rates for similar
types of borrowing arrangements. These carrying amounts approximate fair value.
NOTE 12 - COMMITMENTS AND CONTINGENCIES
The Company leases various office space and equipment under
noncancellable operating leases expiring on various dates through 2004. The
Company leases equipment with a cost of $2,422,984 and $5,981,710 and
cumulative amortization of approximately $504,060 and $1,547,133 under various
capital leases at December 31, 1996 and December 31, 1995, respectively.
The following is a schedule of future minimum lease payments under
capital leases and noncancellable operating leases with initial terms in excess
of one year as of December 31, 1996:
<PAGE> 41
<TABLE>
<CAPTION>
Noncancellable
Capital Operating
December 31 Leases Leases
- ------------------ ---------- ---------------
<S> <C> <C>
1997 $ 905,876 $ 1,257,322
1998 260,955 982,840
1999 113,589 375,242
2000 35,160 295,699
2001 - 275,000
Thereafter - 709,202
---------- -------------
Total minimum
lease payments 1,315,580 $ 3,895,305
=============
Less amount
representing
interest (95,756)
----------
Present value of net
minimum lease payments 1,219,824
Less current
portion (846,528)
----------
Long-term portion $ 373,296
==========
</TABLE>
Rent expense under noncancellable operating leases for the years ended
December 31, 1996, 1995 and 1994 was $1,044,995, $435,008 and $428,233,
respectively.
During 1995, the Company acquired a company which had a contingent
lease agreement with respect to a portion of the land related to one of its
solid waste landfills. Payments under this lease agreement are based upon 50%
of the net cash receipts (as defined in the lease agreement) of the landfill
and are payable monthly. For the year ended December 31, 1996 and 1995 the
related lease expense totaled $751,000 and $243,000, respectively.
The Company owns and operates a waste water sludge composting plant
located in Springfield, Massachusetts. During 1992, the Company entered into a
20-year service agreement with the City of Springfield under which the Company
treats sewage sludge generated at the Springfield Regional Wastewater Treatment
Facility.
While the Company carries a wide range of insurance coverage for the
protection of the Company's assets and operations, the Company does not carry
insurance coverage for environmental liability, except as described in the
following sentence. The Company's insurance coverage for environmental
liability is limited to (i) over-the-road environmental liability protection
for the transportation of asbestos-containing material, (ii) contractor
pollution liability insurance that relates to certain environmental services
provided by the Company and (iii) certain other pollution liability insurance
which is the equivalent to self-insurance because under the terms thereof the
Company is required to fully reimburse the insurance company for any paid
claims. In the event uninsured losses occur, the Company's net income and
financial position could be materially adversely affected.
<PAGE> 42
On January 9, 1996, the Junker Landfill Trust sued the Company, Junker
Sanitation Services, Inc., and United Waste Transfer, Inc., both of which are
subsidiaries of the Company, and approximately 800 other parties in the United
States District Court for the Western District of Wisconsin, Case No. 96C-19S,
for the contribution under the Comprehensive Environmental Response
Compensation and Liability Act ("CERCLA"), as well as state common law, with
respect to the Junker Landfill site in Hudson, Wisconsin. By order entered July
19, 1996, the court approved a consent decree which was signed by the Company
and others with respect to this site. The Company's obligations under the
consent decree are secured by, and limited to, $3,000,000 on promissory notes
issued by the Company for the purchase of Junker Sanitation Services, Inc. A
Settlement Agreement has been reached with the Plaintiff which involves no
payment obligation on the part of Junker Sanitation Services, Inc., United
Waste Systems, Inc., or United Waste Transfer, Inc. That settlement will become
complete when the Court approves a second consent decree, which approval is
expected at a hearing scheduled for April 29, 1997.
On May 26, 1995, the Company sued Robert Foley and Matthew Parzych in
the United States District Court for the District of Connecticut, Case No.
3:95-CV-985. The defendants sold stock in certain Massachusetts corporations to
the Company under an agreement dated April 1, 1992 (the "1992 agreement"). In
the suit the Company seeks approximately $1,115,000 in cash and securities from
an escrow account and additional amounts from defendants by reason of indemnity
provisions contained in the 1992 agreement and confirmed in an agreement dated
January 28, 1994 (the "1994 agreement"). The defendants have counterclaimed
against the Company and its chief executive officer, seeking to invalidate the
1994 agreement primarily for alleged lack of consideration and economic duress,
and to receive alleged damages and costs. The counterclaims for damages are
primarily for alleged misrepresentations by the Company in connection with the
1992 agreement, and were asserted by defendants notwithstanding provisions in
the 1994 agreement which generally released the Company from all claims. The
Company intends vigorously to pursue its claims in this action and to seek
dismissal of the counterclaims. In the opinion of management, this claim should
not materially affect the financial position or operating results of the
Company.
In June 1996, Dale Lynch, Dennis Lynch and D.L. Lynch sued the
Company, its chief executive officer and a subsidiary of the Company in the
Circuit Court of Whitley County, Kentucky (Index No. 96 CI 00355). The
subsidiary purchased the Tri-County landfill from the plaintiffs in 1991. The
suit primarily seeks compensatory and punitive damages for alleged breach of
contract and for allegedly fraudulent representations in connection with this
purchase. The Company has filed a Counterclaim for breach of warranties and
fraud. The Company has also sought indemnification for breach of warranties. In
January 1997, the plaintiffs filed an Amended Complaint, which seeks relief
similar to that of their original Complaint. The Company intends to file a
Motion to Dismiss seven of the eight counts in the Complaint, including the
fraud count. The Company has served discovery requests and deposition notices
on plaintiffs and intends to vigorously defend against plaintiffs' claims and
prosecute its Counterclaim. In the opinion of management, this suit should not
materially affect the financial position or operating results of the Company.
In July 1996 the Company filed suit against H.A.M. Sanitary Landfill,
Inc. and its shareholders. The suit is now pending in the Circuit Court for
Monroe County, West Virginia, Civil Action No. 96-C-51. The Company, among
other things, seeks to recover $1.8 million in advances which the Company made
in connection with an agreement, since terminated, to purchase the H.A.M.
Sanitary Landfill in West Virginia from the defendants, and to recover certain
machinery and equipment with an aggregate replacement value of approximately
$150,000.
<PAGE> 43
The defendants in September 1996 filed a counterclaim against the Company and a
subsidiary which seeks compensatory and punitive damages for claims of alleged
breach of contract, breach of fiduciary duty under an alleged joint venture,
unjust enrichment and fraud. The Company will vigorously prosecute its claim
and defend against the counterclaim. In the opinion of management, the
counterclaim should not materially affect the financial position or operating
results of the Company.
The Company accrues the costs for closure and postclosure monitoring
over the life of its owned landfills and will pay out these costs over the next
fifty years. Major components of these costs include closure cap construction,
leachate treatment and groundwater monitoring. The Company accrues these costs
utilizing engineering estimates based on current governmental regulations
regarding closure requirements. The Company estimates that the aggregate
liability for the closure, postclosure and remediation costs of its landfills
owned at December 31, 1996 will be approximately $66.6 million. At December 31,
1996, the Company has approximately $49.5 million of these costs accrued and,
therefore, has accrued approximately 74.3% of its estimated total costs to
date.
The Company monitors the availability of airspace at each of its
landfills and the need to obtain permit modifications for approvals for
expansion in order to continue operating these landfills. In order to develop
and operate a landfill, a composting facility or transfer station, or other
solid waste management facility, the Company typically must go through several
governmental review processes and obtain one or more permits and often zoning
or other land use approvals. Once obtained, operating permits generally must be
periodically renewed and are subject to modification and revocation by the
issuing agency. There can be no assurance that the Company will succeed in
obtaining these permits, permit modifications or approvals.
The Company has outstanding letters of credit with banks of
approximately $61,311,000 at December 31, 1996. The letters of credit were
obtained as collateral for the Company's Tax Exempt Bonds, self-fund insurance
programs and as direct collateral to assure compliance with governmental
sanitary landfill closure and post-closure obligations for landfills.
NOTE 13 - SUBSEQUENT EVENTS
Subsequent to December 31, 1996, the Company completed the acquisition of
13 solid waste businesses - these businesses include one landfill, 12
collection operations and one transfer operation. These acquisitions were
accounted for as purchases. Also, subsequent to December 31, 1996, the Company
issued Common Stock for all of the outstanding stock of a solid waste business
which includes one collection and one transfer operation. This transaction has
been accounted for as a pooling-of-interests. The historical operations of this
business are not material to the Company's consolidated operations and
financial position and, therefore, no restatement of the accompanying
Consolidated Financial Statements was necessary.
During March 1997, the Company completed a public offering of
3,450,000 shares of its Common Stock. Net proceeds of the offering were
approximately $119.3 million. Approximately $47.2 million of such proceeds have
been used to reduce outstanding indebtedness under the Company's Credit
Facility. At March 25, 1997, the Company has cash and cash equivalents of
approximately $69.0 million.
<PAGE> 44
(b) PRO FORMA FINANCIAL INFORMATION
The following pro forma financial statements and notes thereto are
included herein:
o USA Waste Services, Inc. Pro Forma Condensed Consolidated Balance
Sheet as of June 30, 1997 (unaudited).
o USA Waste Services, Inc. Pro Forma Condensed Consolidated
Statement of Operations for the six months ended June 30, 1997
(unaudited).
o USA Waste Services, Inc. Pro Forma Condensed Consolidated
Statement of Operations for the year ended December 31, 1996
(unaudited).
o USA Waste Services, Inc. Notes to Pro Forma Condensed Consolidated
Financial Statements (unaudited).
<PAGE> 45
USA WASTE SERVICES, INC.
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
On August 26, 1997, USA Waste Services, Inc. ("USA Waste") consummated
a merger transaction with United Waste Systems, Inc. ("United")
accounted for as "pooling of interests" pursuant to Opinion No. 16 of
the Accounting Principles Board whereby 1.075 shares of USA Waste
Common Stock was issued in exchange for each share of United Common
Stock (the "Merger"). The accompanying pro forma condensed consolidated
financial statements give effect to the Merger using the "pooling of
interests" method of accounting which assumes that the combining
companies have been merged from their inception, and that the
historical financial statements for periods prior to consummation of
the Merger are restated as though had been combined from their
inception. The accompanying pro forma condensed consolidated financial
statements should be read in conjunction with the USA Waste
Consolidated Financial Statements and related notes thereto included in
the USA Waste Annual Report on Form 10-K for the year ended December
31, 1996, as amended by Form 10-K/A filed April 30, 1997, the USA Waste
Condensed Consolidated Financial Statements included in the USA Waste
Quarterly Report on Form 10-Q for the quarterly period ended June 30,
1997, the United Consolidated Financial Statements and related notes
thereto as of December 31, 1996 and 1995, and for the three years in
the period ended December 31, 1996, included elsewhere herein, and the
United Condensed Consolidated Financial Statements and related notes
thereto as of June 30, 1997 and December 31, 1996, and for the three
and six months ended June 30, 1997 and 1996, included elsewhere
herein. The pro forma condensed consolidated financial statements are
not necessarily indicative of the operating results that would have
been achieved had the Merger been consummated as of the beginning of
the periods presented and should not be construed as indicative of
future operating results.
<PAGE> 46
USA WASTE SERVICES, INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
PRO FORMA
USA WASTE UNITED ADJUSTMENTS PRO FORMA
=========== =========== =========== ===========
(In thousands)
<S> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 43,937 $ 25,823 $ -- $ 69,760
Accounts receivable, net 327,707 68,824 -- 396,531
Notes and other receivables 61,206 8,883 70,089
Deferred income taxes 31,980 9,613 -- 41,593
Prepaid expenses and other 56,628 10,675 67,303
----------- ----------- ----------- -----------
Total current assets 521,458 123,818 -- 645,276
Notes and other receivables 56,345 -- -- 56,345
Property and equipment, net 2,917,497 438,172 -- 3,355,669
Excess of cost over net assets of acquired
business, net 873,189 333,339 -- 1,206,528
Other intangible assets, net 85,146 4,970 -- 90,116
Other assets 164,207 40,968 -- 205,175
----------- ----------- ----------- -----------
Total assets $ 4,617,842 $ 941,267 $ -- $ 5,559,109
=========== =========== =========== ===========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 153,231 $ 25,448 $ -- $ 178,679
Accrued liabilities 145,121 48,723 (27,087)(a) 216,757
50,000 (b)
Deferred revenues 38,968 13,959 -- 52,927
Current maturities of long-term debt 49,520 7,039 -- 56,559
----------- ----------- ----------- -----------
Total current liabilities 386,840 95,169 22,913 504,922
Long-term debt 1,996,958 273,894 -- 2,270,852
Deferred income taxes 132,478 39,326 -- 171,804
Closure, post-closure and other liabilities 235,429 62,785 -- 298,214
----------- ----------- ----------- -----------
2,751,705 471,174 22,913 3,245,792
----------- ----------- ----------- -----------
Commitments and contingencies -- -- -- --
Stockholders' equity:
Preferred stock:
USA Waste: $1.00 par value; 10,000,000 shares
authorized; none issued -- -- -- --
United: $.001 par value 5,000,000 shares
authorized; none outstanding -- -- -- --
Common stock:
USA Waste: $.01 par value; 300,000,000 shares
authorized; historical 160,702,719 shares
(210,297,099 pro forma shares) issued and outstanding 1,607 -- 17 (a) 2,103
479 (c)
United: $.001 par value 75,000,000
shares authorized; 44,569,287
shares issued and outstanding -- 45 (45)(c) --
Additional paid-in capital 1,845,112 374,085 27,070 (a) 2,245,833
(434)(c)
Retained earnings 35,760 95,963 (50,000)(b) 81,723
Foreign currency translation adjustment (15,858) -- -- (15,858)
Less treasury stock at cost, 23,485 shares (484) -- -- (484)
----------- ----------- ----------- -----------
Total stockholders' equity 1,866,137 470,093 (22,913) 2,313,317
----------- ----------- ----------- -----------
Total liabilities and stockholders' equity $ 4,617,842 $ 941,267 $ -- $ 5,559,109
=========== =========== =========== ===========
</TABLE>
See notes to pro forma condensed consolidated financial statements.
<PAGE> 47
USA WASTE SERVICES, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
USA WASTE UNITED
SIX MONTHS SIX MONTHS
ENDED ENDED PRO FORMA
June 30, 1997 June 30, 1997 ADJUSTMENTS PRO FORMA
----------- ----------- ----------- -----------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C>
Operating revenues $ 900,090 $ 216,619 $ -- $ 1,116,709
----------- ----------- ----------- -----------
Costs and expenses:
Operating (exclusive of depreciation and
amortization shown below) 463,403 136,200 (18,138)(d) 581,465
General and administrative 102,614 33,295 (5,243)(d) 125,407
(5,259)(e)
Depreciation and amortization 108,203 -- 23,381 (d) 131,584
Merger costs -- -- 5,259 (e) 5,259
----------- ----------- ----------- -----------
674,220 169,495 -- 843,715
----------- ----------- ----------- -----------
Income from operations 225,870 47,124 -- 272,994
----------- ----------- ----------- -----------
Other income (expense):
Interest expense (33,373) (7,899) -- (41,272)
Interest income 2,139 -- 1,609 (f) 3,748
Other income (expense), net 7,713 1,585 (1,609)(f) 7,689
----------- ----------- ----------- -----------
(23,521) (6,314) -- (29,835)
----------- ----------- ----------- -----------
Income before income taxes 202,349 40,810 -- 243,159
Provision for income taxes 80,940 16,961 -- 97,901
----------- ----------- ----------- -----------
Income available to common shareholders $ 121,409 $ 23,849 $ -- $ 145,258
=========== =========== =========== ===========
Earnings per common share $ 0.75 $ 0.54 $ 0.70 (g)
=========== =========== ===========
Weighted average number of common and
common equivalent shares outstanding 167,861 44,165 3,312 (g) 215,338
=========== =========== =========== ===========
</TABLE>
See notes to pro forma condensed consolidated financial statements.
<PAGE> 48
USA WASTE SERVICES, INC.
PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION> USA WASTE UNITED
YEAR ENDED YEAR ENDED
December 31, December 31, PRO FORMA
1996 1996 ADJUSTMENTS PRO FORMA
----------- ----------- ----------- -----------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C>
Operating revenues $ 1,313,388 $ 335,743 $ -- $ 1,649,131
----------- ----------- ----------- -----------
Costs and expenses:
Operating (exclusive of depreciation
and amortization show below) 704,917 206,786 (30,302)(d) 881,401
General and administrative 160,539 53,106 (7,574)(d) 200,101
(5,970)(e)
Depreciation and amortization 153,168 -- 37,876 (d) 191,044
Merger costs 120,656 -- 5,970 (e) 126,626
Unusual items 63,800 -- -- 63,800
----------- ----------- ----------- -----------
1,203,080 259,892 -- 1,462,972
----------- ----------- ----------- -----------
Income from operations 110,308 75,851 -- 186,159
----------- ----------- ----------- -----------
Other income (expense):
Interest expense (45,547) (14,950) -- (60,497)
Interest income 5,267 -- 1,432 (f) 6,699
Other income (expense), net 8,060 (252) (1,432)(f) 6,376
----------- ----------- ----------- -----------
(32,220) (15,202) -- (47,422)
----------- ----------- ----------- -----------
Income before income taxes 78,088 60,649 -- 138,737
Provision for income taxes 45,142 25,256 -- 70,398
----------- ----------- ----------- -----------
Income available to common shareholders $ 32,946 $ 35,393 $ -- $ 68,339
=========== =========== =========== ===========
Earnings per common share $ 0.24 $ 0.89 $0.37 (g)
=========== =========== ===========
Weighted average number of common and
common equivalent shares outstanding 139,740 39,944 2,996 (g) 182,680
=========== =========== =========== ===========
</TABLE>
See notes to pro forma condensed consolidated financial statements.
<PAGE> 49
USA WASTE SERVICES, INC.
NOTES TO PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited pro forma condensed consolidated
financial statements present the issuance of USA Waste Common Stock for
all issued and outstanding United Common Stock in a merger transaction
accounted for as a "pooling of interests" pursuant to Opinion No. 16
of the Accounting Principles Board. The "pooling of interests" method
of accounting assumes that the combining companies have been merged
from their inception, and the historical financial statements for
periods prior to consummation of the Merger are restated as though the
companies have been combined since their inception.
The accompanying unaudited pro forma condensed consolidated
balance sheet includes an adjustment for estimated nonrecurring costs
directly related to the Merger which are expected to be included in
operations of USA Waste within the twelve months succeeding the
consummation of the Merger. Such costs are currently estimated to be
approximately $50,000,000.
Certain reclassifications have been made to the historical
financial statements of USA Waste and United to conform to the pro
forma presentation. Such reclassifications are not material to the pro
forma condensed consolidated financial statements.
The pro forma condensed consolidated financial statements are
not necessarily indicative of the operating results that would have
been achieved had the Merger been consummated as of the beginning of
the periods presented and should not be construed as indicative of
future operating results.
2. PRO FORMA ADJUSTMENTS
(a) In connection with the Merger, all outstanding options to
purchase United Common Stock were cancelled in exchange for a
number of shares of USA Waste Common Stock having a market value
equal to the fair value of such options at the time of
consummation of the Merger, as determined by an independent
third party. This adjustment reflects the assumed issuance of
1,682,396 shares of USA Waste Common Stock to accomplish this
exchange. United receives a tax deduction for the fair market
value of the shares issued, and the estimated resulting benefit
of $27,087,000 (40% of the estimated market value of the shares
issued of $67,716,000) is reflected as a reduction in accrued
liabilities. The estimated tax benefit realized, net of par value
of the stock issued, is reflected as an increase in additional
paid-in capital.
(b) Reflects a charge to stockholders' equity and an increase in
accrued liabilities for the estimated nonrecurring costs of
$50,000,000 related to the Merger. Actual nonrecurring costs may
vary from such estimates.
(c) The stockholders' equity accounts have been adjusted to reflect
the issuance of 47,911,984 shares of USA Waste Common Stock for
all issued and outstanding shares of United Common Stock (based
on the exchange ratio of 1.075 shares of USA Waste Common Stock
for each share of United Common Stock outstanding as of June 30,
1997). The actual number of shares of USA Waste Common Stock to
be
<PAGE> 50
issued pursuant to the Merger was based on the number of United
Common Stock issued and outstanding immediately prior to the
consummation of the Merger.
(d) Adjustments have been made to reclassify United's depreciation
and amortization from operating expenses and general and
administrative expenses to a separate line item to conform to the
presentation of USA Waste.
(e) Adjustments have been made to reclassify United's merger costs
from general and administrative expenses to a separate line item
to conform to the presentation of USA Waste.
(f) Adjustments have been made to reclassify United's interest income
from other income (expense), net to a separate line item to
conform to the presentation of USA Waste.
(g) Earnings per common share for each period are based on the
combined weighted average number of common and common equivalent
shares outstanding, after giving effect to the issuance of 1.075
shares of USA Waste Common Stock for each share on United Common
Stock. Earnings per common share for the six months ended
June 30, 1997, is computed by dividing net income, after adjusting
for the after-tax interest expense of approximately $5,033,000 on
the Company's 4% convertible subordinated notes that are
considered to be common stock equivalents based upon the yield
test at the time of issuance, by the weighted average number of
common and dilutive common equivalent shares outstanding for the
period. Fully dilutive earnings per common share are considered
equal to primary earnings per share for all periods presented
because the addition of potentially dilutive securities that are
not common stock equivalents would have been either antidilutive
or not material.
<PAGE> 51
(c) Exhibits
10.1 Revolving Credit Agreement, dated August 9, 1997, among USA
Waste Services, Inc., Bank of America Illinois, Morgan Guaranty
Trust Company and other financial institutions.
10.2 Supplemental Indenture, dated as of August 26, 1997, among United
Waste Systems, Inc. and USA Waste Services, Inc. and Bankers
Trust Company relating to United Waste Systems, Inc.'s 4 1/2%
Convertible Subordinated Notes due June 1, 2001.
23.1 Consent of Ernst & Young LLP.
<PAGE> 52
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
USA WASTE SERVICES, INC.
By: /s/ GREGORY T. SANGALIS
-------------------------------------
Gregory T. Sangalis
Vice President, General Counsel
& Secretary
September 2, 1997
<PAGE> 53
INDEX TO EXHIBITS
<TABLE>
<S> <C>
10.1 Revolving Credit Agreement, dated as of August 9, 1997, among USA Waste
Services, Inc., Bank of America Illinois, Morgan Guaranty Trust Company
and other financial institutions.
10.2 Supplemental Indenture, dated as of August 26, 1997, among United Waste
Systems, Inc. and USA Waste Services, Inc. and Bankers Trust Company
relating to United Waste System, Inc.'s 4 1/2% Convertible Subordinated
Notes due June 1, 2001.
23.1 Consent of Ernst & Young LLP.
</TABLE>
<PAGE> 1
EXHIBIT 10.1
AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
dated as of August 7, 1997
by and among
USA WASTE SERVICES, INC.
(the "Borrower")
AND
THE GUARANTORS
AND
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION
("BOA")
MORGAN GUARANTY TRUST COMPANY OF NEW YORK
("MGT")
AND THE OTHER FINANCIAL INSTITUTIONS WHICH BECOME
A PARTY TO THIS AGREEMENT
(Collectively, the "Banks")
and
MGT AS ADMINISTRATIVE AGENT AND DOCUMENTATION AGENT
(the "Administrative Agent")
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
Section 1. DEFINITIONS AND RULES OF INTERPRETATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1. Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.2. Rules of Interpretation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 2. THE LOAN FACILITIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 2.1. Commitment to Lend. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 2.2. Facility Fee; Utilization Fee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 2.3. Reduction of Total Commitment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 2.4. The Syndicated Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 2.5. Interest on Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 2.6. Requests for Syndicated Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 2.7. Election of Eurodollar Rate; Notice of Election; Interest Periods; Minimum Amounts. . . 21
Section 2.8. Funds for Syndicated Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 2.9. Maturity of the Loans and Reimbursement Obligations. . . . . . . . . . . . . . . . . . . 23
Section 2.10. Optional Prepayments or Repayments of Loans. . . . . . . . . . . . . . . . . . . . . . 23
Section 2.11. Swing Line Loans; Settlements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 3. LETTERS OF CREDIT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 3.1. Letter of Credit Commitments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 3.2. Reimbursement Obligation of the Borrower. . . . . . . . . . . . . . . . . . . . . . . . 26
Section 3.3. Obligations Absolute. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 3.4. Reliance by the Issuing Banks. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 3.5. Notice Regarding Letters of Credit. . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 3.6. Letter of Credit Fee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 4. COMPETITIVE BID LOANS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 4.1. The Competitive Bid Option. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 4.2. Competitive Bid Loan Accounts: Competitive Bid Notes. . . . . . . . . . . . . . . . . . 28
Section 4.3. Competitive Bid Quote Request; Invitation for Competitive Bid Quotes. . . . . . . . . . 29
Section 4.4. Alternative Manner of Procedure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 4.5. Submission and Contents of Competitive Bid Quotes. . . . . . . . . . . . . . . . . . . . 31
Section 4.6. Notice to Borrower. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 4.7. Acceptance and Notice by Borrower and Administrative Agent. . . . . . . . . . . . . . . . 32
Section 4.8. Allocation by Administrative Agent. . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 4.9. Funding of Competitive Bid Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 4.10. Funding Losses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 4.11. Repayment of Competitive Bid Loans; Interest. . . . . . . . . . . . . . . . . . . . . . 34
Section 5. Provisions Relating to All Loans and Letters of Credit. . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 5.1. Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 5.2. Mandatory Repayments of the Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 5.3. Computations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 5.4. Illegality; Inability to Determine Eurodollar Rate. . . . . . . . . . . . . . . . . . . 37
Section 5.5. Additional Costs, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
</TABLE>
<PAGE> 3
ii
<TABLE>
<S> <C> <C>
Section 5.6. Capital Adequacy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 5.7. Certificate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 5.8. Eurodollar and Competitive Bid Indemnity. . . . . . . . . . . . . . . . . . . . . . . . 39
Section 5.9. Interest on Overdue Amounts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 5.10. Interest Limitation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 5.11. Reasonable Efforts to Mitigate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 5.12. Replacement of Banks. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 5.13. Advances by Administrative Agent. . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 6. REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 6.1. Corporate Authority. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 6.2. Governmental Approvals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 6.3. Title to Properties; Leases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 6.4. Financial Statements; Solvency. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 6.5. No Material Changes, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 6.6. Franchises, Patents, Copyrights, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 6.7. Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 6.8. No Materially Adverse Contracts, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 6.9. Compliance With Other Instruments, Laws, Etc. . . . . . . . . . . . . . . . . . . . . . 46
Section 6.10. Tax Status. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 6.11. No Event of Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 6.12. Holding Company and Investment Company Acts. . . . . . . . . . . . . . . . . . . . . . 47
Section 6.13. Absence of Financing Statements, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 6.14. Employee Benefit Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 6.14.1. In General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 6.14.2. Terminability of Welfare Plans. . . . . . . . . . . . . . . . . . . 47
Section 6.14.3. Guaranteed Pension Plans. . . . . . . . . . . . . . . . . . . . . . 47
Section 6.14.4. Multiemployer Plans. . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 6.15. Environmental Compliance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 6.16. True Copies of Charter and Other Documents. . . . . . . . . . . . . . . . . . . . . . . 50
Section 6.17. Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 6.18. Permits and Governmental Authority. . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 7. AFFIRMATIVE COVENANTS OF THE BORROWER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 7.1. Punctual Payment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 7.2. Maintenance of U.S. Office. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 7.3. Records and Accounts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 7.4. Financial Statements, Certificates and Information. . . . . . . . . . . . . . . . . . . 51
Section 7.5. Corporate Existence and Conduct of Business. . . . . . . . . . . . . . . . . . . . . . . 53
Section 7.6. Maintenance of Properties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 7.7. Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 7.8. Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 7.9. Inspection of Properties, Books and Contracts. . . . . . . . . . . . . . . . . . . . . . 54
Section 7.10. Compliance with Laws, Contracts, Licenses and Permits; Maintenance of Material
Licenses and Permits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 7.11. Environmental Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 7.12. Further Assurances. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
</TABLE>
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iii
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Section 7.13. Notice of Potential Claims or Litigation. . . . . . . . . . . . . . . . . . . . . . . . 56
Section 7.14. Notice of Certain Events Concerning Insurance and Environmental Claims. . . . . . . . . 56
Section 7.15. Notice of Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 7.16. Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 7.17. Certain Transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 8. CERTAIN NEGATIVE COVENANTS OF THE BORROWER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Section 8.1. Restrictions on Indebtedness. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Section 8.2. Restrictions on Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Section 8.3. Restrictions on Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 8.4. Mergers, Consolidations, Sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 8.5. Restricted Distributions and Redemptions. . . . . . . . . . . . . . . . . . . . . . . . 63
Section 8.6. Employee Benefit Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Section 9. FINANCIAL COVENANTS OF THE BORROWER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Section 9.1. Interest Coverage Ratio. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Section 9.2. Debt to Total Capitalization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Section 10. CONDITIONS PRECEDENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Section 10.1. Conditions To Effectiveness. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Section 10.1.1. Corporate Action. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Section 10.1.2. Loan Documents, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Section 10.1.3. Certified Copies of Charter Documents. . . . . . . . . . . . . . . . . . . . 65
Section 10.1.4. Incumbency Certificate. . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Section 10.1.5. Certificates of Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . 65
Section 10.1.6. Opinions of Counsel and Permit Certificate. . . . . . . . . . . . . . . . . 65
Section 10.1.7. Existing Debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Section 10.1.8. Satisfactory Financial Condition. . . . . . . . . . . . . . . . . . . . . . 65
Section 10.1.9. Payment of Closing Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Section 10.2. Conditions to Increase in Total Commitment. . . . . . . . . . . . . . . . . . . . . . . 66
Section 10.2.1. United Merger. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Section 10.2.2. Corporate Action. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Section 10.2.3. The United Joinder. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Section 10.2.4. Certified Copies of Charter Documents. . . . . . . . . . . . . . . . . . . . 66
Section 10.2.5. Incumbency Certificate. . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Section 10.2.6. Opinion of Counsel. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Section 10.2.7. Existing United Debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Section 10.2.8. Lien Search Results. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Section 10.2.9. Satisfactory Financial Condition. . . . . . . . . . . . . . . . . . . . . . 67
Section 10.2.10. Notice of United Joinder Date. . . . . . . . . . . . . . . . . . . . . . . 67
Section 11. CONDITIONS TO ALL LOANS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Section 11.1. Representations True. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Section 11.2. Performance; No Event of Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Section 11.3. No Legal Impediment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Section 11.4. Governmental Regulation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Section 11.5. Proceedings and Documents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
</TABLE>
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<TABLE>
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Section 12. EVENTS OF DEFAULT; ACCELERATION; TERMINATION OF COMMITMENT. . . . . . . . . . . . . . . . . . . . . . 68
Section 12.1. Events of Default and Acceleration. . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Section 12.2. Termination of Commitments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Section 12.3. Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Section 13. SETOFF. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Section 14. EXPENSES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Section 15. THE ADMINISTRATIVE AGENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Section 15.1. Appointment, Powers and Immunities. . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Section 15.2. Actions By Administrative Agent. . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Section 15.3. Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Section 15.4. Reimbursement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Section 15.5. Documents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Section 15.6. Non-Reliance on Administrative Agent and Other Banks. . . . . . . . . . . . . . . . . . 75
Section 15.7. Resignation of Administrative Agent. . . . . . . . . . . . . . . . . . . . . . . . . . 76
Section 15.8. Action by the Banks, Consents, Amendments, Waivers, Etc. . . . . . . . . . . . . . . . 76
Section 16. INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
Section 17. WITHHOLDING TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
Section 18. SURVIVAL OF COVENANTS, ETC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
Section 19. ASSIGNMENT AND PARTICIPATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
Section 20. PARTIES IN INTEREST. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
Section 21. NOTICES, ETC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
Section 22. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
Section 23. CONSENTS, ETC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
Section 24. WAIVER OF JURY TRIAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
Section 25. GOVERNING LAW; SUBMISSION TO JURISDICTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
Section 26. SEVERABILITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
Section 27. GUARANTY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
Section 27.1. Guaranty. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
Section 27.2. Guaranty Absolute. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
Section 27.3. Effectiveness; Enforcement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
Section 27.4. Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
Section 27.5. Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
Section 27.6. Concerning Joint and Several Liability of the Guarantors. . . . . . . . . . . . . . . . 86
Section 27.7. Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
Section 27.8. Subrogation; Subordination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
Section 28. Pari Passu treatment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
Section 29. FINAL AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
</TABLE>
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Exhibits
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Exhibit A Form of Syndicated Note
Exhibit B Form of Swing Line Note
Exhibit C Form of Competitive Bid Note
Exhibit D Form of Syndicated Loan Request
Exhibit E Form of Letter of Credit Request
Exhibit F Form of Compliance Certificate
Exhibit G Form of Assignment and Acceptance
Exhibit H Form of Competitive Bid Quote Request
Exhibit I Form of Invitation for Competitive Bid Quotes
Exhibit J Form of Competitive Bid Quote
Exhibit K Form of Notice of Acceptance/Rejection of
Competitive Bid Quote(s)
Exhibit L Form of United Joinder
</TABLE>
Schedules
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Schedule 1 Banks; Commitment Percentages;
Banks' Addresses for Notices
Schedule 3.1(a) Existing Letters of Credit
Schedule 6.7 Litigation
Schedule 6.15 Environmental Compliance
Schedule 8.1(b) Existing Indebtedness
Schedule 8.2(a) Existing Liens
</TABLE>
<PAGE> 7
AMENDED AND RESTATED
REVOLVING CREDIT AGREEMENT
This AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT is made as of the 7th
day of August, 1997, by and among USA WASTE SERVICES, INC., a Delaware
corporation having its chief executive office at 1001 Fannin Street, First City
Tower, Suite 4000, Houston, Texas 77002 (the "Borrower"), the Guarantors, and
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, a national banking
association having its principal place of business at 231 South LaSalle Street
Chicago, IL 60697 (successor by merger to Bank of America Illinois and referred
to herein as "BOA"), MORGAN GUARANTY TRUST COMPANY OF NEW YORK, a New York
state banking association having its principal place of business at 60 Wall
Street, New York, New York 10260 ("MGT"), and each of the other financial
institutions party hereto (collectively, the "Banks"), and MGT as
administrative agent and documentation agent (the "Administrative Agent").
W I T N E S S E T H:
WHEREAS, the Borrower, Canadian Waste Services Inc., Sanifill, BOA, MGT and
certain of the Banks, and MGT as Administrative and Documentation Agent
thereunder (collectively, the "Original Parties") are party to that certain
Amended and Restated Revolving Credit Agreement dated as of March 5, 1997, by
and among the Original Parties (as amended and in effect from time to time, the
"Original Credit Agreement"); and
WHEREAS, the Borrower has requested, among other things, additional
financing and the Banks are willing to provide such financing on the terms and
conditions set forth herein to replace the Original Credit Agreement;
NOW, THEREFORE, in consideration of the foregoing, the mutual covenants and
agreements set forth herein below, and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged by the parties,
the parties hereto agree, and the Original Parties have acknowledged, that on
the Closing Date the Original Credit Agreement shall be amended and restated by
this Agreement, the terms of which are as follows:
SECTION 1. DEFINITIONS AND RULES OF INTERPRETATION.
SECTION 1.1 DEFINITIONS. The following terms shall have the meanings set
forth in this Section 1 or elsewhere in the provisions of this Agreement
referred to below:
<PAGE> 8
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Absolute Competitive Bid Loan(s). See Section 4.3(a).
Accountants. See Section 7.4(a).
Administrative Agent. See Preamble.
Affected Bank. See Section 5.12.
Agents. BOA, BancAmerica Securities, Inc. and J.P. Morgan Securities Inc.
Agreement. This Amended and Restated Revolving Credit Agreement, including
the Schedules and Exhibits hereto, as from time to time amended and
supplemented in accordance with the terms hereof.
Applicable Canadian Pension Legislation. At any time, any pension or
retirement benefits legislation (be it federal, provincial, territorial, or
otherwise) then applicable to any of the Canadian Subsidiaries, including the
Pension Benefits Act (Ontario), the Income Tax Act (Canada), and all
regulations made thereunder.
Applicable Eurodollar Rate. The applicable rate per annum of interest on
the Eurodollar Loans shall be as set forth in the Pricing Table.
Applicable Facility Rate. The applicable rate per annum with respect to
the Facility Fee shall be as set forth in the Pricing Table.
Applicable L/C Rate. The applicable rate per annum on the Maximum Drawing
Amount shall be as set forth in the Pricing Table.
Applicable Requirements. See Section 7.10.
Applicable Swing Line Rate. The annual rate of interest agreed upon from
time to time by MGT and the Borrower with respect to Swing Line Loans.
Assignment and Acceptance. See Section 19.
Average Quarterly Utilization Amount. See Section 2.2(b).
Balance Sheet Date. December 31, 1996.Banks. See Preamble.
Base Rate. The higher of (a) the annual rate of interest announced from
time to time by the Administrative Agent at its Head Office as its "prime rate"
(it being understood that such rate is a reference rate and not necessarily the
<PAGE> 9
-3-
lowest rate of interest charged by the Administrative Agent), or (b) one
percent (1%) above the Overnight Federal Funds Effective Rate.
Base Rate Loans. Syndicated Loans bearing interest calculated by reference
to the Base Rate.
BOA. See Preamble.
Borrower. See Preamble.
Business Day. Any day, other than a Saturday, Sunday or any day on which
banking institutions in New York, New York are authorized by law to close, and,
when used in connection with a Eurodollar Loan, a Eurodollar Business Day.
Capitalized Leases. Leases under which the Borrower or any of its
Subsidiaries is the lessee or obligor, the discounted future rental payment
obligations under which are required to be capitalized on the balance sheet of
the lessee or obligor in accordance with GAAP.
CERCLA. See Section 6.15(a).
Certified or certified. With respect to the financial statements of any
Person, such statements as audited by a firm of independent auditors, whose
report expresses the opinion, without qualification, that such financial
statements present fairly the financial position of such Person.
CFO or the CAO. See Section 7.4(b).
Closing Date. The date on which the conditions precedent set forth in
Section 10.1 hereof are satisfied.
Code. The Internal Revenue Code of 1986, as amended and in effect from
time to time.
Commitment. With respect to each Bank, such Bank's commitment to make
Syndicated Loans to, and to participate in the issuance, extension and renewal
of Letters of Credit for the account of, the Borrower, determined by
multiplying such Bank's Commitment Percentage by the Total Commitment.
Commitment Percentage. With respect to each Bank, the percentage initially
set forth next to such Bank's name on Schedule 1 hereto, as the same may be
adjusted in accordance with Section 2.3 and Section 19.
Competitive Bid Loan(s). A borrowing hereunder consisting of one or more
loans made by any of the participating Banks whose offer to make a
<PAGE> 10
-4-
Competitive Bid Loan as part of such borrowing has been accepted by the
Borrower under the auction bidding procedure described in Section 4 hereof.
Competitive Bid Loan Accounts. See Section 4.2(a).
Competitive Bid Margin. See Section 4.5(b)(iv).
Competitive Bid Notes. See Section 4.2(b).
Competitive Bid Quote. An offer by a Bank to make a Competitive Bid Loan
in accordance with Section 4.5 hereof.
Competitive Bid Quote Request. See Section 4.3.
Competitive Bid Rate. See Section 4.5(b)(v).
Compliance Certificate. See Section 7.4(c).
Consolidated or consolidated. With reference to any term defined herein,
shall mean that term as applied to the accounts of the Borrower and its
Subsidiaries consolidated in accordance with GAAP.
Consolidated Earnings Before Interest and Taxes, or EBIT. For any period,
the Consolidated Net Income (or Deficit) of the Borrower and its Subsidiaries
on a consolidated basis plus the sum of (1) interest expense, (2) income taxes,
(3) up to $39,000,000 in pooling charges actually incurred with respect to the
Western Waste Merger taken as a special charge in the quarter ending June 30,
1996, (4) up to $82,556,000 in pooling charges actually incurred with respect
to the Sanifill Merger, taken as a special charge in the quarter ending
September 30, 1996, (5) up to $50,848,000 in extraordinary charges actually
incurred in the quarter ending September 30, 1996, (6) up to $50,000,000 in
pooling charges actually incurred with respect to the United Merger, taken as a
special charge in the quarter ending September 30, 1997, (7) up to $6,200,000
related to prepayment penalties in connection with the Prudential Private
Placement Debt, and (8) up to $4,000,000 related to prepayment penalties in
connection with the United Senior Secured Notes to the extent that each of
items (1) through (8) was deducted in determining Consolidated Net Income (or
Deficit) in the relevant period; provided, however, that EBIT shall not include
(A) extraordinary gains from tax credits occurring in any quarter commencing
with the quarter ending September 30, 1996, or (B) any cash reimbursements or
payments received with respect to item (5).
Consolidated Earnings Before Interest, Taxes, Depreciation and Amortization
or EBITDA. For any period, EBIT plus (a) depreciation expense, and (b)
amortization expense to the extent the same would be included in the
<PAGE> 11
-5-
calculation of Consolidated Net Income for such period, determined in
accordance with GAAP.
Consolidated Net Income (or Deficit). The consolidated net income (or
deficit) of the Borrower and its Subsidiaries on a consolidated basis, after
deduction of all expenses, taxes, and other proper charges, determined in
accordance with GAAP.
Consolidated Net Worth. The sum of the par value of the capital stock
(excluding treasury stock), capital in excess of par or stated value of shares
of capital stock, retained earnings (minus accumulated deficit) and any other
account which, in accordance with GAAP, constitute stockholders' equity, of the
Borrower and its Subsidiaries determined on a consolidated basis, excluding any
effect of foreign currency transaction computed pursuant to Financial
Accounting Standards Board Statement No. 52, as amended, supplemented or
modified from time to time, or otherwise in accordance with GAAP.
Consolidated Tangible Assets. Consolidated Total Assets less the sum of:
(a) the total book value of all assets of the Borrower and its
Subsidiaries properly classified as intangible assets under generally
accepted accounting principles, including such items as goodwill, the
purchase price of acquired assets in excess of the fair market value
thereof, trademarks, trade names, service marks, customer lists, brand
names, copyrights, patents and licenses, and rights with respect to the
foregoing; plus
(b) all amounts representing any write-up in the book value of
any assets of the Borrower or its Subsidiaries resulting from a revaluation
thereof subsequent to the Balance Sheet Date.
Consolidated Total Assets. All assets of the Borrower and its
Subsidiaries determined on a consolidated basis in accordance with GAAP.
Consolidated Total Capitalization. The sum of Funded Debt plus
Consolidated Net Worth.
Consolidated Total Interest Expense. For any period, the aggregate amount
of interest expense required by GAAP to be paid or accrued during such period
on all Indebtedness of the Borrower and its Subsidiaries outstanding during all
or any part of such period, including capitalized interest expense for such
period.
Defaulting Bank. See Section 5.12.
Defaults. See Section 12.1.
<PAGE> 12
-6-
Disposal. See "Release".
Distribution. The declaration or payment of any dividend or other return
on equity on or in respect of any shares of any class of capital stock, any
partnership interests or any membership interests of any Person, other than
dividends or other such returns payable solely in shares of common stock,
partnership interests or membership units of such Person, as the case may be;
the purchase, redemption, or other retirement of any shares of any class of
capital stock, partnership interests or membership units of such Person,
directly or indirectly through a Subsidiary or otherwise; the return of equity
capital by any Person to its shareholders, partners or members as such; or any
other distribution on or in respect of any shares of any class of capital
stock, partnership interest or membership unit of such Person.
Dollars or US$ or $ or U.S. Dollars. Dollars in lawful currency of the
United States of America.
Drawdown Date. The date on which any Loan is made or is to be made.
EBIT. See definition of Consolidated Earnings Before Interest and Taxes.
EBITDA. See definition of Consolidated Earnings Before Interest, Taxes,
Depreciation and Amortization.
Employee Benefit Plan. Any employee benefit plan within the meaning of
Section 3(3) of ERISA or Applicable Canadian Pension Legislation maintained or
contributed to by the Borrower, any of its Subsidiaries, or any ERISA
Affiliate, other than a Multiemployer Plan.
Environmental Laws. See Section 6.15(a).
EPA. See Section 6.15(b).
ERISA. The Employee Retirement Income Security Act of 1974, as amended and
in effect from time to time.
ERISA Affiliate. Any Person which is treated as a single employer with the
Borrower or any of its Subsidiaries under Section 414 of the Code.
ERISA Reportable Event. A reportable event within the meaning of Section
4043 of ERISA and the regulations promulgated thereunder with respect to a
Guaranteed Pension Plan as to which the requirement of notice has not been
waived.
Eurocurrency Reserve Rate. For any day with respect to a Eurodollar Loan,
the maximum rate (expressed as a decimal) at which any lender subject thereto
would be required to maintain reserves under Regulation D of the Board
<PAGE> 13
-7-
of Governors of the Federal Reserve System (or any successor or similar
regulations relating to such reserve requirements) against "Eurocurrency
Liabilities" (as that term is used in Regulation D), if such liabilities were
outstanding. The Eurocurrency Reserve Rate shall be adjusted automatically on
and as of the effective date of any change in the Eurocurrency Reserve Rate.
Eurodollar Business Day. Any day on which commercial banks are open for
international business (including dealings in Dollar deposits) in London or
such other eurodollar interbank market as may be selected by the Administrative
Agent in its sole discretion acting in good faith.
Eurodollar Interest Determination Date. For any Interest Period, the date
two Eurodollar Business Days prior to the first day of such Interest Period.
Eurodollar Lending Office. Initially, the office of each Bank set forth in
Schedule 1 hereto; thereafter, upon notice to the Administrative Agent, such
other office of such Bank that shall be making or maintaining Eurodollar Loans.
Eurodollar Loans. Syndicated Loans bearing interest calculated by
reference to the Eurodollar Rate.
Eurodollar Rate. For any Interest Period with respect to a Eurodollar
Loan, the rate of interest equal to (i) the arithmetic average of the rates per
annum for each Reference Bank at which such Reference Bank's Eurodollar Lending
Office is offered Dollar deposits at approximately 10:00 a.m. (New York time)
two Eurodollar Business Days prior to the beginning of such Interest Period in
the interbank eurodollar market where the eurodollar operations of such
Eurodollar Lending Office are customarily conducted, for delivery on the first
day of such Interest Period for the number of days comprised therein and in an
amount comparable to the amount of the Eurodollar Rate Loan of such Reference
Bank to which such Interest Period applies, divided by (ii) a number equal to
1.00 minus the Eurocurrency Reserve Rate, if applicable (rounded upwards to the
nearest 1/16 of one percent).
Events of Default. See Section 12.1.
Facility Fee. See Section 2.2(a).
Funded Debt. Consolidated Indebtedness of the Borrower and its
Subsidiaries for borrowed money and guarantees of debt for borrowed money
recorded on the Consolidated balance sheet of the Borrower and its
Subsidiaries, including the amount of any Indebtedness of such Persons for
Capitalized Leases which corresponds to principal and any Indebtedness with
respect to Permitted Receivables Transactions.
<PAGE> 14
-8-
generally accepted accounting principles or GAAP. (i) When used in Section
9, whether directly or indirectly through reference to a capitalized term used
therein, means (A) principles that are consistent with the principles
promulgated or adopted by the Financial Accounting Standards Board and its
predecessors, in effect for the fiscal year ended on the Balance Sheet Date,
and (B) to the extent consistent with such principles, the accounting practice
of the Borrower reflected in its financial statements for the year ended on the
Balance Sheet Date, and (ii) when used in general, other than as provided
above, means principles that are (A) consistent with the principles promulgated
or adopted by the Financial Accounting Standards Board and its predecessors, as
in effect from time to time, and (B) consistently applied with past financial
statements of the Borrower adopting the same principles, provided that in each
case referred to in this definition of "generally accepted accounting
principles" a certified public accountant would, insofar as the use of such
accounting principles is pertinent, be in a position to deliver an unqualified
opinion (other than a qualification regarding changes in generally accepted
accounting principles) as to financial statements in which such principles have
been properly applied.
Guaranteed Obligations. See Section 27.1.
Guaranteed Pension Plan. Any employee pension benefit plan within the
meaning of Section 3(2) of ERISA maintained or contributed to by the Borrower,
its Subsidiaries or any ERISA Affiliate the benefits of which are guaranteed on
termination in full or in part by the PBGC pursuant to Title IV of ERISA, other
than a Multiemployer Plan.
Guarantors. Shall mean Sanifill prior to the United Joinder Date, and
shall mean Sanifill and United, collectively, after the United Joinder Date.
Hazardous Substances. See Section 6.15(b).
Head Office. The Administrative Agent's head office located in New York,
New York, or at such other location as the Administrative Agent may designate
from time to time.
Indebtedness. Collectively without duplication, whether classified as
Indebtedness, an Investment or otherwise on the obligor's balance sheet, (a)
all indebtedness for borrowed money, (b) all obligations for the deferred
purchase price of property or services (other than trade payables not overdue
by more than ninety (90) days incurred in the ordinary course of business), (c)
all obligations evidenced by notes, bonds, debentures or other similar debt
instruments, (d) all obligations created or arising under any conditional sale
or other title retention agreement with respect to property acquired (even
though the rights and remedies of the seller or lender under such agreement in
the event of default are limited to repossession or sale of such property), (e)
all obligations, liabilities and indebtedness under Capitalized Leases, (f) all
<PAGE> 15
-9-
obligations, liabilities or indebtedness (contingent or otherwise) under
surety, performance bonds or any other bonding arrangements, (g) all
Indebtedness of others referred to in clauses (a) through (f) above which is
guaranteed, or in effect guaranteed, directly or indirectly in any manner,
including through an agreement (A) to pay or purchase such Indebtedness or to
advance or supply funds for the payment or purchase of such Indebtedness, (B)
to purchase, sell or lease (as lessee or lessor) property, or to purchase or
sell services, primarily for the purpose of enabling any Person to make payment
of such Indebtedness or to assure the holder of such Indebtedness against loss,
(C) to supply funds to or in any other manner invest in any Person (including
any agreement to pay for property or services irrespective of whether such
property is received or such services are rendered) or (D) otherwise to assure
any Person against loss, and (h) all Indebtedness referred to in clauses (a)
through (g) above secured or supported by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured or
supported by) any lien or encumbrance on (or other right of recourse to or
against) property (including, without limitation, accounts and contract
rights), even though the owner of the property has not assumed or become
liable, contractually or otherwise, for the payment of such Indebtedness;
provided that if a Permitted Receivables Transaction is outstanding and is
accounted for as a sale of accounts receivable under generally accepted
accounting principles, Indebtedness determined as aforesaid shall be adjusted
to include the additional Indebtedness, determined on a consolidated basis,
which would have been outstanding had such Permitted Receivables Transaction
been accounted for as a borrowing.
Interest Period. With respect to each Loan (a) initially, the period
commencing on the Drawdown Date of such Loan and ending on the last day of one
of the periods set forth below, as selected by the Borrower in accordance with
this Agreement (i) for any Base Rate Loan or Swing Line Loan, the first day of
the month; (ii) for any Eurodollar Loan, 1, 2, 3, or 6 months; (iii) for any
Absolute Competitive Bid Loan, from 7 through 180 days; and (iv) for any LIBOR
Competitive Bid Loan, 1, 2, 3, 4, 5, or 6 months; and (b) thereafter, each
period commencing on the last day of the next preceding Interest Period
applicable to such Loan and ending on the last day of one of the periods set
forth above, as selected by the Borrower in accordance with this Agreement;
provided that any Interest Period which would otherwise end on a day which is
not a Business Day shall be deemed to end on the next succeeding Business Day;
provided further that for any Interest Period for any Eurodollar Loan or LIBOR
Competitive Bid Loan, if such next succeeding Business Day falls in the next
succeeding calendar month, such Interest Period shall be deemed to end on the
next preceding Business Day; and provided further that no Interest Period shall
extend beyond the Maturity Date.
Interim Balance Sheet Date. March 31, 1997.
<PAGE> 16
-10-
Investments. All expenditures made by a Person and all liabilities
incurred (contingently or otherwise) by a Person for the acquisition of stock
(other than the stock of wholly owned Subsidiaries), pre-payments for use of
landfill air space in excess of usual and customary industry practice, or
Indebtedness of, or for loans, advances, capital contributions or transfers of
property to, or in respect of any guaranties or other commitments as described
under Indebtedness, or obligations of, any other Person, including without
limitation, the funding of any captive insurance company (other than loans,
advances, capital contributions or transfers of property to any wholly owned
Subsidiaries or guaranties with respect to Indebtedness of wholly owned
Subsidiaries). In determining the aggregate amount of Investments outstanding
at any particular time: (a) the amount of any Investment represented by a
guaranty shall be taken at not less than the principal amount of the
obligations guaranteed and still outstanding; (b) there shall be included as an
Investment all interest accrued with respect to Indebtedness constituting an
Investment unless and until such interest is paid; (c) there shall be deducted
in respect of each such Investment any amount received as a return of capital
(but only by repurchase, redemption, retirement, repayment, liquidating
dividend or liquidating distribution); (d) there shall not be deducted in
respect of any Investment any amounts received as earnings on such Investment,
whether as dividends, interest or otherwise, except that accrued interest
included as provided in the foregoing clause (b) may be deducted when paid; and
(e) there shall not be deducted from the aggregate amount of Investments any
decrease in the value thereof.
Issuance Fee. See Section 3.6.
Issuing Banks. The Bank(s) issuing Letters of Credit, which shall be (a)
MGT, BOA, BankBoston, N.A. (f/k/a The First National Bank of Boston), Texas
Commerce Bank, National Association, and Fleet Bank, N.A. and (b) such other
Banks as agreed to by the Borrower and the Administrative Agent.
Letter of Credit Applications. Letter of credit applications in such form
as may be agreed upon by the Borrower and the Issuing Bank from time to time
which are entered into pursuant to Section 3 hereof, as such Letter of Credit
Applications are amended, varied or supplemented from time to time; provided,
however, in the event of any conflict or inconsistency between the terms of any
Letter of Credit Application and this Agreement, the terms of this Agreement
shall control.
Letter of Credit Fee. See Section 3.6.
Letter of Credit Participation. See Section 3.1(c).
Letters of Credit. Standby letters of credit issued or to be issued by the
Issuing Banks under Section 3 hereof for the account of the Borrower.
<PAGE> 17
-11-
LIBOR Competitive Bid Loan(s). See Section 4.3(a).
LIBOR Rate. For any Interest Period with respect to a LIBOR Competitive
Bid Loan, (a) the rate of interest equal to the rate determined by the
Administrative Agent at which Dollar deposits for such Interest Period are
offered based on information presented on Telerate Page 3750 as of 11:00 a.m.
(London time) two (2) Eurodollar Business Days prior to the first day of such
Interest Period, or (b) if such rate is not shown at such place, the rate of
interest equal to (i) the arithmetic average of the rates per annum for each
Reference Bank at which such Reference Bank's Eurodollar Lending Office is
offered Dollar deposits two Eurodollar Business Days prior to the beginning of
such Interest Period in the interbank eurodollar market where the eurodollar
operations of such Eurodollar Lending Office are customarily conducted, for
delivery on the first day of such Interest Period for the number of days
comprised therein and in an amount comparable to the amount of the Eurodollar
Loan of such Reference Bank to which such Interest Period applies, divided by
(ii) a number equal to 1.00 minus the Eurocurrency Reserve Rate, if applicable
(rounded upwards to the nearest 1/16 of one percent).
Loan Documents. This Agreement, the Notes, the Letter of Credit
Applications, the Letters of Credit, the United Joinder and any documents,
instruments or agreements executed in connection with any of the foregoing,
each as amended, modified, supplemented, or replaced from time to time.
Loans. Collectively, the Syndicated Loans, the Swing Line Loans and the
Competitive Bid Loans.
Majority Banks. The Banks with fifty-one percent (51%) of the Total
Commitment; provided that in the event that the Total Commitment has been
terminated, the Majority Banks shall be the Banks holding fifty-one percent
(51%) of the aggregate outstanding principal amount of the Obligations on such
date.
Material Subsidiary. Any Subsidiary which, at the time such determination
is made, (a) has assets, revenues, or liabilities equal to at least $8,000,000,
or (b) is the holder of or the applicant for a permit to operate a solid waste
facility pursuant to RCRA or any analogous state law.
Maturity Date. August 7, 2002.
Maximum Drawing Amount. The maximum aggregate amount from time to time
that the beneficiaries may draw under outstanding Letters of Credit.
MGT. See Preamble.
Moody's. Moody's Investors Service, Inc.
<PAGE> 18
-12-
Multiemployer Plan. Any multiemployer plan within the meaning of Section
3(37) of ERISA maintained or contributed to by the Borrower, any of its
Subsidiaries, or any ERISA Affiliate.
New Lending Office. See Section 5.1(c).
Non-U.S. Bank. See Section 5.1(b).
Notes. Collectively, the Competitive Bid Notes, the Syndicated Notes, and
the Swing Line Note.
Obligations. All indebtedness, obligations and liabilities of the Borrower
to any of the Banks and the Administrative Agent arising or incurred under this
Agreement or any of the other Loan Documents or in respect of any of the Loans
made or Reimbursement Obligations incurred or the Letters of Credit, the Notes,
or any other instrument at any time evidencing any thereof individually or
collectively, existing on the date of this Agreement or arising thereafter,
direct or indirect, joint or several, absolute or contingent, matured or
unmatured, liquidated or unliquidated, secured or unsecured, arising by
contract, operation of law or otherwise.
Original Credit Agreement. See Recitals.
Original Parties. See Recitals.
Overnight Federal Funds Effective Rate. The overnight federal funds
effective rate as published by the Board of Governors of the Federal Reserve
System, as in effect from time to time.
PBGC. The Pension Benefit Guaranty Corporation created by Section 4002 of
ERISA and any successor entity or entities having similar responsibilities.
Permitted Liens. See Section 8.2.
Permitted Receivables Transaction. Any sale or sales of, and/or
securitization of, any accounts receivable of the Borrower and/or any of its
Subsidiaries (the "Receivables") pursuant to which (a) the Borrower and its
Subsidiaries realize aggregate net proceeds of not more than $150,000,000 at
any one time outstanding, including, without limitation, any revolving
purchase(s) of Receivables where the maximum aggregate uncollected purchase
price (exclusive of any deferred purchase price) for such Receivables at any
time outstanding does not exceed $150,000,000, and (b) which Receivables shall
not be discounted more than 25%.
Person. Any individual, corporation, partnership, joint venture, limited
liability company, trust, unincorporated association, business, or other legal
<PAGE> 19
-13-
entity, and any government or any governmental agency or political subdivision
thereof.
<TABLE>
<CAPTION>
Pricing Table:
-------------
- ----------------------------------------------------------------------------------------------------------------
APPLICABLE
SENIOR PUBLIC APPLICABLE APPLICABLE EURODOLLAR
LEVEL DEBT RATING FACILITY RATE L/C RATE RATE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 At least A- by Standard & Poor's or 0.07500% 0.1500% Eurodollar
at least A3 by Moody's per annum per annum Rate plus
0.1500%
per annum
- ----------------------------------------------------------------------------------------------------------------
2 At least BBB+ by Standard & Poor's 0.0900% 0.1850% Eurodollar
or at least Baa1 by Moody's per annum per annum Rate plus
0.1850%
per annum
- ----------------------------------------------------------------------------------------------------------------
3 At least BBB by Standard & Poor's 0.1125% 0.2375% Eurodollar
or at least Baa2 by Moody's per annum per annum Rate plus
0.2375%
per annum
- ----------------------------------------------------------------------------------------------------------------
4 At least BBB- by Standard & Poor's 0.1500% 0.3000% Eurodollar
or at least Baa3 by Moody's per annum per annum Rate plus
0.3000%
per annum
- ----------------------------------------------------------------------------------------------------------------
5 At least BB+ by Standard & Poor's 0.2500% 0.5000% Eurodollar
or at least Ba1 by Moody's per annum per annum Rate plus
0.5000%
per annum
- ----------------------------------------------------------------------------------------------------------------
6 If no other level applies 0.3000% 0.5750% Eurodollar
per annum per annum Rate plus
0.5750%
per annum
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
The applicable rates charged for any day shall be determined by the Senior
Public Debt Rating in effect as of that day.
Prudential Private Placement Debt. (a) That certain Amended and Restated
Note Agreement dated as of August 28, 1996 by and among the Borrower, Sanifill
and The Prudential Insurance Company of America and (b) that certain Amended
and Restated Master Shelf Agreement dated as of August 28, 1996 by and among
the Borrower, Sanifill and The Prudential Insurance Company of America, as each
shall be amended through the Closing Date.
<PAGE> 20
-14-
RCRA. See Section 6.15(a).
Real Property. All real property heretofore, now, or hereafter owned,
operated, or leased by the Borrower or any of its Subsidiaries.
Reference Banks. BOA and MGT.
Reimbursement Obligation. The Borrower's obligation to reimburse the
applicable Issuing Bank and the Banks on account of any drawing under any
Letter of Credit, all as provided in Section 3.2.
Release. Shall have the meaning specified in the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C.
Sections 9601 et seq. ("CERCLA") and the term "Disposal" (or "Disposed") shall
have the meaning specified in the Resource Conservation and Recovery Act of
1976, 42 U.S.C. Sections 6901 et seq. ("RCRA") and regulations promulgated
thereunder; provided, that in the event either CERCLA or RCRA is amended so as
to broaden the meaning of any term defined thereby, such broader meaning shall
apply as of the effective date of such amendment and provided further, to the
extent that the laws of Canada or a state, province, territory or other
political subdivision thereof wherein the property lies establish a meaning for
"Release" or "Disposal" which is broader than specified in either CERCLA, or
RCRA, such broader meaning shall apply to the Borrower's or any of its
Subsidiaries' activities in that state, province, territory or political
subdivision.
Replacement Bank. See Section 5.12.
Replacement Notice. See Section 5.12.Sanifill. Sanifill, Inc., a Delaware
corporation having its chief executive office at 1001 Fannin Street, First City
Tower, Suite 4000, Houston, Texas 77002.
Sanifill Merger. The merger of Sanifill and Quatro Acquisition Corp., a
Subsidiary of the Borrower, pursuant to the terms of the Sanifill Merger
Agreement.
Sanifill Merger Agreement. The Agreement and Plan of Merger dated as of
June 22, 1996 between Sanifill, the Borrower and Quatro Acquisition Corp.
Sanifill Convertible Subordinated Debt. That certain indenture dated as of
March 1, 1996, by and between Sanifill and Texas Commerce Bank National
Association as Trustee, as in effect on the Closing Date, provided, that the
Obligations and Sanifill's Guaranteed Obligations shall be "Senior
Indebtedness" thereunder.
<PAGE> 21
-15-
Senior Public Debt Rating. The rating(s) of the Borrower's public
unsecured long-term senior debt, without third party credit enhancement, issued
by Moody's and/or Standard & Poor's; or in the event no public unsecured
long-term senior debt is outstanding, the rating(s) of this credit facility
issued by Moody's and/or Standard & Poor's upon the request of the Borrower;
provided that until such time as the Borrower receives such rating(s) on such
public unsecured long-term senior debt or this credit facility, the Borrower's
corporate credit rating by Standard & Poor's shall apply.
Standard & Poor's. Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc..
Subsidiary. Any corporation, association, trust, or other business entity
of which the designated parent shall at any time own directly or indirectly
through a Subsidiary or Subsidiaries at least a majority of the outstanding
capital stock or other interest entitled to vote generally.
Swing Line Loans. See Section 2.11(a).
Swing Line Note. See Section 2.11(a).
Swing Line Settlement. The making or receiving of payments, in immediately
available funds, by the Banks to or from the Administrative Agent in accordance
with Section 2.11 hereof to the extent necessary to cause each Bank's actual
share of the outstanding amount of the Syndicated Loans to be equal to such
Bank's Commitment Percentage of the outstanding amount of such Syndicated
Loans, in any case when, prior to such action, the actual share is not so
equal.
Swing Line Settlement Amount. See Section 2.11(b).
Swing Line Settlement Date. See Section 2.11(b).
Swing Line Settling Bank. See Section 2.11(b).
Syndicated Loan Request. See Section 2.6(a).
Syndicated Loans. A borrowing hereunder consisting of one or more loans
made by the Banks to the Borrower under the procedure described in Section
2.1(a) and Section 2.11 hereof.
Syndicated Notes. See Section 2.4(a).
Total Commitment. (a) $1,700,000,000 prior to the United Joinder Date, or
(b) $2,000,000,000 on and after the United Joinder Date, as such amount may
<PAGE> 22
-16-
be reduced pursuant to Section 2.3 hereof, or, (c) if such Total Commitment has
been terminated pursuant to Section 2.3 or Section 12.2 hereof, zero.
United. United Waste Systems, Inc., a Delaware corporation having its
chief executive office at Four Greenwich Office Park, Greenwich, Connecticut
06830.
United Credit Agreement. That certain Fourth Amended and Restated Credit
Agreement dated as of December 5, 1996 among United, the First National Bank of
Boston as co-agent, Bank of America Illinois as agent, and certain other
financial institutions party thereto.
United Indenture. That certain indenture dated as of June 5, 1996 between
United and Bankers Trust Company, as trustee, in the principal amount of
$150,000,000 due June 1, 2001.
United Joinder. A joinder to this Agreement in the form of Exhibit L
executed by United simultaneously with the closing of the United Merger
Agreement wherein United becomes a Guarantor hereunder, and such other related
documents reasonably requested by the Administrative Agent, all in form and
substance satisfactory to the Administrative Agent.
United Joinder Date. The date of the satisfaction of the conditions set
forth in Section 10.2.
United Merger. The merger of United and Riviera Acquisition Corporation, a
Subsidiary of the Borrower, pursuant to the terms of the United Merger
Agreement.
United Merger Agreement. The Agreement and Plan of Merger dated as of
April 13, 1997 by and among United, the Borrower and Riviera Acquisition
Corporation.
United Senior Secured Notes. That certain Secured Note Agreement among
United and the purchasers listed in the schedule attached thereto dated as of
September 1, 1995 in the principal amount of $75,000,000 due September 1, 2005.
Utilization Fee. See Section 2.2(b).
Western Waste. Western Waste Industries, Inc., a California corporation.
Western Waste Merger. The merger of Western Waste and Riviera Acquisition
Corporation, a Subsidiary of the Borrower, pursuant to the terms of the Western
Waste Merger Agreement.
<PAGE> 23
-17-
Western Waste Merger Agreement. The Agreement and Plan of Merger dated as
of December 18, 1995 between Western Waste, the Borrower and Riviera
Acquisition Corporation.
SECTION 1.2 RULES OF INTERPRETATION.
(a) A reference to any document or agreement (including this
Agreement) shall include such document or agreement as amended, modified or
supplemented from time to time in accordance with its terms and the terms
of this Agreement.
(b) The singular includes the plural and the plural includes
the singular.
(c) A reference to any law includes any amendment or
modification to such law.
(d) A reference to any Person includes its permitted
successors and permitted assigns.
(e) Accounting terms capitalized but not otherwise defined
herein have the meanings assigned to them by generally accepted accounting
principles applied on a consistent basis by the accounting entity to which
they refer.
(f) The words "include", "includes" and "including" are not
limiting.
(g) All terms not specifically defined herein or by generally
accepted accounting principles, which terms are defined in the Uniform
Commercial Code as in effect in the State of New York, have the meanings
assigned to them therein.
(h) Reference to a particular "Section " refers to that
section of this Agreement unless otherwise indicated.
(i) The words "herein", "hereof", "hereunder" and words of
like import shall refer to this Agreement as a whole and not to any
particular section or subdivision of this Agreement.
SECTION 2. THE LOAN FACILITIES.
SECTION 2.1 COMMITMENT TO LEND.
(a) Subject to the terms and conditions set forth in this
Agreement, each of the Banks severally agrees to lend to the Borrower and
the Borrower may borrow, repay, and reborrow from time to time
<PAGE> 24
-18-
between the Closing Date and the Maturity Date, upon notice by the Borrower
to the Administrative Agent given in accordance with this Section 2, its
Commitment Percentage of the Syndicated Loans as are requested by the
Borrower; provided that the sum of the outstanding principal amount of the
Syndicated Loans (including the Swing Line Loans) and the Maximum Drawing
Amount of outstanding Letters of Credit shall not exceed the Total
Commitment minus the aggregate amount of Competitive Bid Loans outstanding
at such time.
(b) Each request for a Loan or Letter of Credit hereunder
shall constitute a representation and warranty by the Borrower that the
conditions set forth in Section 10 and Section 11, as the case may be, have
been satisfied on the date of such request. Any unpaid Reimbursement
Obligation shall be a Base Rate Loan, as set forth in Section 3.2 (a).
SECTION 2.2 FACILITY FEE; UTILIZATION FEE.
(a) The Borrower agrees to pay to the Administrative Agent for
the account of the Banks a fee (the "Facility Fee") on the Total Commitment
equal to the Applicable Facility Rate multiplied by the Total Commitment.
The Facility Fee shall be payable for the period from and after the Closing
Date quarterly in arrears on the first day of each calendar quarter for the
immediately preceding calendar quarter commencing on October 1, 1997 with a
final payment on the Maturity Date (or on the date of termination in full
of the Total Commitment, if earlier). The Facility Fee shall be
distributed pro rata among the Banks in accordance with each Bank's
Commitment Percentage.
(b) In the event that the average outstanding amount of the
Loans plus the average Maximum Drawing Amount of the Letters of Credit in
any calendar quarter (collectively, the "Average Quarterly Utilization
Amount") exceeds fifty percent (50%) of the Total Commitment in effect
during such calendar quarter, the Borrower agrees to pay to the
Administrative Agent for the account of the Banks a fee (the "Utilization
Fee") equal to 0.05% per annum on the Average Quarterly Utilization Amount.
If applicable, the Utilization Fee shall be payable quarterly in arrears on
the first day of each calendar quarter for the immediate preceding calendar
quarter (or such lesser period of time as has elapsed since the Closing
Date), commencing October 1, 1997 with a final payment on the Maturity Date
(or on the date of termination in full of the Total Commitment if earlier).
The Utilization Fee shall be distributed pro rata among the Banks in
accordance with each Bank's Commitment Percentage.
<PAGE> 25
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SECTION 2.3 REDUCTION OF TOTAL COMMITMENT.
(a) The Borrower shall have the right at any time and from
time to time upon three (3) Business Days' prior written notice to the
Administrative Agent to reduce by $25,000,000 or a greater amount or
terminate entirely, the Total Commitment, whereupon each Bank's Commitment
shall be reduced pro rata in accordance with such Bank's Commitment
Percentage of the amount specified in such notice or, as the case may be,
terminated provided that at no time may (i) the Total Commitment be reduced
to an amount less than the sum of (A) the Maximum Drawing Amount of all
Letters of Credit, and (B) all Loans then outstanding.
(b) No reduction or termination of the Total Commitment once
made may be revoked; the portion of the Total Commitment reduced or
terminated may not be reinstated; and amounts in respect of such reduced or
terminated portion may not be reborrowed.
(c) The Administrative Agent will notify the Banks promptly
after receiving any notice delivered by the Borrower pursuant to this
Section 2.3 and will distribute to each Bank a revised Schedule 1 to this
Agreement.
SECTION 2.4 THE SYNDICATED NOTES.
(a) The Syndicated Loans shall be evidenced by separate
promissory notes of the Borrower in substantially the form of Exhibit A
hereto (each, a "Syndicated Note"), dated as of the Closing Date and
completed with appropriate insertions. One Syndicated Note shall be
payable to the order of each Bank in an amount equal to its maximum
Commitment, and shall represent the obligation of the Borrower to pay such
Bank such principal amount or, if less, the outstanding principal amount of
all Syndicated Loans made by such Bank, plus interest accrued thereon, as
set forth herein. Notwithstanding the initial face amounts of the
Syndicated Notes, the Total Commitment shall not exceed $1,700,000,000
prior to the United Joinder Date.
(b) The Borrower irrevocably authorizes each Bank to make, or
cause to be made, in connection with a Drawdown Date of any Syndicated Loan
and at the time of receipt of any payment of principal on its Syndicated
Note, an appropriate notation on such Bank's records or on the schedule
attached to such Bank's Syndicated Note or a continuation of such schedule
attached thereto reflecting the making of such Loan, or the receipt of such
payment (as the case may be) and each Bank may, prior to any transfer of
its Syndicated Note endorse on the reverse side thereof the outstanding
principal amount of such Loans evidenced thereby. The outstanding amount
of the Loans set forth on such Bank's records shall be
<PAGE> 26
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prima facie evidence of the principal amount thereof owing and unpaid to
such Bank, but the failure to record, or any error in so recording, any
such amount shall not limit or otherwise affect the obligations of the
Borrower hereunder or under such Notes to make payments of principal of or
interest on any such Notes when due.
SECTION 2.5 INTEREST ON LOANS.
(a) The outstanding principal amount of the Syndicated Loans
shall bear interest at the rate per annum equal to (i) the Base Rate on
Base Rate Loans, (ii) the Applicable Eurodollar Rate on Eurodollar Loans
and (iii) the Applicable Swing Line Rate on Swing Line Loans.
(b) Interest shall be payable (i) monthly in arrears on the
first Business Day of each month, commencing September 1, 1997, on Base
Rate Loans, (ii) on the last day of the applicable Interest Period, and if
such Interest Period is longer than three months, also on the last day of
the third month following the commencement of such Interest Period, on
Eurodollar Loans, and (iii) on the Maturity Date for all Loans.
SECTION 2.6 REQUESTS FOR SYNDICATED LOANS.
(a) The Borrower shall give to the Administrative Agent
written notice in the form of Exhibit D hereto (or telephonic notice confirmed
in writing or a facsimile in the form of Exhibit D hereto) of each Syndicated
Loan requested hereunder (a "Syndicated Loan Request") not later than (a) 11:00
a.m. (New York time) on the proposed Drawdown Date of any Base Rate Loan, or
(b) 11:00 a.m. (New York time) three (3) Eurodollar Business Days prior to the
proposed Drawdown Date of any Eurodollar Loan. Each such Syndicated Loan
Request shall specify (A) the principal amount of the Syndicated Loan
requested, (B) the proposed Drawdown Date of such Syndicated Loan, (C) whether
such Syndicated Loan requested is to be a Base Rate Loan or a Eurodollar Loan,
and (D) the Interest Period for such Syndicated Loan, if a Eurodollar Loan.
Each Syndicated Loan requested shall be in a minimum amount of $10,000,000.
Each such Syndicated Loan Request shall reflect the Maximum Drawing Amount of
all Letters of Credit outstanding and the amount of all Loans outstanding
(including Competitive Bid Loans and Swing Line Loans). Syndicated Loan
Requests made hereunder shall be irrevocable and binding on the Borrower, and
shall obligate the Borrower to accept the Syndicated Loan requested from the
Banks on the proposed Drawdown Date.
(b) Each of the representations and warranties made by the
Borrower to the Banks or the Administrative Agent in this Agreement or any
other Loan Document shall be true and correct in all material respects when
made and shall, for all purposes of this Agreement, be deemed to be repeated by
the Borrower on and as of the date of the submission of a Syndicated Loan
Request,
<PAGE> 27
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Competitive Bid Quote Request, or Letter of Credit Application and on and as of
the Drawdown Date of any Loan or the date of issuance of any Letter of Credit
(except to the extent (i) of changes resulting from transactions contemplated
or permitted by this Agreement and the other Loan Documents, (ii) of changes
occurring in the ordinary course of business that singly or in the aggregate
are not materially adverse to the business, assets or financial condition of
the Borrower and its Subsidiaries as a whole, or (iii) that such
representations and warranties expressly relate only to an earlier date).
(c) The Administrative Agent shall promptly notify each Bank
of each Syndicated Loan Request received by the Administrative Agent (i) on the
proposed Drawdown Date of any Base Rate Loan, or (ii) three (3) Eurodollar
Business Days prior to the proposed Drawdown Date of any Eurodollar Loan.
SECTION 2.7 ELECTION OF EURODOLLAR RATE; NOTICE OF ELECTION; INTEREST
PERIODS; MINIMUM AMOUNTS.
(a) At the Borrower's option, so long as no Default or Event
of Default has occurred and is then continuing, the Borrower may (i) elect
to convert any Base Rate Loan or a portion thereof to a Eurodollar Loan,
(ii) at the time of any Syndicated Loan Request, specify that such
requested Loan shall be a Eurodollar Loan, or (iii) upon expiration of the
applicable Interest Period, elect to maintain an existing Eurodollar Loan
as such, provided that the Borrower give notice to the Administrative Agent
pursuant to Section 2.7(b) hereof. Upon determining any Eurodollar Rate,
the Administrative Agent shall forthwith provide notice thereof to the
Borrower and the Banks, and each such notice to the Borrower shall be
considered prima facie correct and binding, absent manifest error.
(b) Three (3) Eurodollar Business Days prior to the making of
any Eurodollar Loan or the conversion of any Base Rate Loan to a Eurodollar
Loan, or, in the case of an outstanding Eurodollar Loan, the expiration
date of the applicable Interest Period, the Borrower shall give written,
telex or facsimile notice received by the Administrative Agent not later
than 11:00 a.m. (New York time) of its election pursuant to Section 2.7(a).
Each such notice delivered to the Administrative Agent shall specify the
aggregate principal amount of the Syndicated Loans to be borrowed or
maintained as or converted to Eurodollar Loans and the requested duration
of the Interest Period that will be applicable to such Eurodollar Loan, and
shall be irrevocable and binding upon the Borrower. If the Borrower shall
fail to give the Administrative Agent notice of its election hereunder
together with all of the other information required by this Section 2.7(b)
with respect to any Syndicated Loan, whether at the end of an Interest
Period or otherwise, such Syndicated Loan shall be deemed a Base Rate Loan.
The Administrative Agent shall promptly notify the
<PAGE> 28
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Banks in writing (or by telephone confirmed in writing or by facsimile) of
such election.
(c) Notwithstanding anything herein to the contrary, the
Borrower may not specify an Interest Period that would extend beyond the
Maturity Date.
(d) No conversion of Loans pursuant to this Section 2.7 may
result in Eurodollar Loans that are less than $5,000,000. In no event
shall the Borrower have more than eight (8) different Interest Periods for
borrowings of Eurodollar Loans outstanding at any time.
(e) Subject to the terms and conditions of Section 5.8 hereof,
if any affected Bank demands compensation under Section 5.5(c) or (d) with
respect to any Eurodollar Loan, the Borrower may at any time, upon at least
three (3) Business Days' prior written notice to the applicable
Administrative Agent, elect to convert such Eurodollar Loan into a Base
Rate Loan (on which interest and principal shall be payable
contemporaneously with the related Eurodollar Loans of the other Banks).
Thereafter, and until such time as the affected Bank notifies the
Administrative Agent that the circumstances giving rise to the demand for
compensation under Section 5.5(c) or (d) no longer exist, all requests for
Eurodollar Loans from such affected Bank shall be deemed to be requests for
Base Rate Loans. Once the affected Bank notifies the Administrative Agent
that such circumstances no longer exist, the Borrower may elect that the
principal amount of each such Loan converted hereunder shall again bear
interest as Eurodollar Loans beginning on the first day of the next
succeeding Interest Period applicable to the related Eurodollar Loans of
the other Banks.
SECTION 2.8 FUNDS FOR SYNDICATED LOANS. Not later than 1:00 p.m. (New
York time) on the proposed Drawdown Date (a) in the case of Syndicated Loans,
each of the Banks will make available to the Administrative Agent at its Head
Office, in immediately available funds, the amount of its Commitment Percentage
of the amount of the requested Loan. Upon receipt from each Bank of such
amount, and upon receipt of the documents required by Section 10 and Section 11
and the satisfaction of the other conditions set forth therein, the
Administrative Agent will make available to the Borrower the aggregate amount
of such Syndicated Loans made available by the Banks. The failure or refusal
of any Bank to make available to the Administrative Agent at the aforesaid time
and place on any Drawdown Date the amount of its Commitment Percentage of the
requested Syndicated Loan shall not relieve any other Bank from its several
obligations hereunder to make available to the Administrative Agent the amount
of such Bank's Commitment Percentage of the requested Loan.
<PAGE> 29
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SECTION 2.9 MATURITY OF THE LOANS AND REIMBURSEMENT OBLIGATIONS. The
Borrower promises to pay on the Maturity Date, and there shall become
absolutely due and payable on the Maturity Date, all of the Loans and unpaid
Reimbursement Obligations outstanding on such date, together with any and all
accrued and unpaid interest thereon and any fees and other amounts owing
hereunder.
SECTION 2.10 OPTIONAL PREPAYMENTS OR REPAYMENTS OF LOANS. Subject to the
terms and conditions of Section 5.8, the Borrower shall have the right, at its
election, to repay or prepay the outstanding amount of the Loans, as a whole or
in part, at any time without penalty or premium. The Borrower shall give the
Administrative Agent no later than 11:00 a.m. (New York time) (a) on the
proposed date of prepayment or repayment of Base Rate Loans and (b) one (1)
Business Day prior to the proposed date of prepayment or repayment of all other
Loans, written notice (or telephonic notice confirmed in writing or by
facsimile) of any proposed prepayment or repayment pursuant to this Section
2.10, specifying the proposed date of prepayment or repayment of Loans and the
principal amount to be paid. Notwithstanding the foregoing, the Borrower may
not prepay any Competitive Bid Loans. The Administrative Agent shall promptly
notify each Bank by written notice (or telephonic notice confirmed in writing
or by facsimile) of such notice of payment.
SECTION 2.11 SWING LINE LOANS; SETTLEMENTS.
(a) Solely for ease of administration of the Syndicated Loans,
MGT may, but shall not be required to, fund Base Rate Loans made in
accordance with the provisions of this Agreement ("Swing Line Loans"). The
Swing Line Loans shall be evidenced by a promissory note of the Borrower in
substantially the form of Exhibit B hereto (the "Swing Line Note") and, at
the discretion of MGT may be in amounts less than $10,000,000 provided that
the outstanding amount of Swing Line Loans advanced by MGT hereunder shall
not exceed $10,000,000 at any time. Each Bank shall remain severally and
unconditionally liable to fund its pro rata share (based upon each Bank's
Commitment Percentage) of such Swing Line Loans on each Swing Line
Settlement Date and, in the event MGT chooses not to fund all Base Rate
Loans requested on any date, to fund its Commitment Percentage of the Base
Rate Loans requested, subject to satisfaction of the provisions hereof
relating to the making of Base Rate Loans. Prior to each Swing Line
Settlement, all payments or repayments of the principal of, and interest
on, Swing Line Loans shall be credited to the account of MGT.
(b) The Banks shall effect Swing Line Settlements on (i) the
Business Day immediately following any day which MGT gives written notice
to the Administrative Agent to effect a Swing Line Settlement, (ii)
<PAGE> 30
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the Business Day immediately following the Administrative Agent's becoming
aware of the existence of any Default or Event of Default, (iii) the
Maturity Date and (iv) the Business Day immediately following any day on
which the outstanding amount of Swing Line Loans advanced by MGT exceeds
$10,000,000 (each such date, a "Swing Line Settlement Date"). One (1)
Business Day prior to each such Swing Line Settlement Date, the
Administrative Agent shall give telephonic notice to the Banks of (A) the
respective outstanding amount of Syndicated Loans made by each Bank as at
the close of business on the prior day, (B) the amount that any Bank, as
applicable (a "Swing Line Settling Bank"), shall pay to effect a Swing Line
Settlement (a "Swing Line Settlement Amount") and (C) the portion (if any)
of the aggregate Swing Line Settlement Amount to be paid to each Bank. A
statement of the Administrative Agent submitted to the Banks with respect
to any amounts owing hereunder shall be prima facie evidence of the amount
due and owing. Each Swing Line Settling Bank shall, not later than 1:00
p.m. (New York time) on each Swing Line Settlement Date, effect a wire
transfer of immediately available funds to the Administrative Agent at its
Head Office in the amount of such Bank's Swing Line Settlement Amount. The
Administrative Agent shall, as promptly as practicable during normal
business hours on each Swing Line Settlement Date, effect a wire transfer
of immediately available funds to each Bank of the Swing Line Settlement
Amount to be paid to such Bank. All funds advanced by any Bank as a Swing
Line Settling Bank pursuant to this Section 2.11(b) shall for all purposes
be treated as a Base Rate Loan made by such Swing Line Settling Bank to the
Borrower, and all funds received by any Bank pursuant to this Section
2.11(b) shall for all purposes be treated as repayment of amounts owed by
the Borrower with respect to Base Rate Loans made by such Bank.
(c) The Administrative Agent may (unless notified to the
contrary by any Swing Line Settling Bank by 12:00 noon (New York time) one
(1) Business Day prior to the Settlement Date) assume that each Swing Line
Settling Bank has made available (or will make available by the time
specified in Section 2.11(b)) to the Administrative Agent its Swing Line
Settlement Amount, and the Administrative Agent may (but shall not be
required to), in reliance upon such assumption, make available to each
applicable Bank its share (if any) of the aggregate Swing Line Settlement
Amount. If the Swing Line Settlement Amount of such Swing Line Settling
Bank is made available to the Administrative Agent by such Swing Line
Settling Bank on a date after such Swing Line Settlement Date, such Swing
Line Settling Bank shall pay the Administrative Agent on demand an amount
equal to the product of (i) the average, computed for the period referred
to in clause (iii) below, of the weighted average annual interest rate paid
by the Administrative Agent for federal funds acquired by the
Administrative Agent during each day included in such
<PAGE> 31
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period times (ii) such Swing Line Settlement Amount times (iii) a fraction,
the numerator of which is the number of days that elapse from and including
such Swing Line Settlement Date to but not including the date on which such
Swing Line Settlement Amount shall become immediately available to the
Administrative Agent, and the denominator of which is 365. Upon payment of
such amount such Swing Line Settling Bank shall be deemed to have delivered
its Swing Line Settlement Amount on the Swing Line Settlement Date and
shall become entitled to interest payable by the Borrower with respect to
such Swing Line Settling Bank's Swing Line Settlement Amount as if such
share were delivered on the Swing Line Settlement Date. If such Swing Line
Settlement Amount is not in fact made available to the Administrative Agent
by such Swing Line Settling Bank within three (3) Business Days of such
Swing Line Settlement Date, the Administrative Agent shall be entitled to
recover such amount from the Borrower, with interest thereon at the Base
Rate.
(d) After any Swing Line Settlement Date, any payment by the
Borrower of Swing Line Loans hereunder shall be allocated among the Banks,
in amounts determined so as to provide that after such application and the
related Swing Line Settlement, the outstanding amount of Syndicated Loans
of each Bank equals, as nearly as practicable, such Bank's Commitment
Percentage of the aggregate amount of Syndicated Loans.
SECTION 3. LETTERS OF CREDIT.
SECTION 3.1 LETTER OF CREDIT COMMITMENTS.
(a) Subject to the terms and conditions hereof and the receipt
of a Letter of Credit Application by an Issuing Bank, with a copy to the
Administrative Agent reflecting the Maximum Drawing Amount of all Letters
of Credit (including the requested Letter of Credit), such Issuing Bank, on
behalf of the Banks and in reliance upon the representations and warranties
of the Borrower contained herein and the agreement of the Banks contained
in Section 3.1(b) hereof, agrees to issue Letters of Credit for the account
of the Borrower (which may, with such Issuing Bank's consent, incorporate
automatic renewals for periods of
<PAGE> 32
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up to twelve (12) months), in such form as may be requested from time to
time by the Borrower and agreed to by the Issuing Bank; provided, however,
that, after giving effect to such request, the aggregate Maximum Drawing
Amount of all Letters of Credit issued at any time shall not exceed the
lesser of (i) $650,000,000 or (ii) the Total Commitment minus the aggregate
outstanding amount of the Loans and provided further, that no Letter of
Credit shall have an expiration date later than the earlier of (x) eighteen
(18) months after the date of issuance (which may incorporate automatic
renewals for periods of up to twelve (12) months), or (y) five (5) Business
Days prior to the Maturity Date. The letters of credit listed in Schedule
3.1(a) issued by Issuing Banks under the Original Credit Agreement shall be
Letters of Credit under this Agreement, and the letters of credit listed in
Schedule 3.1(a) issued by Issuing Banks under the United Credit Agreement
shall be Letters of Credit under this Agreement issued for the account of
the Borrower as of the United Joinder Date.
(b) Each Letter of Credit shall be denominated in Dollars.
Each Bank severally agrees that it shall be absolutely liable, without
regard to the occurrence of any Default or Event of Default, the
termination of the Total Commitment pursuant to Section 12.2, or any other
condition precedent whatsoever, to the extent of such Bank's Commitment
Percentage to reimburse the Issuing Bank on demand for the amount of each
draft paid by the Issuing Bank under each Letter of Credit to the extent
that such amount is not reimbursed by the Borrower pursuant to Section 3.2
(such agreement for a Bank being called herein the "Letter of Credit
Participation" of such Bank). Each Bank agrees that its obligation to
reimburse the Issuing Bank pursuant to this Section 3.1(c) shall not be
affected in any way by any circumstance other than the gross negligence or
willful misconduct of the Issuing Bank.
(c) Each such reimbursement payment made by a Bank to the
Issuing Bank shall be treated as the purchase by such Bank of a
participating interest in the applicable Reimbursement Obligation under
Section 3.2 in an amount equal to such payment. Each Bank shall share in
accordance with its participating interest in any interest which accrues
pursuant to Section 3.2.
SECTION 3.2. REIMBURSEMENT OBLIGATION OF THE BORROWER. In order to induce
the Issuing Banks to issue, extend and renew each Letter of Credit, the
Borrower hereby agrees to reimburse or pay to each Issuing Bank, with respect
to each Letter of Credit issued, extended or renewed by such Issuing Bank
hereunder as follows:
(a) if any draft presented under any Letter of Credit is
honored by such Issuing Bank or such Issuing Bank otherwise makes payment
with respect thereto, the sum of (i) the amount paid by such Issuing Bank
under or with respect to such Letter of Credit, and (ii) the amount of any
taxes, fees, charges or other costs and expenses whatsoever incurred by
such Issuing Bank in connection with any payment made by such Issuing Bank
under, or with respect to, such Letter of Credit, provided however, if the
Borrower does not reimburse such Issuing Bank on the Drawdown Date, such
amount shall, provided that no Event of Default under Section 12(g)
<PAGE> 33
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or 12(h) has occurred, become automatically a Syndicated Loan which is a
Base Rate Loan advanced hereunder in an amount equal to such sum; and
(b) upon the Maturity Date or the acceleration of the
Reimbursement Obligations with respect to all Letters of Credit in
accordance with Section 12, an amount equal to the then Maximum Drawing
Amount of all Letters of Credit shall be paid by the Borrower to the
Administrative Agent to be held as cash collateral for the applicable
Reimbursement Obligations.
SECTION 3.3 OBLIGATIONS ABSOLUTE. The Borrower's respective obligations
under this Section 3 shall be absolute and unconditional under any and all
circumstances and irrespective of the occurrence of any Default or Event of
Default or any condition precedent whatsoever or any setoff, counterclaim or
defense to payment which the Borrower may have or have had against any Issuing
Bank, any Bank or any beneficiary of a Letter of Credit, and the Borrower
expressly waives any such rights that it may have with respect thereto. The
Borrower further agrees with each Issuing Bank and the Banks that such Issuing
Bank and the Banks (i) shall not be responsible for, and the Borrower's
Reimbursement Obligations under Section 3.2 shall not be affected by, among
other things, the validity or genuineness of documents or of any endorsements
thereon, even if such documents should in fact prove to be in any or all
respects invalid, fraudulent or forged (unless due to the willful misconduct of
such Issuing Bank or any other Bank), or any dispute between or among the
Borrower and the beneficiary of any Letter of Credit or any financing
institution or other party to which any Letter of Credit may be transferred or
any claims or defenses whatsoever of the Borrower against the beneficiary of
any Letter of Credit or any such transferee, and (ii) shall not be liable for
any error, omission, interruption or delay in transmission, dispatch or
delivery of any message or advice, however transmitted, in connection with any
Letter of Credit except to the extent of their own willful misconduct. The
Borrower agrees that any action taken or omitted by any Issuing Bank or any
Bank in good faith under or in connection with any Letter of Credit and the
related drafts and documents shall be binding upon the Borrower and shall not
result in any liability on the part of such Issuing Bank or any Bank (or their
respective affiliates) to the Borrower. Nothing herein shall constitute a
waiver by the Borrower of any of its rights against any beneficiary of a Letter
of Credit.
SECTION 3.4 RELIANCE BY THE ISSUING BANKS. To the extent not inconsistent
with Section 3.3, each Issuing Bank shall be entitled to rely, and shall be
fully protected in relying, upon any Letter of Credit, draft, writing,
resolution, notice, consent, certificate, affidavit, letter, cablegram,
telegram, facsimile, telex or teletype message, statement, order or other
document believed by such Issuing Bank in good faith to be genuine and correct
and to have been signed, sent or made by the proper Person or Persons and upon
advice and statements of legal
<PAGE> 34
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counsel, independent accountants and other experts selected by such Issuing
Bank.
SECTION 3.5. NOTICE REGARDING LETTERS OF CREDIT. One (1) Business Day
prior to the issuance of any Letter of Credit or amendments or extensions
thereof, the applicable Issuing Bank shall notify the Administrative Agent of
the terms of such Letter of Credit, amendment or extension. On the day of any
drawing under any Letter of Credit, such Issuing Bank shall notify the
Administrative Agent of such drawing under any Letter of Credit.
SECTION 3.6. LETTER OF CREDIT FEE. The Borrower shall pay a fee (the
"Letter of Credit Fee") equal to the Applicable L/C Rate on the Maximum Drawing
Amount of the Letters of Credit to the Administrative Agent for the account of
the Banks, to be shared pro rata by the Banks in accordance with their
respective Commitment Percentages. The Letter of Credit Fee shall be payable
quarterly in arrears on the first day of each calendar quarter for the quarter
just ended, commencing October 1, 1997, and on the Maturity Date. In addition,
an issuing fee (the "Issuance Fee") with respect to each Letter of Credit to be
agreed upon annually between the Borrower and each Issuing Bank shall be
payable to such Issuing Bank for its account.
SECTION 4. COMPETITIVE BID LOANS.
SECTION 4.1. THE COMPETITIVE BID OPTION. In addition to the Syndicated
Loans made pursuant to Section 2 hereof, the Borrower may request Competitive
Bid Loans pursuant to the terms of this Section 4. The Banks may, but shall
have no obligation to, make such offers and the Borrower may, but shall have no
obligation to, accept such offers in the manner set forth in this Section 4.
Notwithstanding any other provision herein to the contrary, at no time shall
the aggregate principal amount of Competitive Bid Loans outstanding at any time
exceed the Total Commitment minus the sum of (a) the aggregate outstanding
principal amount of Syndicated Loans (including the Swing Loans), plus (b) the
Maximum Drawing Amount of Letters of Credit outstanding at such time.
SECTION 4.2. COMPETITIVE BID LOAN ACCOUNTS: COMPETITIVE BID NOTES.
(a) The obligation of the Borrower to repay the outstanding
principal amount of any and all Competitive Bid Loans, plus interest at the
applicable Competitive Bid Rate accrued thereon, shall be evidenced by this
Agreement and by individual loan accounts (the "Competitive Bid Loan
Accounts" and individually, a "Competitive Bid Loan Account") maintained by
the Administrative Agent on its books for each of the Banks, it being the
intention of the parties hereto that, except as provided for in paragraph
(b) of this Section 4.2, the Borrower's obligations with respect to
Competitive Bid Loans are to be evidenced only as stated herein and not by
separate promissory notes.
<PAGE> 35
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(b) Any Bank may at any time, and from time to time, request
that any Competitive Bid Loans outstanding to such Bank be evidenced by a
promissory note of the Borrower in substantially the form of Exhibit C
hereto (each, a "Competitive Bid Note"), dated as of the Closing Date and
completed with appropriate insertions. One Competitive Bid Note shall be
payable to the order of each Bank in an amount equal to the Total
Commitment, and representing the obligation of the Borrower to pay such
Bank such principal amount or, if less, the outstanding principal amount of
any and all Competitive Bid Loans made by such Bank, plus interest at the
applicable Competitive Bid Rate or Competitive Bid Margin accrued thereon,
as set forth herein. Upon execution and delivery by the Borrower of a
Competitive Bid Note, the Borrower's obligation to repay any and all
Competitive Bid Loans made to it by such Bank and all interest thereon
shall thereafter be evidenced by such Competitive Bid Note.
(c) The Borrower irrevocably authorizes (i) each Bank to make
or cause to be made, in connection with a Drawdown Date of any Competitive
Bid Loan or at the time of receipt of any payment of principal on such
Bank's Competitive Bid Note in the case of a Competitive Bid Note, and (ii)
the Administrative Agent to make or cause to be made, in connection with a
Drawdown Date of any Competitive Bid Loan or at the time of receipt of any
payment of principal on such Bank's Competitive Bid Loan Account in the
case of a Competitive Bid Loan Account, an appropriate notation on such
Bank's records or on the schedule attached to such Bank's Competitive Bid
Note or a continuation of such schedule attached thereto, or the
Administrative Agent's records, as applicable, reflecting the making of the
Competitive Bid Loan or the receipt of such payment (as the case may be)
and such Bank may, prior to any transfer of a Competitive Bid Note, endorse
on the reverse side thereof the outstanding principal amount of Competitive
Bid Loans evidenced thereby. The outstanding amount of the Competitive Bid
Loans set forth on such Bank's record or the Administrative Agent's
records, as applicable, shall be prima facie evidence of the principal
amount thereof owing and unpaid to such Bank, but the failure to record, or
any error in so recording, any such amount shall not limit or otherwise
affect the obligations of the Borrower hereunder to make payments of
principal of or interest on any Competitive Bid Loan when due.
SECTION 4.3. COMPETITIVE BID QUOTE REQUEST; INVITATION FOR COMPETITIVE BID
QUOTES.
(a) When the Borrower wishes to request offers to make
Competitive Bid Loans under this Section 4, it shall transmit to the
Administrative Agent by telex or facsimile a Competitive Bid
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Quote Request substantially in the form of Exhibit H hereto (a "Competitive
Bid Quote Request") so as to be received no later than 1:00 p.m. (New York
time) (x) five (5) Eurodollar Business Days prior to the requested Drawdown
Date in the case of a LIBOR Competitive Bid Loan (a "LIBOR Competitive Bid
Loan") or (y) one (1) Business Day prior to the requested Drawdown Date in
the case of an Absolute Competitive Bid Loan (an "Absolute Competitive Bid
Loan"), specifying:
(i) the requested Drawdown Date (which must be a
Eurodollar Business Day in the case of a LIBOR Competitive Bid
Loan or a Business Day in the case of an Absolute Competitive Bid
Loan);
(ii) the aggregate amount of such Competitive Bid Loans,
which shall be $10,000,000 or larger multiple of $1,000,000;
(iii) the duration of the Interest Period(s) applicable
thereto, subject to the provisions of the definition of Interest
Period; and
(iv) whether the Competitive Bid Quotes requested are for
LIBOR Competitive Bid Loans or Absolute Competitive Bid Loans.
The Borrower may request offers to make Competitive Bid Loans for more than
one Interest Period in a single Competitive Bid Quote Request. No new
Competitive Bid Quote Request shall be given until the Borrower has
notified the Administrative Agent of its acceptance or non-acceptance of
the Competitive Bid Quotes relating to any outstanding Competitive Bid
Quote Request.
(b) Promptly upon receipt of a Competitive Bid Quote Request,
the Administrative Agent shall send to the Banks by telecopy or facsimile
transmission an Invitation for Competitive Bid Quotes substantially in the
form of Exhibit I hereto, which shall constitute an invitation by the
Borrower to each Bank to submit Competitive Bid Quotes in accordance with
this Section 4.
SECTION 4.4. ALTERNATIVE MANNER OF PROCEDURE. If, after receipt by the
Administrative Agent and each of the Banks of a Competitive Bid Quote Request
from the Borrower in accordance with Section 4.3, the Administrative Agent or
any Bank shall be unable to complete any procedure of the auction process
described in Sections 4.5 through 4.6 (inclusive) due to the inability of such
Person to transmit or receive communications through the means specified
therein, such Person may rely on telephonic notice for the transmission or
receipt of such communications. In any case where such Person shall rely on
telephone transmission or receipt, any communication made by telephone shall,
as soon as possible thereafter, be followed by written confirmation thereof.
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SECTION 4.5. SUBMISSION AND CONTENTS OF COMPETITIVE BID QUOTES.
(a) Each Bank may, but shall be under no obligation to, submit
a Competitive Bid Quote containing an offer or offers to make Competitive
Bid Loans in response to any Competitive Bid Quote Request. Each
Competitive Bid Quote must comply with the requirements of this Section 4.5
and must be submitted to the Administrative Agent by telex or facsimile
transmission at its offices as specified in or pursuant to Section 21 not
later than (x) 2:00 p.m. (New York time) on the fourth Eurodollar Business
Day prior to the proposed Drawdown Date, in the case of a LIBOR Competitive
Bid Loan or (y) 10:00 a.m. (New York time) on the proposed Drawdown Date,
in the case of an Absolute Competitive Bid Loan, provided that Competitive
Bid Quotes may be submitted by the Administrative Agent in its capacity as
a Bank only if it submits its Competitive Bid Quote to the Borrower not
later than (x) one hour prior to the deadline for the other Banks, in the
case of a LIBOR Competitive Bid Loan or (y) 15 minutes prior to the
deadline for the other Banks, in the case of an Absolute Competitive Bid
Loan. Subject to the provisions of Sections 10 and 11 hereof, any
Competitive Bid Quote so made shall be irrevocable except with the written
consent of the Administrative Agent given on the instructions of the
Borrower.
(b) Each Competitive Bid Quote shall be in substantially the form
of Exhibit J hereto and shall in any case specify:
(i) the proposed Drawdown Date;
(ii) the principal amount of the Competitive Bid Loan for
which each proposal is being made, which principal amount (w) may
be greater than or less than the Commitment of the quoting Bank,
(x) must be $5,000,000 or a larger multiple of $1,000,000, (y) may
not exceed the aggregate principal amount of Competitive Bid Loans
for which offers were requested and (z) may be subject to an
aggregate limitation as to the principal amount of Competitive Bid
Loans for which offers being made by such quoting Bank may be
accepted;
(iii) the Interest Period(s) for which Competitive Bid
Quotes are being submitted;
(iv) in the case of a LIBOR Competitive Bid Loan, the
margin above or below the applicable LIBOR Rate (the "Competitive
Bid Margin") offered for each such Competitive Bid Loan, expressed
as a percentage (specified to the nearest 1/10,000th of 1%) to be
added to or subtracted from such LIBOR Rate;
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(v) in the case of an Absolute Competitive Bid Loan, the
rate of interest per annum (specified to the nearest 1/10,000th of
1%) (the "Competitive Bid Rate") offered for each such Absolute
Competitive Bid Loan; and
(vi) the identity of the quoting Bank.
A Competitive Bid Quote may include up to five separate offers by the quoting
Bank with respect to each Interest Period specified in the related Invitation
for Competitive Bid Quotes.
(c) Any Competitive Bid Quote shall be disregarded if it:
(i) is not substantially in the form of Exhibit J hereto;
(ii) contains qualifying, conditional or similar language;
(iii) proposes terms other than or in addition to those
set forth in the applicable Invitation for Competitive Bid Quotes;
or
(iv) arrives after the time set forth in Section 4.5(a)
hereof.
SECTION 4.6 NOTICE TO BORROWER. The Administrative Agent shall promptly
notify the Borrower of the terms (x) of any Competitive Bid Quote submitted by
a Bank that is in accordance with Section 4.5 and (y) of any Competitive Bid
Quote that amends, modifies or is otherwise inconsistent with a previous
Competitive Bid Quote submitted by such Bank with respect to the same
Competitive Bid Quote Request. Any such subsequent Competitive Bid Quote shall
be disregarded by the Administrative Agent unless such subsequent Competitive
Bid Quote is submitted solely to correct a manifest error in such former
Competitive Bid Quote. The Administrative Agent's notice to the Borrower shall
specify (A) the aggregate principal amount of Competitive Bid Loans for which
offers have been received for each Interest Period specified in the related
Competitive Bid Quote Request, (B) the respective principal amounts and
Competitive Bid Margins or Competitive Bid Rates, as the case may be, so
offered, and the identity of the respective Banks submitting such offers, and
(C) if applicable, limitations on the aggregate principal amount of Competitive
Bid Loans for which offers in any single Competitive Bid Quote may be accepted.
SECTION 4.7. ACCEPTANCE AND NOTICE BY BORROWER AND ADMINISTRATIVE AGENT.
Not later than 11:00 a.m. (New York time) on (x) the third Eurodollar Business
Day prior to the proposed Drawdown Date, in the case of a LIBOR Competitive Bid
Loan or (y) the proposed Drawdown Date, in the case of an Absolute Competitive
Bid Loan, the Borrower shall notify the Administrative Agent of its acceptance
or non-acceptance of each Competitive Bid Quote in
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substantially the form of Exhibit K hereto. The Borrower may accept any
Competitive Bid Quote in whole or in part; provided that:
(i) the aggregate principal amount of each Competitive
Bid Loan may not exceed the applicable amount set forth in the
related Competitive Bid Quote Request;
(ii) acceptance of offers may only be made on the basis
of ascending Competitive Bid Margins or Competitive Bid Rates, as
the case may be, and
(iii) the Borrower may not accept any offer that is
described in subsection 4.5(c) or that otherwise fails to comply
with the requirements of this Agreement.
The Administrative Agent shall promptly notify each Bank which submitted a
Competitive Bid Quote of the Borrower's acceptance or non-acceptance thereof.
At the request of any Bank which submitted a Competitive Bid Quote and with the
consent of the Borrower, the Administrative Agent will promptly notify all
Banks which submitted Competitive Bid Quotes of (a) the aggregate principal
amount of, and (b) the range of Competitive Bid Rates or Competitive Bid
Margins of, the accepted Competitive Bid Loans for each requested Interest
Period.
SECTION 4.8. ALLOCATION BY ADMINISTRATIVE AGENT. If offers are made by
two or more Banks with the same Competitive Bid Margin or Competitive Bid Rate,
as the case may be, for a greater aggregate principal amount than the amount in
respect of which offers are accepted for the related Interest Period, the
principal amount of Competitive Bid Loans in respect of which such offers are
accepted shall be allocated by the Administrative Agent among such Banks as
nearly as possible (in such multiples, not less than $1,000,000, as the
Administrative Agent may deem appropriate) in proportion to the aggregate
principal amounts of such offers. Determination by the Administrative Agent of
the amounts of Competitive Bid Loans shall be conclusive in the absence of
manifest error.
SECTION 4.9. FUNDING OF COMPETITIVE BID LOANS. If, on or prior to the
Drawdown Date of any Competitive Bid Loan, the Total Commitment has not
terminated in full and if, on such Drawdown Date, the applicable conditions of
Sections 10 and 11 hereof are satisfied, the Bank or Banks whose offers the
Borrower has accepted will fund each Competitive Bid Loan so accepted. Such
Bank or Banks will make such Competitive Bid Loans by crediting the
Administrative Agent for further credit to the Borrower's specified account
with the Administrative Agent, in immediately available funds not later than
1:00 p.m. (New York time) on such Drawdown Date.
<PAGE> 40
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SECTION 4.10. FUNDING LOSSES. If, after acceptance of any Competitive Bid
Quote pursuant to Section 4, the Borrower (i) fails to borrow any Competitive
Bid Loan so accepted on the date specified therefor, or (ii) repays the
outstanding amount of the Competitive Bid Loan prior to the last day of the
Interest Period relating thereto, the Borrower shall indemnify the Bank making
such Competitive Bid Quote or funding such Competitive Bid Loan against any
loss or expense incurred by reason of the liquidation or reemployment of
deposits or other funds acquired by such Bank to fund or maintain such
unborrowed Loans, including, without limitation compensation as provided in
Section 5.8.
SECTION 4.11. REPAYMENT OF COMPETITIVE BID LOANS; INTEREST. The principal
of each Competitive Bid Loan shall become absolutely due and payable by the
Borrower on the last day of the Interest Period relating thereto, and the
Borrower hereby absolutely and unconditionally promises to pay to the
Administrative Agent for the account of the relevant Banks at or before 1:00
p.m. (New York time) on the last day of the Interest Periods relating thereto
the principal amount of all such Competitive Bid Loans, plus interest thereon
at the applicable Competitive Bid Rates. The Competitive Bid Loans shall bear
interest at the rate per annum specified in the applicable Competitive Bid
Quotes. Interest on the Competitive Bid Loans shall be payable (a) on the last
day of the applicable Interest Periods, and if any such Interest Period is
longer than three months, also on the last day of the third month following the
commencement of such Interest Period, and (b) on the Maturity Date for all
Loans. Subject to the terms of this Agreement, the Borrower may make
Competitive Bid Quote Requests with respect to new borrowings of any amounts so
repaid prior to the Maturity Date.
SECTION 5. PROVISIONS RELATING TO ALL LOANS AND LETTERS OF CREDIT.
SECTION 5.1. PAYMENTS.
(a) All payments of principal, interest, Reimbursement
Obligations, fees (other than the Issuance Fee) and any other amounts due
hereunder or under any of the other Loan Documents shall be made to the
Administrative Agent at its Head Office in immediately available funds by
11:00 a.m. (New York time) on any due date. Subject to the provisions of
Section 28, if a payment is received by the Administrative Agent at or
before 1:00 p.m. (New York time) on any Business Day, the Administrative
Agent shall on the same Business Day transfer in immediately available
funds, as applicable, to (1) each of the Banks, their pro rata portion of
such payment in accordance with their respective Commitment Percentages, in
the
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case of payments with respect to Syndicated Loans and Letters of Credit,
(2) MGT in the case of payments with respect to Swing Line Loans, and (3)
the appropriate Bank(s), in the case of payments with respect to
Competitive Bid Loans. If such payment is received by the Administrative
Agent after 1:00 p.m. (New York time) on any Business Day, such transfer
shall be made by the Administrative Agent to the applicable Bank(s) on the
next Business Day. In the event that the Administrative Agent fails to
make such transfer to any Bank as set forth above, the Administrative Agent
shall pay to such Bank on demand an amount equal to the product of (i) the
average, computed for the period referred to in clause (iii) below, of the
weighted average interest rate paid by such Bank for funds acquired by such
Bank during each day included in such period, times (ii) the amount (A)
equal to such Bank's Commitment Percentage of such payment in the case of
payments under clause (1) above, or (B) of such payment to which such Bank
is entitled in the case of payments with respect to Competitive Bid Loans
and Swing Line Loans, times (iii) a fraction, the numerator of which is the
number of days that elapse from and including the date of payment to and
including the date on which the amount due to such Bank shall become
immediately available to such Bank, and the denominator of which is 365. A
statement of such Bank submitted to the applicable Administrative Agent
with respect to any amounts owing under this paragraph shall be prima facie
evidence of the amount due and owing to such Bank by the Administrative
Agent.
(b) Each Bank that is not incorporated or organized under the
laws of the United States of America or a state thereof or the District of
Columbia (a "Non-U.S. Bank") agrees that, prior to the first date on which
any payment is due to it hereunder, it will deliver to the Borrower and the
Administrative Agent two duly completed copies of United States Internal
Revenue Service Form 1001 or 4224 or successor applicable form, as the case
may be, certifying in each case that such Non-U.S. Bank is entitled to
receive payments under this Agreement and the Notes payable to it, without
deduction or withholding of any United States federal income taxes. Each
Non-U.S. Bank that so delivers a Form 1001 or 4224 pursuant to the
preceding sentence further undertakes to deliver to each of the Borrower
and the Administrative Agent two further copies of Form 1001 or 4224 or
successor applicable form, or other manner of certification, as the case
may be, on or before the date that any such letter or form expires or
becomes obsolete or after the occurrence of any event requiring a change in
the most recent form previously delivered by it to the Borrower, and such
extensions or renewals thereof as may reasonably be requested by the
Borrower, certifying in the case of a Form 1001 or 4224 that such Non-U.S.
Bank is entitled to receive payments under this Agreement and the Notes
without deduction or withholding of any United States federal income taxes,
unless in any such case an event (including, without limitation, any change
in treaty, law or regulation) has occurred prior to the date on which any
such delivery would otherwise be required
<PAGE> 42
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which renders all such forms inapplicable or which would prevent such
Non-U.S. Bank from duly completing and delivering any such form with
respect to it and such Non-U.S. Bank advises the Borrower that it is not
capable of receiving payments without any deduction or withholding of
United States federal income tax.
(c) The Borrower shall not be required to pay any additional
amounts to any Non-U.S. Bank in respect of United States Federal
withholding tax pursuant to Section 17 to the extent that (i) the
obligation to withhold amounts with respect to United States Federal
withholding tax existed on the date such Non-U.S. Bank became a party to
this Agreement or, with respect to payments to a different lending office
designated by the Non-U.S. Bank as its applicable lending office (a "New
Lending Office"), the date such Non-U.S. Bank designated such New Lending
Office with respect to a Loan; provided, however, that this clause (i)
shall not apply to any transferee or New Lending Office as a result of an
assignment, transfer or designation made at the request of the Borrower;
and provided further, however, that this clause (i) shall not apply to the
extent the indemnity payment or additional amounts any transferee, or Bank
through a New Lending Office, would be entitled to receive without regard
to this clause (i) do not exceed the indemnity payment or additional
amounts that the Person making the assignment or transfer to such
transferee, or Bank making the designation of such New Lending Office,
would have been entitled to receive in the absence of such assignment,
transfer or designation; or (ii) the obligation to pay such additional
amounts would not have arisen but for a failure by such Non-U.S. Bank to
comply with the provisions of paragraph (c) above.
(d) Notwithstanding the foregoing, each Bank agrees to use
reasonable efforts (consistent with legal and regulatory restrictions) to
change its lending office to avoid or to minimize any amounts otherwise
payable under Section 17 in each case solely if such change can be made in
a manner so that such Bank, in its sole determination, suffers no legal,
economic or regulatory disadvantage.
SECTION 5.2. MANDATORY REPAYMENTS OF THE LOANS. If at any time the sum of
the outstanding principal amount of the Loans plus the Maximum Drawing Amount
of all outstanding Letters of Credit exceeds the Total Commitment, whether by
reduction of the Total Commitment or otherwise, then the Borrower shall
immediately pay the amount of such excess to the Administrative Agent, (a) for
application to the Loans, first to Syndicated Loans, then to Competitive Bid
Loans, subject to Section 5.8, or (b) if no Loans shall be outstanding, to be
held by the Administrative Agent for the benefit of the Banks as collateral
security for such excess Maximum Drawing Amount; provided, however, that if the
amount of cash collateral held by the Administrative Agent pursuant to this
Section 5.2 exceeds
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the Maximum Drawing Amount required to be collateralized from time to time, the
Administrative Agent shall return such excess to the Borrower.
SECTION 5.3. COMPUTATIONS. Except as otherwise expressly provided
herein, all computations of interest, Facility Fees, Utilization Fees, Letter
of Credit Fees or other fees shall be based on a 360-day year and paid for the
actual number of days elapsed, except that computations based on the
Administrative Agent's "prime rate" shall be based on a 365 or 366, as
applicable, day year and paid for the actual number of days elapsed. Whenever
a payment hereunder or under any of the other Loan Documents becomes due on a
day that is not a Business Day, the due date for such payment shall be extended
to the next succeeding Business Day, and interest shall accrue during such
extension; provided that for any Interest Period for any Eurodollar Loan if
such next succeeding Business Day falls in the next succeeding calendar month
or after the Maturity Date, it shall be deemed to end on the next preceding
Business Day.
SECTION 5.4. ILLEGALITY; INABILITY TO DETERMINE EURODOLLAR RATE.
Notwithstanding any other provision of this Agreement (other than Section
5.10), if (a) the introduction of, any change in, or any change in the
interpretation of, any law or regulation applicable to any Bank or the
Administrative Agent shall make it unlawful, or any central bank or other
governmental authority having jurisdiction thereof shall assert that it is
unlawful, for any Bank or the Administrative Agent to perform its obligations
in respect of any Eurodollar Loans, or (b) if any Bank or the Administrative
Agent, as applicable, shall reasonably determine with respect to Eurodollar
Loans that (i) by reason of circumstances affecting any Eurodollar interbank
market, adequate and reasonable methods do not exist for ascertaining the
Eurodollar Rate which would otherwise be applicable during any Interest Period,
or (ii) deposits of Dollars in the relevant amount for the relevant Interest
Period are not available to such Bank or the Administrative Agent in any
Eurodollar interbank market, or (iii) the Eurodollar Rate does not or will not
accurately reflect the cost to the Bank or the Administrative Agent of
obtaining or maintaining the Eurodollar Loans during any Interest Period, then
such Bank or the Administrative Agent shall promptly give telephonic, telex or
cable notice of such determination to the Borrower (which notice shall be
conclusive and binding upon the Borrower). Upon such notification by the Bank
or the Administrative Agent, the obligation of the Banks and the Administrative
Agent to make Eurodollar Loans shall be suspended until the Banks or the
Administrative Agent, as the case may be, determine that such circumstances no
longer exist, and to the extent permitted by law the outstanding Eurodollar
Loans shall continue to bear interest at the applicable rate based on the
Eurodollar Rate until the end of the applicable Interest Period, and thereafter
shall be deemed converted to Base Rate Loans in equal principal amounts to such
former Eurodollar Loans.
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SECTION 5.5. ADDITIONAL COSTS, ETC. If any present or future applicable
law (which expression, as used herein, includes statutes, rules and regulations
thereunder and interpretations thereof by any competent court or by any
governmental or other regulatory body or official charged with the
administration or the interpretation thereof and requests, directives,
instructions and notices at any time or from time to time hereafter made upon
or otherwise issued to any Bank by any central bank or other fiscal, monetary
or other authority, whether or not having the force of law) shall:
(a) subject such Bank to any tax, levy, impost, duty, charge, fee,
deduction or withholding of any nature with respect to this Agreement, the
other Loan Documents, such Bank's Commitment or the Loans (other than taxes
based upon or measured by the income or profits of such Bank imposed by the
jurisdiction of its incorporation or organization, or the location of its
lending office); or
(b) materially change the basis of taxation (except for changes in
taxes on income or profits of such Bank imposed by the jurisdiction of its
incorporation or organization, or the location of its lending office) of
payments to such Bank of the principal or of the interest on any Loans or
any other amounts payable to such Bank under this Agreement or the other
Loan Documents; or
(c) except as provided in Section 5.6 or as otherwise reflected in the
Base Rate, the Eurodollar Rate, or the Competitive Bid Rate, impose or
increase or render applicable (other than to the extent specifically
provided for elsewhere in this Agreement) any special deposit, reserve,
assessment, liquidity, capital adequacy or other similar requirements
(whether or not having the force of law) against assets held by, or
deposits in or for the account of, or loans by, or commitments of, an
office of any Bank with respect to this Agreement, the other Loan
Documents, such Bank's Commitment or the Loans; or
(d) impose on such Bank any other conditions or requirements with
respect to this Agreement, the other Loan Documents, the Loans, such Bank's
Commitment or any class of loans or commitments of which any of the Loans
or such Bank's Commitment forms a part, and the result of any of the
foregoing is:
(i) to increase the cost to such Bank of making, funding, issuing,
renewing, extending or maintaining the Loans or such Bank's Commitment
or issuing or participating in Letters of Credit;
(ii) to reduce the amount of principal, interest or other
amount payable to such Bank hereunder on account of such Bank's
Commitment, the Loans or the Reimbursement Obligations; or
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(iii) to require such Bank to make any payment or to forego any
interest or other sum payable hereunder, the amount of which payment
or foregone interest or other sum is calculated by reference to the
gross amount of any sum receivable or deemed received by such Bank
from the Borrower hereunder,
then, and in each such case, the Borrower will, upon demand made by
such Bank at any time and from time to time as often as the occasion
therefore may arise (which demand shall be accompanied by a statement
setting forth the basis of such demand which shall be conclusive absent
manifest error), pay such reasonable additional amounts as will be
sufficient to compensate such Bank for such additional costs, reduction,
payment or foregone interest or other SUM.
SECTION 5.6. CAPITAL ADEQUACY. If any Bank shall have determined that,
after the date hereof, the adoption of any applicable law, rule or regulation
regarding capital adequacy, or any change in any such law, rule, or regulation,
or any change in the interpretation or administration thereof by any
governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or any request or directive regarding
capital adequacy (whether or not having the force of law) of any such
authority, central bank or comparable agency, has or would have the effect of
reducing the rate of return on capital of such Bank (or any corporation
controlling such Bank) as a consequence of such Bank's obligations hereunder to
a level below that which such Bank (or any corporation controlling such Bank)
could have achieved but for such adoption, change, request or directive (taking
into consideration its policies with respect to capital adequacy) by an amount
deemed by such Bank to be material, then from time to time, within 15 days
after demand by such Bank, the Borrower shall pay to such Bank such additional
amount or amounts as will, in such Bank's reasonable determination, fairly
compensate such Bank (or any corporation controlling such Bank) for such
reduction. Each Bank shall allocate such cost increases among its customers in
good faith and on an equitable basis.
SECTION 5.7. CERTIFICATE. A certificate setting forth the additional
amounts payable pursuant to Section 5.5 or Section 5.6 and a reasonable
explanation of such amounts which are due, submitted by any Bank to the
Borrower, shall be conclusive, absent manifest error, that such amounts are due
and owing.
SECTION 5.8. EURODOLLAR AND COMPETITIVE BID INDEMNITY. The Borrower
agrees to indemnify the Banks and the Administrative Agent and to hold them
harmless from and against any reasonable loss, cost or expense that any such
Bank and the Administrative Agent may sustain or incur as a consequence of (a)
the default by the Borrower in payment of the principal amount of or any
interest on any Eurodollar Loans or Competitive Bid Loans as and when due and
payable, including any such loss or expense arising from interest or fees
<PAGE> 46
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payable by any Bank or the Administrative Agent to lenders of funds obtained by
it in order to maintain its Eurodollar Loans or Competitive Bid Loans, (b) the
default by the Borrower in making a borrowing of a Eurodollar Loan or
Competitive Bid Loan or conversion of a Eurodollar Loan or a prepayment of a
Eurodollar or Competitive Bid Loan other than pursuant to Section 2.5(c) after
the Borrower has given (or is deemed to have given) a Syndicated Loan Request,
a notice pursuant to Section 2.7 or a Notice of Acceptance/Rejection of
Competitive Bid Quote(s), or a notice pursuant to Section 2.10, and (c) the
making of any payment of a Eurodollar Loan or Competitive Bid Loan, or the
making of any conversion of any Eurodollar Loan to a Base Rate Loan on a day
that is not the last day of the applicable Interest Period with respect
thereto. Such loss, cost, or reasonable expense shall include an amount equal
to the excess, if any, as reasonably determined by each Bank of (i) its cost of
obtaining the funds for (A) the Eurodollar Loan being paid, prepaid, converted,
not converted, reallocated, or not borrowed, as the case may be (based on the
Eurodollar Rate), or (B) the Competitive Bid Loan being paid, prepaid, or not
borrowed, as the case may be (based on the Competitive Bid Rate) for the period
from the date of such payment, prepayment, conversion, or failure to borrow or
convert, as the case may be, to the last day of the Interest Period for such
Loan (or, in the case of a failure to borrow, the Interest Period for the Loan
which would have commenced on the date of such failure to borrow) over (ii) the
amount of interest (as reasonably determined by such Bank) that would be
realized by such Bank in reemploying the funds so paid, prepaid, converted, or
not borrowed, converted, or prepaid for such period or Interest Period, as the
case may be, which determinations shall be conclusive absent manifest error.
SECTION 5.9. INTEREST ON OVERDUE AMOUNTS. Overdue principal and (to the
extent permitted by applicable law) interest on the Loans and all other overdue
amounts payable hereunder or under any of the other Loan Documents shall bear
interest compounded monthly and payable on demand at a rate per annum equal to
the Base Rate plus 2%, until such amount shall be paid in full (after as well
as before judgment).
SECTION 5.10. INTEREST LIMITATION. Notwithstanding any other term of
this Agreement or the Notes, any other Loan Document or any other document
referred to herein or therein, the maximum amount of interest which may be
charged to or collected from any Person liable hereunder or under the Notes by
any Bank shall be absolutely limited to, and shall in no event exceed, the
maximum amount of interest which could lawfully be charged or collected by such
Bank under applicable laws (including, to the extent applicable, the provisions
of Section 5197 of the Revised Statutes of the United States of America, as
amended, and 12 U.S.C. Section 85, as amended.
SECTION 5.11. REASONABLE EFFORTS TO MITIGATE. Each Bank agrees that as
promptly as practicable after it becomes aware of the occurrence of an event or
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the existence of a condition that would cause it to be affected under Sections
5.4, 5.5 or 5.6, such Bank will give notice thereof to the Borrower, with a
copy to the Administrative Agent and, to the extent so requested by the
Borrower and not inconsistent with such Bank's internal policies, such Bank
shall use reasonable efforts and take such actions as are reasonably
appropriate if as a result thereof the additional moneys which would otherwise
be required to be paid to such Bank pursuant to such sections would be
materially reduced, or the illegality or other adverse circumstances which
would otherwise require a conversion of such Loans or result in the inability
to make such Loans pursuant to such sections would cease to exist, and in each
case if, as determined by such Bank in its sole discretion, the taking such
actions would not adversely affect such Loans or such Bank or otherwise be
disadvantageous to such Bank.
SECTION 5.12. REPLACEMENT OF BANKS. If any Bank (an "Affected Bank") (i)
makes demand upon the Borrower for (or if the Borrower is otherwise required to
pay) amounts pursuant to Sections 5.5 or 5.6, (ii) is unable to make or
maintain Eurodollar Loans as a result of a condition described in Section 5.4
or (iii) defaults in its obligation to make Loans or to participate in Letters
of Credit in accordance with the terms of this Agreement (such Bank being
referred to as a "Defaulting Bank"), the Borrower may, within 90 days of
receipt of such demand, notice (or the occurrence of such other event causing
the Borrower to be required to pay such compensation or causing Section 5.4 to
be applicable), or default, as the case may be, by notice (a "Replacement
Notice") in writing to the Administrative Agent and such Affected Bank (A)
request the Affected Bank to cooperate with the Borrower in obtaining a
replacement bank satisfactory to the Administrative Agent and the Borrower
(the "Replacement Bank"); (B) request the non-Affected Banks to acquire and
assume all of the Affected Bank's Loans and Commitment, and to participate in
Letters of Credit as provided herein, but none of such Banks shall be under an
obligation to do so; or (C) designate a Replacement Bank reasonably
satisfactory to the Administrative Agent. If any satisfactory Replacement Bank
shall be obtained, and/or any of the non-Affected Banks shall agree to acquire
and assume all of the Affected Bank's Loans and Commitment, and to participate
in Letters of Credit then such Affected Bank shall, so long as no Event of
Default shall have occurred and be continuing, assign, in accordance with
Section 19, all of its Commitment, Loans, Notes and other rights and
obligations under this Agreement and all other Loan Documents to such
Replacement Bank or non-Affected Banks, as the case may be, in exchange for
payment of the principal amount so assigned and all interest and fees accrued
on the amount so assigned, plus all other Obligations then due and payable to
the Affected Bank; provided, however, that (x) such assignment shall be without
recourse, representation or warranty and shall be on terms and conditions
reasonably satisfactory to such Affected Bank and such Replacement Bank and/or
non-Affected Banks, as the case may be, and (y) prior to any such assignment,
the Borrower shall have paid to such Affected Bank all amounts properly
demanded and unreimbursed under Sections 5.5, 5.6 and 5.8. Upon the effective
date of such
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assignment, the Borrower shall issue replacement Notes to such Replacement Bank
and/or non-Affected Banks, as the case may be, and such Replacement Bank shall
become a "Bank" for all purposes under this Agreement and the other Loan
Documents.
SECTION 5.13. ADVANCES BY ADMINISTRATIVE AGENT. The Administrative Agent
may (unless earlier notified to the contrary by any Bank by 12:00 noon (New
York time) one (1) Business Day prior to any Drawdown Date) assume that each
Bank has made available (or will before the end of such Business Day make
available) to the Administrative Agent the amount of such Bank's Commitment
Percentage with respect to the Loans (or, in the case of Competitive Bid Loans,
the amount of such Bank's accepted offers of such Loans, if any) to be made on
such Drawdown Date, and the Administrative Agent may (but shall not be required
to), in reliance upon such assumption, make available to the Borrower a
corresponding amount. If any Bank makes such amount available to the
Administrative Agent on a date after such Drawdown Date, such Bank shall pay
the Administrative Agent on demand an amount equal to the product of (i) the
average, computed for the period referred to in clause (iii) below, of the
weighted average annual interest rate paid by the Administrative Agent for
federal funds acquired by the Administrative Agent during each day included in
such period times (ii) the amount equal to such Bank's Commitment Percentage of
such Syndicated Loan (or, in the case of Competitive Bid Loans and Swing Line
Loans, the amount of such Bank's accepted offer of such Competitive Bid Loans,
if any, and portion of such Swing Line Loans) times (iii) a fraction, the
numerator of which is the number of days that elapse from and including such
Drawdown Date to but not including the date on which the amount equal to such
Bank's Commitment Percentage of such Loans, or the amount of such Bank's
accepted offers of such Competitive Bid Loans, if any, and portion of Swing
Line Loans, shall become immediately available to the Administrative Agent, and
the denominator of which is 365. A statement of the Administrative Agent
submitted to such Bank with respect to any amounts owing under this paragraph
shall be prima facie evidence of the amount due and owing to the Administrative
Agent by such Bank. If such amount is not in fact made available to the
Administrative Agent by such Bank within three (3) Business Days of such
Drawdown Date, the Administrative Agent shall be entitled to recover such
amount from such Borrower, with interest thereon at the applicable rate per
annum.
SECTION 6. REPRESENTATIONS AND WARRANTIES. The Borrower (and each of
the Guarantors, where applicable) represents and warrants to the Banks that:
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SECTION 6.1. CORPORATE AUTHORITY.
(a) INCORPORATION; GOOD STANDING. The Borrower and each of its
Subsidiaries (i) is a corporation duly organized, validly existing and in
good standing under the laws of its respective jurisdiction of
incorporation, (ii) has all requisite corporate power to own its property
and conduct its business as now conducted and as presently contemplated,
and (iii) is in good standing as a foreign corporation and is duly
authorized to do business in each jurisdiction in which its property or
business as presently conducted or contemplated makes such qualification
necessary, except where a failure to be so qualified would not have a
material adverse effect on the business, assets or financial condition of
the Borrower and its Subsidiaries as a whole.
(b) AUTHORIZATION. The execution, delivery and performance of its
Loan Documents and the transactions contemplated hereby and thereby (i) are
within the corporate authority of the Borrower and each of the Guarantors,
(ii) have been duly authorized by all necessary corporate proceedings on
the part of each of the Borrower and the Guarantors, (iii) do not conflict
with or result in any breach or contravention of any provision of law,
statute, rule or regulation to which any of the Borrower or the Guarantors
or any of their Subsidiaries is subject or any judgment, order, writ,
injunction, license or permit applicable to the Borrower, any of the
Guarantors or any of their Subsidiaries so as to materially adversely
affect the assets, business or any activity of the Borrower, the Guarantors
and their Subsidiaries as a whole, and (iv) do not conflict with any
provision of the corporate charter or bylaws of the Borrower, the
Guarantors or any Subsidiary or any agreement or other instrument binding
upon the Borrower, the Guarantors or any of their Subsidiaries.
(c) ENFORCEABILITY. The execution, delivery and performance of the
Loan Documents by the Borrower and the Guarantors will result in valid and
legally binding obligations of the Borrower and the Guarantors enforceable
against them in accordance with the respective terms and provisions hereof
and thereof, except as enforceability is limited by bankruptcy, insolvency,
reorganization, moratorium or other laws relating to or affecting generally
the enforcement of creditors' rights and except to the extent that
availability of the remedy of specific performance or injunctive relief is
subject to the discretion of the court before which any proceeding therefor
may be brought.
SECTION 6.2. GOVERNMENTAL APPROVALS. The execution, delivery and
performance of the Loan Documents by the Borrower and the Guarantors and the
consummation by the Borrower and the Guarantors of the transactions
contemplated hereby and thereby do not require any approval or consent of, or
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filing with, any governmental agency or authority other than those already
obtained and those required after the date hereof in connection with the
Borrower's and its Subsidiaries' performance of their covenants contained in
Sections 7, 8 and 9 hereof.
SECTION 6.3. TITLE TO PROPERTIES; LEASES. The Borrower and its
Subsidiaries own all of the assets reflected in the consolidated balance sheet
as at the Interim Balance Sheet Date or acquired since that date (except
property and assets operated under capital leases or sold or otherwise disposed
of in the ordinary course of business since that date), subject to no
mortgages, Capitalized Leases, conditional sales agreements, title retention
agreements, liens or other encumbrances except Permitted Liens.
SECTION 6.4. FINANCIAL STATEMENTS; SOLVENCY.
(a) There have been furnished to the Banks consolidated balance sheets
of the Borrower and its Subsidiaries and United and its Subsidiaries dated
the Balance Sheet Date and consolidated statements of operations for the
fiscal periods then ended, certified by the Accountants. In addition,
there have been furnished to the Banks consolidated balance sheets of the
Borrower and its Subsidiaries, and United and its Subsidiaries dated the
Interim Balance Sheet Date and the related consolidated statements of
operation for the fiscal quarter ending on the Interim Balance Sheet Date.
All said balance sheets and statements of operations have been prepared in
accordance with GAAP (but, in the case of any of such financial statements
which are unaudited, only to the extent GAAP is applicable to interim
unaudited reports), fairly present the financial condition of the Borrower
and its Subsidiaries on a consolidated basis, or United and its
Subsidiaries on a consolidated basis, as at the close of business on the
dates thereof and the results of operations for the periods then ended,
subject, in the case of unaudited interim financial statements, to changes
resulting from audit and normal year-end adjustments and to the absence of
complete footnotes. There are no contingent liabilities of the Borrower
and its Subsidiaries or United and its Subsidiaries involving material
amounts, known to the officers of the Borrower or United which have not
been disclosed in said balance sheets and the related notes thereto or
otherwise in writing to the Banks.
(b) The Borrower and its Subsidiaries on a consolidated basis and
United and its Subsidiaries on a consolidated basis (both before and after
giving effect to the transactions contemplated by this Agreement including
the United Merger) are solvent (i.e., they have assets having a fair value
in excess of the amount required to pay their probable liabilities on their
existing debts as they become absolute and matured) and have,
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and expect to have, the ability to pay their debts from time to time
incurred in connection therewith as such debts mature.
SECTION 6.5 NO MATERIAL CHANGES, ETC. Since the Interim Balance Sheet
Date, there have occurred no material adverse changes in the consolidated
financial condition, business or assets of the Borrower and its Subsidiaries,
taken together, or United and its Subsidiaries, taken together, as the case may
be, as shown on or reflected in the consolidated balance sheets of the Borrower
and its Subsidiaries or United and its Subsidiaries as at the Interim Balance
Sheet Date, or the consolidated statements of income for the period then ended
other than changes in the ordinary course of business which have not had any
material adverse effect either individually or in the aggregate on the
financial condition, business or assets of the Borrower and its Subsidiaries,
taken together, or United and its Subsidiaries, taken together, as the case may
be. Since the Interim Balance Sheet Date, there have not been any
Distributions (including Distributions by the Borrower and United) other than
as permitted by Section 8.5 hereof.
SECTION 6.6. FRANCHISES, PATENTS, COPYRIGHTS, ETC. The Borrower and
each of its Subsidiaries possess all franchises, patents, copyrights,
trademarks, trade names, licenses and permits, and rights in respect of the
foregoing, adequate for the conduct of their business substantially as now
conducted (other than those the absence of which would not have a material
adverse effect on the business, operations or financial condition of the
Borrower and its Subsidiaries as a whole) without known conflict with any
rights of others other than a conflict which would not have a material adverse
effect on the financial condition, business or assets of the Borrower and its
Subsidiaries as a whole.
SECTION 6.7. LITIGATION. Except as set forth on Schedule 6.7, there are
no actions, suits, proceedings or investigations of any kind pending or, to the
knowledge of the Borrower or any of its Subsidiaries, threatened against the
Borrower or any of its Subsidiaries before any court, tribunal or
administrative agency or board which, either in any case or in the aggregate,
could reasonably be expected to have a material adverse effect on the financial
condition, business, or assets of the Borrower and its Subsidiaries, considered
as a whole, or materially impair the right of the Borrower and its
Subsidiaries, considered as a whole, to carry on business substantially as now
conducted, or result in any substantial liability not adequately covered by
insurance, or for which adequate reserves are not maintained on the
consolidated balance sheet or which question the validity of any of the Loan
Documents to which the Borrower or any of its Subsidiaries is a party, or any
action taken or to be taken pursuant hereto or thereto.
SECTION 6.8. NO MATERIALLY ADVERSE CONTRACTS, ETC. Neither the Borrower
nor any of its Subsidiaries is subject to any charter, corporate or other legal
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restriction, or any judgment, decree, order, rule or regulation which in the
judgment of the Borrower's or such Subsidiary's officers has or could
reasonably be expected in the future to have a materially adverse effect on the
business, assets or financial condition of the Borrower and its Subsidiaries,
considered as a whole. Neither the Borrower nor any of its Subsidiaries is a
party to any contract or agreement which in the judgment of the Borrower's or
its Subsidiary's officers has or could reasonably be expected to have any
materially adverse effect on the financial condition, business or assets of the
Borrower and its Subsidiaries, considered as a whole, except as otherwise
reflected in adequate reserves as required by GAAP.
SECTION 6.9. COMPLIANCE WITH OTHER INSTRUMENTS, LAWS, ETC. Neither the
Borrower nor any of its Subsidiaries is (a) violating any provision of its
charter documents or by-laws or (b) any agreement or instrument to which any of
them may be subject or by which any of them or any of their properties may be
bound or any decree, order, judgment, or any statute, license, rule or
regulation, in a manner which could (in the case of such agreements or such
instruments) reasonably be expected to result in the imposition of substantial
penalties or materially and adversely affect the financial condition, business
or assets of the Borrower and its Subsidiaries, considered as a whole.
SECTION 6.10. TAX STATUS. The Borrower and its Subsidiaries have filed
all federal, state, provincial and territorial income and all other tax
returns, reports and declarations (or obtained extensions with respect thereto)
required by applicable law to be filed by them (unless and only to the extent
that the Borrower or such Subsidiary has set aside on its books provisions
reasonably adequate for the payment of all unpaid and unreported taxes as
required by GAAP); and have paid all taxes and other governmental assessments
and charges (other than taxes, assessments and other governmental charges
imposed by jurisdictions other than the United States, Canada or any political
subdivision thereof which in the aggregate are not material to the financial
condition, business or assets of the Borrower or such Subsidiary on an
individual basis or of the Borrower and its Subsidiaries on a consolidated
basis) that are material in amount, shown or determined to be due on such
returns, reports and declarations, except those being contested in good faith;
and, as required by GAAP, have set aside on their books provisions reasonably
adequate for the payment of all taxes for periods subsequent to the periods to
which such returns, reports or declarations apply. Except to the extent
contested in the manner permitted in the preceding sentence, there are no
unpaid taxes in any material amount claimed by the taxing authority of any
jurisdiction to be due and owing by the Borrower or any Subsidiary, nor do the
officers of the Borrower or any of its Subsidiaries know of any basis for any
such claim.
SECTION 6.11. NO EVENT OF DEFAULT. No Default or Event of Default has
occurred and is continuing.
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SECTION 6.12. HOLDING COMPANY AND INVESTMENT COMPANY ACTS. Neither the
Borrower nor any of its Subsidiaries is a "holding Company", or a "subsidiary
Company" of a "holding Borrower", or an "affiliate" of a "holding Company", as
such terms are defined in the Public Utility Holding Company Act of 1935; nor
is any of them a "registered investment Company", or an "affiliated Company" or
a "principal underwriter" of a "registered investment Company", as such terms
are defined in the Investment Company Act of 1940, as AMENDED.
SECTION 6.13. ABSENCE OF FINANCING STATEMENTS, ETC. Except as permitted
by Section 8.2 of this Agreement, there is no Indebtedness senior to the
Obligations, and there is no effective financing statement, security agreement,
chattel mortgage, real estate mortgage or other document filed or recorded with
any filing records, registry, or other public office, which purports to cover,
affect or give notice of any present or possible future lien on, or security
interest in, any assets or property of the Borrower or any of its Subsidiaries
or right thereunder.
SECTION 6.14. EMPLOYEE BENEFIT PLANS.
SECTION 6.14.1. IN GENERAL. Each Employee Benefit Plan has been
maintained and operated in compliance in all material respects with
the provisions of ERISA and/or all Applicable Canadian Pension
Legislation, as applicable, and, to the extent applicable, the Code,
including but not limited to the provisions thereunder respecting
prohibited transactions. Promptly upon the request of any Bank or the
Administrative Agent, the Borrower will furnish to the Administrative
Agent the most recently completed annual report, Form 5500, with all
required attachments, and actuarial statement required to be submitted
under Section 103(d) of ERISA, with respect to each Guaranteed Pension
Plan.
SECTION 6.14.2. TERMINABILITY OF WELFARE PLANS. Under each
Employee Benefit Plan which is an employee welfare benefit plan within
the meaning of Section 3(1) or Section 3(2)(B) of ERISA, no benefits
are due unless the event giving rise to the benefit entitlement occurs
prior to plan termination (except as required by Title I, Part 6 of
ERISA) . The Borrower or an ERISA Affiliate, as appropriate, may
terminate each such Plan at any time (or at any time subsequent to the
expiration of any applicable bargaining agreement) in the discretion
of the Borrower or such ERISA Affiliate without liability to any
Person.
SECTION 6.14.3. GUARANTEED PENSION PLANS. Each contribution
required to be made to a Guaranteed Pension Plan, whether required to
be made to avoid the incurrence of an accumulated funding deficiency,
the notice or lien provisions of Section 302(f) of ERISA,
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or otherwise, has been timely made. No waiver of an accumulated
funding deficiency or extension of amortization periods has been
received with respect to any Guaranteed Pension Plan. No liability to
the PBGC (other than required insurance premiums, all of which have
been paid) has been incurred by the Borrower or any ERISA Affiliate
with respect to any Guaranteed Pension Plan and there has not been any
ERISA Reportable Event, or any other event or condition which presents
a material risk of termination of any Guaranteed Pension Plan by the
PBGC. Based on the latest valuation of each Guaranteed Pension Plan
(which in each case occurred within twelve months of the date of this
representation), and on the actuarial methods and assumptions employed
for that valuation, the aggregate benefit liabilities of all such
Guaranteed Pension Plans within the meaning of Section 4001 of ERISA
did not exceed the aggregate value of the assets of all such
Guaranteed Pension Plans, disregarding for this purpose the benefit
liabilities and assets of any Guaranteed Pension Plan with assets in
excess of benefit liabilities.
SECTION 6.14.4. MULTIEMPLOYER PLANS. Neither the Borrower nor
any ERISA Affiliate has incurred any material liability (including
secondary liability) to any Multiemployer Plan as a result of a
complete or partial withdrawal from such Multiemployer Plan under
Section 4201 of ERISA or as a result of a sale of assets described in
Section 4204 of ERISA. Neither the Borrower nor any ERISA Affiliate
has been notified that any Multiemployer Plan is in reorganization or
insolvent under and within the meaning of Section 4241 or Section 4245
of ERISA or that any Multiemployer Plan intends to terminate or has
been terminated under Section 4041A of ERISA.
SECTION 6.15. ENVIRONMENTAL COMPLIANCE. The Borrower and its Subsidiaries
have taken all necessary steps to investigate the past and present condition
and usage of the Real Property and the operations conducted by the Borrower and
its Subsidiaries and, based upon such diligent investigation, have determined
that, except as set forth on Schedule 6.15:
(a) Neither the Borrower, its Subsidiaries, nor any operator of their
properties, is in violation, or alleged violation, of any judgment, decree,
order, law, permit, license, rule or regulation pertaining to environmental
matters, including without limitation, those arising under the Resource
Conservation and Recovery Act ("RCRA"), the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 as amended ("CERCLA"), the
Superfund Amendments and Reauthorization Act of 1986 ("SARA"), the Federal
Clean Water Act, the Federal Clean Air Act, the Toxic Substances Control
Act, or any United
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States or Canadian federal, state, provincial, territorial or local
statute, regulation, ordinance, order or decree relating to health, safety,
waste transportation or disposal, or the environment (the "Environmental
Laws"), which violation would have a material adverse effect on the
business, assets or financial condition of the Borrower and its
Subsidiaries on a consolidated basis.
(b) Except as described on Schedule 6.15, neither the Borrower nor any
of its Subsidiaries has received notice from any third party including,
without limitation: any federal, state, provincial, territorial or local
governmental authority, (i) that any one of them has been identified by the
United States Environmental Protection Agency ("EPA") as a potentially
responsible party under CERCLA with respect to a site listed on the
National Priorities List, 40 C.F.R. Part 300 Appendix B; (ii) that any
hazardous waste, as defined by 42 U.S.C. Section 6903(5), any hazardous
substances as defined by 42 U.S.C. Section 9601(14), any pollutant or
contaminant as defined by 42 U.S.C. Section 9601(33) or any toxic
substance, oil or hazardous materials or other chemicals or substances
regulated by any Environmental Laws, excluding household hazardous waste
("Hazardous Substances"), which any one of them has generated, transported
or disposed of, has been found at any site at which a federal, state,
provincial, territorial or local agency or other third party has conducted
or has ordered that the Borrower or any of its Subsidiaries conduct a
remedial investigation, removal or other response action pursuant to any
Environmental Law; or (iii) that it is or shall be a named party to any
claim, action, cause of action, complaint, legal or administrative
proceeding arising out of any third party's incurrence of costs, expenses,
losses or damages of any kind whatsoever in connection with the Release of
Hazardous Substances.
(c) (i) No portion of the Real Property or other assets of the
Borrower and its Subsidiaries has been used for the handling, processing,
storage or disposal of Hazardous Substances except in accordance with
applicable Environmental Laws, except as would not reasonably be expected
to have a material adverse effect on the business, assets or financial
condition of the Borrower and its Subsidiaries on a consolidated basis; and
no underground tank or other underground storage receptacle for Hazardous
Substances is located on such properties; (ii) in the course of any
activities conducted by the Borrower, its Subsidiaries, or operators of the
Real Property or other assets of the Borrower and its Subsidiaries, no
Hazardous Substances have been generated or are being used on such
properties except in accordance with applicable Environmental Laws, except
for occurrences that would not have a material adverse effect on the
business, assets or financial condition of the Borrower and its
Subsidiaries on a consolidated basis; (iii) there have been no unpermitted
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Releases or threatened Releases of Hazardous Substances on, upon, into or
from the Real Property or other assets of the Borrower or its Subsidiaries,
which Releases would have a material adverse effect on the value of such
properties; (iv) to the best of the Borrower's and its Subsidiaries'
knowledge, there have been no Releases on, upon, from or into any real
property in the vicinity of the Real Property or other assets of the
Borrower or its Subsidiaries which, through soil or groundwater
contamination, may have come to be located on, and which would reasonably
be expected to have a material adverse effect on the value of, such
properties; and (v) in addition, any Hazardous Substances that have been
generated on the Real Property or other assets of the Borrower or its
Subsidiaries have been transported offsite only by carriers having an
identification number issued by the EPA, treated or disposed of only by
treatment or disposal facilities maintaining valid permits as required
under applicable Environmental Laws, which transporters and facilities have
been and are, to the best of the Borrower's and its Subsidiaries'
knowledge, operating in compliance with such permits and applicable
Environmental Laws.
(d) None of the Real Property or other assets of the Borrower or its
Subsidiaries or any of the stock (or assets) being acquired with proceeds
of Loans is or shall be subject to any applicable environmental clean-up
responsibility law or environmental restrictive transfer law or regulation,
by virtue of the transactions set forth herein and contemplated hereby.
SECTION 6.16. TRUE COPIES OF CHARTER AND OTHER DOCUMENTS. Each of the
Borrower and the Guarantors have furnished the Administrative Agent copies, in
each case true and complete as of the Closing Date, of (a) all charter and
other incorporation documents (together with any amendments thereto) and (b)
by-laws (together with any amendments thereto).
SECTION 6.17. DISCLOSURE. No representation or warranty made by the
Borrower or any Guarantor in this Agreement or in any agreement, instrument,
document, certificate, statement or letter furnished to the Banks or the
Administrative Agent by or on behalf of or at the request of the Borrower and
the Guarantors in connection with any of the transactions contemplated by the
Loan Documents contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements contained
therein not misleading in light of the circumstances in which they are made.
SECTION 6.18. PERMITS AND GOVERNMENTAL AUTHORITY. All permits (other
than those the absence of which would not have a material adverse effect on the
business, operations or financial condition of the Borrower and its
Subsidiaries as a whole) required for the construction and operation of all
landfills currently
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owned or operated by the Borrower or any of its Subsidiaries have been obtained
and remain in full force and effect and are not subject to any appeals or
further proceedings or to any unsatisfied conditions that may allow material
modification or revocation. Neither the Borrower nor any of its Subsidiaries,
nor, to the knowledge of the Borrower and its Subsidiaries, the holder of such
permits is in violation of any such permits, except for any violation which
would not have a material adverse effect on the business, operations or
financial condition of the Borrower and its Subsidiaries as a whole.
SECTION 7. AFFIRMATIVE COVENANTS OF THE BORROWER. The Borrower agrees
that, so long as any Obligation or any Letter of Credit is outstanding or the
Banks have any obligation to make Loans, or the Issuing Bank has any obligation
to issue, extend or renew any Letters of Credit hereunder, or the Banks have
any obligations to reimburse the Issuing Bank for drawings honored under any
Letter of Credit, it shall, and shall cause its Subsidiaries to, comply with
the following covenants:
SECTION 7.1. PUNCTUAL PAYMENT. The Borrower will duly and punctually
pay or cause to be paid the principal and interest on the Loans, all
Reimbursement Obligations, fees and other amounts provided for in this
Agreement and the other Loan Documents, all in accordance with the terms of
this Agreement and such other Loan Documents.
SECTION 7.2. MAINTENANCE OF U.S. OFFICE. The Borrower will, and will
cause each of its Subsidiaries in the United States of America to, maintain its
chief executive offices at Houston, Texas, or at such other place in the United
States of America as the Borrower shall designate upon 30 days' prior written
notice to the Administrative Agent.
SECTION 7.3. RECORDS AND ACCOUNTS. The Borrower will, and will cause
each of its Subsidiaries to, keep true and accurate records and books of
account in which full, true and correct entries will be made in accordance with
GAAP and with the requirements of all regulatory authorities and maintain
adequate accounts and reserves for all taxes (including income taxes),
depreciation, depletion, obsolescence and amortization of its properties, all
other contingencies, and all other proper reserves.
SECTION 7.4. FINANCIAL STATEMENTS, CERTIFICATES AND INFORMATION. The
Borrower will deliver to the Banks:
(a) as soon as practicable, but, in any event not later than 92 days
after the end of each fiscal year of the Borrower, the consolidated balance
sheet of the Borrower and its Subsidiaries as at the end of such year,
consolidated statements of cash flows, and the related consolidated
statements of operations, each setting forth in comparative form the
figures for the previous fiscal year, all such consolidated financial
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statements to be in reasonable detail, prepared, in accordance with GAAP
and, with respect to the consolidated financial statements, certified by
Coopers & Lybrand LLP or by other independent auditors selected by the
Borrower and reasonably satisfactory to the Banks (the "Accountants"). In
addition, simultaneously therewith, the Borrower shall provide the Banks
with a written statement from such Accountants to the effect that they have
read a copy of this Agreement, and that, in making the examination
necessary to said certification, they have obtained no knowledge of any
Default or Event of Default, or, if such Accountants shall have obtained
knowledge of any then existing Default or Event of Default they shall
disclose in such statement any such Default or Event of Default;
(b) as soon as practicable, but in any event not later than 47 days
after the end of each of the first three fiscal quarters of each fiscal
year of the Borrower, copies of the consolidated balance sheet and
statement of operations of the Borrower and its Subsidiaries as at the end
of such quarter, subject to year-end adjustments, and the related
consolidated statement of cash flows, all in reasonable detail and prepared
in accordance with GAAP (to the extent GAAP is applicable to interim
unaudited financial statements) with a certification by the principal
financial or accounting officer of the Borrower (the "CFO or the CAO") that
the consolidated financial statements are prepared in accordance with GAAP
(to the extent GAAP is applicable to interim unaudited financial
statements) and fairly present the consolidated financial condition of the
Borrower and its Subsidiaries on a consolidated basis as at the close of
business on the date thereof and the results of operations for the period
then ended, it being understood that no such statement need be accompanied
by complete footnotes;
(c) simultaneously with the delivery of the financial statements
referred to in (a) and (b) above, a certificate in the form of Exhibit F
hereto (the "Compliance Certificate") signed by the CFO or the CAO or the
Borrower's corporate treasurer, stating that the Borrower and its
Subsidiaries are in compliance with the covenants contained in Sections 7,
8 and 9 hereof as of the end of the applicable period and setting forth in
reasonable detail computations evidencing such compliance with respect to
the covenants contained in Sections 8.1(e), 8.3, 8.4, 8.5, and 9 hereof and
that no Default or Event of Default exists, provided that if the Borrower
shall at the time of issuance of such Compliance Certificate or at any
other time obtain knowledge of any Default or Event of Default, the
Borrower shall include in such certificate or otherwise deliver forthwith
to the Banks a certificate specifying the nature and period of existence
thereof and what action the Borrower proposes to take with respect thereto;
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(d) contemporaneously with, or promptly following, the filing or
mailing thereof, copies of all material of a financial nature filed with
the Securities and Exchange Commission or sent to the Borrower's and its
Subsidiaries' stockholders generally; and
(e) from time to time such other financial data and other information
as the Banks may reasonably request.
The Borrower hereby authorizes each Bank to disclose any information
obtained pursuant to this Agreement to all appropriate governmental regulatory
authorities where required by law; provided, however, this authorization shall
not be deemed to be a waiver of any rights to object to the disclosure by the
Banks of any such information which the Borrower has or may have under the
federal Right to Financial Privacy Act of 1978, as in effect from time to time,
except as to matters specifically permitted therein.
SECTION 7.5. CORPORATE EXISTENCE AND CONDUCT OF BUSINESS. The Borrower
will, and will cause each Subsidiary, to do or cause to be done all things
necessary to preserve and keep in full force and effect its corporate
existence, corporate rights and franchises; and effect and maintain its foreign
qualifications (except where the failure of the Borrower or any Subsidiary to
remain so qualified would not materially adversely impair the financial
condition, business or assets of the Borrower and its Subsidiaries on a
consolidated basis), licensing, domestication or authorization except as
terminated by its Board of Directors in the exercise of its reasonable
judgment; provided that such termination would not have a material adverse
effect on the financial condition, business or assets of the Borrower and its
Subsidiaries on a consolidated basis. The Borrower will not, and will cause
its Subsidiaries not to, become obligated under any contract or binding
arrangement which, at the time it was entered into, would materially adversely
impair the financial condition, business or assets of the Borrower and its
Subsidiaries, on a consolidated basis. The Borrower will, and will cause each
Subsidiary to, continue to engage primarily in the businesses now conducted by
it and in related businesses.
SECTION 7.6. MAINTENANCE OF PROPERTIES. The Borrower will, and will
cause its Subsidiaries to, cause all material properties used or useful in the
conduct of their businesses to be maintained and kept in good condition, repair
and working order (ordinary wear and tear excepted) and supplied with all
necessary equipment and cause to be made all necessary repairs, renewals,
replacements, betterments and improvements thereof, all as in the judgment of
the Borrower and its Subsidiaries may be necessary so that the businesses
carried on in connection therewith may be properly and advantageously conducted
at all times; provided, however, that nothing in this section shall prevent the
Borrower or any of its Subsidiaries from discontinuing the operation and
maintenance of any of its properties if such discontinuance is, in the judgment
of
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the Borrower or such Subsidiary, desirable in the conduct of its or their
business and which does not in the aggregate materially adversely affect the
financial condition, business or assets of the Borrower and its Subsidiaries on
a consolidated basis.
SECTION 7.7. INSURANCE. The Borrower will, and will cause its
Subsidiaries to, maintain with financially sound and reputable insurance
companies, funds or underwriters, insurance of the kinds, covering the risks
(other than risks arising out of or in any way connected with personal
liability of any officers and directors thereof) and in the relative
proportionate amounts usually carried by reasonable and prudent companies
conducting businesses similar to that of the Borrower and its Subsidiaries, in
amounts substantially similar to the existing coverage policies maintained by
the Borrower and its Subsidiaries, copies of which have been provided to the
Administrative Agent. In addition, the Borrower will furnish from time to
time, upon any Bank's request, a summary of the insurance coverage of the
Borrower and its Subsidiaries, which summary shall be in form and substance
satisfactory to the Banks and, if requested by any of the Banks, will furnish
to the Administrative Agent and such Bank copies of the applicable policies.
SECTION 7.8. TAXES. The Borrower will, and will cause its Subsidiaries
to, duly pay and discharge, or cause to be paid and discharged, before the same
shall become overdue, all taxes, assessments and other governmental charges
(other than taxes, assessments and other governmental charges imposed by
jurisdictions other than the United States, Canada or any political subdivision
thereof, which in the aggregate are not material to the business, financial
conditions, or assets of the Borrower and its Subsidiaries on a consolidated
basis) imposed upon it and its real properties, sales and activities, or any
part thereof, or upon the income or profits therefrom, as well as all claims
for labor, materials, or supplies, which if unpaid might by law become a lien
or charge upon any of its property; provided, however, that any such tax,
assessment, charge, levy or claim need not be paid if the validity or amount
thereof shall currently be contested in good faith by appropriate proceedings
and if the Borrower or such Subsidiary shall have set aside on its books
adequate reserves with respect thereto as required by GAAP; and provided,
further, that the Borrower or such Subsidiary will pay all such taxes,
assessments, charges, levies or claims forthwith upon the commencement of
proceedings to foreclose any lien which may have attached as security therefor.
SECTION 7.9. INSPECTION OF PROPERTIES, BOOKS AND CONTRACTS. The
Borrower will, and will cause its Subsidiaries to, permit the Administrative
Agent or any Bank or any of their designated representatives, upon reasonable
notice, to visit and inspect any of the properties of the Borrower and its
Subsidiaries, to examine the books of account of the Borrower and its
Subsidiaries, or contracts (and to make copies thereof and extracts therefrom),
and to discuss the affairs,
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finances and accounts of the Borrower and its Subsidiaries with, and to be
advised as to the same by, their officers, all at such times and intervals as
may be reasonably requested.
SECTION 7.10. COMPLIANCE WITH LAWS, CONTRACTS, LICENSES AND PERMITS;
MAINTENANCE OF MATERIAL LICENSES AND PERMITS. The Borrower will, and will
cause each Subsidiary to, (i) comply with the provisions of its charter
documents and by-laws; (ii) comply in all material respects with all agreements
and instruments by which it or any of its properties may be bound; (iii) comply
with all applicable laws and regulations (including Environmental Laws),
decrees, orders, judgments, licenses and permits, including, without
limitation, all environmental permits ("Applicable Requirements"), except where
noncompliance with such Applicable Requirements would not reasonably be
expected to have a material adverse effect in the aggregate on the consolidated
financial condition, properties or businesses of the Borrower and its
Subsidiaries; and (iv) maintain all material operating permits for all
landfills now owned or hereafter acquired; and (v) dispose of hazardous waste
only at licensed disposal facilities operating, to the best of the Borrower's
or such Subsidiary's knowledge after reasonable inquiry, in compliance with
Environmental Laws. If at any time any authorization, consent, approval,
permit or license from any officer, agency or instrumentality of any government
shall become necessary or required in order that the Borrower or any Subsidiary
may fulfill any of its obligations hereunder or under any other Loan Document,
the Borrower will immediately take or cause to be taken all reasonable steps
within the power of the Borrower or such Subsidiary to obtain such
authorization, consent, approval, permit or license and furnish the Banks with
evidence thereof.
SECTION 7.11. ENVIRONMENTAL INDEMNIFICATION. The Borrower covenants and
agrees that it will indemnify and hold the Banks, the Issuing Banks and the
Administrative Agent and their respective affiliates, and each of the
representatives, agents and officers of each of the foregoing, harmless from
and against any and all claims, expense, damage, loss or liability incurred by
the Banks, the Issuing Banks or the Administrative Agent (including all costs
of legal representation incurred by the Banks, the Issuing Banks or the
Administrative Agent) relating to (a) any Release or threatened Release of
Hazardous Substances on the Real Property; (b) any violation of any
Environmental Laws or Applicable Requirements with respect to conditions at the
Real Property or other assets of the Borrower or its Subsidiaries, or the
operations conducted thereon; or (c) the investigation or remediation of
offsite locations at which the Borrower, any of its Subsidiaries, or their
predecessors are alleged to have directly or indirectly Disposed of Hazardous
Substances. It is expressly acknowledged by the Borrower that this covenant of
indemnification shall survive the payment of the Loans and Reimbursement
Obligations and satisfaction of all other Obligations hereunder and shall inure
to the benefit of
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the Banks, the Issuing Banks, the Administrative Agent and their affiliates,
successors and assigns.
SECTION 7.12. FURTHER ASSURANCES. The Borrower and the Guarantors
will cooperate with the Administrative Agent and execute such further
instruments and documents as the Administrative Agent shall reasonably request
to carry out to the Banks' satisfaction the transactions contemplated by this
Agreement.
SECTION 7.13. NOTICE OF POTENTIAL CLAIMS OR LITIGATION. The Borrower
shall deliver to the Banks, within 30 days of receipt thereof, written notice
of the initiation of any action, claim, complaint, or any other notice of
dispute or potential litigation against the Borrower or any of its Subsidiaries
wherein the potential liability is in excess of $10,000,000 together with a
copy of each such notice received by the Borrower or any of its Subsidiaries.
SECTION 7.14. NOTICE OF CERTAIN EVENTS CONCERNING INSURANCE AND
ENVIRONMENTAL CLAIMS.
(a) The Borrower will provide the Banks with written notice as to any
material cancellation or material adverse change in any insurance of the
Borrower or any of its Subsidiaries within ten (10) Business Days after the
Borrower's or any of its Subsidiary's receipt of any notice (whether formal
or informal) of such material cancellation or material change by any of its
insurers.
(b) The Borrower will promptly notify the Banks in writing of any of
the following events:
(i) upon the Borrower's or any Subsidiary's obtaining knowledge of
any violation of any Environmental Law regarding the Real Property or
the Borrower's or any Subsidiary's operations which violation could
have a material adverse effect on the business, financial condition,
or assets of the Borrower and its Subsidiaries on a consolidated
basis;
(ii) upon the Borrower's or any Subsidiary's obtaining
knowledge of any potential or known Release, or threat of Release, of
any Hazardous Substance at, from, or into the Real Property which
could materially affect the business, financial condition, or assets
of the Borrower and its Subsidiaries on a consolidated basis;
(iii) upon the Borrower's or any Subsidiary's receipt of any
notice of any material violation of any Environmental Law or of any
Release or threatened Release of Hazardous Substances, including a
notice or claim of liability or potential responsibility from any
third party (including any federal, state, provincial, territorial or
local
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governmental officials) and including notice of any formal inquiry,
proceeding, demand, investigation or other action with regard to (A)
the Borrower's, any Subsidiary's or any Person's operation of the Real
Property, (B) contamination on, from, or into the Real Property, or
(C) investigation or remediation of offsite locations at which the
Borrower, any Subsidiary, or its predecessors are alleged to have
directly or indirectly Disposed of Hazardous Substances, and with
respect to which the liability associated therewith could be
reasonably expected to exceed $10,000,000; or
(iv) upon the Borrower's or any Subsidiary's obtaining
knowledge that any expense or loss which individually or in the
aggregate exceeds $10,000,000 has been incurred by such governmental
authority in connection with the assessment, containment, removal or
remediation of any Hazardous Substances with respect to which the
Borrower or any Subsidiary may be liable or for which a lien may be
imposed on the Real Property.
SECTION 7.15. NOTICE OF DEFAULT. The Borrower will promptly notify the
Banks in writing of the occurrence of any Default or Event of Default. If any
Person shall give any notice or take any other action in respect of a claimed
default (whether or not constituting an Event of Default) under this Agreement
or any other note, evidence of indebtedness, indenture or other obligation
evidencing indebtedness in excess of $10,000,000 as to which the Borrower or
any of its Subsidiaries is a party or obligor, whether as principal or surety,
the Borrower shall forthwith upon obtaining actual knowledge thereof give
written notice thereof to the Banks, describing the notice of action and the
nature of the claimed default.
SECTION 7.16. USE OF PROCEEDS. The proceeds of the Loans shall be used
for general corporate purposes and in connection with the United Merger and
refinancing the United Credit Agreement and other existing debt and letters of
credit of United and the Borrower. No proceeds of the Loans shall be used in
any way that will violate Regulations G, T, U or X of the Board of Governors of
the Federal Reserve System.
SECTION 7.17. CERTAIN TRANSACTIONS. Except as disclosed in filings made
by the Borrower and United under the Securities Exchange Act of 1934 prior to
the Closing Date, and except for arm's length transactions pursuant to which
the Borrower or any Subsidiary makes payments in the ordinary course of
business upon terms no less favorable than the Borrower or such Subsidiary
could obtain from third parties, none of the officers, directors, or employees
of the Borrower or any Subsidiary are presently or shall be a party to any
transaction with the Borrower or any Subsidiary (other than for services as
employees, officers and directors), including any contract, agreement or other
arrangement providing for
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the furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the Borrower or any
Subsidiary, any corporation, partnership, trust or other entity in which any
officer, director, or any such employee has a substantial interest or is an
officer, director, trustee or partner.
SECTION 8. CERTAIN NEGATIVE COVENANTS OF THE BORROWER. The Borrower
agrees that, so long as any Obligation or Letter of Credit is outstanding or
the Banks have any obligation to make Loans or any Issuing Bank has any
obligation to issue, extend or renew any Letters of Credit hereunder, or the
Banks have any obligation to reimburse any Issuing Bank for drawings honored
under any Letter of Credit, it shall, and shall cause its Subsidiaries to,
comply with the following covenants:
SECTION 8.1. RESTRICTIONS ON INDEBTEDNESS. Neither the Borrower nor any
of its Subsidiaries shall become or be a guarantor or surety of, or otherwise
create, incur, assume, or be or remain liable, contingently or otherwise, with
respect to any Indebtedness, or become or be responsible in any manner (whether
by agreement to purchase any obligations, stock, assets, goods or services, or
to supply or advance any funds, assets, goods or services or otherwise) with
respect to any Indebtedness of any other Person, or incur any Indebtedness
other than:
(a) Indebtedness arising under this Agreement or the other Loan
Documents;
(b) Existing Indebtedness of the Borrower and its Subsidiaries listed
on Schedule 8.1(b) hereto on the terms and conditions in effect as of the
date hereof, including extensions, renewals and refinancing of such
Indebtedness in amounts no greater than and on terms no more restrictive
than exist on the Closing Date;
(c) (i) Indebtedness incurred by the Borrower or any Subsidiary with
respect to any suretyship or performance bond incurred in the ordinary
course of its business (other than landfill closure bonds); and
(ii) Guarantees of the Subsidiaries' obligations to governmental
authorities in lieu of the posting of any landfill closure bonds;
(d) Unsecured Indebtedness of the Borrower, including commercial
paper, which is pari passu or subordinated to the Obligations; provided
that there does not exist a Default or Event of Default at the time of the
incurrence of such Indebtedness and no Default or Event of Default would be
created by incurrence of such Indebtedness;
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(e) (i) Indebtedness of the Borrower's Subsidiaries, (ii) secured
Indebtedness of the Borrower, (iii) Indebtedness with respect to landfill
closure bonds of the Borrower's Subsidiaries, and (iv) Indebtedness with
respect to Permitted Receivables Transactions; provided that the aggregate
amount of all such Indebtedness in this Section 8.1(e) shall not exceed
7.5% of Consolidated Tangible Assets at any time;
(f) Indebtedness of Sanifill with respect to the Sanifill Convertible
Subordinated Debt;
(g) Other Indebtedness of the Canadian Subsidiaries of the Borrower in
an aggregate amount outstanding not in excess of $50,000,000;
(h) After the United Joinder Date, Indebtedness of United with respect
to the United Indenture;
(i) After the United Joinder Date, Indebtedness of United with respect
to the United Senior Secured Notes, provided that such Indebtedness is
discharged within 60 days after the United Joinder Date, or if not so
discharged, the outstanding amount of such Indebtedness shall be deducted
from the amount of Indebtedness permitted under Section 8.1(e); and
(j) Indebtedness of the Borrower and Sanifill with respect to the
Prudential Private Placement Debt, provided that such Indebtedness is
discharged within 60 days after the Closing DATE.
SECTION 8.2. RESTRICTIONS ON LIENS. The Borrower will not, and will
cause its Subsidiaries not to, create or incur or suffer to be created or
incurred or to exist any lien, encumbrance, mortgage, pledge, charge,
restriction or other security interest of any kind upon any property or assets
of any character, whether now owned or hereafter acquired, or upon the income
or profits therefrom; or transfer any of such property or assets or the income
or profits therefrom for the purpose of subjecting the same to the payment of
Indebtedness or performance of any other obligation in priority to payment of
its general creditors; or acquire, or agree or have an option to acquire, any
property or assets upon conditional sale or other title retention or purchase
money security agreement, device or arrangement; or suffer to exist for a
period of more than 30 days after the same shall have been incurred any
Indebtedness or claim or demand against it which if unpaid might by law or upon
bankruptcy or insolvency, or otherwise, be given any priority whatsoever over
its general creditors; or sell, assign, pledge or otherwise transfer any
accounts, contract rights, general intangibles or chattel paper, with or
without recourse, except as follows (the "Permitted Liens"):
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(a) Liens existing on the Closing Date and listed on Schedule 8.2(a)
hereto;
(b) Liens securing Indebtedness permitted by Section 8.1(c)(i) hereof;
provided that the assets subject to such liens and security interests shall
be limited to those contracts to which such guaranty, suretyship or
indemnification obligations relate and the rights to payment thereunder;
(c) Liens securing Indebtedness permitted under Section 8.1(e)
(provided that Liens created pursuant to a Permitted Receivables
Transaction are only on the receivables so transferred and secure only the
obligations with respect thereto) and Section 8.1(g);
(d) Liens securing Indebtedness arising under the United Senior
Secured Notes;
(e) Liens to secure taxes, assessments and other government charges in
respect of obligations not overdue;
(f) Deposits or pledges made in connection with, or to secure payment
of, workmen's compensation, unemployment insurance, old age pensions or
other social security obligations;
(g) Liens in respect of judgments or awards which have been in force
for less than the applicable period for taking an appeal so long as
execution is not levied thereunder or in respect of which the Borrower (or
any Subsidiary) shall at the time in good faith be prosecuting an appeal or
proceedings for review and in respect of which a stay of execution shall
have been obtained pending such appeal or review and in respect of which
the Borrower maintains adequate reserves;
(h) Liens of carriers, warehousemen, mechanics and materialmen, and
other like liens, in existence less than 120 days from the date of creation
thereof in respect of obligations not overdue, provided that such liens may
continue to exist for a period of more than 120 days if the validity or
amount thereof shall currently be contested by the Borrower (or any
Subsidiary) in good faith by appropriate proceedings and if the Borrower
shall have set aside on its books adequate reserves with respect thereto as
required by GAAP and provided further that the Borrower (or any Subsidiary)
will pay any such claim forthwith upon commencement of proceedings to
foreclose any such lien; and
(i) Encumbrances consisting of easements, rights of way, zoning
restrictions, restrictions on the use of real property and defects and
irregularities in the title thereto, landlord's or lessor's liens under
leases to which the Borrower or any Subsidiary is a party, and other minor
liens
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or encumbrances none of which in the opinion of the Borrower interferes
materially with the use of the property affected in the ordinary conduct of
the business of the Borrower or any of its Subsidiaries, which defects do
not individually or in the aggregate have a material adverse effect on the
business of the Borrower or any Subsidiary individually or of the Borrower
and its Subsidiaries on a consolidated basis.
The Borrower and the Guarantors covenant and agree that if any of them
or any of their Subsidiaries shall create or assume any lien upon any of
their respective properties or assets, whether now owned or hereafter
acquired, other than Permitted Liens (unless prior written consent shall
have been obtained from the Banks), the Borrower and the Guarantors will
make or cause to be made effective provision whereby the Obligations and
their respective Guaranteed Obligations will be secured by such lien
equally and ratably with any and all other Indebtedness thereby secured so
long as such other Indebtedness shall be so secured; provided, that the
covenants of the Borrower and the Guarantors contained in this sentence
shall only be in effect for so long as the Borrower or any Guarantor shall
be similarly obligated under any other Indebtedness; provided, further,
that an Event of Default shall occur for so long as such other Indebtedness
becomes secured notwithstanding any actions taken by the Borrower or any
Guarantor to ratably secure the Obligations and the Guaranteed Obligations
hereunder.
SECTION 8.3. RESTRICTIONS ON INVESTMENTS. Except to the extent provided
in Section 8.4, neither the Borrower nor any Subsidiary may make or permit to
exist or to remain outstanding any Investment, unless both before and after
giving effect thereto (i) the Borrower and its Subsidiaries are in compliance
with the covenants set forth in Sections 7, 8 and 9 hereof; (ii) there does not
exist a Default or Event of Default and no Default or Event of Default would be
created by the making of such Investment; and (iii) the aggregate amount of all
Investments (excluding Investments in (A) direct obligations of the United
States of America or any agency thereof having maturities of less than one (1)
year, (B) certificates of deposit having maturities of less than one (1) year,
issued by commercial banks in the United States or Canada having capital and
surplus of not less than $100,000,000, and (C) wholly owned Subsidiaries) does
not exceed 15% of Consolidated Tangible Assets; provided, that the ability of
the Borrower and its Subsidiaries to incur any Indebtedness in connection with
any Investment permitted by this Section 8.3 shall be governed by Section 8.1.
SECTION 8.4. MERGERS, CONSOLIDATIONS, SALES.
(a) Neither the Borrower nor any Subsidiary shall be a party to any
merger, consolidation or exchange of stock unless the Borrower shall be the
surviving entity with respect to any such transaction to which the Borrower
is a party or a Subsidiary shall be the surviving entity (and
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continue to be a Subsidiary) with respect to any such transactions to which
one or more Subsidiaries is a party (and the conditions set forth below are
satisfied), or purchase or otherwise acquire all or substantially all of
the assets or stock of any class of, or any partnership, membership or
joint venture or other interest in, any other Person except as otherwise
provided in Section 8.3 or this Section 8.4. Notwithstanding the
foregoing, the Borrower and its Subsidiaries may purchase or otherwise
acquire all or substantially all of the assets or stock of any class of, or
joint venture or other interest in, any Person if the following conditions
have been met: (i) the proposed transaction will not otherwise create a
Default or an Event of Default hereunder; (ii) the business to be acquired
predominantly involves the collection, transfer, hauling, disposal or
recycling of solid waste (excluding hazardous waste as that term is defined
in RCRA) or thermal soil remediation; (iii) the business to be acquired
operates predominantly (A) in North America or (B) outside North America,
provided, that the aggregate amount of such acquisitions under this clause
(B) does not exceed five percent (5%) of Consolidated Tangible Assets; and
(iv) the board of directors and (if required by applicable law) the
shareholders, or the equivalent thereof, of the business to be acquired has
approved such acquisition. Notwithstanding the foregoing, the Borrower may
effect the United Merger provided that (x) such transaction will not
otherwise create a Default or Event of Default hereunder, and (y) the Banks
shall have received as soon as is reasonably possible an environmental
permit certificate from the CFO of the Borrower satisfactory to the Banks
concerning principal operating permits of United's principal operating
facilities to be acquired pursuant to the United Merger. Notwithstanding
anything herein to the contrary, the ability of the Borrower and its
Subsidiaries to incur any Indebtedness in connection with any transaction
permitted pursuant to this Section 8.4 shall be governed by Section 8.1.
(b) Neither the Borrower nor any Subsidiary shall sell, transfer,
convey or lease any assets or group of assets including the sale or
transfer of any property owned by the Borrower or any Subsidiary in order
then or thereafter to lease such property or lease other property which the
Borrower or such Subsidiary intends to use for substantially the same
purpose as the property being sold or transferred (except (1) transfers of
personal property among Subsidiaries of the Borrower which are wholly owned
by the Borrower and (2) so long as no Default or Event of Default has
occurred and is continuing, or would result therefrom, sales of assets in
the ordinary course of business between the date hereof and the Maturity
Date with an aggregate value not greater than ten percent (10%) of
Consolidated Total Assets, as set forth in the most recent financial
statements delivered to the Banks pursuant to Section 7.4 hereof) or sell
or assign, with or without recourse, any receivables (except accounts
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receivable more than sixty (60) days past due sold or assigned in the
ordinary course of collecting past due accounts, or pursuant to a Permitted
Receivables Transaction).
SECTION 8.5. RESTRICTED DISTRIBUTIONS AND REDEMPTIONS. Neither the
Borrower nor any of its Subsidiaries will (a) declare or pay any Distributions,
or (b) redeem, convert, retire or otherwise acquire shares of any class of its
capital stock (other than in connection with a merger permitted by Section 8.4
hereof or conversion into another form of equity of any preferred shares of the
Borrower existing as of the Closing Date pursuant to the terms thereof);
provided that the Borrower and its Subsidiaries may pay cash dividends and
redeem stock in an aggregate amount not to exceed (x) $25,000,000 plus (y) on a
cumulative basis, 50% of positive Consolidated Net Income after December 31,
1995. Notwithstanding the above, any Subsidiary may make Distributions to the
Borrower and the Borrower agrees that neither the Borrower nor any Material
Subsidiary will enter into any agreement restricting Distributions from such
Material Subsidiary to the Borrower, other than existing restrictions in the
Prudential Private Placement Debt and the United Senior Secured Notes as in
effect as of the Closing Date.
SECTION 8.6. EMPLOYEE BENEFIT PLANS. None of the Borrower, any of its
Subsidiaries, or any ERISA Affiliate will:
(a) engage in any "prohibited transaction" within the meaning of 9406
of ERISA or Section 4975 of the Code which could result in a material
liability for the Borrower on a consolidated basis; or
(b) permit any Guaranteed Pension Plan to incur an "accumulated
funding deficiency", as such term is defined in Section 302 of ERISA,
whether or not such deficiency is or may be waived; or
(c) fail to contribute to any Guaranteed Pension Plan to an extent
which, or terminate any Guaranteed Pension Plan in a manner which, could
result in the imposition of a lien or encumbrance on the assets of the
Borrower or any guarantor pursuant to Section 302(f) or Section 4068 of
ERISA; or
(d) permit or take any action which would result in the aggregate
benefit liabilities (with the meaning of Section 4001 of ERISA) of all
Guaranteed Pension Plans exceeding the value of the aggregate assets of
such Plans, disregarding for this purpose the benefit liabilities and
assets of any such Plan with assets in excess of benefit liabilities; or
(e) take any action referred to in paragraph (a), (b), (c) or (d)
above that would violate any provisions of Applicable Canadian Pension
Legislation.
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The Borrower and its Subsidiaries will (i) promptly upon the request of any
Bank or the Administrative Agent, furnish to the Banks a copy of the most
recent actuarial statement required to be submitted under Section 103(d) of
ERISA and Annual Report, Form 5500, with all required attachments, in respect
of each Guaranteed Pension Plan and (ii) promptly upon receipt or dispatch,
furnish to the Banks any notice, report or demand sent or received in respect
of a Guaranteed Pension Plan under Sections 302, 4041, 4042, 4043, 4063, 4065,
4066 and 4068 of ERISA, or in respect of a Multiemployer Plan, under Sections
4041A, 4202, 4219, 4242 or 4245 of ERISA.
SECTION 9. FINANCIAL COVENANTS OF THE BORROWER. The Borrower agrees
that, so long as any Obligation or Letter of Credit is outstanding or the Banks
have any obligation to make Loans, or any Issuing Bank has any obligation to
issue, extend or renew any Letter of Credit hereunder, or the Banks have any
obligation to reimburse any Issuing Bank for drawings honored under any Letter
of Credit, it shall, and shall cause its Subsidiaries to, comply with the
following covenants:
SECTION 9.1. INTEREST COVERAGE RATIO. As of the end of any fiscal
quarter of the Borrower, the ratio of (a) EBIT for the period of four
consecutive fiscal quarters ending on that date to (b) Consolidated Total
Interest Expense for such period shall not be less than 3.00:1.
SECTION 9.2. DEBT TO TOTAL CAPITALIZATION.
(a) The ratio of (i) Funded Debt to (ii) Consolidated Total
Capitalization shall not exceed 0.58:1 at any time; and
(b) The ratio of (i) Funded Debt to (ii) Consolidated Total
Capitalization shall not exceed 0.55:1 at the end of any two consecutive
fiscal quarters of the Borrower.
SECTION 10. CONDITIONS PRECEDENT.
SECTION 10.1 CONDITIONS TO EFFECTIVENESS. The effectiveness of this
Agreement and the obligations of the Banks to make any Loans and of any Issuing
Bank to issue Letters of Credit and of the Banks to participate in Letters of
Credit and otherwise be bound by the terms of this Agreement shall be subject
to the satisfaction of each of the following conditions precedent:
SECTION 10.1.1. CORPORATE ACTION. All corporate action necessary
for the valid execution, delivery and performance by the Borrower and Sanifill
of the Loan Documents shall have been duly and effectively taken, and evidence
thereof certified by authorized officers of the Borrower and Sanifill and
satisfactory to the Banks shall have been provided to the Banks.
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SECTION 10.1.2. LOAN DOCUMENTS, ETC. Each of the Loan Documents
and other documents listed on the closing agenda shall have been duly and
properly authorized, executed and delivered by the respective parties thereto
and shall be in full force and effect in a form satisfactory to the Banks.
SECTION 10.1.3. CERTIFIED COPIES OF CHARTER DOCUMENTS. The Banks
shall have received from the Borrower and Sanifill a copy, certified by a duly
authorized officer of such Person to be true and complete on the Closing Date,
of (a) its charter or other incorporation documents as in effect on such date
of certification, and (b) its by-laws as in effect on such date.
SECTION 10.1.4. INCUMBENCY CERTIFICATE. The Banks shall have
received an incumbency certificate, dated as of the Closing Date, signed by
duly authorized officers giving the name and bearing a specimen signature of
each individual who shall be authorized: (a) to sign the Loan Documents on
behalf of the Borrower and Sanifill; (b) to make Syndicated Loan Requests and
Letter of Credit Requests; (c) to make Competitive Bid Quote Requests; and (d)
to give notices and to take other action on the Borrower's behalf under the
Loan Documents.
SECTION 10.1.5. CERTIFICATES OF INSURANCE. The Banks shall have
received (i) a certificate of insurance from an independent insurance broker
dated as of the Closing Date, or within 15 days prior thereto, identifying
insurers, types of insurance, insurance limits, and policy terms, and otherwise
describing the insurance obtained in accordance with the provisions of the Loan
Documents and (ii) copies of all policies evidencing such insurance (or
certificates therefor signed by the insurer or an agent authorized to bind the
insurer).
SECTION 10.1.6. OPINIONS OF COUNSEL AND PERMIT CERTIFICATE. The
Banks shall have received (a) favorable legal opinions from outside counsel to
the Borrower and Sanifill addressed to the Banks, dated the Closing Date, in
form and substance satisfactory to the Administrative Agent, and (b) an
environmental permit certificate from the CFO of the Borrower satisfactory to
the Banks concerning principal operating permits at the Borrower's and its
Subsidiaries' principal operating facilities.
SECTION 10.1.7. EXISTING DEBT. The Administrative Agent shall have
received a payoff letter, in form and substance satisfactory to the
Administrative Agent, with respect to the Original Credit Agreement, such
payoff letter indicating the amount of the loan obligations of the Borrower and
its Subsidiaries as of the Closing Date.
SECTION 10.1.8. SATISFACTORY FINANCIAL CONDITION. No material
adverse change, in the judgment of the Majority Banks, shall have occurred in
the financial condition, results of operations, business, properties or
prospects of the
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Borrower and its Subsidiaries, taken as a whole, since the most recent
financial statements and projections provided to the Banks.
SECTION 10.1.9. PAYMENT OF CLOSING FEES. The Borrower shall have
paid closing fees to the Administrative Agent for the account of the Banks in
accordance with the letter by BOA dated July 10, 1997.
SECTION 10.2. CONDITIONS TO INCREASE IN TOTAL COMMITMENT. The increase
in the Total Commitment from $1,700,000,000 to $2,000,000,000 shall be subject
to the satisfaction of each of the following conditions precedent:
SECTION 10.2.1. UNITED MERGER. The United Merger shall have been
successfully completed on terms no less favorable to the Borrower than the
terms set forth in the United Merger Agreement, and evidence thereof
satisfactory to the Administrative Agent, including, without limitation, a
legal opinion as to the completion of the United Merger, shall have been
furnished to the Administrative Agent.
SECTION 10.2.2. CORPORATE ACTION. All corporate action necessary
for the valid execution, delivery and performance by United of the United
Joinder shall have been duly and effectively taken, and evidence thereof
certified by authorized officers of United and satisfactory to the
Administrative Agent shall have been provided to the Administrative Agent.
SECTION 10.2.3. THE UNITED JOINDER. The United Joinder shall have
been duly and properly authorized, executed and delivered by United and shall
be in full force and effect.
SECTION 10.2.4. CERTIFIED COPIES OF CHARTER DOCUMENTS. The
Administrative Agent shall have received from United a copy, certified by a
duly authorized officer of such Person to be true and complete on the United
Joinder Date, of (a) its charter or other incorporation documents as in effect
on such date of certification, and (b) its by-laws as in effect on such date.
SECTION 10.2.5. INCUMBENCY CERTIFICATE. The Administrative Agent
shall have received an incumbency certificate, dated as of the United Joinder
Date, signed by duly authorized officers giving the name and bearing a specimen
signature of each individual who shall be authorized to sign the United Joinder
on behalf of United.
SECTION 10.2.6. OPINION OF COUNSEL. The Administrative Agent shall
have received a favorable legal opinion from outside counsel to United
addressed to the Administrative Agent and the Banks, dated the United Joinder
Date, in form and substance satisfactory to the Administrative Agent.
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SECTION 10.2.7. EXISTING UNITED DEBT. The Administrative Agent
shall have received a payoff letter, in form and substance satisfactory to the
Administrative Agent, with respect to the United Credit Agreement, together
with necessary disbursement instructions sufficient to discharge all
Indebtedness under the United Credit Agreement on the United Joinder Date.
SECTION 10.2.8. LIEN SEARCH RESULTS. The Administrative Agent
shall have received the results of UCC lien searches with respect to United and
its Subsidiaries indicating no liens or encumbrances other than Permitted
Liens.
SECTION 10.2.9. SATISFACTORY FINANCIAL CONDITION. No material
adverse change, in the judgment of the Majority Banks, shall have occurred in
the financial condition, results of operations, business, properties or
prospects of the Borrower and its Subsidiaries, taken as a whole, or United and
its Subsidiaries, taken as a whole, since the most recent financial statements
and projections provided to the Banks.
SECTION 10.2.10. NOTICE OF UNITED JOINDER DATE. Promptly upon
receipt of the items set forth above, the Administrative Agent shall notify the
Banks that all of the conditions of Section 10.2 have been satisfied, and upon
such notice the Total Commitment shall be increased to $2,000,000,000. As soon
as practical thereafter, the Administrative Agent shall distribute an original
counterpart of the United Joinder to each Bank, together with copies of other
items delivered pursuant to this Section 10.2.
SECTION 11. CONDITIONS TO ALL LOANS. The obligations of the Banks to
make any Loan and the obligation of any Issuing Bank to issue, extend, or renew
any Letter of Credit at the time of and subsequent to the Closing Date is
subject to the following conditions precedent:
SECTION 11.1. REPRESENTATIONS TRUE. Each of the representations and
warranties of the Borrower and the Guarantors (as applicable) contained in this
Agreement or in any document or instrument delivered pursuant to or in
connection with this Agreement shall be true as of the date as of which they
were made and shall also be true at and as of the time of the making of such
Loan or the issuance, extension, or renewal of any Letter of Credit, as
applicable, with the same effect as if made at and as of that time (except to
the extent of changes resulting from transactions contemplated or permitted by
this Agreement and changes occurring in the ordinary course of business which
singly or in the aggregate are not materially adverse to the business, assets
or financial condition of the Borrower and its Subsidiaries as a whole, and to
the extent that such representations and warranties relate expressly and solely
to an earlier date).
SECTION 11.2. PERFORMANCE; NO EVENT OF DEFAULT. The Borrower shall have
performed and complied with all terms and conditions herein required to be
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performed or complied with by them prior to or at the time of the making of any
Loan the issuance, extension or renewal of any Letter of Credit, and at the
time of the making of any Loan or the issuance, renewal or extension of any
Letter of Credit, there shall exist no Default or Event of Default or condition
which would result in a Default or an Event of Default upon consummation of
such Loan or issuance, extension, or renewal of any Letter of Credit, as
applicable. Each request for a Loan, or for issuance, extension or renewal of
a Letter of Credit shall constitute certification by the Borrower that the
conditions specified in Sections 11.1 and 11.2 will be duly satisfied on the
date of such Loan or Letter of Credit issuance, extension or renewal.
SECTION 11.3. NO LEGAL IMPEDIMENT. No change shall have occurred in any
law or regulations thereunder or interpretations thereof which in the
reasonable opinion of the Banks would make it illegal for the Banks to make
Loans, for any Issuing Bank to issue, extend or renew, or the Banks to
participate in, Letters of Credit hereunder.
SECTION 11.4. GOVERNMENTAL REGULATION. The Banks shall have received
from the Borrower and its Subsidiaries such statements in substance and form
reasonably satisfactory to the Banks as they shall require for the purpose of
compliance with any applicable regulations of the Comptroller of the Currency
or the Board of Governors of the Federal Reserve System or the Office of the
Superintendent of Financial Institutions.
SECTION 11.5. PROCEEDINGS AND DOCUMENTS. All proceedings in connection
with the transactions contemplated by this Agreement and all documents incident
thereto shall have been delivered to the Banks as of the date of the making of
any extension of credit in substance and in form satisfactory to the Banks,
including without limitation a Syndicated Loan Request in the form attached
hereto as Exhibit D or a Letter of Credit Request in the form of Exhibit E and
the Banks shall have received all information and such counterpart originals or
certified or other copies of such documents as the Banks may reasonably
request.
SECTION 12. EVENTS OF DEFAULT; ACCELERATION; TERMINATION OF COMMITMENT.
SECTION 12.1. EVENTS OF DEFAULT AND ACCELERATION. If any of the
following events ("Events of Default" or, if the giving of notice or the lapse
of time or both is required, then, prior to such notice and/or lapse of time,
"Defaults") shall occur:
(a) if the Borrower shall fail to pay any principal of the Loans when
the same shall become due and payable, whether at the stated date of
maturity or any accelerated date of maturity or at any other date fixed for
payment;
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(b) if the Borrower shall fail to pay any interest or fees or other
amounts owing hereunder (other than those specified in subsection (a)
above) within five (5) Business Days after the same shall become due and
payable whether at the Maturity Date or any accelerated date of maturity or
at any other date fixed for payment;
(c) if the Borrower shall fail to comply with any of the covenants
contained in Sections 7, 8 and 9 hereof;
(d) if the Borrower shall fail to perform any term, covenant or
agreement contained herein or in any of the other Loan Documents (other
than those specified in subsections (a), (b), and (c) above) and such
failure shall not be remedied within 30 days after written notice of such
failure shall have been given to the Borrower by the Administrative Agent
or any of the Banks;
(e) if any representation or warranty contained in this Agreement or
in any document or instrument delivered pursuant to or in connection with
this Agreement shall prove to have been false in any material respect upon
the date when made or repeated;
(f) if the Borrower or any of its Subsidiaries shall fail to pay when
due, or within any applicable period of grace, any Indebtedness in an
aggregate amount greater than $25,000,000, or fail to observe or perform
any material term, covenant or agreement contained in any one or more
agreements by which it is bound, evidencing or securing any Indebtedness in
an aggregate amount greater than $25,000,000 for such period of time as
would, or would have permitted (assuming the giving of appropriate notice
if required) the holder or holders thereof or of any obligations issued
thereunder to accelerate the maturity thereof or terminate its commitment
with respect thereto;
(g) if the Borrower, any Guarantor or any Material Subsidiary makes an
assignment for the benefit of creditors, or admits in writing its inability
to pay or generally fails to pay its debts as they mature or become due, or
petitions or applies for the appointment of a trustee or other custodian,
liquidator or receiver of the Borrower, the Guarantors or any Material
Subsidiary, or of any substantial part of the assets of the Borrower, the
Guarantors or any Material Subsidiary or commences any case or other
proceeding relating to the Borrower, the Guarantors or any Material
Subsidiary under any bankruptcy, reorganization, arrangement, insolvency,
readjustment of debt, dissolution or liquidation or similar law of any
jurisdiction, now or hereafter in effect, or takes any action to authorize
or in furtherance of any of the foregoing, or if any such petition or
application is filed or any such case or other proceeding is commenced
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against the Borrower, the Guarantors or any Material Subsidiary or the
Borrower, any Guarantor or any Material Subsidiary indicates its approval
thereof, consent thereto or acquiescence therein;
(h) if a decree or order is entered appointing any such trustee,
custodian, liquidator or receiver or adjudicating the Borrower or any
Guarantor or any Material Subsidiary bankrupt or insolvent, or approving a
petition in any such case or other proceeding, or a decree or order for
relief is entered in respect of the Borrower or any Guarantor or any
Material Subsidiary in an involuntary case under federal bankruptcy laws of
any jurisdiction as now or hereafter constituted, and such decree or order
remains in effect for more than 30 days, whether or not consecutive;
(i) if there shall remain in force, undischarged, unsatisfied and
unstayed, for more than thirty days, whether or not consecutive, any final
judgment against the Borrower or any Subsidiary which, with other
outstanding final judgments against the Borrower and its Subsidiaries
exceeds in the aggregate $10,000,000 after taking into account any
undisputed insurance coverage;
(j) if, with respect to any Guaranteed Pension Plan (or any
corresponding plan described in any Applicable Canadian Pension
Legislation), an ERISA Reportable Event or similar event under Applicable
Canadian Pension Legislation shall have occurred and the Banks shall have
determined in their reasonable discretion that such event reasonably could
be expected to result in liability of the Borrower or any Subsidiary to the
PBGC or similar Canadian authorities or the Plan in an aggregate amount
exceeding $10,000,000 and such event in the circumstances occurring
reasonably could constitute grounds for the partial or complete termination
of such Plan by the PBGC or similar Canadian authorities or for the
appointment by the appropriate United States District Court or Canadian
Court of a trustee to administer such Plan; or a trustee shall have been
appointed by the appropriate United States District Court or Canadian Court
to administer such Plan; or the PBGC or similar Canadian authorities shall
have instituted proceedings to terminate such Plan;
(k) if any of the Loan Documents shall be cancelled, terminated,
revoked or rescinded otherwise than in accordance with the terms thereof or
with the express prior written agreement, consent or approval of the Banks,
or any action at law, suit or in equity or other legal proceeding to
cancel, revoke or rescind any of the Loan Documents shall be commenced by
or on behalf of the Borrower, any Guarantor, or any of their respective
stockholders, or any court or any other governmental or regulatory
authority or agency of competent jurisdiction shall make a determination
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that, or issue a judgment, order, decree or ruling to the effect that, any
one or more of the Loan Documents is illegal, invalid or unenforceable in
accordance with the terms thereof; or
(l) if any person or group of persons (within the meaning of Section
13 or 14 of the Securities Exchange Act of 1934, as amended) shall have
acquired beneficial ownership (within the meaning of Rule 13d-3 promulgated
by the Securities and Exchange Commission under said Act) of 25% or more of
the outstanding shares of common voting stock of the Borrower; or, during
any period of twelve consecutive calendar months, individuals who were
directors of the Borrower on the first day of such period shall cease to
constitute a majority of the board of directors of the Borrower;
then, and in any such event, so long as the same may be continuing, the
Administrative Agent may, and upon the request of the Majority Banks shall, by
notice in writing to the Borrower, declare all amounts owing with respect to
this Agreement, the Notes and the other Loan Documents and all Reimbursement
Obligations to be, and they shall thereupon forthwith become, immediately due
and payable without presentment, demand, protest, notice of intent to
accelerate, notice of acceleration to the extent permitted by law or other
notice of any kind, all of which are hereby expressly waived by the Borrower;
provided that in the event of any Event of Default specified in Section 12.1(g)
or 12.1(h), all such amounts shall become immediately due and payable
automatically and without any requirement of notice from the Administrative
Agent or any Bank. Upon demand by the Majority Banks after the occurrence of
any Event of Default, the Borrower shall immediately provide to the
Administrative Agent cash in an amount equal to the aggregate Maximum Drawing
Amount to be held by the Administrative Agent as collateral security for the
Reimbursement Obligations.
SECTION 12.2. TERMINATION OF COMMITMENTS. If any Event of Default
pursuant to Sections 12.1(g) or 12.1(h) hereof shall occur, any unused portion
of the Total Commitment hereunder shall forthwith terminate and the Banks and
the Issuing Banks shall be relieved of all obligations to make Loans or to
issue, extend or renew Letters of Credit hereunder; or if any other Event of
Default shall occur, the Majority Banks may by notice to the Borrower terminate
the unused portion of the Total Commitment hereunder, and, upon such notice
being given, such unused portion of the Total Commitment hereunder shall
terminate immediately and the Banks and the Issuing Banks shall be relieved of
all further obligations to make Loans or to issue, extend or renew Letters of
Credit hereunder. No termination of any portion of the Total Commitment
hereunder shall relieve the Borrower of any of its existing Obligations to the
Banks, the Issuing Banks or the Administrative Agent hereunder or elsewhere.
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SECTION 12.3. REMEDIES. In case any one or more of the Events of
Default shall have occurred and be continuing, and whether or not the Banks
shall have accelerated the maturity of the Loans and other Obligations pursuant
to Section 12.1, each Bank, upon notice to the other Banks, if owed any amount
with respect to the Loans or the Reimbursement Obligations, may proceed to
protect and enforce its rights by suit in equity, action at law or other
appropriate proceeding, whether for the specific performance of any covenant or
agreement contained in this Agreement and the other Loan Documents or any
instrument pursuant to which the Obligations to such Bank are evidenced,
including, without limitation, as permitted by applicable law the obtaining of
the ex parte appointment of a receiver, and, if such amount shall have become
due, by declaration or otherwise, proceed to enforce the payment thereof or any
legal or equitable right of such Bank, any recovery being subject to the terms
of Section 28 hereof. No remedy herein conferred upon any Bank or the
Administrative Agent or the holder of any Note is intended to be exclusive of
any other remedy and each and every remedy shall be cumulative and shall be in
addition to every other remedy given hereunder or now or hereafter existing at
law or in equity or by statute or any other provision of law.
SECTION 13. SETOFF. Regardless of the adequacy of any collateral,
during the continuance of an Event of Default, any deposits or other sums
credited by or due from any Bank to the Borrower or any of them and any
securities or other property of the Borrower or any of them in the possession
of such Bank may be applied to or set off against the payment of Obligations
and any and all other liabilities, direct, or indirect, absolute or contingent,
due or to become due, now existing or hereafter arising, of the Borrower to the
Banks or the Administrative Agent. Any amounts set off pursuant to this
Section 13 shall be distributed ratably in accordance with Section 30 among all
of the Banks by the Bank setting off such amounts. If any Bank fails to share
such setoff ratably, the Administrative Agent shall have the right to withhold
such Bank's share of the Borrower's payments until each of the Banks shall
have, in the aggregate, received a pro rata repayment.
SECTION 14. EXPENSES. Whether or not the transactions contemplated
herein shall be consummated, the Borrower hereby promises to reimburse the
Administrative Agent for all reasonable out-of-pocket fees and disbursements
(including all reasonable attorneys' fees) incurred or expended in connection
with the preparation, filing or recording, or interpretation of this Agreement,
the other Loan Documents, or any amendment, modification, approval, consent or
waiver hereof or thereof. The Borrower further promises to reimburse the
Administrative Agent and the Banks for all reasonable out-of-pocket fees and
disbursements (including all reasonable legal fees and the allocable cost of
in-house attorneys' fees) incurred or expended in connection with the
enforcement of any Obligations or the satisfaction of any indebtedness of the
Borrower hereunder or under any other Loan Document, or in connection with any
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litigation, proceeding or dispute hereunder in any way related to the credit
hereunder. The Borrower also promises to pay the Administrative Agent all
reasonable out-of-pocket fees and disbursements, incurred or expended in
connection with the Competitive Bid Loan procedure under Section 4 hereof.
SECTION 15. THE ADMINISTRATIVE AGENT.
SECTION 15.1. APPOINTMENT, POWERS AND IMMUNITIES. Each Bank hereby
irrevocably appoints and authorizes MGT to act as Administrative Agent,
provided, however, the Administrative Agent is hereby authorized to serve only
as administrative and documentation agent for the Banks and to exercise such
powers as are reasonably incidental thereto and as are set forth in this
Agreement and the other Loan Documents. The Administrative Agent hereby
acknowledges that it does not have the authority to negotiate any agreement
which would bind the Banks or agree to any amendment, waiver or modification of
any of the Loan Documents or bind the Banks except as set forth in this
Agreement or the Loan Documents. Except as provided in this Agreement, and in
the other Loan Documents, the Administrative Agent shall take action or refrain
from acting only upon instructions of the Banks. It is agreed that the duties,
rights, privileges and immunities of the Issuing Banks, in their capacity as
issuers of Letters of Credit hereunder, shall be identical to the duties,
rights, privileges and immunities of the Administrative Agent as provided in
this Section 15. The Administrative Agent shall not have any duties or
responsibilities or any fiduciary relationship with any Bank except those
expressly set forth in this Agreement and the other Loan Documents. Neither
the Administrative Agent nor any of its affiliates shall be responsible to the
Banks for any recitals, statements, representations or warranties made by the
Borrower or any other Person whether contained herein or otherwise or for the
value, validity, effectiveness, genuineness, enforceability or sufficiency of
this Agreement, the other Loan Documents or any other document referred to or
provided for herein or therein or for any failure by the Borrower or any other
Person to perform its obligations hereunder or thereunder or in respect of the
Notes. The Administrative Agent may employ agents and attorneys-in-fact and
shall not be responsible for the negligence or misconduct of any such agents or
attorneys-in-fact selected by it with reasonable care. The Administrative
Agent, the Agents and any of their directors, officers, employees or agents
shall not be responsible for any action taken or omitted to be taken by it or
them hereunder or in connection herewith, except for its or their own gross
negligence or willful misconduct. The Administrative Agent in its separate
capacity as a Bank shall have the same rights and powers hereunder as any other
Bank.
SECTION 15.2. ACTIONS BY ADMINISTRATIVE AGENT. The Administrative Agent
shall be fully justified in failing or refusing to take any action under this
Agreement as reasonably deemed appropriate unless it shall first have received
the consent of the Majority Banks (or, when expressly required hereby, all of
the
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Banks), and shall be indemnified to its reasonable satisfaction by the Banks
against any and all liability and expense which may be incurred by it by reason
of taking or continuing to take any such action. The Administrative Agent
shall in all cases be fully protected in acting, or in refraining from acting,
under this Agreement or any of the Loan Documents in accordance with the
instruction of the Majority Banks (or, when expressly required hereby or
thereby, all of the Banks), and such instruction and any action taken or
failure to act pursuant thereto shall be binding upon the Banks and all future
holders of the Notes or any Letter of Credit Participation.
SECTION 15.3. INDEMNIFICATION. Without limiting the obligations of the
Borrower hereunder or under any other Loan Document, the Banks agree to
indemnify the Administrative Agent, its affiliates and its respective
directors, officers, agents and employees (to the extent not reimbursed by the
Borrower) ratably in accordance with their respective Commitment Percentages
for any and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever which may at any time be imposed on, incurred by or asserted against
the Administrative Agent in any way relating to or arising out of this
Agreement or any other Loan Document or any documents contemplated by or
referred to herein or therein or the transactions contemplated hereby or
thereby or the enforcement of any of the terms hereof or thereof or of any such
other documents; provided, that no Bank shall be liable for any of the
foregoing to the extent they arise from the gross negligence or willful
misconduct of the Administrative Agent (or any agent thereof), IT BEING THE
INTENT OF THE PARTIES HERETO THAT ALL SUCH INDEMNIFIED PARTIES SHALL BE
INDEMNIFIED FOR THEIR ORDINARY SOLE OR CONTRIBUTORY NEGLIGENCE.
SECTION 15.4. REIMBURSEMENT. Without limiting the provisions of
Sections 5.1(a), 5.13, and 13, the Administrative Agent shall not be obliged to
make available to any Person any sum which the Administrative Agent is
expecting to receive for the account of that Person until the Administrative
Agent has determined that it has received that sum. The Administrative Agent
may, however, disburse funds prior to determining that the sums which the
Administrative Agent expects to receive have been finally and unconditionally
paid to the Administrative Agent, if the Administrative Agent wishes to do so.
If and to the extent that the Administrative Agent does disburse funds and it
later becomes apparent that the Administrative Agent did not then receive a
payment in an amount equal to the sum paid out, then any Person to whom the
Administrative Agent made the funds available shall, on demand from the
Administrative Agent, refund to the Administrative Agent the sum paid to that
Person. If, in the opinion of the Administrative Agent, the distribution of
any amount received by it in such capacity hereunder or under the other Loan
Documents might involve it in liability, it may refrain from making
distribution until its right to
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make distribution shall have been adjudicated by a court of competent
jurisdiction. If a court of competent jurisdiction shall adjudge that any
amount received and distributed by the Administrative Agent is to be repaid,
each Person to whom any such distribution shall have been made shall either
repay to the Administrative Agent its proportionate share of the amount so
adjudged to be repaid or shall pay over the same in such manner and to such
Persons as shall be determined by such court.
SECTION 15.5. DOCUMENTS. The Administrative Agent will forward to each
Bank, promptly after receipt thereof, a copy of each notice or other document
furnished to the Administrative Agent for such Bank hereunder; provided,
however, that, notwithstanding the foregoing, the Administrative Agent may
furnish to the Banks a monthly summary with respect to Letters of Credit issued
hereunder in lieu of copies of the related Letter of Credit Applications.
SECTION 15.6. NON-RELIANCE ON ADMINISTRATIVE AGENT AND OTHER BANKS.
Each Bank represents that it has, independently and without reliance on the
Administrative Agent, the Agents or any other Bank, and based on such documents
and information as it has deemed appropriate, made its own appraisal of the
financial condition and affairs of the Borrower and the Guarantors and the
decision to enter into this Agreement and the other Loan Documents and agrees
that it will, independently and without reliance upon the Administrative Agent,
the Agent or any other Bank, and based on such documents and information as it
shall deem appropriate at the time, continue to make its own appraisals and
decisions in taking or not taking action under this Agreement or any other Loan
Document. Except as herein expressly provided to the contrary, the
Administrative Agent shall not be required to keep informed as to the
performance or observance by the Borrower and the Guarantors of this Agreement,
the other Loan Documents or any other document referred to or provided for
herein or therein or by any other Person of any other agreement or to make
inquiry of, or to inspect the properties or books of, any Person. Except for
notices, reports and other documents and information expressly required to be
furnished to the Banks by the Administrative Agent hereunder, the
Administrative Agent shall not have any duty or responsibility to provide any
Bank with any credit or other information concerning any person which may come
into the possession of the Administrative Agent or any of their affiliates.
Each Bank shall have access to all documents relating to the Administrative
Agent's performance of their duties hereunder at such Bank's request. Unless
any Bank shall promptly object to any action taken by the Administrative Agent
hereunder of which such Bank has actual knowledge (other than actions which
require the prior consent of such Bank in accordance with the terms hereof or
to which the provisions of Section 15.8 are applicable and other than actions
which constitute gross negligence or willful misconduct by the Administrative
Agent), such Bank shall be presumed to have approved the same.
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SECTION 15.7. RESIGNATION OF ADMINISTRATIVE AGENT. The Administrative
Agent may resign at any time by giving 60 days' prior written notice thereof to
the Banks and the Borrower. Upon any such resignation, the Banks (other than
the resigning Administrative Agent) shall have the right to appoint a successor
Administrative Agent from among the Banks. If no successor to the
Administrative Agent shall have been so appointed by the Banks and shall have
accepted such appointment within 30 days after the retiring Administrative
Agent's giving of notice of resignation, then the retiring Administrative Agent
may, on behalf of the Banks, appoint a successor Administrative Agent from
among the remaining Banks, which shall be a financial institution having a
combined capital and surplus in excess of $1,000,000,000. Upon the acceptance
of any appointment as the Administrative Agent hereunder by a successor
Administrative Agent, such successor Administrative Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring Administrative Agent, and the retiring Administrative Agent
shall be discharged from its duties and obligations hereunder. After the
retiring Administrative Agent's resignation, the provisions of this Agreement
shall continue in effect for its benefit in respect of any actions taken or
omitted to be taken by it while it was acting as the Administrative Agent. Any
new Issuing Bank appointed pursuant to this Section 15.7 shall immediately
issue new Letters of Credit in place of Letters of Credit previously issued or,
if acceptable to the resigning Issuing Bank, issue letters of credit in favor
of the resigning Issuing Bank as security for the outstanding Letters of Credit
and shall in due course replace all Letters of Credit previously issued by the
resigning Issuing Bank.
SECTION 15.8. ACTION BY THE BANKS, CONSENTS, AMENDMENTS, WAIVERS, ETC.
Any action to be taken (including the giving of notice) may be taken, any
consent or approval required or permitted by this Agreement or any other Loan
Document to be given by the Banks may be given, any term of this Agreement, any
other Loan Document or any other instrument, document or agreement related to
this Agreement or the other Loan Documents or mentioned therein may be amended,
and the performance or observance by the Borrower or any other Person of any of
the terms thereof and any Default or Event of Default (as defined in any of the
above-referenced documents or instruments) may be waived (either generally or
in a particular instance and either retroactively or prospectively), only with
the written consent of the Majority Banks; provided, however, that no such
consent or amendment which affects the rights, duties or liabilities of the
Administrative Agent or any Issuing Bank shall be effective without the written
consent of the Administrative Agent or such Issuing Bank, as the case may be.
Notwithstanding the foregoing, no amendment, waiver or consent shall do any of
the following unless in writing and signed by ALL of the Banks (a) increase the
principal amount of the Total Commitment (or subject any Bank to any additional
obligations), (b) reduce the principal of or interest on the Notes (including,
without limitation, interest on overdue amounts) or any fees payable hereunder,
(c) postpone any date fixed for any payment in respect
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of principal or interest (including, without limitation, interest on overdue
amounts) on the Notes or any fee hereunder; (d) change the definition of
"Majority Banks" or number of Banks which shall be required for the Banks or
any of them to take any action under the Loan Documents; (e) amend this Section
15.8; (f) change the Commitment Percentage of any Bank, except as permitted
under Section 19 hereof, (g) change the Total Commitment Percentage of any
Bank, or (h) release the Borrower or any Guarantor from its obligations
hereunder (except as expressly set forth herein).
SECTION 16. INDEMNIFICATION. The Borrower agrees to indemnify and hold
harmless the Banks, the Agents, the Issuing Banks, and the Administrative Agent
and their affiliates, as well as the Banks' and the Administrative Agent's and
their affiliates' shareholders, directors, agents, officers, subsidiaries and
affiliates, from and against all damages, losses, settlement payments,
obligations, liabilities, claims, suits, penalties, assessments, citations,
directives, demands, judgments, actions or causes of action, whether
statutorily created or under the common law, and reasonable costs and expenses
incurred, suffered, sustained or required to be paid by an indemnified party by
reason of or resulting from the transactions contemplated hereby, except any of
the foregoing which result from the gross negligence or willful misconduct of
any indemnified party. In any investigation, enforcement matter, proceeding or
litigation, or the preparation therefor, the Banks and the Administrative Agent
shall be entitled to select their own counsel and, in addition to the foregoing
indemnity, the Borrower agrees to pay promptly the reasonable fees and expenses
of such counsel. In the event of the commencement of any such proceeding or
litigation against the Banks or Administrative Agent by third parties, the
Borrower shall be entitled to participate in such proceeding or litigation with
counsel of their choice at their expense, provided that such counsel shall be
reasonably satisfactory to the Banks or Administrative Agent. The covenants of
this Section 16 shall survive payment or satisfaction of payment of amounts
owing with respect to any Note or any other Loan Document and satisfaction of
all the Obligations hereunder, IT BEING THE INTENT OF THE PARTIES HERETO THAT
ALL SUCH INDEMNIFIED PARTIES SHALL BE INDEMNIFIED FOR THEIR ORDINARY SOLE OR
CONTRIBUTORY NEGLIGENCE.
SECTION 17. WITHHOLDING TAXES. The Borrower hereby agrees that:
(a) Any and all payments made by the Borrower hereunder shall be made
free and clear of, and without deduction for, any and all present or future
taxes, levies, fees, duties, imposts, deductions, charges or withholdings
of any nature whatsoever, excluding, in the case of the Administrative
Agent or the Banks or any holder of the Notes, (i) taxes imposed on, or
measured by, its net income or profits, (ii) franchise taxes imposed on it,
(iii) taxes imposed by any jurisdiction as a direct
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consequence of it, or any of its affiliates, having a present or former
connection with such jurisdiction, including, without limitation, being
organized, existing or qualified to do business, doing business or
maintaining a permanent establishment or office in such jurisdiction, and
(iv) taxes imposed by reason of its failure to comply with any applicable
certification, identification, information, documentation or other
reporting requirement (all such non-excluded taxes being hereinafter
referred to as "Indemnifiable Taxes"). In the event that any withholding
or deduction from any payment to be made by the Borrower hereunder is
required in respect of any Indemnifiable Taxes pursuant to any applicable
law, or governmental rule or regulation, then the Borrower will (i) direct
to the relevant taxing authority the full amount required to be so withheld
or deducted, (ii) forward to the Administrative Agent for delivery to the
applicable Bank an official receipt or other documentation satisfactory to
the Administrative Agent and the applicable Bank evidencing such payment to
such taxing authority, and (iii) direct to the Administrative Agent for the
account of the relevant Banks such additional amount or amounts as is
necessary to ensure that the net amount actually received by each relevant
Bank will equal the full amount such Bank would have received had no such
withholding or deduction (including any Indemnifiable Taxes on such
additional amounts) been required. Moreover, if any Indemnifiable Taxes
are directly asserted against the Administrative Agent or any Bank with
respect to any payment received by the Administrative Agent or such Bank by
reason of the Borrower's failure to properly deduct and withhold such
Indemnifiable Taxes from such payment, the Administrative Agent or such
Bank may pay such Indemnifiable Taxes and the Borrower will promptly pay
all such additional amounts (including any penalties, interest or
reasonable expenses) as is necessary in order that the net amount received
by such Person after the payment of such Indemnifiable Taxes (including any
Indemnifiable Taxes on such additional amount) shall equal the amount such
Person would have received had not such Indemnifiable Taxes been asserted.
Any such payment shall be made promptly after the receipt by the Borrower
from the Administrative Agent or such Bank, as the case may be, of a
written statement setting forth in reasonable detail the amount of the
Indemnifiable Taxes and the basis of the claim.
(b) The Borrower shall pay any present or future stamp or documentary
taxes or any other excise or any other similar levies which arise from any
payment made hereunder or from the execution, delivery or registration of,
or otherwise with respect to, this Agreement or any other Loan Document
("Other Taxes").
(c) The Borrower hereby indemnify and holds harmless the
Administrative Agent and each Bank for the full amount of Indemnifiable
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Taxes or Other Taxes (including, without limitation, any Indemnifiable
Taxes or Other Taxes imposed on amounts payable under this Section 17) paid
by the Administrative Agent or such Bank, as the case may be, and any
liability (including penalties, interest and reasonable expenses) arising
therefrom or with respect thereto, by reason of the Borrower's failure to
properly deduct and withhold Indemnifiable Taxes pursuant to paragraph (a)
above or to properly pay Other Taxes pursuant to paragraph (b) above. Any
indemnification payment from the Borrower under the preceding sentence
shall be made promptly after receipt by the Borrower from the
Administrative Agent or Bank of a written statement setting forth in
reasonable detail the amount of such Indemnifiable Taxes or such Other
Taxes, as the case may be, and the basis of the claim.
(d) If the Borrower pays any amount under this Section 17 to the
Administrative Agent or any Bank and such payee knowingly receives a refund
of any taxes with respect to which such amount was paid, the Administrative
Agent or such Bank, as the case may be, shall pay to the Borrower the
amount of such refund promptly following the receipt thereof by such payee.
(e) In the event any taxing authority notifies any of the Borrower
that any of them has improperly failed to deduct or withhold any taxes
(other than Indemnifiable Taxes) from a payment made hereunder to the
Administrative Agent or any Bank, the Borrower shall timely and fully pay
such taxes to such taxing authority.
(f) The Administrative Agent or the Banks shall, upon the request of
the Borrower, take reasonable measures to avoid or mitigate the amount of
Indemnifiable Taxes required to be deducted or withheld from any payment
made hereunder if such measures can be taken without such Person in its
sole judgment suffering any legal, regulatory or economic disadvantage.
(g) Without prejudice to the survival of any other agreement of the
parties hereunder, the agreements and obligations of the Borrower contained
in this Section 17 shall survive the payment in full of the Obligations.
SECTION 18. SURVIVAL OF COVENANTS, ETC. Unless otherwise stated herein,
all covenants, agreements, representations and warranties made herein, in the
other Loan Documents or in any documents or other papers delivered by or on
behalf of the Borrower or any Guarantor pursuant hereto shall be deemed to have
been relied upon by the Banks, the Issuing Banks and the Administrative Agent,
notwithstanding any investigation heretofore or hereafter made by them, and
shall survive the making by the Banks of the Loans and the issuance, extension
or renewal of any Letters of Credit by any Issuing Bank, as
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herein contemplated, and shall continue in full force and effect so long as any
amount due under this Agreement, any Obligation, any Letter of Credit or any
Note remains outstanding and unpaid or any Bank has any obligation to make any
Loans or any Issuing Bank has any obligation to issue, extend, or renew any
Letters of Credit hereunder. All statements contained in any certificate or
other paper delivered by or on behalf of the Borrower pursuant hereto or in
connection with the transactions contemplated hereby shall constitute
representations and warranties by the Borrower hereunder.
SECTION 19. ASSIGNMENT AND PARTICIPATION. It is understood and agreed
that each Bank shall have the right to assign at any time all or a portion of
its Commitment Percentage and interests in the risk relating to the Loans,
outstanding Letters of Credit and its Commitment hereunder in an amount equal
to or greater than $5,000,000 to additional banks or other financial
institutions with the prior written approval of the Administrative Agent and,
so long as no Event of Default has occurred and is continuing, the Borrower,
which approvals shall not be unreasonably withheld. Any Bank may at any time,
and from time to time, assign to any branch, lending office, or affiliate or
such Bank all or any part of its rights and obligations under the Loan
Documents by notice to the Administrative Agent and the Borrower. It is
further agreed that each bank or other financial institution which executes and
delivers to the Administrative Agent and the Borrower hereunder an Assignment
and Acceptance substantially in the form of Exhibit G hereto (an "Assignment
and Acceptance") together with an assignment fee in the amount of $2,500
payable by the assigning Bank to the Administrative Agent, shall, on the date
specified in such Assignment and Acceptance, become a party to this Agreement
and the other Loan Documents for all purposes of this Agreement and the other
Loan Documents, and its portion of the Commitment, the Loans and Letters of
Credit shall be as set forth in such Assignment and Acceptance. The Bank
assignor thereunder shall, to the extent that rights and obligations hereunder
have been assigned by it pursuant to such Assignment and Acceptance, relinquish
its rights and be released from its obligations under this Agreement and the
other Loan Documents. Upon the execution and delivery of such Assignment and
Acceptance, (a) the Borrower shall issue to the assignee bank or other
financial institution Notes in the amount of such bank's or other financial
institution's Commitment dated the date of the assignment or such other date as
may be specified by the Administrative Agent, and otherwise completed in
substantially the form of Exhibits A or B, and to the extent any assigning Bank
has retained a portion of its obligations hereunder, a replacement Syndicated
Note, to the assigning Bank reflecting its assignment; (b) to the extent
applicable, the Borrower shall issue a Competitive Bid Note in substantially
the form of Exhibit C (and a replacement Competitive Bid Note) or the
Administrative Agent shall make appropriate entries on the Competitive Bid Loan
Accounts to reflect such assignment of Competitive Bid Loan(s); (c) the
Administrative Agent shall distribute to the Borrower, the Banks and such bank
or financial
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institution a schedule reflecting such changes; and (d) this Agreement shall be
deemed to be appropriately amended to reflect (i) the status of the bank or
financial institution as a party hereto and (ii) the status and rights of the
Banks hereunder.
Each Bank shall also have the right to grant participations to one or more
banks or other financial institutions in its Commitment, the Loans and
outstanding Letters of Credit. The documents evidencing any such participation
shall limit such participating bank's or financial institution's voting rights
with respect to this Agreement to the matters set forth in Section 15.8 which
require the approval of all Banks.
Notwithstanding the foregoing, no assignment or participation shall operate
to increase the Total Commitment hereunder or otherwise alter the substantive
terms of this Agreement, and no Bank which retains a Commitment hereunder shall
have a Commitment of less than $10,000,000, as such amount may be reduced upon
reductions in the Total Commitment pursuant to Section 2.3 hereof.
Anything contained in this Section 19 to the contrary notwithstanding, any
Bank may at any time pledge all or any portion of its interest and rights under
this Agreement (including all or any portion of its Notes) to any of the twelve
Federal Reserve Banks organized under Section 4 of the Federal Reserve Act, 12
U.S.C. Section 341. No such pledge or the enforcement thereof shall release
the pledgor Bank from its obligations hereunder or under any of the other Loan
Documents.
SECTION 20. PARTIES IN INTEREST. All the terms of this Agreement and
the other Loan Documents shall be binding upon and inure to the benefit of and
be enforceable by the respective successors and assigns of the parties hereto
and thereto; provided, that the Borrower shall not assign or transfer its
rights or obligations hereunder or thereunder without the prior written consent
of each of the Banks.
SECTION 21. NOTICES, ETC. Except as otherwise expressly provided in
this Agreement, all notices and other communications made or required to be
given pursuant to this Agreement or the other Loan Documents shall be in
writing and shall be delivered in hand, mailed by United States first class
mail, postage prepaid, or sent by telegraph, telex or facsimile and confirmed
by letter, addressed as follows:
(a) if to the Borrower or the Guarantors, at 1001 Fannin Street, First
City Tower, Suite 4000, Houston, Texas 77002, Attention: Earl E. DeFrates,
facsimile number (713) 209-9710; or
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(b) if to BOA, at Bank of America National Trust and Savings
Association, 231 South LaSalle Street, Chicago, Illinois 60697, Attention:
Robert P. Rospierski, Vice President, facsimile number (312) 828-1974; or
(c) if to MGT, J.P. Morgan Securities Inc. or the Administrative Agent
at Morgan Guaranty Trust Company of New York, 60 Wall Street, New York, New
York 10260-0060, facsimile number (212) 648-5336; or
(d) if to any Bank, at the address set forth next to such Bank's name
on Schedule 1 hereto;
or such other address for notice as shall have last been furnished in writing
to the Person giving the notice.
Any such notice or demand shall be deemed to have been duly given or made
and to have become effective (a) if delivered by hand to a responsible officer
of the party to which it is directed, at the time of the receipt thereof by
such officer, (b) if sent by registered or certified first-class mail, postage
prepaid, five Business Days after the posting thereof, and (c) if sent by
telex, facsimile, or cable, at the time of the dispatch thereof, if in normal
business hours in the country of receipt, or otherwise at the opening of
business on the following Business Day.
SECTION 22. MISCELLANEOUS. The rights and remedies herein expressed are
cumulative and not exclusive of any other rights which the Banks, the Issuing
Banks or the Administrative Agent would otherwise have. The captions in this
Agreement are for convenience of reference only and shall not define or limit
the provisions hereof. This Agreement and any amendment hereof may be executed
in several counterparts and by each party on a separate counterpart, each of
which when so executed and delivered shall be an original, but all of which
together shall constitute one instrument. In proving this Agreement it shall
not be necessary to produce or account for more than one such counterpart
signed by the party against whom enforcement is sought.
SECTION 23. CONSENTS, ETC. Neither this Agreement nor any term hereof
may be changed, waived, discharged or terminated, except as provided in this
Section 23, subject to the provisions of Section 15.8. No waiver shall extend
to or affect any obligation not expressly waived or impair any right consequent
thereon. Except as otherwise expressly provided in this Agreement, any consent
or approval required or permitted by this Agreement to be given by the Banks
may be given, and any term of this Agreement or of any other instrument related
hereto or mentioned herein may be amended, and the performance or observance by
the Borrower of any terms of this Agreement or such other instrument or the
continuance of any Default or Event of Default may be waived (either generally
or in a particular instance and either retroactively or prospectively) with,
but only with, the written consent of the Borrower and the Majority Banks. To
the
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extent permitted by law, no course of dealing or delay or omission on the part
of any of the Banks, the Issuing Banks or the Administrative Agent in
exercising any right shall operate as a waiver thereof or otherwise be
prejudicial thereto. No notice to or demand upon the Borrower shall entitle
the Borrower to other or further notice or demand in similar or other
circumstances.
SECTION 24. WAIVER OF JURY TRIAL. TO THE EXTENT PERMITTED BY APPLICABLE
LAW, EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO
A JURY TRIAL WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN
CONNECTION WITH THIS AGREEMENT, THE NOTES OR ANY OF THE OTHER LOAN DOCUMENTS,
ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THEREUNDER OR THE PERFORMANCE OF SUCH
RIGHTS AND OBLIGATIONS. EXCEPT AS PROHIBITED BY LAW, THE BORROWER AND THE
GUARANTORS HEREBY WAIVE ANY RIGHT ANY OF THEM MAY HAVE TO CLAIM OR RECOVER IN
ANY LITIGATION REFERRED TO IN THE PRECEDING SENTENCE ANY SPECIAL, EXEMPLARY,
PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN, OR IN ADDITION TO,
ACTUAL DAMAGES. THE BORROWER AND EACH OF THE GUARANTORS EACH (A) CERTIFIES
THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY BANK, ANY ISSUING BANK, THE
ADMINISTRATIVE AGENT OR ANY AGENT HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT
SUCH BANK, SUCH ISSUING BANK, THE ADMINISTRATIVE AGENT OR SUCH AGENT WOULD NOT,
IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS AND (B)
ACKNOWLEDGES THAT THE ADMINISTRATIVE AGENT, THE BANKS, AND THE ISSUING BANKS
HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS
BECAUSE OF, AMONG OTHER THINGS, THE BORROWER'S AND THE GUARANTORS' WAIVERS AND
CERTIFICATIONS CONTAINED HEREIN.
SECTION 25. GOVERNING LAW; SUBMISSION TO JURISDICTION. THIS AGREEMENT
AND EACH OF THE OTHER LOAN DOCUMENTS ARE CONTRACTS UNDER THE LAWS OF THE STATE
OF NEW YORK AND SHALL FOR ALL PURPOSES BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF SAID STATE (EXCLUDING THE LAWS APPLICABLE TO CONFLICTS
OR CHOICE OF LAW OTHER THAN GENERAL OBLIGATIONS LAW Section 5-1401). THE
BORROWER AND THE GUARANTORS CONSENT TO THE JURISDICTION OF THE UNITED STATES
DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND OF ANY NEW YORK STATE
COURT SITTING IN THE CITY OF NEW YORK IN CONNECTION WITH ANY SUIT TO ENFORCE
THE RIGHTS OF THE BANKS, THE ISSUING BANKS OR THE ADMINISTRATIVE AGENT UNDER
THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS. THE BORROWER AND EACH OF
THE GUARANTORS EACH IRREVOCABLY
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WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW
OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN
SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS
BEEN BROUGHT IN AN INCONVENIENT FORUM.
SECTION 26. SEVERABILITY. The provisions of this Agreement are
severable and if any one clause or provision hereof shall be held invalid or
unenforceable in whole or in part in any jurisdiction, then such invalidity or
unenforceability shall affect only such clause or provision, or part thereof,
in such jurisdiction, and shall not in any manner affect such clause or
provision in any other jurisdiction, or any other clause or provision of this
Agreement in any jurisdiction.
SECTION 27. GUARANTY.
SECTION 27.1. GUARANTY. For value received and hereby acknowledged and
as an inducement to the Banks and the Issuing Banks to make the Loans available
to the Borrower, and issue, extend or renew Letters of Credit for the account
of the Borrower, the Guarantors each hereby unconditionally and irrevocably
guarantee (a) the full punctual payment when due, whether at stated maturity,
by acceleration or otherwise, of all Obligations of the Borrower now or
hereafter existing whether for principal, interest, fees, expenses or
otherwise, and (b) the strict performance and observance by the Borrower of all
agreements, warranties and covenants applicable to the Borrower in the Loan
Documents and (c) the obligations of the Borrower under the Loan Documents
(such Obligations collectively being hereafter referred to as the "Guaranteed
Obligations").
SECTION 27.2. GUARANTY ABSOLUTE. Each of the Guarantors guarantees that
the Guaranteed Obligations will be paid strictly in accordance with the terms
hereof, regardless of any law, regulation or order now or hereafter in effect
in any jurisdiction affecting any of such terms or the rights of any Bank, any
Issuing Bank or the Administrative Agent with respect thereto. The liability
of the Guarantors under the guaranty granted under this Agreement with regard
to the Guaranteed Obligations shall be absolute and unconditional irrespective
of:
(a) any change in the time, manner or place of payment of, or in any
other term of, all or any of its Guaranteed Obligations or any other
amendment or waiver of or any consent to departure from this Agreement or
any other Loan Document (with regard to such Guaranteed Obligations);
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(b) any release or amendment or waiver of or consent to departure from
any other guaranty for all or any of its Guaranteed Obligations;
(c) any change in ownership of the Borrower;
(d) any acceptance of any partial payment(s) from the Borrower or the
other Guarantor; or
(e) any other circumstance which might otherwise constitute a defense
available to, or a discharge of, any of the Borrower in respect of its
Obligations under any Loan Document.
The guaranty under this Agreement shall continue to be effective or be
reinstated, as the case may be, if at any time any payment of any Guaranteed
Obligation is rescinded or must otherwise be returned by the Banks, the Issuing
Banks or the Administrative Agent upon the insolvency, bankruptcy or
reorganization of the Borrower or otherwise, all as though such payment had not
been made.
SECTION 27.3. EFFECTIVENESS; ENFORCEMENT. The guaranty under this
Agreement shall be effective and shall be deemed to be made with respect to
each Loan and each Letter of Credit as of the time it is made, issued or
extended, or becomes a Letter of Credit under this Agreement, as applicable.
No invalidity, irregularity or unenforceability by reason of any bankruptcy or
similar law, or any law or order of any government or agency thereof purporting
to reduce, amend or otherwise affect any liability of the Borrower, and no
defect in or insufficiency or want of powers of the Borrower or irregular or
improperly recorded exercise thereof, shall impair, affect, be a defense to or
claim against such guaranty. The guaranty under this Agreement is a continuing
guaranty and shall (a) survive any termination of this Agreement, and (b)
remain in full force and effect until payment in full of, and performance of,
all Guaranteed Obligations and all other amounts payable under this Agreement.
Notwithstanding anything set forth in this Section 27 to the contrary, (x)
Sanifill shall be released from its guaranty obligations upon the satisfaction
(as determined in the Administrative Agent's judgment and evidenced by a
release executed by the Administrative Agent) of the Prudential Private
Placement Debt and the Sanifill Convertible Subordinated Debt, and (y) United
shall be released from its guaranty obligations upon the satisfaction (as
determined in the Administrative Agent's judgment and evidenced by a release
executed by the Administrative Agent) of the United Indenture and the United
Senior Secured Notes. The guaranty under this Agreement is made for the
benefit of the Administrative Agent, the Issuing Banks and the Banks and their
successors and assigns, and may be enforced from time to time as often as
occasion therefor may arise and without requirement on the part of the
Administrative Agent, the Issuing Banks
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or the Banks first to exercise any rights against the Borrower, or to resort to
any other source or means of obtaining payment of any of the said obligations
or to elect any other remedy.
SECTION 27.4. WAIVER. Except as otherwise specifically provided in any
of the Loan Documents, each of the Guarantors hereby waives promptness,
diligence, protest, notice of protest, all suretyship defenses, notice of
acceptance and any other notice with respect to any of its Guaranteed
Obligations and the guaranty under this Agreement and any requirement that the
Banks, the Issuing Banks or the Administrative Agent protect, secure, perfect
any security interest or lien or any property subject thereto or exhaust any
right or take any action against the Borrower or any other Person. Each of the
Guarantors also irrevocably waives, to the fullest extent permitted by law, all
defenses which at any time may be available to it in respect of its Guaranteed
Obligations by virtue of any statute of limitations, valuation, stay,
moratorium law or other similar law now or hereafter in effect.
SECTION 27.5. EXPENSES. Each of the Guarantors hereby promises to
reimburse (a) the Administrative Agent for all reasonable out-of-pocket fees
and disbursements (including all reasonable attorneys' fees), incurred or
expended in connection with the preparation, filing or recording, or
interpretation of the guaranty under this Agreement, the other Loan Documents
to which such Guarantor is a party, or any amendment, modification, approval,
consent or waiver hereof or thereof, and (b) the Administrative Agent, the
Issuing Banks and the Banks and their respective affiliates for all reasonable
out-of-pocket fees and disbursements (including reasonable attorneys' fees),
incurred or expended in connection with the enforcement of its Guaranteed
Obligations (whether or not legal proceedings are instituted). The Guarantors
will pay any taxes (including any interest and penalties in respect thereof)
other than the Banks' taxes based on overall income or profits, payable on or
with respect to the transactions contemplated by the guaranty under this
Agreement, each of the Guarantors hereby agreeing jointly and severally to
indemnify each Bank with respect thereto.
SECTION 27.6. CONCERNING JOINT AND SEVERAL LIABILITY OF THE GUARANTORS.
(a) Each of the Guarantors hereby irrevocably and unconditionally
accepts, not merely as a surety but also as a co-debtor, joint and several
liability with the Borrower, with respect to the payment and performance of
all of its Guaranteed Obligations (including, without limitation, any
Guaranteed Obligations arising under this Section 27), it being the
intention of the parties hereto that all such Guaranteed Obligations shall
be the joint and several Guaranteed Obligations of such Guarantor and the
Borrower without preferences or distinction among them.
<PAGE> 93
-87-
(b) If and to the extent that the Borrower shall fail to make any
payment with respect to any of its Guaranteed Obligations as and when due
or to perform any of its Guaranteed Obligations in accordance with the
terms thereof, then in each such event the applicable Guarantor will make
such payment with respect to, or perform, such Guaranteed Obligation.
(c) The Guaranteed Obligations of each Guarantor under the provisions
of this Section 27 constitute full recourse obligations of such Guarantor
enforceable against such Guarantor to the full extent of its properties and
assets, irrespective of the validity, regularity or enforceability of this
Agreement or any other circumstance whatsoever.
(d) Except as otherwise expressly provided in this Agreement, each of
the Guarantors hereby waives notice of acceptance of its joint and several
liability, notice of any Loans made, or Letters of Credit issued under this
Agreement, notice of any action at any time taken or omitted by the
Administrative Agent, the Issuing Banks or the Banks under or in respect of
any of the Guaranteed Obligations, and, generally, to the extent permitted
by applicable law, all demands, notices and other formalities of every kind
in connection with this Agreement. Each of the Guarantors hereby assents
to, and waives notice of, any extension or postponement of the time for the
payment of any of the Guaranteed Obligations, the acceptance of any payment
of any of the Guaranteed Obligations, the acceptance of any partial payment
thereon, any waiver, consent or other action or acquiescence by the
Administrative Agent, the Issuing Banks or the Banks at any time or times
in respect of any Default or Event of Default by the Borrower or the
Guarantors in the performance or satisfaction of any term, covenant,
condition or provision of this Agreement or any other Loan Document, any
and all other indulgences whatsoever by the Administrative Agent, the
Issuing Banks or the Banks in respect of any of the Guaranteed Obligations,
and the taking, addition, substitution or release, in whole or in part, at
any time or times, of any security for any of the Guaranteed Obligations or
the addition, substitution or release, in whole or in part, of the Borrower
or any Guarantor. Without limiting the generality of the foregoing, each
of the Guarantors assents to any other action or delay in acting or failure
to act on the part of the Banks, the Issuing Banks or the Administrative
Agent with respect to the failure by the Borrower or any Guarantor to
comply with its respective Obligations or Guaranteed Obligations,
including, without limitation, any failure strictly or diligently to assert
any right or to pursue any remedy or to comply fully with applicable laws
or regulations thereunder, which might, but for the provisions of this
Section 27, afford grounds for terminating, discharging or relieving the
Guarantors, in whole or in part, from any of the Guaranteed Obligations
under this
<PAGE> 94
-88-
Section 27, it being the intention of the Guarantors that, so long as any
of the Guaranteed Obligations hereunder remain unsatisfied, the Guaranteed
Obligations of each of the Guarantors under this Section 27 shall not be
discharged except by performance and then only to the extent of such
performance. The Guaranteed Obligations of each of the Guarantors under
this Section 27 shall not be diminished or rendered unenforceable by any
winding up, reorganization, arrangement, liquidation, reconstruction or
similar proceeding with respect to the Borrower or any of the Guarantors or
the Banks, the Issuing Banks or the Administrative Agent. The joint and
several liability of each of the Guarantors hereunder shall continue in
full force and effect notwithstanding any absorption, merger,
consolidation, amalgamation or any other change whatsoever in the name,
membership, constitution or place of formation of the Borrower or the
Guarantors, the Banks, the Issuing Banks or the Administrative Agent.
(e) The Guarantors shall be liable under the Guaranty under this
Section 27 only for the maximum amount of such liabilities that can be
incurred under applicable law without rendering this Agreement, as it
relates to the guaranty under this Section 27, voidable under applicable
law relating to fraudulent conveyance and fraudulent transfer, and not for
any greater amount. Accordingly, if any obligation under any provision of
the guaranty under this Section 27 shall be declared to be invalid or
unenforceable in any respect or to any extent, it is the stated intention
and agreement of the Guarantors, the Administrative Agent, the Issuing
Banks and the Banks that any balance of the obligation created by such
provision and all other obligations of the Guarantors under this Section 27
to the Banks, the Issuing Banks or the Administrative Agent shall remain
valid and enforceable, and that all sums not in excess of those permitted
under applicable law shall remain fully collectible by the Banks, the
Issuing Banks and the Administrative Agent from the Borrower or the
Guarantors, as the case may be.
(f) The provisions of this Section 27 are made for the benefit of the
Administrative Agent, the Issuing Banks and the Banks and their successors
and assigns, and may be enforced in good faith by them from time to time
against the Guarantors as often as occasion therefor may arise and without
requirement on the part of the Administrative Agent, the Issuing Banks or
the Banks first to marshal any of their claims or to exercise any of their
rights against the Borrower or the Guarantors or to exhaust any remedies
available to them against the Borrower or the Guarantors or to resort to
any other source or means of obtaining payment of any of the obligations
hereunder or to elect any other remedy. The provisions of this Section 27
shall remain in effect until all of the Guaranteed Obligations shall have
been paid in full or otherwise fully satisfied and the Commitments have
expired and all outstanding Letters of Credit have
<PAGE> 95
-89-
expired, matured or otherwise been terminated. If at any time, any
payment, or any part thereof, made in respect of any of the Guaranteed
Obligations, is rescinded or must otherwise be restored or returned by the
Banks, the Issuing Banks or the Administrative Agent upon the insolvency,
bankruptcy or reorganization of the Borrower or any of the Guarantors, or
otherwise, the provisions of this Section 27 will forthwith be reinstated
in effect, as though such payment had not been made.
SECTION 27.7. WAIVER. Until the final payment and performance in full
of all of the Obligations, neither of the Guarantors shall exercise and each of
the Guarantors hereby waives any rights such Guarantor may have against the
Borrower or the other Guarantor arising as a result of payment by such
Guarantor hereunder, by way of subrogation, reimbursement, restitution,
contribution or otherwise, and will not prove any claim in competition with the
Administrative Agent, the Issuing Banks or any Bank in respect of any payment
hereunder in any bankruptcy, insolvency or reorganization case or proceedings
of any nature; such Guarantor will not claim any setoff, recoupment or
counterclaim against the Borrower or the other Guarantor in respect of any
liability of the Borrower to such Guarantor; and such Guarantor waives any
benefit of and any right to participate in any collateral security which may be
held by the Administrative Agent, the Issuing Banks or any Bank.
SECTION 27.8. SUBROGATION; SUBORDINATION. The payment of any amounts
due with respect to any indebtedness of the Borrower for money borrowed or
credit received now or hereafter owed to either of the Guarantors is hereby
subordinated to the prior payment in full of all of the Obligations. Each of
the Guarantors agrees that, after the occurrence of any default in the payment
or performance of any of the Obligations, such Guarantor will not demand, sue
for or otherwise attempt to collect any such indebtedness of the Borrower or
the other Guarantor to such Guarantor until all of the Obligations shall have
been paid in full. If, notwithstanding the foregoing sentence, either of the
Guarantors shall collect, enforce or receive any amounts in respect of such
indebtedness while any Obligations are still outstanding, such amounts shall be
collected, enforced and received by such Guarantor as trustee for the Banks,
the Issuing Banks and the Administrative Agent and be paid over to the
Administrative Agent at Default, for the benefit of the Banks, the Issuing
Banks, and the Administrative Agent on account of the Obligations without
affecting in any manner the liability of such Guarantor under the other
provisions hereof.
28 PARI PASSU TREATMENT.
(a) Notwithstanding anything to the contrary set forth herein, each
payment or prepayment of principal and interest received after the
occurrence of an Event of Default hereunder shall be distributed pari
<PAGE> 96
-90-
passu among the Banks, in accordance with the aggregate outstanding
principal amount of the Obligations owing to each Bank divided by the
aggregate outstanding principal amount of all Obligations.
(b) Following the occurrence and during the continuance of any Event
of Default, each Bank agrees that if it shall, through the exercise of a
right of banker's lien, setoff or counterclaim against any Borrower
(pursuant to Section 13 or otherwise), including a secured claim under
Section 506 of the Bankruptcy Code or other security or interest arising
from or in lieu of, such secured claim, received by such Bank under any
applicable bankruptcy, insolvency or other similar law or otherwise, obtain
payment (voluntary or involuntary) in respect of the Notes, Loans,
Reimbursement Obligations and other Obligations held by it (other than
pursuant to Section 5.5, Section 5.6 or Section 5.8) as a result of which
the unpaid principal portion of the Notes and the Obligations held by it
shall be proportionately less than the unpaid principal portion of the
Notes and Obligations held by any other Bank, it shall be deemed to have
simultaneously purchased from such other Bank a participation in the Notes
and Obligations held by such other Bank, so that the aggregate unpaid
principal amount of the Notes, Obligations and participations in Notes and
Obligations held by each Bank shall be in the same proportion to the
aggregate unpaid principal amount of the Notes and Obligations then
outstanding as the principal amount of the Notes and other Obligations held
by it prior to such exercise of banker's lien, setoff or counterclaim was
to the principal amount of all Notes and other Obligations outstanding
prior to such exercise of banker's lien, setoff or counterclaim; provided,
however, that if any such purchase or purchases or adjustments shall be
made pursuant to this Section 28 and the payment giving rise thereto shall
thereafter be recovered, such purchase or purchases or adjustments shall be
rescinded to the extent of such recovery and the purchase price or prices
or adjustments restored without interest. The Borrower expressly consents
to the foregoing arrangements and agrees that any Person holding such a
participation in the Notes and the Obligations deemed to have been so
purchased may exercise any and all rights of banker's lien, setoff or
counterclaim with respect to any and all moneys owing by the Borrower to
such Person as fully as if such Person had made a Loan directly to the
Borrower in the amount of such participation.
SECTION 29. FINAL AGREEMENT. THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES.
<PAGE> 97
-91-
IN WITNESS WHEREOF, the undersigned have duly executed this Agreement under
seal as of the date first set forth above.
THE BORROWER AND GUARANTORS:
USA WASTE SERVICES, INC.
By: /s/ EARL E. DEFRATES
---------------------------------
Earl E. DeFrates
Executive Vice President and CFO
SANIFILL, INC.
By: /s/ EARL E DEFRATES
---------------------------------
Earl E. DeFrates
Executive Vice President and CFO
THE BANKS AND AGENTS:
MORGAN GUARANTY TRUST COMPANY OF NEW
YORK, individually and as Administrative
Agent
By: /s/ CHRISTOPHER C. KUNHARDT
-----------------------------------
Name: Christopher C. Kunhardt
Title: Vice President
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION
By: /s/ ROBERT P. ROSPIERSKI
-----------------------------------
Name: Robert P. Rospierski
Title: Vice President
<PAGE> 98
-92-
ABN AMRO BANK, N.A.
By: /s/ LAURIE C. TUZO
-----------------------------------
Name: Laurie C. Tuzo
Title: Vice President
By: /s/ LILA JORDAN
-----------------------------------
Name: Lila Jordan
Title: Vice President
BANCA COMMERCIALE ITALIANA, LOS ANGELES
FOREIGN BRANCH
By: /s/ RICHARD E. IWANICKI
---------------------------------
Name: Richard E. Iwanicki
Title: Vice President
By: /s/ E. BOMBIERI
---------------------------------
Name: E. Bombieri
Title: Vice President & Manager
BANK AUSTRIA
AKTIENGESELLSCHAFT
By: /s/ JOSEPH A. STEINER
-----------------------------------
Name: Joseph A. Steiner
Title: Senior Vice President
BANK AUSTRIA
By: /s/ JEANINE BALL
-----------------------------------
Name: Jeanine Ball
Title: Assistant Vice President
BANK AUSTRIA
<PAGE> 99
-93-
BANKBOSTON, N.A.
By: /s/ ARTHUR J. OBERHEIM
---------------------------------------
Name: Arthur J. Oberheim
Title: Vice President
BANK OF MONTREAL
By: /s/ ANGELO A. BARONE
---------------------------------------
Name: Angelo A. Barone
Title: Director
BANQUE NATIONALE DE PARIS
By: /s/ JOHN L. STACY
---------------------------------------
Name: John L. Stacy
Title: Vice President
WELLS FARGO BANK (TEXAS),
NATIONAL ASSOCIATION
By: /s/ CHRISTOPHER A. KING
---------------------------------------
Name: Christopher A. King
Title: Assistant Vice President
THE BANK OF NOVA SCOTIA
By: /s/ F.C.H. ASHBY
---------------------------------------
Name: F.C.H. Ashby
Title: Senior Manager Loan Operations
THE BANK OF TOKYO-MITSUBISHI, LTD.
By: /s/ J. MEARNS
---------------------------------------
Name: J. Mearns
Title: VP & Manager
<PAGE> 100
-94-
BANK ONE, TEXAS
By: /s/ SCOTT RHEA
---------------------------------------
Name: Scott Rhea
Title: Vice President
BANQUE PARIBAS
By: /s/ GLENN E. MEALEY
---------------------------------------
Name: Glenn E. Mealey
Title: Vice President
By: /s/ TIMOTHY A. DONNNON
---------------------------------------
Name: Timothy A. Donnon
Title: Regional General Manager
COMERICA BANK
By: /s/ REGINALD M. GOLDSMITH III
---------------------------------------
Reginald M. Goldsmith III
Vice President
CIBC INC.
By: /s/ TIMOTHY E. DOYLE
---------------------------------------
Name: Timothy E. Doyle
Title: Managing Director,
CIBC Wood Gundy
Securities Corp. as Agent
CREDIT LYONNAIS NEW YORK BRANCH
By: /s/ ALAIN PAPIASSE
---------------------------------------
Name: Alain Papiasse
Title: Executive Vice President
<PAGE> 101
-95-
THE DAI-ICHI KANGYO BANK, LTD.
By: /s/ MASAYOSHI KOMAKI
---------------------------------
Name: Masayoshi Komaki
Title: Vice President
DEUTSCHE BANK AG, NEW YORK AND/OR CAYMAN
ISLANDS BRANCHES
By: /s/ JOHN AUGSBURGER
---------------------------------
Name: John Augsburger
Title: Vice President
By: /s/ ROBERT WOOD
---------------------------------
Name: Robert Wood
Title: Director
DG BANK
By: /s/ MARK K. CONNOLLY TREVOR H. BROOKES
-----------------------------------
Name: Mark K. Connolly Trevor H. Brookes
Title: Vice President Assistant Vice
President
THE FIRST NATIONAL BANK OF MARYLAND
By: /s/ ANDREW W. FISH
-----------------------------------
Name: Andrew W. Fish
Title: Vice President
<PAGE> 102
-96-
FLEET BANK, N.A.
By: /s/ CHRISTOPHER MAYROSE
---------------------------------------
Name: Christopher Mayrose
Title: Vice President
THE FUJI BANK, LIMITED, HOUSTON AGENCY
By: /s/ P.C. LAUINGER III
---------------------------------------
Name: Philip C. Lauinger III
Title: Vice President & Manager
HIBERNIA NATIONAL BANK
By: /s/ TROY J. VILLAFARRA
---------------------------------------
Name: Troy J. Villafarra
Title: Vice President
THE INDUSTRIAL BANK OF JAPAN
TRUST COMPANY
By: /s/ KAZUTHOSHI KUWAHARA
---------------------------------------
Name: Kazuthoshi Kuwahara
Title: Executive Vice President
THE INDUSTRIAL BANK OF JAPAN,
LIMITED, HOUSTON OFFICE
(AUTHORIZED REPRESENTATIVE)
KREDIETBANK, N.V.
By: /s/ ROBERT SNAUFFER
---------------------------------------
Name: Robert Snauffer
Title: Vice President
By: /s/ [ILLEGIBLE]
---------------------------------------
Name:
Title: Vice President
<PAGE> 103
-97-
THE MITSUBISHI TRUST AND BANKING
CORPORATION
By: /s/ MASAAKI YAMAGISHI
---------------------------------------
Name: Masaaki Yamagishi
Title: Chief Manager
PNC BANK, NATIONAL ASSOCIATION
By: /s/ PHILIP K. LIEBSCHER
---------------------------------------
Name: Philip K. Liebscher
Title: Vice President
ROYAL BANK OF CANADA
By: /s/ GORDON MACARTHUR
---------------------------------------
Name: Gordon MacArthur
Title: Manager
THE SANWA BANK LIMITED
By: /s/ TORU SAKAMURO
---------------------------------------
Name: Toru Sakamuro
Title: Vice President
THE SUMITOMO BANK, LIMITED
By: /s/ HARUMITSU SEKI
---------------------------------------
Name: Harumitsu Seki
Title: General Manager
<PAGE> 104
-98-
SUNTRUST BANK, ATLANTA
By: /s/ TRISHA E. HARDY
---------------------------------------
Name: Trisha E. Hardy
Title: Corporate Banking Officer
By: /s/ JOHN A. FIELDS, JR.
---------------------------------------
Name: John A. Fields, Jr.
Title: Vice President
TEXAS COMMERCE BANK, NATIONAL ASSOCIATION
By: /s/ MICHAEL ONDRUCH
---------------------------------------
Name: Michael Ondruch
Title: Vice President
TORONTO DOMINION (TEXAS), INC.
By: /s/ NEVA NESBITT
---------------------------------------
Name: Neva Nesbitt
Title: Vice President
WACHOVIA BANK, N.A.
By: /s/ DAVID K. ALEXANDER
---------------------------------------
Name: David K. Alexander
Title: Senior Vice President
WESTDEUTSCHE LANDESBANK GIROZENTRALE, NEW
YORK BRANCH
By: /s/ RICHARD R. NEWMAN JAMES VENEAU
---------------------------------------
Name: Richard R. Newman James Veneau
Title: Vice President Analyst
<PAGE> 105
-99-
THE BANK OF NEW YORK
By: /s/ ALAN F. LYSTER, JR.
---------------------------------------
Alan F. Lyster, Jr.
Vice President
<PAGE> 1
EXHIBIT 10.2
================================================================================
UNITED WASTE SYSTEMS, INC.
AND
USA WASTE SERVICES, INC.
TO
BANKERS TRUST COMPANY
as Trustee
---------------------
FIRST SUPPLEMENTAL INDENTURE
Dated as of August 26, 1997
---------------------
Supplementing and Amending Indenture Dated as of June 5, 1996
================================================================================
<PAGE> 2
THIS FIRST SUPPLEMENTAL INDENTURE, dated as of August 26, 1997 (the
"Supplemental Indenture"), is by and among United Waste Systems, Inc., a
corporation duly organized and existing under the laws of the State of Delaware
(herein called "United" or the "Company"), having its principal executive
office at Four Greenwich Office Park, Greenwich, Connecticut 06830. USA Waste
Services, Inc., a corporation duly organized and existing under the laws of the
State of Delaware (herein called "USA Waste"), having its principal executive
office at First City Tower, 1001 Fannin Street, Suite 4000, Houston, Texas
77002, and Bankers Trust company, a New York banking association, as Trustee
(herein called the "Trustee").
RECITALS OF UNITED AND USA WASTE
United has executed and delivered to the Trustee its Indenture, dated
as of June 5, 1996 (herein called the "Indenture"), to provide for the issuance
of $150,000,000 aggregate principal amount of its 4-1/2% Convertible
Subordinated Notes Due June 1, 2001 (the "Securities").
Pursuant to the Indenture, United has issued Securities in an original
principal amount of $150,000,000, all of which are currently outstanding. No
other securities have been issued pursuant to the Indenture.
Effective as of August 26, 1997 (the "Merger Date"), Riviera
Acquisition Corporation, a Delaware corporation and a wholly-owned subsidiary
of USA Waste, was merged with and into United pursuant to the provisions of the
General Corporation Law of the State of Delaware (the "Merger"), as a result of
which United became a wholly-owned subsidiary of USA Waste.
Each share of common stock of United which was issued and outstanding
immediately prior to the Merger was, by virtue of the Merger and without any
action on the part of the holder thereof, converted into 1.075 shares of the
common stock, par value $0.01 per share, of USA Waste (the "USA Waste Shares").
In connection with the Merger, United and USA Waste, pursuant to
appropriate resolutions of their respective Boards of Directors, have duly
determined to make, execute and deliver to the Trustee this Supplemental
Indenture in order to reflect the results of the Merger as required by the
Indenture.
Pursuant to Section 12.11 of the Indenture, United, as the survivor in
the Merger, is required to execute and deliver to the Trustee an indenture
supplemental to the Indenture in connection with the Merger.
The Indenture provides that, without the consent of any Holders, United
and the Trustee may enter into a supplemental indenture to make provision with
respect to the conversion rights of Holders pursuant to the requirements of
Article Twelve of the Indenture, and United has determined that this
Supplemental Indenture may therefore be entered into without the consent of any
Holder in accordance with Section 8.1(5) of the Indenture.
<PAGE> 3
United and USA Waste have duly authorized the execution and delivery of
this Supplemental Indenture and all things necessary have been done to make
this Supplemental Indenture a valid agreement of United and USA Waste, in
accordance with its terms.
NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE WITNESSETH:
For and in consideration of the premises, it is mutually agreed, for
the equal and proportionate benefit of the respective Holders from time to time
of the Securities, as follows:
ARTICLE ONE
DEFINITIONS
SECTION 101. Indenture Terms.
Capitalized terms used but not defined in this Supplemental Indenture
have the respective meanings assigned to them in the Indenture.
ARTICLE TWO
CONCERNING THE SECURITIES
SECTION 201. Conversion Privilege
The Holder of each Security Outstanding on the date hereof shall have
the right from and after the date hereof, during the period such Security shall
be convertible as specified in Section 12.1 of the Indenture, to convert such
Security only into the number of USA Waste Shares, and cash in lieu of
fractional USA Waste Shares, receivable upon the effectiveness of the Merger by
a holder of the number of shares of Common Stock of the Company into which such
Security might have been converted immediately prior to the Merger, subject to
adjustment as provided in Section 202 below.
SECTION 202. Conversion Price.
The price at which USA Waste Shares shall be delivered upon conversion
of Securities (herein called the "Conversion Price") shall be the price
specified in Section 12.1 of the Indenture, as adjusted in accordance with
Article Twelve of the Indenture prior to the Merger. For events subsequent to
the effective date of this Supplemental Indenture, the Conversion Price shall
be adjusted in a manner as nearly equivalent as may be practical to the
adjustments provided for in Article Twelve of the Indenture.
-2-
<PAGE> 4
ARTICLE THREE
CONCERNING THE TRUSTEE
SECTION 301. Terms and Conditions.
The Trustee accepts this Supplemental Indenture and agrees to perform
the duties of the Trustee upon the terms and conditions herein and in the
Indenture set forth.
SECTION 302. No Responsibility.
The Trustee shall not be responsible in any manner whatsoever for or in
respect of (i) the validity or sufficiency of this Supplemental Indenture, the
authorization or permissibility of this Supplemental Indenture pursuant to the
terms of the Indenture or the due execution thereof by United or USA Waste or
(ii) the recitals herein contained, all such recitals being made by United and
USA Waste. The Trustee shall not be responsible in any manner to determine the
correctness of provisions contained in this Supplemental Indenture relating
either to the kind or amount of securities receivable by Holders of Securities
upon the conversion of their Securities after the Merger or to any adjustment
provided herein.
ARTICLE FOUR
EFFECT OF EXECUTION AND DELIVERY HEREOF
From and after the execution and delivery of this Supplemental
Indenture, (i) the Indenture shall be deemed to be amended and modified as
provided herein, (ii) this Supplemental Indenture shall form a part of the
Indenture, (iii) except as modified and amended by this Supplemental Indenture,
the Indenture shall continue in full force and effect, (iv) the Securities
shall continue to be governed by the Indenture, as modified and amended by this
Supplemental Indenture, and (v) every Holder of Securities heretofore and
hereafter authenticated and delivered under the Indenture shall be bound by
this Supplemental Indenture.
ARTICLE FIVE
MISCELLANEOUS PROVISIONS
SECTION 501. Headings Descriptive.
The headings of the several Articles and Sections of this Supplemental
Indenture are inserted for convenience only and shall not in any way affect the
meaning or construction of any provision of this Supplemental Indenture.
SECTION 502. Rights and Obligations of the Trustee.
-3-
<PAGE> 5
All of the provisions of the Indenture with respect to the rights,
privileges, immunities, powers and duties of the Trustee shall be applicable in
respect of this Supplemental Indenture as fully and with the same effect as if
set forth herein in full.
SECTION 503. Successors and Assigns.
This Supplemental Indenture shall be binding upon and inure to the
benefit of and be enforceable by the respective successors and assigns of the
parties hereto and the Holders of any Securities then Outstanding.
SECTION 504. Counterparts.
This Supplemental Indenture may be executed in several counterparts,
each of which shall be an original and all of which shall constitute but one
and the same instrument.
SECTION 505. Governing Law.
This Supplemental Indenture shall be governed by and construed in
accordance with the laws of the State of New York.
[The next page is the signature page]
-4-
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed, and their respective corporate seals to be
hereunto affixed and attested, all as of the day and year first above written.
UNITED WASTE SYSTEMS, INC.
By: /s/ BRADLEY S. JACOBS
------------------------------------
Name: Bradley S. Jacobs
Title: Chairman of the Board and
Chief Executive Officer
Attest:
By: /s/ JOHN N. MILNE
---------------------------------
NAME: John N. Milne
Title: Secretary
USA WASTE SERVICES, INC.
By: /s/ EARL E. DEFRATES
------------------------------------
Name: Earl E. DeFrates
Title: Executive Vice President and
Chief Financial Officer
Attest:
By: /s/ GREGORY T. SANGALIS
---------------------------------
Name: Gregory T. Sangalis
Title: Vice President, General
Counsel and Secretary
BANKERS TRUST COMPANY
By: /s/ SUSAN JOHNSON
------------------------------------
Name: Susan Johnson
Title: Assistant Vice President
-5-
<PAGE> 7
STATE OF TEXAS )
)
COUNTY OF HARRIS )
On the 26th day of August, 1997, before me personally came Bradley S.
Jacobs, to me known, who, being by me duly sworn, did depose and say that he is
Chairman of the Board and Chief Executive Officer of United Waste Systems,
Inc., one of the corporations described in and which executed the foregoing
instrument; that he knows the seal of said corporation; that the seal affixed
to said instrument is such corporate seal; that it was so affixed by authority
of the Board of Directors of said corporation; and that he signed his name
thereto by like authority.
By: /s/ DEBORAH S. BRIGGS
------------------------------------
[NOTARY SEAL]
STATE OF TEXAS )
)
COUNTY OF HARRIS )
On the 26th day of August, 1997, before me personally came Earl E.
DeFrates, to me known, who, being by me duly sworn, did depose and say that he
is Executive Vice President and Chief Financial Officer of USA Waste Services,
Inc., one of the corporations described in and which executed the foregoing
instrument; that he knows the seal of said corporation; that the seal affixed
to said instrument is such corporate seal; that it was so affixed by authority
of the Board of Directors of said corporation; and that he signed his name
thereto by like authority.
By: /s/ DEBORAH S. BRIGGS
------------------------------------
[NOTARY SEAL]
STATE OF NEW YORK )
)
COUNTY OF NEW YORK )
On the 26th day of August, 1997, before me personally came Susan
Johnson, to me known, who, being by me duly sworn, did depose and say that she
is Assistant Vice President of Bankers Trust Company, Inc., one of the
corporations described in and which executed the foregoing instrument; that she
knows the seal of said corporation; that the seal affixed to said instrument is
such corporate seal; that it was so affixed by authority of the Board of
Directors of said corporation; and that she signed her name thereto by like
authority.
By: /s/ MARGARET BEREZA
------------------------------------
[NOTARY SEAL]
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements
(Form S-3, No. 333-00097, No. 333-08573, No. 333-17421, No. 333-32471, No.
333-33889) of USA Waste Services, Inc. and the related Prospectuses, and in the
Registration Statements (Form S-4, No. 333-31979, No. 333-32805) of USA
Waste Services, Inc., and the related Prospectuses, and in the Registration
Statements (Form S-8, No. 33-43619, No. 33-59807, No. 33-61621, No. 33-61625,
No. 33-61627, No. 33-72436, No. 33-84988, No. 33-84990, No. 333-02181, No.
333-08161, No. 333-14115, No. 333-14613, No. 333-34819) of USA Waste Services,
Inc., and the related Prospectuses of our report, dated February 21, 1997,
except for Note 13, as to which the date is March 25, 1997, with respect to the
consolidated financial statements of United Waste Systems, Inc. for the year
ended December 31, 1996, in this Current Report on Form 8-K, dated August 26,
1997.
Ernst & Young LLP
MetroPark, New Jersey
August 29, 1997
