<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For The quarterly period ended: March 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ___________
Commission File Number: 0-19285
ALLIED WASTE INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 88-0228636
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization.) Identification No.)
15880 North Greenway-Hayden Loop, Suite 100, Scottsdale, Arizona 85260
(Address of principal executive offices and zip code)
Registrant's telephone number, including area code: (602) 423-2946
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of the issuer's class of common
stock, as of the latest practicable date.
CLASS OUTSTANDING AS OF MARCH 31, 1997
----- --------------------------------
Common Stock................. 75,813,070
<PAGE> 2
ALLIED WASTE INDUSTRIES, INC.
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1997
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
PART I FINANCIAL INFORMATION
Item 1 -- Financial Statements
Condensed Consolidated Balance Sheets.................................... 3
Condensed Consolidated Statements of Operations.......................... 4
Condensed Consolidated Statements of Cash Flows.......................... 5
Notes to Condensed Consolidated Financial Statements..................... 6
Item 2 -- Management's Discussion and Analysis of Financial Condition and
Results of Operations.................................................. 14
Item 3 -- Quantitative and Qualitative Disclosures About Market Risk............... 25
PART II OTHER INFORMATION
Item 1 -- Legal Proceedings........................................................ 26
Item 2 -- Changes in Securities.................................................... 26
Item 3 -- Defaults Upon Senior Securities.......................................... 26
Item 4 -- Submission of Matters to a Vote of Securing Holders...................... 26
Item 5 -- Other Information........................................................ 26
Item 6 -- Exhibits and Reports on Form 8-K......................................... 26
Signature ......................................................................... 27
</TABLE>
2
<PAGE> 3
ALLIED WASTE INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1996 1997
---- ----
<S> <C> <C>
(UNAUDITED)
ASSETS
Current Assets --
Cash and cash equivalents...................................... $ 50,094 $ 46,004
Accounts receivable, net of allowance of
$5,806 and $5,817............................................ 88,522 104,221
Prepaid and other current assets............................... 9,860 16,807
Current portion of landfills................................... 23,820 24,805
Inventories.................................................... 6,941 6,998
Assets held for sale........................................... 524,716 6,716
Deferred income taxes.......................................... 5,809 5,809
---------- ----------
Total current assets......................................... 709,762 211,360
Property and equipment, net...................................... 706,752 775,934
Goodwill, net.................................................... 856,108 869,054
Other assets..................................................... 44,927 60,549
---------- ----------
Total assets................................................. $2,317,549 $1,916,897
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities --
Current portion of long-term debt to related parties........... $ 136 $ 136
Current portion of long-term debt to unrelated parties......... 532,811 37,176
Accounts payable............................................... 56,186 37,109
Accrued interest............................................... 4,910 23,025
Other accrued liabilities...................................... 60,458 70,864
Unearned income................................................ 11,185 30,017
---------- ----------
Total current liabilities.................................... 665,686 198,327
Long-term debt to related parties, less current portion.......... 112,473 116,316
Long-term debt to unrelated parties, less current portion........ 1,034,330 1,069,026
Convertible subordinated debt, net of discount, less current portion 1,706 1,697
Deferred income taxes............................................ 53,095 55,262
Accrued closure, post-closure and environmental costs............ 152,604 159,012
Deferred royalties and other long-term obligations............... 22,097 29,461
Commitments and contingencies....................................
Stockholders' Equity --
Preferred stock, aggregate liquidation preference
of $9,907 and $9,496 at December 31, 1996
and March 31, 1997, respectively.............................. 1 1
Common stock.................................................... 747 758
Additional paid-in capital...................................... 352,589 358,948
Retained (deficit).............................................. (77,779) (71,911)
---------- ----------
Total stockholders' equity.................................... 275,558 287,796
---------- ----------
Total liabilities and stockholders' equity.................... $2,317,549 $1,916,897
========== ==========
</TABLE>
The accompanying Notes to Condensed Consolidated Financial Statements are an
integral part of these balance sheets.
3
<PAGE> 4
ALLIED WASTE INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except for per share amounts and number of shares; unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------------
1996 1997
---- ----
<S> <C> <C>
Revenues............................... $ 56,946 $ 184,065
Cost of operations..................... 32,785 104,922
Selling, general
and administrative expenses......... 9,685 22,635
Depreciation and amortization.......... 7,412 24,863
------------ ------------
Operating income....................... 7,064 31,645
Interest income........................ (42) (718)
Interest expense....................... 2,000 22,069
------------ ------------
Income before income taxes............. 5,106 10,294
Income tax expense..................... 2,300 4,426
------------ ------------
Net income............................. 2,806 5,868
Dividends on preferred stock........... 288 171
------------ ------------
Net income to common shareholders...... $ 2,518 $ 5,697
============ ============
Income per share....................... $ 0.04 $ 0.08
============ ============
Weighted average common and common
equivalent shares outstanding........ 57,302,129 75,919,939
============ ============
</TABLE>
The accompanying Notes to Condensed Consolidated Financial Statements are an
integral part of these statements.
4
<PAGE> 5
ALLIED WASTE INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS; UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------
1996 1997
------ ------
<S> <C> <C>
Operating Activities --
Net income $ 2,806 $ 5,868
Adjustments to reconcile net income to cash
provided by (used for) operating activities --
Provisions for:
Depreciation and amortization 7,412 24,863
Closure and post-closure costs 239 2,671
Doubtful accounts 360 872
Accretion of debentures -- 3,876
Deferred income taxes 555 2,370
Gain on sale of fixed assets (39) (115)
Change in operating assets and liabilities,
excluding the effects of purchase acquisitions --
Accounts receivable, prepaid expenses, inventories
and other (672) (47,322)
Accounts payable, accrued liabilities, unearned
income, closure and post-closure costs and other (11,452) 25,879
------- --------
Cash provided by (used for) operating activities (791) 18,962
------- --------
Investing Activities --
Cost of acquisitions, net of cash acquired (3,304) (36,632)
Capital expenditures (6,737) (17,425)
Capitalized interest (3,634) (5,883)
Proceeds from sale of fixed assets 90 518,859
Change in deferred acquisition costs and
notes receivable (112) (308)
------- --------
Cash provided by (used for) investing activities (13,697) 458,611
Financing activities --
Net proceeds from sale of common stock, preferred
stock, stock options and warrants 48,217 486
Proceeds from long-term debt, net of issuance costs 13,050 36,219
Repayments of long-term debt (46,009) (525,564)
Other long-term obligations (197) 7,364
Dividends paid (327) (168)
Equity transactions of pooled companies 152 --
------- --------
Cash provided by (used for) financing activities 14,886 (481,663)
------- --------
Increase (decrease) in cash and cash equivalents 398 (4,090)
Cash and cash equivalents, beginning of period 4,016 50,094
------- --------
Cash and cash equivalents, end of period $ 4,414 $ 46,004
======= ========
</TABLE>
The accompanying Notes to Condensed Consolidated Financial Statements
are an integral part of these statements.
5
<PAGE> 6
ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Allied Waste Industries, Inc. ("Allied" or the "Company"), is
incorporated under the laws of the state of Delaware. Allied is a solid waste
management company providing non-hazardous waste collection, transfer, recycling
and disposal services in selected markets.
The condensed consolidated financial statements include the accounts of
Allied and its subsidiaries. All significant intercompany accounts and
transactions are eliminated in consolidation. The condensed consolidated balance
sheet as of December 31, 1996, which has been derived from audited consolidated
financial statements, and the unaudited interim condensed consolidated financial
statements included herein have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission (the "SEC"). As applicable
under such regulations, certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. The Company believes that
the presentations and disclosures herein are adequate to make the information
not misleading when read in connection with the Company's Annual Report on Form
10-K. The condensed consolidated financial statements as of March 31, 1997 and
for the three months ended March 31, 1996 and 1997 reflect, in the opinion of
management, all adjustments (which include only normal recurring adjustments)
necessary to fairly state the financial position and results of operations for
such periods. The condensed consolidated financial statements and accompanying
notes have also been restated to reflect acquisitions accounted for as
poolings-of-interests (See Note 2).
Operating results for interim periods are not necessarily indicative of
the results for full years. It is suggested that these condensed consolidated
financial statements be read in conjunction with the consolidated financial
statements of Allied Waste Industries, Inc. and subsidiaries for the year ended
December 31, 1996 and the related notes thereto included in the Company's Annual
Report on Form 10-K filed with the SEC on March 27, 1997.
There have been no significant additions to or changes in accounting
policies of the Company since December 31, 1996. For a description of these
policies, see Note 1 of Notes to Consolidated Financial Statements for the year
ended December 31, 1996 in the Company's Annual Report on Form 10-K.
Certain reclassifications have been made in prior period financial
statements to conform to the current presentation.
6
<PAGE> 7
Financial instruments --
In connection with the financing of a $1.275 billion credit agreement (the
"Senior Credit Facility"), the Company has entered into interest rate swap
agreements (the "Agreements") with reputable national banks and investment
banking institutions to reduce its exposure to market changes in interest rates.
A summary of the Agreements outstanding as of March 31, 1997 is as follows:
<TABLE>
<CAPTION>
Notional Amount Fixed Rate
---------------- ----------
(dollars in millions)
<C> <C>
$ 50 5.76 %
50 5.81
130 6.2655
</TABLE>
The Agreements effectively change the Company's interest rate paid on a
portion of its floating rate long-term debt ($490.2 million at March 31, 1997)
to a weighted average fixed rate ceiling of approximately 6.06% plus additional
credit margins imposed by the terms of the Senior Credit Facility at March 31,
1997.
As the Company utilizes the Agreements for hedging purposes, amounts paid
to obtain the Agreements, if any, are capitalized into deferred financing
charges in the accompanying consolidated balance sheets and amortized over the
life of the specific Agreement.
Accounting pronouncements not yet required to be adopted --
The Company will be required to adopt Statement of Financial Accounting
Standards ("SFAS") No. 128, "Earnings per Share" for periods ending after
December 15, 1997. SFAS No. 128 establishes standards for computing and
presenting earnings per share ("EPS") by simplifying the standards for computing
EPS previously found in Accounting Pronouncements Board Opinion No. 15,
"Earnings per Share", and making them comparable to international EPS standards.
The adoption of SFAS No. 128 does not have a material effect on the Company's
financial position or results of operations.
7
<PAGE> 8
ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Statements of cash flows --
The supplemental cash flow disclosures and non-cash transactions for
the three months ended March 31, 1996 and 1997 are as follows (in thousands):
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------
1996 1997
------------------
(unaudited)
<S> <C> <C>
Supplemental Disclosures --
Interest paid $8,943 $16,772
Income taxes paid 1,929 533
Non Cash Transactions --
Common stock, preferred stock or warrants issued
in acquisitions or contributed to 401(k) plan $3,093 $5,838
Capital leases and debt obligations for the purchase of property
and equipment 4,603 1,520
Debt and liabilities incurred or assumed in acquisitions 3,364 32,531
</TABLE>
2. BUSINESS COMBINATIONS AND DIVESTITURES
Acquisitions accounted for as purchases are reflected in the results of
operations since the date of purchase in Allied's condensed consolidated
financial statements. The results of operations for acquisitions accounted for
as poolings-of-interests are included in Allied's condensed consolidated
financial statements for all periods presented. Often, the final determination
of the cost, and the allocation thereof, of certain of the Company's
acquisitions is subject to resolution of certain contingencies. Once such
contingencies are achieved, the purchase price is adjusted. Shares issued in
connection with business acquisitions have been valued taking into consideration
certain restrictions placed on the stock.
On March 16, 1997, pursuant to a share purchase agreement with USA
Waste Services, Inc. ("USA Waste"), the Company sold to USA Waste (the "Canadian
Sale") for approximately $518 million substantially all of the Canadian
non-hazardous solid waste management operations of the Company acquired from
Laidlaw. The Company used the proceeds from the Canadian Sale to pay down
approximately $517 million in debt under the Senior Credit Facility.
8
<PAGE> 9
ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The following table summarizes acquisitions for the three months ended
March 31, 1996 and 1997 (unaudited):
<TABLE>
<CAPTION>
Three Months
Ended March 31,
---------------
1996 1997
---- ----
<S> <C> <C>
Number of businesses acquired and accounted for as:
Poolings-of-interests............................................. 3 --
Purchases......................................................... 6 2
Total consideration (in millions)...................................... $ 23.4 $ 68.9
Shares of common stock issued.......................................... 1,906,493(1) 746,665
</TABLE>
- -----------------
(1) Includes 103,590 shares of contingently issuable common stock.
The following table presents revenues and net income restated from
amounts originally reported for the cumulative effect of acquisitions accounted
for as poolings-of-interests, (in thousands):
<TABLE>
<CAPTION>
Before After
Pooling Effect of Pooling
Effects Poolings Effects
------- -------- -------
<S> <C> <C> <C>
Three months ended March 31, 1996 (unaudited)
Revenues................................................... $ 44,418 $12,528 $ 56,946
Net income................................................. 2,340 466 2,806
Year ended December 31, 1996
Revenues................................................... 221,265 25,414 246,679
Net loss................................................... (77,132) (2,295) (79,427)
Year ended December 31, 1995
Revenues................................................... 169,865 47,679 217,544
Net income ................................................ 11,584 797 12,381
Year ended December 31, 1994
Revenues................................................... 114,814 43,540 158,354
Net loss................................................... (6,731) 696 (6,035)
</TABLE>
9
<PAGE> 10
ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Unaudited pro forma income statement data --
The following unaudited pro forma consolidated data for the year ended
December 31, 1996 and the three months ended March 31, 1997 presents the results
of operations of Allied as if the companies acquired using the purchase method
of accounting for business combinations in 1996 and through March 31, 1997
(giving effect to the Canadian Sale), had all occurred as of January 1, 1996
(in thousands, except per share data). This data does not purport to be
indicative of the results of operations of Allied that might have occurred nor
which might occur in the future.
<TABLE>
<CAPTION>
December 31, March 31,
1996 1997
---- ----
(unaudited)
<S> <C> <C>
Revenues............................................. $ 774,645 $187,823
Operating income..................................... 930 32,483
Net income (loss).................................... (101,495) 6,361
Net income (loss) to common shareholders............. (102,568) 6,190
Net income (loss) per common share................... (1.40) 0.08
</TABLE>
- -------------------
10
<PAGE> 11
ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
3. PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1996 and March 31, 1997 was as
follows (in thousands):
<TABLE>
<CAPTION>
1996 1997
---- ----
(unaudited)
<S> <C> <C>
Land and improvements........................................................... $ 39,858 $ 49,539
Land held for permitting as landfills(1)........................................ 66,070 76,711
Landfills....................................................................... 296,943 348,140
Buildings and improvements...................................................... 59,896 61,620
Vehicles and equipment.......................................................... 156,444 157,367
Containers and compactors....................................................... 159,032 160,808
Furniture and office equipment.................................................. 17,724 17,690
----------- --------
795,967 871,875
Accumulated depreciation and amortization.............................. (89,215) (95,941)
----------- --------
$ 706,752 $775,934
=========== ========
</TABLE>
- ------------------
(1) These properties have been approved for use as a landfill, and the Company
is currently in the process of obtaining the necessary permits.
4. NET INCOME PER COMMON SHARE
Net income per common share is calculated by dividing net income less
dividend requirements on preferred stock by the weighted average number of
common shares and common share equivalents outstanding during each period, as
restated to reflect acquisitions accounted for as poolings-of-interests. The
computation of weighted average common and common equivalent shares used in the
calculation of income per common share is as follows (unaudited):
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------
1996 1997
---- ----
<S> <C> <C>
Common shares outstanding....................................................... 56,566,147 76,635,927
Effect of using weighted average
common shares outstanding during the period.................................. (2,397,487) (1,479,856)
Effect of stock options and warrants assumed exercisable........................ 2,314,668 --
Effect of shares assumed issued pursuant to earn-out............................ 818,801 763,868
---------- ----------
57,302,129 75,919,939
========== ==========
</TABLE>
Conversion has not been assumed for 7% preferred stock and convertible
subordinated notes in 1996 and 1997, as the effect would not be dilutive.
Additionally, conversion has not been assumed for Series D preferred stock and
9% preferred stock in 1996, and conversion has not been assumed for stock
options and warrants in 1997, as the effects would not be dilutive.
11
<PAGE> 12
ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
5. SUMMARIZED FINANCIAL INFORMATION OF ALLIED WASTE NORTH AMERICA, INC.
As discussed in Note 5 of the Company's 10-K, the $525 million of
10.25% Senior Subordinated Notes due 2006 (the "1996 Notes") issued by Allied
Waste North America, Inc. ("Allied NA"; a consolidated subsidiary of the
Company) are guaranteed by Allied. The separate complete financial statements of
Allied NA have not been included herein as such disclosure is not considered to
be material to the holders of the 1996 Notes. However, summarized financial
information for Allied NA and subsidiaries as of March 31, 1997 is as follows
(in thousands):
Summarized Consolidated Balance Sheet Information
<TABLE>
<CAPTION>
December 31, 1996 March 31, 1997
----------------- --------------
<S> <C> <C> <C>
Current assets.................................. $ 709,762 $ 211,163
Property and equipment, net..................... 706,752 775,934
Goodwill........................................ 856,108 869,054
Other non-current assets........................ 44,927 60,549
Current liabilities............................. 682,686 198,227
Long-term debt, net of current portion.......... 1,037,762 1,072,417
Due to parent................................... 355,348 361,621
Due to Allied Canada Finance, Ltd............... 110,747 114,623
Other long-term obligations..................... 210,796 243,734
Shareholders' equity............................ (79,790) (73,922)
</TABLE>
On November 25, 1996, substantially all of the operating assets and
liabilities of Allied were contributed from Allied to Allied NA. The results of
operations for Allied NA from inception to December 31, 1996 were not material
except for the acquisition related costs and unusual items (see Note 1).
Summarized Statement of Operations Information
<TABLE>
<CAPTION>
Three Months Ended
March 31, 1997
------------------
<S> <C> <C>
Total revenue................................... $184,065
Total operating costs and expenses.............. 152,420
Operating income................................ 31,645
Net income attributable to shareholders......... 5,868
</TABLE>
6. SUBSEQUENT EVENTS
In April 1997, the Company completed the sale of certain non-core
medical waste assets for approximately $6.7 million, which are included in
assets held for sale and classified as current assets at March 31, 1997. No gain
or loss was recorded in connection with the sale.
Subsequent to March 31, 1997, the Company completed the acquisition of
six privately-held solid waste companies representing approximately $34 million
in annual revenue. Total consideration of approximately $42.3 million, comprised
of cash, notes and Common Stock, was paid in the separate transactions.
12
<PAGE> 13
ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
On May 15, 1997, the Company, pursuant to a Securities Purchase
Agreement (the "Laidlaw Securities Purchase Agreement") with Laidlaw and Laidlaw
Transportation, Inc. (collectively, the "Laidlaw Group") and certain private
securities investment funds, repurchased (the "Repurchase") from the Laidlaw
Group the $150 million 7% Junior Subordinated Debenture and the $168.3 million
Zero Coupon Debenture and a warrant to purchase 20.4 million shares of common
stock for an aggregate purchase price of $230 million in cash. The proceeds of
an offering of $418 million face value, $240 million discounted value, 11.3%
senior discount notes (the "Senior Discount Notes") which also closed on May 15,
1997, have been used to fund the Repurchase. Also pursuant to the Laidlaw
Securities Purchase Agreement, the private securities investment funds purchased
all of the common stock of Allied held by Laidlaw.
The Company has arranged with Credit Suisse First Boston, Citibank,
N.A., and Goldman Sachs Credit Partners, L.P. to modify its Senior Credit
Facility. Although no assurances can be given as to closing, the Company
anticipates that such modified credit facility will contain more advantageous
pricing and other terms.
13
<PAGE> 14
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion should be read in conjunction with the
Company's Condensed Consolidated Financial Statements and the notes thereto,
included elsewhere herein.
INTRODUCTION
The Company has experienced significant growth, a substantial portion
of which has resulted from the acquisition of solid waste businesses. Since
January 1, 1992, the Company has completed 102 acquisitions including the
Laidlaw Acquisition. In 1996, the Company acquired 22 businesses including the
Laidlaw Acquisition (as defined below) and subsequent to 1997 it has acquired 8
businesses. See Note 2 to the Company's Consolidated Financial Statements. The
Company's Consolidated Financial Statements have been restated to reflect the
acquisition of companies accounted for using the pooling-of-interests method for
business combinations. The majority of the acquisitions were accounted for under
the purchase method for business combinations and, accordingly, the results of
operations for such acquired businesses are included in the Company's financial
statements only from the applicable date of acquisition. As a result, the
Company believes its historical results of operations for the periods presented
are not directly comparable.
On December 30, 1996, the Company completed the acquisition of
substantially all of the non-hazardous solid waste management business conducted
by Laidlaw Inc. ("Laidlaw") in the United States and Canada, for total
consideration of approximately $1.5 billion comprised of $1.2 billion cash, 14.6
million shares of Common Stock, a warrant to acquire 20.4 million shares of the
Company's common stock, par value $0.01 per share (the "Common Stock"), and two
junior subordinated debentures with an aggregate face amount of $318.3 million
(the "Laidlaw Acquisition"). The cash consideration was financed from the
proceeds of the Senior Credit Facility and the sale of the 1996 Notes.
On March 16, 1997, pursuant to a share purchase agreement with USA
Waste Services, Inc. ("USA Waste"), the Company sold to USA Waste all of the
Canadian non-hazardous solid waste management operations of the Company for
approximately $518 million (the "Canadian Sale"). The Company used the proceeds
from the Canadian Sale to pay down approximately $517 million in debt under the
Senior Credit Facility. The Company acquired the Canadian operations in
connection with the Laidlaw Acquisition.
On May 15, 1997, the Company, pursuant to a Securities Purchase
Agreement (the "Laidlaw Securities Purchase Agreement") with Laidlaw and Laidlaw
Transportation, Inc. (collectively, the "Laidlaw Group") and certain private
securities investment funds affiliated with either (i) Apollo Advisors II, L.P.
or (ii) the Blackstone Group, repurchased from the Laidlaw Group the $150
million 7% Junior Subordinated Debenture and the $168.3 million Zero Coupon
Debenture (collectively, the "Allied Debentures") and a warrant to purchase 20.4
million shares of common stock (the "Warrant") for an aggregate purchase price
of $230 million in cash (the "Repurchase"). The net proceeds of an offering (the
"Offering") of $418 million face value, $240 million discounted value, 11.3%
senior discount notes, (the "Senior Discount Notes") which also closed on May
15, 1997, have been used to fund the Repurchase. Also pursuant to the Laidlaw
Securities Purchase Agreement, the private securities investment funds purchased
all of the common stock of Allied held by Laidlaw.
14
<PAGE> 15
GENERAL
Revenues. The Company's revenues are attributable primarily to fees
charged to customers for waste collection, transfer, recycling and disposal
services. The Company's collection services are generally provided under direct
agreements with its customers or pursuant to contracts with municipalities.
Commercial and municipal contract terms, where used, generally range from 1 to 5
years and commonly have automatic renewal options. The Company's landfill
operations include both Company-owned landfills and those operated for
municipalities for a fee. The Company is fully integrated in each geographic
region in which it is located as it provides collection, transfer and disposal
services. The tables below show for the periods indicated the percentage of the
Company's total reported revenues attributable to services provided and to
geographic region:
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------- Three Months Ended
1994 1995 1996 March 31, 1997
---- ---- ---- ------------------
<S> <C> <C> <C> <C>
Collection(1).......................... 69.9% 64.7% 61.9% 59.7%
Transfer............................... 8.4 9.5 8.5 6.2
Landfill(1)............................ 14.5 18.3 22.0 23.3
Other.................................. 7.2 7.5 7.6 10.8
--------- --------- -------- ----------
Total Revenues..................... 100.0% 100.0% 100.0% 100.0%
========= ========= ======== ==========
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------- Three Months Ended
1994 1995 1996 March 31, 1997
---- ---- ---- ------------------
<S> <C> <C> <C> <C>
Central States......................... -% -% -% 9.3%
Great Lakes............................ 31.9 33.2 31.3 20.9
Midwest................................ 16.8 19.0 18.7 16.6
Northeast.............................. - - - 11.1
Southeast.............................. 30.2 28.0 30.6 11.7
West................................... 21.1 19.8 19.4 30.4
--------- --------- -------- ---------
Total Revenues..................... 100.0% 100.0% 100.0% 100.0%
========= ========= ======== =========
</TABLE>
- ------------------
(1) The portion of collection revenues attributable to disposal charges for
waste collected by the Company and disposed at the Company's landfills have
been excluded from collection revenues and included in landfill revenues.
The Company's strategy is to develop vertically integrated operations
to ensure internalization of waste it collects and thus realize higher margins
from its operations. By disposing of waste at Company-owned and/or operated
landfills, the Company retains the margin generated through disposal operations
that would otherwise be earned by third-party landfills. Approximately 56% of
Company-collected waste is disposed of at Company-owned and/or operated
landfills as measured using disposal costs in the first quarter of 1997. In
addition, transfer stations are an integral part of the disposal process. The
Company locates its transfer stations in areas where its landfills are outside
of the population centers in which it collects waste. Such waste is transferred
to long-haul trailers and economically transported to its landfills.
15
<PAGE> 16
Expenses. Cost of operations includes labor, maintenance and repairs,
equipment and facility rent, utilities and taxes, the costs of ongoing
environmental compliance, safety and insurance, disposal costs and costs of
independent haulers transporting Company waste to the disposal site. Disposal
costs include certain landfill taxes, host community fees, payments under
agreements with respect to landfill sites that are not owned, landfill site
maintenance, fuel and other equipment operating expenses and accruals for
estimated closure and post-closure monitoring expenses anticipated to be
incurred in the future.
Selling, general and administrative expenses include management,
clerical and administrative compensation and overhead, sales costs, community
relations expenses and provisions for estimated uncollectable accounts
receivable and potentially unrealizable acquisition costs.
Depreciation and amortization expense includes depreciation of fixed
assets and amortization of landfill airspace, goodwill and other intangible
assets.
In connection with potential acquisitions, the Company incurs and
capitalizes certain transaction and integration costs which include stock
registration, legal, accounting, consulting, engineering and other direct costs.
When an acquisition is completed and is accounted for using the
pooling-of-interests method for business combinations, these costs are charged
to the statement of operations as acquisition related costs. When a completed
acquisition is accounted for using the purchase method for business
combinations, these costs are capitalized. The Company routinely evaluates
capitalized transaction and integration costs and expenses those costs related
to acquisitions not likely to occur. Indirect acquisition costs, such as
executive salaries, general corporate overhead and other corporate services, are
expensed as incurred.
Certain direct landfill development costs, such as engineering,
upgrading, construction and permitting costs, are capitalized and amortized
based on consumed airspace. The Company believes that the costs associated with
engineering, owning and operating landfills will increase in the future as a
result of federal, state and local regulation and a growing community awareness
of the landfill permitting process. Although there can be no assurance, the
Company believes that it will be able to implement price increases sufficient to
offset these increased expenses. All indirect landfill development costs, such
as executive salaries, general corporate overhead, public affairs and other
corporate services, are expensed as incurred.
Accrued closure and post-closure costs represent an estimate of the
current value of the future obligation associated with closure and post-closure
monitoring of non-hazardous solid waste landfills currently owned and/or
operated by the Company. Site specific closure and post-closure engineering cost
estimates are prepared annually for landfills owned and/or operated by the
Company for which it is responsible for closure and post-closure. The present
value of estimated future costs are accrued based on accepted tonnage as
landfill airspace is consumed. Discounting of future costs is applied where the
Company believes that both the amounts and timing of related payments are
reliably determinable. The Company periodically updates its estimates of future
closure and post-closure costs. The impact of changes which are determined to be
changes in estimates are accounted for on a prospective basis.
16
<PAGE> 17
The net present value of the closure and post-closure commitment is
calculated assuming inflation of 3.5% and a risk-free capital rate of 7.0%.
Discounted amounts previously recorded are accreted to reflect the effects of
the passage of time. The Company's current estimate of total future payments for
closure and post-closure is $467 million while the present value of such
estimate is $181 million. At December 31, 1996 and March 31, 1997, accruals for
landfill closure and post-closure costs (including costs assumed through
acquisitions) were approximately $107.5 million and $114.0 million. The accruals
reflect relatively young landfills with estimated remaining lives, based on
current waste flows, that range from 1 to over 75 years, and an estimated
average remaining life of greater than 30 years.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1996 AND 1997
The following table sets forth the percentage relationship that the
various items bear to revenues and the percentage change in dollar amounts for
the periods indicated. The statement of operations data have been restated to
give effect to acquisitions that were accounted for using the
pooling-of-interests method for business combinations. See Note 2 to the
Company's Condensed Consolidated Financial Statements.
<TABLE>
<CAPTION>
Three Months Ended March 31,
1997
Compared
to 1996
% Change
1996 1997 in Amounts
---- ---- ----------
<S> <C> <C> <C>
(unaudited)
STATEMENT OF OPERATIONS DATA:
Revenues ............................................................. 100.0 % 100.0% 223.2%
Cost of operations..................................................... 57.6 57.0 220.0
Selling, general and administrative expenses........................... 17.0 12.3 133.7
Depreciation and amortization.......................................... 13.0 13.5 235.4
----- -----
Operating income ...................................................... 12.4 17.2 348.0
Interest expense, net.................................................. 3.4 11.6 990.5
Income tax provision................................................... 4.1 2.4 92.4
----- ----
Net income........................................................... 4.9 % 3.2% 109.1
===== ======
</TABLE>
Revenues. Revenues in 1997 were $184.1 million compared to $56.9
million in 1996, an increase of 223.2%. Revenues of approximately $122.3 million
in the first quarter of 1997 were generated from companies acquired subsequent
to December 1995, while increases in revenues attributable to existing
operations amounted to $4.9 million.
Cost of Operations. Cost of operations in 1997 was $104.9 million
compared to $32.8 million in 1996, an increase of 220.0%. The increase in cost
of operations was primarily attributable to the increase in revenues described
above. As a percentage of revenues, cost of operations decreased to 57.0% in
1997 from 57.6% in 1996. Operating cost margins were favorably impacted by
financial benefits and operational efficiencies associated with the Laidlaw
Acquisition.
17
<PAGE> 18
Selling, General and Administrative Expenses. SG&A expenses increased
to $22.6 million in 1997 compared to $9.7 million in 1996, an increase of
133.7%. As a percentage of revenues, SG&A decreased to 12.3% in 1997 compared to
17.0% in 1996. The increase in SG&A expense resulted from expenses associated
with acquired companies and expenses incurred in connection with the Company's
increase in personnel and other expenses related to the growth of the Company as
it continues to acquire companies. The decrease in SG&A as a percentage of
revenues can be attributed to a higher relative growth of revenue compared to
expense for this period.
Depreciation and amortization. Depreciation and amortization in 1997
was $24.9 million compared to $7.4 million in 1996, an increase of 235.4%. The
increase in depreciation and amortization expense is due to acquisitions and
capital expenditures. Fixed assets have increased from $384.3 million at March
31, 1996 to $871.9 million at March 31, 1997 and goodwill has increased from
$102.5 million at March 31, 1996 to $887.1 million at March 31, 1997. As a
percentage of revenues, depreciation and amortization increased to 13.5% in 1997
from 13.0% in 1996. This is primarily the result of an increase in amortization
of goodwill related to the Laidlaw Acquisition.
Net interest expense. Net interest expense was $21.4 million in 1997
compared to $2.0 million in 1996, an increase of 990.5%. The increase in
interest expense is due to the increase in debt from $196.6 million at March 31,
1996 compared to $1.2 billion at March 31, 1997. This increase in debt
outstanding is primarily the result of debt incurred in connection with the
Laidlaw Acquisition net of the application of the net proceeds received in
connection with the Canadian Sale.
Income taxes. Income taxes reflect a 43% effective income tax rate in
1997 as compared to a 45% rate in 1996. The Company's effective tax rate in 1997
and 1996 deviates from the federal statutory rate of 35%, due primarily to the
effects of differences in the treatment of goodwill for book and tax purposes,
state income taxes, and other permanent differences.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company has satisfied its acquisition, capital
expenditure and working capital needs primarily through bank financing, public
offerings and private placements of debt and equity securities. Between January
1, 1994 and March 31, 1997, the Company completed the $1.275 billion Senior
Credit Facility (of which $517 million was repaid with proceeds from the
Canadian Sale in March 1997), a $525 million private placement of the 1996
Notes, a $100 million public offering of its $100 million 12% Senior
Subordinated Notes due 2004 (the "1994 Notes") (substantially all of which were
repurchased pursuant to a tender offer (the "Tender Offer") in July 1996), a $50
million private placement of Common Stock, a $300 million senior revolving
credit facility (all debt under which was repaid in December 1996), and a $48
million public equity offering. Because of the capital intensive nature of the
solid waste industry and companies that grow substantially through acquisition,
the Company has used, and believes that it is reasonably possible that it will
continue using amounts in excess of the cash generated from operations to fund
acquisitions and capital expenditures, including landfill development. In
connection with acquisitions, the Company has assumed or incurred indebtedness
with relatively short-term repayment schedules, thereby increasing its current
and medium-term liabilities. Additionally, operating equipment has been acquired
using financing leases which have short and medium-term maturities. As a result,
the Company has periodically had low levels of working capital or working
capital deficits.
18
<PAGE> 19
During the three months ended March 31, 1996 and 1997, the Company's
cash flows for operating, investing and financing activities were as follows
(dollars in millions; unaudited):
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------
1996 1997
---- ----
<S> <C> <C>
OPERATING ACTIVITIES:
Net income............................................................. $ 2.8 $ 5.9
Non-cash operating expenses(1)......................................... 8.5 34.6
Gain on sale of fixed assets........................................... -- (0.1)
Increase in operating assets and liabilities, net...................... (12.1) (21.5)
------------- --------------
Cash provided by (used in) operating activities........................ (0.8) 18.9
------------- --------------
INVESTING ACTIVITIES:
Cost of acquisitions, net of cash acquired............................. (3.3) (36.6)
Capital expenditures................................................... (6.7) (17.4)
Capitalized interest................................................... (3.6) (5.9)
Proceeds from sale of fixed assets..................................... -- 518.8
Other.................................................................. (0.1) (0.3)
------------- --------------
Cash used for investing activities..................................... (13.7) 458.6
------------- --------------
FINANCING ACTIVITIES:
Net proceeds from sale and redemption of preferred
stock, common stock, stock options and warrants................... 48.2 0.5
Net proceeds from long-term debt....................................... 13.1 36.2
Repayments of long-term debt........................................... (46.0) (525.5)
Other.................................................................. (0.4) 7.2
------------- --------------
Cash provided by financing activities.................................. 14.9 (481.6)
------------- --------------
Increase (decrease) in cash............................................ $ 0.4 $ (4.1)
============= ==============
</TABLE>
- ----------------
(1) Consists principally of provisions for depreciation and amortization,
landfill closure and post-closure costs, doubtful accounts, potentially
unrealizable acquisition costs and deferred income taxes.
As of March 31, 1997, the Company had cash and cash equivalents of
$46.0 million. The Company's capital expenditure and working capital
requirements have increased significantly, reflecting the Company's rapid growth
by acquisition and development of revenue producing assets, and will increase
further as the Company continues to pursue its business strategy. During 1996
the Company completed the Laidlaw Acquisition for total consideration of
approximately $1.5 billion consisting of $1.2 billion cash, 14.6 million shares
of Common Stock, a warrant to acquire 20.4 million shares of Common Stock, and
two junior subordinated debentures with an aggregate face amount of $318.3
million and acquired 21 additional businesses for total consideration of
approximately $126.5 million of which approximately $73.9 million of such
consideration was paid in common stock and $3.9 million was paid in seller
notes. Total annualized revenues of the latter businesses are approximately
$78.8 million. Since January 1, 1997, the Company has purchased 8 privately held
solid waste companies, representing approximately $61 million in annual
revenues. Total consideration of approximately $111.2 million (including $10
million for the landfill under development) comprised of cash, notes and Common
Stock, was paid in these transactions. For the calendar year 1997, the Company
expects to spend approximately $126 million for capital, closure and
post-closure, and remediation expenditures relating to its landfill operations.
As the Company continues to acquire waste operations in 1997, additional capital
amounts will be required during 1997 for the acquisition of businesses and the
capital expenditure requirements related to those acquired businesses.
19
<PAGE> 20
On March 31, 1997, the Company's debt structure consisted of $525
million of the 1996 Notes, amounts outstanding under the Senior Credit Facility
of approximately $490 million, and $114.6 million of Allied Debentures
(repurchased by Allied on May 15, 1997). As of March 31, 1997 there is aggregate
availability under the Senior Credit Facility of $185.9 million pursuant to a
revolving credit facility to be used for working capital, letters of credit,
acquisitions and other general corporate purposes. No more than $200 million of
funded loans (excluding amounts outstanding pursuant to drawn letters-of-credit)
may be outstanding at one time, of which not more than $100 million may be used
for acquisitions. The indenture relating to the 1996 Notes and the Senior Credit
Facility contain financial and operating covenants and significant restrictions
on the ability of the Company to complete acquisitions, pay dividends, incur
indebtedness, make investments and take certain other corporate actions. A
substantial portion of the Company's available cash will be required to be
applied to service indebtedness and preferred stock obligations, including
indebtedness incurred to finance the Laidlaw Acquisition, which is expected to
include approximately $0.7 million for preferred stock dividends and
approximately $135.3 million in annual principal and interest payments (after
giving effect to the payment of $517 million on the Senior Credit Facility from
the Canadian Sale). In addition the Company completed the Offering of the Senior
Discount Notes on May 15, 1997.
The Company is also required to provide financial assurances to
governmental agencies under applicable environmental regulations relating to its
landfill operations. These financial assurances include performance bonds,
letters-of-credit and trust deposits required principally to secure the
Company's landfill estimated closure and post-closure obligations and collection
contracts. At March 31, 1997, the Company had outstanding approximately $88.2
million of performance bonds, $123.3 million in letters-of-credit and $6.5
million of trust deposits. During calendar year 1997, the Company expects to be
required to provide approximately $227.6 million in financial assurance
obligations relating to its landfill operations. The Company expects that
financial assurance obligations will increase in the future as it acquires and
expands its activities and that a greater percentage of the financial assurances
will be comprised of letters-of-credit.
The Company has lease facilities (the "Lease Facilities") that allow it
to enter into equipment leases at rates ranging from similar term treasury note
rates plus 2.5% to 3.5% for terms of 36 to 84 months. In addition to equipment
leases outstanding at December 31, 1996 and March 31, 1997 of $45.2 million and
$51.2 million, respectively, the Company had available lease commitments of
$11.9 million and $24.0 million, respectively. The Company has entered into
master equipment lease facilities relating to the financing of the acquisition
of trucks and containers.
The Company expects that Subtitle D and other regulations that apply to
the non-hazardous waste disposal industry will require the Company, as well as
others in the industry, to alter operations and to modify or replace existing
facilities. Such expenditures have been and will continue to be substantial.
Further regulatory changes could accelerate expenditures for closure and
post-closure monitoring and obligate the Company to spend sums in addition to
those presently reserved for such purposes. These factors, together with the
other factors discussed above, could substantially increase the Company's
operating costs and impair the Company's ability to invest in its facilities.
The Company's ability to meet future capital expenditure and working
capital requirements, to make scheduled payments of principal of, to pay
interest on, or to refinance its indebtedness, and to fund capital amounts
required for the acquisition of businesses and the expansion of existing
businesses depends on its future performance, which, to a certain extent, is
subject to general economic, financial, competitive, legislative, regulatory and
other factors beyond its control. One of the primary factors impacting the
Company's future performance will be its ability to integrate the assets
acquired in the Laidlaw Acquisition after the Canadian Sale, and to reduce
redundancies and excess costs. These operations are significantly larger than
the Company's previous operations and represent a substantial increase in the
scope of the Company's business. Based upon the current level of operations and
anticipated growth, management of the Company believes that available cash flow,
together with available borrowing under the Senior Credit Facility, the Lease
Facilities and other sources of liquidity, will be adequate to meet the
Company's anticipated future requirements
20
<PAGE> 21
for working capital, letters-of-credit, capital expenditures, scheduled payments
of principal of and interest on debt incurred under the Senior Credit Facility,
interest on the 1996 Notes and capital amounts required for acquisitions and
expansion. However, the principal payment at maturity on the 1996 Notes may
require refinancing. Also there can be no assurance that the Company's business
will generate sufficient cash flow from operations or that future financings
will be available in an amount sufficient to enable the Company to service its
indebtedness or to make necessary capital expenditures, or that any refinancing
would be available on commercially reasonable terms if at all. Additionally,
depending on the timing, amount and structure of any future acquisitions and the
availability of funds under the acquisition facility under the Senior Credit
Facility, the Company may need to raise additional capital to fund the
acquisition and integration of additional solid waste businesses. The Company
may raise such funds through additional bank financings or public or private
offerings of its debt and equity securities. There can be no assurance that the
Company will be able to secure such funding, if necessary, on favorable terms,
if at all. If the Company is not successful in securing such funding, the
Company's ability to pursue its business strategy may be impaired and results of
operations for future periods may be negatively affected.
SIGNIFICANT FINANCING EVENTS
The Company has arranged with Credit Suisse First Boston, Citibank,
N.A., and Goldman Sachs Credit Partners, L.P. to modify its Senior Credit
Facility described below. Although no assurances can be given as to closing, the
Company anticipates that such modified credit facility will contain more
advantageous pricing and other terms. As of March 31, 1997, Allied Waste NA had
$32.0 million in funded loans outstanding under the revolving credit facility
and had issued approximately $82.1 million of standby letters-of-credit, leaving
$185.9 million of revolving
21
<PAGE> 22
credit availability, of which $168 million was available for funded loans under
the revolving credit facility and $67.9 million was available for
letters-of-credit.
Also in connection with the Laidlaw Acquisition, Allied NA issued $525
million of 10.25% Senior Subordinated Notes due 2006 in a Rule 144A private
offering (the "1996 Notes"). Net proceeds from the sale of the 1996 Notes, after
the underwriting discount and other expenses, were approximately $509 million.
The net proceeds were used to pay a portion of the cash purchase price of the
Laidlaw Acquisition, repay amounts outstanding under the Company's previous $300
million credit facility with Credit Suisse as agent, fund certain acquisitions
and for general corporate purposes. Allied NA has an obligation to offer fully
registered securities, pursuant to an exchange offer, that are substantially
identical to the 1996 Notes. If Allied NA fails to effect an exchange offer, or
if the registration statement relating to the exchange offer shall be withdrawn
by Allied NA before certain dates, Allied NA will be subject to penalty interest
in varying amounts ranging from 0.25% to 1.0% per annum on the principal amount
thereof as liquidated damages to the holders of the 1996 Notes. On February 28,
1997, Allied NA filed a registration statement relating to the exchange offer
with the Securities and Exchange Commission on Form S-4. The 1996 Notes cannot
be redeemed until December 1, 2001, except under certain circumstances. Prior to
December 1, 2001, the 1996 Notes are subject to redemption, at the option of
Allied NA, at the greater of (i) 100% of the principal amount of (ii) the sum of
the present values of the remaining scheduled payments of principal and interest
thereon discounted to maturity on a semiannual basis at a comparable treasury
yield plus 75 basis points, plus in each case accrued and unpaid interest to the
date of redemption. At any time prior to December 1, 1999, up to 33% of
principal amount of 1996 Notes will be redeemable, at the option of Allied NA,
from the proceeds of one or more public offerings of capital stock by the
Company at a redemption price of 110.25% of principal amount, plus accrued
interest. The 1996 Notes are guaranteed by the Company and substantially all of
Allied NA's subsidiaries, the guarantees of which are expressly subordinated to
the guarantees of Allied NA's Senior Credit Facility. The 1996 Notes contain
several covenants, the most restrictive of which limits Allied NA and its
subsidiaries' ability to incur additional indebtedness without complying with an
interest coverage ratio test. Other covenants contain limitations on payment of
dividends, issuance of redeemable preferred stock, transactions with affiliates,
granting of liens and security interests, sales of assets and the use of
proceeds from sales of assets, mergers and consolidations, and changes of
control. The covenants do permit Allied NA to incur certain indebtedness
including the Senior Credit Facility, indebtedness issued and/or assumed in
permitted acquisitions and other indebtedness which is limited to a certain
percentage of Allied NA's total assets.
In connection with the Laidlaw Acquisition, the Company issued a
warrant to Laidlaw for the purchase of 20.4 million shares of common stock of
the Company at an exercise price of $8.25 per share (the "Warrant"). The Warrant
was retired in connection with the Repurchase on May 15, 1997.
In January 1994, the Company issued $100 million of 10 3/4% senior
subordinated notes (the "1994 Notes"). The net proceeds from the sale of the
1994 Notes after underwriting discount and other expenses, were approximately
$95 million. In July 1996, the Company completed the Tender Offer and purchased
substantially all of its 1994 Notes at the redemption price of $1,157.50 per
$1,000 principal amount. In connection with the Tender Offer, the Company
recognized an extraordinary charge of $18.4 million ($11.0 million net of income
tax benefit), in the third quarter of
22
<PAGE> 23
1996. The Company also received a consent from a majority of the holders of the
1994 Notes to eliminate all substantive financial covenants associated with the
remaining 1994 Notes.
Simultaneously with the Tender Offer in July 1996, the Company
completed a new $300 million revolving credit facility which was extinguished on
December 30, 1996 in connection with the financing of the Laidlaw Acquisition.
The Company recognized an extraordinary charge of $4.0 million ($2.4 million net
of income tax benefit), in the fourth quarter.
On January 24, 1996, the Company completed a public offering of its
Common Stock. It issued 7.6 million shares for approximately $48 million net of
$5.2 million in underwriter discounts, commissions and offering costs. The net
proceeds from the offering were used to repay amounts outstanding under the
Company's outstanding credit agreement and for other general corporate purposes.
During 1995, the Company offered to holders of all of its Series D, 9%
and $90 convertible preferred stock and its 6% Convertible Subordinated notes an
inducement to exercise their conversion option to receive Allied Common Stock.
The inducement consisted of the payment of dividends and interest that the
holders of these securities would have received from the date of conversion
through the first call or redemption date of each security. In total, 7,757,056
shares of Common Stock were issued upon conversion. Substantially all of the
Series D preferred stock and 6% Convertible Subordinated notes were converted,
all but 5,029 shares of the 9% preferred stock was converted and all of the $90
preferred stock was converted. Accordingly, the Company's annual dividend and
interest requirements decreased by approximately $2.7 million and $0.8 million,
respectively. The inducement resulted in a 1996 conversion fee charge of
approximately $2.2 million paid in 285,000 shares of Common Stock.
On January 30, 1995, the Company obtained stockholder approval of the
issuance of 11,709,602 shares of Common Stock to TPG and an affiliate, for $50
million (less approximately $5.0 million of direct offering costs and other
costs related to an amendment to the 1994 Notes).
DISCLOSURE REGARDING FORWARD LOOKING STATEMENTS
This quarterly report includes forward looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended ("Forward Looking
Statements"). All statements other than statements of historical fact included
in this section, are Forward Looking Statements. Although the Company believes
that the expectations reflected in such Forward Looking Statements are
reasonable, it can give no assurance that such expectations will prove to have
been correct. Generally, these statements relate to business plans or
strategies, projected or anticipated benefits or other consequences of such
plans or strategies, number of acquisitions and projected or anticipated
benefits from acquisitions made by or to be made by the Company, or projections
involving anticipated revenues, earnings, levels of capital expenditures or
other aspects of operating results. All phases of the Company operations are
subject to a number of uncertainties, risks and other influences, many of which
are outside the control of the Company and any one of which, or a combination of
which, could materially affect the results of the company's operations and
whether Forward Looking Statements made by the Company ultimately prove to be
accurate. Such important factors ("Important Factors") that could cause actual
results to differ materially from the Company's expectations are disclosed in
this section and elsewhere in this report. All subsequent written and oral
Forward Looking Statements attributable to the Company or persons acting on its
behalf are expressly qualified in their entirety by the Important Factors
described below that could cause actual results to differ from the Company's
expectations
23
<PAGE> 24
Competition: The solid waste collection and disposal business is highly
competitive and requires substantial amounts of capital. The Company competes
with numerous waste management companies, a number of which have significantly
larger operations and greater resources than the Company. The Company also
competes with those counties and municipalities that maintain their own waste
collection and disposal operations. Forward Looking Statements assume that the
Company will be able to effectively compete with the other waste management
companies.
Availability of Acquisition Targets: The Company's ongoing acquisition
program is a key element of its expansion strategy. In addition, obtaining
landfill permits has become increasingly difficult, time consuming and
expensive. There can be no assurance, however, that the Company will succeed in
obtaining landfill permits or locating appropriate acquisition candidates that
can be acquired at price levels that the Company considers appropriate and that
reflects historical prices. The Forward Looking Statements assume that a number
of acquisition candidates and landfill properties sufficient to meet the
Company's goals will be available for purchase and that the Company will be able
to complete the acquisition at prices that the Company has experienced in the
past two years.
Integration: The Company's financial position and results of operations
depend to a large extent on the integration of recently acquired businesses. The
Forward Looking Statements assume that integration of acquired companies,
including the internalization of waste, will require from three to nine months
from the date the acquisition closes. Failure to achieve effective integration
in the anticipated time period or at all could have an adverse effect on the
Company's future results of operations.
Ongoing Capital Requirements: To the extent that internally generated
cash and cash available under the Company's existing credit facilities are not
sufficient to provide the cash required for future operations, capital
expenditures, acquisitions, debt repayment obligations and/or financial
assurance obligations, the Company will require additional equity and/or debt
financing in order to provide such cash. The Company has incurred significant
debt obligations in the last two years, which entail substantial debt service
costs. The Forward Looking Statements assume that the Company will be able to
raise the capital necessary to finance such requirements at rates that are as
good as or better than those it is currently experiencing. There can be no
assurance, however, that such financing will be available or, if available, will
be available on terms satisfactory to the Company.
Economic Conditions: The Company's business is affected by general
economic conditions. The Forward Looking Statements assume that the Company will
be able to achieve internal volume and price growth which is not impacted by an
economic downturn. (As revenue of the Company continues to grow it is likely
that the rates of internal growth will reflect growth rates which are less than
those experienced in 1996.) There can be no assurance that an economic downturn
will not result in a reduction in the volume of waste being disposed of at the
Company's operations and/or the price that the Company can charge for its
services.
Weather Conditions: Protracted periods of inclement weather may
adversely affect the Company's operations by interfering with collection and
landfill operations, delaying the development of landfill capacity and/or
reducing the volume of waste generated by the Company's customers. In addition,
particularly harsh weather conditions may result in the temporary suspension of
certain of the Company's operations. The Forward Looking Statements do not
assume that such weather conditions will occur.
Dependence on Senior Management: The Company is highly dependent upon
its senior management team. In addition, as the Company continues to grow, its
requirements for operations management with waste industry experience will also
increase. The availability of such experienced management is not known. The
Forward Looking Statements assume that experienced management will be available
when needed by the Company at compensation levels
24
<PAGE> 25
that are within industry norms. The loss of the services of any member of senior
management or the inability to hire experienced operations management could have
a material adverse effect on the Company.
Influence of Government Regulation: The Company's operations are
subject to and substantially affected by extensive federal, state and local
laws, regulations, orders and permits, which govern environmental protection,
health and safety, zoning and other matters. These regulations may impose
restrictions on operations that could adversely affect the Company's results,
such as limitations on the expansion of disposal facilities, limitations on or
the banning of disposal of out-of-state waste or certain categories of waste or
mandates regarding the disposal of solid waste. Because of heightened public
concern, companies in the waste management business may become subject to
judicial and administrative proceedings involving federal, state or local
agencies. These governmental agencies may seek to impose fines or to revoke or
deny renewal of operating permits or licenses for violations of environmental
laws or regulations or to require remediation of environmental problems at sites
or nearby properties, or resulting from transportation or predecessors'
transpiration and collection operations, all of which could have a material
adverse effect on the Company. Liability may also arise from actions brought by
individuals or community groups in connection with the permitting or licensing
of operations, any alleged violations of such permits and licenses or other
matters. The Forward Looking Statements assume that there will be no materially
negative impact on its operations due to government regulation.
Potential Environmental Liability: The Company may incur liabilities
for the deterioration of the environment as a result of its operations. Any
substantial liability for environmental damage could materially adversely affect
the operating results and financial condition of the Company. Due to the limited
nature of the Company's insurance coverage of environmental liability, if the
Company were to incur liability for environmental damage, its business and
financial condition could be materially adversely affected. The Forward Looking
Statements assume that the Company will not incur any material environmental
liabilities other than those for which a provision has been recorded in the
consolidated financial statements and disclosed in the notes thereto.
INFLATION AND PREVAILING ECONOMIC CONDITIONS
To date, inflation has not had a significant impact on the Company's
operations. Consistent with industry practice, most of the Company's contracts
provide for a pass through of certain costs, including increases in landfill
tipping fees and, in some cases, fuel costs. The Company therefore believes it
should be able to implement price increases sufficient to offset most cost
increases resulting from inflation. However, competitive factors may require the
Company to absorb cost increases, resulting from inflation. The Company is
unable to determine the future impact of a sustained economic slowdown.
SEASONALITY
The Company believes that its collection and landfill operations can be
adversely affected by protracted periods of inclement weather which could delay
the development of landfill capacity or transfer of waste and/or reduce the
volume of waste generated.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
In connection with the financing of the Senior Credit Facility, the
Company has entered into interest rate swap agreements (the "Agreements") with
reputable national banks and investment banking institutions to reduce its
exposure to market changes in interest rates. See footnote 1 to Condensed
Consolidated Financial Statements. The Company's use of the Agreements has not
been and is not expected to be material with respect to its financial position
or results of operations.
25
<PAGE> 26
P A R T II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
No changes to previously reported information.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 Securities Purchase Agreement dated April 21, 1997 between Apollo
Investment Fund III, L.P., Apollo Overseas Partners III, L.P.,
and Apollo (U.K.) Partners III, L.P.; Blackstone Capital Partners
II Merchant Banking Fund L.P., Blackstone Offshore Capital Partners
II L.P. and Blackstone Family Investment Partnership II L.P.;
Laidlaw Inc. and Laidlaw Transportation, Inc.; and Allied Waste
Industries, Inc.
10.2 Shareholders Agreement dated as of April 14, 1997 between Allied
Waste Industries, Inc. and Apollo Investment Fund III, L.P.,
Apollo Overseas Partners III, L.P., and Apollo (U.K.) Partners III,
L.P.; Blackstone Capital Partners II Merchant Banking Fund L.P.,
Blackstone Offshore Capital Partners II L.P. and Blackstone Family
Investment Partnership II L.P.
10.3 Amended and Restated Shareholders Agreement dated as of April 21,
1997 between Allied Waste Industries, Inc. and Apollo Investment
Fund III, L.P., Apollo Overseas Partners III, L.P., and Apollo
(U.K.) Partners III, L.P.; Blackstone Capital Partners II Merchant
Banking Fund L.P., Blackstone Offshore Capital Partners II L.P. and
Blackstone Family Investment Partnership II L.P.
10.4 Registration Rights Agreement dated as of April 21, 1997 between
Allied Waste Industries, Inc. and Apollo Investment Fund III,
L.P., Apollo Overseas Partners III, L.P., and Apollo (U.K.)
Partners III, L.P.; Blackstone Capital Partners II Merchant Banking
Fund L.P., Blackstone Offshore Capital Partners II L.P. and
Blackstone Family Investment Partnership II L.P.
11.1 Statement regarding the computation of per share earnings - primary.
11.2 Statement regarding the computation of per share earnings - fully
diluted.
12 Ratio of earnings to fixed charges
27 Financial data schedule
(b) Reports on Form 8-K
January 30, 1997 The Company's current report on Form 8-K reports that the
Company entered into a share purchase agreement with USA
Waste Services, Inc. to sell all of the Canadian
non-hazardous solid waste management operations of the
Company.
February 14, 1997 The Company's current report on Form 8-K/A-1 reports pro
forma financial statements related to the sale of the
Company's Canadian non-hazardous solid waste management
operations.
February 19, 1997 The Company's current report on Form 8-K revises the
description of the Company's business to reflect the
acquisition of the solid waste management operations of
Laidlaw Inc. and the sale of the Company's Canadian
non-hazardous solid waste management operations.
26
<PAGE> 27
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant, Allied Waste Industries, Inc., has caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
ALLIED WASTE INDUSTRIES, INC.
By: /s/HENRY L. HIRVELA
-------------------------------------------
Henry L. Hirvela
Vice President and Chief Financial Officer
(Principal Financial Officer)
By: /s/PETER S. HATHAWAY
-------------------------------------------
Peter S. Hathaway
Vice President, Chief Accounting Officer
(Principal Accounting Officer)
Date: May 15, 1997
27
<PAGE> 1
EXHIBIT 10.1
SECURITIES PURCHASE AGREEMENT
This SECURITIES PURCHASE AGREEMENT dated as of April 21, 1997
(this "Agreement") is made and entered into by and between Apollo Investment
Fund III, L.P., a Delaware limited partnership, Apollo Overseas Partners III,
L.P., a Delaware limited partnership, and Apollo (U.K.) Partners III, L.P., an
English limited partnership (collectively, the "Apollo Purchasers"), and
Blackstone Capital Partners II Merchant Banking Fund L.P., a Delaware limited
partnership, Blackstone Offshore Capital Partners II L.P., a Cayman Islands
limited partnership, and Blackstone Family Investment Partnership II L.P., a
Delaware limited partnership (collectively, the "Blackstone Purchasers" and,
together with the Apollo Purchasers, "Purchasers"), Laidlaw Inc., a Canadian
corporation ("Laidlaw") and Laidlaw Transportation, Inc., a Delaware corporation
and a wholly-owned subsidiary of Laidlaw ("LTI" and, together with Laidlaw,
"Sellers"), and Allied Waste Industries, Inc., a Delaware corporation (the
"Company"). Capitalized terms not otherwise defined herein have the meanings set
forth in Section 6.1.
WHEREAS, LTI owns (a) 14,600,000 shares of common stock, par
value $.01 per share, of the Company, constituting approximately 19.3% of the
issued and outstanding shares of capital stock of the Company as of the date
hereof (such shares being referred to herein as the "Shares") and (b) Warrants
to purchase 20,400,000 shares of the Company's common stock (the "Warrants");
WHEREAS, Laidlaw owns (a) $150,000,000 aggregate principal
amount of the 7% Junior Subordinated Debentures of Allied Waste Finance (Canada)
Ltd., a Canadian corporation and a wholly-owned subsidiary of the Company
("Allied Finance") (the "7% Debentures") and (b) $168,300,000 aggregate
principal amount of the Zero Coupon Junior Subordinated Debentures of Allied
Finance (the "Zero Coupon Debentures" and, together with the 7% Debentures, the
"Debentures");
WHEREAS, LTI desires to sell, and Purchasers desire to
purchase, the Shares on the terms and subject to the conditions set forth in
this Agreement;
WHEREAS, LTI desires to sell the Warrants, and the Company
desires to purchase, the Warrants on the terms and subject to the conditions set
forth in this Agreement;
<PAGE> 2
WHEREAS, Laidlaw desires to sell the Debentures, and the
Company desires to purchase, the Debentures on the terms and subject to the
conditions set forth in this Agreement;
WHEREAS, in connection with the agreement to purchase certain
shares of the Company's common stock (including the assignment of certain
related registration rights (the "TPG Registration Rights")) pursuant to a Stock
Purchase Agreement dated April 14, 1997 between the Purchasers, TPG Partners,
L.P. and TPG Parallel I, L.P., the Company and Purchasers have entered into a
Shareholders Agreement, dated April 14, 1997 (the "TPG Shareholders Agreement");
WHEREAS, in connection with this Agreement, the Company and
the Purchasers have entered into (i) an amended and restated Shareholders
Agreement, dated the date hereof (the "Shareholders Agreement"), and (ii) a
Registration Rights Agreement (the "Registration Rights Agreement"), each
effective upon the Closing Date (which Shareholders Agreement and Registration
Rights Agreement shall supersede and replace the TPG Shareholders Agreement and
the TPG Registration Rights on the Closing Date);
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth in this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
ARTICLE I
SALE OF SHARES AND CLOSING
1.1 Purchase and Sale. At the Closing, on the terms and
subject to the conditions set forth in this Agreement, (i) LTI agrees to sell to
Purchasers all of the right, title and interest of LTI in and to the Shares, and
Purchasers jointly and severally agree to purchase from LTI all of the Shares
and (ii) LTI agrees to sell to the Company all of the right, title and interest
of LTI in and to the Warrants, and the Company agrees to purchase from LTI all
of the Warrants, and (iii) Laidlaw agrees to sell to the Company all of the
right, title and interest of Laidlaw in and to the Debentures, and the Company
agrees to purchase from Laidlaw all of the Debentures.
1.2 Purchase Price.
(a) Shares. Subject to adjustment as provided in
Section 5.1(b), the purchase price per share for the Shares is $10.00
per share, or $146,000,000 in the aggregate (the
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<PAGE> 3
"Shares Purchase Price"), payable in immediately available United
States funds at the Closing in the manner provided in Section 1.3.
(b) Other Securities. Subject to adjustment as
provided in Section 5.1(b), the purchase price for the Debentures and
the Warrants, (collectively, the "Other Securities") shall be
$230,000,000 (the "Other Securities Purchase Price"), payable in
immediately available United States funds at the Closing in the manner
provided in Section 1.3.
1.3 Closing. The Closing will take place at the offices of
Fried, Frank, Harris, Shriver & Jacobson, One New York Plaza, New York, New
York, or at such other place as Purchasers, Sellers and the Company mutually
agree, at 10:00 A.M. local time, on the Closing Date; provided, that the parties
hereto will use commercially reasonable efforts to cause the Closing to occur by
May 31, 1997. At the Closing, Purchasers will pay the Shares Purchase Price and
the Company will pay the Other Securities Purchase Price by wire transfer of
immediately available funds to such account or accounts as Laidlaw may
reasonably direct by written notice delivered to Purchasers and the Company at
least one (1) Business Day before the Closing Date (Laidlaw shall accept
delivery of the Securities Purchase Price on behalf of itself and LTI, which
hereby appoints Laidlaw as its agent for such purpose). Simultaneously, (i) LTI
will assign and transfer to Purchasers all of LTI's right, title and interest in
and to the Shares by delivering to Purchasers one or more certificates
representing such Shares, in genuine and unaltered form, duly endorsed in blank
or accompanied by duly executed stock powers endorsed in blank, with requisite
transfer tax stamps, if any, attached, and (ii) each of Laidlaw and LTI will
assign and transfer to the Company all of Laidlaw's and LTI's respective right,
title and interest in and to the Others Securities by delivering to the Company
one or more Notes, Warrants or other certificates representing such Other
Securities, in genuine and unaltered form, duly endorsed in blank or accompanied
by duly executed bond or stock powers endorsed in blank, with requisite transfer
tax stamps, if any, attached.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties of Sellers. Laidlaw
and LTI, jointly and severally, hereby represent and warrant to
Purchasers and the Company as follows:
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<PAGE> 4
(a) Organization. Each of Laidlaw and LTI is a
corporation duly organized, validly existing and in good standing under
the laws of Canada and Delaware, respectively. Each of Laidlaw and LTI
has full corporate power and authority to execute and deliver this
Agreement and to perform its obligations hereunder and to consummate
the transactions contemplated hereby, including without limitation to
own, hold, sell and transfer (pursuant to this Agreement) the Shares
and the Other Securities owned by such Seller.
(b) Title to Shares. The Shares represent all of the
common stock and any other equity equivalents (other than the Warrants
and options held by Company directors who are affiliates of Sellers) of
the Company owned directly or indirectly by Sellers or any of their
affiliates, and LTI is the sole record and beneficial owner of such
Shares, free and clear of all Liens. The delivery of one or more
certificates at the Closing representing the Shares in the manner
provided in Section 1.3 will transfer to Purchasers good and valid
title to the Shares, free and clear of all Liens (except such as may be
imposed on the Shares by the Purchasers).
(c) Title to Other Securities. The Other Securities
represent all of the securities (other than the Shares and options held
by Company directors who are affiliates of Sellers) of the Company
owned directly or indirectly by Sellers or any of their affiliates.
Laidlaw is the sole record and beneficial owner of the Debentures, and,
LTI is the sole record and beneficial owner of the Warrants, in each
case, free and clear of all Liens. The delivery of one or more Notes,
Warrants or other certificates at the Closing representing the Other
Securities in the manner provided in Section 1.3 will transfer to the
Company good and valid title to the Other Securities, free and clear of
all Liens (except such as may be imposed on the Other Securities by the
Company).
(d) Authority. The execution and delivery by each of
Laidlaw and LTI of this Agreement and the performance by each of
Laidlaw and LTI of its obligations hereunder have been duly and validly
authorized, no other action on the part of Laidlaw, LTI or their
stockholders being necessary. This Agreement has been duly and validly
executed and delivered by each of Laidlaw and LTI and constitutes a
legal, valid and binding obligation of each of Laidlaw and LTI
enforceable against each of Laidlaw and LTI in accordance with its
terms, except to the extent such enforceability may be limited by (i)
bankruptcy, insolvency,
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<PAGE> 5
reorganization, moratorium or other similar laws relating to or
affecting generally the enforcement of creditors' rights and (ii) the
availability of equitable remedies (whether in a proceeding in equity
or at law).
(e) No Conflicts. The execution and delivery by each
of Laidlaw and LTI of this Agreement do not, and the performance by
each of Laidlaw and LTI of its obligations under this Agreement and the
consummation of the transactions contemplated hereby will not:
(i) conflict with or result in a violation
or breach of any of the terms, conditions or provisions of the
certificate or articles of incorporation or by-laws (or other
comparable charter documents) of Laidlaw or LTI;
(ii) subject to making all filings, giving
all notices and obtaining all approvals required under the HSR
Act, conflict with or result in a violation or breach of any
term or provision of any Law or Order applicable to Laidlaw or
LTI, the Shares or the Other Securities; or
(iii) (A) conflict with or result in a
violation or breach of, (B) constitute (with or without notice
or lapse of time or both) a default under, (C) require Laidlaw
or LTI to obtain any consent from any Person as a result or
under the terms of, or (D) result in the creation or
imposition of any Lien (other than such Liens as may be
created by this Agreement) upon Laidlaw or LTI, the Shares or
the Other Securities under, any Contract to which Laidlaw or
LTI is a party.
(f) Governmental Approvals and Filings. Other than
the filing of a Schedule 13D and applicable forms under Section 16 as
required under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), no consent, approval or action of, filing with or
notice to any Governmental or Regulatory Authority on the part of
Laidlaw or LTI is required in connection with the execution, delivery
and performance of this Agreement or the consummation of the
transactions contemplated hereby.
(g) Legal Proceedings. As of the date of this
Agreement, there are no Actions or Proceedings pending or, to the
knowledge of Laidlaw or LTI, threatened against, relating to or
affecting Laidlaw or LTI (or to the knowledge of Laidlaw or LTI, the
Company) which could reasonably be
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<PAGE> 6
expected to result in the issuance of an Order restraining, enjoining
or otherwise prohibiting or making illegal the consummation of any of
the transactions contemplated by this Agreement.
(h) Brokers. All negotiations relative to this
Agreement and the transactions contemplated hereby have been carried
out by Laidlaw and LTI directly with Purchasers and the Company without
the intervention of any Person on behalf of such Seller in such manner
as to give rise to any valid claim by any Person against Purchasers or
the Company for a finder's fee, brokerage commission or similar
payment, except for Goldman, Sachs & Co., whose fees (i) with respect
to the purchase of the Shares shall be payable by Purchasers and (ii)
with respect to the Financing (as defined herein) shall be payable by
the Company.
(i) Agreements Relating to Shares. Other than the
documents listed on Schedule 2.1(i) (the "Sellers Agreements"), true
and complete copies of which have been filed with the Securities and
Exchange Commission by the Company and made available to Purchasers,
neither Laidlaw nor LTI is a party to (i) any Contracts or other
arrangements concerning the acquisition, disposition or the voting of
the Shares or the Other Securities, (ii) any options with respect to
the Shares or the Other Securities, including without limitation any
form of preemptive rights or claims of third parties or (iii) any
outstanding proxies, shareholder agreements, voting trusts, powers of
attorney or comparable delegations of authority concerning the Shares
or the Other Securities. Each Sellers Agreement is valid, binding and
in full force and effect.
2.2 Representations and Warranties of Purchasers. Each
Purchaser, severally but not jointly, hereby represents and warrants to Sellers
and the Company as follows:
(a) Organization. Purchaser is a limited partnership
duly organized, validly existing and in good standing under the laws of
its jurisdiction of organization. Purchaser has full power and
authority to execute and deliver this Agreement, to perform its
obligations hereunder and to consummate the transactions contemplated
hereby.
(b) Authority. The execution and delivery by
Purchaser of this Agreement, and the performance by Purchaser of its
obligations hereunder, have been duly and validly authorized, no other
action on the part of Purchaser, its general partner or their
respective partners and stockholders being necessary. This Agreement
has been
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<PAGE> 7
duly and validly executed and delivered by Purchaser and constitutes a
legal, valid and binding obligation of Purchaser enforceable against
Purchaser in accordance with its terms, except to the extent such
enforceability may be limited by (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or
affecting generally the enforcement of creditors' rights and (ii) the
availability of equitable remedies (whether in a proceeding in equity
or at law).
(c) No Conflicts. The execution and delivery by
Purchaser of this Agreement do not, and the performance by Purchaser of
its obligations under this Agreement and the consummation of the
transactions contemplated hereby will not:
(i) conflict with or result in a violation
or breach of any of the terms, conditions or provisions of the
partnership agreement, certificate or articles of
incorporation or by-laws (or other comparable organizational
documents) of Purchaser or its general partner;
(ii) subject to making all filings, giving
all notices and obtaining all approvals required under the HSR
Act, conflict with or result in a violation or breach of any
term or provision of any Law or Order applicable to Purchaser;
(iii) (A) conflict with or result in a
violation or breach of, (B) constitute (with or without notice
or lapse of time or both) a default under, or (C) require
Purchaser to obtain any consent from any Person as a result or
under the terms of, any Contract to which Purchaser is a
party.
(d) Governmental Approvals and Filings. Other than
filings, notices and approvals required under the HSR Act and the
Exchange Act, no consent, approval or action of, filing with or notice
to any Governmental or Regulatory Authority on the part of Purchaser is
required in connection with the execution, delivery and performance of
this Agreement or the consummation of the transactions contemplated
hereby.
(e) Legal Proceedings. As of the date hereof, there
are no Actions or Proceedings pending or, to the knowledge of
Purchaser, threatened against, relating to or affecting Purchaser which
could reasonably be expected to result in the issuance of an Order
restraining, enjoining or
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<PAGE> 8
otherwise prohibiting or making illegal the consummation of any of the
transactions contemplated by this Agreement.
(f) Purchase for Investment. The Shares will be
acquired by Purchaser (or, if applicable, its permitted assigns
hereunder) for its own account for the purpose of investment, it being
understood that the right to dispose of such Shares shall be entirely
within the discretion of Purchaser (or such assignee, as the case may
be).
(g) Brokers. All negotiations relative to this
Agreement and the transactions contemplated hereby have been carried
out by Purchaser directly with Sellers and the Company without the
intervention of any Person on behalf of such Purchaser in such manner
as to give rise to any valid claim by any Person against Sellers or the
Company for a finder's fee, brokerage commission or similar payment,
except for Goldman, Sachs & Co., whose fees (i) with respect to the
purchase of the Shares shall be payable by Purchasers and (ii) with
respect to the Financing shall be payable by the Company.
2.3 Representations and Warranties of the Company. The Company
hereby represents and warrants to Purchasers and Sellers as follows:
(a) Organization. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Delaware. The Company has full corporate power and authority
to execute and deliver this Agreement and to perform its obligations
hereunder and to consummate the transactions contemplated hereby,
including without limitation to purchase (pursuant to this Agreement)
the Other Securities.
(b) Authority. The execution and delivery by the
Company of this Agreement and the performance by the Company of its
obligations hereunder have been duly and validly authorized, no other
action on the part of the Company or its stockholders being necessary.
This Agreement has been duly and validly executed and delivered by the
Company and constitutes a legal, valid and binding obligation of the
Company enforceable against the Company in accordance with its terms,
except to the extent such enforceability may be limited by (i)
bankruptcy, insolvency, reorganization, moratorium or other similar
laws relating to or affecting generally the enforcement of creditors'
rights and (ii) the availability of equitable remedies (whether in a
proceeding in equity or at law).
-8-
<PAGE> 9
(c) No Conflicts. The execution and delivery by the
Company of this Agreement do not, and the performance by the Company of
its obligations under this Agreement and the consummation of the
transactions contemplated hereby will not:
(i) conflict with or result in a violation
or breach of any of the terms, conditions or provisions of the
certificate or by-laws of the Company;
(ii) subject to making all filings, giving
all notices and obtaining all approvals required under the HSR
Act and the Exchange Act, conflict with or result in a
violation or breach of any term or provision of any Law or
Order applicable to the Company, the Shares or the Other
Securities, except as would not, and in the aggregate have a
material adverse effect on the Business or Condition of the
Company or the consummation of the transactions contemplated
hereby;
(iii) (A) conflict with or result in a
violation or breach of, (B) constitute (with or without notice
or lapse of time or both) a default under, or (C) require the
Company to obtain any consent from any Person as a result or
under the terms of, any Contract to which the Company is a
party, except as would not, in the aggregate have a material
adverse effect on the Business or Condition of the Company or
the consummation of the transactions contemplated hereby.
(d) Governmental Approvals and Filings. Other than
filings, notices and approvals required under the HSR Act and the
Exchange Act, no consent, approval or action of, filing with or notice
to any Governmental or Regulatory Authority on the part of the Company
is required in connection with the execution, delivery and performance
of this Agreement or the consummation of the transactions contemplated
hereby.
(e) Legal Proceedings. As of the date of this
Agreement, there are no Actions or Proceedings pending or, to the
knowledge of the Company, threatened against, relating to or affecting
the Company which could reasonably be expected to result in the
issuance of an Order restraining, enjoining or otherwise prohibiting or
making illegal the consummation of any of the transactions contemplated
by this Agreement.
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<PAGE> 10
(f) Brokers. All negotiations relative to this
Agreement and the transactions contemplated hereby have been carried
out by the Company directly with Purchasers and Sellers without the
intervention of any Person on behalf of the Company in such manner as
to give rise to any valid claim by any Person against Purchasers,
Sellers or the Company for a finder's fee, brokerage commission or
similar payment, except for Goldman, Sachs & Co., whose fees (i) with
respect to the purchase of the Shares shall be payable by Purchasers
and (ii) with respect to the Financing shall be payable by the Company.
(g) USRPHC Status. None of the Company and its
subsidiaries is a United States real property holding company within
the meaning of Section 897(c)(2) of the Internal Revenue Code of 1986,
as amended (the "Code") during the applicable period specified in Code
Section 897(c)(1)(A)(ii).
ARTICLE III
COVENANTS
3.1 Covenants of Sellers. Each Seller, jointly and severally,
covenants and agrees with Purchasers and the Company that:
(a) No Solicitations. From and after the date hereof,
Seller will not take, nor will it permit any affiliate of Seller (or
authorize or permit any investment banker, financial advisor, attorney,
accountant or other Person retained by or acting for or on behalf of
Seller or any such affiliate) to take, directly or indirectly, any
action to solicit, encourage, receive, negotiate, assist or otherwise
facilitate any offer or inquiry from any Person concerning a transfer
of the Shares or the Other Securities (other than the sale pursuant to
this Agreement). If Seller or any such affiliate (or any such Person
acting for or on their behalf) receives from any Person any offer,
inquiry or informational request referred to above, Seller will
promptly advise such Person, by written notice, of the terms of this
Section and will promptly, orally and in writing, advise Purchasers and
the Company of such offer, inquiry or request and deliver a copy of
such notice to Purchasers and the Company.
(b) Certain Restrictions. Seller will not vote the
Shares in any manner that would have a material adverse effect on the
Business or Condition of the Company or vote
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<PAGE> 11
for any material transaction not otherwise in the ordinary course of
business of the Company.
(c) Notice and Cure. Seller will notify Purchasers
and the Company in writing of, and contemporaneously will provide
Purchasers and the Company with true and complete copies of any and all
information or documents relating to, and will use all commercially
reasonable efforts to cure before the Closing, any event, transaction
or circumstance, as soon as practicable after it becomes known to
Seller, occurring after the date of this Agreement that causes or will
cause any covenant or agreement of Seller under this Agreement to be
breached or that renders or will render untrue any representation or
warranty of Seller contained in this Agreement as if the same were made
on or as of the date of such event, transaction or circumstance.
(d) Board Resignations. Seller shall cause each of
James R. Bullock and Ivan R. Cairns (or any other person who shall
replace or succeed such person as a member of the Board of Directors of
the Company), representing all of Sellers' designees or affiliates on
the Board of Director of the Company, to have resigned from the Board
of Directors of the Company on or prior to the Closing Date.
(e) Amendments and Assignments. From the date hereof
until the earlier to occur of the Closing or the termination of this
Agreement, without the consent of Purchasers, Sellers will not
materially amend the Sellers Agreements or assign any of their rights
under this Agreement.
3.2 Covenants of Purchaser. Each Purchaser, severally but not
jointly, covenants and agrees with Sellers and the Company that:
(a) HSR. Purchaser will promptly take all reasonable
actions to obtain all approvals required under the HSR Act in
connection with the transactions contemplated by this Agreement.
(b) Notice and Cure. Purchaser will notify Sellers
and the Company in writing of, and contemporaneously will provide
Sellers and the Company with true and complete copies of any and all
information or documents relating to, and will use all commercially
reasonable efforts to cure before the Closing, any event, transaction
or circumstance, as soon as practicable after it becomes known to
Purchaser,
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<PAGE> 12
occurring after the date of this Agreement that causes or will cause
any covenant or agreement of Purchaser under this Agreement to be
breached or that renders or will render untrue any representation or
warranty of Purchaser contained in this Agreement as if the same were
made on or as of the date of such event, transaction or circumstance.
No notice given pursuant to this Section shall have any effect on the
representations, warranties, covenants or agreements contained in this
Agreement for purposes of determining satisfaction of any condition
contained herein.
(c) Amendments and Assignments. From the date hereof
until the earlier to occur of the Closing or the termination of this
Agreement, without the consent of Sellers, Purchasers will not
materially amend the TPG Shareholders Agreement or assign any of their
rights under this Agreement; provided, that the Purchasers may assign
this Agreement to any Person who is a Related Transferee (as such term
is defined in the TPG Shareholders Agreement).
3.3 Covenants of the Company. The Company covenants and agrees
with Sellers and Purchasers that:
(a) HSR. The Company will promptly take all
reasonable actions to obtain all approvals required under the HSR Act
in connection with the transactions contemplated by this Agreement.
(b) Conduct of Business. Until the Closing, the
Company will conduct business only in the ordinary course consistent
with past practice, except with the written consent of Purchasers or as
otherwise contemplated by this Agreement (including the Financing) or
the TPG Shareholders Agreement.
(c) Certain Restrictions. Until the Closing, the
Company will not without the written consent of Purchasers:
(i) amend its certificate of incorporation
or by-laws, except as contemplated by the TPG Shareholders
Agreement, or take any action with respect to any such
amendment or any recapitalization, reorganization, liquidation
or dissolution of the Company;
(ii) authorize, issue, sell or otherwise
dispose of any shares of capital stock of or any option with
respect to the Company (other than (x) grants of stock or
stock options pursuant to the Company's benefit plans and (y)
issuances of shares of common
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<PAGE> 13
stock upon the exercise of such options, the conversion of
currently outstanding securities or, in lieu of cash,
acquisitions permitted in the ordinary course of business
under Section 3.3(b)), or modify or amend any right of any
holder of outstanding shares of capital stock of or option
with respect to the Company;
(iii) declare, set aside or pay any dividend
or other distribution in respect of the capital stock of the
Company, or directly or indirectly redeem, purchase or
otherwise acquire any capital stock of or any option with
respect to the Company (except with respect to the payment of
regular dividends on shares of preferred stock); or
(iv) enter into any Contract to do or engage
in any of the foregoing.
(d) Notice and Cure. The Company will notify Sellers
and Purchasers in writing of, and contemporaneously will provide
Sellers and Purchasers with true and complete copies of any and all
information or documents relating to, and will use all commercially
reasonable efforts to cure before the Closing, any event, transaction
or circumstance, as soon as practicable after it becomes known to the
Company, occurring after the date of this Agreement that causes or will
cause any covenant or agreement of the Company under this Agreement to
be breached or that renders or will render untrue any representation or
warranty of the Company contained in this Agreement as if the same were
made on or as of the date of such event, transaction or circumstance.
No notice given pursuant to this Section shall have any effect on the
representations, warranties, covenants or agreements contained in this
Agreement for purposes of determining satisfaction of any condition
contained herein.
(e) Financing. The Company will use commercially
reasonable efforts to obtain the financing (the "Financing") for the
Company's purchase of the Other Securities from Sellers on such terms
as are satisfactory to Purchasers and the Company, and to obtain on the
Closing Date the funds contemplated to be raised by such Financing.
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<PAGE> 14
ARTICLE IV
CONDITIONS
4.1 Sellers' Conditions. The obligation of Sellers hereunder
to sell the Shares and the Other Securities are subject to the fulfillment, at
or before the Closing, of each of the following conditions (all or any of which
may be waived in whole or in part by Sellers in their sole discretion):
(a) Representations and Warranties. Each of the
representations and warranties made by Purchasers and the Company in
this Agreement shall be true and correct in all material respects on
and as of the Closing Date as though such representation or warranty
was made on and as of the Closing Date.
(b) Performance. Purchasers and the Company shall
have performed and complied with, in all material respects, each
agreement, covenant and obligation required by this Agreement to be so
performed or complied with by Purchasers and the Company at or before
the Closing.
(c) Regulatory Consents and Approvals. All approvals
(or terminations or expirations of waiting periods) required under the
HSR Act necessary for the consummation of the transactions contemplated
by this Agreement shall have been obtained (or terminated or expired).
(d) No Orders. There shall not be in effect on the
Closing Date any Order restraining, enjoining or otherwise prohibiting
or making illegal the consummation of any of the transactions
contemplated by this Agreement.
(e) Purchase of Shares and Other Securities. The
Purchasers shall have paid to Sellers the Shares Purchase Price for the
Shares and the Company shall have paid to Sellers the Other Securities
Purchase Price for the Other Securities.
4.2 Purchasers' Conditions. The obligations of Purchasers
hereunder to purchase the Shares is subject to the fulfillment, at or before the
Closing, of each of the following conditions (all or any of which may be waived
in whole or in part only by Purchasers in their sole discretion, except that
Purchasers shall not waive the conditions in Section 4.2(g) without the
Company's consent):
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<PAGE> 15
(a) Representations and Warranties. Each of the
representations and warranties made by Sellers and the Company in this
Agreement shall be true and correct in all material respects on and as
of the Closing Date as though such representation or warranty was made
on and as of the Closing Date.
(b) Performance. Sellers and the Company shall have
performed and complied with, in all material respects, each agreement,
covenant and obligation required by this Agreement to be so performed
or complied with by Sellers and the Company at or before the Closing.
(c) Regulatory Consents and Approvals. All approvals
(or terminations or expirations of waiting periods) required under the
HSR Act necessary for the consummation of the transactions contemplated
by this Agreement shall have been obtained (or terminated or expired).
(d) No Orders. There shall not be in effect on the
Closing Date any Order restraining, enjoining or otherwise prohibiting
or making illegal the consummation of any of the transactions
contemplated by this Agreement.
(e) Delivery of Shares. All of the Shares, and not
just a portion thereof, shall have been delivered for sale by Laidlaw.
(f) Purchase of Other Securities. All of the Other
Securities, and not just a portion thereof, shall have been delivered
for sale by Sellers, and the Company shall have completed the Financing
and purchased the Other Securities for the Other Securities Purchase
Price.
(g) Board Resignations. Each of James R. Bullock and
Ivan R. Cairns (or any other person who shall replace or succeed such
person as a member of the Board of Directors of the Company),
representing all of Sellers' designees or affiliates on the Board of
Director of the Company, shall have resigned from the Board of
Directors of the Company.
(h) USRPHC Affidavit. The Company shall have
delivered to Purchasers an affidavit of an authorized officer in form
and substance reasonably satisfactory to Purchasers indicating that
none of the Company or the Company's subsidiaries is a United States
real property holding company within the meaning of Code Section
897(c)(2) during the applicable period specified in Code Section
897(c)(1)(A)(ii).
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<PAGE> 16
4.3 The Company's Conditions. The obligation of Company
hereunder to purchase the Other Securities is subject to the fulfillment, at or
before the Closing, of each of the following conditions (all or any of which may
be waived in whole or in part by the Company in its sole discretion):
(a) Representations and Warranties. Each of the
representations and warranties made by Sellers and Purchasers in this
Agreement shall be true and correct in all material respects on and as
of the Closing Date as though such representation or warranty was made
on and as of the Closing Date.
(b) Performance. Sellers and Purchasers shall have
performed and complied with, in all material respects, each agreement,
covenant and obligation required by this Agreement to be so performed
or complied with by Sellers and Purchasers at or before the Closing.
(c) Regulatory Consents and Approvals. All approvals
(or terminations or expirations of waiting periods) required under the
HSR Act necessary for the consummation of the transactions contemplated
by this Agreement shall have been obtained (or terminated or expired).
(d) No Orders. There shall not be in effect on the
Closing Date any Order restraining, enjoining or otherwise prohibiting
or making illegal the consummation of any of the transactions
contemplated by this Agreement.
(e) Financing. The Company shall have consummated the
Financing.
(f) Delivery of Other Securities. All of the Other
Securities, and not just a portion thereof, shall have been delivered
for sale by Sellers.
(g) Purchase of Shares. All of the Shares, and not
just a portion thereof, shall have been delivered for sale by Laidlaw
and purchased by Purchasers.
(h) Board Resignations. Each of James R. Bullock and
Ivan R. Cairns (or any other person who shall replace or succeed such
person as a member of the Board of Directors of the Company),
representing all of Sellers' designees or affiliates on the Board of
Director of the Company, shall have resigned from the Board of
Directors of the Company.
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<PAGE> 17
ARTICLE V
TERMINATION
5.1 Termination. This Agreement may be terminated, and the
transactions contemplated hereby may be abandoned:
(a) at any time before the Closing, by mutual written
agreement of Sellers, Purchasers and the Company; or
(b) at any time after May 31, 1997, by Sellers,
Purchasers or the Company, upon notification to the non-terminating
parties by the terminating party if the Closing shall not have occurred
on or before such date and such failure to consummate is not caused by
a breach of this Agreement by the terminating party; provided, that
Purchasers shall have the right from time to time to extend such date
for up to an additional 10 days upon written notice to Sellers on or
prior to such date. For each day that Purchasers and the Company extend
the termination date by written notification pursuant to the foregoing
provision, $25,000 shall be added to the Shares Purchase Price and
$75,000 shall be added to the Other Securities Purchase Price, with the
payment of such additional amounts being subject to the same terms and
conditions hereunder as the payment of such Purchase Prices.
5.2 Effect of Termination. If this Agreement is validly
terminated pursuant to Section 5.1, this Agreement will forthwith become null
and void, and there will be no liability or obligation on the part of Sellers,
Purchasers or the Company (or any of their respective officers, directors,
employees, agents or other representatives or affiliates), except as provided in
the next succeeding sentence and except that the provisions with respect to
confidentiality in Section 7.1 will continue to apply following any such
termination. Notwithstanding any other provision in this Agreement to the
contrary, upon termination of this Agreement pursuant to Section 5.1(b), each
party will remain liable to the other parties for any willful breach of this
Agreement by such party existing at the time of such termination, and such other
parties may seek such remedies, including damages and fees of attorneys, against
the other with respect to any such breach as are provided in this Agreement or
as are otherwise available at Law or in equity.
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<PAGE> 18
ARTICLE VI
DEFINITIONS
6.1 Definitions. (a) Defined Terms. As used in this Agreement,
the following defined terms have the meanings indicated below:
"Actions or Proceedings" means any action, suit, proceeding,
arbitration or Governmental or Regulatory Authority investigation or audit.
"Business or Condition of the Company" means the business,
condition (financial or otherwise), results of operations, assets and properties
and prospects of the Company taken as a whole.
"Business Day" means a day other than Saturday, Sunday or any
other day on which banks located in the States of New York or California are
authorized or obligated to close.
"Closing" means the closing of the transactions contemplated
by Section 1.3.
"Closing Date" means (a) the later of (i) the first Business
Day after the day on which the last of the approval or waiting period described
in Section 4.1(c), Section 4.2(c) and Section 4.3(c) has been obtained or has
expired, as applicable, or (ii) the date of the consummation of the Financing or
(b) such other date as Purchasers, Sellers and the Company mutually agree upon
in writing.
"Company" means Allied Waste Industries, Inc., a Delaware
corporation. Unless the context requires otherwise, all references to the
Company herein shall be deemed to include all of the consolidated subsidiaries
of the Company.
"Contract" means any agreement, lease, license, evidence of
indebtedness, mortgage, indenture, security agreement or other contract (whether
written or oral).
"Financing" shall have the meaning set forth in Section
3.3(e).
"Governmental or Regulatory Authority" means any court,
tribunal, arbitrator, authority, agency, commission, official or other
instrumentality of the United States, any foreign country or any domestic or
foreign state, county, city or other political subdivision.
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<PAGE> 19
"HSR Act" means Section 7A of the Clayton Act (Title II of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended) and the rules
and regulations promulgated thereunder.
"Laws" means all laws, statutes, rules, regulations,
ordinances and other pronouncements having the effect of law of the United
States, any foreign country or any domestic or foreign state, county, city or
other political subdivision or of any Governmental or Regulatory Authority.
"Liens" means any mortgage, pledge, assessment, security
interest, lease, lien, adverse claim, levy, charge or other encumbrance of any
kind, or any conditional sale Contract, title retention Contract or other
Contract to give any of the foregoing.
"Order" means any writ, judgment, decree, injunction or
similar order of any Governmental or Regulatory Authority (in each such case
whether preliminary or final).
"Person" means any natural person, corporation, general
partnership, limited partnership, proprietorship, other business organization,
trust, union, association or Governmental or Regulatory Authority.
ARTICLE VII
MISCELLANEOUS
7.1 Confidentiality. Until this Agreement is publicly
disclosed, no party to this Agreement will, and each party will cause its
respective representatives not to, make any release to the press or other public
disclosure with respect to the existence or contents of this Agreement or the
transactions contemplated by this Agreement, except for such public disclosure
as may be necessary for the party proposing to make the disclosure not to be in
violation of or default under any applicable law, regulation or governmental
order. If any party proposes to make any such disclosure, such party will in
good faith consult with and consider the suggestions of the other parties
concerning the nature and scope of the information it proposes to disclose.
7.2 Further Assurances. The parties hereto will execute and
deliver at or prior to the Closing each agreement and other document that such
party is required hereby to execute and deliver as a condition to the Closing,
and will take all commercially reasonable steps necessary or desirable and
proceed diligently and in good faith to satisfy each condition to the
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<PAGE> 20
obligations of such party contained in this Agreement and will not take or fail
to take any action that could reasonably be expected to result in the
nonfulfillment of any such condition. At the Closing and from time to time
thereafter, the parties hereto shall execute and deliver such other documents
and instruments (including officers' certificates and opinions of counsel),
provide such materials and information and take such other actions as may be
reasonably requested to cause such party to fulfill its obligations under this
Agreement.
7.3 Entire Agreement. This Agreement, the TPG Shareholders
Agreement, the Shareholders Agreement and the Registration Rights Agreement
supersede all prior discussions and agreements between the parties with respect
to the subject matter hereof and thereof, and this Agreement contains the sole
and entire agreement between the parties hereto with respect to the subject
matter hereof.
7.4 Amendment. This Agreement may be amended, supplemented or
modified only by a written instrument duly executed by or on behalf of each
party hereto.
7.5 Remedies. No remedy or election hereunder shall be deemed
exclusive but shall, wherever possible, be cumulative with all other remedies at
law or in equity. Notwithstanding the foregoing, the parties acknowledge that it
will be impossible to measure in money the damage caused by any failure of
either party to comply with its agreements set forth herein, that each such
agreement is material, and that in the event of any such failure, the other
party will not have an adequate remedy at law or in damages. Therefore, each
party consents to the issuance of an injunction or the enforcement of other
equitable remedies against such party at the suit of the other party, without
bond or other security, to compel performance of all of the terms hereof, and
each party hereby waives the defense of availability of relief in damages.
7.6 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York applicable to a
Contract executed and performed in such State, without giving effect to the
conflicts of laws principles thereof.
7.7 Consent to Jurisdiction and Service of Process. Each
Seller hereby irrevocably appoints Ivan R. Cairns, at its office at 3221 North
Service Road, Burlington, Ontario, Canada, and each Apollo Purchaser hereby
irrevocably appoints David Kaplan, at its offices at 1999 Avenue of the Stars,
Suite 1900, Los Angeles, California, and each Blackstone Purchaser hereby
irrevocably appoints Howard Lipson, at its offices at 345 Park
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<PAGE> 21
Avenue, New York, New York, and the Company hereby irrevocably appoints Steve
Helm, at its offices at 15880 North Greenway-Hayden Loop, Suite 100, Scottsdale,
Arizona, its lawful agent and attorney to accept and acknowledge service of any
and all process against it in any action, suit or proceeding arising out of or
relating to this Agreement or any of the transactions contemplated hereby and
upon whom such process may be served, with the same effect as if such party were
a resident of the State of Delaware and had been lawfully served with such
process in such jurisdiction, and waives all claims of error by reason of such
service, provided that in the case of any service upon such agent and attorney,
the party effecting such service shall also deliver a copy thereof to the other
parties. Sellers, Purchasers and the Company will enter into such agreements
with such agents as may be necessary to constitute and continue the appointment
of such agents hereunder. In the event that such agent and attorney resigns or
otherwise becomes incapable of acting as such, such party will appoint a
successor agent and attorney, reasonably satisfactory to the other parties, with
like powers. Each party hereby irrevocably submits to the exclusive jurisdiction
of the United States District Court for the Southern District of New York or any
court of the State of New York located in the Borough of Manhattan in the City
of New York in any action, suit or proceeding arising out of or relating to this
Agreement or any of the transactions contemplated hereby, and agrees that any
such action, suit or proceeding shall be brought only in such court, provided,
however, that such consent to jurisdiction is solely for the purpose referred to
in this Section 7.7 and shall not be deemed to be a general submission to the
jurisdiction of said courts or in the State of Delaware other than for such
purpose. Each party hereby irrevocably waives, to the fullest extent permitted
by Law, any objection that it may now or hereafter have to the laying of the
venue of any such action, suit or proceeding brought in such a court and any
claim that any such action, suit or proceeding brought in such a court has been
brought in an inconvenient forum.
7.8 Counterparts. This Agreement may be executed in any number
of counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
7.9 Miscellaneous. The Company shall have the right to assign
its right to purchase the Other Securities to any of its wholly-owned
subsidiaries, provided that no such assignment shall relieve the Company of any
of its obligations hereunder.
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<PAGE> 22
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the duly authorized officer of each party hereto as of the date
first above written.
LAIDLAW INC.
By: /s/ Ivan R. Cairns
----------------------------------------------------
Name: Ivan R. Cairns
Title: Senior Vice President and General Counsel
LAIDLAW TRANSPORTATION, INC.
By: /s/ Ivan R. Cairns
----------------------------------------------------
Name: Ivan R. Cairns
Title: Senior Vice President and General Counsel
APOLLO INVESTMENT FUND III, L.P.
APOLLO OVERSEAS PARTNERS III, L.P.
APOLLO (U.K.) PARTNERS III, L.P.
By: Apollo Advisors II, L.P.
By: Apollo Capital Management II, Inc.
By: /s/ David B. Kaplan
----------------------------------------------------
Name: David B. Kaplan
Title: Vice President
BLACKSTONE CAPITAL PARTNERS II MERCHANT BANKING FUND L.P.
BLACKSTONE OFFSHORE CAPITAL PARTNERS II L.P.
BLACKSTONE FAMILY INVESTMENT PARTNERSHIP II L.P.
By: Blackstone Management Associates II L.L.C.
By: /s/ Howard A. Lipson
----------------------------------------------------
Name: Howard A. Lipson
Title: Senior Managing Director
ALLIED WASTE INDUSTRIES, INC.
By: /s/ Thomas Van Weelden
----------------------------------------------------
Name: Thomas Van Weelden
Title: President and Chief Operating Officer
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<PAGE> 23
Schedule 2.1(i)
- - Stock Purchase Agreement, dated September 17, 1996, as amended on
December 30, 1996
- - $150 million 7% Junior Subordinated Debenture due 2008, dated December
30, 1996
- - Zero Coupon Junior Subordinated Debenture due 2008, dated December 30,
1996
- - Warrant (to purchase 20,400,000 shares of Allied common stock), dated
December 30, 1996
- - Subscription Agreement, dated December 30, 1996
- - Registration Rights Agreement, dated December 30, 1996
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<PAGE> 1
EXHIBIT 10.2
SHAREHOLDERS AGREEMENT
This Shareholders Agreement (the "Agreement"), dated as of
April 14, 1997, by and between Allied Waste Industries, Inc., a Delaware
corporation (the "Company"), on the one hand, and Apollo Investment Fund III,
L.P., a Delaware limited partnership, Apollo Overseas Partners III, L.P., a
Delaware limited partnership, Apollo (U.K.) Partners III, L.P., an English
limited partnership, Blackstone Capital Partners II Merchant Banking Fund L.P.,
a Delaware limited partnership ("BCP"), Blackstone Offshore Capital Partners II
L.P., a Cayman Islands limited partnership, and Blackstone Family Investment
Partnership II L.P., a Delaware limited partnership (collectively,
"Shareholders"), on the other hand.
WHEREAS, simultaneously with the execution of this Agreement,
Shareholders are entering into an agreement (the "TPG Group Agreement") to
purchase an aggregate of 11,776,765 shares (the "Shares") of the Company's
common stock, par value $.01 per share (the "Common Stock"), from TPG Partners,
L.P., a Delaware limited partnership, and TPG Parallel I, L.P., a Delaware
limited partnership (collectively, "TPG Group");
WHEREAS, concurrently with the acquisition of the Shares by
Shareholders pursuant to the TPG Group Agreement, TPG Group intends to assign to
Shareholders its registration rights with respect to the Shares under Article IV
of the Securities Purchase Agreement dated as of October 27, 1994, as amended,
by and between TPG Group and the Company (the "Registration Rights");
WHEREAS, in recognition of Shareholders' significant share
ownership in the Company, the Company has determined to grant to Shareholders,
effective upon the
<PAGE> 2
closing of the acquisition of the Shares pursuant to the TPG Group Agreement,
the right as a group to appoint certain designees for election to the Board of
Directors of the Company; and
WHEREAS, in view of the foregoing, Shareholders have agreed to
certain restrictions on the acquisition and disposition of Common Stock and the
conduct of Shareholders with respect to the Company.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained in this Agreement and in the Assignment Agreement and
intending to be legally bound hereby, the parties agree as follows:
ARTICLE 1
Definitions; Representations and Warranties
SECTION 1.1 Definitions. Unless otherwise specified all
references to "days" shall be deemed to be references to calendar days. For
purposes of this Agreement, the following terms shall have the following
meanings:
"Actual Voting Power" shall mean the total voting power of all
the then outstanding securities of the Company at the time then entitled to vote
for the general election of directors, without giving effect to securities
issuable upon exercise or conversion of such outstanding securities.
"Affiliate" of a Person shall have the meaning set forth in
Rule 12b-2 of the Exchange Act as in effect on the date of this Agreement, but
shall not include (i) any investment fund in which a Person has invested if the
Person does not otherwise control the investment fund or have, directly or
indirectly, voting or dispositive power over any
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<PAGE> 3
securities owned by such fund or (ii) any investor or limited partner of any
Person who does not otherwise have voting or dispositive power over securities
owned by that Person and is not controlled by that Person. It is expressly
intended that any Person who now or hereafter controls, directly or indirectly,
any Shareholder shall be subject to the restrictions of Section 2.1 as if it
were a Shareholder.
"Beneficial ownership" by a Person of any Voting Securities
shall be determined in accordance with the term "beneficial ownership" as
defined in Rule 13d-3 under the Exchange Act as in effect on the date of this
Agreement and, in addition, "beneficial ownership" shall include securities
which such Person has the right to acquire (irrespective of whether such right
is exercisable immediately or only after the passage of time, including the
passage of time in excess of sixty (60) days) pursuant to any agreement,
arrangement or understanding or upon the exercise of conversion rights, exchange
rights, warrants or options, or otherwise. For purposes of this Agreement, a
Shareholder shall be deemed to beneficially own any Voting Securities
beneficially owned by its Affiliates or any Group of which such Shareholder or
any such Affiliate is a member.
"Board of Directors" shall mean the Board of Directors of the
Company.
"Closing Date" shall mean the date of the closing of the
purchase of the Shares by Shareholders pursuant to the TPG Group Agreement.
"Commission" shall mean the Securities and Exchange
Commission.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
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<PAGE> 4
"Group" shall mean a "group" as such term is used in Section
13(d)(3) of the Exchange Act as in effect on the date of this Agreement.
"Laws" shall mean all applicable foreign, federal, state and
local laws, statutes, rules, regulations, codes and ordinances.
"Person" shall mean any individual, Group, corporation,
general or limited partnership, limited liability company, governmental entity,
joint venture, estate, trust, association, organization or other entity of any
kind or nature.
"Reorganization Transaction" means: (i) any merger,
consolidation, recapitalization, liquidation or other business combination
transaction involving the Company; (ii) any tender offer or exchange offer for
any securities of the Company; or (iii) any sale or other disposition of assets
of the Company or any of its Subsidiaries in a single transaction or in a series
of related transactions in each of the foregoing cases constituting individually
or in the aggregate 10% or more of the assets or Voting Securities (as
applicable) of the Company.
"Securities Act" shall mean the Securities Act of 1933, as
amended.
"Shareholder Designee" shall mean a person designated for
election to the Board of Directors by Shareholders as provided in Section 3.1.
"Total Voting Power" shall mean the total combined Voting
Power, on a fully diluted basis, of all the Voting Securities then outstanding.
"Voting Power" shall mean the voting power in the general
election of directors of the Company, and shall be calculated for each Voting
Security by reference to the maximum number of votes such Voting Security is or
would be entitled to cast in
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<PAGE> 5
the general election of directors, and, in the case of convertible (or
exercisable or exchangeable) securities, by reference to the maximum number of
votes such Voting Security would be entitled to cast in unconverted or converted
(or exercised, unexercised, exchanged or unexchanged) status. For purposes of
determining Voting Power under this Agreement, a Voting Security which is
convertible into or exchangeable for a Voting Security shall be counted as
having the greater of (i) the number of votes to which such Voting Security is
entitled prior to conversion or exchange and (ii) the number of votes to which
the Voting Security into which such Voting Security is convertible or
exchangeable is entitled. Notwithstanding anything else to the contrary
contained in this Agreement, there shall not be included in calculating Voting
Power any votes which a Person shall have upon the non-payment of dividends on
the Preferred Shares in accordance with the terms of the Preferred Shares.
"Voting Securities" shall mean (x) any securities entitled, or
which may be entitled, to vote generally in the election of directors of the
Company, (y) any securities convertible or exercisable into or exchangeable for
such securities (whether or not the right to convert, exercise or exchange is
subject to the passage of time or contingencies or both), or (z) any direct or
indirect rights or options to acquire any such securities; provided that
unexercised options granted pursuant to any employment benefit or similar plan
and rights issued pursuant to any shareholder rights plan (including that
described in Section 3.5) shall be deemed not to be "Voting Securities" (or to
have Voting Power).
In addition, the following terms have the definitions
specified in the Sections noted:
Term Section
Actual Voting Power Threshold 3.1(b)
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<PAGE> 6
Agreement recitals
Beneficial Ownership Threshold 3.1(b)
Common Stock recitals
Company recitals
Disposition 4.1
Laidlaw 3.1(a)
Laidlaw Agreement 3.1(a)
Registration Rights recitals
Related Transferee 4.1(e)
Rule 144 Sale 4.1(b)
Shareholders recitals
Shareholder Designee Period 3.1(b)
Shares recitals
Standstill Period 2.1
TPG Group Agreement recitals
SECTION 1.2. Representations and Warranties of the Company.
The Company represents and warrants to Shareholders as follows:
(a) The execution, delivery and performance by the Company of
this Agreement and the consummation by the Company of the transactions
contemplated hereby are within its corporate powers and have been duly
authorized by all necessary corporate action on its part. This Agreement
constitutes a legal, valid and binding agreement of the Company enforceable
against the Company in accordance with its terms, subject, as to enforcement, to
bankruptcy, and insolvency, fraudulent transfer
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<PAGE> 7
reorganization, moratorium and similar laws of general applicability relating to
or affecting creditor's rights and to general equity principles.
(b) The execution, delivery and performance of this Agreement
by the Company does not and will not (i) contravene or conflict with or
constitute a default under the Company's Articles of Incorporation or By-laws,
(ii) contravene or conflict with or constitute a default under any agreement to
which the Company is a party or is bound, or result in a breach of or default
under any instrument or agreement to which the Company is a party or is bound,
which violation, breach or default would have a material adverse effect on the
Company's business taken as a whole or would adversely affect the consummation
of the transactions contemplated by this Agreement or the TPG Group Agreement,
(iii) violate any judgment, order, injunction, decree or award against or
binding upon the Company as of the date of this Agreement, the violation of
which, individually or in the aggregate, would have a material adverse effect on
the Company's business taken as a whole or would adversely affect the
consummation of the transactions contemplated by this Agreement or the TPG Group
Agreement or (iv) violate any Law relating to the Company, the violation of
which, individually or in the aggregate, would have a material adverse effect on
the Company's business taken as a whole or would adversely affect the
consummation of the transactions contemplated by this Agreement or the TPG Group
Agreement.
(c) Except for applicable requirements of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act")
and the Exchange Act, the Company is not required to make any filing or
registration with, or obtain any permit, authorization, consent or approval of,
any governmental entity or any other Person in
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connection with this Agreement, the TPG Agreement, or any of the transactions
contemplated hereby and thereby.
(d) As of the date of this Agreement, there is no action, suit
or proceeding pending or, to the knowledge of the Company, threatened against
the Company that relates to this Agreement, the TPG Group Agreement, or any of
the transactions contemplated hereby or thereby.
(e) As of the date hereof, the Company would be entitled to
make at least $1.00 in additional borrowings under the Credit Agreement between
the Company and NatWest Bank, N.A., as agent (the "Credit Agreement"), and the
consummation of the transactions contemplated by the TPG Group Agreement and
this Agreement will not, by themselves, limit the Company's ability to borrow
under the Credit Agreement.
(f) All documents which have been filed by the Company with
the Commission under the Exchange Act, at the time they were filed with the
Commission, conformed in all material respects with the requirements of Exchange
Act, and the rules and regulations of the Commission thereunder, and, as of the
date thereof and taken as a whole, as of the date hereof do not contain an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading.
(g) The Board of Directors of the Company has approved the
transfer of the Shares to the Shareholders pursuant to the TPG Group Agreement,
subject to the execution and delivery by the Shareholders of this Agreement.
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SECTION 1.3. Representations and Warranties of Shareholder.
Each Shareholder severally, but not jointly, represents and warrants to the
Company as follows:
(a) The execution, delivery and performance by such
Shareholder of this Agreement and the consummation by such Shareholder of the
transactions contemplated by this Agreement are within its powers and have been
duly authorized by all necessary action on its part. This Agreement constitutes
a legal, valid and binding agreement of such Shareholder enforceable against
such Shareholder in accordance with its terms, subject, as to enforcement, to
bankruptcy, and insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditor's rights
and to general equity principles.
(b) The execution, delivery and performance of this Agreement
by such Shareholder does not and will not contravene or conflict with or
constitute a default under such Shareholder's partnership agreement or similar
governing documents.
(c) As of the date of this Agreement, such Shareholder does
not beneficially own any Voting Securities except, to the extent such shares may
be deemed to be beneficially owned, the shares of Common Stock which are subject
to the TPG Group Agreement.
(d) A condition to the consummation of the purchase of the
Shares by the Shareholders pursuant to the TPG Group Agreement is that the four
persons designated to the Board of Directors by TPG Group shall have resigned,
and the Shareholders agree not to waive this condition without the prior written
consent of the Company.
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ARTICLE 2
Standstill
SECTION 2.1. Standstill. Until the earliest to occur of (A)
the sixth anniversary of the Closing Date, (B) the date on which Shareholders
own, collectively, Voting Securities which would represent (i) less than 10% of
the Total Voting Power and (ii) less than 10% of the Actual Voting Power and (C)
termination under Section 2.2 (such period, the "Standstill Period"), each
Shareholder will not, and will cause each of its Affiliates not to, directly or
indirectly:
(i) acquire, offer to acquire, or agree to acquire,
by purchase or otherwise, any Voting Securities or voting rights or
direct or indirect rights or options to acquire any Voting Securities
of the Company or any of its Affiliates other than (A) the exercise of
convertible securities acquired in compliance with the terms of this
Agreement, or an acquisition as a result of a stock split, stock
dividend or similar recapitalization, (B) the acquisition of shares of
Common Stock which are subject to the TPG Group Agreement, (C) in the
event that the Company shall have issued or sold securities entitled to
vote for the general election of directors, the acquisition of shares
of Common Stock to the extent necessary to maintain such Shareholder's
percentage of the Actual Voting Power as held immediately prior to such
issuance or sale, (D) with the prior written consent of the two most
senior executive officers of the Company, acquisitions by all
Shareholders of up to a collective aggregate amount of 3,000,000 shares
(as such number may be appropriately adjusted to reflect stock splits,
reverse stock splits, stock dividends or any other recapitalization of
the Company) of Common Stock, (E) stock options or similar rights
granted by the Company to an Affiliate of
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such Shareholder as compensation for performance as a director or
officer of the Company or its subsidiaries (and any shares issuable
upon exercise thereof), (F) transfers between such Shareholder and
Related Transferees as permitted under Section 4.1(e) or (G) any rights
which are granted to all shareholders of the Company (and any shares
issuable upon exercise thereof); provided, however, that if the
Shareholders or any of their Affiliates in good faith inadvertently
acquire not more than 500,000 shares of Common Stock in violation of
these provisions and within 15 days after the first date on which the
Shareholders have actual knowledge (including by way of written notice
given by the Company) that a violation has occurred Shareholders or any
of their Affiliates shall have transferred any shares of Common Stock
held in violation of these provisions to unrelated third parties so
that the Shareholders or any of their Affiliates no longer beneficially
own such shares or have any agreement or understanding relating to such
shares, this Section 2.1 shall be deemed to not have been violated; and
provided, further, that no violation of this provision shall be deemed
to have occurred by reason of the indirect acquisition of beneficial
ownership of securities resulting from (x) investments in investment
funds as to which no Shareholder or Affiliate has control or power to
control with respect to voting or investment decisions or (y)
acquisitions of securities by limited partners in any Shareholder or
its Affiliates as to limited partners which no Shareholder or its
Affiliates has control or power to control;
(ii) make or cause to be made any proposal for a
Reorganization Transaction;
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<PAGE> 12
(iii) form, join or in any way participate in a Group
with respect to any securities of the Company or its Affiliates, other
than with other Shareholders or Affiliates of any Shareholder;
provided, however, that in the case of securities other than voting
securities, Shareholders may participate in a Group with respect
thereto with the prior approval of a majority of the entire Board of
Directors (which approval is requested in a manner which does not
require disclosure publicly or to any third party);
(iv) make, or in any way cause or participate in, any
"solicitation" of "proxies" to vote (as those terms are defined in
Regulation 14A under the Exchange Act) with respect to the Company or
its Affiliates, or communicate with, seek to advise, encourage or
influence any Person, in any manner, with respect to the voting of,
securities of the Company or its Affiliates, or become a "participant"
in any "election contest" (as those terms are defined or used in Rule
14a-11 under the Exchange Act) with respect to the Company or its
Affiliates (other than non-public communications with other
Shareholders or Affiliates of any Shareholder which would not require
public disclosure by any Person);
(v) initiate, propose or, except with the prior
approval of a majority of the entire Board of Directors (which approval
is requested in a manner which does not require disclosure publicly or
to any third parties) otherwise solicit stockholders for the approval
of one or more stockholder proposals with respect to the Company or its
Affiliates or induce or attempt to induce any other Person to initiate
any stockholder proposal or seek election to or seek to place a
representative on the Board of Directors of the Company (except
pursuant to Section 3.1 of this Agreement) or its Affiliates or seek
the removal of any member
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<PAGE> 13
of the Board of Directors of the Company or its Affiliates (for this
purpose, the actions of the Shareholder Designees in communicating
(without public disclosure or disclosure to third parties) with the
Board of Directors in their capacity as directors of the Company, and
non-public communication by a Shareholder with other Shareholders or
Affiliates of any Shareholder which would not require public disclosure
by any Person, shall not be deemed to be in contravention of the
paragraph (v));
(vi) in any manner, agree, attempt, seek or propose
(other than making any request for permission with respect thereto
which would not require disclosure publicly or to any third party) to
deposit any securities of the Company or its Affiliates in any voting
trust or similar arrangement or to subject any securities of the
Company or its Affiliates to any other voting or proxy agreement,
arrangement or understanding (other than any such agreements or
understandings with other Shareholders or Affiliates of any
Shareholder);
(vii) offer, sell or transfer any Common Stock or
rights to receive Common Stock except for Dispositions in accordance
with Article 4;
(viii) disclose any intention, plan or arrangement,
or make any public announcement (or request permission to make any such
announcement other than making any request for permission which would
not require disclosure publicly or to any third party), or induce any
other Person to take any action, inconsistent with the foregoing;
(ix) enter into any negotiations, arrangements or
understandings with any third party with respect to any of the
foregoing;
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<PAGE> 14
(x) advise, assist or encourage or finance (or assist
or arrange financing to or for) any other Person in connection with any
of the foregoing;
(xi) otherwise act in concert with others, to seek to
control or influence the management, Board of Directors or policies of
the Company or its Affiliates (for this purpose, the actions of the
Shareholder Designees in their capacity as directors of the Company
shall not be deemed to be in contravention of this paragraph (xi)); or
(xii) request a waiver of any of the provisions of
paragraphs (i) through (xi) above (except any request which would not
require disclosure publicly or to any third party);
provided, that this Section 2.1 shall not restrict or inhibit the rights of a
Shareholder to exercise its voting rights as a stockholder of the Company
(subject to Section 3.2).
SECTION 2.2. Early Termination of Standstill. The obligations
of Shareholders under Section 2.1 shall terminate upon the occurrence of any of
the following events:
(a) At least $10,000,000 in indebtedness for monies borrowed
by the Company or its subsidiaries shall have been accelerated and payment
therefor shall not have been made within 20 days after such acceleration, and
the Company shall not in good faith be contesting whether such amount is owed.
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<PAGE> 15
(b) A final judgment or judgments (not subject to appeal) for
the payment of money shall have been entered against the Company or its
subsidiaries in an aggregate amount in excess of $10,000,000 (exclusive of any
amounts fully covered by insurance (less any applicable deductible) or
indemnification) by a court or courts of competent jurisdiction, which judgments
remain unsatisfied, undischarged, unstayed or unbonded for a period of 45 days
after the entry of such judgment or judgments.
(c) The Company shall file a petition in bankruptcy or for
reorganization or for an arrangement or any composition, readjustment,
liquidation, dissolution or similar relief pursuant to Title 11 of the United
States Code or under any similar present or future federal law or the law of any
other jurisdiction or shall be adjudicated a bankrupt or insolvent, or consent
to the appointment of or taking possession by a receiver, liquidator, assignee,
trustee, custodian, sequestrator (or other similar official) of the Company or
for all or any substantial part of its property, or shall make a general
assignment for the benefit of its creditors.
(d) A petition or answer shall be filed proposing the
adjudication of the Company as bankrupt or its reorganization or arrangement, or
any composition, readjustment, liquidation, dissolution or similar relief with
respect to it pursuant to Title 11 of the United States Code or under any
similar present or future federal law or the law of any other jurisdiction, and
the Company shall consent to or acquiesce in the
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<PAGE> 16
filing thereof, or such petition or answer shall not be discharged or denied
within 60 days after the filing thereof.
(e) The Company shall be in material breach of its obligations
to Shareholders under the Registration Rights and such breach shall not have
been cured within 20 days after receipt by the Company from Shareholders of a
written notice specifying such breach and requiring it to be remedied, and the
Company shall not in good faith be contesting whether such breach has occurred.
(f) If the Company shall, in breach of its obligations under
this Agreement, fail to nominate for election to the Board of Directors any
Shareholder Designee who satisfies the requirements for designation to the Board
of Directors set forth in Sections 3.1(d).
ARTICLE 3
Board Representation and Voting
SECTION 3.1. Board Representation. (a) As of the Closing Date
and during the Standstill Period the Board of Directors shall consist of no more
than twelve (12) directors as follows: (A) two directors shall be executive
officers of the Company; (B) up to two directors, as determined pursuant to
Sections 3.1(b) and 3.1(c), shall be Shareholder Designees; (C) for so long as
required under the Stock Purchase Agreement dated as of September 17, 1996, as
the same may be amended (the "Laidlaw
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<PAGE> 17
Agreement"), by and among the Company, Allied Holding (United States), Inc., a
Delaware corporation, Laidlaw, Inc., a Canadian corporation ("Laidlaw"), and
certain of Laidlaw's subsidiaries, two directors as shall be designated in
accordance with the Laidlaw Agreement; and (D) each other director shall be an
individual who is not a partner, employee, director, officer or affiliate of any
Shareholder or any employee or officer of the Company; provided, however, that
if Mr. O'Leary ceases to serve as a director, the Board of Directors shall
thereafter consist of no more than eleven (11) directors during the Standstill
Period.
For so long as Shareholders are entitled to two Shareholder
Designees under this Agreement, Shareholders shall be entitled to have one
Shareholder Designee serve on each committee of the Board of Directors other
than any committee formed for the purpose of considering matters relating to the
Shareholders.
(b) On the Closing Date, the Company will cause Anthony P.
Ressler and Howard A. Lipson or, subject to Section 3.1(d), such other
substitute persons as may be designated by Shareholders and be reasonably
acceptable to the Company, to be elected to the Board of Directors. Until the
earlier to occur of the sixth anniversary of the Closing Date and the date on
which Shareholders own, collectively, less than 20% of the Shares (the
"Shareholder Designee Period"), the Company agrees, subject to Section 3.1(d),
to support the nomination of, and the Company's nominating committee (or any
other committee exercising a similar function) shall recommend to the Board of
Directors that, (A) two Shareholder Designees, so long as Shareholders
beneficially own 50% or more of the Shares and (B) one Shareholder Designee, so
long as Shareholders beneficially own 20% or more and less than 50% of the
Shares (each a "Beneficial Ownership Threshold"), be included in the slate of
nominees recommended by the Board
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<PAGE> 18
of Directors to shareholders for election as directors at each annual meeting of
shareholders of the Company commencing with the next annual meeting of
shareholders. Notwithstanding the foregoing, if at any time as a result of the
Company's issuance of Voting Securities Shareholders beneficially own 9% or less
of the Actual Voting Power (the "Actual Voting Power Threshold"), Shareholders
shall be entitled to no more than one Shareholder Designee. In the event that
any of the Shareholder Designees shall cease to serve as a director for any
reason, the Board of Directors shall fill the vacancy resulting thereby, subject
to the terms of this Agreement, with a person designated by Shareholders,
subject to Section 3.1(d) (and such person shall be a "Shareholder Designee" for
purposes of this Agreement). The foregoing provision shall be effected pursuant
to an amendment to the Company's By-laws in a form reasonably acceptable to the
parties to this Agreement which shall not be further amended by the Board of
Directors during the Shareholder Designee Period.
Notwithstanding the foregoing, the Company shall have no
obligation to support the nomination, recommendation or election of any
Shareholder Designee pursuant to this Section 3.1(b) if Shareholders are in
breach of any material provision of this Agreement.
(c) Upon any decrease in Shareholders' beneficial ownership of
Common Stock below any Beneficial Ownership Threshold or Voting Securities below
the Actual Voting Power Threshold, Shareholders shall cause a number of
Shareholder Designees to offer to immediately resign from the Company's Board of
Directors such that the number of Shareholder Designees serving on the Board of
Directors immediately thereafter will be equal to the number of Shareholder
Designees which Shareholders would then be entitled to designate under Section
3.1(b). Upon termination of the
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Shareholder Designee Period, Shareholders shall promptly offer to cause all of
the Shareholder Designees to resign from the Board of Directors and any
committees thereof and the Company's obligations under this Section 3.1 shall
terminate.
(d) Notwithstanding the provisions of this Section 3.1,
Shareholder shall not be entitled to designate any person to the Company's Board
of Directors (or any committee thereof) in the event that the Company receives a
written opinion of its outside counsel that a Shareholder Designee would not be
qualified under any applicable law, rule or regulation to serve as a director of
the Company or if the Company objects to a Shareholder Designee because such
Shareholder Designee has been involved in any of the events enumerated in Item
2(d) or (e) of Schedule 13D or such person is currently the target of an
investigation by any governmental authority or agency relating to felonious
criminal activity or is subject to any order, decree, or judgment of any court
or agency prohibiting service as a director of any public company or providing
investment or financial advisory services and, in any such event, the
Shareholder shall withdraw the designation of such proposed Shareholder Designee
and designate a replacement therefor (which replacement Shareholder Designee
shall also be subject to the requirements of this Section). The Company shall
use its reasonable best efforts to notify the Shareholder of any objection to a
Shareholder Designee sufficiently in advance of the date on which proxy
materials are mailed by the Company in connection with such election of
directors to enable the Shareholder to propose a replacement Shareholder
Designee in accordance with the terms of this Agreement.
(e) Each Shareholder Designee serving on the Board of
Directors shall be entitled to all compensation and stock incentives granted to
directors who are not employees of the Company on the same terms provided to
such directors.
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<PAGE> 20
SECTION 3.2. Voting. (a) Each Shareholder agrees that during
the Standstill Period such Shareholder shall, and shall cause its Affiliates and
any Person which is a member of any Group of which such Shareholder or any of
its Affiliates is a member to, be present, in person or represented by proxy, at
all meetings of shareholders of the Company so that all Voting Securities
beneficially owned by such Shareholder shall be counted for the purpose of
determining the presence of a quorum at such meetings. Each Shareholder agrees
that during the Standstill Period:
(i) In connection with (A) the election of directors
of the Company and (B) any proposal for a Reorganization Transaction,
such Shareholder shall vote or cause to be voted, or consent with
respect to, all Voting Securities beneficially owned by such
Shareholder in the manner recommended by a majority of the entire Board
of Directors.
(ii) In connection with other proposals submitted to
shareholders of the Company, such Shareholder shall be free to vote or
cause to be voted, or consent with respect to, all Voting Securities
beneficially owned by such Shareholder in its discretion.
SECTION 3.3. Notices of Dispositions of Voting Securities. Not
later than the tenth day following the end of any calendar month during the
Standstill Period in which one or more Dispositions of Voting Securities by a
Shareholder or any of its Affiliates shall have occurred, such Shareholder shall
use its reasonable best efforts to give written notice to the Company of all
such Dispositions (in the case of Dispositions by Affiliates, to the extent it
has knowledge) unless any such Disposition has been reflected in a public filing
that was delivered to the Company on or in advance of the date upon which notice
thereof under this Section 3.3 would have been due. Such notice shall
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<PAGE> 21
state the date upon which each such Disposition was effected, the number and
type of Voting Securities involved in each such Disposition, the means by which
each such Disposition was effected and, to the extent known, the identity of the
Person acquiring Voting Securities.
ARTICLE 4
Transfer Restrictions
SECTION 4.1. Restrictions on Dispositions. During the
Standstill Period, each Shareholder shall not, and shall cause its Affiliates
not to, directly or indirectly (including, without limitation, through the
disposition or transfer of control of another Person), sell, assign, donate,
transfer, pledge, hypothecate, grant any option with respect to or otherwise
dispose of any interest in (or enter into an agreement or understanding with
respect to the foregoing) any Voting Securities (a "Disposition"), except as set
forth below in this Section 4.1. Without limiting the generality of the
foregoing, any sale of securities held by any Shareholder or any of its
Affiliates which is currently (or following the passage of time, the occurrence
of any event or the giving of notice), directly or indirectly, exchangeable or
exercisable for, or convertible into, any Voting Securities shall constitute a
Disposition of such Voting Securities.
Dispositions may be effected by a Shareholder during the
Standstill Period as follows:
(a) Dispositions of Voting Securities may be made at any time
in compliance with the Registration Rights.
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<PAGE> 22
(b) Dispositions of Voting Securities may be made pursuant to
sales effected in accordance with Rule 144 under the Securities Act (a "Rule 144
Sale"); provided that such Dispositions shall not be made to any Person who or
which would immediately thereafter, to the knowledge of such Shareholder, any of
its Affiliates, or such Shareholder's broker, beneficially own Voting Securities
representing 9% or more of the Total Voting Power (and such Person shall have
provided a certificate to such effect).
(c) Prior to the second anniversary of the Closing Date,
Dispositions may be made to any Person which is a financial institution acting
on its own behalf or ultimately on the behalf of another financial institution
or institutions that would, following such sale, beneficially own no more than
9% of the Total Voting Power. After the second anniversary of the Closing Date,
Dispositions may be made to any Person (other than pursuant to a Reorganization
Transaction) that would, following such sale, beneficially own no more than 9%
of the Total Voting Power (and such Person shall have provided a certificate to
such effect).
(d) Dispositions may be made pursuant to a merger transaction
or a tender offer for all of the outstanding shares of Common Stock which is
recommended to the shareholders of the Company generally by at least a majority
of the entire Board of Directors, on the terms and conditions of such
transaction available to all other holders of shares of Common Stock.
(e) Dispositions may be made by a Shareholder to (i) any other
Shareholder or (ii) any Affiliate of any Shareholder that executes an instrument
in form and substance satisfactory to the Company in which it makes the
representations and warranties set forth in Section 1.3(b) as of the date of the
execution of such instrument
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and agrees to be bound by the terms of this Agreement as if an original
signatory to this Agreement (such transferee, a "Related Transferee"), in which
case such Related Transferee shall thereafter be a "Shareholder" for all
purposes of this Agreement.
(f) With respect to Voting Securities which are, by their
terms, convertible into or exercisable or exchangeable for other Voting
Securities such conversion, exercise or exchange shall not be deemed a
Disposition.
(g) Each Shareholder agrees that during the Standstill Period,
without the consent of the managing underwriter(s) in an underwritten offering
in respect of the Company's Voting Securities, it will not effect any sale or
distribution of Voting Securities (other than in connection with such
Shareholder's own registration pursuant to paragraph (b) of this Section 4.1),
including a Rule 144 Sale, during the ten (10) day period prior to, and during
the ninety (90) day period beginning on, the effective date of the registration
statement filed by the Company in respect of such underwritten offering.
ARTICLE 5
Miscellaneous
SECTION 5.1. Notices. All notices, requests, demands and other
communications required or permitted hereunder shall be made in writing by
hand-delivery, registered first-class mail, telex, fax or air courier
guaranteeing delivery:
(a) If to the Company, to:
Allied Waste Industries, Inc.
7701 East Camelback Road, Suite 375
Scottsdale, Arizona 85251
Attn: Roger A. Ramsey
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<PAGE> 24
Fax: (602) 481-9347
with copies to:
Porter & Hedges, L.L.P.
700 Louisiana Street, Suite 3500
Houston, Texas 77002
Attn: Robert G. Reedy
Fax: (713) 228-1331
and to:
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, New York 10004
Attn: Arthur Fleischer, Jr.
Fax: (212) 859-4000
or to such other person or address as the Company shall furnish to Shareholders
in writing;
(b) If to Shareholders, to:
Apollo Management, L.P.
1999 Avenue of the Stars, Suite 1900
Los Angeles, CA 90067
Attn: David Kaplan
Fax: (310) 201-4198
with a copy to:
Milbank, Tweed, Hadley & McCloy
601 South Figueroa Street, 30th Floor
Los Angeles, CA 90017
Attn: Kenneth J. Baronsky, Esq.
Fax: (213) 629-5063
and:
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<PAGE> 25
The Blackstone Group
345 Park Avenue
New York, NY 10154
Attn: Howard A. Lipson
Fax: (212) 754-8716
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017
Attn: Wilson S. Neely, Esq.
Fax: (212) 455-2502
or to such other person or address as Shareholders shall furnish to the Company
in writing.
All such notices, requests, demands and other communications
shall be deemed to have been duly given: at the time of delivery by hand, if
personally delivered; five (5) Business Days after being deposited in the mail,
postage prepaid, if mailed domestically in the United States (and seven (7)
Business Days if mailed internationally); when answered back, if telexed; when
receipt acknowledged, if telecopied; and on the Business Day for which delivery
is guaranteed, if timely delivered to an air courier guaranteeing such delivery.
SECTION 5.2. Legends. (a) If requested in writing by the
Company, a Shareholder shall present or cause to be presented promptly all
certificates representing Voting Securities beneficially owned by such
Shareholder or any of its Affiliates, for the placement thereon of a legend
substantially to the following effect, which legend will remain thereon so long
as such legend is required under applicable securities laws:
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<PAGE> 26
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS
AMENDED, OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES. SUCH SHARES MAY NOT BE OFFERED, SOLD, TRANSFERRED,
PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF IN THE ABSENCE
OF SUCH A REGISTRATION THEREUNDER OTHER THAN PURSUANT TO AN
EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS AND DELIVERY TO
ALLIED WASTE INDUSTRIES, INC. OF AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO IT TO THE EFFECT THAT SUCH TRANSFER
IS EXEMPT FROM REGISTRATION UNDER THOSE LAWS."
(b) Each Shareholder shall present or cause to be presented
promptly all certificates representing Voting Securities beneficially owned by
such Shareholder or any of its Affiliates, for the placement thereon of a legend
substantially to the following effect, which legend will remain thereon during
the Standstill Period as long as such Voting Securities are beneficially owned
by any Shareholder or a Affiliate:
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE
PROVISIONS OF A SHAREHOLDERS AGREEMENT, DATED AS OF APRIL 14,
1997, BETWEEN ALLIED WASTE
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<PAGE> 27
INDUSTRIES, INC. ("ALLIED") AND CERTAIN SHAREHOLDERS OF ALLIED
NAMED THEREIN AND MAY NOT BE OFFERED, SOLD, TRANSFERRED,
PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF EXCEPT IN
ACCORDANCE THEREWITH. A COPY OF SAID AGREEMENT IS ON FILE AT
THE OFFICE OF THE CORPORATE SECRETARY OF ALLIED"
(c) The Company may enter a stop transfer order with the
transfer agent or agents of Voting Securities against any Disposition not in
compliance with the provisions of this Agreement.
SECTION 5.3. Enforcement. Shareholders, on the one hand, and
the Company, on the other hand, acknowledge and agree that irreparable injury to
the other party would occur in the event any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached and that such injury would not be adequately compensable in damages. It
is accordingly agreed that, in addition to any other remedies which may be
available at law or in equity, each party hereto (the "Moving Party") shall be
entitled to specific enforcement of, and injunctive relief to prevent any
violation of, the terms of this Agreement, and the other parties hereto will not
take action, directly or indirectly, in opposition to the Moving Party seeking
such relief on the grounds that any other remedy or relief is available at law
or in equity. The parties further agree that no bond shall be required as a
condition to the granting of any such relief.
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SECTION 5.4. Entire Agreement. This Agreement constitutes the
entire agreement and understanding of the parties with respect to the
transactions contemplated hereby. This Agreement may be amended only by a
written instrument duly executed by the parties or their respective successors
or assigns; provided, however, that any amendment or waiver by the Company shall
be made only with the prior approval of a majority of the directors of the
Company other than Shareholder Designees.
SECTION 5.5. Severability. Whenever possible, each provision
or portion of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law, but if any provision or portion of any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law, rule or regulation in any jurisdiction,
such invalidity, illegality or unenforceability will not affect any other
provision or portion of any provision in such jurisdiction, and this Agreement
will be reformed, construed and enforced in such jurisdiction as if such
invalid, illegal or unenforceable provision or portion of any provision shall
have been replaced with a provision which shall, to the maximum extent
permissible under such applicable law, rule or regulation, give effect to the
intention of the parties as expressed in such invalid, illegal or unenforceable
provision.
SECTION 5.6. Headings. Descriptive headings contained in the
Agreement are for convenience only and will not control or affect the meaning or
construction of any provision of this Agreement.
SECTION 5.7. Counterparts. For the convenience of the parties,
any number of counterparts of this Agreement may be executed by the parties, and
each such executed counterpart will be an original instrument.
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<PAGE> 29
SECTION 5.8. No Waiver. Any waiver by any party of a breach of
any provision of this Agreement shall not operate as or be construed to be a
waiver of any other breach of such provision or of any breach of any other
provision of this Agreement. The failure of a party to insist upon strict
adherence to any term of this Agreement on one or more occasions shall not be
considered a waiver or deprive that party of the right thereafter to insist upon
strict adherence to that term or any other term of this Agreement.
SECTION 5.9. Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the Company and Shareholders, and to
their respective successors and assigns other than, in the case of Shareholders,
transferees that are not Related Transferees, including any successors to the
Company or Shareholders or their businesses or assets as the result of any
merger, consolidation, reorganization, transfer of assets or otherwise, and any
subsequent successor thereto, without the execution or filing of any instrument
or the performance of any act; provided that no party may assign this Agreement
without the other party's prior written consent, except by the Shareholders to a
Shareholder or a Related Transferee as expressly provided in this Agreement (and
that nothing herein restricts the transfer of Registration Rights in accordance
their terms).
SECTION 5.10. Governing Law. This Agreement will be governed
by and construed and enforced in accordance with the internal laws of the State
of Delaware, without giving effect to the conflict of laws principles thereof.
SECTION 5.11. Further Assurances. From time to time on and
after the date of this Agreement, the Company and Shareholders, as the case may
be, shall deliver or cause to be delivered to the other party hereto such
further documents and instruments and shall do and cause to be done such further
acts as the other parties hereto shall reasonably request to carry out more
effectively the provisions and purposes of this
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<PAGE> 30
Agreement, to evidence compliance herewith or to assure that it is protected in
acting hereunder.
SECTION 5.12. Consent to Jurisdiction and Service of Process.
Any legal action or proceeding with respect to this Agreement or any matters
arising out of or in connection with this Agreement, and any action for
enforcement of any judgment in respect thereof shall be brought exclusively in
the state or federal courts located in the State of Delaware, and, by execution
and delivery of this Agreement, the Company and Shareholders each irrevocably
consent to service of process out of any of the aforementioned courts in any
such action or proceeding by the mailing of copies thereof by registered or
certified mail, postage prepaid, or by recognized international express carrier
or delivery service, to the Company or Shareholders at their respective
addresses referred to in this Agreement. The Company and Shareholders each
hereby irrevocably waives any objection which it may now or hereafter have to
the laying of venue of any of the aforesaid actions or proceedings arising out
of or in connection with this Agreement brought in the courts referred to above
and hereby further irrevocably waives and agrees, to the extent permitted by
applicable law, not to plead or claim in any such court that any such action or
proceeding brought in any such court has been brought in an inconvenient forum.
Nothing in this Agreement shall affect the right of any party hereto to serve
process in any other manner permitted by law.
SECTION 5.13. Shareholder Action. The Company shall be
entitled to rely upon any written notice, designation, or instruction signed by
Apollo Capital Management II, Inc. and BCP (the "Representatives") as a notice,
designation or instruction of all Shareholders and the Company shall not be
liable to any Shareholder if the Company acts in accordance with and relies upon
such writing. In that regard, each of
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the Shareholders acknowledges that the Representatives have full power and
authority to act on their behalf.
SECTION 5.14. Registration Rights. Upon closing of the
acquisition of the Shares pursuant to the TPG Group Agreement, any previous
demand by TPG Group for a shelf registration with respect to certain of the
Shares shall be deemed withdrawn and the parties shall disregard such demand and
treat such demand as if it were never made; provided that the Shareholders may
reinstate such demand at any time after the Closing Date.
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<PAGE> 32
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the date first referred to above.
ALLIED WASTE INDUSTRIES, INC.
By: /s/ Thomas H. Van Weelden
-------------------------------------------
Title: President
APOLLO INVESTMENT FUND III, L.P.
APOLLO OVERSEAS PARTNERS III, L.P.
APOLLO (U.K.) PARTNERS III, L.P.
By: Apollo Advisors II, L.P.
By: Apollo Capital Management II, Inc.
By: /s/ David Kaplan
-------------------------------------------
Title: V.P.
BLACKSTONE CAPITAL PARTNERS II
MERCHANT BANKING FUND L.P.
BLACKSTONE OFFSHORE CAPITAL
PARTNERS II L.P.
BLACKSTONE FAMILY INVESTMENT
PARTNERSHIP II L.P.
By: Blackstone Management Associates II L.L.C.
By: /s/ Howard A. Lipson
-------------------------------------------
Title: Senior Managing Director
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<PAGE> 1
EXHIBIT 10.3
AMENDED AND RESTATED SHAREHOLDERS AGREEMENT
This Amended and Restated Shareholders Agreement (this
"Agreement"), dated as of April 21, 1997, by and between Allied Waste
Industries, Inc., a Delaware corporation (the "Company"), on the one hand, and
Apollo Investment Fund III, L.P., a Delaware limited partnership, Apollo
Overseas Partners III, L.P., a Delaware limited partnership, Apollo (U.K.)
Partners III, L.P., an English limited partnership, Blackstone Capital Partners
II Merchant Banking Fund L.P., a Delaware limited partnership ("BCP"),
Blackstone Offshore Capital Partners II L.P., a Cayman Islands limited
partnership, and Blackstone Family Investment Partnership II L.P., a Delaware
limited partnership (collectively, "Shareholders"), on the other hand, amending
and restating in its entirety the Shareholders Agreement dated as of April 14,
1997 (the "Original Agreement"), by and between the Company, on the one hand,
and the Shareholders, on the other hand.
WHEREAS, simultaneously with the execution of the Original
Shareholders Agreement, Shareholders entered into an agreement (the "TPG Group
Purchase Agreement") to purchase an aggregate of 11,776,765 shares (the "TPG
Group Block") of the Company's common stock, par value $.01 per share (the
"Common Stock"), from TPG Partners, L.P., a Delaware limited partnership, and
TPG Parallel I, L.P., a Delaware limited partnership (collectively, "TPG
Group");
WHEREAS, concurrently with the acquisition of the TPG Group
Block by Shareholders pursuant to the TPG Group Purchase Agreement, TPG Group
intends to assign to Shareholders its registration rights with respect to the
TPG Group Block under Article IV of the Securities Purchase Agreement dated as
of October 27, 1994, as amended, by and between TPG Group and the Company;
<PAGE> 2
WHEREAS, under the Original Stockholders Agreement, the
Company granted to Shareholders, effective upon the closing of the acquisition
of the TPG Group Block pursuant to the TPG Group Purchase Agreement, the right
as a group to appoint certain designees for election to the Board of Directors
of the Company and agreed to certain restrictions on the acquisition and
disposition of Common Stock and the conduct of Shareholders with respect to the
Company;
WHEREAS, simultaneously with the execution of this Agreement,
Shareholders are entering into (i) a Securities Purchase Agreement (the "Laidlaw
Purchase Agreement") with Laidlaw, Inc., a Canadian corporation ("Laidlaw"),
Laidlaw Transportation, Inc., a Delaware corporation, and the Company, pursuant
to which, among other things, the Shareholders have agreed to purchase an
aggregate of 14,600,000 shares of Common Stock (the "Laidlaw Block" and together
with the TPG Group Block, the "Shares") from Laidlaw and (ii) a Registration
Rights Agreement (the "Registration Rights Agreement") with respect to the
Shares granting certain registration rights and superseding all other
registration rights with respect to the Shares;
WHEREAS, in recognition of Shareholders' significant change in
ownership in the Company, upon the closing of the purchase of the Laidlaw Block
pursuant to the Laidlaw Purchase Agreement, the parties desire to amend and
restate the Original Shareholders Agreement in its entirety (except as may be
otherwise set forth herein) as set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained in this Agreement and in the Registration Rights Agreement
and intending to be legally bound hereby, the parties agree as follows,
effective upon the
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<PAGE> 3
closing of the purchase of the Laidlaw Block pursuant to the Laidlaw Purchase
Agreement:
ARTICLE 1
Definitions; Representations and Warranties
SECTION 1.1 Definitions. Unless otherwise specified all
references to "days" shall be deemed to be references to calendar days. For
purposes of this Agreement, the following terms shall have the following
meanings:
"Actual Voting Power" shall mean the total voting power of all
the then outstanding securities of the Company at the time then entitled to vote
for the general election of directors, without giving effect to securities
issuable upon exercise or conversion of such outstanding securities.
"Affiliate" of a Person shall have the meaning set forth in
Rule 12b-2 of the Exchange Act as in effect on the date of this Agreement, but
shall not include (i) any investment fund in which a Person has invested if the
Person does not otherwise control the investment fund or have, directly or
indirectly, voting or dispositive power over any securities owned by such fund
or (ii) any investor or limited partner of any Person who does not otherwise
have voting or dispositive power over securities owned by that Person and is not
controlled by that Person. It is expressly intended that any Person who now or
hereafter controls, directly or indirectly, any Shareholder shall be subject to
the restrictions of Section 2.1 as if it were a Shareholder.
"Beneficial ownership" by a Person of any Voting Securities
shall be determined in accordance with the term "beneficial ownership" as
defined in Rule 13d-3
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<PAGE> 4
under the Exchange Act as in effect on the date of this Agreement and, in
addition, "beneficial ownership" shall include securities which such Person has
the right to acquire (irrespective of whether such right is exercisable
immediately or only after the passage of time, including the passage of time in
excess of sixty (60) days) pursuant to any agreement, arrangement or
understanding or upon the exercise of conversion rights, exchange rights,
warrants or options, or otherwise. For purposes of this Agreement, a Shareholder
shall be deemed to beneficially own any Voting Securities beneficially owned by
its Affiliates or any Group of which such Shareholder or any such Affiliate is a
member.
"Board of Directors" shall mean the Board of Directors of the
Company.
"Commission" shall mean the Securities and Exchange
Commission.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
"First Closing Date" shall mean the date of the closing of the
purchase of the TPG Group Block by Shareholders pursuant to the TPG Group
Purchase Agreement.
"Group" shall mean a "group" as such term is used in Section
13(d)(3) of the Exchange Act as in effect on the date of this Agreement.
"Laws" shall mean all applicable foreign, federal, state and
local laws, statutes, rules, regulations, codes and ordinances.
"Person" shall mean any individual, Group, corporation,
general or limited partnership, limited liability company, governmental entity,
joint venture, estate, trust, association, organization or other entity of any
kind or nature.
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<PAGE> 5
"Reorganization Transaction" means: (i) any merger,
consolidation, recapitalization, liquidation or other business combination
transaction involving the Company; (ii) any tender offer or exchange offer for
any securities of the Company; or (iii) any sale or other disposition of assets
of the Company or any of its Subsidiaries in a single transaction or in a series
of related transactions in each of the foregoing cases constituting individually
or in the aggregate 10% or more of the assets or Voting Securities (as
applicable) of the Company.
"Second Closing Date" shall mean the date of the closing of
the purchase of the Laidlaw Block by Shareholders pursuant to the Laidlaw
Purchase Agreement.
"Securities Act" shall mean the Securities Act of 1933, as
amended.
"Shareholder Designee" shall mean a person designated for
election to the Board of Directors by Shareholders as provided in Section 3.1.
"Total Voting Power" shall mean the total combined Voting
Power, on a fully diluted basis, of all the Voting Securities then outstanding.
"Voting Power" shall mean the voting power in the general
election of directors of the Company, and shall be calculated for each Voting
Security by reference to the maximum number of votes such Voting Security is or
would be entitled to cast in the general election of directors, and, in the case
of convertible (or exercisable or exchangeable) securities, by reference to the
maximum number of votes such Voting Security would be entitled to cast in
unconverted or converted (or exercised, unexercised, exchanged or unexchanged)
status. For purposes of determining Voting Power under this Agreement, a Voting
Security which is convertible into or exchangeable for a Voting Security shall
be counted as having the greater of (i) the number of votes to which such
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<PAGE> 6
Voting Security is entitled prior to conversion or exchange and (ii) the number
of votes to which the Voting Security into which such Voting Security is
convertible or exchangeable is entitled. Notwithstanding anything else to the
contrary contained in this Agreement, there shall not be included in calculating
Voting Power any votes which a Person shall have upon the non-payment of
dividends on preferred shares in accordance with the terms of such preferred
shares.
"Voting Securities" shall mean (x) any securities entitled, or
which may be entitled, to vote generally in the election of directors of the
Company, (y) any securities convertible or exercisable into or exchangeable for
such securities (whether or not the right to convert, exercise or exchange is
subject to the passage of time or contingencies or both), or (z) any direct or
indirect rights or options to acquire any such securities; provided that
unexercised options granted pursuant to any employment benefit or similar plan
and rights issued pursuant to any shareholder rights plan (including that
described in Section 3.5) shall be deemed not to be "Voting Securities" (or to
have Voting Power).
In addition, the following terms have the definitions
specified in the Sections noted:
Term Section
---- -------
Actual Voting Power Threshold 3.1(b)
Agreement recitals
Beneficial Ownership Threshold 3.1(b)
Common Stock recitals
Company recitals
Disposition 4.1
Laidlaw recitals
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<PAGE> 7
Laidlaw Purchase Agreement recitals
Laidlaw Block recitals
Registration Rights Agreement recitals
Related Transferee 4.1(f)
Rule 144 Sale 4.1(c)
Shareholders recitals
Shareholder Designee Period 3.1(b)
Shares recitals
Standstill Period 2.1
TPG Group Block recitals
TPG Group Purchase Agreement recitals
SECTION 1.2. Representations and Warranties of the Company.
The Company represents and warrants to Shareholders as follows:
(a) The execution, delivery and performance by the Company of
this Agreement and the consummation by the Company of the transactions
contemplated hereby are within its corporate powers and have been duly
authorized by all necessary corporate action on its part. This Agreement
constitutes a legal, valid and binding agreement of the Company enforceable
against the Company in accordance with its terms, subject, as to enforcement, to
bankruptcy, and insolvency, fraudulent transfer reorganization, moratorium and
similar laws of general applicability relating to or affecting creditor's rights
and to general equity principles.
(b) The execution, delivery and performance of this Agreement
by the Company does not and will not (i) contravene or conflict with or
constitute a default
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<PAGE> 8
under the Company's Certificate of Incorporation or Bylaws, (ii) contravene or
conflict with or constitute a default under any agreement to which the Company
is a party or is bound, or result in a breach of or default under any instrument
or agreement to which the Company is a party or is bound, which violation,
breach or default would have a material adverse effect on the Company's business
taken as a whole or would adversely affect the consummation of the transactions
contemplated by this Agreement or the Laidlaw Purchase Agreement, (iii) violate
any judgment, order, injunction, decree or award against or binding upon the
Company as of the date of this Agreement, the violation of which, individually
or in the aggregate, would have a material adverse effect on the Company's
business taken as a whole or would adversely affect the consummation of the
transactions contemplated by this Agreement or the Laidlaw Purchase Agreement,
(iv) violate any Law relating to the Company, the violation of which,
individually or in the aggregate, would have a material adverse effect on the
Company's business taken as a whole or would adversely affect the consummation
of the transactions contemplated by this Agreement or the Laidlaw Purchase
Agreement or (v) constitute a "change of control," or result in the acceleration
of rights, under any material debt instrument to which the Company is a party.
(c) Except for applicable requirements of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act")
and the Exchange Act, the Company is not required to make any filing or
registration with, or obtain any permit, authorization, consent or approval of,
any governmental entity or any other Person in connection with this Agreement,
the Laidlaw Purchase Agreement, or any of the transactions contemplated hereby
and thereby.
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<PAGE> 9
(d) As of the date of this Agreement, there is no action, suit
or proceeding pending or, to the knowledge of the Company, threatened against
the Company that relates to this Agreement, the TPG Group Purchase Agreement,
the Laidlaw Purchase Agreement, or any of the transactions contemplated hereby
or thereby.
(e) As of the date hereof, the Company would be entitled to
make at least $1.00 in additional borrowings under the Credit Agreement (the
"Credit Agreement") among the Company, Allied Waste North America, Inc. and the
various lenders represented by Goldman Sachs Credit Partners, L.P., Credit
Suisse and Citibank, N.A., and the consummation of the transactions contemplated
by the Laidlaw Purchase Agreement and this Agreement will not, by themselves,
limit the Company's ability to borrow under the Credit Agreement.
(f) All documents which have been filed by the Company with
the Commission under the Exchange Act, at the time they were filed with the
Commission, conformed in all material respects with the requirements of Exchange
Act, and the rules and regulations of the Commission thereunder, and, as of the
date thereof and taken as a whole as of the date hereof do not contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading.
(g) The Board of Directors of the Company has approved the
transfer of the Laidlaw Block to the Shareholders pursuant to the Laidlaw
Purchase Agreement, subject to the execution and delivery by the Shareholders of
this Agreement.
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<PAGE> 10
SECTION 1.3. Representations and Warranties of Shareholder.
Each Shareholder severally, but not jointly, represents and warrants to the
Company as follows:
(a) The execution, delivery and performance by such
Shareholder of this Agreement and the consummation by such Shareholder of the
transactions contemplated by this Agreement are within its powers and have been
duly authorized by all necessary action on its part. This Agreement constitutes
a legal, valid and binding agreement of such Shareholder enforceable against
such Shareholder in accordance with its terms, subject, as to enforcement, to
bankruptcy, and insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditor's rights
and to general equity principles.
(b) The execution, delivery and performance of this Agreement
by such Shareholder does not and will not contravene or conflict with or
constitute a default under such Shareholder's partnership agreement or similar
governing documents.
(c) As of the date of this Agreement, such Shareholder does
not beneficially own any Voting Securities except (i) any Voting Securities
beneficially owned on the date hereof in compliance with the Original
Shareholders Agreement and (ii) to the extent such shares may be deemed to be
beneficially owned, the shares of Common Stock which are subject to the Laidlaw
Purchase Agreement or the TPG Group Purchase Agreement.
(d) A condition to the consummation of the purchase of the
Laidlaw Block by the Shareholders pursuant to the Laidlaw Purchase Agreement is
that the persons designated to the Board of Directors by Laidlaw shall have
resigned, and the
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<PAGE> 11
Shareholders agree not to waive this condition without the prior written consent
of the Company.
ARTICLE 2
Standstill
SECTION 2.1. Standstill. Until the earliest to occur of (A)
the sixth anniversary of the Second Closing Date, (B) the date on which
Shareholders own, collectively, Voting Securities which would represent (i) less
than 10% of the Total Voting Power and (ii) less than 10% of the Actual Voting
Power and (C) termination under Section 2.2 (such period, the "Standstill
Period"), each Shareholder will not, and will cause each of its Affiliates not
to, directly or indirectly:
(i) acquire, offer to acquire, or agree to acquire,
by purchase or otherwise, any Voting Securities or voting rights or
direct or indirect rights or options to acquire any Voting Securities
of the Company or any of its Affiliates other than (A) the exercise of
convertible securities acquired in compliance with the terms of this
Agreement, or an acquisition as a result of a stock split, stock
dividend or similar recapitalization, (B) the acquisition of shares of
Common Stock which are subject to the Laidlaw Purchase Agreement, (C)
with the prior written consent of the two most senior executive
officers of the Company, acquisitions by all Shareholders of up to a
collective aggregate amount of 3,000,000 shares (as such number may be
appropriately adjusted to reflect stock splits, reverse stock splits,
stock dividends or any other recapitalization of the Company) of Common
Stock, (D) stock options or similar rights granted by the Company to an
Affiliate of such Shareholder as compensation for performance as
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<PAGE> 12
a director or officer of the Company or its subsidiaries (and any
shares issuable upon exercise thereof), (E) transfers between such
Shareholder and Related Transferees as permitted under Section 4.1(f)
or (F) any rights which are granted to all shareholders of the Company
(and any shares issuable upon exercise thereof); provided, however,
that if the Shareholders or any of their Affiliates in good faith
inadvertently acquire not more than 500,000 shares of Common Stock in
violation of these provisions and within 15 days after the first date
on which the Shareholders have actual knowledge (including by way of
written notice given by the Company) that a violation has occurred
Shareholders or any of their Affiliates shall have transferred any
shares of Common Stock held in violation of these provisions to
unrelated third parties so that the Shareholders and their Affiliates
no longer beneficially own any such shares or have any agreement or
understanding relating to such shares, this Section 2.1 shall be deemed
to not have been violated; and provided, further, that no violation of
this provision shall be deemed to have occurred by reason of the
indirect acquisition of beneficial ownership of securities resulting
from (x) investments in investment funds as to which no Shareholder or
Affiliate thereof has control or power to control with respect to
voting or investment decisions or (y) acquisitions of securities by a
limited partner in any Shareholder or Affiliates thereof as to which
limited partner no Shareholder or its Affiliates has control or power
to control;
(ii) make or cause to be made any proposal for a
Reorganization Transaction;
(iii) form, join or in any way participate in a Group
with respect to any securities of the Company or its Affiliates, other
than with other Shareholders
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<PAGE> 13
or Affiliates of any Shareholder; provided, however, that in the case
of securities other than voting securities, Shareholders may
participate in a Group with respect thereto with the prior approval of
a majority of the entire Board of Directors (which approval is
requested in a manner which does not require disclosure publicly or to
any third party);
(iv) make, or in any way cause or participate in, any
"solicitation" of "proxies" to vote (as those terms are defined in
Regulation 14A under the Exchange Act) with respect to the Company or
its Affiliates, or communicate with, seek to advise, encourage or
influence any Person, in any manner, with respect to the voting of,
securities of the Company or its Affiliates, or become a "participant"
in any "election contest" (as those terms are defined or used in Rule
14a-11 under the Exchange Act) with respect to the Company or its
Affiliates (other than non-public communications with other
Shareholders or Affiliates of any Shareholder which would not require
public disclosure by any Person);
(v) initiate, propose or, except with the prior
approval of a majority of the entire Board of Directors (which approval
is requested in a manner which does not require disclosure publicly or
to any third parties) otherwise solicit stockholders for the approval
of one or more stockholder proposals with respect to the Company or its
Affiliates or induce or attempt to induce any other Person to initiate
any stockholder proposal or seek election to or seek to place a
representative on the Board of Directors of the Company (except
pursuant to Section 3.1 of this Agreement) or its Affiliates or seek
the removal of any member of the Board of Directors of the Company or
its Affiliates (for this purpose, the actions of the Shareholder
Designees in communicating (without public disclosure
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<PAGE> 14
or disclosure to third parties) with the Board of Directors in their
capacity as directors of the Company, and non-public communication by a
Shareholder with other Shareholders or Affiliates of any Shareholder
which would not require public disclosure by any Person, shall not be
deemed to be in contravention of the paragraph (v));
(vi) in any manner, agree, attempt, seek or propose
(other than making any request for permission with respect thereto
which would not require disclosure publicly or to any third party) to
deposit any securities of the Company or its Affiliates in any voting
trust or similar arrangement or to subject any securities of the
Company or its Affiliates to any other voting or proxy agreement,
arrangement or understanding (other than any such agreements or
understandings with other Shareholders or Affiliates of any
Shareholder);
(vii) offer, sell or transfer any Common Stock or
rights to receive Common Stock except for Dispositions in accordance
with Article 4;
(viii) disclose any intention, plan or arrangement,
or make any public announcement (or request permission to make any such
announcement other than making any request for permission which would
not require disclosure publicly or to any third party), or induce any
other Person to take any action, inconsistent with the foregoing;
(ix) enter into any negotiations, arrangements or
understandings with any third party with respect to any of the
foregoing;
(x) advise, assist or encourage or finance (or assist
or arrange financing to or for) any other Person in connection with any
of the foregoing;
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<PAGE> 15
(xi) otherwise act in concert with others, to seek to
control or influence the management, Board of Directors or policies of
the Company or its Affiliates (for this purpose, the actions of the
Shareholder Designees in their capacity as directors of the Company
shall not be deemed to be in contravention of this paragraph (xi)); or
(xii) request a waiver of any of the provisions of
any of paragraphs (i) through (xii) of this Section 2.1 (except any
request which would not require disclosure publicly or to any third
party);
provided, that this Section 2.1 shall not restrict or inhibit the rights of a
Shareholder to exercise its voting rights as a stockholder of the Company
(subject to Section 3.2).
SECTION 2.2. Early Termination of Standstill. The obligations
of Shareholders under Section 2.1 shall terminate early upon the occurrence of
any of the following events:
(a) At least $10,000,000 in indebtedness for monies borrowed
by the Company or its subsidiaries shall have been accelerated and payment
therefor shall not have been made within 20 days after such acceleration, and
the Company shall not in good faith be contesting whether such amount is owed.
(b) A final judgment or judgments (not subject to appeal) for
the payment of money shall have been entered against the Company or its
subsidiaries in an aggregate amount in excess of $10,000,000 (exclusive of any
amounts fully covered by insurance (less any applicable deductible) or
indemnification) by a court or courts of competent jurisdiction, which judgments
remain unsatisfied, undischarged, unstayed or unbonded for a period of 45 days
after the entry of such judgment or judgments.
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<PAGE> 16
(c) The Company shall file a petition in bankruptcy or for
reorganization or for an arrangement or any composition, readjustment,
liquidation, dissolution or similar relief pursuant to Title 11 of the United
States Code or under any similar present or future federal law or the law of any
other jurisdiction or shall be adjudicated a bankrupt or insolvent, or consent
to the appointment of or taking possession by a receiver, liquidator, assignee,
trustee, custodian, sequestrator (or other similar official) of the Company or
for all or any substantial part of its property, or shall make a general
assignment for the benefit of its creditors.
(d) A petition or answer shall be filed proposing the
adjudication of the Company as bankrupt or its reorganization or arrangement, or
any composition, readjustment, liquidation, dissolution or similar relief with
respect to it pursuant to Title 11 of the United States Code or under any
similar present or future federal law or the law of any other jurisdiction, and
the Company shall consent to or acquiesce in the filing thereof, or such
petition or answer shall not be discharged or denied within 60 days after the
filing thereof.
(e) The Company shall be in material breach of its obligations
to Shareholders under the Registration Rights Agreement and such breach shall
not have been cured within 20 days after receipt by the Company from
Shareholders of a written notice specifying such breach and requiring it to be
remedied, and the Company shall not in good faith be contesting whether such
breach has occurred.
(f) If the Company shall, in breach of its obligations under
this Agreement, fail to nominate for election to the Board of Directors any
Shareholder Designee who satisfies the requirements for designation to the Board
of Directors set forth in Sections 3.1(d).
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ARTICLE 3
Board Representation and Voting
SECTION 3.1. Board Representation. (a) As of the Second
Closing Date and until the earlier to occur of the sixth anniversary of the
Second Closing Date and the date on which Shareholders own, collectively, less
than 20% of the Shares (the "Shareholder Designee Period"), the Board of
Directors shall consist of no more than twelve (12) directors; provided,
however, that if Mr. O'Leary ceases to serve as a director, the Board of
Directors shall thereafter consist of no more than eleven (11) directors during
the Shareholder Designee Period.
For so long as Shareholders are entitled to at least two
Shareholder Designees under this Agreement, Shareholders shall be entitled to
have one Shareholder Designee serve on each committee of the Board of Directors
other than any committee formed for the purpose of considering matters relating
to the Shareholders and as set forth below with respect to the Nominating
Committee.
(b) On the Second Closing Date, the Company will cause David
Kaplan and one additional person as designated by Shareholders or, subject to
Section 3.1(d), such other substitute persons as may be designated by
Shareholders, to be elected to the Board of Directors. At all times during the
Shareholder Designee Period, the Company agrees, subject to Section 3.1(d), to
support the nomination of, and the Company's Nominating Committee (as defined
herein) shall recommend to the Board of Directors the inclusion in the slate of
nominees recommended by the Board of Directors to shareholders for election as
directors at each annual meeting of shareholders of the Company: (i) no more
than two persons who are executive officers of the Company
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<PAGE> 18
("Management Directors"), (ii) (A) four Shareholder Designees, so long as
Shareholders beneficially own 75% or more of the Shares, (B) three Shareholder
Designees, so long as Shareholders beneficially own 50% or more but less than
75% of the Shares, (C) two Shareholder Designees, so long as Shareholders
beneficially own 25% or more but less than 50% of the Shares and (D) one
Shareholder Designee, so long as Shareholders beneficially own 20% or more but
less than 25% of the Shares (each a "Beneficial Ownership Threshold"), provided
that if at any time as a result of the Company's issuance of Voting Securities
Shareholders beneficially own 9% or less of the Actual Voting Power (the "Actual
Voting Power Threshold"), Shareholders shall be entitled to no more than one
Shareholder Designee, and (iii) such other persons, each of whom is (A)
recommended by the Nominating Committee and (B) not an employee or officer of or
outside counsel to the Company or a partner, employee, director, officer,
affiliate or associate (as defined in Rule 12b-2 under the Exchange Act) of any
Shareholder or any affiliate of a Shareholder or as to which the Shareholders or
their affiliates own at lest ten percent of the voting equity securities
("Unaffiliated Directors"). If any vacancy (whether by death, retirement,
disqualification, removal from office or other cause, or by increase in number
of directors) occurs prior to a meeting of the Company's stockholders, the Board
(i) may appoint a member of management to fill a vacancy caused by a Management
Director ceasing to serve as a director, (ii) shall appoint, subject to Section
3.1(d), a person designated by the Shareholders to fill a vacancy created by a
Shareholder Designee ceasing to serve as a director (except as a result of the
reduction of the number of Shareholder Designees entitled to be included on the
Board of Directors by reason of a decrease in Shareholders' beneficial ownership
of Common Stock below any Beneficial Ownership Threshold or Voting Securities
below the Actual Voting Power Threshold), and (iii) may appoint a person who
qualifies as an Unaffiliated Director and is
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<PAGE> 19
recommended by the Nominating Committee pursuant to the procedures set forth in
the following paragraph to fill a vacancy created by an Unaffiliated Director
ceasing to serve as a director (provided that in the case of a vacancy relating
to an Unaffiliated Director, if a majority of the Nominating Committee is unable
to recommend a replacement, then the Board seat with respect to this vacancy
shall remain vacant), and each such person shall be a Management Designee,
Shareholder Designee or Unaffiliated Director, as the case may be, for purposes
of this Agreement.
At all times during the Shareholder Designee Period,
Unaffiliated Directors shall be designated exclusively by a majority of a
nominating committee (the "Nominating Committee"), which shall at all times
during the Shareholder Designee Period consist of not more than four persons,
two of whom shall be Shareholder Designees (or such lesser number of Shareholder
Designees as then serves on the Board of Directors) and two of whom shall be
either Management Directors or Unaffiliated Directors. If the Nominating
Committee is unable to recommend one or more persons to serve as Unaffiliated
Directors (except with respect to any vacancy created by an Unaffiliated
Director ceasing to serve as such), then the Board of Directors shall nominate
and recommend for election by stockholders an Unaffiliated Director then serving
on the Board of Directors. Notwithstanding the foregoing, if the Shareholders
beneficially own less than 50% of the Shares, the Nominating Committee shall be
comprised of individuals only one of whom is a Shareholder Designee.
The foregoing provisions shall be effected pursuant to an
amendment to the Company's Bylaws in a form reasonably acceptable to the parties
to this Agreement, which shall not be further amended by the Board of Directors
during the Shareholder Designee Period.
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<PAGE> 20
Notwithstanding the foregoing, the Company shall have no
obligation to support the nomination, recommendation or election of any
Shareholder Designee pursuant to this Section 3.1(b) or any other obligation
under this Section 3.1 if Shareholders are in breach of any material provision
of this Agreement.
(c) Upon any decrease in Shareholders' beneficial ownership of
Common Stock below any Beneficial Ownership Threshold or Voting Securities below
the Actual Voting Power Threshold, Shareholders shall cause a number of
Shareholder Designees to offer to immediately resign from the Company's Board of
Directors such that the number of Shareholder Designees serving on the Board of
Directors immediately thereafter will be equal to the number of Shareholder
Designees which Shareholders would then be entitled to designate under Section
3.1(b). Upon termination of the Shareholder Designee Period, Shareholders shall
promptly offer to cause all of the Shareholder Designees to resign from the
Board of Directors and any committees thereof and the Company's obligations
under this Section 3.1 shall terminate.
(d) Notwithstanding the provisions of this Section 3.1,
Shareholder shall not be entitled to designate any person to the Company's Board
of Directors (or any committee thereof) in the event that the Company receives a
written opinion of its outside counsel that a Shareholder Designee would not be
qualified under any applicable law, rule or regulation to serve as a director of
the Company or if the Company objects to a Shareholder Designee because such
Shareholder Designee has been involved in any of the events enumerated in Item
2(d) or (e) of Schedule 13D or such person is currently the target of an
investigation by any governmental authority or agency relating to felonious
criminal activity or is subject to any order, decree, or judgment of any court
or agency prohibiting service as a director of any public company or providing
investment or
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<PAGE> 21
financial advisory services and, in any such event, the Shareholder shall
withdraw the designation of such proposed Shareholder Designee and designate a
replacement therefor (which replacement Shareholder Designee shall also be
subject to the requirements of this Section). The Company shall use its
reasonable best efforts to notify the Shareholder of any objection to a
Shareholder Designee sufficiently in advance of the date on which proxy
materials are mailed by the Company in connection with such election of
directors to enable the Shareholder to propose a replacement Shareholder
Designee in accordance with the terms of this Agreement.
(e) Each Shareholder Designee serving on the Board of
Directors shall be entitled to all compensation and stock incentives granted to
directors who are not employees of the Company on the same terms provided to
such directors.
SECTION 3.2. Voting. (a) Each Shareholder agrees that during
the Standstill Period such Shareholder shall, and shall cause its Affiliates and
any Person which is a member of any Group of which such Shareholder or any of
its Affiliates is a member to, be present, in person or represented by proxy, at
all meetings of shareholders of the Company so that all Voting Securities
beneficially owned by such Shareholder shall be counted for the purpose of
determining the presence of a quorum at such meetings. Each Shareholder agrees
that during the Standstill Period:
(i) In connection with the election of directors of
the Company, such Shareholder shall vote or cause to be voted all
Voting Securities beneficially owned by such Shareholder to elect those
individuals nominated in accordance with the provisions of Section 3.1.
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<PAGE> 22
(ii) In connection with any proposal for a
Reorganization Transaction, such Shareholder shall vote or cause to be
voted, or consent with respect to, all Voting Securities beneficially
owned by such Shareholder in the manner recommended by a majority of
the entire Board of Directors.
(iii) In connection with other proposals submitted to
shareholders of the Company, such Shareholder shall be free to vote or
cause to be voted, or consent with respect to, all Voting Securities
beneficially owned by such Shareholder in its discretion.
SECTION 3.3. Notices of Dispositions of Voting Securities. Not
later than the tenth day following the end of any calendar month during the
Standstill Period in which one or more Dispositions of Voting Securities by a
Shareholder or any of its Affiliates shall have occurred, such Shareholder shall
use its reasonable best efforts to give written notice to the Company of all
such Dispositions (in the case of Dispositions by Affiliates, to the extent it
has knowledge) unless any such Disposition has been reflected in a public filing
that was delivered to the Company on or in advance of the date upon which notice
thereof under this Section 3.3 would have been due. Such notice shall state the
date upon which each such Disposition was effected, the number and type of
Voting Securities involved in each such Disposition, the means by which each
such Disposition was effected and, to the extent known, the identity of the
Person acquiring Voting Securities.
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<PAGE> 23
ARTICLE 4
Transfer Restrictions
SECTION 4.1. Restrictions on Dispositions. During the
Standstill Period, each Shareholder shall not, and shall cause its Affiliates
not to, directly or indirectly (including, without limitation, through the
disposition or transfer of control of another Person), sell, assign, donate,
transfer, pledge, hypothecate, grant any option with respect to or otherwise
dispose of any interest in (or enter into an agreement or understanding with
respect to the foregoing) any Voting Securities (a "Disposition"), except as set
forth below in this Section 4.1. Without limiting the generality of the
foregoing, any sale of securities held by any Shareholder or any of its
Affiliates which is currently (or following the passage of time, the occurrence
of any event or the giving of notice), directly or indirectly, exchangeable or
exercisable for, or convertible into, any Voting Securities shall constitute a
Disposition of such Voting Securities.
Dispositions may be effected by a Shareholder during the
Standstill Period as follows:
(a) No Dispositions of any nature may be made prior to the
second anniversary of the Second Closing Date except pursuant to Section 4.1(e)
or 4.1(f).
(b) After the second anniversary of the Second Closing Date,
Dispositions of Voting Securities may be made at any time in compliance with the
Registration Rights Agreement.
(c) After the second anniversary of the Second Closing Date,
Dispositions of Voting Securities may be made pursuant to sales effected in
accordance
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<PAGE> 24
with Rule 144 under the Securities Act (a "Rule 144 Sale"); provided that such
Dispositions shall not be made to any Person who or which would immediately
thereafter, to the knowledge of such Shareholder, any of its Affiliates, or such
Shareholder's broker, beneficially own Voting Securities representing 9% or more
of the Total Voting Power (and such Person shall have provided a certificate to
such effect).
(d) After the second anniversary of the Second Closing Date,
Dispositions may be made to any Person (other than pursuant to a Reorganization
Transaction) that would, following such sale, beneficially own no more than 9%
of the Total Voting Power (and such Person shall have provided a certificate to
such effect).
(e) Dispositions may be made pursuant to a merger transaction
or a tender offer for all of the outstanding shares of Common Stock which is
recommended to the shareholders of the Company generally by at least a majority
of the entire Board of Directors, on the terms and conditions of such
transaction available to all other holders of shares of Common Stock.
(f) Dispositions may be made by a Shareholder to (i) any other
Shareholder or (ii) any Affiliate of any Shareholder that executes an instrument
in form and substance satisfactory to the Company in which it makes the
representations and warranties set forth in Section 1.3(b) as of the date of the
execution of such instrument and agrees to be bound by the terms of this
Agreement as if an original signatory to this Agreement (such transferee, a
"Related Transferee"), in which case such Related Transferee shall thereafter be
a "Shareholder" for all purposes of this Agreement.
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<PAGE> 25
(g) With respect to Voting Securities which are, by their
terms, convertible into or exercisable or exchangeable for other Voting
Securities such conversion, exercise or exchange shall not be deemed a
Disposition.
(h) Each Shareholder agrees that during the Standstill Period,
without the consent of the managing underwriter(s) in an underwritten offering
in respect of the Company's Voting Securities, it will not effect any sale or
distribution of Voting Securities (other than in connection with such
Shareholder's own registration pursuant to paragraph (b) of this Section 4.1),
including a Rule 144 Sale, during the ten (10) day period prior to, and during
the ninety (90) day period beginning on, the effective date of the registration
statement filed by the Company in respect of such underwritten offering, or any
shorter period as may apply to the Company and its affiliates.
ARTICLE 5
Miscellaneous
SECTION 5.1. Notices. All notices, requests, demands and other
communications required or permitted hereunder shall be made in writing by
hand-delivery, registered first-class mail, telex, fax or air courier
guaranteeing delivery:
(a) If to the Company, to:
Allied Waste Industries, Inc.
7701 East Camelback Road, Suite 375
Scottsdale, Arizona 85251
Attn: Roger A. Ramsey
Fax: (602) 481-9347
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<PAGE> 26
with copies to:
Porter & Hedges, L.L.P.
700 Louisiana Street, Suite 3500
Houston, Texas 77002
Attn: Robert G. Reedy
Fax: (713) 228-1331
and to:
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, New York 10004
Attn: Arthur Fleischer, Jr.
Fax: (212) 859-4000
or to such other person or address as the Company shall furnish to Shareholders
in writing;
(b) If to Shareholders, to:
Apollo Management, L.P.
1999 Avenue of the Stars, Suite 1900
Los Angeles, CA 90067
Attn: David Kaplan
Fax: (310) 201-4198
with a copy to:
Milbank, Tweed, Hadley & McCloy
601 South Figueroa Street, 30th Floor
Los Angeles, CA 90017
Attn: Kenneth J. Baronsky, Esq.
Fax: (213) 629-5063
and:
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<PAGE> 27
The Blackstone Group
345 Park Avenue
New York, NY 10154
Attn: Howard A. Lipson
Fax: (212) 754-8716
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017
Attn: Wilson S. Neely, Esq.
Fax: (212) 455-2502
or to such other person or address as Shareholders shall furnish to the Company
in writing.
All such notices, requests, demands and other communications
shall be deemed to have been duly given: at the time of delivery by hand, if
personally delivered; five (5) Business Days after being deposited in the mail,
postage prepaid, if mailed domestically in the United States (and seven (7)
Business Days if mailed internationally); when answered back, if telexed; when
receipt acknowledged, if telecopied; and on the Business Day for which delivery
is guaranteed, if timely delivered to an air courier guaranteeing such delivery.
SECTION 5.2. Legends. (a) If requested in writing by the
Company, a Shareholder shall present or cause to be presented promptly all
certificates representing Voting Securities beneficially owned by such
Shareholder or any of its Affiliates, for the placement thereon of a legend
substantially to the following effect, which legend will remain thereon so long
as such legend is required under applicable securities laws:
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<PAGE> 28
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS
AMENDED, OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES. SUCH SHARES MAY NOT BE OFFERED, SOLD, TRANSFERRED,
PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF IN THE ABSENCE
OF SUCH A REGISTRATION THEREUNDER OTHER THAN PURSUANT TO AN
EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS AND DELIVERY TO
ALLIED WASTE INDUSTRIES, INC. OF AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO IT TO THE EFFECT THAT SUCH TRANSFER
IS EXEMPT FROM REGISTRATION UNDER THOSE LAWS."
(b) Each Shareholder shall present or cause to be presented
promptly all certificates representing Voting Securities beneficially owned by
such Shareholder or any of its Affiliates, for the placement thereon of a legend
substantially to the following effect, which legend will remain thereon during
the Standstill Period as long as such Voting Securities are beneficially owned
by any Shareholder or an Affiliate of any Shareholder:
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE
PROVISIONS OF AN AMENDED AND RESTATED SHAREHOLDERS AGREEMENT,
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<PAGE> 29
DATED AS OF APRIL 21, 1997, BETWEEN ALLIED WASTE INDUSTRIES,
INC. ("ALLIED") AND CERTAIN SHAREHOLDERS OF ALLIED NAMED
THEREIN AND MAY NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED,
HYPOTHECATED OR OTHERWISE DISPOSED OF EXCEPT IN ACCORDANCE
THEREWITH. A COPY OF SAID AGREEMENT IS ON FILE AT THE OFFICE
OF THE CORPORATE SECRETARY OF ALLIED"
(c) The Company may enter a stop transfer order with the
transfer agent or agents of Voting Securities against any Disposition not in
compliance with the provisions of this Agreement.
SECTION 5.3. Enforcement. Shareholders, on the one hand, and
the Company, on the other hand, acknowledge and agree that irreparable injury to
the other party would occur in the event any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached and that such injury would not be adequately compensable in damages. It
is accordingly agreed that, in addition to any other remedies which may be
available at law or in equity, each party hereto (the "Moving Party") shall be
entitled to specific enforcement of, and injunctive relief to prevent any
violation of, the terms of this Agreement, and the other parties hereto will not
take action, directly or indirectly, in opposition to the Moving Party seeking
such relief on the grounds that any other remedy or relief is available at law
or in equity. The parties further agree that no bond shall be required as a
condition to the granting of any such relief.
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<PAGE> 30
SECTION 5.4. Entire Agreement. This Agreement constitutes the
entire agreement and understanding of the parties with respect to the
transactions contemplated hereby; provided that the Original Shareholders
Agreement shall remain in full force and effect until the closing of the
purchase of the Laidlaw Block pursuant to the Laidlaw Purchase Agreement and the
representations and warranties of the parties set forth in Sections 1.2 and 1.3
of the Original Agreement shall survive and shall be deemed to be not amended or
otherwise affected by this Agreement. This Agreement may be amended only by a
written instrument duly executed by the parties or their respective successors
or assigns; provided, however, that any amendment or waiver by the Company shall
be made only with the prior approval of a majority of the directors of the
Company other than Shareholder Designees.
SECTION 5.5. Severability. Whenever possible, each provision
or portion of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law, but if any provision or portion of any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law, rule or regulation in any jurisdiction,
such invalidity, illegality or unenforceability will not affect any other
provision or portion of any provision in such jurisdiction, and this Agreement
will be reformed, construed and enforced in such jurisdiction as if such
invalid, illegal or unenforceable provision or portion of any provision shall
have been replaced with a provision which shall, to the maximum extent
permissible under such applicable law, rule or regulation, give effect to the
intention of the parties as expressed in such invalid, illegal or unenforceable
provision.
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<PAGE> 31
SECTION 5.6. Headings. Descriptive headings contained in the
Agreement are for convenience only and will not control or affect the meaning or
construction of any provision of this Agreement.
SECTION 5.7. Counterparts. For the convenience of the parties,
any number of counterparts of this Agreement may be executed by the parties, and
each such executed counterpart will be an original instrument.
SECTION 5.8. No Waiver. Any waiver by any party of a breach of
any provision of this Agreement shall not operate as or be construed to be a
waiver of any other breach of such provision or of any breach of any other
provision of this Agreement. The failure of a party to insist upon strict
adherence to any term of this Agreement on one or more occasions shall not be
considered a waiver or deprive that party of the right thereafter to insist upon
strict adherence to that term or any other term of this Agreement.
SECTION 5.9. Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the Company and Shareholders, and to
their respective successors and assigns other than, in the case of Shareholders,
transferees that are not Related Transferees, including any successors to the
Company or Shareholders or their businesses or assets as the result of any
merger, consolidation, reorganization, transfer of assets or otherwise, and any
subsequent successor thereto, without the execution or filing of any instrument
or the performance of any act; provided that no party may assign this Agreement
without the other party's prior written consent, except by the Shareholders to a
Shareholder or a Related Transferee as expressly provided in this Agreement (and
that nothing herein restricts the transfer of any of the rights of Shareholders
under the Registration Rights Agreement in accordance the terms of the
Registration Rights Agreement).
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<PAGE> 32
SECTION 5.10. Governing Law. This Agreement will be governed
by and construed and enforced in accordance with the internal laws of the State
of Delaware, without giving effect to the conflict of laws principles thereof.
SECTION 5.11. Further Assurances. From time to time on and
after the date of this Agreement, the Company and Shareholders, as the case may
be, shall deliver or cause to be delivered to the other party hereto such
further documents and instruments and shall do and cause to be done such further
acts as the other parties hereto shall reasonably request to carry out more
effectively the provisions and purposes of this Agreement, to evidence
compliance herewith or to assure that it is protected in acting hereunder.
SECTION 5.12. Consent to Jurisdiction and Service of Process.
Any legal action or proceeding with respect to this Agreement or any matters
arising out of or in connection with this Agreement, and any action for
enforcement of any judgment in respect thereof shall be brought exclusively in
the state or federal courts located in the State of Delaware, and, by execution
and delivery of this Agreement, the Company and Shareholders each irrevocably
consent to service of process out of any of the aforementioned courts in any
such action or proceeding by the mailing of copies thereof by registered or
certified mail, postage prepaid, or by recognized international express carrier
or delivery service, to the Company or Shareholders at their respective
addresses referred to in this Agreement. The Company and Shareholders each
hereby irrevocably waives any objection which it may now or hereafter have to
the laying of venue of any of the aforesaid actions or proceedings arising out
of or in connection with this Agreement brought in the courts referred to above
and hereby further irrevocably waives and agrees, to the extent permitted by
applicable law, not to plead or claim in any such court that any
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<PAGE> 33
such action or proceeding brought in any such court has been brought in an
inconvenient forum. Nothing in this Agreement shall affect the right of any
party hereto to serve process in any other manner permitted by law.
SECTION 5.13. Shareholder Action. The Company shall be
entitled to rely upon any written notice, designation, or instruction signed by
Apollo Capital Management II, Inc. and BCP (the "Representatives") as a notice,
designation or instruction of all Shareholders and the Company shall not be
liable to any Shareholder if the Company acts in accordance with and relies upon
such writing. In that regard, each of the Shareholders acknowledges that the
Representatives have full power and authority to act on their behalf.
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<PAGE> 34
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the date first referred to above.
ALLIED WASTE INDUSTRIES, INC.
By: /s/ Thomas H. Van Weelden
-------------------------------------------
Title: President
APOLLO INVESTMENT FUND III, L.P.
APOLLO OVERSEAS PARTNERS III, L.P.
APOLLO (U.K.) PARTNERS III, L.P.
By: Apollo Advisors II, L.P.
By: Apollo Capital Management II, Inc.
By: /s/ David Kaplan
-------------------------------------------
Title: V.P.
BLACKSTONE CAPITAL PARTNERS II
MERCHANT BANKING FUND L.P.
BLACKSTONE OFFSHORE CAPITAL
PARTNERS II L.P.
BLACKSTONE FAMILY INVESTMENT
PARTNERSHIP II L.P.
By: Blackstone Management Associates II L.L.C.
By: /s/ Howard A. Lipson
-------------------------------------------
Title: Senior Managing Director
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<PAGE> 1
EXHIBIT 10.4
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement dated as of April 21, 1997
(this "Agreement"), by and between Allied Waste Industries, Inc., a Delaware
corporation (the "Company"), on the one hand, and Apollo Investment Fund III,
L.P., a Delaware limited partnership, Apollo Overseas Partners III, L.P., a
Delaware limited partnership, Apollo (U.K.) Partners III, L.P., an English
limited partnership, Blackstone Capital Partners II Merchant Banking Fund L.P.,
a Delaware limited partnership ("BCP"), Blackstone Offshore Capital Partners II
L.P., a Cayman Islands limited partnership, and Blackstone Family Investment
Partnership II L.P., a Delaware limited partnership (collectively,
"Shareholders"), on the other hand.
W I T N E S S E T H:
WHEREAS, (i) prior to the date hereof, Shareholders have
entered into an agreement to purchase an aggregate of 11,776,765 shares (the
"TPG Group Block") of the Company's common stock, par value $.01 per share (the
"Common Stock"), from TPG Partners, L.P., a Delaware limited partnership, and
TPG Parallel I, L.P., a Delaware limited partnership and (ii) concurrently
herewith, Shareholders are entering into an agreement to purchase an aggregate
of 14,600,000 shares (the "Laidlaw Block" and, together with the TPG Group
Block, the "Shares") of Common Stock from Laidlaw, Inc., a Canadian corporation;
WHEREAS, concurrently herewith, Company and Shareholders are
entering into an Amended and Restated Shareholders Agreement (the "Shareholders
Agreement") granting Shareholders certain rights to designate directors and
setting forth certain restrictions on the acquisition and distribution of
securities of the Company by Shareholders and the conduct of Shareholders with
respect to the Company; and
<PAGE> 2
WHEREAS, as part of establishing the relationship between
Shareholders and the Company, Shareholders and the Company have agreed to enter
into this Agreement.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and agreements contained in this Agreement and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
ARTICLE I
Definitions
1.1. Certain Definitions. In this Agreement:
"Exchange Act" means the United States Securities Exchange Act
of 1934, as amended, and the rules and regulations of the SEC promulgated under
such Act.
"Registrable Securities" means the Shares and any additional
shares of Common Stock acquired by Shareholders in compliance with the
Shareholders Agreement, and any shares of Common Stock issued in connection with
any stock dividend on, or any stock split, reclassification or reorganization of
Shares or such additional shares of Common Stock.
"SEC" means the United States Securities and Exchange
Commission or any successor agency.
"Securities Act" means the United States Securities Act of
1933, as amended, and the rules and regulations of the SEC promulgated under
such Act.
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<PAGE> 3
ARTICLE II
REGISTRATION RIGHTS
2.1. Incidental Rights. If at any time or from time to time
after two years following the date of the closing of the purchase of the Laidlaw
Block, Company proposes to file with the SEC a registration statement (whether
on Form S-1, S-2, or S-3, or any equivalent form then in effect) for the
registration under the Securities Act of any shares of Common Stock for sale,
for cash consideration, to the public by Company or on behalf of one or more
shareholders of Company (excluding any sale of securities convertible into or
exercisable for Common Stock, and any shares of Common Stock issuable by Company
upon the exercise of employee stock options, or to any employee stock ownership
plan, or in connection with any acquisition made by Company, any securities
exchange offer, dividend reinvestment plan, employee benefit plan, corporate
reorganization, or in connection with any amalgamation, merger or consolidation
of Company or any direct or indirect subsidiary of Company with one or more
other corporations if Company is the surviving corporation), Company shall give
Shareholders at least 20 days' prior written notice of the proposed filing (or
if 20 days' notice is not practicable, a reasonable shorter period to be not
less than 7 days), which notice shall outline the nature of the proposed
distribution and the jurisdictions in the United States in which Company
proposes to qualify and offer such securities (the "Elected Jurisdictions"). On
the written request of Shareholders received by Company within 15 days after the
date of Company's delivery to Shareholders of the notice of intended
registration (which request shall specify the Registrable Securities sought to
be disposed of by Shareholders and the intended method or methods by which
dispositions are intended to be made), Company shall, under the terms and
subject to the conditions of this Article II, at its own expense as provided in
Section 4.1, include in the coverage of such registration statement (or in a
separate registration statement concurrently filed) and
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qualify for sale under the blue sky or securities laws of the various states in
the Elected Jurisdictions the number of Registrable Securities (the "Specified
Securities") held by Shareholders and which Shareholders have so requested to be
registered or qualified for distribution, to the extent requisite to permit the
distribution (in accordance with the intended method or methods thereof as
aforesaid) in the Elected Jurisdictions requested by Shareholders of such
Registrable Securities.
If the distribution proposed to be effected by Company
involves an underwritten offering of the securities being so distributed by or
through one or more underwriters, and if the managing underwriter of such
underwritten offering indicates in writing its reasonable belief that including
all or part of the Specified Securities in the coverage of such registration
statement or in the distribution to be effected by such prospectus will
materially and adversely affect the sale of securities proposed to be sold
(which statement of the managing underwriter shall also state the maximum number
of shares, if any, which can be sold by Shareholders requesting registration
under this Section 2.1 without materially adversely affecting the sale of the
shares proposed to be sold), then the number of Specified Securities which
Shareholders shall have the right to include in such registration statement
shall be reduced to the maximum number of shares specified by the managing
underwriter. In all cases, priority shall be afforded to securities covered by a
registration statement filed in response to the exercise of a demand
registration right by another holder of Common Stock and no securities proposed
to be sold by such other holder shall be so reduced until all securities
proposed to be sold by all other parties have been entirely eliminated. As to
all other proposed selling shareholders of Common Stock, including Shareholders,
any such reduction in the number of shares of Common Stock proposed to be sold
by the selling shareholders shall be effected on a pro rata basis in accordance
with the relationship which the number of shares of Common
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Stock proposed to be sold by each selling shareholder bears to the number of
shares of Common Stock proposed to be sold by all selling shareholders.
Company shall have the sole right to select any underwriters,
including the managing underwriter, of any public offering of shares of Common
Stock subject to this Section 2.1. Nothing in this Section 2.1 shall create any
liability on the part of Company to Shareholders if Company for any reason
decides not to file or to delay or withdraw a registration statement (which
Company may do in its sole discretion).
Shareholders may request to have Common Stock included in an
unlimited number of registrations under this Section 2.1.
2.2. Demand Rights. Upon written request of Shareholders made
at any time after two years following the date of the closing of the purchase of
the Laidlaw Block, Company shall, under the terms and subject to the conditions
set forth in this Section 2.2, and Sections 2.3 and 2.4, file (and use its
reasonable efforts to cause to become effective) a registration statement
covering, and use its reasonable efforts to qualify for sale under the blue sky
or securities laws of the various states of the United States as may be
requested by Shareholders (except any such state in which, in the opinion of the
managing underwriter of the offering, the failure to so qualify would not
materially and adversely affect the proposed offering), in accordance with the
intended method or methods of disposition set forth in that notice, of such
number of Registrable Securities, as may be designated by Shareholders in their
request, or that portion thereof designated in said request for registration in
each of the Designated Jurisdictions (as defined below). A request for
registration under this Section 2.2 shall specify the number of shares to be
registered, the jurisdictions in the United States in which such registration is
to be effected (the "Designated Jurisdictions") and the proposed manner of sale,
including the name and address of any proposed underwriter; provided, that all
offerings
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contemplated by a request for registration under this Section 2.2 shall be
underwritten offerings involving a distribution of Registrable Shares to the
public in which reasonable efforts are made not to knowingly sell to any single
buyer, acting individually or with others, who after such underwriting will own
more than 9% of the Total Voting Power (as defined in the Shareholders
Agreement) (any such buyer, "Significant Stockholder"), under circumstances in
which it would reasonably be expected to not result in any person becoming
Significant Stockholder. The principal underwriter or underwriters for any such
offering shall be selected by Shareholders, subject to Company's approval, which
may not be unreasonably withheld. Notwithstanding any other provision in this
Section, Shareholders shall not be permitted to make a demand for registration
pursuant to this Section unless the number of Registrable Securities covered by
such demand is at least five million shares (as such number may be appropriately
adjusted to reflect stock splits, reverse stock splits, dividends and any other
recapitalization or reorganization of Company).
If the distribution proposed to be effected pursuant to this
Section 2.2 involves an underwritten offering of Registrable Securities and
securities of the Company other than Registrable Securities ("Other
Securities"), and if the managing underwriter of such underwritten offering
indicates in writing its reasonable belief that including all or part of such
securities in the coverage of such registration statement will materially and
adversely affect the sale of the securities proposed to be sold, then the number
of securities proposed to be sold shall be reduced to the maximum number of
securities specified by the managing underwriter. In such a case, priority shall
be afforded to Registrable Securities, and such Other Securities shall be
completely eliminated before the number of Registrable Securities is reduced.
Company may delay the filing of any registration statement
requested under this Section 2.2, or delay its effectiveness, for a reasonable
period (but not longer than 90
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days) if, in the sole judgment of Company's Board of Directors, (i) a delay is
necessary in light of pending financing transactions, corporate reorganizations,
or other major events involving Company, or (ii) filing at the time requested
would materially and adversely affect the business or prospects of Company in
view of disclosures that may be thereby required. Once the cause of the delay is
eliminated, Company shall promptly notify Shareholders and, promptly after
Shareholders notify Company to proceed, Company shall file a registration
statement and begin performance of its other obligations under this Section 2.2.
Shareholders shall be entitled to request not more than three
registrations under this Section 2.2 (provided that the filing of a registration
statement in more than one Designated Jurisdiction in connection with a
concurrent or substantially concurrent distribution shall be deemed for the
purposes of this Agreement to be a single registration). However, if
Shareholders request a registration under this Section 2.2, but no registration
statement becomes effective with respect to the Registrable Securities covered
by such request, then such request shall not count as a request for purposes of
determining the number of requests for registration Shareholders may make under
this Section 2.2.
If there is an effective registration statement requested by
the Shareholders pursuant to this Section 2.2, the Shareholders may require the
Company to delay the filing of any registration statement relating to shares of
Common Stock or delay its effectiveness, for a reasonable period (but not longer
than 90 days) if, in the sole judgment of the Shareholders, a delay is necessary
in order to avoid materially and adversely affecting the disposition of Shares
pursuant to the offering by the Shareholders; provided that the foregoing shall
not limit the Company's right to file and have declared effective registration
statements relating to shares of Common Stock issuable pursuant to employee
benefit plans of the Company or any of its subsidiaries or issuable pursuant to
a
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merger, acquisition or similar transaction involving the Company or any of its
subsidiaries.
2.3. Registration Conditions. Notwithstanding any other
provision of this Agreement, Company shall not be required to effect a
registration of any securities under this Article II, or file any post-effective
amendment to such a registration statement relating to such a qualification:
(a) unless Shareholders agree to (x) sell
and distribute a portion or all of their Registrable Securities in
accordance with the plan or plans of distribution adopted by and
through underwriters, if any, acting for Company or any such other
sellers of Common Stock, and (y) bear a pro rata share of underwriter's
discounts and commissions;
(b) if a registration requested under
Section 2.2, or any post-effective amendment to the registration
statement filed in connection therewith, requires, under applicable
statutes and rules, a special audit (other than a normal fiscal
year-end audit) of any financial statements, unless Shareholders agree
to pay their proportionate share (determined by the number of shares to
be sold by Shareholders in the offering in proportion to the total
number of shares to be sold by Company and all other participants in
such offering) of the reasonable fees and expenses of accountants
incurred in connection with the special audit and which would otherwise
not be incurred; provided that Shareholders shall not be required to
pay any share of such fees and expenses if such audit would otherwise
be required at substantially the same time to satisfy the Company's
reporting requirements under the Exchange Act absent such registration;
(c) if, in the case of a request for
registration under Section 2.2, (x) any offering pursuant to a
registration statement covering securities regarding
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which Shareholders could have exercised registration rights under
Section 2.1 of this Agreement has been completed within the prior 90
days, (y) a registration statement requested by Shareholders pursuant
to Section 2.2 has become effective under the Securities Act within the
prior twelve months, or (z) Company has given notice under Section 2.1
of its intention to file a registration statement under the Securities
Act and has not completed or abandoned the proposed offering; and
(d) unless Company has received from
Shareholders all information Company has reasonably requested
concerning Shareholders and their method of distribution of Registrable
Securities, so as to enable Company to include in the registration
statement all facts required to be disclosed in it.
2.4. Covenants and Procedures. If Company becomes obligated
under this Article II to effect a registration of Registrable Securities on
behalf of Shareholders, then (as applicable to the jurisdictions for which such
registration is to be made):
(a) Company, at its expense as provided in
Section 4.2, shall prepare and file with the SEC a registration
statement covering such securities and such other related documents as
may be necessary or appropriate relating to the proposed distribution,
and shall use reasonable efforts to cause the registration statement to
become effective. Company will also, with respect to any registration
statement, file such post-effective amendments to the registration
statement (and use reasonable efforts to cause them to become
effective) and such supplements as are necessary so that current
prospectuses are at all times available for a period of at least 90
days after the effective date of the registration statement or for such
longer period, not to exceed 180 days, as may be required under the
plan or plans of distribution set forth in the registration statement.
Shareholders shall promptly provide Company with such information with
respect to Shareholders' Registrable
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Securities to be so registered and, if applicable, the proposed terms
of their offering, as is required for the registration. If the
Registrable Securities to be covered by the registration statement are
not to be sold to or through underwriters acting for Company, Company
shall:
(i) deliver to Shareholders, as promptly as
practicable, as many copies of preliminary prospectuses as
Shareholders may reasonably request (in which case
Shareholders shall keep a written record of the distribution
of the preliminary prospectuses and shall refrain from
delivery of the preliminary prospectuses in any manner or
under any circumstances which would violate the Securities Act
or the securities laws of any other jurisdiction, including
the various states of the United States);
(ii) deliver to Shareholders, as soon as
practicable after the effective date of the registration
statement, and from time to time thereafter during the
applicable period described in Section 2.4, as many copies of
the relevant prospectuses as Shareholders may reasonably
request; and
(iii) in case of the happening, after the
effective date of the registration statement and during the
applicable 90 or 180-day period described in the second
sentence of Section 2.4(a), of any event or occurrence as a
result of which the prospectus, as then in effect, would
include an untrue statement of a material fact or omit to
state any material fact required to be stated therein or
necessary to make any statement therein not misleading in the
light of the circumstances in which it was made, give
Shareholders written notice of the event or occurrence and
prepare and furnish to Shareholders, in such quantities as it
may reasonably request, copies of an amendment of or a
supplement to such prospectus as may be
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necessary so that the prospectus, as so amended or
supplemented and thereafter delivered to purchasers of the
securities, will not contain any untrue statement of a
material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein,
in the light of the circumstances under which it was made, not
misleading.
(b) Company will notify Shareholders of any action by
the SEC or any Commission to suspend the effectiveness of any
registration statement filed pursuant hereto or the initiation or
threatened initiation of any proceeding for such purpose or the receipt
by Company of any notification with respect to the suspension of the
qualification of the securities for sale in any jurisdiction.
Immediately upon receipt of any such notice, Shareholders shall cease
to offer or sell any Registrable Securities pursuant to the
registration statement or prospectus in the jurisdiction to which such
order or suspension relates. Company will also notify Shareholders
promptly of the occurrence of any event or the existence of any state
of facts that, in the judgment of Company, should be set forth in such
registration statement or prospectus. Immediately upon receipt of such
notice, Shareholders shall cease to offer or sell any Registrable
Securities pursuant to such registration statement or prospectus, cease
to deliver or use such registration statement or prospectus and, if so
requested by Company, return to Company at Company's expense all copies
of such registration statement or prospectus. Company will as promptly
as practicable take such action as may be necessary to amend or
supplement such registration statement or prospectus in order to set
forth or reflect such event or state of facts and provide copies of
such proposed amendment or supplement to Shareholders.
(c) On or before the date on which the registration
statement is declared effective, Company shall use its reasonable
efforts to:
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(i) register or qualify (and cooperate with
Shareholders, the underwriter or underwriters, if any, and
their counsel, in connection with the registration or
qualification of) the securities covered by the registration
statement for offer and sale under the securities or blue sky
laws of each state and other jurisdiction as Shareholders or
any underwriter reasonably requests;
(ii) use its reasonable efforts to keep each
such registration or qualification effective, including
through new filings, or amendments or renewals, during the
period the registration statement or prospectus is required to
be kept effective; and
(iii) do any and all other acts or things
necessary or advisable to enable the disposition in all such
jurisdictions of the Common Stock covered by the applicable
registration statement, provided that Company will not be
required to qualify generally to do business in any
jurisdiction where it is not then so qualified.
(d) Company shall use its reasonable efforts to cause
all Registrable Securities of Shareholders included in the registration
statement to be listed, by the date of the first sale of such shares
pursuant to such registration statement, on each securities exchange on
which the securities is then listed or proposed to be listed, if any.
(e) Company shall make generally available to
Shareholders and any underwriter participating in the offering
conducted pursuant to the registration statement an earnings statement
satisfying Section 11(a) of the Securities Act no later than 45 days
after the end of the 12-month period beginning with the first day of
Company's first fiscal quarter commencing after the effective date of
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the registration statement. The earnings statement shall cover such
12-month period. This requirement will be deemed to be satisfied if
Company timely files complete and accurate information on Forms 10-Q,
10-K, and 8-K under the Exchange Act, and otherwise complies with Rule
158 under the Securities Act as soon as feasible.
(f) Company shall cooperate with Shareholders and the
managing underwriter or underwriters, if any, to facilitate the timely
preparation and delivery of certificates (not bearing any restrictive
legends) representing Registrable Securities to be sold under the
registration statement, and to enable such securities to be in such
denominations and registered in such names as the managing underwriter
or underwriters, if any, or Shareholders, may request, subject to the
underwriters' obligation to return any certificates representing unsold
securities.
(g) Company shall use its reasonable efforts to cause
Registrable Securities covered by the registration statement to be
registered with or approved by such other governmental agencies or
authorities in the United States (including the registration of
Registrable Securities under the Exchange Act) as may be necessary to
enable Shareholders or the underwriter or underwriters, if any, to
consummate the disposition of such securities.
(h) Company shall, during normal business hours and
upon reasonable notice, make available for inspection by Shareholders,
any underwriter participating in any offering pursuant to the
registration statement, and any attorney, accountant or other agent
retained by Shareholders or any such underwriter (collectively, the
"Inspectors"), all financial and other records, pertinent corporate
documents, and properties of Company (including non-public
information), as shall be reasonably necessary to enable the Inspectors
to exercise
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their due diligence responsibilities; provided that any Inspector
receiving non-public information shall have previously entered into an
appropriate confidentiality agreement in mutually satisfactory form and
substance. Company shall also cause its officers, directors, and
employees to supply all nonconfidential information reasonably
requested by any Inspector in connection with the registration
statement.
(i) Company shall use its reasonable efforts to
obtain a "cold comfort" letter and, as applicable, a "long-form comfort
letter" from Company's independent public accountants, and an opinion
of counsel for Company, each in customary form and covering such
matters of the type customarily covered by cold comfort letters and
long form comfort letters and legal opinions in connection with public
offerings of securities, as Shareholders reasonably request.
(j) Company shall enter into such customary
agreements (including an underwriting agreement containing such
representations and warranties by Company and such other terms and
provisions, as are customarily contained in underwriting agreements for
comparable offerings and are reasonably satisfactory to the Company)
and take all such other actions as Shareholders or the underwriters
participating in such offering and sale may reasonably request in order
to expedite or facilitate such offering and sale (other than such
actions which are disruptive to the Company or require significant
management availability).
ARTICLE III
INDEMNIFICATION
3.1. Indemnification by Company. In the event of any
registration under the Securities Act by any registration statement pursuant to
rights granted in this
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Agreement of Registrable Securities held by Shareholders, Company will hold
harmless Shareholders and each underwriter of such securities and each other
person, if any, who controls any Shareholder or such underwriter within the
meaning of the Securities Act, against any losses, claims, damages, or
liabilities (including legal fees and costs of court), joint or several, to
which Shareholders or such underwriter or controlling person may become subject
under the Securities Act or otherwise, insofar as such losses, claims, damages,
or liabilities (or any actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact (i)
contained, on its effective date, in any registration statement under which such
securities were registered under the Securities Act or any amendment or
supplement to any of the foregoing, or which arise out of or are based upon the
omission or alleged omission to state a material fact required to be stated
therein or necessary to make the statements therein not misleading or (ii)
contained in any preliminary prospectus, if used prior to the effective date of
such registration statement, or in the final prospectus (as amended or
supplemented if Company shall have filed with the SEC any amendment or
supplement to the final prospectus) if used within the period which Company is
required to keep the registration to which such registration statement or
prospectus relates current under Section 2.4, or which arise out of or are based
upon the omission or alleged omission (if so used) to state a material fact
required to be stated in such prospectus or necessary to make the statements in
such prospectus not misleading; and will reimburse Shareholders and each such
underwriter and each such controlling person for any legal or any other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, or liability; provided, however, that Company shall
not be liable to any Shareholder or its underwriters or controlling persons in
any such case to the extent that any such loss, claim, damage, or liability
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in such registration statement or such
amendment or supplement, in reliance upon and in
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conformity with information furnished to Company through a written instrument
duly executed by Shareholders or such underwriter specifically for use in the
preparation thereof.
3.2. Indemnification by Shareholders. It shall be a condition
precedent to the obligation of Company to include in any registration statement
any Registrable Securities of Shareholders that Company shall have received from
Shareholders an undertaking, reasonably satisfactory to Company and its counsel,
to indemnify and hold harmless (in the same manner and to the same extent as set
forth in Section 3.1) Company, each director of Company, each officer of Company
who shall sign the registration statement, and any person who controls Company
within the meaning of the Securities Act, (i) with respect to any statement or
omission from such registration statement, or any amendment or supplement to it,
if such statement or omission was made in reliance upon and in conformity with
information furnished to Company through a written instrument duly executed by
Shareholders specifically for use in the preparation of such registration
statement or amendment or supplement, and (ii) with respect to compliance by
Shareholders with applicable laws in effecting the sale or other disposition of
the securities covered by such registration statement.
3.3 Indemnification Procedures. Promptly after receipt by an
indemnified party of notice of the commencement of any action involving a claim
referred to in the preceding Sections of this Article III, the indemnified party
will, if a resulting claim is to be made or may be made against and indemnifying
party, give written notice to the indemnifying party of the commencement of the
action. If any such action is brought against an indemnified party, the
indemnifying party will be entitled to participate in and to assume the defense
of the action with counsel reasonably satisfactory to the indemnified party, and
after notice from the indemnifying party to such indemnified party of its
election to assume defense of the action, the indemnifying party
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will not be liable to such indemnified party for any legal or other expenses
incurred by the latter in connection with the action's defense. An indemnified
party shall have the right to employ separate counsel in any action or
proceeding and participate in the defense thereof, but the fees and expenses of
such counsel shall be at such indemnified party's expense unless (a) the
employment of such counsel has been specifically authorized in writing by the
indemnifying party, which authorization shall not be unreasonably withheld, (ii)
the indemnifying party has not assumed the defense and employed counsel
reasonably satisfactory to the indemnified party within 30 days after notice of
any such action or proceeding, or (iii) the named parties to any such action or
proceeding (including any impleaded parties) include the indemnified party and
the indemnifying party and the indemnified party shall have been advised by such
counsel that there may be one or more legal defenses available to the
indemnified party that are different from or additional to those available to
the indemnifying party (in which case the indemnifying party shall not have the
right to assume the defense of such action or proceeding on behalf of the
indemnified party), it being understood, however, that the indemnifying party
shall not, in connection with any one such action or separate but substantially
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the reasonable fees and
expenses of more than one separate firm of attorneys (in addition to all local
counsel which is necessary, in the good faith opinion of both counsel for the
indemnifying party and counsel for the indemnified party in order to adequately
represent the indemnified parties) for the indemnified party and that all such
fees and expenses shall be reimbursed as they are incurred upon written request
and presentation of invoices. Whether or not a defense is assumed by the
indemnifying party, the indemnifying party will not be subject to any liability
for any settlement made without its consent. No indemnifying party will consent
to entry of any judgment or enter into any settlement which does not include as
an unconditional term the
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giving by the claimant or plaintiff, to the indemnified party, of a release from
all liability in respect of such claim or litigation.
3.4. Contribution. If the indemnification required by this
Article III from the indemnifying party is unavailable to or insufficient to
hold harmless an indemnified party in respect of any indemnifiable losses,
claims, damages, liabilities, or expenses, then the indemnifying party shall
contribute to the amount paid or payable by the indemnified party as a result of
such losses, claims, damages, liabilities, or expenses in such proportion as is
appropriate to reflect (i) the relative benefit of the indemnifying and
indemnified parties and (ii) if the allocation in clause (i) is not permitted by
applicable law, in such proportion as is appropriate to reflect the relative
benefit referred to in clause (i) and also the relative fault of the indemnified
and indemnifying parties, in connection with the actions which resulted in such
losses, claims, damages, liabilities, or expenses, as well as any other relevant
equitable considerations. The relative fault of the indemnifying party and the
indemnified party shall be determined by reference to, among other things,
whether any action in question, including any untrue or alleged untrue statement
of a material fact, has been made by, or relates to information supplied by,
such indemnifying party or parties, and the parties' relative intent, knowledge,
access to information, and opportunity to correct or prevent such action. The
amount paid or payable by a party as a result of the losses, claims, damage,
liabilities, and expenses referred to above shall be deemed to include any legal
or other fees or expenses reasonably incurred by such party in connection with
any investigation or proceeding. Company and Shareholders agree that it would
not be just and equitable if contribution pursuant to this Section 3.4 were
determined by pro rata allocation or by any other method of allocation which
does not take account of the equitable considerations referred to in the prior
provisions of this Section 3.4.
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Notwithstanding the provisions of this Section 3.4, no
indemnifying party shall be required to contribute any amount in excess of [the
amount by which the total price at which the securities were offered to the
public by the indemnifying party exceeds the amount of any damages which the
indemnifying party has otherwise been required to pay by reason of an untrue
statement or omission]. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such a fraudulent
misrepresentation.
ARTICLE IV
OTHER AGREEMENTS
4.1. Other Registration Rights. Company agrees that it will
not grant to any party registration rights which would allow such party to limit
Shareholders' priority for the sale or distribution of Registrable Securities
upon the exercise of a demand registration right pursuant to Section 2.2.
4.2. Expenses. All expenses incurred by Company in connection
with any registration statement covering Registrable Securities offered by
Shareholders, including, without limitation, all registration and filing fees
(including all expenses incident to filing with the National Association of
Securities Dealers, Inc.), printing expenses, fees and disbursements of counsel
(except for the fees and disbursements of counsel for Shareholders) and of the
independent certified public accountants (except, in the case of any special
audits, if required in connection with any such registration, Shareholders'
proportionate share of their expense as provided in Section 2.4), and the
expense of qualifying such shares under state blue sky laws, shall be borne by
Company, including such expenses of any registration delayed by the Company
under the fourth paragraph of Section 2.2; provided, however, that Company shall
not be required to pay
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for any expenses of any registration proceeding begun pursuant to Section 2.2 if
the registration request is subsequently withdrawn at the request of
Shareholders (in which case Shareholders shall bear such expenses), unless
Shareholders agrees to forfeit their right to one demand registration under
Section 2.2; provided further, however, that if at the time of such withdrawal,
Shareholders have learned of a material adverse change in the condition,
business, or prospects of the Company from that known at the time of its
request, then Shareholders shall not be required to pay any of such expenses and
shall retain their rights pursuant to Section 2.2. Company's obligations under
this Section 4.2 shall apply to each registration under the Securities Act or
state blue sky legislation pursuant to Section 2.2. However, all underwriting
expenses incurred by Shareholders, including underwriter's discounts and
commissions and legal, accounting and similar expenses, shall be borne by
Shareholders.
4.3. Dispositions During Registration. Each Shareholder agrees
that, without the consent of the managing underwriter(s) in an underwritten
offering in respect of Common Stock or securities convertible into Common Stock,
it will not effect any sale or distribution of Common Stock or securities
convertible into Common Stock (other than Registrable Securities included in
such offering), during the ten (10) day period prior to, and during the ninety
(90) day period beginning on, the effective date of the registration statement
filed by the Company in respect of such underwritten offering, or any shorter
period as may apply to the Company and its affiliates.
4.4. Transfer of Rights. All rights of Shareholders under this
Agreement shall be transferable by Shareholders to a Related Transferee (as
defined in the Shareholders Agreement) who acquires shares of Common Stock in
compliance with Section 4.1(f) of the Shareholders Agreement and who executes an
instrument in form and substance satisfactory to the Company in which it agrees
to be bound by the terms of this Agreement as if an original signatory hereto,
in which case such Related Transferee
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shall thereafter be a "Shareholder" for all purposes of this Agreement. The
incidental registration rights or benefits of this Agreement and the demand
registration rights, including indemnification by Company, shall be transferable
by Shareholders only in a transaction permitted under Section 4.1(c) or 4.1(d)
of the Shareholders Agreement to a transferee that is not an Affiliate of the
Company who receives at least an aggregate of 1,000,000 shares of Common Stock,
in the case of incidental registration rights, or 5,000,000 shares of Common
Stock for each right to demand registration, in the case of demand registration
rights. In the case of any assignment, the party or parties who have the rights
and benefits of Shareholders under this Agreement shall become parties to and be
subject to this Agreement, and shall not, as a group, have the right to request
any greater number of registrations than Shareholders would have had if no
assignment had occurred. Upon any transfer of the registration rights or
benefits of this Agreement, Shareholders shall give Company written notice prior
to or promptly following such transfer stating the name and address of the
transferee and identifying the securities with respect to which such rights are
being assigned. Such notice shall include or be accompanied by a written
undertaking by the transferee to comply with the obligations imposed hereunder.
In the event any registration rights are transferred in accordance with the
terms of this Agreement, any actions required to be taken by Shareholders will
be taken with the approval of the holders of such registration rights who hold a
majority of the Registrable Securities, whose actions shall bind all such
holders of such registration rights.
4.5. Best Registration Rights. If the Company grants to any
Person with respect to any security issued by the Company or any of its
Affiliates registration rights that provide for terms that are in any manner
more favorable to the holder of such registration rights than the terms granted
to the Shareholders other than the number of demand registrations or the minimum
amount of shares required to exercise demand
-21-
<PAGE> 22
registration rights (or if the Company amends or waives any provision of any
agreement providing registration rights of others or takes any other action
whatsoever to provide for terms that are more favorable to other holders than
the terms provided to the Shareholders other than the number of demand
registrations or the minimum amount of shares required to exercise demand
registration rights), then this Agreement shall immediately be deemed amended to
provide the Shareholders with any (or all) of such more favorable terms as
Shareholders shall elect to include herein.
ARTICLE V
MISCELLANEOUS
5.1. Notices. All notices, requests, demands and other
communications required or permitted hereunder shall be made in writing by
hand-delivery, registered first-class mail, telex, fax or air courier
guaranteeing delivery:
(a) If to the Company, to:
Allied Waste Industries, Inc.
7701 East Camelback Road, Suite 375
Scottsdale, Arizona 85251
Attn: Roger A. Ramsey
Fax: (602) 481-9347
with copies to:
Porter & Hedges, L.L.P.
700 Louisiana Street, Suite 3500
Houston, Texas 77002
Attn: Robert G. Reedy
Fax: (713) 228-1331
and to:
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
-22-
<PAGE> 23
New York, New York 10004
Attn: Arthur Fleischer, Jr.
Fax: (212) 859-4000
or to such other person or address as the Company shall furnish to Shareholders
in writing;
(b) If to Shareholders, to:
Apollo Management, L.P.
1999 Avenue of the Stars, Suite 1900
Los Angeles, CA 90067
Attn: David Kaplan
Fax: (310) 201-4198
with a copy to:
Milbank, Tweed, Hadley & McCloy
601 South Figueroa Street, 30th Floor
Los Angeles, CA 90017
Attn: Kenneth J. Baronsky, Esq.
Fax: (213) 629-5063
and:
The Blackstone Group
345 Park Avenue
New York, NY 10154
Attn: Howard A. Lipson
Fax: (212) 754-8716
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017
Attn: Wilson S. Neely, Esq.
Fax: (212) 455-2502
or to such other person or address as Shareholders shall furnish to the Company
in writing.
-23-
<PAGE> 24
All such notices, requests, demands and other communications
shall be deemed to have been duly given: at the time of delivery by hand, if
personally delivered; five (5) Business Days after being deposited in the mail,
postage prepaid, if mailed domestically in the United States (and seven (7)
Business Days if mailed internationally); when answered back, if telexed; when
receipt acknowledged, if telecopied; and on the Business Day for which delivery
is guaranteed, if timely delivered to an air courier guaranteeing such delivery.
5.2. Section Headings. The article and section headings in
this Agreement are for reference purposes only and shall not affect the meaning
or interpretation of this Agreement. References in this Agreement to a
designated "Article" or "Section" refer to an Article or Section of this
Agreement unless otherwise specifically indicated.
5.3. Governing Law. This Agreement shall be construed and
enforced in accordance with and governed by the law of Delaware, without regard
to its conflicts of laws principles.
5.4. Consent to Jurisdiction and Service of Process. Any legal
action or proceeding with respect to this Agreement or any matters arising out
of or in connection with this Agreement (other than the Shareholders Agreement,
which shall be governed solely by the analogous provisions thereof), and any
action for enforcement of any judgment in respect thereof shall be brought
exclusively in the state of federal courts located in the State of Delaware,
and, by execution and delivery of this Agreement, the Company and Shareholder
each irrevocably consent to service of process out of any of the aforementioned
courts in any such action or proceeding by the mailing of copies thereof by
registered or certified mail, postage prepaid, or by recognized international
express carrier or delivery service, to the Company or Shareholder at their
respective
-24-
<PAGE> 25
addresses referred to in this Agreement. The Company and the Shareholder each
hereby irrevocably waives any objection which it may now or hereafter have to
the laying of venue of any of the aforesaid actions or proceedings arising out
of or in connection with this Agreement (other than the Shareholders Agreement,
which shall be governed solely by the analogous provisions thereof) brought in
the courts referred to above and hereby further irrevocably waives and agrees,
to the extent permitted by applicable law, not to plead or claim in any such
court that any such action or proceeding brought in any such court has been
brought in an inconvenient forum. Nothing in this Agreement shall affect the
right of any party hereto to serve process in any other manner permitted by law.
5.5. Amendments. This Agreement may be amended only by an
instrument in writing executed by all of its parties.
5.6. Entire Agreement. This Agreement and the Shareholders
Agreement constitute the entire agreement and understanding of the parties with
respect to the transactions contemplated hereby and thereby. The registration
rights granted under this Agreement supersede any registration, qualification or
similar rights with respect to any of the Shares granted under any other
agreement, and any of such preexisting registration rights are hereby
terminated. This Agreement may be amended only by a written instrument duly
executed by the parties or their respective successors or assigns; provided,
however, that any amendment or waiver by the Company shall be made only with the
prior approval of a majority of the entire Board of Directors of the Company
other than Shareholder Designees (as defined in the Shareholders Agreement).
5.7. Severability. The invalidity or unenforceability of any
specific provision of this Agreement shall not invalidate or render
unenforceable any of its other provisions. Any provision of this Agreement held
invalid or unenforceable shall be deemed reformed, if practicable, to the extent
necessary to render it valid and enforceable
-25-
<PAGE> 26
and to the extent permitted by law and consistent with the intent of the parties
to this Agreement.
5.8. Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, but all of which
together shall constitute the same instrument.
5.9. Shareholder Action. The Company shall be entitled to rely
upon any written notice, designation, or instruction signed by Apollo Capital
Management II, Inc. and BCP (the "Representatives") as a notice, designation or
instruction of all Shareholders and the Company shall not be liable to any
Shareholder if the Company acts in accordance with and relies upon such writing.
In that regard, each of the Shareholders acknowledges that the Representatives
have full power and authority to act on their behalf.
-26-
<PAGE> 27
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
ALLIED WASTE INDUSTRIES, INC.
By: /s/ Thomas H. Van Weelden
-------------------------------------------
Title: President
APOLLO INVESTMENT FUND III, L.P.
APOLLO OVERSEAS PARTNERS III, L.P.
APOLLO (U.K.) PARTNERS III, L.P.
By: Apollo Advisors II, L.P.
By: Apollo Capital Management II, Inc.
By: /s/ David Kaplan
-------------------------------------------
Title: V.P.
BLACKSTONE CAPITAL PARTNERS II
MERCHANT BANKING FUND L.P.
BLACKSTONE OFFSHORE CAPITAL
PARTNERS II L.P.
BLACKSTONE FAMILY INVESTMENT
PARTNERSHIP II L.P.
By: Blackstone Management Associates II L.L.C.
By: /s/ Howard A. Lipson
-------------------------------------------
Title: Senior Managing Director
-27-
<PAGE> 1
EXHIBIT 11.1
ALLIED WASTE INDUSTRIES, INC.
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS - PRIMARY
(IN THOUSANDS EXCEPT FOR PER SHARE AMOUNTS AND NUMBER OF SHARES)
<TABLE>
<CAPTION>
Three Months
Ended March 31,
---------------
1996 1997
---- ----
(unaudited)
<S> <C> <C>
Net income $ 2,806 $ 5,868
Dividends on preferred stock 288 171
------------- -------------
Adjusted net income to common shareholders $ 2,518 $ 5,697
============ =============
Historical
Weighted average common
shares outstanding....................... 54,168,660 75,156,071
Common Stock Equivalents -
Stock options and warrants............... 2,314,668 --
Issuable pursuant to
earn-out agreements..................... 818,801 763,868
------------ -------------
Weighted average
Common and common
equivalent shares....................... 57,302,129 75,919,939
============ =============
Primary net income per share................ $ 0.04 $ 0.08
============ =============
</TABLE>
<PAGE> 1
EXHIBIT 11.2
ALLIED WASTE INDUSTRIES, INC.
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS - FULLY DILUTED
(IN THOUSANDS EXCEPT FOR PER SHARE AMOUNTS AND NUMBER OF SHARES)
<TABLE>
<CAPTION>
Three Months
Ended March 31,
---------------------------
1996 1997
----------- ------------
<S> <C> <C>
Net income ...................................... $ 2,806 $ 5,868
Dividends on preferred stock..................... 288 171
----------- ------------
Adjusted net income to common shareholders...... $ 2,518 $ 5,697
=========== ============
Historical
Weighted average common shares
outstanding................................... 54,168,660 75,156,071
Common stock equivalents -
Stock options and warrants.................... 2,314,668 --(*)
Assumed conversions -
9% cumulative convertible preferred........... --(*) --
7% cumulative convertible preferred........... --(*) --(*)
Convertible notes............................. --(*) --(*)
Issuable pursuant to earn-out
agreements.................................... 818,801 763,868
----------- ------------
Weighted average
Common and common
equivalent shares............................. 57,302,129 75,919,939
=========== ============
Fully diluted net income per share:.............. $ 0.04 $ 0.08
=========== ============
</TABLE>
------------------------
(*) Assumed conversion of each of these securities, on an individual basis,
has an anti-dilutive effect on earnings per share.
<PAGE> 1
EXHIBIT 12
ALLIED WASTE INDUSTRIES, INC.
RATIO OF EARNINGS TO FIXED CHARGES
(IN THOUSANDS EXCEPT FOR RATIOS)
<TABLE>
<CAPTION>
Three Months
Ended March 31
--------------
1996 1997
---- ----
(unaudited)
<S> <C> <C>
Fixed Charges:
Interest expensed....................................................... $ 1,787 $20,789
Interest capitalized.................................................... 3,634 5,883
------- -------
Total interest expense.............................................. 5,421 26,672
Interest component of rent expense...................................... 251 962
Amortization/write-off of debt issuance costs........................... 213 1,280
------- -------
Total Fixed Charges................................................. $ 5,885 $28,914
======= =======
Earnings:
Income from continuing operations
before income taxes................................................. $ 5,106 $10,294
Plus fixed charges...................................................... 5,885 28,914
Less interest capitalized............................................... (3,634) (5,883)
------- -------
Total Earnings...................................................... $ 7,357 $33,325
======= =======
Ratio of earnings to fixed charges......................................... 1.25x 1.15x
======= =======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 46,004
<SECURITIES> 0
<RECEIVABLES> 110,038
<ALLOWANCES> 5,817
<INVENTORY> 6,998
<CURRENT-ASSETS> 211,360
<PP&E> 871,875
<DEPRECIATION> 95,941
<TOTAL-ASSETS> 1,916,897
<CURRENT-LIABILITIES> 198,327
<BONDS> 1,069,026
0
1
<COMMON> 758
<OTHER-SE> 287,037
<TOTAL-LIABILITY-AND-EQUITY> 1,916,897
<SALES> 184,065
<TOTAL-REVENUES> 184,065
<CGS> 104,922
<TOTAL-COSTS> 104,922
<OTHER-EXPENSES> 47,498
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 22,069
<INCOME-PRETAX> 10,294
<INCOME-TAX> 4,426
<INCOME-CONTINUING> 5,868
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,868
<EPS-PRIMARY> .08
<EPS-DILUTED> .08
</TABLE>
