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PROSPECTUS
Allied Waste North America, Inc.
OFFER TO EXCHANGE ALL OF ITS OUTSTANDING 10 1/4% SENIOR SUBORDINATED NOTES
DUE 2006 FOR 10 1/4% SENIOR SUBORDINATED NOTES DUE 2006
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON JULY 23, 1997, UNLESS EXTENDED.
Allied Waste North America, Inc., a Delaware corporation (the "Company"),
hereby offers (the "Exchange Offer"), upon the terms and subject to the
conditions set forth in this Prospectus and the accompanying Letter of
Transmittal (the "Letter of Transmittal") relating to the Exchange Offer, to
exchange $1,000 principal amount of its 10 1/4% Senior Subordinated Notes Due
2006 (the "Exchange Notes"), which will be registered under the Securities Act
of 1933, as amended (the "Securities Act"), pursuant to a Registration Statement
of which this Prospectus is a part, for $1,000 principal amount of its
outstanding 10 1/4% Senior Subordinated Notes Due 2006 (the "Notes"), of which
an aggregate of $525,000,000 in principal amount is outstanding as of the date
of this Prospectus. The form and terms of the Exchange Notes are identical in
all material respects to the form and terms of the Notes.
Interest on the Exchange Notes will be payable semi-annually on June 1 and
December 1 of each year, commencing June 1, 1997. The Exchange Notes will mature
on December 1, 2006 and will not be subject to redemption at the option of the
Company except as follows. The Exchange Notes will be redeemable at the option
of the Company, in whole or in part, at any time on or after December 1, 2001 at
the redemption prices set forth herein plus accrued and unpaid interest to the
date of redemption. Prior to December 1, 2001, the Exchange Notes will be
subject to redemption, at the option of the Company, in whole or in part, at any
time, at a redemption price equal to the greater of (i) 100% of their principal
amount or (ii) the sum of the present values of the remaining scheduled payments
of principal and interest thereon discounted to maturity on a semi-annual basis
at the Treasury Yield (as defined herein) plus 75 basis points, plus in each
case accrued and unpaid interest to the date of redemption. Up to 33 1/3% in
aggregate principal amount of Exchange Notes originally issued will be
redeemable at the option of the Company at any time or times prior to December
1, 1999 from the net proceeds of one or more Public Offerings (as defined
herein), at a redemption price of 110.25% of the principal amount thereof, plus
accrued and unpaid interest to the date of redemption. Up to $100 million in
aggregate principal amount of Exchange Notes will be redeemable at the option of
the Company out of proceeds of Asset Dispositions (as defined herein) at any
time or times on or before June 28, 1997, at a redemption price of 110.25% of
the principal amount thereof, plus accrued and unpaid interest to the date of
redemption. Upon a Change of Control, holders of the Exchange Notes may require
the Company to purchase all or a portion of the Exchange Notes at a purchase
price equal to 101% of the principal amount thereof, plus accrued and unpaid
interest to the date of purchase. See "Description of the Exchange Notes."
The Exchange Notes will be senior subordinated unsecured obligations of the
Company and will be unconditionally guaranteed on a senior subordinated basis by
Allied Waste Industries, Inc. ("Allied"), a Delaware corporation and the sole
stockholder of the Company, and all of the Restricted Subsidiaries of the
Company other than Allied Insurance (as defined herein). The Exchange Notes and
the Senior Subordinated Guarantees will be subordinated in right of payment to
all existing and future Senior Debt of the Company and the Guarantors,
respectively, will rank pari passu in right of payment with all unsecured senior
subordinated indebtedness of the Company and the Guarantors, respectively, and
will rank senior in right of payment to any future indebtedness of the Company
and the Guarantors, respectively, that may be subordinated thereto. The Senior
Subordinated Guarantees may be subject to certain legal limitations under
certain circumstances. See "Risk Factors -- Substantially All Operations at
Subsidiary Level; Structural Subordination" and "-- Fraudulent Conveyance."
The Company will accept for exchange any and all validly tendered Notes on
or prior to 5:00 p.m., New York City time, on July 23, 1997, unless extended (if
and as extended, the "Expiration Date"). Tenders of Notes may be withdrawn at
any time prior to 5:00 p.m., New York City time, on the Expiration Date. See
"The Exchange Offer".
The Exchange Notes are being offered hereunder in order to satisfy certain
obligations of the Company contained in the Registration Rights Agreement (as
defined). Based on interpretations by the staff of the Securities and Exchange
Commission (the "Commission") set forth in no-action letters issued to third
parties, the Company believes the Exchange Notes issued pursuant to the Exchange
Offer in exchange for Notes may be offered for resale, resold and otherwise
transferred by any holder thereof (other than broker-dealers, as set forth
below, and any such holder that is an "affiliate" of the Company or Allied
within the meaning of Rule 405 under the Securities Act) without compliance with
the registration and prospectus delivery requirements of the Securities Act,
provided that such Exchange Notes are acquired in the ordinary course of such
holder's business and that such holder has no arrangement or understanding with
any person to participate in the distribution of such Exchange Notes. Any holder
who tenders in the Exchange Offer with the intention to participate, or for the
purpose of participating, in a distribution of the Exchange Notes or who is an
affiliate of the Company or Allied may not rely upon such interpretations by the
staff of the Commission and, in the absence of an exemption therefrom, must
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any secondary resale transaction. Holders of
Notes wishing to accept the Exchange Offer must represent to the Company in the
Letter of Transmittal that such conditions have been met.
Each broker-dealer (other than an affiliate of the Company or Allied) that
receives Exchange Notes for its own account pursuant to the Exchange Offer must
acknowledge that it will deliver a prospectus in connection with any resale of
such Exchange Notes. The Letter of Transmittal states that by so acknowledging
and by delivering a prospectus, a broker-dealer will not be deemed to admit that
it is an "underwriter" within the meaning of the Securities Act. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of Exchange Notes received in
exchange for Notes where such Notes were acquired by such broker-dealer as a
result of market-making activities or other trading activities. The Company has
agreed that, for a period of 90 days after the Expiration Date, it will make
this Prospectus available to any broker-dealer for use in connection with any
such resale. See "Plan of Distribution." Any broker-dealer who is an affiliate
of the Company or Allied may not rely on such no-action letters and must comply
with the registration and prospectus delivery requirements of the Securities Act
in connection with a secondary resale transaction.
The Company will not receive any proceeds from this Exchange Offer. No
dealer-manager is being used in connection with this Exchange Offer.
SEE "RISK FACTORS" BEGINNING ON PAGE 11 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BEFORE TENDERING NOTES IN THE EXCHANGE OFFER.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is June 20, 1997.
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AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-4 (No 333-22575), including any amendments thereto, under the Securities Act,
with respect to the Exchange Notes offered hereby (the "Registration
Statement"). This Prospectus does not contain all the information set forth in
the Registration Statements and the exhibits and schedules thereto. For further
information with respect to the Company and the Exchange Notes, reference is
made to the Registration Statement and the exhibits and schedules filed as a
part thereof. Statements made in this Prospectus as to the contents of any
contract or any other document referred to are not necessarily complete, and, in
each instance, reference is made to the copy of such contract or document filed
as an exhibit to the Registration Statement. Each such statement is qualified in
all respects by reference to such exhibit. The Registration Statement, including
exhibits and schedules thereto, is on file at the offices of the Commission and
may be inspected without charge. Copies of such material may be obtained from
the Public Reference Section of the Commission at Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates.
Allied is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Commission. The Company is also subject to the requirements of the Exchange Act,
but is not required to file separate reports, proxy statements or other
information with the Commission as long as certain information regarding the
Company is contained in Allied's reports on Forms 10-K and 10-Q. Such
information is contained in Allied's Annual Report on Form 10-K and Quarterly
Report on Form 10-Q provided with this Prospectus. The Registration Statement
(with exhibits), as well as such reports, proxy statements and other
information, can be inspected and copied at the public reference facilities
maintained by the Commission at its principal offices at Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549, its regional offices at Northwestern
Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60601 and
7 World Trade Center, 13th Floor, New York, New York 10007, and at its site on
the World Wide Web at http://www.sec.gov. Copies of such material can also be
obtained at prescribed rates from the Public Reference Section of the Commission
at its principal office at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549. Allied's common stock is listed on the National Market
tier of the Nasdaq Stock Market ("Nasdaq") and material filed by Allied can be
inspected at the offices of Nasdaq at 1735 K Street, N.W., Washington, D.C.
20006.
A copy of (i) Allied's Annual Report on Form 10-K for the year ended
December 31, 1996; and (ii) Allied's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1997 are provided with this Prospectus and are
incorporated herein by reference. All other reports filed pursuant to Section
13(a) or 15(d) of the Exchange Act since December 31, 1996 are also incorporated
by reference.
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information appearing elsewhere in this
Prospectus. Unless the context requires otherwise, all references in this
Prospectus to (i) "Allied" are to Allied Waste Industries, Inc. and (ii) the
"Company" are to Allied Waste North America, Inc., the issuer of the Exchange
Notes and a wholly-owned subsidiary of Allied, and its direct and indirect
subsidiaries.
THE COMPANY
The Company is a vertically-integrated, non-hazardous solid waste
management company providing collection, recycling and disposal services. The
Company serves approximately 1.4 million customers in 22 states. The Company
currently conducts its operations through 41 transfer stations, 56 landfills and
20 recycling facilities.
The Company was organized in November 1996, when Allied contributed
substantially all of its operations to the Company. In December 1996, the
Company acquired (the "Laidlaw Acquisition") substantially all of the
non-hazardous solid waste management operations of Laidlaw Inc. ("Laidlaw"). In
March 1997, the Company sold (the "Canadian Sale") substantially all of its
operations in Canada to USA Waste Services, Inc. ("USA Waste"). See "The
Company -- Recent Transactions."
ALLIED
Allied is the fourth largest solid waste management company in the United
States, as measured by revenues, and the sole stockholder of the Company.
Substantially all the business operations of Allied are conducted through the
Company and the Company's subsidiaries.
BUSINESS STRATEGY
The Company's strategy is to build a vertically-integrated solid waste
management company with a strong presence in select markets. The Company plans
to implement this strategy by establishing a market presence generally based on
its landfills, increasing volume in its markets through "tuck-in" acquisitions
of collection companies, marketing to new customers, providing a high level of
customer service, competitively pricing its services based on the particular
circumstances of each market, and continuing to control costs and reduce
corporate overhead as a percentage of revenues. Management believes that its
strategy to build vertically-integrated operations will provide the Company with
competitive advantages in its targeted regional markets.
THE NOTE OFFERING
The Notes.................. The Notes were sold by the Company on December 5,
1996, and were subsequently resold to qualified
institutional buyers pursuant to Rule 144A under
the Securities Act, to institutional investors that
are accredited investors in a manner exempt from
registration under the Securities Act and to
certain persons in transactions outside the United
States in reliance on Regulation S under the
Securities Act (the "Note Offering").
Registration Rights
Agreement................ In connection with the Note Offering, the Company
entered into the Registration Rights Agreement,
which grants holders ("Holders") of the Notes
certain exchange and registration rights. The
Exchange Offer is intended to satisfy such exchange
and registration rights, which generally terminate
upon the consummation of the Exchange Offer.
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THE EXCHANGE OFFER
Securities Offered......... $525,000,000 aggregate principal amount of 10 1/4%
Senior Subordinated Notes due December 1, 2006.
The Exchange Offer......... $1,000 principal amount of the Exchange Notes in
exchange for each $1,000 principal amount of Notes.
As of the date hereof, $525,000,000 aggregate
principal amount of Notes are outstanding. The
Company will issue the Exchange Notes to holders on
or promptly after the Expiration Date.
Based on an interpretation by the staff of the SEC
set forth in no-action letters issued to third
parties, the Company believes that Exchange Notes
issued pursuant to the Exchange Offer in exchange
for Notes may be offered for resale, resold and
otherwise transferred by any Holder thereof (other
than any such Holder which is an "affiliate" of the
Company within the meaning of Rule 405 under the
Securities Act) without compliance with the
registration and prospectus delivery provisions of
the Securities Act, provided that such Exchange
Notes are acquired in the ordinary course of such
Holder's business and that such Holder does not
intend to participate and has no arrangement or
understanding with any person to participate in the
distribution of such Exchange Notes.
Each broker-dealer that receives Exchange Notes for
its own account pursuant to the Exchange Offer must
acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Notes.
The Letters of Transmittal state that by so
acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the
Securities Act. This Prospectus, as it may be
amended or supplemented from time to time, may be
used by a broker-dealer in connection with resales
of Exchange Notes received in exchange for Notes
where such Notes were acquired by such
broker-dealer as a result of market-making
activities or other trading activities. The Company
has agreed that for a period of 90 days after the
Expiration Date, it will make this Prospectus
available to any broker-dealer for use in
connection with any such resale.
Any Holder who tenders in the Exchange Offer with
the intention to participate, or for the purpose of
participating, in a distribution of the Exchange
Notes could not rely on the position of the staff
of the SEC enunciated in Exxon Capital Holdings
Corporation (available April 13, 1989), Morgan
Stanley & Co., Inc. (available June 5, 1991) or
similar no-action letters and, in the absence of an
exemption therefrom, must comply with the
registration and prospectus delivery requirements
of the Securities Act in connection with the resale
of the Exchange Notes. Failure to comply with such
requirements in such instance may result in such
Holder incurring liability under the Securities Act
for which the Holder is not indemnified by the
Company.
Expiration Date............ 5:00 p.m., New York City time, on July 23, 1997,
unless the Exchange Offer is extended, in which
case the term "Expiration Date" means the latest
date and time to which the Exchange Offer is
extended.
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Interest on the Exchange
Notes
and the Notes............ The Exchange Notes will bear interest from December
5, 1996, the date of issuance of the Notes that are
tendered in exchange for the Exchange Notes (or the
most recent Interest Payment Date (as defined below
in the Summary of Terms of Exchange Notes) to which
interest on such Notes has been paid). Accordingly,
Holders of Notes that are accepted for exchange
will not receive interest on the Notes that is
accrued but unpaid at the time of tender, but such
interest will be payable on the first Interest
Payment Date after the Expiration Date.
Conditions to the
Exchange Offer........... The Exchange Offer is subject to certain customary
conditions, which may be waived by the Company.
Procedures for
Tendering Notes.......... Each Holder of Notes wishing to accept the Exchange
Offer must complete, sign and date the relevant
accompanying Letter of Transmittal, or a facsimile
thereof, in accordance with the instructions
contained herein and therein, and mail or otherwise
deliver such Letter of Transmittal, or such
facsimile, together with the Notes and any other
required documentation to the Exchange Agent at the
address set forth in the Letter of Transmittal. By
executing the Letter of Transmittal, each Holder
will represent to the Company that, among other
things, the Holder or the person receiving such
Exchange Notes, whether or not such person is the
Holder, is acquiring the Exchange Notes in the
ordinary course of business and that neither the
Holder nor any such other person has any
arrangement or understanding with any person to
participate in the distribution of such Exchange
Notes. In lieu of physical delivery of the
certificates representing Notes, tendering Holders
may transfer Notes pursuant to the procedure for
book-entry transfer as set forth under "The
Exchange Offer -- Procedures for Tendering."
Special Procedures for
Beneficial Owners........ Any beneficial owner whose Notes are registered in
the name of a broker, dealer, commercial bank,
trust company or other nominee and who wishes to
tender should contact such registered Holder
promptly and instruct such registered Holder to
tender on such beneficial owner's behalf. If such
beneficial owner wishes to tender on such owner's
own behalf, such beneficial owner must, prior to
completing and executing the Letter of Transmittal
and delivering its Notes, either make appropriate
arrangements to register ownership of the Notes in
such beneficial owner's name or obtain a properly
completed bond power from the registered holder.
The transfer of registered ownership may take
considerable time.
Guaranteed Delivery
Procedures............... Holders of Notes who wish to tender their Notes and
whose Notes are not immediately available or who
cannot deliver their Notes, the Letter of
Transmittal or any other documents required by the
Letter of Transmittal to the Exchange Agent (or
comply with the procedures for book-entry transfer)
prior to the Expiration Date must tender their
Notes according to the guaranteed delivery
procedures set forth in "The Exchange
Offer -- Guaranteed Delivery Procedures."
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Withdrawal Rights.......... Tenders may be withdrawn at any time prior to 5:00
p.m., New York City time, on the Expiration Date
pursuant to the procedures described under "The
Exchange Offer -- Withdrawals of Tenders."
Acceptance of Notes and
Delivery of Exchange
Notes.................... The Company will accept for exchange any and all
Notes that are properly tendered in the Exchange
Offer prior to 5:00 p.m., New York City time, on
the Expiration Date. The Exchange Notes issued
pursuant to the Exchange Offer will be delivered
promptly following the Expiration Date.
Federal Income Tax
Consequences of the
Exchange Offer........... The issuance of the Exchange Notes to Holders of
the Notes pursuant to the terms set forth in this
Prospectus will not constitute an exchange for
federal income tax purposes. Consequently, no gain
or loss would be recognized by Holders of the Notes
upon receipt of the Exchange Notes. See "Certain
Federal Income Tax Consequences of the Exchange
Offer."
Effect on Holders of
Notes.................... As a result of the making of this Exchange Offer,
the Company will have fulfilled certain of its
obligations under the Registration Rights
Agreement, and Holders of Notes who do not tender
their Notes will generally not have any further
registration rights under the Registration Rights
Agreement or otherwise. Such Holders will continue
to hold the untendered Notes and will be entitled
to all the rights and subject to all the
limitations applicable thereto under the
Indentures, except to the extent such rights or
limitations, by their terms, terminate or cease to
have further effectiveness as a result of the
Exchange Offer. All untendered Notes will continue
to be subject to certain restrictions on transfer.
Accordingly, if any Notes are tendered and accepted
in the Exchange Offer, the trading market for the
untendered Notes could be adversely affected.
Exchange Agent............. First Bank National Association (the "Exchange
Agent").
THE EXCHANGE NOTES
Maturity Date.............. December 1, 2006.
Interest Payment Dates..... June 1 and December 1 of each year, commencing June
1, 1997.
Optional Redemption........ Except as set forth below, the Exchange Notes will
not be redeemable prior to December 1, 2001. On or
after such date, the Exchange Notes will be subject
to redemption, at the option of the Company, in
whole or in part, at any time prior to maturity, at
the redemption prices set forth herein, plus
accrued and unpaid interest (if any) to the date of
redemption.
Prior to December 1, 2001, the Exchange Notes will
be subject to redemption, at the option of the
Company, in whole or in part, at any time, at a
redemption price equal to the greater of (i) 100%
of their principal amount or (ii) the sum of the
present values of the remaining scheduled payments
of principal and interest thereon discounted to
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maturity on a semiannual basis at the Treasury
Yield (as defined herein) plus 75 basis points,
plus in each case accrued and unpaid interest (if
any) to the date of redemption.
At any time, or from time to time, prior to
December 1, 1999, up to 33 1/3% in aggregate
principal amount of Exchange Notes originally
issued will be redeemable, at the option of the
Company, from the net proceeds of one or more
Public Offerings as defined herein at a redemption
price equal to 110.25% of the principal amount
thereof, plus accrued and unpaid interest (if any)
to the date of redemption. At any time, or from
time to time, on or before June 28, 1997, up to
$100 million in aggregate principal amount of the
Exchange Notes will be redeemable, at the option of
the Company, from the net proceeds of Asset
Dispositions (as defined herein) at a redemption
price equal to 110.25% of the principal amount
thereof, plus accrued and unpaid interest (if any)
to the date of redemption. See "Description of the
Exchange Notes -- Optional Redemption."
Change of Control.......... Upon the occurrence of a Change of Control, each
holder of the Exchange Notes may require the
Company to repurchase the Exchange Notes held by
such holder at 101% of the principal amount thereof
plus accrued and unpaid interest (if any) to the
date of repurchase. See "Description of the
Exchange Notes -- Repurchase at the Option of
Holders -- Change of Control."
Guarantees, Security
Therefor and Ranking
Thereof.................. The Exchange Notes will be fully and
unconditionally guaranteed (the "Parent Guarantee")
on a senior subordinated basis by Allied. Allied's
obligations under such Parent Guarantee will be
fully and unconditionally guaranteed on a senior
subordinated basis by Allied Finance (the "Allied
Finance Guarantee"). The Exchange Notes will also
be fully and unconditionally guaranteed by the
existing Restricted Subsidiaries (as defined
herein) of the Company other than Allied Insurance
(as defined herein) and the Company will covenant
to cause any future Restricted Subsidiaries to
fully and unconditionally guarantee the Exchange
Notes, in each case jointly and severally on a
senior subordinated basis and subject to
limitations intended to prevent such guarantees
from constituting a fraudulent conveyance under
applicable law (the "Subsidiary Guarantees"; the
Subsidiary Guarantees, Parent Guarantee and Allied
Finance Guarantee are collectively referred to as
the "Senior Subordinated Guarantees"; and Allied,
Allied Finance and the Restricted Subsidiaries,
other than Allied Insurance, are collectively
referred to as the "Guarantors").
The Senior Subordinated Guarantees will be senior
subordinated obligations of the Guarantors and will
be subordinate in right of payment to the prior
payment in full of all Senior Debt of the
Guarantors to substantially the same extent as the
Exchange Notes are subordinated to Senior Debt of
the Company.
The Senior Subordinated Guarantees will be
unsecured, except that the Allied Finance Guarantee
will be secured on a senior subordinated basis by a
second priority lien on the Allied Canada
Debentures.
Ranking.................... The Exchange Notes will be unsecured and will rank
junior in right of payment to all existing and
future Senior Debt of the Company. The
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Exchange Notes will rank pari passu in right of
payment with all existing and future senior
subordinated Debt of the Company and senior to any
other subordinated Debt of the Company issued after
the Exchange Offering. See "Description of the
Exchange Notes -- Subordination."
At March 31, 1997, there was approximately $583.0
million of Senior Debt of the Company and the
Subsidiary Guarantors outstanding. At June 5, 1997,
there was approximately $525.0 million outstanding
under the Senior Credit Facility (as defined
herein). While the indenture under which the
Exchange Notes will be issued (the "Indenture")
will limit, subject to certain financial tests, the
amount of additional Debt that the Company and its
Restricted Subsidiaries can incur, the Indenture
will not restrict the amount of otherwise
permissible indebtedness that may be incurred as
Senior Debt. See "Description of the Exchange
Notes -- Certain Covenants -- Limitation on
Consolidated Debt."
The Exchange Notes will be effectively subordinated
to all existing and future Debt of Allied Insurance
and of the Company's subsidiaries that are
Unrestricted Subsidiaries, and thus not Subsidiary
Guarantors, and would be so subordinated to all
existing and future Debt of the Subsidiary
Guarantors if the Subsidiary Guarantees were
avoided or subordinated in favor of the Subsidiary
Guarantors' other creditors. See "Risk
Factors -- Subordination; Ranking of Exchange Notes
and Guarantees as Unsecured Obligations,"
"-- Substantially All Operations at Subsidiary
Level; Structural Subordination" and "-- Fraudulent
Conveyance."
Restrictive Covenants...... The Indenture will restrict, among other things,
the ability of the Company and its Restricted
Subsidiaries, (i) to incur additional Debt, (ii) to
pay dividends and make other distributions, (iii)
to have restrictions on the ability of any
Restricted Subsidiary to make dividends or other
payments to the Company or any other Restricted
Subsidiary, (iv) to sell assets and to use the
proceeds of asset sales; (v) to pledge assets, (vi)
to sell a minority interest in a Restricted
Subsidiary, (vii) to merge or consolidate with or
transfer all or substantially all of its assets to,
or to acquire the stock or assets of, another
entity or (viii) to engage in certain transactions
with affiliates. All of these restrictions,
however, are subject to a number of important
qualifications. See "Description of the Exchange
Notes -- Certain Covenants."
Form and Denomination...... The Exchange Notes will be fully registered as to
principal and interest in minimum denominations of
$1,000 and integral multiples thereof. The Exchange
Notes will be initially issued in the form of one
or more global notes and deposited with a custodian
for and registered in the name of a nominee of The
Depository Trust Company. Exchange Notes will not
be issued in certificated, fully registered form,
except in the circumstances provided for in the
Indenture. See "Description of Exchange Notes --
Form, Denomination, Transfer, Exchange and
Book-Entry, Delivery and Form."
Registration Rights........ Under current interpretations of applicable law by
the staff of the Commission, holders of Exchange
Notes will be permitted to resell such securities
into the public market without further registration
or delivery of a prospectus, except that any such
holder who is a broker or dealer would be required
to deliver a copy of this prospectus in connection
with any such resale. The Company has agreed to
keep such prospectus
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current so as to enable brokers and dealers to
effect this resales for a period of 90 days
following completion of the Exchange Offer. Certain
holders who participate in the Exchange Offer will
not be permitted to rely on the interpretation of
the Commission staff. For a discussion of the
requirements that must be met in order to rely on
the interpretation, see "Description of the
Exchange Notes -- Registration Rights."
Pursuant to an Exchange and Registration Rights
Agreement (the "Registration Rights Agreement")
between the Company and the Initial Purchasers (as
defined herein), in the event the interpretation of
the Commission staff does not permit the Company to
effect the Exchange Offer and under certain other
circumstances, the Company would use its best
efforts to cause to become effective a "shelf"
registration statement (the "Shelf Registration
Statement") with respect to the resale of the
Exchange Notes (a "Shelf Registration") and to keep
such Shelf Registration Statement effective until
the third anniversary of the effectiveness of the
Shelf Registration Statement. In such event,
Holders who registered their Exchange Notes would
be permitted to resell their Exchange Notes into
the public market, but only if they delivered a
copy of the prospectus included in the Shelf
Registration Statement in connection with such
resales.
In the event that (i) the Company has not filed the
Shelf Registration Statement on or before the date
on which such registration statement is required to
be filed pursuant to the Registration Rights
Agreement, or (ii) such Shelf Registration
Statement has not become effective or been declared
effective by the Commission on or before the date
on which such registration statement is required to
become or be declared effective pursuant to the
Registration Rights Agreement, or (iii) the
Exchange Offer has not been completed within 45
days after the date upon which the Registration
Statement is declared effective or (iv) the
Registration Statement or any Shelf Registration
Statement required under the Registration Rights
Agreement is filed and declared effective but shall
thereafter either be withdrawn by the Company or
shall become subject to an effective stop order
issued pursuant to Section 8(d) of the Securities
Act suspending the effectiveness of such
registration statement (except as specifically
permitted in the Registration Rights Agreement)
without being succeeded immediately by an
additional registration statement filed and
declared effective (each such event referred to in
clauses (i) through (iv), a "Registration Default"
and each period during which a Registration Default
has occurred and is continuing, a "Registration
Default Period"), then, as liquidated damages for
such Registration Default, special interest
("Special Interest"), in addition to the base
interest that would otherwise accrue on the
Exchange Notes, shall accrue at a per annum rate of
0.25% for the first 90 days of the Registration
Default Period, at a per annum rate of 0.50% for
the second 90 days of the Registration Default
Period, at a per annum rate of 0.75% for the third
90 days of the Registration Default Period and at a
per annum rate of 1.0% thereafter for the remaining
portion of the Registration Default Period. See
"Description of the Exchange Notes -- Registration
Rights."
For additional information regarding the Exchange Notes, see "Certain
Federal Income Tax Consequences" and "Description of the Exchange Notes."
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RISK FACTORS
Holders of Notes should consider carefully all of the information set forth
in this Prospectus and, in particular, the information set forth under "Risk
Factors" before making any decision regarding tendering their Notes pursuant to
the Exchange Offer and receiving Exchange Notes.
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RISK FACTORS
In addition to the other information in this Prospectus, the following
factors should be considered carefully in evaluating an investment in the
Exchange Notes offered by this Prospectus, including information under
"Disclosure Regarding Forward Looking Statements."
SUBSTANTIAL LEVERAGE; ABILITY TO SERVICE DEBT
The Company has substantial indebtedness with significant debt service
requirements and is highly leveraged. At March 31, 1997, the Company's
consolidated debt was approximately $1,109.7 million and Allied's consolidated
debt was approximately $1,224.4 million. The degree to which the Company and
Allied are leveraged has important consequences to holders of the Exchange
Notes, including the following: (i) the ability of the Company to obtain
additional financing in the future, whether for working capital, capital
expenditures, acquisitions or other purposes, may be impaired, (ii) a
substantial portion of the Company's cash flow from operations is required to be
dedicated to the payment of principal and interest on its debt, thereby reducing
funds available to the Company for other purposes, (iii) the Company's
flexibility in planning for or reacting to changes in market conditions may be
limited, (iv) the Company may be more vulnerable in the event of a downturn in
its business, and (v) to the extent of the Company's outstanding debt under the
Senior Credit Facility at variable rates that have not been hedged, the Company
will be vulnerable to increases in interest rates. At June 5, 1997,
approximately $525.0 million in aggregate borrowings were outstanding under the
Senior Credit Facility. All borrowings under the Senior Credit Facility will
mature in 2003.
The ability of the Company to meet its debt service obligations will depend
on the future operating performance and financial results of the Company, which
will be subject in part to factors beyond the control of the Company. Although
the Company believes that its cash flow will be adequate to meet its interest
payments, there can be no assurance that the Company will continue to generate
earnings in the future sufficient to cover its fixed charges. If the Company is
unable to generate earnings in the future sufficient to cover its fixed charges
and is unable to borrow sufficient funds under either the Senior Credit Facility
or from other sources, it may be required to refinance all or a portion of its
existing debt or to sell all or a portion of its assets. There can be no
assurance that a refinancing would be possible, nor can there be any assurance
as to the timing of any asset sales or the proceeds which the Company could
realize therefrom. In addition, the terms of certain of its debt restrict the
Company's ability to sell assets and the Company's use of the proceeds
therefrom.
Allied derives substantially all its revenues from the operations of the
Company. It is unlikely that Allied would be able to meet its obligations under
the Parent Guarantee if the Company were unable to meet its debt service
obligations with respect to the Exchange Notes.
If for any reason, including a shortfall in anticipated operating results
or proceeds from asset sales, the Company were unable to meet its debt service
obligations, it would be in default under the terms of certain of its debt. In
the event of such a default, the holders of such debt could elect to declare all
of such debt immediately due and payable, including accrued and unpaid interest,
and to terminate their commitments with respect to funding obligations under
such debt. In addition, such holders could proceed against any collateral which,
in the case of certain debt, consists of the capital stock of the Company's
subsidiaries and substantially all of the assets of the Company. Any default
with respect to any of the Company's debt could result in a default under other
debt or result in the bankruptcy of the Company.
ABILITY TO ACHIEVE SYNERGIES; INTEGRATION OF ACQUIRED BUSINESSES
In December 1996, the Company acquired substantially all of the
non-hazardous solid waste management business of Laidlaw. The Laidlaw
Acquisition represented a substantial increase in the scope of the Company's
business. On a pro forma basis, after giving effect to the Laidlaw Acquisition
and the Canadian Sale, the businesses acquired from Laidlaw (the "Acquired
Businesses") generated revenues for the twelve months ended November 30, 1996 of
approximately $494.5 million. The revenues for the year ended December 31, 1996
generated by the operations of the Company excluding such Acquired Businesses
were
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approximately $246.7 million. Successful integration of such Acquired Businesses
will depend primarily on the Company's ability to manage its operations and to
eliminate redundancies and excess costs. There can be no assurance that the
Company will successfully integrate the Acquired Businesses and any failure or
any inability to do so may have a material adverse effect on the Company's
results of operations and financial condition. In addition, the Company expects
to realize certain financial benefits and operational efficiencies as a result
of the Laidlaw Acquisition. Realization and timing of such financial benefits
and operational efficiencies could be affected by a number of factors beyond the
Company's control, such as general economic conditions, increased operating
costs, the response of competitors or customers and regulatory developments.
There can be no assurance that the Company will achieve all or any portion of
the expected financial benefits and operational efficiencies.
The integration and consolidation of the Acquired Businesses will require
substantial management time and financial and other resources. While the Company
believes that it has sufficient financial and management resources to accomplish
the integration of the Acquired Businesses, there can be no assurances in this
regard or that the Company will not experience difficulties with customers,
personnel or operations.
LIMITED OPERATING HISTORY IN REGARD TO SIGNIFICANT ASSETS
The Company has a limited operating history with regard to a significant
portion of its operations. During 1996, the Company acquired 21 companies,
excluding the Acquired Businesses, which collectively comprised approximately
$78.8 million or 31.9% of the Company's revenues in 1996. The financial position
and results of operations of the Company will depend to a large extent on the
Company's ability to integrate these acquired operations effectively and to
realize expected financial benefits and operational efficiencies. There can be
no assurance that the Company's efforts to integrate these acquired operations
will be effective, or that expected financial benefits and operational
efficiencies will be realized. Failure to effectively integrate acquired
operations could have an adverse effect on the Company's future results of
operations. As the Company continues to pursue its acquisition strategy in the
future, its financial position and results of operations may fluctuate
significantly from period to period.
CAPITAL REQUIREMENTS AND LIMITED WORKING CAPITAL
The Company intends to fund its cash needs through cash flow from
operations and borrowings under the Senior Credit Facility and its equipment
lease facilities. Because of the capital intensive nature of the solid waste
industry, the Company may use amounts in excess of the cash generated from
operations to retire and service debt, fund acquisitions, landfill development
and capital expenditures. A substantial portion of the Company's available cash
will be required to be applied to service indebtedness, 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 repurchase of the Allied Finance Debentures in the Laidlaw Repurchase.
During calendar year 1997, the Company also expects to spend approximately $126
million for capital, closure and post-closure, and remediation expenditures and
expects to provide approximately $227.6 million in financial assurance
obligations related to its landfill operations. Amounts expended on capital
expenditures and financial assurance obligations will increase as a result of
any acquisitions or expansions of the Company's operations. As a result of these
capital requirements, the Company may periodically have low levels of working
capital or be required to finance working capital deficits.
Further regulatory action by federal, state and local governments 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 make scheduled payments of principal of, or to pay
interest on, or to refinance its indebtedness 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 Acquired Businesses, and to
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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, and
other sources of liquidity, will be adequate to meet the Company's anticipated
future requirements for working capital, letters of credit, capital expenditures
and scheduled payments of principal of, and interest on debt. However, the
principal payments at maturity on the Exchange Notes may require refinancing.
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, including
the Notes, or to make necessary capital expenditures, or that any refinancing
would be available on commercially reasonable terms or 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. There can be
no assurance that the Company will be able to secure such additional funding on
favorable terms, if at all.
THE COMPANY'S STRATEGY; POTENTIAL DIFFICULTY IN OBTAINING SUITABLE LANDFILLS,
COLLECTION OPERATIONS, TRANSFER STATIONS AND PERMITS
The Company's strategy depends on its ability to identify and acquire
appropriate landfills, collection operations and transfer stations. There can be
no assurance that the Company will be able to locate appropriate acquisition
candidates, that any identified candidates will be acquired or that acquired
operations will be integrated effectively or prove profitable. Completion of an
acquisition requires the expenditure of sizeable amounts of capital and the
competition among companies pursuing an acquisition strategy may increase
capital requirements. The Company could be forced to alter its strategy in the
future if such candidates become unavailable or too costly. In addition,
obtaining permits to operate non-hazardous waste landfills has become
increasingly difficult and expensive, often taking a number of years to obtain,
requiring numerous hearings and compliance with zoning, environmental and other
regulatory measures, and often being subject to resistance from citizen or other
groups. There can be no assurance that the Company will be successful in
obtaining the permits it requires, and an inability to receive such permits
could have an adverse effect on the Company's future results of operations. In
some areas, suitable land may be unavailable for new landfill sites. There can
be no assurance that the Company will be successful in obtaining new landfill
sites or expanding the permitted capacity of its current landfills once its
landfill capacity has been consumed. In such event, the Company could be forced
to dispose of collected waste at landfills operated by its competitors, which
could have an adverse effect on the Company's landfill revenues and collection
expenses.
COMPETITION FROM OTHER COMPANIES AND MUNICIPALITIES; LANDFILL ALTERNATIVES
The non-hazardous solid waste industry is led by four large national waste
management companies, one of which is the Company, and includes numerous
regional and local companies, all of which contribute to the high level of
competition that characterizes the industry. Some of these companies have
considerably greater financial and operational resources than the Company. In
addition, cities and counties that operate their own waste collection and
disposal facilities often enjoy the benefits of tax-exempt financing and may
control the disposal of waste collected within their jurisdictions.
Alternatives to landfill disposal, such as recycling and composting, are
increasingly being used, and incineration continues to be utilized in some
markets in which the Company operates. There has also been an increasing trend
at the state and local levels to mandate waste reduction at the source and to
prohibit the disposal of certain types of wastes, such as yard wastes, at
landfills. This trend may result in a reduction in the volume of waste going to
landfills in certain areas, which may affect the Company's ability to operate
its landfills at their full capacity and/or affect the prices that can be
charged for landfill disposal services. In addition, most of the states in which
the Company operates landfills have adopted plans or requirements that set goals
for specified percentages of certain solid waste items to be recycled. These
recycling goals will be phased in over the next few years.
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LACK OF PUBLIC MARKET FOR THE EXCHANGE NOTES; RESTRICTIONS ON RESALE
There is no existing trading market for the Exchange Notes, and there can
be no assurance regarding the future development of a market for the Exchange
Notes, or the ability of the holders of the Exchange Notes to sell their
Exchange Notes, or the price at which such holders may be able to sell their
Exchange Notes. If such a market were to develop, the Exchange Notes, could
trade at prices that may be higher or lower than the initial offering price
depending on many factors, including prevailing interest rates, the Company's
operating results and the market for similar securities. Each of Goldman, Sachs
& Co., Citicorp Securities, Inc. and CS First Boston, Inc. (the "Initial
Purchasers") has advised the Company that it intends to make a market in the
Exchange Notes. The Initial Purchasers are not obligated to do so, however, and
any market making with respect to the Exchange Notes may be discontinued at any
time without notice. Therefore, there can be no assurance as to the liquidity of
any trading market for the Exchange Notes or that an active trading market for
the Exchange Notes will develop. The Company does not intend to apply for
listing or quotation of the Exchange Notes on any securities exchange or stock
market.
Historically, the market for non-investment grade debt has been subject to
disruptions that have caused substantial volatility in the prices of such
securities. There can be no assurance that the market for the Exchange Notes
will not be subject to similar disruptions. Any such disruptions may have an
adverse effect on holders of the Exchange Notes.
SUBORDINATION TO SENIOR DEBT AND SECURED OBLIGATIONS
The Exchange Notes and the Senior Subordinated Guarantees will be
subordinated in right of payment to all existing and future Senior Debt of the
Company and the Guarantors, will rank pari passu in right of payment with all
unsecured senior subordinated debt and all unsecured senior subordinated
guarantees of the Company and the Guarantors, and will rank senior in right of
payment to any future debt of the Company and the Guarantors that may be
subordinated thereto. Upon any payment or distribution of assets of the Company
to creditors upon any liquidation, dissolution, winding up, reorganization,
assignment for the benefit of creditors, marshaling of assets and liabilities or
any bankruptcy, insolvency or similar proceedings of the Company, the holders of
Senior Debt will be entitled to receive payment in full of the principal of (and
premium, if any) and interest on such Senior Debt, including all amounts due or
to become due on all Senior Debt, or provision will be made for payment in cash
or cash equivalents or otherwise, before the Holders of Notes are entitled to
receive any payments, subject to certain exceptions.
The Exchange Notes and the Senior Subordinated Guarantees will be
effectively subordinated in right of payment to all existing and future secured
debt of the Company and the Guarantors, respectively, to the extent of the
collateral securing such debt.
At March 31, 1997, there was approximately $583.0 million of Senior Debt of
the Company outstanding, which would have been guaranteed by the Guarantors on a
senior basis. While the Indenture will limit, subject to certain financial
tests, the amount of additional debt that the Company and its Restricted
Subsidiaries can incur, there is no limitation on the amount of otherwise
permissible indebtedness that may be incurred as Senior Debt.
SUBSTANTIALLY ALL OPERATIONS AT SUBSIDIARY LEVEL; STRUCTURAL SUBORDINATION
The Company will hold substantially all of its assets and conduct
substantially all of its operations through its subsidiaries. The Company thus
derives substantially all of its operating income and cash flow from its
subsidiaries and must rely upon distributions from its subsidiaries to generate
the funds necessary to meet its obligations, including the payment of principal
of and interest on the Exchange Notes. Although the Indenture generally
prohibits the Company from permitting its Restricted Subsidiaries to allow
restrictions on their ability to pay dividends and other amounts to the Company,
any such restrictions could materially and adversely affect the ability of the
Company to service and repay its existing debt, including the Exchange Notes.
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The Exchange Notes are effectively subordinated to all existing and future
indebtedness and other liabilities of the Company's subsidiaries that are
Unrestricted Subsidiaries, and thus not Guarantors, and would be so subordinated
to all existing and future indebtedness of the Guarantors if the Senior
Subordinated Guarantees were avoided or subordinated in favor of the Guarantors'
other creditors.
FRAUDULENT CONVEYANCE
The Senior Subordinated Guarantees may be subject to review under federal
or state fraudulent transfer law. To the extent that a court were to find that
(x) the Senior Subordinated Guarantees were incurred by any Guarantor with
intent to hinder, delay or defraud any present or future creditor, or a
Guarantor contemplated insolvency with a design to prefer one or more creditors
to the exclusion in whole or in part of others, or (y) any Guarantor did not
receive fair consideration or reasonably equivalent value for issuing its Senior
Subordinated Guarantees and any Guarantor (i) was insolvent, (ii) was rendered
insolvent by reason of the issuance of the Senior Subordinated Guarantees, (iii)
was engaged or about to engage in a business or transaction for which the
remaining assets of a Guarantor constituted unreasonably small capital to carry
on its business or (iv) intended to incur, or believed that it would incur,
debts beyond its ability to pay such debts as they matured, a court could avoid
or subordinate the Senior Subordinated Guarantees in favor of a Guarantor's
creditors. If the Senior Subordinated Guarantees are avoided or subordinated,
payments of principal and interest on the Exchange Notes generally would be
subject to the prior payment in full of all indebtedness of the Guarantors.
Among other things, a legal challenge of the Senior Subordinated Guarantees on
fraudulent conveyance grounds may focus on the benefits, if any, realized by a
Guarantor as a result of the issuance by the Company of the Exchange Notes. The
extent (if any) to which a particular Guarantor may be deemed to have received
such benefits may depend on the Company's use of the Note Offering proceeds,
including the extent (if any) to which such proceeds or benefits therefrom are
contributed to the Guarantor. The measure of insolvency for purposes of the
foregoing will vary depending on the law of the applicable jurisdiction.
Generally, however, an entity would be considered insolvent if the sum of its
debts (including contingent or unliquidated debts) is greater than all of its
property at a fair valuation or if the present fair saleable value of its assets
is less than the amount that will be required to pay its probable liability
under its existing debts as such debts become absolute and matured. Based upon
financial and other information currently available to it, the Company presently
believes that the Senior Subordinated Guarantees are being incurred for proper
purposes and in good faith, and that the Guarantors (i) are solvent and will
continue to be solvent after issuing the Senior Subordinated Guarantees, (ii)
will have sufficient capital for carrying on their business after such issuance
and (iii) will be able to pay their debts as they mature. There can be no
assurance, however, that a court would necessarily agree with these conclusions,
or determine that any particular Guarantor received fair consideration or
reasonably equivalent value for issuing its Senior Subordinated Guarantee.
POTENTIAL INABILITY TO EFFECT REPURCHASE UPON A CHANGE OF CONTROL
The Indenture requires the Company, in the event of a Change of Control, to
make an offer to purchase all outstanding Exchange Notes at a price equal to
101% of the principal amount thereof, plus accrued interest to the date of
repurchase. The Senior Credit Facility restricts such a purchase and such an
offer requires the approval of the lenders thereunder. Accordingly, the right of
the holders of the Exchange Notes to require the Company to repurchase the
Exchange Notes may be of limited value if the Company cannot obtain the required
approval under the Senior Credit Facility. There can be no assurance that the
Company will have the financial resources necessary to purchase the Exchange
Notes upon a Change of Control. Failure to offer to repurchase the Exchange
Notes under such circumstances, however, would constitute an event of default
under the Indenture.
RESTRICTIONS IMPOSED BY THE SENIOR CREDIT FACILITY AND THE INDENTURE
The Senior Credit Facility and the Indenture will contain a number of
significant covenants that, among other things, will restrict the ability of the
Company and its subsidiaries to dispose of assets, incur additional
indebtedness, incur liens on property or assets, repay other indebtedness, pay
dividends, enter into certain
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investments or transactions, repurchase or redeem capital stock, engage in
mergers or consolidations, or engage in certain transactions with subsidiaries
and affiliates and otherwise restrict corporate activities. There can be no
assurance that such restrictions will not adversely affect the Company's ability
to finance its future operations or capital needs or engage in other business
activities that may be in the interest of the Company. In addition, the Senior
Credit Facility will also require the Company to maintain compliance with
certain financial ratios. The ability of the Company to comply with such ratios
may be affected by events beyond the Company's control. A breach of any of these
covenants or the inability of the Company to comply with the required financial
ratios could result in a default under the Senior Credit Facility. In the event
of any such default, the lenders under the Senior Credit Facility could elect to
declare all borrowings outstanding under the Senior Credit Facility, together
with accrued interest and other fees, to be due and payable, to require the
Company to apply all of its available cash to repay such borrowings or to
prevent the Company from making debt service payments on the Exchange Notes. If
the Company were unable to repay any such borrowings when due, the lenders could
proceed against their collateral. If the indebtedness under the Senior Credit
Facility or the Exchange Notes were to be accelerated, there can be no assurance
that the assets of the Company would be sufficient to repay such indebtedness in
full.
RELIANCE ON MANAGEMENT
The Company will rely significantly on the services of its senior
management team. The Company could be adversely affected if any member of the
senior management team were unwilling or unable to continue in the Company's
employ. The Company is expanding the staff in its executive offices to support
the new operations associated with the Laidlaw Acquisition. There can be no
assurance that the Company will be successful in locating, hiring or retaining
qualified personnel.
IMPACT OF ADVERSE WEATHER CONDITIONS
The collection and landfill operations of the Company could be adversely
affected by protracted periods of inclement weather which delay the development
of landfill capacity, the transfer of waste or reduce the volume of waste
generated. There can be no assurance that protracted periods of inclement
weather will not have a material adverse effect on the Company's future results
of operations.
COST OF COMPLIANCE WITH ENVIRONMENTAL REGULATIONS; RISK OF FUTURE LITIGATION
The scope and stringency of laws and regulations designed to protect the
environment have increased dramatically. Compliance with the evolving and
expanding regulatory requirements, including the adoption in October 1991 of
Subtitle D regulations ("Subtitle D") pursuant to the Resource Conservation and
Recovery Act of 1976, as amended ("RCRA"), has been and will continue to be
costly. Rigorous regulatory standards require waste management companies to
enhance or replace equipment and to modify landfill operations or, in some
cases, to close landfills. There can be no assurance that the Company will be
able to implement price increases sufficient to offset the cost of complying
with these standards. In addition, environmental regulatory changes could
accelerate expenditures for closure and post-closure monitoring at solid waste
facilities and obligate the Company to spend sums in addition to those presently
reserved for such purposes. These factors could increase substantially the
Company's operating costs as well as the possibility of the impairment of the
Company's investment in its facilities.
In addition to the costs of complying with environmental regulations, the
Company will continue to be involved in legal proceedings in the ordinary course
of business. Government agencies may seek to impose fines on the Company for
alleged failure to comply with laws and regulations or to revoke or to deny the
renewal of, the Company's permits and licenses. In addition, governmental
agencies, as well as surrounding landowners, may assert claims against the
Company alleging environmental damage or violations of permits and licenses
pursuant to which the Company operates. Citizens' groups have become
increasingly active in challenging the grant or renewal of permits and licenses,
and responding to such challenges has further increased the costs associated
with permitting new facilities or expanding current facilities. A significant
judgment against the Company, the loss of a significant permit or license or the
imposition of a significant fine could have a material adverse effect on the
Company's financial condition.
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Certain of the Company's waste disposal operations traverse state
boundaries. Such operations could be adversely affected if the federal
government or a state in which a landfill is located limits or prohibits,
imposes discriminatory fees on, or otherwise seeks to discourage disposal,
within state boundaries, of waste collected outside of the state.
As a condition to the Laidlaw Acquisition, Allied engaged Emcon
Environmental Services, Inc. ("Emcon"), an independent environmental consultant,
to conduct environmental assessments of the subsidiaries acquired in the Laidlaw
Acquisition (the "LSW Subsidiaries"). In its report (the "Emcon Report"), Emcon
identified several contaminated landfills and other locations, including
landfills and other locations owned by the LSW Subsidiaries, that could pose
significant sources of liability to the LSW Subsidiaries. The costs of
performing the investigation, design, remediation and allocation of
responsibility to the subsidiaries of the Company vary significantly between
sites. Based on the information currently available, the Company recorded a
provision of $51.5 million for environmental matters, including closure and
post-closure costs, in the 1996 statement of operations and expects these
amounts to be disbursed over the next 30 years. The actual liability at these
sites cannot currently be determined due to a number of uncertainties including
the extent of the contamination, the appropriate remedy, the financial viability
of other potentially responsible parties and the ultimate apportionment of
responsibility among such potentially responsible parties.
The representations made by the Laidlaw sellers in the Stock Purchase
Agreement, dated September 17, 1996, among Allied, the Company and Laidlaw,
among others, relating to the Laidlaw Acquisition (the "Laidlaw Acquisition
Agreement") with respect to environmental matters (i) terminated on the closing
of the Laidlaw Acquisition as to all matters disclosed in writing to Allied at
least five business days prior to the closing or disclosed with specificity in
the Emcon Report and (ii) terminate on the third anniversary of the closing of
the Laidlaw Acquisition as to all matters other than those described in clause
(i) and which are known to Laidlaw on the closing date. The Laidlaw Acquisition
Agreement further provided that Laidlaw's indemnification obligations with
respect to environmental matters would be limited to the amount by which the
aggregate of all such damages exceed a $1,000,000 basket, without giving effect
to any materiality qualifications. At the closing of the Laidlaw Acquisition,
the Company and Laidlaw entered into a Special Environmental Indemnity, which
provided that the indemnity in respect of properties located at Etobicoke,
Ontario, Delafield, Wisconsin and Gary Lagoons, Indiana would not be subject to
the three-year limitation or any basket. In connection with the Laidlaw
Repurchase (as defined herein), Allied has agreed that the indemnity for damages
arising out of the Etobicoke, Ontario and Delafield, Wisconsin sites will be
limited to a three-year period from the closing of the Laidlaw Acquisition and
to an amount in excess of a $25,000,000 basket with such $25,000,000 basket to
be reduced by any damages to which the $1,000,000 basket in the Laidlaw
Acquisition Agreement applies.
POTENTIAL UNINSURED OR UNDERINSURED ENVIRONMENTAL LIABILITIES
As is typically the case in the solid waste industry, the Company is able
to obtain only very limited environmental impairment insurance regarding its
landfills. An uninsured or underinsured claim of sufficient magnitude could have
a material adverse effect on the Company's financial condition. In connection
with any transaction made by the Company, there may be liabilities that the
Company fails or is unable to discover, including liabilities arising from
non-compliance with environmental laws by prior owners, and for which the
Company, as a successor owner, may be responsible.
HAZARDOUS SUBSTANCES LIABILITY
The Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended ("CERCLA"), has been interpreted to impose joint and several
liability on current and former owners or operators of facilities at which there
has been a release or a threatened release of a "hazardous substance" and on
persons who generate, transport or arrange for the disposal of such substances
at the facility. Hundreds of substances are defined as "hazardous" under CERCLA
and their presence, even in minute amounts, can result in substantial liability.
The statute provides for the remediation of contaminated facilities and imposes
costs on the responsible parties. The expense of conducting such a cleanup can
be significant. Notwithstanding its efforts to comply with applicable
regulations and to avoid transporting and receiving hazardous substances,
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such substances may be present in waste collected by the Company or disposed of
in its landfills, or in waste collected, transported or disposed of in the past
by acquired companies. As used in this Prospectus, "non-hazardous waste" means
substances, including asbestos, that are not defined as hazardous wastes under
federal regulations.
POTENTIAL UNDISCLOSED LIABILITIES ASSOCIATED WITH ACQUISITIONS
In connection with any acquisition of business or assets by the Company,
there may be liabilities that the Company fails or is unable to discover,
including liabilities arising from non-compliance with environmental laws by
prior owners, and for which the Company, as a successor owner, may be
responsible.
LAIDLAW TAX INDEMNIFICATION
Laidlaw has disclosed to the Company the existence of a tax controversy
(the "Tax Controversy") in the amount of more than $385 million with the United
States Internal Revenue Service (the "IRS") involving the consolidated U.S.
federal income tax liability for the fiscal years 1986 through 1991 of the
members of an affiliated group of corporations (the "LTI U.S. Consolidated Tax
Group") within the meaning of Section 1504(c) of the Internal Revenue Code
("IRC"), of which Laidlaw Transportation, Inc. ("LTI") is the common parent
corporation (which includes LTI, those Acquired Businesses which are
incorporated in the U.S. (the "LSW U.S. Subsidiaries"), and other U.S.
subsidiaries of LTI which were not acquired in the Laidlaw Acquisition). The LTI
U.S. Consolidated Tax -- Group has also received notice that fiscal years 1992,
1993 and 1994 will be examined regarding this issue. Under Treasury Regulations
promulgated under Section 1502 of the IRC, each member of the LTI U.S.
Consolidated Tax Group including each LSW U.S. Subsidiary, is or could be
severally liable for United States federal income tax liabilities of the entire
LTI U.S. Consolidated Tax Group, including all amounts at issue in the Tax
Controversy which are ultimately determined to be owed.
The Company has obtained an indemnity from the Laidlaw Group which covers
the amounts at issue in the Tax Controversy for which any LSW U.S. Subsidiary
may ultimately be found liable. The obligation of the Laidlaw Group to indemnify
the Company in respect of amounts at issue in the Tax Controversy is a general,
unsecured obligation of the Laidlaw Group. The ability of the Laidlaw Group to
pay and fulfill such indemnification obligation will depend on the financial
condition of the Laidlaw Group at the time of any required performance of such
obligation, as to which the Company has no assurance.
DISCLOSURE REGARDING FORWARD LOOKING STATEMENTS
This Prospectus contains certain statements that are "Forward Looking
Statements" within the meaning of Section 27A of the Securities Act and Section
21E of the Exchange Act. Those statements include, among other things, the
discussions of the Company's business strategy and expectations concerning
market position, future operations, margins, profitability, liquidity and
capital resources, as well as statements concerning the integration of the
operations of businesses and assets that have been acquired by the Company and
the achievement of financial benefits and operational efficiencies in connection
therewith. Although the Company believes that the expectations reflected in such
Forward Looking Statements are reasonable, they can give no assurance that such
expectations will prove to be 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, expenses, earnings, levels of
capital expenditures or other aspects of operating results and financial
conditions. All phases of the operations of the Company 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 the
Forward Looking Statements made by the Company ultimately prove to be accurate.
Important factors that could cause actual results to differ materially from the
Company's expectations are disclosed in this section and in "Risk Factors," and
any prospective investor in the Exchange Notes should give careful consideration
to such factors.
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THE COMPANY
Allied is the fourth largest solid waste management company in the United
States, as measured by revenues. The Company pursues a business strategy
designed to develop vertically-integrated operations centered around landfills
that are owned or operated by the Company in the markets it currently serves.
The Company, which conducts all of Allied's business operations through the
Company's subsidiaries, is a vertically-integrated, non-hazardous solid waste
management company providing collection, transfer, processing and disposal
services. The Company serves 1.4 million customers through operations in 22
states located primarily in the midwest, northeast, southeast and southwest
United States. The Company has an extensive network of 41 transfer stations, 56
landfills, and 20 recycling facilities.
RECENT TRANSACTIONS
On December 30, 1996, the Company completed the Laidlaw Acquisition for
consideration comprised of $1.2 billion cash (the "Cash Consideration"), 14.6
million shares (the "Laidlaw Shares") of Allied's common stock (the "Common
Stock"), a warrant to acquire 20.4 million shares of Allied common stock (the
"Laidlaw Warrant"), and two junior subordinated debentures, with an aggregate
face amount of $318.3 million (the "Allied Canada Debentures") issued by Allied
Waste Holdings (Canada), Ltd., a Canadian corporation and a wholly-owned
subsidiary of the Company. Immediately after the closing of the Laidlaw
Acquisition, Laidlaw exchanged the Allied Canada Debentures for identical
debentures (the "Allied Finance Debentures" and, collectively with the Allied
Canada Debentures, the "Allied Debentures") issued by Allied Waste Finance
(Canada), Ltd., a Canadian corporation and a wholly-owned subsidiary of Allied
("Allied Finance"). The cash consideration was financed from the proceeds of the
Senior Credit Facility and the sale of the Notes.
On March 16, 1997, the Company completed the Canadian Sale for
approximately $518 million in cash. The Company acquired the Canadian operations
in the Laidlaw Acquisition in December 1996. Under the terms of the Canadian
Sale, USA Waste acquired 41 collection companies, eight transfer stations, ten
recycling facilities and seven landfills in Canada. The Company used the
proceeds from the Canadian Sale to pay down approximately $517 million in debt
under the Senior Credit Facility. Unless otherwise indicated, all references to
the Company and its operations contained herein give effect to the Laidlaw
Acquisition and the Canadian Sale.
On May 15, 1997, Allied repurchased ("Laidlaw Repurchase") the Allied
Finance Debentures and the Laidlaw Warrant from Laidlaw and Laidlaw
Transportation, Inc. ("Laidlaw Transportation") for cash consideration of $230
million. Contemporaneously with the Laidlaw Repurchase, certain private
securities investment funds affiliated with either Apollo Advisors II, L.P. or
The Blackstone Group (collectively, the "Apollo/Blackstone Investors") acquired
the Laidlaw Shares from Laidlaw Transportation and also acquired approximately
11.8 million shares of Common Stock from TPG Partners, L.P. and TPG Parallel I,
L.P. Pursuant to the terms of the Shareholders Agreement dated May 15, 1997
between Allied and the Apollo/Blackstone Investors (the "Shareholders
Agreement"), the Apollo/Blackstone Investors currently have the right to
designate four members of the Board of Directors of Allied, subject to reduction
upon the occurrence of certain circumstances. The Shareholders Agreement also
grants the Apollo/Blackstone Investors certain registration rights regarding the
shares of Common Stock owned by the Apollo/Blackstone Investors and restricts
the Apollo/Blackstone Investors from engaging in certain activities or
transactions which could result in a change in control of Allied.
In connection with the Laidlaw Repurchase, Allied issued (the "Discount
Offering") $418 million aggregate principal amount of its 11.30% Senior Discount
Notes due 2007 the ("Discount Notes") in a private offering on May 15, 1997. The
net proceeds of the Discount Offering were used to pay the cash consideration of
the Laidlaw Repurchase. The Discount Notes are not guaranteed by the Company or
any subsidiaries of the Company and, therefore, the Discount Notes are
effectively subordinated to the Exchange Notes. The Discount Notes were issued
at a discount of principal amount, unless certain provisions are triggered,
there will be no periodic cash payments of interest before June 1, 2002.
Thereafter, the Discount Notes will accrue cash interest at the rate of 11.30%
per annum, payable semi-annually on June 1 and December 1 of each year,
commencing December 1, 2002.
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On June 12, 1997, the Company completed a series of transactions with USA
Waste (the "USA Waste Transactions") pursuant to which the Company acquired six
landfills, eight collection operations, five transfer stations and one recycling
facility with an annual aggregate revenue of $58.0 million for cash
consideration of $87.5 million. Two additional landfills, the consideration for
which is included in the $87.5 million, are scheduled to be acquired in June
1997 upon the satisfactory completion of certain permitting and regulatory
matters. Also pursuant to the USA Waste Transactions, Allied sold to USA Waste
one landfill, two collection operations and one recycling facility with an
aggregate of approximately $33.6 million in annual revenue for which it received
cash consideration of approximately $61.3 million.
On June 5, 1997 Allied and the Company entered into an Amended and Restated
Credit Agreement (the "Senior Credit Facility") with Goldman Sachs Credit
Partners, L.P., as syndication agent, Credit Suisse First Boston ("Credit
Suisse"), as administrative agent, and Citibank, N.A., as documentation agent.
See "Description of Senior Credit Facility."
Since January 1, 1997, the Company has completed the acquisition of ten
solid waste businesses, not including the assets acquired in the USA Waste
Transactions, representing approximately $71.4 million in annual revenue. The
acquired businesses, which include three landfills (one of which is under
development), nine collection operations, four transfer stations and one
recycling facility, are located in ten separate markets and will be integrated
into existing operations. Total consideration of approximately $123.2 million
(including $10 million for the landfill under development), comprised of cash,
notes and Common Stock, was paid in these transactions.
INDUSTRY TRENDS
According to the National Solid Waste Management Association and Waste Age
Magazine, the North American solid waste industry was estimated to have had
revenues of more than $32 billion in 1995. The industry is highly fragmented
with the four largest companies accounting, in 1995, for approximately 30% of
revenues, seven mid-sized public companies accounting for approximately 4% of
revenues, and several thousand municipalities and independent collection firms
accounting for the remainder. The solid waste management industry has been
affected significantly by increased regulation of disposal activities and to a
lesser extent collection activities also, have been affected. In October 1991,
the Environmental Protection Agency (the "EPA") adopted new regulations pursuant
to Subtitle D of the RCRA governing the disposal of non-hazardous solid waste.
These regulations led to a variety of requirements applicable to landfill
disposal sites, including the construction of liners and the installation of
leachate collection systems, groundwater monitoring systems and methane gas
recovery systems. The regulations also require enhanced control systems to
monitor more closely the waste streams being disposed at landfills, extensive
post-closure monitoring of sites and financial assurances that landfill
operators will be able to comply with the stringent regulations. The rising
costs associated with increasingly stringent industry regulations have tended to
promote consolidation and acquisition activity within the industry.
The Company believes that these trends will continue and are the result of
several factors:
(1) Subtitle D and similar state regulations have significantly increased
the amount of capital and technical expertise required to own and
operate a landfill. As a result, many landfill operators that lack the
necessary capital or expertise are electing to sell their landfills as
an alternative to closing them;
(2) a number of municipalities are electing to privatize their municipal
landfills as an alternative to funding the changes to such landfills
required by Subtitle D and related state regulations; and
(3) as a result of heightened sensitivity to environmental conditions in
many communities, it is becoming increasingly desirable for solid
waste management companies to provide waste recycling programs in
addition to conventional collection and disposal services.
These developments, as well as more stringent bonding requirements being
imposed on solid waste management companies by various municipalities, have
increased the amount of capital generally required for solid waste management
operations, causing smaller companies that lack the requisite capital to sell
their operations to better-capitalized companies.
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BUSINESS STRATEGY
The Company's business strategy is to build a vertically-integrated solid
waste management company with a strong presence in specific markets. The Company
implements this strategy by (i) establishing a market presence generally based
on the acquisition or development of a landfill; (ii) increasing volume in its
markets through "tuck-in" acquisitions of collection companies and marketing to
new customers; (iii) providing a high level of customer service; (iv)
competitively pricing its services based on the particular circumstances of each
market; and (v) continuing to control costs and reduce corporate overhead as a
percentage of revenues. The Company believes that its strategy to build
vertically-integrated operations will provide the Company with competitive
advantages in its targeted regional markets.
The Company pursues acquisitions in geographic areas characterized by one
or more of the following criteria: (i) the availability of permitted and
underutilized landfill capacity located either close to or outside of, but
within economic range of, a major population center, (ii) disposal fees that
justify necessary transportation expenses, (iii) near- or medium-term scheduled
closures of landfills near such a population center, (iv) a shift in landfill
ownership from public to private and (v) rural landfills that are likely to
provide opportunities in a local market.
The Company has adopted the following four-step program in executing its
business strategy:
(1) Landfill Acquisitions. Once the Company identifies an area that
qualifies under its target market criteria, the Company seeks to
establish a market presence, generally by acquiring one or more
landfills in that area that can be accessed economically from the
metropolitan center or from the regional market area, either through
direct hauling or through strategically located transfer operations.
In evaluating a landfill acquisition, the Company considers, among
others, the following factors: (i) current disposal costs together
with transportation costs to the targeted landfill relative to
transportation and disposal costs of potential competitors, (ii)
landfill capacity, (iii) opportunities for landfill expansion, and
(iv) projected short-term ability to secure an acceptable level of
disposal volume.
(2) Secure Captive Waste Volumes. The Company seeks to build a market
presence and increase the utilization of the landfill by securing
captive waste streams, which includes developing and acquiring
transfer stations, entering into waste collection contracts and
acquiring waste collection companies. Generally, the Company pursues
the acquisition of collection companies that: (i) have
well-established residential or commercial collection routes and
accounts, (ii) own and operate transfer stations, or (iii) do not own
landfills and are vulnerable to volatile disposal pricing, which the
Company believes it can minimize through landfill ownership.
(3) "Tuck-in" Acquisitions. The Company acquires service rights,
obligations, machinery and equipment in "tuck-in" acquisitions of
collection companies to: (i) increase the waste stream directed to its
landfills, (ii) maximize its market presence, and (iii) increase
customer density on collection routes to reduce operating costs and
strengthen return on capital.
(4) Integration of Operations. Immediately following an acquisition, the
Company begins to integrate the acquired company into its operating
and control systems, internalizing waste previously disposed at third
party landfills to facilities owned or operated by the Company,
establishing an operating plan, implementing the Company's operating
policies and procedures, including the consolidation and
rationalization of routes and pricing, establishing new banking and
cash control procedures, integrating the acquired company's
accounting, data processing and management reporting systems and
appointing a new board of directors. In many acquisitions, the Company
retains the management of the company it acquires in order to benefit
from the existing management's understanding of the local market,
personal and business contacts, and goodwill in the community.
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OPERATIONS
COLLECTION. Collection operations involve collecting and transporting
non-hazardous waste from the point of generation to the transfer station or the
site of disposal. Solid waste collection is generally provided under two primary
types of arrangements, depending on the customer being served.
Commercial. The Company provides containerized non-hazardous solid
waste disposal services to a wide variety of commercial and industrial
customers. These customers are provided with containers that are designed
to be lifted mechanically and either emptied into a collection vehicle's
compaction hopper or, in the case of roll-off containers, to be loaded onto
the collection vehicle. The Company's commercial containers generally range
in size from one to eight cubic yards and its roll-off containers generally
range in size from 20 to 40 cubic yards. Contracts for commercial
containers typically have terms of up to five years, may not be terminated
by the customer prior to the end of the term and have renewal options.
Contracts for roll-off containers may provide for temporary (such as the
removal of waste from a construction site) or ongoing services. Fees
relating to those contracts are determined by general competitive and
prevailing local economic conditions and include other considerations such
as collection frequency, type of equipment furnished, distance traveled to
the disposal site, the cost of disposal and the type and volume or weight
of the waste collected.
Residential. Residential collection services are performed pursuant
to individual monthly subscriptions directly to households or long-term
contracts with municipal governments that give the Company exclusive rights
to service all or a portion of the homes in such municipalities at
established rates. The Company seeks to obtain municipal contracts which
enhance the efficiency and profitability of the Company's operations as a
result of the density of collection customers within a given area. At the
end of the term of most municipal contracts, the Company will attempt to
renegotiate the contract, and if unable to do so, will rebid the contract
on a sealed bid basis. Residential collection service arrangements with
households are made directly between the Company and the resident. The
Company seeks to enter into residential service arrangements where the
route density is high, thereby creating additional economic benefit.
Collection fees are determined by the Company and the customer based on
general competitive and prevailing local economic conditions and include
other considerations such as collection frequency, the type and volume or
weight of the waste collected, the distance to the disposal facility, and
cost of disposal. Residential collection fees are either paid by the
municipalities out of tax revenues or service charges or are paid directly
by the residents who receive the service.
TRANSFER STATIONS. A transfer station is a facility where solid waste is
received from third-party and Company owned collection vehicles and then
transferred to and compacted in large, specially-constructed trailers for
transportation to disposal facilities. This consolidation reduces costs by
increasing the density of the waste being transported and by improving
utilization of collection personnel and equipment, and is an increasingly common
procedure in the solid waste management industry. Fees are generally based upon
such factors as the type and volume or weight of the waste transferred and the
transport distance involved. The Company believes that as increased regulations
and public pressure restrict the development of landfills in urban and suburban
areas, transfer stations will increasingly be used as an efficient means to
transport waste over longer distances to available landfills.
RECYCLING. In response to increasing awareness by the customer of
environmental concerns and expanding federal and state regulations pertaining to
waste recycling, the Company includes recycling as a component of its vertically
integrated solid waste business strategy. Services include curbside collection
of recyclable materials for residential customers, commercial and industrial
collection of recyclable materials, and, to a lesser extent, material
recovery/waste reduction. Recycling fees are generally service based wherein the
customer pays for the cost of removing, processing and disposing of potentially
recyclable materials. In most cases, mixed waste materials are received at an
owned or leased materials recovery facility which is often integrated into or
contiguous to a transfer operation. Materials such as paper, cardboard, plastic,
aluminum and other metals are sorted, separated, accumulated, bound or placed in
a container and readied for transportation to a third-party which will reuse the
separated materials. The purchaser generally pays for the materials based on
fluctuating spot-market prices. Material for which there is no market or for
which the
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market price is insufficient to warrant processing are disposed of at a landfill
or other disposal facility. The Company seeks to avoid exposure to fluctuating
commodity prices by passing through substantially all of the profit or loss from
the sale of recyclables to its service customers.
LANDFILLS. Landfills are the primary method of disposal of solid waste in
the United States. Currently, a landfill must be designed, permitted, operated
and closed in compliance with federal, state and local regulations pursuant to
Subtitle D. Operating procedures include excavation, continuous spreading and
compacting of waste, and covering of waste with earth or other inert material.
The cost of transferring solid waste to a disposal location places an economic
restriction on the geographic scope of landfill operations in a particular
market. Access to a disposal facility, such as a landfill, is a requirement for
all solid waste management companies. While access can generally be obtained to
disposal facilities owned or operated by unaffiliated parties, the Company
believes that, in keeping with its business strategy, it is preferable for
collection companies to own or operate their own disposal facilities thereby
ensuring access on favorable terms and the internalization of disposal fees.
MARKETING AND SALES
Each of the Company's districts has a staff responsible for sales and
marketing. The Company's policy is to periodically visit each commercial account
to ensure customer satisfaction and to sell additional services. In addition to
calling on existing customers, each salesperson calls upon potential customers
within a defined area in each market.
In addition to its sales efforts directed at commercial and industrial
customers, the Company has a municipal marketing coordinator in most service
areas. The municipal marketing coordinators are responsible for interfacing with
each municipality or community to which the Company provides residential service
to assure customer satisfaction. In addition, the municipal coordinators
organize and handle bids for renewal and new municipal contracts in their
service area.
COMPETITION
The industry is comprised of four national waste companies in addition to
the Company: WMX Technologies, Inc., Browning-Ferris Industries, Inc. ("BFI"),
Republic Industries, Inc., USA Waste Services, Inc., and local and regional
companies of varying sizes and competitive resources such as United Waste
Systems, Inc. and Superior Services, Inc. The Company also competes with those
counties and municipalities that maintain their own waste collection or disposal
operations. These counties and municipalities may have financial advantages
through their access to tax revenues and tax-exempt financing and their ability
to mandate the disposal of waste collected within the jurisdiction at a
municipal landfill. The Company may also experience competition from companies
using alternative methods of managing solid waste streams, such as incineration.
The solid waste collection and disposal industry is currently undergoing
significant consolidation, and the Company encounters competition in its efforts
to acquire landfills and collection operations.
Accordingly, it may become uneconomical for the Company to make further
acquisitions or the Company may be unable to locate or acquire suitable
acquisition candidates at price levels and on terms and conditions that the
Company considers appropriate, particularly in markets the Company does not
already serve.
ENVIRONMENTAL AND OTHER REGULATIONS
The Company is subject to extensive and evolving environmental laws and
regulations. These regulations are administered by the EPA and various other
federal, state and local environmental, zoning, health and safety agencies, many
of which periodically examine the Company's operations to monitor compliance
with such laws and regulations. The Company believes that there will be
increased regulation and legislation related to the waste management industry
and the Company attempts to anticipate such future regulatory requirements to
ensure compliance.
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The Company's operation of landfills subjects it to certain operational,
monitoring, site maintenance, closure, post-closure and other obligations which
could give rise to increased costs for monitoring and corrective measures. In
connection with the Company's acquisition of existing landfills, it is often
necessary to expend considerable time, effort and money to obtain permits
required to increase the capacity of these landfills. Governmental authorities
have the power to enforce compliance with these regulations and to obtain
injunctions or impose civil or criminal penalties in case of violations. The
Company cannot predict whether or not it will be able to obtain the governmental
approvals necessary to establish new or expand existing landfills and, if it
does, whether or not it will be economically beneficial to do so.
The Company's operations are subject to extensive regulation, principally
under the following federal statutes:
The Resource Conservation and Recovery Act of 1976, as amended. RCRA
regulates the handling, transportation and disposal of hazardous and
non-hazardous wastes and delegates authority to states to develop programs to
ensure the safe disposal of solid wastes. On October 9, 1991, the EPA
promulgated Solid Waste Disposal Facility Criteria for non-hazardous solid waste
landfills under Subtitle D. Subtitle D includes location standards, facility
design and operating criteria, closure and post-closure requirements, financial
assurance standards and groundwater monitoring as well as corrective action
standards, many of which had not commonly been in place or enforced previously
at landfills. Subtitle D applies to all solid waste landfill cells that received
waste after October 9, 1991, and, with limited exceptions, all landfills were
required to meet these requirements by October 9, 1993. Landfills that were not
in compliance with the requirements of Subtitle D on the applicable date of
implementation were required to close. In addition, landfills that stopped
receiving waste before October 9, 1993 were not required to comply with the
final cover provisions of Subtitle D. Each state must comply with Subtitle D and
was required to submit a permit program designed to implement Subtitle D to the
EPA for approval by April 9, 1993. States may impose requirements for landfill
units that are more stringent than the requirements of Subtitle D. Once a state
has an approved program, it must review all existing landfill permits to ensure
that they comply with Subtitle D.
The Federal Water Pollution Control Act of 1972, as amended (the "Clean
Water Act"). This act establishes rules regulating the discharge of pollutants
into streams and other waters of the United States (as defined in the Clean
Water Act) from a variety of sources, including solid waste disposal sites. If
runoff from the Company's landfills or transfer stations may be discharged into
surface waters, the Clean Water Act requires the Company to apply for and obtain
discharge permits, conduct sampling and monitoring and, under certain
circumstances, reduce the quantity of pollutants in those discharges. The permit
program has been expanded to include stormwater discharges from landfills that
receive, or in the past received, industrial waste. In addition, if development
may alter or affect "wetlands," a permit may have to be obtained and certain
mitigation measures may need to be undertaken before such development may be
commenced. This requirement is likely to affect the construction or expansion of
many solid waste disposal sites, including some owned or being developed by the
Company. The Clean Water Act provides civil, criminal and administrative
penalties for violations of its provisions.
The Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended. CERCLA addresses problems created by the release or threatened
release of hazardous substances into the environment. CERCLA's primary mechanism
for remediating such problems is to impose strict, joint and several liability
for cleanup of disposal sites on current owners and operators of the site,
former site owners and operators at the time of disposal, and waste generators
and parties who arranged for disposal at the facility. The costs of a CERCLA
cleanup can be substantial. Liability under CERCLA is not dependent on the
existence or disposal of "hazardous wastes" (as defined under RCRA), but can
also be founded on the existence of even minute amounts of the more than 700
"hazardous substances" listed by the EPA.
The Clean Air Act of 1970, as amended (the "Clean Air Act"). The Clean Air
Act provides for increased federal, state and local regulation of the emission
of air pollutants. The EPA has construed the Clean Air Act to apply to
landfills. In March 1996, the EPA adopted New Source Performance Standard and
Emission Guidelines (the "Emission Guidelines") for municipal solid waste
landfills. The Emission Guidelines impose limits on air emissions from solid
waste landfills. The Emission Guidelines propose two sets of
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emissions standards, one of which is applicable to all solid waste landfills
that commence construction, reconstruction or modification after May 30, 1991
and another which is applicable to all solid waste landfills that received waste
or had the capacity to receive waste after November 8, 1987. The Emission
Guidelines may be implemented by the states. These guidelines, combined with the
new permitting programs established under the recent Clean Air Act amendments,
will likely subject solid waste landfills to significant new permitting
requirements and, in some instances, require installation of methane gas
recovery systems.
The Occupational Safety and Health Act of 1970, as amended ("OSHA"). OSHA
establishes certain employer responsibilities, including maintenance of a
workplace free of recognized hazards likely to cause death or serious injury,
compliance with standards promulgated by the Occupational Safety and Health
Administration, and various recordkeeping, disclosure and procedural
requirements. Various standards, including standards for notices of hazards,
safety in excavation and demolition work, and the handling of asbestos, may
apply to the Company's operations.
Future Federal Legislation. In the future, the Company's collection,
transfer and landfill operations may also be affected by legislation that may be
proposed in the United States Congress that would authorize the states to enact
legislation governing interstate shipments of waste. Such proposed federal
legislation may allow individual states to prohibit the disposal of out-of-state
waste or to limit the amount of out-of-state waste that could be imported for
disposal and would require states, under certain circumstances, to reduce the
amounts of waste exported to other states. If this or similar legislation is
enacted, states in which the Company will operate landfills could act to limit
or prohibit the importation of out-of-state waste. Such state actions could
adversely affect landfills within these states that receive a significant
portion of waste originating from out-of-state.
State Regulation. Each state in which the Company operates has laws and
regulations governing solid waste disposal, water and air pollution and
remediation, and, in most cases, the design, operation, maintenance and closure
of landfills and transfer stations. Management believes that several states have
proposed or have considered adopting legislation that would regulate the
interstate transportation and disposal of waste in their landfills. Many states
have also adopted legislative and regulatory measures to mandate or encourage
waste reduction at the source and waste recycling.
The Company's collection and landfill operations may be affected by the
current trend toward laws requiring the development of waste reduction and
recycling programs. For example, a number of states have recently enacted laws
that will require counties to adopt comprehensive plans to reduce, through waste
planning, composting and recycling or other programs, the volume of solid waste
deposited in landfills within the next few years. A number of states have also
taken or propose to take steps to ban or otherwise limit the disposal of certain
wastes, such as yard wastes, beverage containers, newspapers, unshredded tires,
lead-acid batteries and household appliances into landfills.
The Company has implemented and will continue to implement its own
environmental safeguards that comply with or exceed governmental requirements.
Additionally, the Company's policy will be to obtain an environmental assessment
prepared by an independent environmental consulting firm for all real estate it
acquires.
LIABILITY INSURANCE AND BONDING
The Company carries general liability, comprehensive property damage,
workers' compensation, employer's liability, directors' and officers' liability
and other coverages it believes are customary to the industry. The Company also
has environmental impairment liability insurance for all of its operating
landfills except one owned and four operated sites. The environmental impairment
liability insurance is in the amount of up to $5 million for the policy term in
excess of a $1 million deductible per claim. Except as discussed in "-- Legal
Proceedings" below, management does not expect the impact of any known
environmental or other contingencies to be material to the Company's
consolidated liquidity, financial position or results of operations.
The Company is required to provide certain financial assurances to
governmental agencies under applicable environmental regulations relating to its
landfill and collection operations. These financial
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assurances include performance bonds, letters of credit, insurance policies and
trust deposits required principally to secure the Company's estimated landfill
closure and post-closure obligations and collection contracts. The Company
expects to be required to provide approximately $227.6 million in financial
assurance obligations relating to its landfill operations during 1997. The
Company expects that financial assurances will increase in the future as the
Company acquires and expands its activities and that a greater percentage of the
financial assurances will be comprised, directly and indirectly, of letters of
credit.
EMPLOYEES
As of March 31, 1997, the Company employed approximately 5,000 persons.
Certain employees of the Company are covered by collective bargaining
agreements. The Company believes relations with its employees are satisfactory.
PROPERTIES
The Company's principal executive offices are located at 15880 North
Greenway-Hayden Loop, Suite 100, Scottsdale, Arizona 85260 where it currently
leases 33,000 square feet of office space. The Company also maintains six
regional administrative offices in the United States.
The principal fixed assets used by the Company in its collection and
transfer operations are 41 transfer stations, 56 landfills and 20 recycling
facilities.
LEGAL PROCEEDINGS
The Company is currently involved in certain routine litigation. The
Company believes that all such litigation arose in the ordinary course of
business and that costs of settlements or judgments arising from such suits will
not have a materially adverse effect on the Company's consolidated liquidity
financial position or results of operations.
The business of the Company is regulated by federal, state and local
provisions that relate to the protection of the environment. The nature of the
Company's business results in it frequently becoming a party to judicial or
administrative proceedings involving governmental authorities and other
interested parties. At May 31, 1997, the Company was not involved in any such
proceedings where management believes sanctions imposed by governmental
authorities may exceed $100,000. From time to time the Company may also be
subject to actions brought by citizens' groups, adjacent landowners or others in
connection with the permitting and licensing of its landfills or transfer
stations, or alleging personal injury, environmental damage or violations of the
permits and licenses pursuant to which the Company operates.
In connection with the Laidlaw Acquisition, the Company engaged Emcon to
assist in conducting an environmental assessment of the real property owned by
the LSW Subsidiaries or third-parties, and properties under the management of
the LSW Subsidiaries. Several contaminated landfills and other properties have
been identified, two of which are owned by subsidiaries of the Company, that
would require those subsidiaries to incur costs for incremental closure and
post-closure measures, remediation activities and litigation costs in the
future. The cost of performing the investigation, design, remediation and
allocation of responsibility to the subsidiaries of the Company vary
significantly between sites. Based on information available to the Company,
Allied recorded a provision of $51.5 million for environmental matters,
including closure and post-closure costs, in the 1996 statement of operations
and expects these amounts to be disbursed over the next 30 years.
The Company has been notified that it is considered a potentially
responsible party at a number of locations under CERCLA or other environmental
laws. The Company continually reviews its status with respect to each location,
taking into account the alleged connection to the location and the extent of the
contribution to the volume of waste at the location, the available evidence
connecting the entity to that location and the numbers and financial soundness
of other potentially responsible parties at the location. The ultimate amounts
for environmental liabilities at sites regarding which the Company may be a
potentially responsible party cannot be determined and estimates of such
liabilities made by the Company, after consultation with its independent
environmental engineers, require assumptions about future events due to a
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<PAGE> 27
number of uncertainties including the extent of the contamination, the
appropriate remedy, the financial viability of other potentially responsible
parties and the final apportionment of responsibility among the potentially
responsible parties. Where the Company has concluded that its estimated share of
potential liabilities is probable, a provision has been made in the consolidated
financial statements. Since the ultimate outcome of these matters may differ
from the estimates used in the Company's assessment to date, the recorded
liabilities will be periodically evaluated as additional information becomes
available to ascertain that the accrued liabilities are adequate. The Company
has determined that the recorded liability for environmental matters as of
December 31, 1996 of approximately $152.5 million (including the $51.5 million
provision charged to the 1996 statement of operations) represents the most
probable outcome of these contingent matters. The Company does not expect that
adjustments to estimates, which are reasonably possible in the near term and
that may result in changes to recorded amounts, will have a material effect on
the Company's consolidated liquidity, financial position or results of
operations.
The consolidated federal income tax returns for the fiscal years ended
August 31, 1986, 1987 and 1988 of certain subsidiaries of the Company that were
acquired from Laidlaw in December 1996 have been under audit by the IRS. In
March 1994, the LSW U.S. Subsidiaries received a Statutory Notice of Deficiency
proposing that the LSW U.S. Subsidiaries pay additional taxes relating to the
Tax Controversy. The consolidated tax group of the LSW U.S. Subsidiaries has
also received notice that fiscal years 1992, 1993 and 1994 will be examined
regarding the Tax Controversy. The LSW U.S. Subsidiaries could be directly
liable for a substantial portion of any tax and interest assessed if the
disallowance of the deduction is sustained. In addition, under Treasury
Regulations promulgated under Section 1502 of the IRC, each member of the
consolidated tax group including each LSW U.S. Subsidiary, is or could be
severally liable for federal income tax liabilities of the entire consolidated
tax group, including any taxes due on the deemed sale of assets by the LSW U.S.
Subsidiaries pursuant to Section 338 of the IRC and all amounts at issue in the
Tax Controversy which are ultimately determined to be owed.
Any amounts at issue in the Tax Controversy and for which any LSW U.S.
Subsidiary may ultimately be found liable, are included in and covered by the
indemnification of the Company by Laidlaw set forth in the Laidlaw Acquisition
Agreement. The obligation of Laidlaw to indemnify the Company in respect of
amounts at issue in the Tax Controversy is a general, unsecured obligation of
Laidlaw. The ability of Laidlaw to pay and fulfill such indemnification
obligation will depend on the financial condition of Laidlaw at the time of any
required performance of such obligation.
THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The Notes were sold by the Company on December 5, 1996, and were
subsequently resold to qualified institutional buyers pursuant to Rule 144A
under the Securities Act, to institutional investors that are accredited
investors in a manner exempt from registration under the Securities Act and to
certain persons in transactions outside the United States in reliance on
Regulation S under the Securities Act. In connection with the Note Offering, the
Company entered into the Registration Rights Agreement, which requires, among
other things, that on or before March 1, 1997, the Company (i) file with the SEC
a registration statement under the Securities Act with respect to an issue of
new notes of the Company identical in all material respects to the Notes, (ii)
use their best efforts to cause such registration statement to become effective
under the Securities Act and (iii) upon the effectiveness of that registration
statement, offer to the Holders of the Notes the opportunity to exchange their
Notes for a like principal amount of Exchange Notes, which would be issued
without a restrictive legend and may be reoffered and resold by the holder
without restrictions or limitations under the Securities Act (other than any
such holder that is an "affiliate" of the Company within the meaning of Rule 405
under the Securities Act). A copy of the Registration Rights Agreement has been
filed as an exhibit to the Registration Statement of which this Prospectus is a
part. The term "Holder" with respect to the Exchange Offer means any person in
whose name the Notes are registered on the books of the Company or any other
person who has obtained a properly completed bond power from the registered
holder.
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<PAGE> 28
Because the Exchange Offer is for any and all Notes, the number of Notes
tendered and exchanged in the Exchange Offer will reduce the principal amount of
Notes outstanding. Following the consummation of the Exchange Offer, Holders of
the Notes who did not tender their Notes generally will not have any further
registration rights under the Registration Rights Agreement, and such Notes will
continue to be subject to certain restrictions on transfer. Accordingly, the
liquidity of the market for such Notes could be adversely affected. The Notes
are currently eligible for sale pursuant to Rule 144A through the PORTAL System
of the National Association of Securities Dealers, Inc. Because the Company
anticipates that most holders of Notes will elect to exchange such Notes for
Exchange Notes due to the absence of restrictions on the resale of Exchange
Notes under the Securities Act, the Company anticipates that the liquidity of
the market for any Notes remaining after the consummation of the Exchange Offer
may be substantially limited.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Company will accept any and all Notes
validly tendered and not withdrawn prior to 5:00 p.m. New York City time, on the
Expiration Date. The Company will issue $1,000 principal amount of Exchange
Notes in exchange for each $1,000 principal amount of outstanding Notes accepted
in the Exchange Offer. Holders may tender some or all of their Notes pursuant to
the Exchange Offer. However, Notes may be tendered only in integral multiples of
$1,000.
The form and terms of the Exchange Notes are the same as the form and terms
of the Notes except that (i) the Exchange Notes have been registered under the
Securities Act and hence will not bear legends restricting the transfer thereof
and (ii) the holders of the Exchange Notes generally will not be entitled to
certain rights under the Registration Rights Agreement, which rights generally
will terminate upon consummation of the Exchange Offer. The Exchange Notes will
evidence the same debt as the Notes and will be entitled to the benefits of the
Indenture.
Holders of Notes do not have any appraisal or dissenter's rights under the
General Corporation Law of Delaware or the Indenture in connection with the
Exchange Offer. The Company intends to conduct the Exchange Offer in accordance
with the applicable requirements of the Exchange Act and the rules and
regulations of the SEC thereunder, including Rule 14e-1 thereunder.
The Company shall be deemed to have accepted validly tendered Notes when,
as and if the Company has given oral or written notice thereof to the Exchange
Agent. The Exchange Agent will act as agent for the tendering Holders for the
purpose of receiving the Exchange Notes from the Company.
If any tendered Notes are not accepted for exchange because of an invalid
tender, the occurrence of certain other events set forth herein or otherwise,
the certificates for any such unaccepted Notes will be returned, without
expense, to the tendering Holder thereof as promptly as practicable after the
Expiration Date.
Holders who tender Notes in the Exchange Offer will not be required to pay
brokerage commissions or fees or, subject to the instructions in the Letter of
Transmittal, transfer taxes with respect to the exchange of Notes pursuant to
the Exchange Offer. The Company will pay all charges and expenses, other than
transfer taxes in certain circumstances, in connection with the Exchange Offer.
See "-- Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time, on
July 23, 1997, unless the Company, in its sole discretion, extends the Exchange
Offer, in which case the term "Expiration Date" shall mean the latest date and
time to which the Exchange Offer is extended.
To extend the Exchange Offer, the Company will notify the Exchange Agent of
any extension by oral or written notice, followed by a public announcement
thereof no later than 9:00 a.m., New York City time, on the next business day
after the previously scheduled expiration date.
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<PAGE> 29
The Company reserves the right, in its reasonable judgment, (i) to delay
accepting any Notes, to extend the Exchange Offer or to terminate the Exchange
Offer if any of the conditions set forth below under "-- Conditions" shall not
have been satisfied, by giving oral or written notice of such delay, extension
or termination to the Exchange Agent or (ii) to amend the terms of the Exchange
Offer in any manner. Any such delay in acceptance, extension, termination or
amendment will be followed as promptly as practicable by a public announcement
thereof. If the Exchange Offer is amended in a manner determined by the Company
to constitute a material change, the Company will promptly disclose such
amendment by means of a prospectus supplement that will be distributed to the
registered Holders, and, depending upon the significance of the amendment and
the manner of disclosure to the registered Holders, the Company will extend the
Exchange Offer for a period of five to ten business days if the Exchange Offer
would otherwise expire during such five to ten business-day period.
If the Company does not consummate the Exchange Offer, or, in lieu thereof,
the Company does not file and cause to become effective the Shelf Registration
Statement within the time periods set forth herein, liquidated damages will
accrue and be payable on the Notes either temporarily or permanently. See
"Description of Exchange Notes -- Registration Rights."
Without limiting the manner in which the Company may choose to make public
announcement of any delay, extension, amendment or termination of the Exchange
Offer, the Company shall have no obligation to publish, advertise or otherwise
communicate any such public announcement, other than by making a timely release
to the Dow Jones News Service.
INTEREST ON EXCHANGE NOTES
The Exchange Senior Subordinated Notes will bear interest from December 5,
1996, the date of issuance of the Notes that are tendered in exchange for the
Exchange Notes (or the most recent Interest Payment Date to which interest on
such Notes has been paid). Accordingly, holders of Notes that are accepted for
exchange will not receive interest that is accrued but unpaid on the Notes at
the time of tender, but such interest will be payable on the first Interest
Payment Date after the Expiration Date. Interest on the Exchange Notes will be
payable semiannually on each June 1 and December 1, commencing on June 1, 1997.
PROCEDURES FOR TENDERING
Only a Holder of Notes may tender such Notes in the Exchange Offer. To
tender in the Exchange Offer, a Holder must complete, sign and date the Letter
of Transmittal, or a facsimile thereof, have the signatures thereon guaranteed
if required by the Letter of Transmittal and mail or otherwise deliver such
Letter of Transmittal or such facsimile, together with the Notes and any other
required documents, to the Exchange Agent so as to be received by the Exchange
Agent at the address set forth below prior to 5:00 p.m., New York City time, on
the Expiration Date. Delivery of the Notes may be made by book-entry transfer in
accordance with the procedures described below. Confirmation of such book-entry
transfer must be received by the Exchange Agent prior to the Expiration Date.
By executing the Letter of Transmittal, each Holder will make to the
Company the representation set forth below in the second paragraph under the
heading "-- Resale of Exchange Notes."
The tender by a Holder and the acceptance thereof by the Company will
constitute an agreement between such Holder and the Company in accordance with
the terms and subject to the conditions set forth herein and in the Letter of
Transmittal.
THE METHOD OF DELIVERY OF NOTES AND THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF THE
HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE AN
OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. NO
LETTER OF TRANSMITTAL OR NOTES SHOULD BE SENT TO THE COMPANY. HOLDERS MAY
REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COM-
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<PAGE> 30
MERCIAL BANKS, TRUST COMPANIES OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR
SUCH HOLDERS.
Any beneficial owner whose Notes are registered in the name of a broker,
dealer, commercial bank, trust company or other nominee and who wishes to tender
should contact the registered Holder promptly and instruct such registered
Holder to tender on such beneficial owner's behalf.
Signatures on the Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by an Eligible Institution (as defined herein)
unless the Notes tendered pursuant thereto are tendered (i) by a registered
Holder who has not completed the box entitled "Special Registration
Instructions" or "Special Delivery Instructions" on the Letter of Transmittal or
(ii) for the account of an Eligible Institution. In the event that signatures on
a Letter of Transmittal or a notice of withdrawal, as the case may be, are
required to be guaranteed, such guarantee must be by a member firm of a
registered national securities exchange or of the National Association of
Securities Dealers, Inc., a commercial bank or trust company having an office or
correspondent in the United States or an "eligible guarantor institution" within
the meaning of Rule 17Ad-15 under the Exchange Act (an "Eligible Institution").
If the Letter of Transmittal is signed by a person other than the
registered Holder of any Notes listed therein, such Notes must be endorsed or
accompanied by a properly completed bond power, signed by such registered Holder
as such registered Holder's name appears on such Notes with the signature
thereon guaranteed by an Eligible Institution. If the Letter of Transmittal or
any Notes or bond powers are signed by trustees, executors, administrators,
guardians, attorneys-in-fact, officers of corporations or others acting in a
fiduciary or representative capacity, such persons should so indicate when
signing, and unless waived by the Company, evidence satisfactory to the Company
of their authority to so act must be submitted with the Letter of Transmittal.
The Company understands that the Exchange Agent will make a request
promptly after the date of this Prospectus to establish accounts with respect to
the Notes at the Depository for the purpose of facilitating the Exchange Offer,
and subject to the establishment thereof, any financial institution that is a
participant in the Depository's system may make book-entry delivery of the Notes
by causing the Depository to transfer such Notes into the Exchange Agent's
account with respect to the Notes in accordance with the Depository's procedures
for such transfer. Although delivery of the Notes may be effected through
book-entry transfer into the Exchange Agent's account at the Depository, an
appropriate Letter of Transmittal properly completed and duly executed with any
required signature guarantee and all other required documents must in each case
be transmitted to and received or confirmed by the Exchange Agent at its address
set forth below on or prior to the Expiration Date, or, if the guaranteed
delivery procedures described below are complied with, within the time period
provided under such procedures. Delivery of documents to the Depository does not
constitute delivery to the Exchange Agent.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Notes and withdrawal of tendered Notes will be
determined by the Company in its sole discretion, which determination will be
final and binding. The Company reserves the absolute right to reject any and all
Notes not properly tendered or any Notes the Company's acceptance of which
would, in the opinion of counsel for the Company, be unlawful. The Company also
reserves the right to waive any defects, irregularities or conditions of tender
as to particular Notes. The Company's interpretation of the terms and conditions
of the Exchange Offer (including the instructions in the Letter of Transmittal)
will be final and binding on all parties. Unless waived, any defects or
irregularities in connection with tenders of Notes must be cured within such
time as the Company shall determine. Although the Company intends to notify
Holders of defects or irregularities with respect to tenders of Notes, none of
the Company, the Exchange Agent or any other person shall incur any liability
for failure to give such notification. Tenders of Notes will not be deemed to
have been made until such defects or irregularities have been cured or waived.
Any Notes received by the Exchange Agents that are not properly tendered and as
to which the defects or irregularities have not been cured or waived will be
returned by the Exchange Agent to the tendering Holders, unless otherwise
provided in the Letter of Transmittal, as soon as practicable following the
Expiration Date.
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GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Notes and (i) whose Notes are not
immediately available, (ii) who cannot deliver their Notes, the Letter of
Transmittal or any other required documents to the Exchange Agent or (iii) who
cannot complete the procedures for book-entry transfer, prior to the Expiration
Date, may effect a tender if:
(a) the tender is made through an Eligible Institution;
(b) prior to the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed and duly executed Notice of Guaranteed
Delivery (by facsimile transmission, mail or hand delivery) setting forth the
name and address of the Holder, the certificate number(s) of such Notes and the
principal amount of Notes tendered, stating that the tender is being made
thereby and guaranteeing that, within three New York Stock Exchange trading days
after the Expiration Date, the Letter of Transmittal (or facsimile thereof),
together with the certificate(s) representing the Notes (or a confirmation of
book-entry transfer of such Notes into the Exchange Agent's account at the
Depository) and any other documents required by the Letter of Transmittal, will
be deposited by the Eligible Institution with the Exchange Agent; and
(c) such properly completed and executed Letter of Transmittal (or
facsimile thereof), as well as the certificate(s) representing all tendered
Notes in proper form for transfer (or a confirmation of book-entry transfer of
such Notes into the Exchange Agent's account at the Depository) and all other
documents required by the Letter of Transmittal, are received by the Exchange
Agent within three New York Stock Exchange trading days after the Expiration
Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to Holders who wish to tender their Notes according to the guaranteed
delivery procedures set forth above.
WITHDRAWALS OF TENDERS
Except as otherwise provided herein, tenders of Notes may be withdrawn at
any time prior to 5:00 p.m., New York City time, on the Expiration Date.
To withdraw a tender of Notes in the Exchange Offer, a written or facsimile
transmission notice of withdrawal must be received by the Exchange Agent at its
address set forth herein prior to 5:00 p.m., New York City time, on the
Expiration Date. Any such notice of withdrawal must (i) specify the name of the
person having deposited the Notes to be withdrawn (the "Depositor"), (ii)
identify the Notes to be withdrawn (including the certificate number(s) and
principal amount of such Notes, or, in the case of notes transferred by
book-entry transfer, the name and number of the account at the Depository to be
credited), (iii) be signed by the Holder in the same manner as the original
signature on the Letter of Transmittal by which such Notes were tendered
(including any required signature guarantees) or be accompanied by documents of
transfer sufficient to have the Trustee with respect to the Notes register the
transfer of such Notes into the name of the person withdrawing the tender and
(iv) specify the name in which any such Notes are to be registered, if different
from that of the Depositor. All questions as to the validity, form and
eligibility (including time or receipt) of such notices will be determined by
the Company, whose determination shall be final and binding on all parties. Any
Notes so withdrawn will be deemed not to have been validly tendered for purposes
of the Exchange Offer and no Exchange Notes will be issued with respect thereto
unless the Notes so withdrawn are validly retendered. Any Notes which have been
tendered but which are not accepted for exchange will be returned to the Holder
thereof without cost to such Holder as soon as practicable after withdrawal,
rejection of tender or termination of the Exchange Offer. Properly withdrawn
Notes may be retendered by following one of the procedures described above under
"-- Procedures for Tendering" at any time prior to the Expiration Date.
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CONDITIONS
Notwithstanding any other term of the Exchange Offer, the Company shall not
be required to accept for exchange, or to exchange Exchange Notes for, any
Notes, and may terminate or amend the Exchange Offer as provided herein before
the acceptance of such Notes, if:
(a) any law, statute, rule, regulation or interpretation by the staff of
the SEC is proposed, adopted or enacted, which, in the reasonable judgment of
the Company, might materially impair the ability of the Company to proceed with
the Exchange Offer or materially impair the contemplated benefits of the
Exchange Offer to the Company; or
(b) any governmental approval has not been obtained, which approval the
Company shall, in its reasonable judgment, deem necessary for the consummation
of the Exchange Offer as contemplated hereby.
If the Company determines in its reasonable judgment that any of the
conditions are not satisfied, the Company may (i) refuse to accept any Notes and
return all tendered Notes to the tendering Holders, (ii) extend the Exchange
Offer and retain all Notes tendered prior to the expiration of the Exchange
Offer, subject, however, to the rights of Holders to withdraw such Notes (see
"-- Withdrawals of Tenders") or (iii) waive such unsatisfied conditions with
respect to the Exchange Offer and accept all properly tendered Notes which have
not been withdrawn. If such waiver constitutes a material change to the Exchange
Offer, the Company will promptly disclose such waiver by means of a prospectus
supplement that will be distributed to the registered Holders, and, depending
upon the significance of the waiver and the manner of disclosure to the
registered Holders, the Company will extend the Exchange Offer for a period of
five to ten business days if the Exchange Offer would otherwise expire during
such five to ten business-day period.
EXCHANGE AGENT
First Bank National Association will act as Exchange Agent for the Exchange
Offer.
Questions and requests for assistance, requests for additional copies of
this Prospectus or of the Letter of Transmittal for the Notes and requests for
copies of Notice of Guaranteed Delivery should be directed to the Exchange
Agent, addressed as follows:
By mail or delivery service:
First Bank National Association
First Trust Center
180 East Fifth Street
St. Paul, Minnesota 55101
Attn: David Hauger
By hand delivery:
First Bank National Association
First Trust Center
Fourth Floor -- Bond Drop Window
180 Fifth Street
St. Paul, Minnesota 55101
Attn: David Hauger
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By facsimile (eligible institutions only):
(612) 244-1537
For telephone inquiries:
(612) 244-1197
FEES AND EXPENSES
The expenses of the Exchange Offer will be borne by the Company. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, telephone, facsimile or in person by officers and
regular employees of the Company and its affiliates.
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers or other persons
soliciting acceptances of the Exchange Offer. The Company, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
it for its reasonable out-of-pocket expenses in connection therewith and pay
other registration expenses, including fees and expenses of the Trustee, filing
fees, blue sky fees and printing and distribution expenses.
The Company will pay all transfer taxes, if any, applicable to the exchange
of the Notes pursuant to the Exchange Offer. If, however, certificates
representing the Exchange Notes or the Notes for principal amounts not tendered
or accepted for exchange are to be delivered to, or are to be issued in the name
of, any person other than the registered Holder of the Notes tendered, or if
tendered Notes are registered in the name of any person other than the person
signing the Letter of Transmittal, or if a transfer tax is imposed for any
reason other than the exchange of the Notes pursuant to the Exchange Offer, then
the amount of any such transfer taxes (whether imposed on the registered Holder
or any other person) will be payable by the tendering Holder.
ACCOUNTING TREATMENT
The Exchange Notes will be recorded at the same carrying value as the
Notes, which is the aggregate principal amount, as reflected in the Company's
accounting records on the date of exchange. Accordingly, no gain or loss for
accounting purposes will be recognized in connection with the Exchange Offer.
The expenses of the Exchange Offer will be amortized over the term of the
Exchange Notes.
RESALE OF EXCHANGE NOTES
Based on an interpretation by the staff of the SEC set forth in no-action
letters issued to third parties, the Company believes that Exchange Notes issued
pursuant to the Exchange Offer in exchange for Notes may be offered for resale,
resold and otherwise transferred by any Holder of such Exchange Notes (other
than any such Holder which is an "affiliate" of the Company within the meaning
of Rule 405 under the Securities Act) without compliance with the registration
and prospectus delivery provisions of the Securities Act, provided that such
Exchange Notes are acquired in the ordinary course of such Holder's business and
such Holder does not intend to participate, and has no arrangement or
understanding with any person to participate, in the distribution of such
Exchange Notes. Any Holder who tenders in the Exchange Offer with the intention
to participate, or for the purpose of participating, in a distribution of the
Exchange Notes may not rely on the position of the staff of the SEC enunciated
in Exxon Capital Holdings Corporation (available April 13, 1989) and Morgan
Stanley & Co., Incorporated (available June 5, 1991), or similar no-action
letters, but rather must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale transaction. In
addition, any such resale transaction should be covered by an effective
registration statement containing the selling security holders information
required by Item 507 of Regulation S-K of the Securities Act. Each broker-dealer
that receives Exchange Notes for its own account in exchange for Notes, where
such Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities, may be a statutory underwriter and must
acknowledge that it will deliver a prospectus in connection with any resale of
such Exchange Notes.
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<PAGE> 34
By tendering in the Exchange Offer, each Holder will represent to the
Company that, among other things, (i) the Exchange Notes acquired pursuant to
the Exchange Offer are being obtained in the ordinary course of business of the
person receiving such Exchange Notes, whether or not such person is a Holder,
(ii) neither the Holder nor any such other person has an arrangement or
understanding with any person to participate in the distribution of such
Exchange Notes and (iii) the Holder and such other person acknowledge that if
they participate in the Exchange Offer for the purpose of distributing the
Exchange Notes (a) they must, in the absence of an exemption therefrom, comply
with the registration and prospectus delivery requirements of the Securities Act
in connection with any resale of the Exchange Notes and cannot rely on the
no-action letters referenced above and (b) failure to comply with such
requirements in such instance could result in such Holder incurring liability
under the Securities Act for which such Holder is not indemnified by the
Company. Further, by tendering in the Exchange Offer, each Holder that may be
deemed an "affiliate" (as defined under Rule 405 of the Securities Act) of the
Company will represent to the Company that such Holder understands and
acknowledges that the Exchange Notes may not be offered for resale, resold or
otherwise transferred by that Holder without registration under the Securities
Act or an exemption therefrom.
As set forth above, affiliates of the Company are not entitled to rely on
the foregoing interpretations of the staff of the SEC with respect to resales of
the Exchange Notes without compliance with the registration and prospectus
delivery requirements of the Securities Act.
CONSEQUENCES OF FAILURE TO EXCHANGE
As a result of the making of this Exchange Offer, the Company will have
fulfilled one of its obligations under the Registration Rights Agreement, and
Holders of Notes who do not tender their Notes generally will not have any
further registration rights under the Registration Rights Agreement or
otherwise. Accordingly, any Holder of Notes that does not exchange that Holder's
Notes for Exchange Notes will continue to hold the untendered Notes and will be
entitled to all the rights and limitations applicable thereto under the
Indenture, except to the extent that such rights or limitations, by their terms,
terminate or cease to have further effectiveness as a result of the Exchange
Offer.
The Notes that are not exchanged for Exchange Notes pursuant to the
Exchange Offer will remain restricted securities. Accordingly, such Notes may be
resold only (i) to the Company (upon redemption thereof or otherwise), (ii)
pursuant to an effective registration statement under the Securities Act, (iii)
so long as the Notes are eligible for resale pursuant to Rule 144A, to a
qualified institutional buyer within the meaning of Rule 144A under the
Securities Act in a transaction meeting the requirements of Rule 144A, (iv)
outside the United States to a foreign person pursuant to the exemption from the
registration requirements of the Securities Act provided by Regulation S
thereunder, (v) pursuant to an exemption from registration under the Securities
Act provided by Rule 144 thereunder (if available) or (vi) to an institutional
accredited investor in a transaction exempt from the registration requirements
of the Securities Act, in each case in accordance with any applicable securities
laws of any state of the United States.
OTHER
Participation in the Exchange Offer is voluntary and Holders should
carefully consider whether to accept. Holders of the Notes are urged to consult
their financial and tax advisors in making their own decision on what action to
take.
The Company may in the future seek to acquire untendered Notes in open
market or privately negotiated transactions, through subsequent exchange offers
or otherwise. The Company has no present plans to acquire any Notes that are not
tendered in the Exchange Offer or to file a registration statement to permit
resales of any untendered Notes.
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES
OF THE EXCHANGE OFFER
The following discussion is based upon current provisions of the IRC,
applicable Treasury regulations, judicial authority and administrative rulings
and practice. There can be no assurance that the IRS will not take a contrary
view, and no ruling from the IRS has been or will be sought. Legislative,
judicial or administrative changes or interpretations may be forthcoming that
could alter or modify the statements and conditions set forth herein. Any such
changes or interpretations may or may not be retroactive and could affect the
tax consequences to Holders. Certain Holders of the Notes (including insurance
companies, tax-exempt organizations, financial institutions, broker-dealers,
foreign corporations and persons who are not citizens or residents of the United
States) may be subject to special rules not discussed below. Each Holder of a
Note should consult his, her or its own tax advisor as to the particular tax
consequences of exchanging such Holder's Notes for Exchange Notes, including the
applicability and effect of any state, local or foreign tax laws.
The issuance of the Exchange Notes to Holders of the Notes pursuant to the
terms set forth in this Prospectus will not constitute an exchange for federal
income tax purposes. Consequently, no gain or loss would be recognized by
Holders of the Notes upon receipt of the Exchange Notes, and ownership of the
Exchange Notes will be considered a continuation of ownership of the Notes. For
purposes of determining gain or loss upon the subsequent sale or exchange of the
Exchange Notes, a Holder's basis in the Exchange Notes should be the same as
such Holder's basis in the Notes exchanged therefor. A Holder's holding period
for the Exchange Notes should include the Holder's holding period for the Notes
exchanged therefor. The issue price, original issue discount inclusion and other
tax characteristics of the Exchange Notes should be identical to the issue
price, original issue discount inclusion and other tax characteristics of the
Notes exchanged therefor.
See also "Description of Certain Federal Income Tax Consequences of an
Investment in the Exchange Notes."
DESCRIPTION OF THE SENIOR CREDIT FACILITY
Concurrently with the Laidlaw Acquisition, the Company entered into a
senior credit facility (the "1996 Senior Credit Facility") consisting of (i) a
$475 million five and one-half year amortizing senior secured term loan facility
(the "1996 Term Loan Facility"), (ii) three amortizing senior secured term loan
facilities (the "1996 Serialized Facilities") in an aggregate original principal
amount of $500 million and with ultimate maturities which ranged from six and
one-half years to eight and one-half years, and (iii) a $300 million five and
one-half year senior secured revolving credit facility. In connection with the
closing of the Canadian Sale, an aggregate amount of approximately $517 million
was applied to prepayment of the 1996 Term Loan Facility and the 1996 Serialized
Facilities.
In June 1997, the Company entered into the Senior Credit Facility providing
for a six and one-half year senior secured $500 million term loan facility (the
"Term Loan Facility") and a six and one-half year senior secured $400 million
revolving credit facility (the "Revolving Credit Facility"). The Term Loan
Facility is an amortizing senior secured term loan with annual amortizations of
principal (payable quarterly) increasing from $10 million in 1997 to $100
million in each of 2000, 2001, 2002 and 2003.
The Company is required to make prepayments on the Senior Credit Facility
under certain circumstances, including upon certain asset sales and issuance of
debt or equity securities. The Company is also required to make prepayments on
the Senior Credit Facility in an amount equal to 50% of the Company's annual
Excess Cash Flow (as defined in the Senior Credit Facility) unless the Company's
Senior Debt Ratio (as defined in the Senior Credit Facility) for the relevant
fiscal year is less than 2.0 to 1.0. These mandatory prepayments will be applied
first, to the Term Loan Facility and second, to the permanent reduction of the
Revolving Credit Facility. In no event, however, will the Revolving Credit
Facility be required to be reduced to an amount less than $300 million in
connection with any such mandatory prepayment.
The Term Loan Facility and the Revolving Credit Facility bear interest, at
the Company's option, at Credit Suisse's customary base rate or at Credit
Suisse's Eurodollar rate plus, in either case, an agreed upon
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margin. The applicable margins above Credit Suisse's customary base rate and
Credit Suisse's Eurodollar rate, at which the Term Loan Facility and the
Revolving Credit Facility bear interest, will be adjusted from time to time
pursuant to a floating performance pricing grid which is based on the Leverage
Ratio and Senior Debt Ratio (as defined in the Senior Credit Facility)
applicable for each testing period. Based upon the floating performance pricing
grid, the margin applicable to base rate loans may vary between .75% (if the
Leverage Ratio is greater than or equal to 4.5 to 1.0) and zero (if the Leverage
Ratio is less than 3.5 to 1.0) and the margin applicable to Eurodollar based
loans may vary between 1.75% (if the Leverage Ratio is greater than or equal to
4.5 to 1.0) and .75% (if the Leverage Ratio is less than 3.0 to 1.0). If the
Senior Debt Ratio is greater than 2.5 to 1.0, the applicable margin for all
loans will be increased by .25%.
Pursuant to the Revolving Credit Facility, the Company has $400 million of
availability for working capital, letters of credit, and other general corporate
purposes. Not more than $175 million of the Revolving Credit Facility will be
available to support the issuance of letters of credit. All loans under the
Senior Credit Facility must be "Senior Debt" under the Indenture. At June 5,
1997, approximately $850 million in loans could be incurred pursuant to the
Senior Credit Facility which would be "Senior Debt" under the Indenture. As a
result, notwithstanding the aggregate amount of the Revolving Credit Facility at
June 5, 1997, the aggregate amount of the Senior Credit Facility which is
available for loans pursuant to the Revolving Credit Facility is approximately
$307 million.
The Senior Credit Facility is guaranteed by Allied and by each of the
Company's present and future subsidiaries and is secured by all of the stock of
the Company and the Company's present and future subsidiaries and by
substantially all of the present and future property and assets of the Company
and its present and future subsidiaries.
The Senior Credit Facility contains certain financial covenants, including,
but not limited to, covenants related to cash interest coverage, fixed charge
coverage, Total Debt/EBITDA ratio and a limit upon annual capital expenditures.
In addition, the Senior Credit Facility contains other affirmative and negative
covenants relating to (among other things) liens, payments on other Debt
(including the Exchange Notes), transactions with affiliates, mergers and
acquisitions, sales of assets, leases, guarantees and investments. The Senior
Credit Facility contains customary events of default for highly leveraged
financings.
The Company has entered into interest rate protection agreements in an
amount equal to approximately 46% of the Term Loan Facility.
DESCRIPTION OF THE EXCHANGE NOTES
The Exchange Notes will be issued pursuant to an Indenture, dated as of
December 1, 1996, as amended (the "Indenture"), among the Company, Allied, as a
Guarantor, the Subsidiary Guarantors and First Bank National Association, as
trustee (the "Trustee").
The Indenture is by its terms subject to and governed by the Trust
Indenture Act of 1939, as amended. The statements under this caption relating to
the Exchange Notes and the Indenture are summaries and do not purport to be
complete, and are subject to, and are qualified in their entirety by reference
to, all the provisions of the Indenture, including the definitions therein of
certain terms. Wherever defined terms or particular sections of the Indenture
are referred to, such defined terms and sections are incorporated herein by
reference. All references in this section to the "Company" refer solely to
Allied Waste North America, Inc., the issuer of the Exchange Notes, and to
"Allied" refer solely to Allied Waste Industries, Inc., and not to their
respective subsidiaries.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
Indenture. Reference is made to the Indenture for the full definition of all
such terms, as well as any other terms used herein for which no definition is
provided. (Section 101).
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"Affiliate" of any Person means any other Person directly or indirectly
controlling or controlled by or under direct or indirect common control with
such Person. For the purposes of this definition, "control" when used with
respect to any Person means the power to direct the management and policies of
such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Allied Canada Debentures" means the Zero Coupon Junior Subordinated
Debenture of Allied Canada and the 7% Junior Subordinated Debenture of Allied
Canada issued to Laidlaw Inc. ("Laidlaw") and subsequently transferred by
Laidlaw to Allied Finance.
"Allied Insurance" means Reliant Insurance Company, a Vermont corporation
and a Subsidiary of the Company, engaged solely in the business of issuing
insurance policies with respect to the closure and post-closure financial
assurance obligations of the Company and its Restricted Subsidiaries.
"Asset Disposition" by any Person that is the Company or any Restricted
Subsidiary means any transfer, conveyance, sale, lease or other disposition by
the Company or any of its Restricted Subsidiaries (including a consolidation or
merger or other sale of any Restricted Subsidiary with, into or to another
Person in a transaction in which such Subsidiary ceases to be a Restricted
Subsidiary of such Person), of (i) shares of Capital Stock (other than
directors' qualifying shares) or other ownership interests of a Restricted
Subsidiary or (ii) the property or assets of such Person or any Restricted
Subsidiary representing a division or line of business or (iii) other assets or
rights of such Person or any Restricted Subsidiary outside of the ordinary
course of business, but excluding in each case in Clauses (i), (ii) and (iii),
(x) a disposition by a Subsidiary of such Person to such Person or a Wholly
Owned Restricted Subsidiary or by such Person to a Wholly Owned Restricted
Subsidiary, (y) the disposition of all or substantially all of the assets of the
Company in a manner permitted pursuant to the provisions described above under
"Mergers, Consolidations and Certain Sales and Purchases of Assets" of the
Company and (z) any disposition that constitutes a Restricted Payment or
Permitted Investment that is permitted pursuant to the provisions described
under "Certain Covenants -- Limitation on Restricted Payments."
"Bank Agreement" means the Credit Agreement entered into by the Company
with Goldman Sachs Credit Partners L.P., Citibank, N.A., Citicorp Securities,
Inc., Citicorp USA, Inc. and Credit Suisse, or any bank credit agreement that
replaces, amends, supplements, restates or renews such Credit Agreement.
"Bank Facility Capacity Increase" means a replacement, amendment,
supplement, restatement, renewal or other modification of the Bank Agreement
that increases the aggregate amount of borrowings permitted under the Bank
Agreement.
"Bank Facility Limit" means (x) $1,275 million less principal payments of
term loans and permanent commitment reductions with respect to revolving loans
under the Bank Agreement since the date of the Indenture or (y) following a Bank
Facility Capacity Increase, the Increased Bank Facility Limit, less principal
payment of term loans and permanent commitment reductions with respect to
revolving loans under the Bank Agreement, as so replaced, amended, supplemented,
restated, renewed or modified, since the date of such Bank Facility Capacity
Increase.
"Capital Lease Obligation" of any Person means the obligation to pay rent
or other payment amounts under a lease of (or other arrangements conveying the
right to use) real or personal property of such Person which is required to be
classified and accounted for as a capital lease or a liability on a balance
sheet of such Person in accordance with generally accepted accounting
principles. The stated maturity of such obligation shall be the date of the last
payment of rent or any other amount due under such lease prior to the first date
upon which such lease may be terminated by the lessee without payment of a
penalty. The principal amount of such obligation shall be the capitalized amount
thereof that would appear on a balance sheet of such Person in accordance with
generally accepted accounting principles.
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"Capital Stock" of any Person means any and all shares, interests,
participations or other equivalents (however designated) of corporate stock or
other equity participations, including partnership interests, whether general or
limited, of such Person.
"Common Stock" of any Person means Capital Stock of such Person that does
not rank prior, as to the payment of dividends or as to the distribution of
assets upon any voluntary or involuntary liquidation, dissolution or winding up
of such Person, to shares of Capital Stock of any other class of such Person.
"Comparable Treasury Issue" means on any date the United States Treasury
security selected by an Independent Investment Banker as having a maturity
comparable to the remaining term of the Exchange Notes on such date that would
be utilized, at the time of selection and in accordance with customary financial
practice, in pricing new issues of corporate debt securities of a maturity
comparable to the remaining term of the Exchange Notes on such date.
"Independent Investment Banker" means Goldman, Sachs or, if such firm is
unwilling or unable to select the Comparable Treasury Issue, an independent
investment banking institution of national standing appointed by the Trustee.
"Comparable Treasury Price" means, with respect to any Redemption Date, (i)
the average of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) on the third
business day preceding such Redemption Date, as set forth in the daily
statistical release (or any successor release) published by the Federal Reserve
Bank of New York and designated "Composite 3:30 p.m. Quotations for U.S.
Government Securities" or (ii) if such release (or any successor release) is not
published or does not contain such prices on such business day, (A) the average
of the Reference Treasury Dealer Quotations for such Redemption Date, after
excluding the highest and lowest such Reference Treasury Dealer Quotations, or
(B) if the Trustee obtains fewer than four such Reference Treasury Dealer
Quotations, the average of all such Quotations. "Reference Treasury Dealer
Quotations" means, with respect to each Reference Treasury Dealer and any
Redemption Date, the average, as determined by the Trustee, of the bid and asked
prices for the Comparable Treasury Issue (expressed in each case as a percentage
of its principal amount) quoted in writing to the Trustee by such Reference
Treasury Dealer at 5:00 p.m. on the third business day preceding such Redemption
Date.
"Consolidated EBITDA" of any Person means for any period the Consolidated
Net Income for such period increased by the sum of (i) Consolidated Interest
Expense of such Person for such period, plus (ii) Consolidated Income Tax
Expense of such Person for such period, plus (iii) the consolidated depreciation
and amortization expense deducted in determining the Consolidated Net Income of
such Person for such period; provided, however, that the Consolidated Interest
Expense, Consolidated Income Tax Expense and consolidated depreciation and
amortization expense of a Consolidated Subsidiary of such Person shall be added
to the Consolidated Net Income pursuant to the foregoing only (x) to the extent
and in the same proportion that the Consolidated Net Income of such Consolidated
Subsidiary was included in calculating the Consolidated Net Income of such
Person and (y) only to the extent that the amount specified in Clause (x) is not
subject to restrictions that prevent the payment of dividends or the making of
distributions to such Person.
"Consolidated EBITDA Coverage Ratio" of any Person means for any period the
ratio of (i) Consolidated EBITDA of such Person for such period to (ii) the sum
of (A) Consolidated Interest Expense of such Person for such period plus (B) the
annual interest expense (including the amortization of debt discount) with
respect to any Debt incurred or proposed to be Incurred by such Person or its
Consolidated Subsidiaries since the beginning of such period to the extent not
included in clause (ii)(A), minus (C) Consolidated Interest Expense of such
Person with respect to any Debt that is no longer outstanding or that will no
longer be outstanding as a result of the transaction with respect to which the
Consolidated EBITDA Coverage Ratio is being calculated, to the extent included
within Clause (ii)(A); provided, however, that in making such computation, the
Consolidated Interest Expense of such Person attributable to interest on any
Debt bearing a floating interest rate shall be computed on a pro forma basis as
if the rate in effect on the date of computation had been the applicable rate
for the entire period; and provided further, that, in the event such Person or
any of its Consolidated Subsidiaries has made acquisitions or dispositions of
assets not in the ordinary course of business (including the acquisition by the
Company of the
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Subsidiaries of Allied, the acquisition by the Company of the Subsidiaries of
Laidlaw pursuant to the Acquisition and any other acquisitions of any other
Persons by merger, consolidation or purchase of Capital Stock) during or after
such period, the computation of the Consolidated EBITDA Coverage Ratio (and for
the purpose of such computation, the calculation of Consolidated Net Income,
Consolidated Interest Expense, Consolidated Income Tax Expense and Consolidated
EBITDA) shall be made on a pro forma basis as if the acquisitions or
dispositions had taken place on the first day of such period.
"Consolidated Income Tax Expense" of any Person means for any period the
consolidated provision for income taxes of such Person and its Consolidated
Subsidiaries for such period determined in accordance with generally accepted
accounting principles.
"Consolidated Interest Expense" of any Person means for any period the
consolidated interest expense included in a consolidated income statement (net
of interest income) of such Person and its Consolidated Subsidiaries for such
period determined in accordance with generally accepted accounting principles,
including without limitation or duplication (or, to the extent not so included,
with the addition of), (i) the portion of any rental obligation in respect of
any Capital Lease Obligation allocable to interest expense in accordance with
generally accepted accounting principles; (ii) the amortization of Debt
discounts; (iii) any payments or fees with respect to letters of credit,
bankers' acceptances or similar facilities; (iv) fees with respect to interest
rate swap or similar agreements or foreign currency hedge, exchange or similar
agreements; (v) any Preferred Stock dividends declared and paid or payable in
cash; and (vi) any interest capitalized in accordance with generally accepted
accounting principles; provided, however, that Consolidated Interest Expense
shall not include interest expense or amortization of Debt discounts relating to
the Allied Canada Debentures.
"Consolidated Net Income" of any Person means for any period the
consolidated net income (or loss) of such Person and its Consolidated
Subsidiaries for such period determined in accordance with generally accepted
accounting principles; provided that there shall be excluded therefrom (a) the
net income (or loss) of any Person acquired by such Person or a Subsidiary of
such Person in a pooling-of-interests transaction for any period prior to the
date of such transaction (subject to the final proviso of the definition of
Consolidated EBITDA Coverage Ratio when Consolidated Net Income is being
computed for purposes of calculating the Consolidated EBITDA Coverage Ratio),
(b) the net income (but not net loss) of any Consolidated Subsidiary of such
Person that is subject to restrictions that prevent the payment of dividends or
the making of distributions to such Person to the extent of such restrictions,
(c) the net income (or loss) of any Person that is not a Consolidated Subsidiary
of such Person except to the extent of the amount of dividends or other
distributions actually paid to such Person by such other Person during such
period, (d) gains or losses on asset dispositions by such Person or its
Consolidated Subsidiaries, (e) any net income (loss) of a Consolidated
Subsidiary that is attributable to a minority interest in such Consolidated
Subsidiary, (f) all extraordinary gains and extraordinary losses that involve a
present or future cash payment and (g) the tax effect of any of the items
described in Clauses (a) through (f) above.
"Consolidated Net Worth" of any Person at any date means the consolidated
stockholders' equity of such Person and its Restricted Subsidiaries at such
date, as determined on a consolidated basis in accordance with generally
accepted accounting principles, less amounts attributable to Redeemable
Interests of such Person; provided, however, that, with respect to the Company
and its Restricted Subsidiaries, adjustments following the date of the Indenture
to the accounting books and records of the Company and its Restricted
Subsidiaries in accordance with Accounting Principles Board Opinions Nos. 16 and
17 (or successor opinions thereto) or otherwise resulting from the acquisition
of control of the Company by another Person shall not be given effect to.
"Consolidated Subsidiaries" of any Person means all other Persons that
would be accounted for as consolidated Persons in such Person's financial
statements in accordance with generally accepted accounting principles;
provided, however, that for any particular period during which any Subsidiary of
such person was an Unrestricted Subsidiary, "Consolidated Subsidiaries" will
exclude such Subsidiary for such period (or portion thereof) during which it was
an Unrestricted Subsidiary.
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"Consolidated Total Assets" of any Person at any date means the
consolidated total assets of such Person and its Restricted Subsidiaries at such
date, as determined on a consolidated basis in accordance with generally
accepted accounting principles.
"Debt" means (without duplication), with respect to any Person, whether
recourse is to all or a portion of the assets of such Person, (i) every
obligation of such Person for money borrowed, (ii) every obligation of such
Person evidenced by bonds, debentures, Exchange Notes or other similar
instruments, including obligations Incurred in connection with the acquisition
of property, assets or businesses, (iii) every reimbursement obligation of such
Person with respect to letters of credit, bankers' acceptances or similar
facilities issued for the account of such Person, (iv) every obligation of such
Person issued or assumed as the deferred purchase price of property or services
(but excluding trade accounts payable or accrued liabilities arising in the
ordinary course of business), (v) every Capital Lease Obligation of such Person,
(vi) the maximum fixed redemption or repurchase price of Redeemable Interests of
such Person at the time of determination, (vii) every net payment obligation of
such Person under interest rate swap or similar agreements or foreign currency
hedge, exchange or similar agreements at the time of determination and (viii)
every obligation of the type referred to in Clauses (i) through (vii) of another
Person and all dividends of another Person the payment of which, in either case,
such Person has Guaranteed or for which such Person is responsible or liable,
directly or indirectly, jointly or severally, as obligor, Guarantor or
otherwise.
"Excepted Disposition" means a transfer, conveyance, sale, lease or other
disposition by the Company or any Restricted Subsidiary of (i) the Capital Stock
or assets of Specialized Waste, or (ii) any other asset of the Company or any
Restricted Subsidiary the fair market value of which does not exceed $5 million
by itself or $10 million in aggregate with all other assets disposed off in
Excepted Dispositions under this Clause (ii) in any fiscal year.
"Guaranty" by any Person means any obligation, contingent or otherwise, of
such Person guaranteeing any Debt, or dividends or distributions on any equity
security, of any other Person (the "primary obligor") in any manner, whether
directly or indirectly, and including, without limitation, any obligation of
such Person (i) to purchase or pay (or advance or supply funds for the purchase
or payment of) such Debt or to purchase (or to advance or supply funds for the
purchase of) any security for the payment of such Debt, (ii) to purchase
property, securities or services for the purpose of assuring the holder of such
Debt of the payment of such Debt or (iii) to maintain working capital, equity
capital or other financial statement condition or liquidity of the primary
obligor so as to enable the primary obligor to pay such Debt (and "Guaranteed",
"Guaranteeing" and "Guarantor" shall have meanings correlative to the
foregoing); provided, however, that the Guaranty by any Person shall not include
endorsements by such Person for collection or deposit, in either case, in the
ordinary course of business.
"Increased Bank Facility Limit" means, in connection with any Bank Facility
Capacity Increase, the amount that is the least of (i) the aggregate amount of
Debt permitted to be outstanding under the terms of the Bank Agreement, as
amended pursuant to such Bank Facility Capacity Increase, (ii) the amount equal
to three times Consolidated EBITDA of the Company for the most recently ended
four fiscal quarters period for which financial statements are available
immediately preceding the date of such Bank Facility Capacity Increase and (iii)
the amount equal to the sum of (x) the maximum amount of Debt that the Company
would be permitted to Incur on such date under the Consolidated EBITDA Coverage
Ratio test set forth in the first paragraph of Section 1008 on the terms
contemplated by the Bank Agreement, as amended by the Bank Facility Capacity
Increase and (y) the aggregate amount of Debt outstanding under the Bank
Agreement on such date.
"Incur" means, with respect to any Debt of any Person, to create, issue,
incur (by conversion, exchange or otherwise), assume, Guarantee or otherwise
become liable in respect of such Debt, or the taking of any other action which
would cause such Debt, in accordance with generally accepted accounting
principles to be recorded on the balance sheet of such Person (and "Incurrence",
"Incurred", "Incurrable" and "Incurring" shall have meanings correlative to the
foregoing); provided that, the Debt of any other Person becoming a Restricted
Subsidiary of such Person will be deemed for this purpose to have been Incurred
by such Person at the time such other Person becomes a Restricted Subsidiary of
such Person; provided, however, that a change
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in generally accepted accounting principles that results in an obligation of
such Person that exists at such time becoming Debt shall not be deemed an
Incurrence of such Debt.
"Intercompany Agreements" means the Management Agreements between Allied
and the Company dated November 15, 1996.
"Interest Rate or Currency Protection Agreement" of any Person means any
interest rate protection agreement (including, without limitation, interest rate
swaps, caps, floors, collars, derivative instruments and similar agreements),
and/or other types of interest hedging agreements and any currency protection
agreement (including foreign exchange contracts, currency swap agreements or
other currency hedging arrangements).
"Investment" by any Person in any other Person means (i) any direct or
indirect loan, advance or other extension of credit or capital contribution to
or for the account of such other Person (by means of any transfer of cash or
other property to any Person or any payment for property or services for the
account or use of any Person, or otherwise), (ii) any direct or indirect
purchase or other acquisition of any Capital Stock, bond, note, debenture or
other debt or equity security or evidence of Debt, or any other ownership
interest, issued by such other Person, whether or not such acquisition is from
such or any other Person, (iii) any direct or indirect payment by such Person on
a Guaranty of any obligation of or for the account of such other Person or any
direct or indirect issuance by such Person of such a Guaranty or (iv) any other
investment of cash or other property by such Person in or for the account of
such other Person.
"Lien" means, with respect to any property or assets, any mortgage or deed
of trust, pledge, hypothecation, assignment, deposit arrangement, security
interest, lien, charge, easement or title exception, encumbrance, preference,
priority or other security agreement or preferential arrangement of any kind or
nature whatsoever on or with respect to such property or assets (including any
conditional sale or other title retention agreement having substantially the
same economic effect as any of the foregoing).
"Net Available Proceeds" from any Asset Disposition by any Person that is
the Company or any Restricted Subsidiary means cash or readily marketable cash
equivalents received (including by way of sale or discounting of a note,
installment receivable or other receivable, but excluding any other
consideration received in the form of assumption by the acquiree of Debt or
other obligations relating to such properties or assets or received in any other
noncash form) therefrom by such Person, net of (i) all legal, title and
recording tax expenses, commissions and other fees and expenses Incurred and all
federal, state, provincial, foreign and local taxes required to be accrued as a
liability as a consequence of such Asset Disposition, (ii) all payments made by
such Person or its Restricted Subsidiaries on any Debt that is secured by such
assets in accordance with the terms of any Lien upon or with respect to such
assets or that must, by the terms of such Lien, or in order to obtain a
necessary consent to such Asset Disposition, or by applicable law, be repaid out
of the proceeds from such Asset Disposition (iii) amounts provided as a reserve
by such Person or its Restricted Subsidiaries, in accordance with generally
accepted accounting principles, against liabilities under any indemnification
obligations to the buyer in such Asset Disposition (except to the extent and at
the time any such amounts are released from any such reserve, such amounts shall
constitute Net Available Proceeds) and (iv) all distributions and other payments
made to minority interest holders in Restricted Subsidiaries of such Person or
joint ventures as a result of such Asset Disposition.
"pari passu", when used with respect to the ranking of any Debt of any
Person in relation to other Debt of such Person, means that each such Debt (a)
either (i) is not subordinated in right of payment to any other Debt of such
Person or (ii) is subordinate in right of payment to the same Debt of such
Person as is the other Debt and is so subordinate to the same extent and (b) is
not subordinate in right of payment to the other Debt or to any Debt of such
Person as to which the other Debt is not so subordinate.
"Permitted Interest Rate or Currency Protection Agreement" of any Person
means any Interest Rate or Currency Protection Agreement entered into with one
or more financial institutions in the ordinary course of business that is
designed to protect such Person against fluctuations in interest rates or
currency exchange rates with respect to Debt Incurred and which shall have a
notional amount no greater than the payments due with respect to the Debt being
hedged thereby.
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"Permitted Investment" means (i) Investments in the Company or any Person
that is, or as a consequence of such Investment becomes, a Wholly Owned
Restricted Subsidiary, (ii) securities either issued directly or fully
guaranteed or insured by the government of the United States of America or any
agency or instrumentality thereof having maturities of not more than one year,
(iii) time deposits and certificates of deposit, demand deposits and banker's
acceptances having maturities of not more than one year from the date of
deposit, of any domestic commercial bank having capital and surplus in excess of
$500 million and having peer group rating of B or better (or the equivalent
thereof) by Thompson BankWatch, Inc. or outstanding long-term debt rated BBB or
better (or the equivalent thereof) by Standard & Poor's Ratings Group or Baa or
better (or the equivalent thereof) by Moody's Investors Service, Inc., (iv)
demand deposits made in the ordinary course of business and consistent with the
Company's customary cash management policy in any domestic office of any
commercial bank organized under the laws of the United States of America or any
State thereof, (v) insured deposits issued by commercial banks of the type
described in Clause (iv) above, (vi) mutual funds whose investment guidelines
restrict such funds' investments primarily to those satisfying the provisions of
Clauses (i) through (iii) above, (vii) repurchase obligations with a term of not
more than seven days for underlying securities of the types described in Clauses
(ii) and (iii) above entered into with any bank meeting the qualifications
specified in Clause (iii) above, (viii) commercial paper (other than commercial
paper issued by an Affiliate or Related Person) rated A-1 or the equivalent
thereof by Standard & Poor's Ratings Group or P-1 or the equivalent thereof by
Moody's Investors Service, Inc., and in each case maturing within 360 days, (ix)
receivables owing to the Company or a Restricted Subsidiary of the Company if
created or acquired in the ordinary course of business and payable or
dischargeable in accordance with customary trade terms, (x) any Investment
consisting of loans and advances to employees of the Company or any Restricted
Subsidiary for travel, entertainment, relocation or other expenses in the
ordinary course of business, (xi) any Investment consisting of loans and
advances by the Company or any Restricted Subsidiary to employees, officers and
directors of the Company or Allied, in connection with management incentive
plans not to exceed $5 million at any time outstanding; provided, however, that
to the extent the proceeds thereof are used to purchase Capital Stock (other
than Redeemable Interests) of Allied and Allied uses the proceeds thereof to
acquire Capital Stock (other than Redeemable Interests) of the Company, such
limitation on the amount of such Investments at any time outstanding shall not
apply with respect to such Investments, (xii) any Investment consisting of a
Permitted Interest Rate or Currency Protection Agreement, (xiii) any Investment
acquired by the Company or any of its Restricted Subsidiaries (A) in exchange
for any other Investment or accounts receivable held by the Company or any such
Restricted Subsidiary in connection with or as a result of a bankruptcy,
workout, reorganization or recapitalization of the issuer of such other
Investment or accounts receivable or (B) as a result of a foreclosure by the
Company or any of its Restricted Subsidiaries with respect to any secured
Investment or other transfer of title with respect to any secured Investment in
default, (xiv) any Investment that constitutes part of the consideration from an
Asset Disposition made pursuant to, and in compliance with, the covenant
described above under "-- Repurchase at the Option of Holders -- Asset Sales,"
(xv) Investments the payment for which consists exclusively of Capital Stock
(exclusive of Redeemable Interests) of the Company and (xvi) other Investments
in an aggregate amount of not to exceed $50 million.
"Preferred Stock", as applied to the Capital Stock of any Person, means
Capital Stock of such Person of any class or classes (however designated) that
ranks prior, as to the payment of dividends or as to the distribution of assets
upon any voluntary or involuntary liquidation, dissolution or winding up of such
Person, to shares of Capital Stock of any other class of such Person.
"Public Offering" means any underwritten public offering of Common Stock
pursuant to a registration statement filed under the Securities Act of 1933, as
amended.
"Redeemable Interest" of any Person means any equity security of or other
ownership interest in such Person that by its terms (or by the terms of any
security into which it is convertible or for which it is exchangeable) or
otherwise (including upon the occurrence of an event) matures or is required to
be redeemed (pursuant to any sinking fund obligation or otherwise) or is
convertible into or exchangeable for Debt or is redeemable at the option of the
holder thereof, in whole or in part, at any time prior to the final Stated
Maturity of the Exchange Notes.
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"Reference Treasury Dealer" means each of Goldman, Sachs & Co., Citicorp
Securities, Inc., and CS First Boston Corporation and their respective
successors, provided, however, that if any of the foregoing shall cease to be a
primary U.S. Government securities dealer in New York City (a "Primary Treasury
Dealer"), the Company shall substitute therefor another Primary Treasury Dealer.
"Related Person" of any Person means, without limitation, any other Person
owning (a) 5% or more of the outstanding Common Stock of such Person or (b) 5%
or more of the Voting Stock of such Person.
"Restricted Subsidiary" means (i) at any date, a Subsidiary of the Company
that is not an Unrestricted Subsidiary as of such date and (ii) for any period,
a Subsidiary of the Company that for any portion of such period is not an
Unrestricted Subsidiary, provided that such term shall mean such Subsidiary only
for such portion of such period.
"Sale and Leaseback Transaction" means an arrangement with any lender or
investor or to which such lender or investor is a party providing for the
leasing by a Person of any property or asset of such Person which has been or is
being sold or transferred, more than 270 days after the acquisition thereof or
the completion of construction or commencement of operation thereof, by such
Person to such lender or investor or to any person to whom funds have been or
are to be advanced by such lender or investor on the security of such property
or asset. The stated maturity of such arrangement shall be the date of the last
payment of rent or any other amount due under such arrangement prior to the
first date on which such arrangement may be terminated by the lessee without
payment of a penalty.
"Senior Debt" means (i) with respect to the Company, Debt created pursuant
to the Bank Agreement, (ii) with respect to the Company, any Guarantor or any
Restricted Subsidiary, Debt of such Person referred to in clauses (i), (ii),
(iii), (v) or (vii) of the definition of Debt, whether Incurred on or prior to
the date of the Indenture or thereafter Incurred, (iii) with respect to the
Company, any Guarantor or any Restricted Subsidiary, Guarantees by such person
of Senior Debt and (iv) amendments, modifications, renewals, extensions,
refinancings and refundings of any such Debt; provided, however, the following
shall not constitute Senior Debt: (A) any Debt owed to a Person when such Person
is a Subsidiary of the Company, (B) any Debt which by the terms of the
instrument creating or evidencing the same is pari passu or subordinate in right
of payment to the Exchange Notes, (C) any Debt Incurred in violation of the
Indenture or (D) any Debt which is subordinate in right of payment in any
respect to any other Debt of the Company. For purposes of this definition,
"Debt" includes any obligation to pay principal, premium (if any), interest,
penalties, reimbursement or indemnity amounts, fees and expenses (including
interest accruing on or after the filing of any petition in bankruptcy or for
reorganization relating to the Company whether or not a claim for post-petition
interest is allowed in such proceeding).
"Subsidiary" of any Person means (i) a corporation more than 50% of the
combined voting power of the outstanding Voting Stock of which is owned,
directly or indirectly, by such Person or by one or more other Subsidiaries of
such Person or by such Person and one or more Subsidiaries thereof, (ii) a
partnership of which such Person, or one or more other Subsidiaries of such
Person or such Person and one or more other Subsidiaries thereof, directly or
indirectly, is the general partner and has the power to direct the policies,
management and affairs or (iii) any other Person (other than a corporation) in
which such Person, or one or more other Subsidiaries of such Person or such
Person and one or more other Subsidiaries thereof, directly or indirectly, has
at least a majority ownership interest and power to direct the policies,
management and affairs thereof.
"Treasury Yield" means, with respect to any Redemption Date, the rate per
annum equal to the semiannual equivalent yield to maturity of the Comparable
Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as
a percentage of its principal amount) equal to the Comparable Treasury Price for
such Redemption Date.
"U.S. Government Obligations" means securities that are (x) direct
obligations of the United States of America for the payment of which its full
faith and credit is pledged or (y) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America the payment of which is unconditionally guaranteed as a full faith and
credit obligation by the United States of America,
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which, in either case, are not callable or redeemable at the option of the
issuer thereof, and shall also include a depository receipt issued by a bank (as
defined in Section 3(a)(2) of the Securities Act of 1933, as amended) as
custodian with respect to any such U.S. Government Obligation or a specific
payment of principal of or interest on any such U.S. Government Obligation held
by such custodian for the account of the holder of such depository receipt,
provided that (except as required by law) such custodian is not authorized to
make any deduction from the amount payable to the holder of such depository
receipt from any amount received by the custodian in respect of the U.S.
Government Obligation or the specific payment of principal of or interest on the
U.S. Government Obligation evidenced by such depository receipt.
"Unrestricted Subsidiary" means (i) at any date a Subsidiary of the Company
that is an Unrestricted Subsidiary in accordance with the provisions of the
Indenture described under the caption "Covenants -- Unrestricted Subsidiaries"
and (ii) for any period, a Subsidiary of the Company that for any portion of
such period is an Unrestricted Subsidiary in accordance with the provisions of
the Indenture as described under the caption "Covenants -- Unrestricted
Subsidiaries," provided that such term shall mean such Subsidiary only for such
portion of such period.
"Voting Stock" of any Person means Capital Stock of such Person that
ordinarily has voting power for the election of directors (or persons performing
similar functions) of such Person, whether at all times or only so long as no
senior class of securities has such voting power by reason of any contingency.
"Weighted Average Life" means, as of the date of determination, with
respect to any Debt, the quotient obtained by dividing (i) the sum of the
products of the number of years from the date of determination to the dates of
each successive scheduled principal payment of such Debt and the amount of such
principal by (ii) the sum of all such principal payments.
GENERAL
The Exchange Notes are unsecured senior subordinated obligations of the
Company, are limited to $525 million aggregate principal amount and mature on
December 1, 2006.
The Exchange Notes are fully and unconditionally guaranteed on a senior
subordinated basis by Allied (such guarantee, the "Parent Guarantee"). Subject
to the provisions of the following paragraph, Allied's obligations under the
Parent Guarantee will be fully and unconditionally guaranteed, on a senior
subordinated basis by Allied Finance (such guarantee, the "Allied Finance
Guarantee"), and the Allied Finance Guarantee will be secured on a senior
subordinated basis by a pledge of the Allied Canada Debentures.
Pursuant to the Laidlaw Repurchase, Allied has acquired the Allied Finance
Debentures from Laidlaw. Allied intends to transfer the Allied Finance
Debentures and the capital stock of Allied Finance to the Company. Following
that transfer, Allied Canada and Allied Finance intend to change their
jurisdiction of incorporation from Canada to Delaware, and Allied Finance will
merge with and into Allied Canada. As a result of that merger, the obligations
of Allied Finance under the Allied Finance Guarantee will be released pursuant
to Section 1304 of the Indenture, and the pledge of the Allied Canada Debenture
will be released pursuant to the terms of the Allied Finance Pledge.
The Exchange Notes will also be fully and unconditionally guaranteed by the
existing Restricted Subsidiaries of the Company, other than Allied Insurance,
and the Company will covenant to cause any Restricted Subsidiaries acquired or
created in the future to fully and unconditionally guarantee the Exchange Notes,
in each case jointly and severally on a senior subordinated basis (such
guarantees, the "Subsidiary Guarantees" and together with the Parent Guarantee
and the Allied Finance Guarantee, the "Senior Subordinated Guarantees"; such
guarantors, the "Subsidiary Guarantors", and together with Allied and Allied
Finance, the "Guarantors"). The Senior Subordinated Guarantees will be unsecured
(except as described in the following paragraph with respect to the Allied
Finance Guarantee) senior subordinated obligations of the Guarantors and will be
subordinate in right of payment to the prior payment in full of all Senior Debt
of the Guarantors to substantially the same extent as the Exchange Notes are
subordinated to Senior Debt of the Company.
The Exchange Notes are effectively subordinated to all existing and future
indebtedness and other liabilities (including trade payables and capital lease
obligations) of Allied Insurance and the Company's Subsidiaries (if
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any) that are Unrestricted Subsidiaries, and thus not Subsidiary Guarantors, and
would be so subordinated to all existing and future indebtedness of the
Subsidiary Guarantors if the Subsidiary Guarantees were avoided or subordinated
in favor of the Subsidiary Guarantors' other creditors. See "Risk
Factors -- Substantially All Operations at Subsidiary Level; Structural
Subordination" and "-- Fraudulent Conveyance."
INTEREST AND PAYMENTS
The Exchange Notes will bear interest at 10 1/4% per annum, payable
semi-annually on June 1 and December 1 of each year, commencing June 1, 1997,
until the principal thereof is paid or made available for payment, to the Person
in whose name the Exchange Note (or any Predecessor Note) is registered at the
close of business on the preceding May 15 or November 15, as the case may be.
The Exchange Notes will bear interest on overdue principal and premium (if any)
and, to the extent permitted by law, overdue interest at 10 1/4% per annum plus
2%. Interest on the Exchange Notes will be computed on the basis of a 360-day
year of twelve 30-day months. (Section 301).
The principal of (and premium, if any) and interest (including Special
Interest (as defined herein)) on the Exchange Notes will be payable, and the
transfer of Exchange Notes will be registrable, at the office or agency of the
Company in The Borough of Manhattan, The City of New York. In addition, payment
of interest may, at the option of the Company, be made by check mailed to the
address of the Person entitled thereto as it appears in the Security Register;
provided, however, that all payments of the principal (and premium, if any) and
interest on Exchange Notes, the Holders of which have given wire transfer
instructions to the Company or its agent at least 10 Business Days prior to the
applicable payment date will be required to be made by wire transfer of
immediately available funds to the accounts specified by such Holders in such
instructions.
No service charge will be made for any registration of transfer or exchange
of Exchange Notes, but the Company may require payment of a sum sufficient to
cover any tax or other governmental charge payable in connection therewith.
(Sections 203 and 307).
FORM, DENOMINATION, TRANSFER, EXCHANGE AND BOOK-ENTRY PROCEDURES
Exchange Notes will be issued only in fully registered form, without
interest coupons, in denominations of $1,000 and integral multiples thereof. The
Exchange Notes generally will be represented by one or more fully-registered
global notes (collectively, the "Global Exchange Note"). Notwithstanding the
foregoing, Notes held in certificated form will be exchanged solely for Exchange
Notes in certificated form, as discussed below. The Global Exchange Note will be
deposited upon issuance with The Depository Trust Company ("DTC") and registered
in the name of DTC or a nominee of DTC (the "Global Exchange Note Registered
Owner"). Except as set forth below, the Global Exchange Note may be transferred,
in whole and not in part, only to another nominee of DTC or to a successor of
DTC or its nominee.
A Holder may transfer or exchange Exchange Notes in accordance with the
Indenture. The Registrar and the Trustee may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents and the
Company may require a Holder to pay any taxes and fees required by law or
permitted by the Indenture. The Company is not required to transfer or exchange
any Exchange Notes selected for redemption. Also, the Company is not required to
transfer or exchange Exchange Note for a period of 15 days before a selection of
Exchange Notes to be redeemed.
The registered Holder of an Exchange Note will be treated as the owner of
such Exchange Note for all purposes.
EXCHANGES OF BOOK-ENTRY EXCHANGE NOTES FOR CERTIFICATED EXCHANGE NOTES
A beneficial interest in a Global Exchange Note may not be exchanged for an
Exchange Note in certificated form unless (i) DTC (x) notifies the Company that
it is unwilling or unable to continue as Depositary for the Global Exchange Note
or (y) has ceased to be a clearing agency registered under the Exchange Act, and
in either case the Company thereupon fails to appoint a successor Depositary,
(ii) the Company, at its option, notifies the Trustee in writing that it elects
to cause the issuance of the Exchange Notes in certificated form or (iii) there
shall
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have occurred and be continuing an Event of Default or any event which after
notice or lapse of time or both would be an Event of Default with respect to the
Exchange Notes. In all cases, certificated Exchange Notes delivered in exchange
for any Global Exchange Note or beneficial interests therein will be registered
in the names, and issued in any approved denominations, requested by or on
behalf of the Depositary (in accordance with its customary procedures). Any such
exchange will be effected through the DWAC System and an appropriate adjustment
will be made in the records of the Security Registrar to reflect a decrease in
the principal amount of the relevant Global Exchange Note.
CERTAIN BOOK-ENTRY PROCEDURES FOR GLOBAL EXCHANGE NOTES
The descriptions of the operations and procedures of DTC that follow are
provided solely as a matter of convenience. These operations and procedures are
solely within the control of the respective settlement systems and are subject
to changes by them from time to time. The Company takes no responsibility for
these operations and procedures and urges investors to contact the system or
their participants directly to discuss these matters.
DTC has advised the Company as follows: DTC is a limited purpose trust
company organized under the laws of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the
Uniform Commercial Code and a "Clearing Agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC was created to hold
securities for its participants ("participants") and facilitate the clearance
and settlement of securities transactions between participants through
electronic book-entry changes in accounts of its participants, thereby
eliminating the need for physical transfer and delivery of certificates.
Participants include securities brokers and dealers, banks, trust companies and
clearing corporations and may include certain other organizations. Indirect
access to the DTC system is available to other entities such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a participant, either directly or indirectly ("indirect
participants").
DTC had advised the Company that its current practice, upon the issuance of
the Global Exchange Notes, is to credit, on its internal system, the respective
principal amount of the individual beneficial interests represented by such
Global Exchange Notes to the accounts with DTC of the participants through which
such interests are to be held. Ownership of beneficial interests in the Global
Exchange Notes will be shown on, and the transfer of that ownership will be
effected only through, records maintained by DTC or its nominees (with respect
to interests of participants) and the records of participants and indirect
participants (with respect to interests of persons other than participants).
AS LONG AS DTC, OR ITS NOMINEE, IS THE REGISTERED HOLDER OF A GLOBAL
EXCHANGE NOTE, DTC OR SUCH NOMINEE, AS THE CASE MAY BE, WILL BE CONSIDERED THE
SOLE OWNER AND HOLDER OF THE EXCHANGE NOTES REPRESENTED BY SUCH GLOBAL EXCHANGE
NOTE FOR ALL PURPOSES UNDER THE INDENTURE AND THE EXCHANGE NOTES. Except in the
limited circumstances described above under "-- Exchanges of Book-Entry Notes
for Certificated Notes," owners of beneficial interests in a Global Exchange
Note will not be entitled to have any portions of such Global Exchange Note
registered in their names, will not receive or be entitled to receive physical
delivery of Exchange Notes in definitive form and will not be considered the
owners or Holders of the Global Exchange Note (or any Exchange Notes represented
thereby) under the Indenture or the Exchange Notes.
Investors may hold their interests in the Global Exchange Note directly
through DTC, if they are participants in such system, or indirectly through
organizations (including Euroclear and CEDEL) which are participants in such
system. The laws of some states require that certain persons take physical
delivery in definitive form of securities that they own. Consequently, the
ability to transfer beneficial interests in a Global Exchange Note to such
persons may be limited to that extent. Because DTC can act only on behalf of its
participants, which in turn act on behalf of indirect participants and certain
banks, the ability of a person having beneficial interests in a Global Exchange
Note to pledge such interest to persons or entities that do not participate in
the DTC system, or otherwise take actions in respect of such interests, may be
affected by the lack of a physical certificate evidencing such interests.
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Payments of the principal of, premium, if any, and interest on Global
Exchange Notes will be made to DTC or its nominee as the registered owner
thereof. Neither the Company, the Trustee nor any of their respective agents
will have any responsibility or liability for any aspect of the records relating
to or payments made on account of beneficial ownership interests in the Global
Exchange Notes or for maintaining, supervising or reviewing any records relating
to such beneficial ownership interests.
The Company expects that DTC or its nominee, upon receipt of any payment of
principal or interest in respect of a Global Exchange Note representing any
Exchange Notes held by it or its nominee, will credit participants' accounts
with payments in amounts proportionate to their respective beneficial interests
in the principal amount of such Global Exchange Note for such Exchange Notes as
shown on the records of DTC or its nominee. The Company also expects that
payments by participants to owners of beneficial interests in such Global
Exchange Note held through such participants will be governed by standing
instructions and customary practices, as is now the case with securities held
for the accounts of customers registered in "street name." Such payments will be
the responsibility of such participants. None of the Company or the Trustee will
be liable for any delay by DTC or any of its participants in identifying the
beneficial owners of the Exchange Notes, and the Company and the Trustee may
conclusively rely on and will be protected in relying on instructions from DTC
or its nominee as the registered owner of the Exchange Notes for all purposes.
Interests in the Global Exchange Notes will trade in DTC's Same-Day Funds
Settlement System and secondary market trading activity in such interests will
therefore settle in immediately available funds, subject in all cases to the
rules and procedures of DTC and its participants. Transfers between participants
in DTC will be effected in accordance with DTC's procedures, and will be settled
in same-day funds.
Because of time zone differences, the securities account of a Euroclear or
CEDEL participant purchasing an interest in a Global Exchange Note from a DTC
participant will be credited, and any such crediting will be reported to the
relevant Euroclear or CEDEL participant, during the securities settlement
processing day (which must be a business day for Euroclear and CEDEL)
immediately following the DTC settlement date. Cash received in Euroclear or
CEDEL as a result of sales of interests in a Global Exchange Note by or through
a Euroclear or CEDEL participant to a DTC participant will be received with
value on the DTC settlement date but will be available in the relevant Euroclear
or CEDEL cash account only as of the business day for Euroclear or CEDEL
following the DTC settlement date.
DTC has advised the Company that it will take any action permitted to be
taken by a holder of Exchange Notes only at the direction of one or more
participants to whose accounts with DTC interests in the Global Exchange Notes
are credited and only in respect of such portion of the aggregate principal
amount of the Exchange Notes as to which such participant or participants has or
have given such direction. However, if there is an Event of Default (as defined
below) under the Exchange Notes, DTC reserves the right to exchange the Global
Exchange Notes for Exchange Notes in certificated form, and to distribute such
Exchange Notes to its participants.
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of beneficial ownership interests in the Global Exchange Notes among
participants of DTC, it is under no obligation to perform or continue to perform
such procedures, and such procedures may be discontinued at any time. None of
the Company, the Trustee nor any of their respective agents will have any
responsibility for the performance by DTC, or its participants or indirect
participants of their respective obligations under the rules and procedures
governing their operations, including maintaining, supervising or reviewing the
records relating to, or payments made on account of, beneficial ownership
interests in Global Exchange Notes.
OPTIONAL REDEMPTION
The Exchange Notes will not be subject to any redemption at the option of
the Company prior to December 1, 2001 except as set forth in the following
paragraphs. On or after December 1, 2001, the Exchange Notes will be subject to
redemption, in whole or in part, at the option of the Company at any time prior
to maturity, upon not less than 30 nor more than 60 days notice mailed to each
Holder of Exchange Notes to be redeemed at his address appearing in the Security
Register, in amounts of $1,000 or an integral multiple of $1,000, at the
following Redemption Prices (expressed as percentages of principal amount) plus
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accrued but unpaid interest (including Special Interest) to but excluding the
Redemption Date (subject to the right of Holders of record on the relevant
Regular Record Date to receive interest due on an Interest Payment Date that is
on or prior to the Redemption Date), if redeemed during the twelve-month period
beginning on December 1 of each of the years indicated below:
<TABLE>
<CAPTION>
YEAR REDEMPTION PRICE
--------------------------------------------- ----------------
<S> <C>
2001......................................... 105.1250%
2002......................................... 103.4167
2003......................................... 101.7083
and thereafter............................... 100.0000
</TABLE>
Prior to December 1, 2001, the Exchange Notes will be subject to
redemption, at the option of the Company, in whole or in part, at any time, upon
not less than 30 nor more than 60 days notice mailed to each Holder of Exchange
Notes to be redeemed at such Holder's address appearing in the Note Register, in
amounts of $1,000 or an integral multiple of $1,000, at a Redemption Price equal
to the greater of (i) 100% of their principal amount or (ii) the sum of the
present values of the remaining scheduled payments of principal and interest
thereon discounted to maturity on a semiannual basis (assuming a 360-day year
consisting of twelve 30-day months) at the Treasury Yield plus 75 basis points,
plus in each case accrued but unpaid interest (including Special Interest) to
but excluding the Redemption Date (subject to the right of Holders of record on
the relevant Regular Record Date to receive interest due on an Interest Payment
Date that is on or prior to the Redemption Date). (Sections 203, 301 and 1102).
At any time, or from time to time, prior to 180 days after December 30,
1996, up to $100 million in aggregate principal amount of the Exchange Notes
will be redeemable, at the option of the Company, from the net proceeds of one
or more Asset Dispositions by the Company or its Subsidiaries, at a Redemption
Price equal to 110.25% of the principal amount thereof, together with accrued
but unpaid interest (including Special Interest) to the Redemption Date (subject
to the right of Holders of record on the relevant Regular Record Date to receive
interest due on an Interest Payment Date that is on or prior to the Redemption
Date); provided that the notice of redemption with respect to any such
redemption is mailed within 30 days following the closing of the corresponding
Asset Disposition (Sections 203, 301 and 1102).
At any time, or from time to time, prior to December 1, 1999, up to 33 1/3%
in aggregate principal amount of Exchange Notes originally issued under the
Indenture will be redeemable, at the option of the Company, from the net
proceeds of one or more Public Offerings of Capital Stock (other than Redeemable
Interests) of Allied, at a Redemption Price equal to 110.25% of the principal
amount thereof, together with accrued but unpaid interest (including Special
Interest) to the Redemption Date (subject to the right of Holders of record on
the relevant Regular Record Date to receive interest due on an Interest Payment
Date that is on or prior to the Redemption Date); provided that the notice of
redemption with respect to any such redemption is mailed within 30 days
following the closing of the corresponding public offering. (Sections 203, 301
and 1102).
If less than all the Exchange Notes are to be redeemed, the particular
Exchange Notes to be redeemed will be selected not more than 60 days prior to
the Redemption Date by the Trustee, from the Outstanding Exchange Notes not
previously called for redemption, by such method as the Trustee shall deem fair
and appropriate and which may provide for the selection for redemption of
portions (equal to $1,000 or any integral multiple thereof) of the principal
amount of Exchange Notes of a denomination larger than $1,000. (Sections 1103,
1104 and 1105).
MANDATORY REDEMPTION
Except as described below under "Repurchase at the Option of
Holders -- Asset Dispositions" and "-- Change of Control," the Exchange Notes
will not have the benefit of any mandatory redemption or sinking fund
obligations of the Company.
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REPURCHASE AT THE OPTION OF HOLDERS
ASSET DISPOSITIONS
The Company may not make, and may not permit any Restricted Subsidiary to
make, any Asset Disposition (other than an Asset Disposition permitted under
"Mergers, Consolidations and Certain Sales and Purchases of Assets") unless: (i)
the Company (or such Restricted Subsidiary, as the case may be) receives
consideration at the time of such disposition at least equal to the fair market
value of the shares or the assets disposed of, as determined in good faith by
the Board of Directors for any transaction (or series of transactions) involving
in excess of $1 million and not involving solely a sale of equipment or other
assets specifically contemplated by the Company's capital expenditure budget
previously approved by the Board of Directors; (ii) at least 75% of the
consideration received by the Company (or such Subsidiary) consists of (u) cash
or readily marketable cash equivalents, (v) the assumption of Debt or other
liabilities reflected on the consolidated balance sheet of the Company and its
Restricted Subsidiaries in accordance with generally accepted accounting
principles (excluding Debt or any other liabilities subordinate in right of
payment to the Exchange Notes) and release from all liability on such Debt or
other liabilities assumed, (w) assets used in, or stock or other ownership
interests in a Person that upon the consummation of such Asset Disposition
becomes a Restricted Subsidiary and will be principally engaged in, the business
of the Company or any of its Wholly Owned Restricted Subsidiaries as such
business is conducted immediately prior to such Asset Disposition or (x) any
combination thereof; and (iii) 100% of the Net Available Proceeds from such
Asset Disposition (including from the sale of any marketable cash equivalents
received therein) are applied by the Company or a Restricted Subsidiary (A)
first, within one year from the later of the date of such Asset Disposition or
the receipt of such Net Available Proceeds, to repayment of Senior Debt of the
Company or its Restricted Subsidiaries then outstanding under any agreements or
instruments which would require such application or which would prohibit
payments pursuant to Clause (B) following; (B) second, to the extent Net
Available Proceeds are not required to be applied to Senior Debt as specified in
Clause (A), to purchases of Outstanding Exchange Notes pursuant to an Offer to
Purchase (to the extent such an offer is not prohibited by the terms of any
Senior Debt then outstanding) at a purchase price equal to 100% of their
principal amount plus accrued interest to the date of purchase (subject to the
rights of Holders of record on the relevant Regular Record Date to receive
interest due on an Interest Payment Date that is on or prior to the purchase
date); and (C) third, to the extent of any remaining Net Available Proceeds
following completion of such Offer to Purchase, to any other use as determined
by the Company which is not otherwise prohibited by the Indenture. (Section
1014).
Notwithstanding the foregoing, the Company will not be required to comply
with the provisions of the Indenture described in Clause (iii) of the preceding
paragraph (i) if the Net Available Proceeds (less any amounts ("Reinvested
Amounts") invested within one year from the later of the date of the related
Asset Disposition or the receipt of such Net Available Proceeds in assets that
will be used in the business of the Company or any of its Wholly Owned
Restricted Subsidiaries as such business is conducted prior to such Asset
Disposition (determined by the Board of Directors in good faith) are less than
$50 million (such lesser amount to be carried forward on a cumulative basis for
purposes of determining the application of this paragraph) or (ii) to the extent
the Company elects to redeem the Exchange Notes with the Net Available Proceeds
pursuant to the third paragraph under "Optional Redemption." Notwithstanding the
foregoing, if any Restricted Subsidiary in which a Reinvested Amount is invested
becomes an Unrestricted Subsidiary thereafter, then such change in status will
be deemed an Asset Disposition with Net Available Proceeds of cash in an amount
equal to such Reinvested Amount, and such amount of cash will be applied
pursuant to Clause (iii) above (subject to this paragraph). (Section 1014).
Notwithstanding the foregoing, the Company will not be required to comply
with the requirements described in Clause (ii) of the second preceding paragraph
if the Asset Disposition is an Excepted Disposition.
Any Offer to Purchase required by the provisions described above will be
effected by the sending of the written terms and conditions thereof (the "Offer
Document"), by first class mail, to Holders of the Exchange Notes within 30 days
after the date which is one year after the later of the date of such Asset
Disposition or the receipt of the related Net Available Proceeds. The form of
the Offer to Purchase and the requirements
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that a Holder must satisfy to tender any Exchange Note pursuant to such Offer to
Purchase are substantially the same as those described below under "Change of
Control."
CHANGE OF CONTROL
Within 30 days following the date the Company becomes aware of the
consummation of a transaction that results in a Change of Control (as defined
below), the Company will commence an Offer to Purchase all Outstanding Exchange
Notes, at a purchase price equal to 101% of their aggregate principal amount
plus accrued interest to the date of purchase (subject to the rights of Holders
of record on the relevant Regular Record Date to receive interest due on an
Interest Payment Date that is on or prior to the date of purchase). Such
obligation will not continue after a discharge of the Company or defeasance from
its obligations with respect to the Exchange Notes. See "Defeasance."
A "Change of Control" will be deemed to have occurred in the event that,
after the date of the Indenture, (i) any Person, or any Persons acting together
that would constitute a "group" (a "Group") for purposes of Section 13(d) of the
Exchange Act, together with any Affiliates or Related Persons thereof (other
than any employee stock ownership plan), beneficially own 50% or more of the
total voting power of all classes of Voting Stock of Allied, (ii) any Person or
Group, together with any Affiliates or Related Persons thereof, succeeds in
having sufficient of its nominees elected to the Board of Directors of Allied
such that such nominees, when added to any existing director remaining on the
Board of Directors of Allied after such election who is an Affiliate or Related
Person of such Person or Group, will constitute a majority of the Board of
Directors of Allied, (iii) there occurs any transaction or series of related
transactions, and the beneficial owners of the Voting Stock of Allied
immediately prior to such transaction (or series) do not, immediately after such
transaction (or series), beneficially own Voting Stock representing more than
50% of the total voting power of all classes of Voting Stock of Allied (or in
the case of a transaction (or series) in which another entity becomes a
successor to Allied, of the successor entity) or (iv) the Company ceases to be a
Subsidiary of Allied. (Section 1015).
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of the Exchange Notes resulting from a Change of Control.
The terms of the Bank Agreement prohibit any repurchase of Exchange Notes
by the Company in the event of a Change of Control, unless all indebtedness then
outstanding under the Bank Agreement is first repaid. In order to repay such
indebtedness and repurchase the Exchange Notes, it may be necessary for the
Company to recapitalize and/or refinance some or all of its outstanding
indebtedness. There can be no assurance that such recapitalization or
refinancing, if required, would be accomplished on favorable terms, in a timely
manner or at all. Were any obligation of the Company to repurchase Exchange
Notes upon a Change of Control to result in a default under the Bank Agreement,
payments owing on the Exchange Notes could be blocked pursuant to the
subordination provisions of the Exchange Notes. See "Subordination."
Prior to the mailing of an Offer Document, the Company will in good faith
seek to obtain any required consents of the Holders of Senior Debt or repay the
outstanding obligations thereunder. The right of the Holders to require the
Company to purchase Exchange Notes pursuant to an Offer will be subject to
obtaining the requisite consents or making such repayment.
Within 30 days of a Change of Control, an Offer Document will be sent, by
first class mail, to Holders of the Exchange Notes, accompanied by such
information regarding the Company and its Subsidiaries as the Company in good
faith believes will enable such Holders to make an informed decision with
respect to the Offer to Purchase, which at a minimum will include (a) the most
recent annual and quarterly financial statements and "Management's Discussion
and Analysis of Financial Condition and Results of Operations" contained in the
documents required to be filed with the Trustee pursuant to the provisions
described under "Certain Covenants -- Provision of Financial Information" below
(which requirements may be satisfied by delivery of such documents together with
the Offer to Purchase), (b) a description of material developments in the
Company's business subsequent to the date of the latest of such financial
statements referred to in
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Clause (a) (including a description of the events requiring the Company to make
the Offer to Purchase), (c) if applicable, appropriate pro forma financial
information concerning the Offer to Purchase and the events requiring the
Company to make the Offer to Purchase and (d) any other information required by
applicable law to be included therein. The Offer Document will contain all
instructions and materials necessary to enable Holders of the Exchange Notes to
tender Exchange Notes pursuant to the Offer to Purchase. The Offer Document will
also state (i) that a Change of Control has occurred (or, if the Offer to
Purchase is delivered in connection with an Asset Disposition, that an Asset
Disposition has occurred) and that the Company will offer to purchase the
Holder's Exchange Notes, (ii) the Expiration Date of the Offer to Purchase,
which will be, subject to any contrary requirements of applicable law, not less
than 30 days or more than 60 days after the date of such Offer Document, (iii)
the Purchase Date for the purchase of Exchange Notes which will be within five
Business Days after the Expiration Date, (iv) the aggregate principal amount of
Exchange Notes to be purchased (including, if less than 100%, the manner by
which such purchase has been determined pursuant to the Indenture) and the
purchase price and (v) a description of the procedure which a Holder must follow
to tender all or any portion of the Exchange Notes. (Sections 101 and 1016).
To tender any Exchange Note, a Holder must surrender such Exchange Note at
the place or places specified in the Offer Document prior to the close of
business on the Expiration Date (such Exchange Note being, if the Company or the
Trustee so requires, duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Company and the Trustee duly executed by,
the Holder thereof or his attorney duly authorized in writing). Holders will be
entitled to withdraw all or any portion of Exchange Notes tendered if the
Company (or its Paying Agent) receives, not later than the close of business on
the Expiration Date, a telegram, telex, facsimile transmission or letter setting
forth the name of the Holder, the principal amount of the Exchange Note the
Holder tendered, the certificate number of the Exchange Note the Holder tendered
and a statement that such Holder is withdrawing all or a portion of his tender.
Any portion of an Exchange Note tendered must be tendered in an integral
multiple of $1,000 principal amount. (Section 101).
REGISTRATION RIGHTS
The Company has entered into the Registration Rights Agreement pursuant to
which the Company agreed, for the benefit of the Holders of the Notes and the
Exchange Notes, to (i) file the Registration Statement under the Securities Act
relating to the Exchange Offer; (ii) use its best efforts to cause the
Registration Statement to become effective as soon as practicable, but in no
case later than June 28, 1997; (iii) use its best efforts to complete the
Exchange Offer promptly, but no later than 45 days after the date upon which the
Registration Statement became effective; (iv) hold the Exchange Offer open for
at least 30 days; and (v) issue Exchange Notes for all Notes validly tendered
and not withdrawn before the expiration of the Exchange Offer.
The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified in
its entirety by reference to, all the provisions of the Registration Rights
Agreement, a copy of which is filed with the Commission as an exhibit to the
Registration Statement.
Under existing Commission interpretations, the Exchange Notes would
generally be freely transferable after the Exchange Offer without further
registration under the Securities Act, except that broker-dealers
("Participating Broker-Dealers") receiving Exchange Notes in the Exchange Offer
will be subject to a prospectus delivery requirement with respect to the resale
of those Exchange Notes. The Commission has taken the position that
Participating Broker-Dealers may fulfill their prospectus delivery requirements
with respect to the Exchange Notes (other than a resale of any unsold allotment
from the original sale of the Notes) by delivery of this Prospectus. Under the
Registration Rights Agreement, the Company is required to allow Participating
Broker-Dealers to use this Prospectus in connection with the resale of such
Exchange Notes. The Registration Statement will be kept effective for a period
of 90 days after the Exchange Offer has been completed in order to permit
resales of Exchange Notes acquired by broker-dealers in the Exchange Offer for
Notes acquired in after-market transactions. Each Holder of the Notes (other
than certain specified Holders) who wishes to exchange such Notes for Exchange
Notes in the Exchange Offer will be required to represent that any Exchange
Notes to be received by it will be acquired in the ordinary course of its
business,
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that at the time of the commencement of the Exchange Offer it has no arrangement
with any Person to participate in the distribution (within the meaning of the
Securities Act) of the Exchange Notes and that it is not an Affiliate of the
Company.
However, if on or before the date of consummation of the Exchange Offer the
existing Commission interpretations are changed such that the Exchange Notes
would not generally be freely transferable on such date, the Company will, in
lieu of effecting registration of Exchange Notes, use its best efforts to file
the Shelf Registration Statement as soon as practicable, but no later than the
later of 30 days after the time such obligation to file arises and February 28,
1997. The Company agrees to use its best efforts to cause the Shelf Registration
Statement to become or be declared effective no later than 120 days after such
Shelf Registration Statement is filed and to keep such Shelf Registration
Statement continuously effective for a period of three years after the date the
Shelf Registration Statement becomes or is declared effective. The Company will,
in the event the Shelf Registration Statement is filed, provide to the Holders
of the Notes copies of the prospectus that is a part of the Shelf Registration
Statement, notify such Holders when the Shelf Registration Statement for the
Notes has become effective and take certain other actions as are required to
permit unrestricted resales of the Notes. A Holder of Notes that sells such
Notes pursuant to the Shelf Registration Statement generally will be required to
be named as a selling security holder in the related prospectus and to deliver a
prospectus to purchasers, will be subject to certain of the civil liability
provisions under the Securities Act in connection with such sales and will be
bound by the provisions of the Registration Rights Agreement that are applicable
to such a Holder (including certain indemnification obligations).
In the event that (i) the Company has not filed the Shelf Registration
Statement on or before any date on which such Shelf Registration Statement is
required to be filed; (ii) such Shelf Registration Statement has not become
effective or been declared effective by the Commission on or before any date on
which such Shelf Registration Statement is required to become or be declared
effective; (iii) the Exchange Offer has not been completed within 45 days after
the date upon which the Registration Statement became effective; or (iv) the
Registration Statement or any required Shelf Registration Statement is filed and
declared effective but shall thereafter either be withdrawn by the Company or
shall become subject to an effective stop order issued pursuant to Section 8(d)
of the Securities Act suspending the effectiveness of such registration
statement (except as specifically permitted in the Registration Rights
Agreement) without being succeeded immediately by an additional registration
statement filed and declared effective (each such event referred to in clauses
(i) through (iv), a "Registration Default" and each period during which a
Registration Default has occurred and is continuing, a "Registration Default
Period"), then, as liquidated damages for such Registration Default, Special
Interest, in addition to the base interest that would otherwise accrue on the
Notes, shall accrue at a per annum rate of 0.25% for the first 90 days of the
Registration Default Period, at a per annum rate of 0.50% for the second 90 days
of the Registration Default Period, at a per annum rate of 0.75% for the third
90 days of the Registration Default Period and at a per annum rate of 1.0%
thereafter for the remaining portion of the Registration Default Period. The
Special Interest will be payable in cash semiannually in arrears on each June 1
and December 1. Special Interest, if any, will be computed on the basis of a 365
or 366 day year, as the case may be, and the number of days actually elapsed.
SUBORDINATION
The payment of the principal of (and premium, if any) and interest
(including Special Interest) on the Exchange Notes will, in certain
circumstances as set forth in the Indenture, be subordinated in right of payment
to the prior payment in full of all Senior Debt of the Company. Upon any payment
or distribution of assets of the Company to creditors upon any liquidation,
dissolution, winding up, reorganization, assignment for the benefit of
creditors, marshaling of assets and liabilities or any bankruptcy, insolvency or
similar proceedings of the Company, the holders of Senior Debt of the Company
will be entitled to receive payment in full of the principal of (and premium, if
any) and interest on such Senior Debt, including all amounts due or to become
due on all such Senior Debt, or provision will be made for payment in cash or
cash equivalents or otherwise in a manner satisfactory to the holders of such
Senior Debt, before the Holders of Exchange Notes are entitled to receive any
Securities Payments. "Securities Payment" means any payment or distribution of
any kind, whether in cash, property or securities (including any payment or
distribution deliverable by reason
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of the payment of any other Debt subordinated to the Exchange Notes but
excluding any payment or distribution made from the Collateral Account pursuant
to the Collateral Agreement) on account of the principal of (and premium, if
any) or interest (including Special Interest) on the Exchange Notes or on
account of the purchase or redemption or other acquisition of Exchange Notes by
the Company, Allied or any Subsidiary of the Company. In the event that,
notwithstanding the foregoing, the Trustee or the Holder of any Note receives
any Securities Payment before all Senior Debt of the Company is paid in full or
payment thereof is provided for in cash or cash equivalents or otherwise in a
manner satisfactory to the holders of such Senior Debt, then and in such event
such Securities Payment will be required to be paid over or delivered forthwith
to the holders of Senior Debt for application to the payment of all Senior Debt
of the Company remaining unpaid, to the extent necessary to pay such Senior Debt
in full. (Sections 1401 and 1402).
The Company may not make any Securities Payments if there has occurred and
is continuing a default in the payment of the principal of (or premium, if any)
or interest on Senior Debt of the Company or if there has occurred and is
continuing any event of default with respect to Senior Debt of the Company which
has resulted in such Senior Debt becoming or being declared due and payable
prior to the date on which it would otherwise have become due and payable (a
"Senior Payment Default"). In addition, if any default (other than a Senior
Payment Default), with respect to any Senior Debt of the Company permitting
after notice or lapse of time (or both) the holders thereof (or a trustee on
behalf thereof) to accelerate the maturity thereof (a "Senior Nonmonetary
Default") has occurred and is continuing and the Company and the Trustee have
received written notice thereof from the Agent Bank under the Bank Agreement (or
if such Agreement has been terminated, from any holder of Senior Debt of the
Company with a principal amount in excess of $50 million), then the Company may
not make any Securities Payments for a period (a "blockage period") commencing
on the date the Company and the Trustee receive such written notice and ending
on the earlier of (x) 179 days after such date and (y) the date, if any, on
which the Senior Debt of the Company to which such default relates is discharged
or such default is waived or otherwise cured. (Section 1403).
In any event, not more than one blockage period may be commenced during any
period of 360 consecutive days. No Senior Payment Default or Senior Nonmonetary
Default that existed or was continuing on the date of commencement of any
blockage period with respect to the Senior Debt of the Company will be, or can
be, made the basis for the commencement of a subsequent blockage period, unless
such default has been cured for a period of not less than 90 consecutive days.
In the event that, notwithstanding the foregoing, the Company makes any
Securities Payment to the Trustee or any Holder of a Exchange Note prohibited by
the subordination provisions, then and in such event such Securities Payment
will be required to be paid over and delivered forthwith to the holders of the
Senior Debt of the Company. (Section 1403).
By reason of such subordination, in the event of insolvency, creditors of
the Company who are not holders of Senior Debt of the Company or of the Exchange
Notes may recover less, ratably, than holders of such Senior Debt and may
recover more, ratably, than the Holders of the Exchange Notes.
The subordination provisions described above will cease to be applicable to
the Exchange Notes upon any defeasance or covenant defeasance of the Exchange
Notes as described under "Defeasance."
At March 31, 1997, there was $583.0 million of Senior Debt of the Company
outstanding. While the Indenture will limit, subject to certain financial tests,
the amount of additional Debt that the Company and its Restricted Subsidiaries
can Incur, the Company may from time to time hereafter incur additional Debt
constituting Senior Debt under the Bank Agreement. See "Certain
Covenants -- Limitation on Consolidated Debt."
SENIOR SUBORDINATED GUARANTEES
The Guarantors will, jointly and severally, on a senior subordinated basis,
unconditionally guarantee the due and punctual payment of principal of (and
premium, if any) and interest (including Special Interest) on the Exchange
Notes, when and as the same shall become due and payable, whether at the
maturity date, by declaration of acceleration, call for redemption or otherwise.
Each of the Guarantors will further agree, jointly and severally and on a senior
subordinated basis, that any amounts to be paid by the Guarantors under the
Senior Subordinated Guarantees will be paid without deduction or withholding for
or on account of any and all
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present or future tax, duty, assessment or governmental charge imposed upon or
as a result of such payment by the Government of Canada, or any province or
other political subdivision or taxing authority thereof or therein, or if
deduction or withholding of any such tax, duty, assessment or charge shall at
any time be required by or on behalf of the Government of Canada or any such
province, political subdivision or taxing authority, the Subsidiary Guarantors
will pay such additional amount in respect of principal and interest as may be
necessary in order that the net amounts paid to the holders of the Exchange
Notes or the Trustee, as the case may be, pursuant to the Senior Subordinated
Guarantees after such deduction or withholding shall not be less than the amount
provided for in the Exchange Notes to be then due and payable; except that no
such additional amount shall be payable in respect of any Exchange Notes to any
Holder (a) who is subject to such tax, duty, assessment or governmental charge
in respect of such Exchange Notes by reason of his being connected with Canada
otherwise than merely by the holding or ownership of such Exchange Notes, or (b)
who is not dealing at arm's length with any of the Subsidiary Guarantors (within
the meaning of the Income Tax Act (Canada) as reenacted or amended from time to
time). (Section 1301).
The Senior Subordinated Guarantees of any Guarantor will be subordinate in
right of payment to the prior payment in full of all Senior Debt of such
Guarantor to substantially the same extent as the Exchange Notes are
subordinated to Senior Debt of the Company. No payment will be made by any
Guarantor under its Senior Subordinated Guarantee in respect of the Exchange
Notes during any period that payments by the Company on the Exchange Notes are
suspended by the subordination provisions of the Indenture. See "Subordination."
(Sections 1401, 1402 and 1403).
The Senior Subordinated Guarantees will remain in effect with respect to
each Guarantor until the entire principal of, premium, if any, and interest on
the Exchange Notes shall have been paid in full or otherwise discharged in
accordance with the provisions of the Indenture; provided, however, that if (i),
with respect to each Guarantor, the Exchange Notes are defeased and discharged
as described under Clause (A) under "Defeasance" or (ii), with respect to each
Subsidiary Guarantor, such Subsidiary Guarantor (x) ceases to be a Restricted
Subsidiary or (y) all or substantially all of the assets of such Subsidiary
Guarantor or all of the Capital Stock of such Subsidiary Guarantor is sold
(including by issuance, merger, consolidation or otherwise) by the Company or
any of its Subsidiaries in a transaction constituting an Asset Disposition and
the Net Available Proceeds from such Asset Disposition are used in accordance
with the provisions described under "Repurchase at the Option of
Holders -- Asset Dispositions," then in each case of (i) and (ii) above, such
Guarantor or the corporation acquiring such assets (in the event of a sale or
other disposition of all or substantially all of the assets of such Subsidiary
Guarantor) shall be released and discharged of its Senior Subordinated Guarantee
obligations.
Subject to payment in full of all Senior Debt of any Guarantor, the rights
of the Holders of the Exchange Notes under the related Senior Subordinated
Guarantees of such Guarantor will be subrogated to the rights of the holders of
such Senior Debt to receive payments or distributions of cash, property or
securities of the Guarantors applicable to Senior Debt of such Guarantor.
CERTAIN COVENANTS
The Indenture contains, among others, the following covenants:
LIMITATION ON CONSOLIDATED DEBT
The Company may not Incur any Debt and may not permit Restricted
Subsidiaries to Incur any Debt or issue Preferred Stock unless, immediately
after giving effect to the Incurrence of such Debt or issuance of such Preferred
Stock and the receipt and application of the proceeds thereof, the Consolidated
EBITDA Coverage Ratio of the Company for the four full fiscal quarters next
preceding the Incurrence of such Debt or issuance of such Preferred Stock,
calculated on a pro forma basis as if such Debt had been Incurred or such
Preferred Stock had been issued and the proceeds thereof had been received and
so applied at the beginning of the four full fiscal quarters, would be greater
than 2.0 to 1.0 if such Incurrence is on or prior to December 31, 1999 and 2.25
to 1.0 if thereafter. (Section 1008).
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Without regard to the foregoing limitations, the Company or any Restricted
Subsidiary of the Company may Incur the following Debt:
(i) Debt under the Bank Agreement in an aggregate principal amount at any
one time outstanding not to exceed the Bank Facility Limit then in effect;
(ii) Debt evidenced by the Exchange Notes;
(iii) Debt evidenced by the Allied Canada Debentures;
(iv) Debt owed by the Company to any Restricted Subsidiary or Debt owed by
a Restricted Subsidiary to the Company or to a Restricted Subsidiary;
provided, however, that in the event that either (x) the Company or the
Restricted Subsidiary to which such Debt is owed transfers or otherwise
disposes of such Debt to a Person other than the Company or another
Restricted Subsidiary or (y) such Restricted Subsidiary ceases to be a
Restricted Subsidiary, the provisions of this Clause (iv) shall no longer
be applicable to such Debt and such Debt shall be deemed to have been
Incurred at the time of such transfer or other disposition or at the time
such Restricted Subsidiary ceases to be a Restricted Subsidiary;
(v) Debt outstanding on the date of the Indenture;
(vi) Debt Incurred in connection with an acquisition, merger or
consolidation transaction permitted under the provisions of the Indenture
described under "Mergers, Consolidations and Certain Sales and Purchases of
Assets," which Debt (A) was issued by a Person prior to the time such
Person becomes a Restricted Subsidiary in such transaction (including by
way of merger or consolidation with the Company or another Restricted
Subsidiary) and was not issued in contemplation of such transaction or (B)
is issued by the Company or a Restricted Subsidiary to a seller in
connection with such transaction, in an aggregate amount for all such Debt
issued pursuant to the provisions of the Indenture described under this
Clause (vi) not to exceed $50 million at any one time outstanding;
(vii) Debt consisting of Permitted Interest Rate or Currency Protection
Agreements;
(viii) Debt Incurred to renew, extend, refinance or refund any outstanding
Debt permitted in Clauses (i) through (vi) above; provided, however, that
such Debt does not exceed the principal amount of Debt so renewed,
extended, refinanced or refunded; and provided further, that Debt the
proceeds of which are used to refinance or refund Debt which is pari passu
to the Exchange Notes or Debt which is subordinate in right of payment to
the Exchange Notes shall only be permitted if (A) in the case of any
refinancing or refunding of Debt which is pari passu to the Exchange Notes,
the refinancing or refunding Debt is made pari passu to the Exchange Notes
or subordinated to the Exchange Notes, and, in the case of any refinancing
or refunding of Debt which is subordinated to the Exchange Notes, the
refinancing or refunding Debt is made subordinate to the Exchange Notes to
substantially the same extent as, or a greater extent than, the Exchange
Notes are subordinated to Senior Debt of the Company as described under the
subordination provisions described under "Subordination" above and (B) such
refinancing or refunding Debt (x) does not have a final Stated Maturity
earlier than the final Stated Maturity of the refinanced or refunded Debt
or permit redemption or other retirement of such Debt (including pursuant
to an offer to purchase by the Company) at the option of the holder thereof
prior to the final Stated Maturity of the Debt being refinanced or
refunded, other than a redemption or other retirement at the option of the
holder of such Debt on terms and in circumstances that are substantially
similar to those on and in which the Debt being refinanced may be redeemed
or otherwise retired and (y) does not have a Weighted Average Life less
than the Weighted Average Life of the Debt being refinanced; and
(ix) Debt not otherwise permitted to be Incurred pursuant to Clauses (i)
through (viii) above, which, in aggregate amount, together with the
aggregate amount of all other Debt previously Incurred pursuant to the
provisions of the Indenture described under this Clause (ix) and then
outstanding, does not exceed 5% of the Consolidated Total Assets of the
Company at the time of such Incurrence. (Section 1008).
Notwithstanding the foregoing, the Company may not permit Allied Insurance
to Incur any Debt other than reimbursement obligations with respect to letters
of credit and other financial assurance obligations
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issued to enable Allied Insurance to issue insurance policies for the benefit of
the Company and its Restricted Subsidiaries.
LIMITATION ON LAYERED AND JUNIOR DEBT
The Indenture provides that, so long as any of the Exchange Notes are
Outstanding, (i) the Company may not incur or suffer to exist any Debt that is
by its terms subordinate in right of payment to any other Debt of the Company
unless such Debt is also pari passu with, or subordinate by its terms in right
of payment to, the Exchange Notes and (ii) Allied may not, and the Company may
not permit any Subsidiary Guarantor to, Incur or suffer to exist any Debt that
is by its terms subordinate in right of payment to any other Debt of Allied or
the Subsidiary Guarantor, as the case may be, unless such Debt is also pari
passu with or subordinate by its terms in right of payment to the Senior
Subordinated Guarantees of Allied or the Subsidiary Guarantor, as the case may
be. (Section 1009).
LIMITATION ON RESTRICTED PAYMENTS
The Company may not, and may not permit any Restricted Subsidiary to,
directly or indirectly, (i) declare or pay any dividend, or make any
distribution, of any kind or character (whether in cash, property or securities)
in respect of the Capital Stock of the Company or any Restricted Subsidiary or
to the holders thereof in their capacity as such (excluding any dividends or
distributions (u) to the extent payable in shares of the Capital Stock of the
Company (other than Redeemable Interests) or in options, warrants or other
rights to acquire the Capital Stock of the Company (other than Redeemable
Interests), (v) dividends or distributions by a Restricted Subsidiary to the
Company or another Wholly Owned Restricted Subsidiary and (w) the payment of pro
rata dividends by a Restricted Subsidiary to holders of both minority and
majority interests in such Restricted Subsidiary), (ii) purchase, redeem or
otherwise acquire or retire for value (a) any Capital Stock of the Company or
any Capital Stock of or other ownership interests in any Subsidiary or any
Affiliate or Related Person of the Company or (b) any options, warrants or
rights to purchase or acquire shares of Capital Stock of the Company or any
Capital Stock of or other ownership interests in any Subsidiary or any Affiliate
or Related Person of the Company (excluding, in each case of (a) and (b), the
purchase, redemption, acquisition or retirement by any Restricted Subsidiary of
any of its Capital Stock, other ownership interests or options, warrants or
rights to purchase such Capital Stock or other ownership interests, in each
case, owned by the Company or a Wholly Owned Restricted Subsidiary), (iii) make
any Investment that is not a Permitted Investment or (iv) redeem, defease,
repurchase, retire or otherwise acquire or retire for value prior to any
scheduled maturity, repayment or sinking fund payment, Debt of the Company
(other than the Exchange Notes) that is pari passu with or subordinate in right
of payment to the Exchange Notes (each of the transactions described in Clauses
(i) through (iv) being a "Restricted Payment"), if:
(1) an Event of Default, or an event that with the lapse of time or the
giving of notice, or both, would constitute an Event of Default, shall have
occurred and be continuing;
(2) the Company would, at the time of such Restricted Payment and after
giving pro forma effect thereto as if such Restricted Payment had been made
at the beginning of the most recently ended four full fiscal quarter period
for which internal financial statements are available immediately preceding
the date of such Restricted Payment, not have been permitted to Incur at
least $1.00 of additional Debt pursuant to the Consolidated EBITDA Coverage
Ratio test set forth in the first paragraph under "Limitation on
Consolidated Debt" above; or
(3) upon giving effect to such Restricted Payment, the aggregate of all
Restricted Payments (excluding Restricted Payments permitted by Clauses
(ii) and (iii) of the next succeeding paragraph) from the date of the
Indenture (the amount so expended, if other than in cash, determined in
good faith by the Board of Directors) exceeds the sum, without duplication,
of: (a) 50% of the aggregate Consolidated Net Income (or, in case
Consolidated Net Income shall be negative, less 100% of such deficit) for
the period (taken as one accounting period) from the beginning of the first
fiscal quarter commencing after the date of the Indenture to the end of the
Company's most recently ended fiscal quarter for which internal financial
statements are available at the time of such Restricted Payment; (b) 100%
of the aggregate net cash
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proceeds from the issuance and sale to Allied of Capital Stock (other than
Redeemable Interests) of the Company and options, warrants or other rights
to acquire Capital Stock (other than Redeemable Interests and Debt
convertible into Capital Stock) of the Company and the principal amount of
Debt and Redeemable Interests of the Company that has been converted into
Capital Stock (other than Redeemable Interests) of the Company after the
date of the Indenture, provided that any such net proceeds received by the
Company from an employee stock ownership plan financed by loans from the
Company or a Subsidiary of the Company shall be included only to the extent
such loans have been repaid with cash on or prior to the date of
determination; (c) 50% of any dividends received by the Company or a Wholly
Owned Restricted Subsidiary after the date of the Indenture from an
Unrestricted Subsidiary of the Company; and (d) $10 million. (Section
1010).
The foregoing covenant will not be violated by reason of:
(i) the payment of any dividend within 60 days after declaration thereof
if at the declaration date such payment would have complied with the
foregoing covenant;
(ii) any refinancing or refunding of Debt permitted pursuant to clause
(viii) of the second paragraph under "Limitation on Consolidated Debt"
above; and
(iii) the purchase, redemption or other acquisition or retirement for
value of any Capital Stock of the Company or any options, warrants or
rights to purchase or acquire shares of Capital Stock of the Company in
exchange for, or out of the net cash proceeds of, the substantially
concurrent issuance or sale (other than to a Restricted Subsidiary of the
Company) of Capital Stock (other than Redeemable Interests) of the Company,
provided that the amount of any such net cash proceeds that are utilized
for any such purchase, redemption or other acquisition or retirement for
value shall be excluded from Clause (3)(b) in the foregoing paragraph.
Upon the designation of any Restricted Subsidiary as an Unrestricted
Subsidiary, an amount equal to the greater of the book value and the fair market
value of all assets of such Restricted Subsidiary at the end of the Company's
most recently ended fiscal quarter for which internal financial statements are
available prior to such designation will be deemed to be a Restricted Payment at
the time of such designation for purposes of calculating the aggregate amount of
Restricted Payments (including the Restricted Payment resulting from such
designation) permitted under provisions described in the second preceding
paragraph (Section 1010).
LIMITATIONS CONCERNING DISTRIBUTIONS BY SUBSIDIARIES, ETC.
The Company may not, and may not permit any Restricted Subsidiary to,
suffer to exist any consensual encumbrance or restriction on the ability of such
Restricted Subsidiary (i) to pay, directly or indirectly, dividends or make any
other distributions in respect of its Capital Stock or other ownership interests
or pay any Debt or other obligation owed to the Company or any other Restricted
Subsidiary; (ii) to make loans or advances to the Company or any other
Restricted Subsidiary; or (iii) to sell, lease or transfer any of its property
or assets to the Company or any Wholly Owned Restricted Subsidiary, except, in
any such case, any encumbrance or restriction: (a) pursuant to the Exchange
Notes, the Indenture, the Senior Subordinated Guarantees or any other agreement
in effect on the date of the Indenture, (b) pursuant to the Bank Agreement,
including any Guarantees of or Liens securing the Senior Debt Incurred
thereunder, (c) pursuant to an agreement relating to any Debt Incurred by such
Subsidiary prior to the date on which such Subsidiary was acquired by the
Company and outstanding on such date and not Incurred in anticipation of
becoming a Subsidiary, (d) pursuant to an agreement which has been entered into
for the pending sale or disposition of all or substantially all of the Capital
Stock, other ownership interests or assets of such Subsidiary, provided that
such restriction terminates upon consummation or abandonment of such disposition
and upon termination of such agreement, (e) pursuant to customary non-assignment
provisions in leases entered into in the ordinary course of business, (f)
pursuant to purchase money obligations for property acquired in the ordinary
course of business or liens in connection therewith permitted to be Incurred
under "-- Limitation on Liens" that impose restrictions of the nature described
in Clause (iii) above on the property so acquired or (g) pursuant to an
agreement effecting a renewal, extension, refinancing or refunding of Debt
Incurred pursuant to an agreement referred to in Clause (a) or (b) above;
provided, however, that the provisions relating to such encumbrance or
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restriction contained in such renewal, extension, refinancing or refunding
agreement are no more restrictive in any material respect than the provisions
contained in the agreement it replaces, as determined in good faith by the Board
of Directors. (Section 1011).
LIMITATION ON LIENS
Allied may not, and the Company may not, and may not permit any Restricted
Subsidiary to, Incur any Lien on property or assets of Allied, the Company or
such Restricted Subsidiary to secure Debt that is pari passu or subordinate in
right of payment to the Exchange Notes or the Senior Subordinated Guarantees
without making, or causing such Restricted Subsidiary to make, effective
provision for securing the Exchange Notes or the Senior Subordinated Guarantees,
as the case may be (and, if the Company may so determine, any other Debt of the
Company or of such Subsidiary that is not pari passu or subordinate to the
Exchange Notes or the Senior Subordinated Guarantees), (i) in the case of Debt
that is pari passu with the Exchange Notes or the Senior Subordinated
Guarantees, as the case may be, pari passu with such Debt and (ii) in the case
of Debt that is subordinated in right of payment to the Exchange Notes or the
Senior Subordinated Guarantees, as the case may be, prior to such Debt, in each
case, as to such property for so long as such Debt will be so secured. (Section
1012).
LIMITATION ON TRANSACTIONS WITH AFFILIATES AND RELATED PERSONS
The Company may not, and may not permit any Restricted Subsidiary of the
Company to, directly or indirectly, enter into any transaction (or series of
related transactions) after the date of the Indenture with any Affiliate or
Related Person unless (i) such Affiliate or Related Person is (both before and
after such transaction) (a) Allied or a Wholly Owned Restricted Subsidiary of
the Company or (b) another Restricted Subsidiary of the Company, the minority
interests in which are not held by any Affiliate or Related Person; or (ii)
where the total consideration given or to be provided by the Company or such
Restricted Subsidiary in or pursuant to such transaction (or series) (including
cash, the fair value of non-cash property and the assumption of Debt) (a) will
be no more than $1 million, the Chief Executive Officer, the Chief Operating
Officer or the Chief Financial Officer certifies in an Officer's Certificate
that the terms of the transaction (or series) are in the best interests of the
Company or such Restricted Subsidiary and are no less favorable to the Company
or such Restricted Subsidiary than those that could be obtained in a comparable
arm's-length transaction with an entity that is not an Affiliate or Related
Person, (b) will be in excess of $1 million but no more than $5 million, a
majority of the disinterested members of the Board of Directors determines in
its good faith judgment that the terms of the transaction are in the best
interests of the Company or such Restricted Subsidiary and are no less favorable
to the Company or such Restricted Subsidiary than those that could be obtained
in a comparable arm's-length transaction with an entity that is not an Affiliate
or a Related Person or (c) will be in excess of $5 million, a nationally
recognized investment banking firm (which may not be an Affiliate or Related
Person of the Company), in a written opinion delivered to the Board of Directors
prior to consummation of such transaction (or series) that the terms of the
transaction (or series) are in the best interests of the Company or such
Restricted Subsidiary and are no less favorable to the Company or such
Restricted Subsidiary than those that could be obtained in a comparable
arm's-length transaction with an entity that is not an Affiliate or Related
Person; provided, however, that the foregoing restriction will not apply to the
Intercompany Agreements as in effect on the date of the Indenture or the
transactions contemplated thereby. (Section 1013).
LIMITATION ON SALE OF CAPITAL STOCK OF SUBSIDIARIES
The Company may not, and may not permit any Restricted Subsidiary to,
issue, transfer, convey, lease or otherwise dispose of any shares of Capital
Stock of or other ownership interests in a Restricted Subsidiary or securities
convertible or exchangeable into, or options, warrants, rights or any other
interest with respect to, Capital Stock of or other ownership interests in a
Restricted Subsidiary to any Person (other than the Company or a Wholly Owned
Restricted Subsidiary) except in a transaction that consists of a sale of all of
the Capital Stock of or other ownership interests in such Subsidiary owned by
the Company and any Subsidiary of the Company and that complies with the
provisions described under "Repurchase at the Option of Holders -- Asset
Dispositions" above to the extent such provisions apply. (Section 1019).
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RESTRICTION ON BUSINESS AND INCURRENCE OF DEBT BY ALLIED FINANCE
Allied Finance may not, and Allied may not permit Allied Finance to, engage
in any activities, transactions or business, including, without limitation, the
Incurrence of any Debt, provided that the foregoing will not prohibit Allied
Finance from (i) holding the Allied Canada Debentures and (ii) engaging in any
other activities and transactions that are directly related to its status as an
obligor under the Allied Finance Debentures or its status as a holder of the
Allied Canada Debentures. (Section 1020).
Pursuant to the Laidlaw Repurchase, Allied has acquired the Allied Finance
Debentures from Laidlaw. Allied intends to transfer the Allied Finance
Debentures and the capital stock of Allied Finance to the Company. Following
that transfer, Allied Canada and Allied Finance intend to change their
jurisdiction of incorporation from Canada to Delaware, and Allied Finance will
merge with and into Allied Canada. As a result of that merger, the obligations
of Allied Finance under the Allied Finance Guarantee will be released pursuant
to Section 1304 of the Indenture, and the pledge of the Allied Canada Debenture
will be released pursuant to the terms of the Allied Finance Pledge.
PROVISION OF FINANCIAL INFORMATION
Whether or not the Company is required to be subject to Section 13(a) or
15(d) of the Securities Exchange Act of 1934, or any successor provision
thereto, the Company will file with the Commission the annual reports, quarterly
reports and other documents which the Company would have been required to file
with the Commission pursuant to such Section 13(a) or 15(d) or any successor
provision thereto if the Company were so required, such documents to be filed
with the Commission on or prior to the respective dates (the "Required Filing
Dates") by which the Company would have been required so to file such documents
if the Company were so required. The Company shall also in any event (a) within
15 days of each Required Filing Date (i) transmit by mail to all Holders, as
their names and addresses appear in the Security Register, without cost to such
Holders, and (ii) file with the Trustee, copies of the annual reports, quarterly
reports and other documents which the Company files with the Commission pursuant
to such Section 13(a) or 15(d) or any successor provisions thereto or would have
been required to file with the Commission pursuant to such Section 13(a) or
15(d) or any successor provisions thereto if the Company were required to comply
with such Sections and (b) if filing such documents by the Company with the
Commission is not permitted under the Securities Exchange Act of 1934, promptly
upon written request supply copies of such documents to any prospective Holder.
(Section 1016).
UNRESTRICTED SUBSIDIARIES
The Company at any time may designate any Person that is a Subsidiary, or
after the date of the Indenture becomes a Subsidiary, of the Company as an
"Unrestricted Subsidiary," whereupon (and until such Person ceases to be an
Unrestricted Subsidiary) such Person and each other Person that is then or
thereafter becomes a Subsidiary of such Person will be deemed to be an
Unrestricted Subsidiary. In addition, the Company may at any time terminate the
status of any Unrestricted Subsidiary as an Unrestricted Subsidiary, whereupon
such Subsidiary and each other Subsidiary of the Company (if any) of which such
Subsidiary is a Subsidiary will be a Restricted Subsidiary. (Section 1018).
Notwithstanding the foregoing, no change in the status of a Subsidiary of
the Company from a Restricted Subsidiary to an Unrestricted Subsidiary or from
an Unrestricted Subsidiary to a Restricted Subsidiary will be effective, and no
Person may otherwise become a Restricted Subsidiary, if:
(i) the Consolidated EBITDA Coverage Ratio of the Company for the four full
fiscal quarters of the Company next preceding the effective date of such
purported change or other event, calculated on a pro forma basis as if such
change or other event had been effective at the beginning of such period,
would not exceed 2.0 to 1.0 if such purported change is to occur on or
prior to December 31, 1999 and 2.25 to 1.0 if thereafter;
(ii) in the case of any change in status of a Restricted Subsidiary to an
Unrestricted Subsidiary, the Restricted Payment resulting from such change,
would violate the provisions of the Indenture described under Clause (3) of
the first paragraph under "Limitation on Restricted Payments" above; or
(iii) such change or other event would otherwise result (after the giving
of notice or the lapse of time, or both) in an Event of Default.
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In addition and notwithstanding the foregoing, no Restricted Subsidiary of
the Company may become an Unrestricted Subsidiary, and the status of any
Unrestricted Subsidiary as an Unrestricted Subsidiary will be deemed to have
been immediately terminated (whereupon such Subsidiary and each other Subsidiary
of the Company (if any) of which such Subsidiary is a Subsidiary will be a
Restricted Subsidiary) at any time when:
(i) such Subsidiary (A) has outstanding Debt that is Unpermitted Debt or
(B) owns or holds any Capital Stock of or other ownership interests in, or
a Lien on any property or other assets of, the Company or any of its
Restricted Subsidiaries;
(ii) the Company or any other Restricted Subsidiary (A) provides credit
support for, or a Guaranty of, any Debt of such Subsidiary (including any
undertaking, agreement or instrument evidencing such Debt) or (B) is
directly or indirectly liable for any Debt of such Subsidiary; or
(iii) such Subsidiary fails to notify in writing the holders of its Debt
for borrowed money that such Debt is without recourse to the property and
assets of the Company and its Restricted Subsidiaries. Any termination of
the status of an Unrestricted Subsidiary as an Unrestricted Subsidiary
pursuant to the preceding sentence will be deemed to result in a breach of
this covenant in any circumstance in which the Company would not be
permitted to change the status of such Unrestricted Subsidiary to the
status of a Restricted Subsidiary pursuant to the provision of the
Indenture described under the preceding paragraph. "Unpermitted Debt" means
any Debt of a Subsidiary of the Company if (x) a default thereunder (or
under any instrument or agreement pursuant to or by which such Debt is
issued, secured or evidenced), or any right that the holders thereof may
have to take enforcement action against such Subsidiary or its property or
other assets, would permit (whether or not after the giving of notice or
the lapse of time or both) the holders of any Debt of the Company or any
other Restricted Subsidiary to declare the same due and payable prior to
the date on which it otherwise would have become due and payable or
otherwise to take any enforcement action against the Company or any such
other Restricted Subsidiary or (y) such Debt is secured by a Lien on any
property or other assets of the Company and any of its other Restricted
Subsidiaries. (Section 1018).
Each Person that is or becomes a Subsidiary of the Company will be deemed
to be a Restricted Subsidiary at all times when it is a Subsidiary of the
Company that is not an Unrestricted Subsidiary. Each Person that is or becomes a
Wholly Owned Subsidiary of the Company shall be deemed to be a Wholly Owned
Restricted Subsidiary at all times when it is a Wholly Owned Subsidiary of the
Company that is not an Unrestricted Subsidiary. (Section 1018).
MERGERS, CONSOLIDATIONS AND CERTAIN SALES AND PURCHASES OF ASSETS
The Company (i) may not, and may not permit any Restricted Subsidiary to,
consolidate with or merge into any Person, in the case of a Restricted
Subsidiary, in a transaction in which such Restricted Subsidiary remains a
Restricted Subsidiary, unless such Restricted Subsidiary consolidates with or
merges into a Wholly Owned Restricted Subsidiary; (ii) may not permit any Person
other than a Wholly Owned Restricted Subsidiary to consolidate with or merge
into the Company or any Restricted Subsidiary (in a transaction in which such
Restricted Subsidiary remains a Restricted Subsidiary); (iii) may not, directly
or indirectly, in one or a series of transactions, transfer, convey, sell, lease
or otherwise dispose of all or substantially all of the properties and assets of
the Company and its Subsidiaries on a consolidated basis; (iv) may not, and may
not permit any Restricted Subsidiary of the Company to, acquire Capital Stock of
or other ownership interests in any other Person such that such other Person
becomes a Restricted Subsidiary (excluding the Acquisition and other
transactions with an aggregate purchase price of not more than $50 million with
respect to the consummation of which, as of the date of the Indenture, the
Company has entered into a letter of intent, option or other contract); and (v)
may not, and may not permit any Restricted Subsidiary of the Company to,
purchase, lease or otherwise acquire all or substantially all of the properties
and assets of any Person or any existing business (whether existing as a
separate entity, subsidiary, division, unit or otherwise) of any Person
(excluding the Acquisition and other transactions with an aggregate purchase
price of not more than $50
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million with respect to the consummation of which, as of the date of the
Indenture, the Company has entered into a letter of intent, option or other
contract) unless, in each case (i), (ii), (iii), (iv) and (v) above:
(1) immediately before and after giving effect to such transaction (or
series) and treating any Debt Incurred by the Company or a Subsidiary of
the Company as a result of such transaction (or series) as having been
Incurred by the Company or such Subsidiary at the time of the transaction
(or series), no Event of Default, or event that with the passing of time or
the giving of notice, or both, will constitute an Event of Default, shall
have occurred and be continuing;
(2) in a transaction (or series) in which the Company does not survive or
in which the Company transfers, conveys, sells, leases or otherwise
disposes of all or substantially all of its properties and assets, the
successor entity is a corporation, partnership, limited liability company
or trust and is organized and validly existing under the laws of the United
States of America, any State thereof or the District of Columbia and
expressly assumes, by a supplemental indenture executed and delivered to
the Trustee in form satisfactory to the Trustee, all the Company's
obligations under the Indenture;
(3) immediately after giving effect to such transaction (or series), the
Company or the successor entity would have a Consolidated Net Worth equal
to or greater than 90% of the Consolidated Net Worth of the Company
immediately prior to such transaction (or series);
(4) either (x) the Company or the successor entity would, at the time of
such transaction (or series) and after giving pro forma effect thereto as
if such transaction (or series) had occurred at the beginning of the most
recently ended four full fiscal quarter period for which internal financial
statements are available immediately preceding the date of such transaction
(or series), have been permitted to Incur at least $1.00 of additional Debt
pursuant to the Consolidated EBITDA Coverage Ratio test set forth in the
first paragraph under "Certain Covenants -- Limitation on Consolidation
Debt" above or (y) the Consolidated EBITDA Coverage Ratio of the Company or
the successor entity for the most recently ended four full fiscal quarter
period for which internal financial statements are available immediately
preceding the date of such transaction (or series), calculated on a pro
forma basis as if such transaction (or series) had occurred at the
beginning of such four full fiscal quarter period, would be no less than
such Consolidated EBITDA Coverage Ratio, calculated without giving effect
to such transaction or series or any other transactions (or series) that is
subject to the provisions of the Indenture described in this paragraph and
that occurred after the later of the Acquisition Closing and the date that
is twelve months before the date of such transaction (or series);
(5) if, as a result of any such transaction, property or assets of the
Company or any Restricted Subsidiary of the Company would become subject to
a Lien prohibited by the "Certain Covenants -- Limitation on Liens"
covenant, the Company or the successor entity will have secured the
Exchange Notes as required by such covenant; and
(6) unless such transaction (or series) is referred to in Clauses (iii) or
(iv) and involves an aggregate purchase price of less than $50 million, the
Company has delivered to the Trustee an Officers' Certificate and an
Opinion of Counsel as specified in the Indenture. (Section 801).
EVENTS OF DEFAULT
The following will be Events of Default under the Indenture: (a) failure to
pay any interest on any Exchange Note when due (whether or not prohibited by the
subordination provisions described under "Subordination" above), continued for
30 days; (b) failure to pay principal of (or premium, if any, on) any Exchange
Note when due (whether or not prohibited by the subordination provisions
described under "Subordination" above); (c) failure to perform or comply with
the provisions described under "Mergers, Consolidations and Certain Sales and
Purchases of Assets" or the provisions described under "Repurchase at the Option
of Holders -- Asset Dispositions" and "-- Change of Control"; (d) failure to
perform any other covenant or warranty of the Company or any Guarantor in the
Indenture or the Exchange Notes, continued for 60 days after written notice from
Holders of at least 10% in principal amount of the Outstanding Exchange Notes as
provided in the Indenture; (e) a default or defaults under any bonds,
debentures, Exchange Notes or
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other evidences of, or obligations constituting, Debt by the Company, any
Guarantors or any Restricted Subsidiary or under any mortgages, indentures,
instruments or agreements under which there may be issued or existing or by
which there may be secured or evidenced any Debt of the Company, the Guarantors
or any Restricted Subsidiary with a principal or similar amount then
outstanding, individually or in the aggregate, in excess of $25 million, whether
such Debt now exists or is hereafter created, which default or defaults
constitute a failure to pay any portion of the principal or similar amount of
such Debt when due and payable after the expiration of any applicable grace
period with respect thereto or will have resulted in such Debt becoming or being
declared due and payable prior to the date on which it would otherwise have
become due and payable; (f) the rendering of a final judgment or judgments (not
subject to appeal) against the Company, the Parent Guarantor or any of its
Restricted Subsidiaries in an aggregate amount in excess of $25 million which
remains unstayed, undischarged or unbonded for a period of 60 days thereafter;
and (g) certain events of bankruptcy, insolvency or reorganization affecting the
Company, the Parent Guarantor or any Restricted Subsidiary of the Company.
(Section 501).
Subject to the provisions of the Indenture relating to the duties of the
Trustee in case an Event of Default occurs and is continuing, the Trustee will
be under no obligation to exercise any of its rights or powers under the
Indenture at the request or direction of any of the Holders, unless such Holders
have offered to the Trustee reasonable indemnity. (Section 603). Subject to such
provisions for the indemnification of the Trustee and certain other conditions
provided in the Indenture, the Holders of a majority in aggregate principal
amount of the Outstanding Exchange Notes will have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Trustee or exercising any trust or power conferred on the Trustee. (Section
512).
If an Event of Default (other than an Event of Default of the type
described in Clause (g) above) occurs and is continuing, either the Trustee or
the Holders of at least 25% in aggregate principal amount of the Outstanding
Exchange Notes may accelerate the maturity of all Exchange Notes, and if an
Event of Default of the type described in Clause (g) above occurs, the principal
of and any accrued interest on the Exchange Notes then outstanding will become
immediately due and payable; provided, however, that after such acceleration,
but before a judgment or decree based on acceleration, the Holders of a majority
in aggregate principal amount of Outstanding Exchange Notes may, under certain
circumstances, rescind and annul such acceleration if all Events of Default,
other than the non-payment of accelerated principal, have been cured or waived
as provided in the Indenture. (Section 502). For information as to waiver of
defaults, see "Modification and Waiver."
No Holder of any Exchange Note will have any right to institute any
proceeding with respect to the Indenture or for any remedy thereunder, unless
such Holder has previously given to the Trustee written notice of a continuing
Event of Default and unless also the Holders of at least 25% in aggregate
principal amount of the Outstanding Exchange Notes have made written request,
and offered reasonable indemnity, to the Trustee to institute such proceeding as
trustee, and the Trustee has not received from the Holders of a majority in
aggregate principal amount of the Outstanding Exchange Notes a direction
inconsistent with such request and has failed to institute such proceeding
within 60 days. However, such limitations do not apply to a suit instituted by a
Holder of an Exchange Note for enforcement of payment of the principal of (and
premium, if any) or interest on such Exchange Note on or after the respective
due dates expressed in such Exchange Note. (Section 507 and 508).
In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Company with
the intention of avoiding payment of the premium that the Company would have had
to pay if the Company then had elected to redeem the Exchange Notes pursuant to
the provisions described above under "Optional Redemption," an equivalent
premium will also become and be immediately due and payable upon the
acceleration of the Exchange Notes.
The Company will be required to furnish to the Trustee annually a statement
as to the performance by the Company of certain of its obligations under the
Indenture and as to any default in such performance. The Company will be
required to deliver to the Trustee, as soon as possible and in any event within
30 days after the Company becomes aware of the occurrence of an Event of Default
or an event which, with notice or the
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lapse of time or both, would constitute an Event of Default, an Officers'
Certificate setting forth the details of such Event of Default or default, and
the action which the Company proposes to take with respect thereto. (Section
1020).
DEFEASANCE
The Indenture will provide that (A) if applicable, the Company will be
discharged from any and all obligations in respect of the Outstanding Exchange
Notes (and the provisions described under "Subordination" will cease to be
effective) or (B) if applicable, the Company may omit to comply with certain
restrictive covenants, and that such omission will not be deemed to be an Event
of Default under the Indenture and the Exchange Notes and the provisions
described under "Subordination" shall cease to apply, in either case (A) or (B)
upon irrevocable deposit with the Trustee, in trust, of money and/or U.S.
Government Obligations that will provide money in an amount sufficient in the
opinion of a nationally recognized firm of independent certified public
accountants to pay the principal of, and premium, if any, and each installment
of interest, if any, on the Outstanding Exchange Notes. With respect to clause
(B), the obligations under the Indenture other than with respect to such
covenants and the Events of Default other than the Event of Default relating to
such covenants above will remain in full force and effect. Such trust may only
be established if, among other things (i) with respect to clause (A), the
Company has received from, or there has been published by, the Internal Revenue
Service a ruling or there has been a change in law, which in the Opinion of
Counsel provides that Holders of the Exchange Notes will not recognize gain or
loss for Federal income tax purposes as a result of such deposit, defeasance and
discharge and will be subject to Federal income tax on the same amount, in the
same manner and at the same times as would have been the case if such deposit,
defeasance and discharge had not occurred; or, with respect to clause (B), the
Company has delivered to the Trustee an Opinion of Counsel to the effect that
the Holders of the Exchange Notes will not recognize gain or loss for Federal
income tax purposes as a result of such deposit and defeasance and will be
subject to Federal income tax on the same amount, in the same manner and at the
same times as would have been the case if such deposit and defeasance had not
occurred; (ii) no Event of Default (or event that with the passing of time or
the giving of notice, or both, will constitute an Event of Default) shall have
occurred or be continuing; (iii) the Company has delivered to the Trustee an
Opinion of Counsel to the effect that such deposit shall not cause the Trustee
or the trust so created to be subject to the Investment Company Act of 1940;
(iv) at the time of such establishment: (A) no default in the payment of all or
a portion of principal of (or premium, if any) or interest on any Senior Debt of
the Company shall have occurred and be continuing, and no event of default with
respect to any Senior Debt shall have occurred and be continuing and shall have
resulted in such Senior Debt becoming or being declared due and payable prior to
the date on which it would otherwise have become due and payable and (B) no
other event of default with respect to any Senior Debt of the Company shall have
occurred and be continuing permitting (after notice or the lapse of time, or
both) the holders of such Senior Debt (or a trustee on behalf of the holders
thereof) to declare such Senior Debt due and payable prior to the date on which
it would otherwise have become due and payable, or, in the case of either Clause
(A) or Clause (B) above, each such default or event of default shall have been
cured or waived or shall have ceased to exist; and (v) certain other customary
conditions precedent are satisfied. (Sections 1201, 1202, 1203 and 1204).
In the event the Company omits to comply with its remaining obligations
under the Indenture and the Exchange Notes after a defeasance of the Indenture
with respect to the Exchange Notes as described under Clause (B) above and the
Exchange Notes are declared due and payable because of the occurrence of any
Event of Default, the amount of money and U.S. Government Obligations on deposit
with the Trustee may be insufficient to pay amounts due on the Exchange Notes at
the time of the acceleration resulting from such Event of Default. However, the
Company will remain liable in respect of such payments.
MODIFICATION AND WAIVER
Modifications and amendments of the Indenture may be made by the Company
and the Trustee with the consent of the Holders of a majority in aggregate
principal amount of the Outstanding Exchange Notes; provided, however, that no
such modification or amendment may, without the consent of the Holder of each
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Outstanding Exchange Note affected thereby, (a) change the Stated Maturity of
the principal of, or any installment of interest on, any Exchange Note, (b)
reduce the principal amount of, (or the premium, if any) or interest on, any
Exchange Note, (c) change the place or currency of payment of principal of, (or
premium, if any) or interest on, any Exchange Note, (d) impair the right to
institute suit for the enforcement of any payment on or with respect to any
Exchange Note, (e) reduce the above-stated percentage of Outstanding Exchange
Notes necessary to modify or amend the Indenture, (f) reduce the percentage of
aggregate principal amount of Outstanding Exchange Notes necessary for waiver of
compliance with certain provisions of the Indenture or for waiver of certain
defaults, (g) modify any provisions of the Indenture relating to the
modification and amendment of the Indenture or the waiver of past defaults or
covenants, except as otherwise specified, (h) modify any of the provisions of
the Indenture relating to the subordination of the Exchange Notes in a manner
adverse to the Holders or (i) modify the provisions described under "Repurchase
at the Option of Holders -- Asset Dispositions" and under "-- Change of Control"
in a manner adverse to the Holders thereof in any material respect. (Section
902).
The Holders of a majority in aggregate principal amount of the Outstanding
Exchange Notes may waive compliance by the Company with certain restrictive
provisions of the Indenture. (Section 1021). The Holders of a majority in
aggregate principal amount of the Outstanding Exchange Notes may waive any past
default under the Indenture, except a default in the payment of principal (or
premium, if any) or interest. (Section 513).
NOTICES
Notices to Holders of Exchange Notes will be given by mail to the addresses
of such Holders as they may appear in the Security Register. (Sections 101 and
106).
TITLE
The Company, the Trustee and any agent of the Company or the Trustee may
treat the Person in whose name an Exchange Note is registered as the absolute
owner thereof (whether or not such Exchange Note may be overdue) for the purpose
of making payment and for all other purposes. (Section 308).
GOVERNING LAW
The Indenture and the Exchange Notes will be governed by, and construed in
accordance with, the law of the State of New York. (Section 112).
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF
AN INVESTMENT IN THE EXCHANGE NOTES
The following is a summary of certain federal income tax consequences
associated with the acquisition, ownership, and disposition of the Exchange
Notes by holders who acquire the Exchange Notes at original issue for cash. The
following summary does not discuss all of the aspects of federal income taxation
that may be relevant to a prospective holder of the Exchange Notes in light of
his or her particular circumstances, or to certain types of holders (including
dealers in securities, insurance companies, tax-exempt organizations, financial
institutions, broker-dealers, S corporations, and except as discussed below,
foreign corporations and persons who are not citizens or residents of the U.S.
nor does it include persons who hold the Exchange Notes as part of a hedge,
straddle, "synthetic security" or other integrated investment) which are subject
to special treatment under the federal income tax laws. In addition, this
summary does not describe any tax consequences under state, local, or foreign
tax laws.
The discussion is based upon the IRC, Treasury Regulations, Internal
Revenue Service rulings and pronouncements and judicial decisions now in effect,
all of which are subject to change at any time by legislative, judicial or
administrative action. Any such changes may be applied retroactively in a manner
that could adversely affect a holder of the Exchange Notes. Allied has not
sought and will not seek any rulings or opinions from the IRS or counsel with
respect to the matters discussed below. There can be no assurance that
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the IRS will not take positions concerning the tax consequences of the purchase,
ownership or disposition of the Exchange Notes which are different from those
discussed herein.
PROSPECTIVE PURCHASERS OF EXCHANGE NOTES SHOULD CONSULT THEIR OWN TAX
ADVISORS WITH RESPECT TO THE U.S. FEDERAL INCOME TAX CONSEQUENCES THAT MAY BE
SPECIFIC TO THEM OF ACQUIRING, OWING AND DISPOSING OF THE EXCHANGE NOTES, AS
WELL AS THE APPLICATION OF STATE, LOCAL, FOREIGN AND OTHER TAX LAWS.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES TO U.S. HOLDERS
Taxation of Stated Interest. In general, interest on an Exchange Note will
be taxable to a U.S. holder as ordinary interest income at the time it accrues
or is received, in accordance with the holder's regular method of accounting for
federal income tax purposes. A U.S. holder means any person who or which is (i)
a citizen or resident of the U.S.; (ii) a corporation or partnership created or
organized in the U.S. or under the laws of the U.S. or of any state; (iii) any
estate or trust whose income is included in gross income for U.S. federal income
tax purposes regardless of its source; and (iv) a person otherwise subject to
U.S. federal income taxation on its worldwide income.
Possible Original Issue Discount on the Exchange Note. Depending on the
initial offering price to the public at which a substantial amount of the
Exchange Notes are sold, the Exchange Notes may be issued with original issue
discount for federal income tax purposes. The amount of original issue discount
with respect to each Exchange Note will be equal to the excess of the "stated
redemption price at maturity" of such Exchange Note over its "issue price." For
these purposes, the "issue price" of an Exchange Note is the initial offering
price to the public at which a substantial amount of the Notes were sold. The
"stated redemption price at maturity" of each Exchange Note will include all
cash payments (other than stated interest to the extent that it is
unconditionally payable at least annually at a single fixed rate ("qualified
stated interest")) required to be made thereunder until maturity. The amount of
original issue discount with respect to a debt instrument is considered to be
zero if such discount is less than one-fourth of one percent of its stated
redemption price at maturity (as defined above) multiplied by the number of
complete years from the issue date to the maturity date of the debt instrument
("de minimis" original issue discount).
Taxation of Original Issue Discount on the Exchange Notes. If there is
more than de minimis original issue discount, each Holder of an Exchange Note
will be required to include in gross income (as ordinary interest income) an
amount equal to the sum of the "daily portions" of the original issue discount
on the Exchange Notes for each day such Holder holds an Exchange Note. The daily
portions of original issue discount required to be included in a Holder's gross
income will be determined on a constant yield basis by allocating to each day
during the taxable year in which the Holder holds the Exchange Notes a pro rata
portion of the original issue discount thereon which is attributable to the
"accrual period."
The amount of the original issue discount attributable to each accrual
period will be the product of the "adjusted issue price" of the Exchange Notes
at the beginning of such accrual period multiplied by the "yield to maturity" of
the Exchange Notes, less the amount of any qualified stated interest allocable
to the accrual period. Appropriate adjustments will be made in computing the
amount of original issue discount attributable to the initial accrual period.
The adjusted issue price of the Exchange Notes at the beginning of the first
accrual period is the issue price. Thereafter, the adjusted issue price of an
Exchange Note is the issue price of the Exchange Note plus the aggregate amount
of original issue discount that accrued in all prior accrual periods, less
payments (other than payments of qualified stated interest) on the Exchange
Note. The yield to maturity of an Exchange Note will be the discount rate that,
when used to compute the present value (on a semi-annual compounded basis) of
all principal and interest payments to be made under an Exchange Note, produces
a present value equal to the issue price of the Exchange Note.
The "accrual periods" of an Exchange Note (other than the initial accrual
period) are each of the six-month periods during the term of the Exchange Note
that end on the biannual payment dates of each year.
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Effect of Mandatory Repurchase and Optional Redemption on Original Issue
Discount of the Exchange Notes. In the event the Company is required to make an
Offer to Purchase, each Holder may require the Company to repurchase such
Holder's Exchange Notes in accordance with such offer. In addition, in the event
of certain sales or other dispositions of assets the Company may be required to
make an Offer to Purchase the Exchange Notes. Treasury Regulations contain
special rules for calculating the yield to maturity and maturity on a note in
the event the debt instrument provides for a contingency that could result in
the acceleration or deferral of one or more payments. Further, Treasury
Regulations contain special rules for determining the yield to maturity or
maturity of a debt instrument if either the holder or the issuer has an option
to defer or accelerate payments. Because neither of these rules should apply to
an Offer to Purchase for either of the reasons described above, the Company has
no present intention of treating such repurchase provisions of the Exchange
Notes as affecting the computation of the yield to maturity or maturity date of
any Exchange Notes.
The Company may redeem the Exchange Notes, in whole or in part, at any time
on or after December 1, 2001. The Company may also redeem up to 33 1/3% of the
Exchange Notes prior to December 1, 1999, in connection with a Public Offering
of Capital Stock and, up to $100 million prior to 180 days after the Acquisition
Closing with Net Available Proceeds from Asset Disposition. The Company may also
redeem the Exchange Notes prior to December 1, 2001 at a redemption price equal
to the greater of 100% of their principal amount or the sum of the present
values of the remaining scheduled payments of principal and interest thereon
discounted to maturity on a semi-annual basis of the Treasury Yield plus 75
basis points. Treasury Regulations set forth special rules relating to the
determination of yield to maturity and maturity for a debt instrument that may
be redeemed prior to its stated maturity date at the option of the issuer. These
rules should not apply to a debt instrument, and, hence, should not affect the
determination of the yield to maturity or the maturity date of such debt
instrument, unless the issuer's exercise of its redemption rights would reduce
the yield to maturity on such instruments. The Company's exercise of either of
these redemption rights would not reduce the yield to maturity on the Exchange
Notes; therefore, the special option rules will not apply to the Exchange Notes.
Sale or other Taxable Disposition of the Exchange Notes. The sale or other
taxable disposition of an Exchange Note will result in the recognition of gain
or loss to the holder in an amount equal to the difference between (a) the
amount of cash and fair market value of property received in exchange therefor
(except to the extent attributable to the payment of accrued stated interest)
and (b) the holder's adjusted tax basis in such Note.
A holder's initial tax basis in an Exchange Note purchased by such holder
will be equal to the issue price of the Notes. The holder's initial tax basis in
an Exchange Note will be increased by the amount of original issue discount
included in gross income with respect to such Note to the date of disposition
and decreased by the amount of payments (other than payments of stated interest)
with respect to such Note.
Any gain or loss on the sale or other taxable disposition of an Exchange
Note will be capital gain or loss, assuming a purchaser of the Exchange Note
holds such security as a "capital asset" (generally property held for
investment) within the meaning of Section 1221 of the IRC. Any capital gain or
loss will be long-term capital gain or loss if the Exchange Note had been held
for more than one year and otherwise will be short-term capital gain or loss.
Payments on such disposition for accrued qualified stated interest not
previously included in income will be treated as ordinary interest income.
Backup Withholding. The backup withholding rules require a payor to deduct
and withhold a tax if (i) the payee fails to furnish a taxpayer identification
number ("TIN") to the payor, (ii) the IRS notifies the payor that the TIN
furnished by the payee is incorrect, (iii) the payee has failed to report
properly the receipt of "reportable payments" and the IRS has notified the payor
that withholding is required or (iv) there has been a failure of the payee to
certify under the penalty of perjury that a payee is not subject to withholding
under section 3406 of the IRC. As a result, if any one of the events discussed
above occurs with respect to a holder of Exchange Notes, Allied, its paying
agent or other withholding agent will be required to withhold a tax equal to 31%
of any "reportable payment" made in connection with the Exchange Notes of such
holder. A "reportable payment" includes, among other things, amounts paid in
respect of interest or original issue discount and amounts paid through brokers
in retirement of securities. Any amounts withheld from a payment
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to a holder under the backup withholding rules will be allowed as a refund or
credit against such holder's federal income tax, provided that the required
information is furnished to the IRS. Certain holders (including, among others,
corporations and certain tax-exempt organizations) are not subject to backup
withholding.
CERTAIN U.S. FEDERAL INCOME AND ESTATE TAX CONSIDERATIONS FOR NON-U.S. HOLDERS
The following is a summary of certain U.S. federal income and estate tax
consequences of the ownership and disposition of Exchange Notes by holders who
are Non-U.S. Holders (as defined below). This summary discusses only Exchange
Notes held as "capital assets" (as defined in the IRC) by the holders thereof.
This summary does not discuss all aspects of U.S. federal income and estate
taxation that may be relevant to a particular Non-U.S. Holder (as defined
herein) of the Exchange Notes in light of its particular investment
circumstances. This discussion also does not address the tax consequences to
stockholders, partners or beneficiaries in a Non-U.S. Holder. Further, it does
not consider Non-U.S. Holders subject to special tax treatment under the federal
income tax laws (including dealers in securities, holders of securities held as
part of a "straddle," hedge or "conversion transaction," or situations in which
the "functional currency" of a Holder, within the meaning of Section 985(b) of
the IRC, is not the U.S. dollar).
The following discussion is based upon the IRC, the applicable Treasury
regulations promulgated and proposed thereunder, judicial authority and current
administrative rulings and practices. All of the foregoing are subject to change
(possibly on a retroactive basis) and any such change could affect the
continuing validity of this discussion.
For purposes hereof, a "Non-U.S. Holder" means any person other than (i) a
citizen or resident of the U.S.; (ii) a corporation or partnership created or
organized in the U.S. or under the laws of the U.S. or of any state; or (iii)
any estate or trust whose income is included in gross income for U.S. federal
income tax purposes regardless of its source. For purposes of the withholding
tax on interest discussed below, a non-resident alien or other non-resident
fiduciary of an estate or trust will be considered a Non-U.S. Holder.
For purposes of the following discussion, interest income and gain on the
sale, exchange or retirement of an Exchange Note will be "U.S. trade or business
income" if such income or gain is (i) effectively connected with a trade or
business carried on by the Non-U.S. Holder within the U.S. or (ii) if a tax
treaty applies, attributable to a permanent establishment (or in the case of an
individual, a fixed place of business) in the U.S. trade or business income will
be taxed at regular U.S. federal income tax rates. See, generally, "Certain U.S.
Federal Income Tax Considerations for U.S. Holders" above. In the case of a
Non-U.S. Holder that is a corporation, such U.S. trade or business income may
also be subject to the branch profits tax (which is generally imposed on a
foreign corporation on the actual or deemed repatriation from the U.S. of
earnings and profits attributable to U.S. trade or business income) at a 30%
rate. The branch profits tax may not apply (or may apply at a reduced rate) if
the recipient is a qualified resident of certain countries with which the U.S.
has an income tax treaty.
Interest. Payments of interest to a Non-U.S. Holder that do not qualify
for the portfolio interest exception discussed below and which are not U.S.
trade or business income will be subject to withholding of U.S. federal income
tax at a rate of 30% unless a U.S. income tax treaty applies to reduce the rate
of withholding. To claim a treaty reduced rate or an exemption from withholding
because the interest is U.S. trade or business income, the Non-U.S. Holder must
provide a properly executed Form 1001 or Form 4224, respectively.
Interest that is paid to a Non-U.S. Holder on an Exchange Note that is not
U.S. trade or business income will not be subject to U.S. tax if the interest
qualifies as "portfolio interest." Generally, interest on the Exchange Notes
that is paid by the Company will qualify as portfolio interest if (i) the
Non-U.S. Holder does not own, actually or constructively, 10% or more of the
total combined voting power of all classes of stock of the Company entitled to
vote within the meaning of section 871(h)(3) of the IRC and the regulations
thereunder; (ii) the Non-U.S. Holder is not a controlled foreign corporation
that is related to the Company through stock ownership for U.S. federal income
tax purposes; (iii) the Non-U.S. Holder is not a bank whose receipt of interest
on an Exchange Note is described in Section 881(c)(3)(A) of the IRC; and (iv)
the Company, or its paying agent, receives a properly executed certification as
set forth in Section 871(h) and
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881(c) of the IRC and the regulations thereunder, signed under penalties of
perjury that the beneficial owner is not a "U.S. person" for U.S. federal income
tax purposes and which provides the beneficial owner's name and address.
Sale, Exchange or Retirement of Exchange Notes. Any gain realized by a
Non-U.S. Holder on the sale exchange or retirement of Exchange Notes, will
generally not be subject to U.S. federal income tax provided that (i) such gain
is not U.S. trade or business income; (ii) the Non-U.S. Holder is not an
individual who is present in the U.S. for 183 days or more in the taxable year
of the disposition and meets certain other requirements; and (iii) the Non-U.S.
Holder is not subject to tax pursuant to the provisions of U.S. tax law
applicable to certain U.S. expatriates. For the treatment of amounts received in
respect of accrued and unpaid interest, see discussion above under "Interest."
Federal Estate Tax. Exchange Notes held (or treated as held) by an
individual who is a Non-U.S. Holder at the time of his or her death (or
theretofore transferred subject to certain retained rights or powers) will not
be subject to U.S. federal estate tax provided that any interest thereon would
be exempt as portfolio interest if such interest were received by the Non-U.S.
Holder at the time of his or her death.
U.S. Information Reporting and Backup Withholding Tax. The Company
generally must report annually on Form 1042-S to the IRS and to each Non-U.S.
Holder the amount of interest paid to, and the tax withheld, if any, with
respect to each Non-U.S. Holder. These reporting requirements apply whether or
not withholding is reduced or eliminated by an applicable tax treaty. Copies of
these information returns may also be made available under the provisions of a
specific treaty or agreement to the tax authorities of the country in which the
Non-U.S. Holder resides.
The U.S. backup withholding tax (in general, a tax imposed at the rate of
31% on interest payments to persons that fail to furnish the information
required under the U.S. information reporting requirements) will generally not
apply to payments of interest that qualify as portfolio interest as described
above (provided that the Company has no actual knowledge that the holder is a
U.S. person). Non-U.S. Holders will be required to provide certification to the
Company of qualification for the portfolio interest or treaty exemption to avoid
withholding.
Payments of the proceeds of the sale of Exchange Notes to or through a
foreign office of a "broker" (as defined in the pertinent regulations) will not
be subject to backup withholding (absent actual knowledge that the payee is a
U.S. person) but will be subject to information reporting if the broker is a
U.S. person, a controlled foreign corporation for U.S. federal income tax
purposes, or a foreign person 50% or more of whose gross income is from a U.S.
trade or business for a specified three-year period, unless the broker has in
its records documentary evidence that the holder is not a U.S. person and
certain conditions are met (including that the broker has no actual knowledge
that the holder is a U.S. person) or the holder otherwise establishes an
exemption. Payment of the proceeds of a sale to or through the U.S. office of a
broker is subject to backup withholding and information reporting, unless the
holder certifies that it is a Non-U.S. Holder under penalties of perjury or
otherwise establishes an exemption.
Any amount withheld under the backup withholding rules from a payment to a
Non-U.S. Holder will be allowed as a credit against, or refund of, such holder's
regular federal income tax liability, provided that certain information is
provided by the holder to the IRS.
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
Prospectus in connection with any resale of such Exchange Notes. The Prospectus,
as it may be amended or supplemented from time to time, may be used by a
broker-dealer in connection with resales of Exchange Notes received in exchange
for Notes where such Notes were acquired as a result of market-making activities
or other trading activities. The Company has agreed that, for a period of 90
days after the Expiration Date, it will make this Prospectus, as amended or
supplemented, available to any broker-dealer for use in connection with any such
resale. In addition, until September 21, 1997 (90 days after
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commencement of the Exchange Offer), all dealers effecting transactions in the
Exchange Notes may be required to deliver a Prospectus.
The Company will not receive any proceeds from any sales of the Exchange
Notes by broker-dealers. Exchange Notes received by broker-dealers for their own
account pursuant to the Exchange Offer may be sold from time to time in one or
more transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the Exchange Notes or a combination of such
methods of resale, at market prices prevailing at the time of resale, at prices
related to such prevailing market prices or negotiated prices. Any such resale
may be made directly to the purchaser or to or through brokers or dealers who
may receive compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such Exchange Notes. Any
broker-dealer that resells the Exchange Notes that were received by it for its
own account pursuant to the Exchange Offer and any broker or dealer that
participates in a distribution of such Exchange Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit on any
such resale of Exchange Notes and any commissions or concessions received by any
such persons may be deemed to be underwriting compensation under the Securities
Act. The Letters of Transmittal state that, by acknowledging that it will
deliver and by delivering a prospectus, a broker-dealer will not be deemed to
admit that it is an "underwriter" within the meaning of the Securities Act.
For a period of 90 days after the Expiration Date, the Company will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal. The Company has agreed to pay certain expenses
incident to the Exchange Offer, other than commission or concessions of any
brokers or dealers, and will indemnify the holders of the Exchange Notes
(including any broker-dealers) against certain liabilities, including
liabilities under the Securities Act.
By acceptance of this Exchange Offer, each broker-dealer that receives
Exchange Notes for its own account pursuant to the Exchange Offer agrees that,
upon receipt of notice from the Company of the happening of any event which
makes any statement in the Prospectus untrue in any material respect or which
requires the making of any changes in the Prospectus in order to make the
statements therein not misleading (which notice the Company agrees to deliver
promptly to such broker-dealer), such broker-dealer will suspend use of the
Prospectus until the Company has amended or supplemented the Prospectus to
correct such misstatement or omission and has furnished copies of the amended or
supplemental Prospectus to such broker-dealer.
LEGAL MATTERS
Certain legal matters in connection with the Exchange Notes offered hereby
will be passed on for the Company by Porter & Hedges, L.L.P., Houston, Texas.
Robert G. Reedy, a partner of the firm of Porter & Hedges, L.L.P., is a director
of Allied. Porter & Hedges, L.L.P. is the Company's principal outside legal
counsel. As of January 1, 1997, Mr. Reedy owns 26,407 shares of Allied common
stock and holds options to purchase an additional 45,000 shares.
EXPERTS
The audited consolidated financial statements incorporated by reference in
this prospectus and elsewhere in the Registration Statement have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
reports with respect thereto, and are incorporated by reference in reliance upon
the authority of said firm as experts in giving said reports.
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======================================================
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED
HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH
OFFER IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE
MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE
INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE SUCH DATE.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information................. 2
Prospectus Summary.................... 3
Risk Factors.......................... 11
Disclosure Regarding Forward Looking
Statements.......................... 18
The Company........................... 19
The Exchange Offer.................... 27
Certain Federal Income Tax
Consequences of the Exchange
Offer............................... 35
Description of the Senior Credit
Facility............................ 35
Description of the Exchange Notes..... 36
Certain Federal Income Tax
Consequences of an Investment in the
Exchange Notes...................... 64
Plan of Distribution.................. 68
Legal Matters......................... 69
Experts............................... 69
</TABLE>
======================================================
======================================================
ALLIED WASTE NORTH
AMERICA, INC.
$525,000,000
OFFER TO EXCHANGE
ITS 10 1/4% SENIOR SUBORDINATED NOTES
DUE 2006 FOR 10 1/4% SENIOR
SUBORDINATED NOTES DUE 2006 THAT
HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933
JUNE 20, 1997
======================================================
