<PAGE> 1
================================================================================
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED: JUNE 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
-------- -----------
COMMISSION FILE NUMBER: 0-19285
ALLIED WASTE INDUSTRIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 88-0228636
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION.) IDENTIFICATION NO.)
15880 NORTH GREENWAY-HAYDEN LOOP, SUITE 100, SCOTTSDALE, ARIZONA 85260
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES AND ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (602) 423-2946
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH
FILING REQUIREMENTS FOR THE PAST 90 DAYS.
YES X NO
--- ---
INDICATE THE NUMBER OF SHARES OUTSTANDING OF THE ISSUER'S CLASS OF
COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE.
<TABLE>
<CAPTION>
CLASS OUTSTANDING AS OF JUNE 30, 1997
----- -------------------------------
<S> <C>
COMMON STOCK............................ 77,689,646
</TABLE>
================================================================================
<PAGE> 2
ALLIED WASTE INDUSTRIES, INC.
FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1997
INDEX
PAGE
PART I FINANCIAL INFORMATION
Item 1 -- Financial Statements
Condensed Consolidated Balance Sheets........................ 3
Condensed Consolidated Statements of Operations.............. 4
Condensed Consolidated Statements of Cash Flows.............. 5
Notes to Condensed Consolidated Financial Statements......... 6
Item 2 -- Management's Discussion and Analysis of Financial
Condition and Results of Operations.......................... 13
Item 3 -- Quantitative and Qualitative Disclosures About Market Risk... 27
PART II OTHER INFORMATION
Item 1-- Legal Proceedings............................................. 28
Item 2-- Changes in Securities......................................... 28
Item 3-- Defaults Upon Senior Securities............................... 28
Item 4-- Submission of Matters to a Vote of Securing Holders........... 28
Item 5-- Other Information............................................. 28
Item 6-- Exhibits and Reports on Form 8-K.............................. 29
Signature ............................................................. 30
2
<PAGE> 3
ALLIED WASTE INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1996 1997
----------- -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current Assets --
Cash and cash equivalents ........................ $ 50,094 $ 14,641
Accounts receivable, net of allowance of
$5,806 and $5,618 .............................. 88,522 118,735
Prepaid and other current assets ................. 9,860 21,140
Inventories ...................................... 6,941 7,327
Assets held for sale ............................. 524,716 --
Deferred income taxes ............................ 5,809 5,809
----------- -----------
Total current assets ........................... 685,942 167,652
Property and equipment, net ......................... 730,572 897,086
Goodwill, net ....................................... 856,108 854,491
Other assets ........................................ 44,927 89,608
----------- -----------
Total assets ................................... $ 2,317,549 $ 2,008,837
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities --
Current portion of long-term debt ................ $ 532,947 $ 22,986
Accounts payable ................................. 56,186 41,033
Accrued interest ................................. 4,910 7,319
Other accrued liabilities ........................ 60,458 74,595
Unearned income .................................. 11,185 29,817
----------- -----------
Total current liabilities ...................... 665,686 175,750
Long-term debt, less current portion ................ 1,146,803 1,415,022
Convertible subordinated debt, net of discount,
less current portion ............................. 1,706 1,684
Deferred income taxes ............................... 53,095 21,359
Accrued closure, post-closure and environmental costs 152,604 154,704
Deferred royalties and other long-term obligations .. 22,097 32,106
Commitments and contingencies
Stockholders' Equity --
Preferred stock, aggregate liquidation preference
of $9,907 and $9,496 at December 31, 1996
and June 30, 1997, respectively .................. 1 1
Common stock ..................................... 747 777
Additional paid-in capital ....................... 352,589 319,028
Retained deficit ................................. (77,779) (111,594)
----------- -----------
Total stockholders' equity ..................... 275,558 208,212
----------- -----------
Total liabilities and stockholders' equity ....... $ 2,317,549 $ 2,008,837
=========== ===========
</TABLE>
The accompanying Notes to Condensed Consolidated Financial Statements are an
integral part of these balance sheets.
3
<PAGE> 4
ALLIED WASTE INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS EXCEPT FOR PER SHARE AMOUNTS AND NUMBER OF SHARES; UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED THREE MONTHS ENDED
JUNE 30, JUNE 30,
-------------------------------- --------------------------------
1996 1997 1996 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues ......................... $ 118,958 $ 395,184 $ 62,012 $ 211,119
Cost of operations ............... 65,699 218,282 33,842 113,360
Selling, general
and administrative expenses .... 18,464 46,512 8,779 23,877
Depreciation and amortization .... 15,408 52,161 7,996 27,298
Acquisition related costs ........ 6,690 -- 5,762 --
------------ ------------ ------------ ------------
Operating income ............... 12,697 78,229 5,633 46,584
Interest income .................. (142) (1,104) (61) (386)
Interest expense ................. 4,567 46,707 2,528 24,638
------------ ------------ ------------ ------------
Income before income taxes ..... 8,272 32,626 3,166 22,332
Income tax expense ............... 4,035 14,029 1,735 9,603
------------ ------------ ------------ ------------
Income before extraordinary loss 4,237 18,597 1,431 12,729
Extraordinary loss due to early
extinguishment of debt,
net of income tax benefit
of $34,942 ..................... -- 52,412 -- 52,412
------------ ------------ ------------ ------------
Net income (loss) ................ 4,237 (33,815) 1,431 (39,683)
Dividends on preferred stock ..... (575) (337) (287) (166)
------------ ------------ ------------ ------------
Net income (loss) to common
shareholders .................. $ 3,662 $ (34,152) $ 1,144 $ (39,849)
============ ============ ============ ============
Net income (loss) per share:
Income before extraordinary loss $ 0.06 $ 0.21 $ 0.02 $ 0.15
Extraordinary loss ............. -- (0.60) -- (0.60)
------------ ------------ ------------ ------------
Net income (loss) ................ $ 0.06 $ (0.39) $ 0.02 $ (0.45)
============ ============ ============ ============
Weighted average common and common
equivalent shares outstanding .... 58,873,215 88,375,927 60,451,959 87,871,611
============ ============ ============ ============
</TABLE>
The accompanying Notes to Condensed Consolidated Financial Statements are an
integral part of these statements.
4
<PAGE> 5
ALLIED WASTE INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS; UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
------------------------------
1996 1997
----------- -----------
<S> <C> <C>
Operating Activities --
Net income (loss) ............................................ $ 4,237 $ (33,815)
Adjustments to reconcile net income (loss) to cash
provided by (used for) operating activities --
Extraordinary loss on early extinguishment of debt ........... -- 87,354
Provisions for:
Depreciation and amortization .............................. 15,408 52,161
Closure and post-closure costs ............................. 522 4,159
Doubtful accounts .......................................... 1,175 1,552
Accretion of debentures .................................... -- 9,204
Deferred income taxes ...................................... (637) (31,102)
(Gain) loss on sale of fixed assets ........................ 1,972 (531)
Change in operating assets and liabilities,
excluding the effects of purchase acquisitions --
Accounts receivable, prepaid expenses, inventories and other (4,607) (151,353)
Accounts payable, accrued liabilities, unearned income,
closure and post-closure costs and other ................... (10,491) 6,955
----------- -----------
Cash provided by (used for) operating activities ................ 7,579 (55,416)
----------- -----------
Investing Activities --
Cost of acquisitions, net of cash acquired ................... (3,852) (161,800)
Capital expenditures ......................................... (22,208) (77,593)
Capitalized interest ......................................... (6,893) (15,223)
Proceeds from sale of fixed assets and subsidiaries .......... 243 588,153
Change in deferred acquisition costs and notes receivable .... 695 (23,285)
----------- -----------
Cash provided by (used for) investing activities ................ (32,015) 310,252
----------- -----------
Financing activities --
Net proceeds from sale of common stock,
stock options and warrants ................................. 48,330 1,873
Proceeds from long-term debt, net of issuance costs .......... 25,431 876,149
Repayments of long-term debt ................................. (51,165) (1,174,665)
Other long-term obligations .................................. 486 6,706
Dividends paid ............................................... (614) (352)
Equity transactions of pooled companies ...................... 387 --
----------- -----------
Cash provided by (used for) financing activities ................ 22,855 (290,289)
----------- -----------
Decrease in cash and cash equivalents ........................... (1,581) (35,453)
Cash and cash equivalents, beginning of period .................. 4,016 50,094
----------- -----------
Cash and cash equivalents, end of period ........................ $ 2,435 $ 14,641
=========== ===========
</TABLE>
The accompanying Notes to Condensed Consolidated Financial Statements are an
integral part of these statements.
5
<PAGE> 6
ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Allied Waste Industries, Inc. ("Allied" or the "Company"), is
incorporated under the laws of the state of Delaware. Allied is a solid waste
management company providing non-hazardous waste collection, transfer, recycling
and disposal services in selected markets.
The condensed consolidated financial statements include the accounts of
Allied and its subsidiaries. All significant intercompany accounts and
transactions are eliminated in consolidation. The condensed consolidated balance
sheet as of December 31, 1996, which has been derived from audited consolidated
financial statements, and the unaudited interim condensed consolidated financial
statements included herein have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission (the "SEC"). As applicable
under such regulations, certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. The Company believes that
the presentations and disclosures herein are adequate to make the information
not misleading when read in connection with the Company's Annual Report on Form
10-K. The condensed consolidated financial statements as of June 30, 1997 and
for the six months ended June 30, 1996 and 1997 reflect, in the opinion of
management, all adjustments (which include only normal recurring adjustments)
necessary to fairly state the financial position and results of operations for
such periods. The condensed consolidated financial statements and accompanying
notes have also been restated to reflect acquisitions accounted for as
poolings-of-interests (See Note 2).
Operating results for interim periods are not necessarily indicative of
the results for full years. It is suggested that these condensed consolidated
financial statements be read in conjunction with the consolidated financial
statements of Allied Waste Industries, Inc. and subsidiaries for the year ended
December 31, 1996 and the related notes thereto included in the Company's Annual
Report on Form 10-K filed with the SEC on March 27, 1997 and amended on August
8, 1997.
There have been no significant additions to or changes in accounting
policies of the Company since December 31, 1996. For a description of these
policies, see Note 1 of Notes to Consolidated Financial Statements for the year
ended December 31, 1996 in the Company's Annual Report on Form 10-K.
Certain reclassifications have been made in prior period financial
statements to conform to the current presentation.
FINANCIAL INSTRUMENTS
In June 1997, the Company entered into an Amended and Restated Credit
Agreement (the "Credit Agreement") with Credit Suisse First Boston, as
administrative and collateral agent, Citibank, N.A. as documentation agent and
Goldman Sachs Credit Partners, LP, as syndication agent. The Credit Agreement
provides 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" and together
with the Term Loan Facility, the "Senior Credit Facility"). Principal payments
on the Term Loan Facility are payable quarterly, beginning in September 1997 and
increase from $10 million to $100 million per annum through maturity in December
2003. Principal under the Revolving Credit Facility is due upon maturity.
6
<PAGE> 7
ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Senior Credit Facility bears interest, at the Company's option, at
either (a) a Base Rate, or (b) a Eurodollar Rate, both terms as defined in the
Credit Agreement, plus, in either case, an agreed upon applicable margin. The
applicable margin will be adjusted from time to time pursuant to a pricing grid
based upon the Company's Leverage Ratio, as defined in the Credit Agreement, and
varies between zero percent and 0.75% for Base Rate loans, and 0.75% and 1.75%
for Eurodollar loans. In addition, if at any time the Company's Senior Debt
Ratio is greater than 2.5 to 1.0, the applicable margin for all loans will be
increased by 0.25%.
The Credit Agreement contains certain financial covenants including,
but not limited to, a Total Debt to EBITDA ratio, a Senior Debt to EBITDA ratio,
a Fixed Charge Coverage ratio and an Interest Expense Coverage ratio, all terms
as defined in the Credit Agreement. In addition, the Credit Agreement also
limits the Company's ability to make acquisitions, purchase fixed assets above
certain amounts, pay dividends, incur additional indebtedness and liens, make
optional prepayments on certain subordinated indebtedness, make investments,
loans or advances, enter into certain transactions with affiliates or enter into
a merger, consolidation or sale of all or a substantial portion of the Company's
assets.
The Company has entered into interest rate protection agreements (the
"Agreements"), with reputable national banks and investment banking institutions
to reduce its exposure to fluctuations in variable interest rates. A summary of
the Agreements outstanding as of June 30, 1997 is as follows:
<TABLE>
<CAPTION>
Notional Amount Fixed Rate
(dollars in millions)
<S> <C>
$ 50 5.76%
50 5.81
130 6.27
</TABLE>
The Agreements effectively change the Company's interest rate paid on
$230 million of its floating rate long-term debt ($576 million at June 30, 1997)
to a weighted average fixed rate ceiling of approximately 6.06% plus applicable
margins imposed by the terms of the Credit Agreement at June 30, 1997.
As the Company utilizes the Agreements for hedging purposes, amounts
paid to obtain the Agreements, if any, are capitalized into deferred financing
charges in the accompanying consolidated balance sheets and amortized over the
life of the specific Agreement.
ACCOUNTING PRONOUNCEMENTS NOT YET REQUIRED TO BE ADOPTED
In March 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128 "Earnings per Share" ("SFAS
No. 128"), which specifies the computation, presentation and disclosure
requirements for earnings per share. SFAS No. 128 is effective for periods
ending after December 15, 1997 and requires retroactive restatement of prior
periods earnings per share. The statement replaces the "primary earnings per
share" calculation with a "basic earnings per share" and redefines the "dilutive
earnings per share" computation. Management does not expect the adoption of the
statement to have a material effect on the Company's reported income per common
share.
7
<PAGE> 8
ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
EXTRAORDINARY LOSS, NET
On May 15, 1997, the Company repurchased (the "Repurchase") from
Laidlaw Inc. ("Laidlaw") and Laidlaw Transportation, Inc. (collectively, the
"Laidlaw Group") for $230 million in cash, the $150 million 7% Junior
Subordinated Debenture ($81.6 million book value), the $168.3 million Zero
Coupon Debenture ($34.9 million book value, collectively the "Allied
Debentures") and the warrant to purchase 20.4 million shares of common stock
($49.0 million book value, the "Warrant"), issued as partial consideration for
the purchase of Laidlaw's solid waste business in 1996 (the "Laidlaw
Acquisition"). An extraordinary charge of approximately $65.7 million ($39.4
million net of income tax benefit) related to the Repurchase was recorded in the
second quarter of 1997. In addition, on June 5, 1997, the Company replaced its
1996 Bank Agreement (as defined herein) with the Senior Credit Facility and
recognized an extraordinary charge of approximately $21.6 million
($13.0 million net of income tax benefit) related to prepayment penalties and
the write off of previous deferred debt issuance costs in the second quarter
of 1997.
STATEMENTS OF CASH FLOWS
The supplemental cash flow disclosures and non-cash transactions for
the six months ended June 30, 1996 and 1997 are as follows (in thousands):
<TABLE>
<CAPTION>
Six Months Ended
June 30,
---------------------
1996 1997
------- -------
(unaudited)
<S> <C> <C>
Supplemental Disclosures
Interest paid .......................................... $10,599 $58,539
Income taxes paid ...................................... 5,641 10,083
Non Cash Transactions
Common stock, preferred stock or warrants issued in
acquisitions or contributed to 401(k) plan .......... $ 5,716 $12,730
Capital leases and debt obligations for the purchase of
property and equipment .............................. 8,020 6,701
Debt and liabilities incurred or assumed in acquisitions 4,659 47,246
Debt converted to common stock ......................... 3,595 535
</TABLE>
2. BUSINESS COMBINATIONS AND DIVESTITURES
Acquisitions accounted for as purchases are reflected in the results of
operations since the date of purchase in Allied's condensed consolidated
financial statements. The results of operations for acquisitions accounted for
as poolings-of-interests are included in Allied's condensed consolidated
financial statements for all periods presented. Often, the final determination
of the cost, and the allocation thereof, of certain of the Company's
acquisitions is subject to resolution of certain contingencies. Once such
contingencies are achieved, the purchase price is adjusted. Shares issued in
connection with business acquisitions have been valued taking into consideration
certain restrictions placed on the stock.
8
<PAGE> 9
ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
In April 1997, the Company completed the sale of certain non-core
medical waste assets for approximately $6.7 million. In addition, the Company
sold five collection operations, one recycling facility and one landfill to USA
Waste and Browning-Ferris Industries ("BFI") during the second quarter of 1997
for approximately $68.4 million. No gain or loss was recorded in connection with
these sales.
The following table summarizes acquisitions for the six months ended
June 30, 1996 and 1997. In May 1997, the Company acquired a collection company
in a transaction accounted for as a pooling-of-interests. As the effect of this
business combination was not significant, prior period financial statements were
not restated to include historical operating results of the acquired company.
<TABLE>
<CAPTION>
Six Months
Ended June 30,
----------------------------
1996 1997
---------- ---------
(unaudited)
<S> <C> <C>
Number of businesses acquired and accounted for as:
Poolings-of-interests ........................... 5 1
Purchases ....................................... 9 11
Total consideration (in millions) ................. $ 101.3 $ 226.4
Shares of common stock issued ..................... 8,805,278(1) 1,675,470
</TABLE>
- ----------
(1) Includes 779,005 shares of contingently issuable common stock.
The following table presents revenues and net income restated from
amounts originally reported for the cumulative effect of acquisitions accounted
for as poolings-of-interests, (in thousands):
<TABLE>
<CAPTION>
Before After
Pooling Effect of Pooling
Effects Poolings Effects
------- -------- -------
<S> <C> <C> <C>
Three months ended June 30, 1996 (unaudited)
Revenues ................................ $ 48,914 $ 13,107 $ 62,021
Net income .............................. 3,715 (2,284) 1,431
Six months ended June 30, 1996 (unaudited)
Revenues ................................ 93,544 25,414 118,958
Net income .............................. 6,532 (2,295) 4,237
Year ended December 31, 1996
Revenues ................................ 221,265 25,414 246,679
Net loss ................................ (77,132) (2,295) (79,427)
Year ended December 31, 1995
Revenues ................................ 169,865 47,679 217,544
Net income .............................. 11,584 797 12,381
Year ended December 31, 1994
Revenues ................................. 114,814 43,540 158,354
Net loss ................................. (6,731) 696 (6,035)
</TABLE>
9
<PAGE> 10
ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
UNAUDITED PRO FORMA INCOME STATEMENT DATA
The following unaudited pro forma consolidated data for the year ended
December 31, 1996 and the six months ended June 30, 1997 presents the results of
operations of Allied as if the companies acquired using the purchase method of
accounting for business combinations in 1996 and through June 30, 1997 (giving
effect to the Canadian Sale), had all occurred as of January 1, 1996 (in
thousands, except per share data). This data does not purport to be indicative
of the results of operations of Allied that might have occurred nor which might
occur in the future.
<TABLE>
<CAPTION>
December 31, June 30,
1996 1997
--------- ---------
(unaudited)
<S> <C> <C>
Revenues ............................... $ 856,368 $ 428,043
Operating income ....................... 10,648 82,870
Net loss ............................... (96,150) (31,219)
Net loss to common shareholders ........ (97,223) (31,556)
Net loss per common share .............. (1.30) (0.36)
</TABLE>
3. PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1996 and June 30, 1997 was as
follows (in thousands):
<TABLE>
<CAPTION>
1996 1997
----------- -----------
(unaudited)
<S> <C> <C>
Land and improvements .................... $ 39,858 $ 56,763
Land held for permitting as landfills(1) . 66,070 104,678
Landfills ................................ 320,763 412,812
Buildings and improvements ............... 59,359 75,274
Vehicles and equipment ................... 266,494 168,458
Containers and compactors ................ 59,931 169,728
Furniture and office equipment ........... 7,312 17,223
----------- -----------
819,787 1,004,936
Accumulated depreciation and amortization (89,215) (107,850)
----------- -----------
$ 730,572 $ 897,086
=========== ===========
</TABLE>
- ----------
(1) These properties have been approved for use as landfills, and the
Company is currently in the process of obtaining the necessary permits.
10
<PAGE> 11
ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
4. NET INCOME (LOSS) PER COMMON SHARE
Net income (loss) per common share is calculated by dividing net income
(loss) less dividend requirements on preferred stock by the weighted average
number of common shares and common share equivalents outstanding during each
period, as restated to reflect acquisitions accounted for as
poolings-of-interests. The computation of weighted average common and common
equivalent shares used in the calculation of net income (loss) per common share
is as follows (unaudited):
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1996 1997
----------- -----------
<S> <C> <C>
Common shares outstanding .................... 58,466,227 77,689,646
Effect of using weighted average common shares
outstanding during the period .............. (2,554,392) (1,502,502)
Effect of stock options and warrants
assumed exercisable ........................ 2,166,106 11,279,994
Effect of convertible debt assumed converted . -- 162,500
Effect of shares assumed issued pursuant
to earn-out ................................ 795,274 746,289
----------- -----------
58,873,215 88,375,927
</TABLE>
Conversion has not been assumed for 7% preferred stock in 1996 and
1997, as the effect would not be dilutive. Additionally, conversion has not been
assumed for Series D preferred stock, 9% preferred stock and convertible debt in
1996, as the effects would not be dilutive.
5. SUMMARIZED FINANCIAL INFORMATION OF ALLIED WASTE NORTH AMERICA, INC.
As discussed in Note 5 of the Company's 10-K, the $525 million of
10.25% Senior Subordinated Notes due 2006 (the "1996 Notes") issued by Allied
Waste North America, Inc. ("Allied NA"; a consolidated subsidiary of the
Company) are guaranteed by Allied. The separate complete financial statements of
Allied NA have not been included herein as management has determined that such
disclosure is not material. However, summarized financial information for Allied
NA and subsidiaries as of December 31, 1996 and June 30, 1997 is as follows (in
thousands):
SUMMARIZED CONSOLIDATED BALANCE SHEET INFORMATION
<TABLE>
<CAPTION>
December 31, 1996 June 30, 1997
(unaudited)
<S> <C> <C>
Current assets ........................... $ 685,942 $ 167,651
Property and equipment, net .............. 730,572 897,086
Goodwill ................................. 856,108 854,491
Other non-current assets ................. 44,927 89,608
Current liabilities ...................... 682,686 175,366
Long-term debt, net of current portion ... 1,037,762 1,176,706
Due to parent ............................ 355,348 562,267
Due to Allied Canada Finance, Ltd. ....... 110,747 --
Other long-term obligations .............. 210,796 206,209
Shareholders' equity ..................... (79,790) (111,712)
</TABLE>
On November 25, 1996, substantially all of the operating assets and
liabilities of Allied were contributed from Allied to Allied NA. The results of
operations for Allied NA from inception to December 31, 1996 were not material
except for the acquisition related costs and unusual items (see Note 1).
11
<PAGE> 12
ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SUMMARIZED STATEMENT OF OPERATIONS INFORMATION
<TABLE>
<CAPTION>
Six Months Ended
June 30, 1997
(unaudited)
<S> <C>
Total revenue ........................................... $ 395,184
Total operating costs and expenses ...................... 316,955
Operating income ........................................ 78,229
Net income before extraordinary loss .................... 20,566
Extraordinary loss ...................................... (52,412)
Net loss to shareholders ................................ (31,846)
</TABLE>
6. SUBSEQUENT EVENTS
Subsequent to June 30, 1997, the Company completed the acquisition of 4
privately-held solid waste companies representing approximately $2.9 million in
annual revenue. Total consideration of approximately $3.3 million, comprised of
cash, notes and Common Stock, was paid in the separate transactions.
Subsequent to June 30, 1997, all of the 7% preferred stock outstanding
was converted into 1,356,573 shares of Common Stock and approximately $755,000
of convertible debt was converted into 75,494 shares of Common Stock in
accordance with the original terms of each of the agreements.
On August 12, 1997, the Company executed a definitive agreement to
assume ownership and operation of the solid waste disposal system for San Diego
County, California. The completion of this transaction is subject to normal
regulatory approvals, the transfer of operating permits and certain other
conditions. Allied will purchase four landfills, one transfer station, and one
material recovery facility for $160 million in cash paid directly to San Diego
County, and make certain agreed upon future capital expenditures for
approximately $24 million. Completion of this transaction is expected to occur
before December 31, 1997.
12
<PAGE> 13
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
Company's Condensed Consolidated Financial Statements and the notes thereto,
included elsewhere herein.
INTRODUCTION
The Company has experienced significant growth, a substantial portion
of which has resulted from the acquisition of solid waste businesses. Since
January 1, 1992, the Company has completed 112 acquisitions including the
Laidlaw Acquisition (as described below). In 1996, the Company acquired
22 businesses including the Laidlaw Acquisition and subsequent to 1996
it has acquired 15 businesses, excluding the assets acquired in the USA
Waste transactions (see below). See Note 2 to the Company's Consolidated
Financial Statements. The Company's Consolidated Financial Statements
have been restated to reflect the acquisition of companies accounted
for using the pooling-of-interests method for business combinations. The
majority of the acquisitions were accounted for under the purchase method for
business combinations and, accordingly, the results of operations for such
acquired businesses are included in the Company's financial statements only from
the applicable date of acquisition. As a result, the Company believes its
historical results of operations for the periods presented are not directly
comparable.
On December 30, 1996, the Company completed the acquisition (the
"Laidlaw Acquisition") of substantially all of the non-hazardous solid waste
management business conducted by Laidlaw Inc. ("Laidlaw") in the United States
and Canada, for total consideration of approximately $1.5 billion comprised of
$1.2 billion cash, 14.6 million shares of Common Stock, a warrant (the
"Warrant") to acquire 20.4 million shares of the Company's Common Stock, par
value $0.01 per share (the "Common Stock"), and two junior subordinated
debentures with an aggregate face amount of $318.3 million comprised of a $150
million 7% Junior Subordinated Debenture and a $168.3 million Zero Coupon
Debenture (collectively, the "Allied Debentures"). The cash consideration was
financed from the proceeds of the 1996 Bank Agreement and the sale of the
1996 Notes.
On March 16, 1997, pursuant to a share purchase agreement with USA
Waste Services, Inc. ("USA Waste"), the Company sold to USA Waste all of the
Canadian non-hazardous solid waste management operations of the Company for
approximately $518 million (the "Canadian Sale"). The Company used the proceeds
from the Canadian Sale to pay down approximately $517 million in debt under the
1996 Bank Agreement. The Company acquired the Canadian operations in connection
with the Laidlaw Acquisition.
On May 15, 1997, the Company, pursuant to a Securities Purchase
Agreement (the "Laidlaw Securities Purchase Agreement") with Laidlaw and Laidlaw
Transportation, Inc. (collectively, the "Laidlaw Group") and certain private
securities investment funds affiliated with either (i) Apollo Advisors II, L.P.
or (ii) the Blackstone Group, repurchased from the Laidlaw Group the Allied
Debentures and the Warrant for an aggregate purchase price of $230 million in
cash (the "Repurchase"). The net proceeds of $240 million related to the $418
million face value 11.3% senior discount notes, (the "Senior Discount Notes")
were used to fund the Repurchase. The offering of the Senior Discount Notes
closed on May 15, 1997. Also pursuant to the Laidlaw Securities Purchase
Agreement, the private securities investment funds purchased all of the Common
Stock of Allied held by Laidlaw.
In June 1997, the Company entered into an Amended and Restated Credit
Agreement (the "Credit Agreement") with Credit Suisse First Boston, an
administrative and collateral agent, Citibank, N.A. as documentation agent and
Goldman Sachs Credit Partners, LP, as syndication agent. The Credit Agreement
provides 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" and together
with the Term Loan Facility, the "Senior Credit Facility").
13
<PAGE> 14
On June 12, 1997, the Company completed a series of transactions with
USA Waste (the "USA Waste Transactions") pursuant to which the Company acquired
eight landfills (two of which were consummated in July 1997 after completion of
certain permitting and regulatory matters), eight collection operations, five
transfer stations and one recycling facility with an annual aggregate revenue of
$58.0 million for consideration of $87.5 million. Also pursuant to the USA Waste
Transactions, the Company 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 consideration of approximately
$61.3 million.
GENERAL
Revenues. The Company's revenues are attributable primarily to fees
charged to customers for waste collection, transfer, recycling and disposal
services. The Company's collection services are generally provided under direct
agreements with its customers or pursuant to contracts with municipalities.
Commercial and municipal contract terms, where used, generally range from 1 to 5
years and commonly have automatic renewal options. The Company's landfill
operations include both Company-owned landfills and those operated for
municipalities for a fee. The Company is fully integrated in each geographic
region in which it is located as it provides collection, transfer and disposal
services. The tables below show for the periods indicated the percentage of the
Company's total reported revenues attributable to services provided and to
geographic region:
<TABLE>
<CAPTION>
Six Months
Year Ended December 31, Ended
1994 1995 1996 June 30, 1997
----- ----- ----- -------------
<S> <C> <C> <C> <C>
Collection(1) .................. 69.9% 64.7% 61.9% 57.8%
Transfer ....................... 8.4 9.5 8.5 7.5
Landfill(1) .................... 14.5 18.3 22.0 24.4
Other .......................... 7.2 7.5 7.6 10.3
----- ----- ----- -----
Total Revenues 100.0% 100.0% 100.0% 100.0%
===== ===== ===== =====
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31, Six Months
Ended
1994 1995 1996 June 30, 1997
----- ----- ----- -------------
<S> <C> <C> <C> <C>
Central States ................. -- % -- % -- % 9.0%
Great Lakes .................... 31.9 33.2 31.3 21.9
Midwest ........................ 16.8 19.0 18.7 16.2
Northeast ...................... -- -- -- 11.9
Southeast ...................... 30.2 28.0 30.6 12.1
West ........................... 21.1 19.8 19.4 28.9
----- ----- ----- -----
Total Revenues 100.0% 100.0% 100.0% 100.0 %
===== ===== ===== =====
</TABLE>
- ---------
(1) The portion of collection and third-party transfer revenues
attributable to disposal charges for waste collected by the Company and
disposed at the Company's landfills have been excluded from collection
and transfer revenues and included in landfill revenues.
The Company's strategy is to develop vertically integrated operations
to ensure internalization of waste it collects and thus realize higher margins
from its operations. By disposing of waste at Company-owned and/or operated
landfills, the Company retains the margin generated through disposal operations
that would otherwise be earned by third-party landfills. Approximately 57% of
Company-collected waste is disposed of at Company-owned and/or operated
landfills as measured using disposal costs in the first six months of 1997. In
addition, transfer stations are an integral part of the disposal process. The
Company locates its transfer stations in areas where its landfills are outside
of the population centers in which it collects waste. Such waste is transferred
to long-haul trailers and economically transported to its landfills.
14
<PAGE> 15
Expenses. Cost of operations includes labor, maintenance and repairs,
equipment and facility rent, utilities and taxes, the costs of ongoing
environmental compliance, safety and insurance, disposal costs and costs of
independent haulers transporting Company waste to the disposal site. Disposal
costs include certain landfill taxes, host community fees, payments under
agreements with respect to landfill sites that are not owned, landfill site
maintenance, fuel and other equipment operating expenses and accruals for
estimated closure and post-closure monitoring expenses anticipated to be
incurred in the future.
Selling, general and administrative expenses include management,
clerical and administrative compensation and overhead, sales costs, community
relations expenses and provisions for estimated uncollectible accounts
receivable and potentially unrealizable acquisition costs.
Depreciation and amortization expense includes depreciation of fixed
assets and amortization of landfill airspace, goodwill and other intangible
assets.
In connection with potential acquisitions, the Company incurs and
capitalizes certain transaction and integration costs which include stock
registration, legal, accounting, consulting, engineering and other direct costs.
When an acquisition is completed and is accounted for using the
pooling-of-interests method for business combinations, these costs are charged
to the statement of operations as acquisition related costs. When a completed
acquisition is accounted for using the purchase method for business
combinations, these costs are capitalized. The Company routinely evaluates
capitalized transaction and integration costs and expenses those costs related
to acquisitions not likely to occur. Indirect acquisition costs, such as
executive salaries, general corporate overhead and other corporate services, are
expensed as incurred.
Certain direct landfill development costs, such as engineering,
upgrading, construction and permitting costs, are capitalized and amortized
based on consumed airspace. The Company believes that the costs associated with
engineering, owning and operating landfills will increase in the future as a
result of federal, state and local regulation and a growing community awareness
of the landfill permitting process. Although there can be no assurance, the
Company believes that it will be able to implement price increases sufficient to
offset these increased expenses. All indirect landfill development costs, such
as executive salaries, general corporate overhead, public affairs and other
corporate services, are expensed as incurred.
Accrued closure and post-closure costs represent an estimate of the
current value of the future obligation associated with closure and post-closure
monitoring of non-hazardous solid waste landfills currently owned and/or
operated by the Company. Site specific closure and post-closure engineering cost
estimates are prepared annually for landfills owned and/or operated by the
Company for which it is responsible for closure and post-closure. The present
value of estimated future costs are accrued based on accepted tonnage as
landfill airspace is consumed. Discounting of future costs is applied where the
Company believes that both the amounts and timing of related payments are
reliably determinable. The Company periodically updates its estimates of future
closure and post-closure costs. The impact of changes which are determined to be
changes in estimates are accounted for on a prospective basis.
Currently, the net present value of the closure and post-closure
commitment is calculated assuming inflation of 2.5% and a risk-free capital rate
of 7.0%. Discounted amounts previously recorded are accreted to reflect the
effects of the passage of time. The Company's current estimate of total future
payments for closure and post-closure is $623.6 million while the present value
of such estimate is $190.5 million. At December 31, 1996 and June 30, 1997,
accruals for landfill closure and post-closure costs (including costs assumed
through acquisitions) were approximately $107.5 million and $109.7 million. The
accruals reflect relatively young landfills with estimated remaining lives,
based on current waste flows, that range from 1 to over 75 years, and an
estimated average remaining life of greater than 30 years.
15
<PAGE> 16
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1996 AND 1997
The following table sets forth the percentage relationship that the
various items bear to revenues and the percentage change in dollar amounts for
the periods indicated. The statement of operations data have been restated to
give effect to acquisitions that were accounted for using the
pooling-of-interests method for business combinations. See Note 2 to the
Company's Condensed Consolidated Financial Statements.
<TABLE>
<CAPTION>
Three Months Ended June 30,
----------------------------------------
1997
Compared
to 1996
% Change
1996 1997 in Amounts
------- ------- ----------
(unaudited)
<S> <C> <C> <C>
Statement of Operations Data:
Revenues ................................... 100.0% 100.0% 240.4%
Cost of operations ......................... 54.6 53.7 235.0
Selling, general and administrative expenses 14.1 11.3 172.0
Depreciation and amortization .............. 12.9 12.9 241.4
Acquisition related costs .................. 9.3 -- (100.0)
------- -------
Operating income ........................... 9.1 22.1 727.0
Interest expense, net ...................... 4.0 11.5 883.1
Income tax provision ....................... 2.8 4.6 453.5
Extraordinary loss, net .................... -- 24.8 100.0
------- -------
Net income (loss) ........................ 2.3% (18.8)% (2,873.1)
======= =======
</TABLE>
Revenues. Revenues in 1997 were $211.1 million compared to $62.0
million in 1996, an increase of 240.4%. Revenues of approximately $143.0 million
in the second quarter of 1997 were generated from companies acquired subsequent
to March 1996, while increases in revenues attributable to existing operations
("Internal Growth") amounted to $6.1 million. If the Laidlaw Acquisition, net of
the Canadian Sale, is included as of March 1996, Internal Growth would have
approximated 11% with 7% attributable to net volume increases and 4%
attributable to price increases.
Cost of Operations. Cost of operations in 1997 was $113.4 million
compared to $33.8 million in 1996, an increase of 235.0%. The increase in cost
of operations was primarily attributable to the increase in revenues described
above. As a percentage of revenues, cost of operations decreased to 53.7% in
1997 from 54.6% in 1996. Operating cost margins were favorably impacted by
financial benefits and operational efficiencies associated with the Laidlaw
Acquisition and the significant increase in revenues.
Selling, General and Administrative Expenses. SG&A expenses increased
to $23.9 million in 1997 compared to $8.8 million in 1996, an increase of
172.0%. As a percentage of revenues, SG&A decreased to 11.3% in 1997 compared to
14.1% in 1996. The increase in SG&A expense resulted from expenses associated
with acquired companies and expenses incurred in connection with the Company's
increase in personnel and other expenses related to the growth of the Company.
The decrease in SG&A as a percentage of revenues can be attributed to the
substantial increase in the revenues of the Company resulting principally from
the Laidlaw Acquisition while SG&A expenses of the combined companies were
significantly reduced.
16
<PAGE> 17
Depreciation and amortization. Depreciation and amortization in 1997
was $27.3 million compared to $8.0 million in 1996, an increase of 241.4%. The
increase in depreciation and amortization expense is due to acquisitions and
capital expenditures. As a percentage of revenues, depreciation and amortization
has remained constant at 12.9%.
Acquisition related costs. Costs of $5.8 million were incurred in 1996
for transaction and integration costs directly related to acquisitions accounted
for using the pooling-of-interests method for business combinations. Transaction
costs include stock registration, legal, accounting, consulting, engineering and
other direct third-party costs incurred to complete the acquisitions.
Integration costs include uncollectible accounts receivable write-offs, employee
termination and relocation, write down of fixed assets, lease termination, and
deferred repairs and maintenance of vehicles and equipment. During the second
quarter of 1997, no material acquisition related costs were incurred.
Net interest expense. Net interest expense was $24.3 million in 1997
compared to $2.5 million in 1996, an increase of 883.1%. The increase in
interest expense is due to the increase in debt from $205.7 million at June 30,
1996 compared to $1.4 billion at June 30, 1997. This increase in debt
outstanding is primarily the result of debt incurred in connection with the
Laidlaw Acquisition net of the application of the net proceeds received in
connection with the Canadian Sale.
Income taxes. Income taxes reflect a 43% effective income tax rate in
1997 as compared to a 55% rate in 1996. The Company's effective tax rate in 1997
and 1996 deviates from the federal statutory rate of 35%, due primarily to the
effects of differences in the treatment of goodwill for book and tax purposes,
state income taxes, and other permanent differences.
Extraordinary loss, net. On May 15, 1997, the Company repurchased from
the Laidlaw Group the Allied Debentures and the Warrant, used as partial
consideration for the Laidlaw Acquisition, for an aggregate purchase price of
$230 million in cash. An extraordinary charge to earnings related to the
Repurchase of approximately $65.7 million ($39.4 million net of income tax
benefit) was recorded in the second quarter of 1997. In addition, the Company
replaced its $1.275 billion senior credit facility (the "Bank Agreement") with
the $900 million Senior Credit Facility on June 5, 1997 and recognized an
extraordinary charge of approximately $21.6 million ($13.0 million net of income
tax benefit) in the second quarter of 1997.
17
<PAGE> 18
SIX MONTHS ENDED JUNE 30, 1996 AND 1997
The following table sets forth the percentage relationship that the
various items bear to revenues and the percentage change in dollar amounts for
the periods indicated.
<TABLE>
<CAPTION>
Six Months Ended June 30,
-----------------------------------
1997
Compared
to 1996
% Change
1996 1997 in Amounts
----- ----- -----------
(unaudited)
<S> <C> <C> <C>
Statement of Operations Data:
Revenues ................................... 100.0% 100.0% 232.2%
Cost of operations ......................... 55.2 55.2 232.2
Selling, general and administrative expenses 15.5 11.8 151.9
Depreciation and amortization .............. 13.0 13.2 238.5
Acquisition related costs .................. 5.6 -- (100.0)
----- -----
Operating income ........................... 10.7 19.8 516.1
Interest expense, net ...................... 3.7 11.5 930.6
Income tax provision ....................... 3.4 3.6 247.7
Extraordinary loss, net .................... -- 13.3 100.0
----- -----
Net income (loss)....................... 3.6% (8.6%) (898.1%)
===== =====
</TABLE>
Revenues. Revenues in 1997 were $395.2 million compared to $119.0
million in 1996, an increase of 232.2%. Revenues of approximately $265.4 million
in the first six months of 1997 were generated from companies acquired
subsequent to December 1995, while increases in revenues attributable to
existing operations amounted to $10.8 million. If the Laidlaw Acquisition, net
of the Canadian Sale, is included as of March 1996, Internal Growth would have
approximated 9% with 5% attributable to net volume increases and 4% attributable
to price increases..
Cost of Operations. Cost of operations in 1997 was $218.3 million
compared to $65.7 million in 1996, an increase of 232.2%. The increase in cost
of operations was primarily attributable to the increase in revenues described
above. As a percentage of revenues, cost of operations remained constant at
55.2%. Operating cost margins were favorably impacted by financial benefits and
operational efficiencies associated with the Laidlaw Acquisition and the
significant increase in revenues.
Selling, General and Administrative Expenses. SG&A expenses increased
to $46.5 million in 1997 compared to $18.5 million in 1996, an increase of
151.9%. As a percentage of revenues, SG&A decreased to 11.8% in 1997 compared to
15.5% in 1996. The increase in SG&A expense resulted from expenses associated
with acquired companies and expenses incurred in connection with the Company's
increase in personnel and other expenses related to the growth of the Company.
The decrease in SG&A as a percentage of revenues can be attributed to the
substantial increase in the revenues of the Company resulting principally from
the Laidlaw Acquisition while SG&A expenses of the combined companies were
significantly reduced.
Depreciation and amortization. Depreciation and amortization in 1997
was $52.2 million compared to $15.4 million in 1996, an increase of 238.5%. The
increase in depreciation and amortization expense is due to acquisitions and
capital expenditures. Fixed assets have increased from $414.3 million at June
30, 1996 to $1,004.9 million at June 30, 1997 and goodwill has increased from
$98.0 million at June 30, 1996 to $877.6 million at June 30, 1997. As a
percentage of revenues, depreciation and amortization increased to 13.2% in 1997
from 13.0% in 1996. This is primarily the result of an increase in amortization
of goodwill as a percentage of revenues to 2.8% in 1997 from 1.9% in 1996
partially offset by a decrease in landfill amortization as a percentage of
revenues to 2.7% in 1997 from 3.2% in 1996 related to increased goodwill and
decreased internalization in connection with the Laidlaw Acquisition.
18
<PAGE> 19
Acquisition related costs. Costs of $6.7 million were incurred in 1996
transaction and integration costs directly related to acquisitions accounted for
using the pooling-of-interests method for business combinations. Transaction
costs include stock registration, legal, accounting, consulting, engineering and
other direct third-party costs incurred to complete the acquisitions.
Integration costs include uncollectible accounts receivable write-offs, employee
termination and relocation, write down of fixed assets, lease termination, and
deferred repairs and maintenance of vehicles and equipment. During the first six
months of 1997, no material acquisition related costs were incurred.
Net interest expense. Net interest expense was $45.6 million in 1997
compared to $4.4 million in 1996, an increase of 930.6%. The increase in
interest expense is due to the increase in debt from $205.7 million at June 30,
1996 compared to $1.4 billion at June 30, 1997. This increase in debt
outstanding is primarily the result of debt incurred in connection with the
Laidlaw Acquisition net of the application of the net proceeds received in
connection with the Canadian Sale.
Income taxes. Income taxes reflect a 43% effective income tax rate in
1997 as compared to a 49% rate in 1996. The Company's effective tax rate in 1997
and 1996 deviates from the federal statutory rate of 35%, due primarily to the
effects of differences in the treatment of goodwill for book and tax purposes,
state income taxes, and other permanent differences.
Extraordinary loss, net. On May 15, 1997, the Company repurchased from
the Laidlaw Group the $150 million 7% Junior Subordinated Debenture, the $168.3
million Zero Coupon Debenture and a warrant to purchase 20.4 million shares of
common stock, used as partial consideration for the purchase of Laidlaw's solid
waste business in 1996, for an aggregate purchase price of $230 million in cash.
An extraordinary charge related to the Repurchase of approximately $65.7 million
($39.4 million net of income tax benefit) was charged to earnings in the second
quarter of 1997. In addition, the Company replaced its $1.275 billion Bank
Agreement with the $900 million Senior Credit Facility on June 5, 1997 and
recognized an extraordinary charge of approximately $21.6 million ($13.0 million
net of income tax benefit) in the second quarter of 1997.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company has satisfied its acquisition, capital
expenditure and working capital needs primarily through bank financing, public
offerings and private placements of debt and equity securities. Between January
1, 1994 and June 30, 1997, the Company completed the $900 million Senior Credit
Facility which replaced the $1.275 billion Bank Agreement completed in
connection with the Laidlaw Acquisition (of which $517 million was repaid with
proceeds from the Canadian Sale in March 1997), a $418 million private placement
of its 11.3% senior discount notes, a $525 million private placement of the 1996
Notes, a $100 million public offering of its $100 million 12% Senior
Subordinated Notes due 2004 (the "1994 Notes") (substantially all of which were
repurchased pursuant to a tender offer (the "Tender Offer") in July 1996), a $50
million private placement of Common Stock, a $300 million senior revolving
credit facility (all debt under which was repaid in December 1996), and a $48
million public equity offering. Because of the capital intensive nature of the
solid waste industry and companies that grow substantially through acquisition,
the Company has used, and believes that it is reasonably possible that it will
continue using amounts in excess of the cash generated from operations to fund
acquisitions and capital expenditures, including landfill development. In
connection with acquisitions, the Company has assumed or incurred indebtedness
with relatively short-term repayment schedules, thereby increasing its current
and medium-term liabilities. Additionally, operating equipment has been acquired
using financing leases which have short and medium-term maturities. As a result,
the Company has periodically had low levels of working capital or working
capital deficits.
19
<PAGE> 20
During the first six months ended June 30, 1996 and 1997, the Company's
cash flows for operating, investing and financing activities were as follows
(dollars in millions; unaudited):
<TABLE>
<CAPTION>
Six Months Ended
June 30,
------------------------
1996 1997
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) ....................................... $ 4.2 $ (33.8)
Non-cash operating expenses(1) .......................... 16.5 123.3
(Gain) loss on sale of fixed assets ..................... 2.0 (0.5)
Decrease in operating assets and liabilities, net ....... (15.1) (144.4)
-------- --------
Cash provided by (used for) operating activities ........ 7.6 (55.4)
-------- --------
INVESTING ACTIVITIES:
Cost of acquisitions, net of cash acquired .............. (3.8) (161.8)
Capital expenditures .................................... (22.2) (77.6)
Capitalized interest .................................... (6.9) (15.2)
Proceeds from sale of fixed assets ...................... 0.2 588.1
Other ................................................... 0.7 (23.3)
-------- --------
Cash provided by (used for) investing activities ........ (32.0) 310.2
-------- --------
FINANCING ACTIVITIES:
Net proceeds from sale and redemption of preferred stock,
common stock, stock options and warrants ............. 48.3 1.9
Net proceeds from long-term debt ........................ 25.4 876.1
Repayments of long-term debt ............................ (51.2) (1,174.7)
Other ................................................... 0.3 6.4
-------- --------
Cash provided by (used for) financing activities ..... 22.8 (290.3)
-------- --------
Decrease in cash ........................................ $ (1.6) $ (35.5)
======== ========
</TABLE>
- ----------------
(1) Consists principally of provisions for depreciation and amortization,
landfill closure and post-closure costs, doubtful accounts, potentially
unrealizable acquisition costs and deferred income taxes.
As of June 30, 1997, the Company had cash and cash equivalents of $14.6
million. The Company's capital expenditure and working capital requirements have
increased significantly, reflecting the Company's rapid growth by acquisition
and development of revenue producing assets, and will increase further as the
Company continues to pursue its business strategy. During 1996 the Company
completed the Laidlaw Acquisition for total consideration of approximately $1.5
billion consisting of $1.2 billion cash, 14.6 million shares of Common Stock,
the Warrant to acquire 20.4 million shares of Common Stock, and the Allied
Debentures with an aggregate face amount of $318.3 million and acquired 21
additional businesses for total consideration of approximately $126.5 million of
which approximately $73.9 million of such consideration was paid in Common Stock
and $3.9 million was paid in seller notes. Total annualized revenues of the
latter businesses are approximately $78.8 million. Since January 1, 1997, the
Company has acquired solid waste operations, representing approximately $142.8
million in annual revenues and sold operations representing approximately $46.5
million in annual revenue. Net consideration of approximately $165.1 million
(including $10 million for the landfill under development) comprised of cash,
notes and Common Stock, was paid in these transactions. For the calendar year
1997, the Company expects to spend approximately $172 million for capital,
closure and post-closure, and remediation expenditures relating to its landfill
operations. As the Company continues to acquire waste operations in 1997,
additional capital amounts will be required during 1997 for the acquisition of
businesses and the capital expenditure requirements related to those acquired
businesses.
20
<PAGE> 21
On June 30, 1997, the Company's debt structure consisted of $525
million of the 1996 Notes, $500 million outstanding under the Term Loan
Facility, approximately $76 million outstanding under the Revolving Credit
Facility, and approximately $240 million of the Senior Discount Notes. As of
June 30, 1997 there is aggregate availability under the Revolving Credit
Facility of approximately $256 million to be used for working capital, letters
of credit, acquisitions and other general corporate purposes. No more than $175
million of the Revolving Credit Facility may be used to support the issuance of
letters of credit. The indenture relating to the 1996 Notes and the Senior
Credit Facility contain financial and operating covenants and significant
restrictions on the ability of the Company to complete acquisitions, pay
dividends, incur indebtedness, make investments and take certain other corporate
actions. A substantial portion of the Company's available cash will be required
to be applied to service indebtedness and preferred stock obligations, including
indebtedness incurred to finance the Laidlaw Acquisition, which is expected to
include approximately $203.6 million in annual principal and interest payments
(after giving effect to the payment of $517 million on the 1996 Bank Agreement
from the Canadian sale).
The Company is also required to provide financial assurances to
governmental agencies under applicable environmental regulations relating to its
landfill operations and collection contracts. These financial assurance
requirements are satisfied by the Company issuing performance bonds, letters of
credit, insurance policies and trust deposits to secure the Company's
obligations as they relate to landfill closure and post-closure costs and
performance under certain collection contracts. At June 30, 1997, the Company
had outstanding approximately $264.6 million in financial assurance instruments,
represented by $180.1 million of performance bonds, $22.3 million of letters of
credit, $55.9 million of insurance policies and $6.3 million of trust deposits.
During calendar year 1997, the Company expects to be required to provide
approximately $258 million in financial assurance obligations relating to its
landfill operations and collection contracts. The Company expects that financial
assurance obligations will increase in the future as it acquires and expands its
landfill activities and that a greater percentage of the financial assurance
instruments will be comprised of performance bonds and insurance policies.
The Company has lease facilities (the "Lease Facilities") that allow it
to enter into equipment leases at rates ranging from similar term treasury note
rates plus 2.5% to 3.5% for terms of 36 to 84 months. In addition to equipment
leases outstanding at December 31, 1996 and June 30, 1997 of $45.2 million and
$74.2 million, respectively, the Company had available lease commitments of
$11.9 million and $22.4 million, respectively. The Company has entered into
master equipment lease facilities relating to the financing of the acquisition
of trucks and containers.
On August 12, 1997, the Company executed a definitive agreement to
assume ownership and operation of the solid waste disposal system for San Diego
County, California. The completion of this transaction is subject to certain
normal regulation approvals, the transfer of operating permits and certain other
conditions. Allied will purchase four landfills, one transfer station, and one
material recovery facility for $160 million in cash paid directly to San Diego
County, and make certain agreed upon future capital expenditures for
approximately $24 million. Completion of this transaction is expected to occur
before December 31, 1997.
The Company expects that Subtitle D and other regulations that apply to
the non-hazardous waste disposal industry will require the Company, as well as
others in the industry, to alter operations and to modify or replace existing
facilities. Such expenditures have been and will continue to be substantial.
Further regulatory changes could accelerate expenditures for closure and
post-closure monitoring and obligate the Company to spend sums in addition to
those presently reserved for such purposes. These factors, together with the
other factors discussed above, could substantially increase the Company's
operating costs and impair the Company's ability to invest in its facilities.
21
<PAGE> 22
The Company's ability to meet future capital expenditure and working
capital requirements, to make scheduled payments of principal of, to pay
interest on, or to refinance its indebtedness, and to fund capital amounts
required for the acquisition of businesses and the expansion of existing
businesses depends on its future performance, which, to a certain extent, is
subject to general economic, financial, competitive, legislative, regulatory and
other factors beyond its control. One of the primary factors impacting the
Company's future performance will be its ability to integrate the assets
acquired in the Laidlaw Acquisition after the Canadian Sale, and to reduce
redundancies and excess costs. These operations are significantly larger than
the Company's previous operations and represent a substantial increase in the
scope of the Company's business. Based upon the current level of operations and
anticipated growth, management of the Company believes that available cash flow,
together with available borrowing under the Senior Credit Facility, the Lease
Facilities and other sources of liquidity, will be adequate to meet the
Company's anticipated future requirements for working capital,
letters-of-credit, capital expenditures, scheduled payments of principal of and
interest on debt incurred under the Senior Credit Facility, interest on the 1996
Notes and the Senior Discount Notes, and capital amounts required for
acquisitions and expansion. However, the principal payment at maturity on the
1996 Notes and the Senior Discount Notes may require refinancing. Also there can
be no assurance that the Company's business will generate sufficient cash flow
from operations or that future financings will be available in an amount
sufficient to enable the Company to service its indebtedness or to make
necessary capital expenditures, or that any refinancing would be available on
commercially reasonable terms if at all. Additionally, depending on the timing,
amount and structure of any future acquisitions and the availability of funds
under the acquisition facility under the Senior Credit Facility, the Company may
need to raise additional capital to fund the acquisition and integration of
additional solid waste businesses. The Company may raise such funds through
additional bank financings or public or private offerings of its debt and equity
securities. There can be no assurance that the Company will be able to secure
such funding, if necessary, on favorable terms, if at all. If the Company is not
successful in securing such funding, the Company's ability to pursue its
business strategy may be impaired and results of operations for future periods
may be negatively affected.
SIGNIFICANT FINANCING EVENTS
In December 1996, the Company entered into a bank credit facility
(the "1996 Bank Agreement") consisting of (i) a $475 million five and one-half
year amortizing senior secured term loan facility, (ii) three amortizing
senior secured term loan 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 Bank Agreement.
In June 1997, the Company entered into the Credit Agreement with Credit
Suisse First Boston, as administrative and collateral agent, Citibank, N.A. as
documentation agent and Goldman Sachs Credit Partners, LP, as syndication agent.
The Credit Agreement provides a six and one-half year senior secured $500
million Term Loan Facility and a six and one-half year senior secured $400
million Revolving Credit Facility. Principal payments on the Term Loan
Facility are payable quarterly, beginning in September 1997 and increase from
$10 million to $100 million per annum through maturity in December 2003.
Principal under the Revolving Credit Facility is due upon maturity.
In addition to the scheduled principal payments above, the Company is
also required to make mandatory prepayments on the Senior Credit Facility equal
to 100% of the net proceeds from certain asset sales, the issuance of new debt
securities and extraordinary amounts, which include tax refunds, pension plan
reversions and certain insurance proceeds, and 50% of the net proceeds from new
equity issuances. Furthermore, the Company is also required to make mandatory
prepayments on the Senior Credit Facility equal to 50% of the Company's annual
excess Cash Flow, as defined in the Credit Agreement, unless the Company's
Senior Debt Ratio, as defined in the Credit Agreement, for the relevant fiscal
year end is less than 2.0 to 1.0. Mandatory prepayments are applied first to the
Term Loan Facility on a pro rata basis against remaining scheduled principal
payments, and second; to the permanent reduction of the Revolving Credit
Facility.
22
<PAGE> 23
In no event, however, shall the Revolving Credit Facility be required to be
reduced to an amount less than $300 million in connection with any such
mandatory prepayment.
Borrowings under the Revolving Credit Facility may be used for
acquisitions, the issuance of letters of credit, working capital and other
general corporate purposes. Of the $400 million available under the Revolving
Credit Facility, no more than $175 million may be used to support the issuance
of letters of credit.
The Senior Credit Facility bears interest, at the Company's option, at
either (a) a Base Rate, or (b) a Eurodollar Rate, both terms as defined in the
Credit Agreement, plus, in either case, an agreed upon applicable margin. The
applicable margin will be adjusted from time to time pursuant to a pricing grid
based upon the Company's Leverage Ratio, as defined in the Credit Agreement, and
varies between zero percent and 0.75% for Base Rate loans, and 0.75% and 1.75%
for Eurodollar loans. In addition, if any time, the Company's Senior Debt Ratio
is greater than 2.5 to 1.0, the applicable margin for all loans will be
increased by 0.25%.
The Senior Credit Facility is guaranteed by substantially all of the
Company's present and future subsidiaries. In addition, the Senior Credit
Facility is secured by substantially all the personal property and a pledge of
the stock, of substantially all the Company's present and future subsidiaries.
The Credit Agreement contains certain financial covenants including,
but not limited to, a Total Debt to EBITDA ratio, a Senior Debt to EBITDA ratio,
a Fixed Charge Coverage ratio and an Interest Expense Coverage ratio, all terms
as defined in the Credit Agreement. In addition, the Credit Agreement also
limits the Company's ability to make acquisitions, purchase fixed assets above
certain amounts, pay dividends, incur additional indebtedness and liens, make
optional prepayments on certain subordinated indebtedness, make investments,
loans or advances, enter into certain transactions with affiliates or enter into
a merger, consolidation or sale of all or a substantial portion of the Company's
assets.
The Company has entered into interest rate protection agreements (the
"Agreements"), with reputable national banks and investment banking institutions
to reduce its exposure to fluctuations in variable interest rates. A summary of
the Agreements outstanding as of June 30, 1997 is as follows:
<TABLE>
<CAPTION>
Notional Amount Fixed Rate
--------------------- ----------
(dollars in millions)
<S> <C>
$ 50 5.76%
50 5.81
130 6.27
</TABLE>
The Agreements effectively change the Company's interest rate paid on
$230 million of its floating rate long-term debt ($576 million at June 30, 1997)
to a weighted average fixed rate ceiling of approximately 6.06% plus applicable
margins imposed by the terms of the Credit Agreement at June 30, 1997.
In December 1996, Allied NA issued $525 million of 10.25% Senior
Subordinated Notes due 2006 in a Rule 144A private offering (the "1996 Notes").
Net proceeds from the sale of the 1996 Notes, after the underwriting discount
and other expenses, were approximately $509 million. The net proceeds were used
to pay a portion of the cash purchase price of the Laidlaw Acquisition, repay
amounts outstanding under the Company's previous $300 million credit facility
with Credit Suisse as agent, fund certain acquisitions and for general corporate
purposes. Allied NA had an obligation to offer fully registered securities,
pursuant to an exchange offer, that are substantially identical to the 1996
Notes. Allied NA completed this exchange offer on July 23, 1997. The 1996 Notes
cannot be redeemed until December 1, 2001, except under certain circumstances.
Prior to December 1, 2001, the 1996 Notes are subject to redemption, at the
option of Allied NA, at the greater of (i) 100% of the principal amount of (ii)
the sum of the present values of the remaining scheduled payments of principal
and interest thereon discounted to maturity on a semiannual basis at a
comparable treasury yield plus 75 basis points, plus in each case accrued and
unpaid interest to the date of redemption. At any time prior to December 1,
1999, up to 33% of principal amount of 1996 Notes
23
<PAGE> 24
will be redeemable, at the option of Allied NA, from the proceeds of one or more
public offerings of capital stock by the Company at a redemption price of
110.25% of principal amount, plus accrued interest. The 1996 Notes are
guaranteed by the Company and substantially all of Allied NA's subsidiaries, the
guarantees of which are expressly subordinated to the guarantees of Allied NA's
Senior Credit Facility. The 1996 Notes contain several covenants, the most
restrictive of which limits Allied NA and its subsidiaries' ability to incur
additional indebtedness without complying with an interest coverage ratio test.
Other covenants contain limitations on payment of dividends, issuance of
redeemable preferred stock, transactions with affiliates, granting of liens and
security interests, sales of assets and the use of proceeds from sales of
assets, mergers and consolidations, and changes of control. The covenants do
permit Allied NA to incur certain indebtedness including the Senior Credit
Facility, indebtedness issued and/or assumed in permitted acquisitions and other
indebtedness which is limited to a certain percentage of Allied NA's total
assets.
On May 15, 1997, the Company, pursuant to (the Laidlaw Securities
Purchase Agreement) with the Laidlaw Group and certain private securities
investment funds affiliated with either (i) Apollo Advisors II, L.P. or (ii) the
Blackstone Group, repurchased from the Laidlaw Group the Allied Debentures and
the Warrant for an aggregate purchase price of $230 million in cash. The net
proceeds of the Offering of the Senior Discount Notes which also closed on May
15, 1997, have been used to fund the Repurchase. Also pursuant to the Laidlaw
Securities Purchase Agreement, the private securities investment funds purchased
all of the Common Stock of Allied held by Laidlaw.
In connection with the Laidlaw Acquisition, the Company issued a
warrant to Laidlaw for the purchase of 20.4 million shares of common stock of
the Company at an exercise price of $8.25 per share (the "Warrant"). The Warrant
was retired in connection with the Repurchase on May 15, 1997.
In January 1994, the Company issued $100 million of 10 3/4% senior
subordinated notes (the "1994 Notes"). The net proceeds from the sale of the
1994 Notes after underwriting discount and other expenses, were approximately
$95 million. In July 1996, the Company completed the Tender Offer and purchased
substantially all of its 1994 Notes at the redemption price of $1,157.50 per
$1,000 principal amount. In connection with the Tender Offer, the Company
recognized an extraordinary charge of $18.4 million ($11.0 million net of income
tax benefit), in the third quarter of 1996. The Company also received a consent
from a majority of the holders of the 1994 Notes to eliminate all substantive
financial covenants associated with the remaining 1994 Notes.
Simultaneously with the Tender Offer in July 1996, the Company
completed a new $300 million revolving credit facility which was extinguished on
December 30, 1996 in connection with the financing of the Laidlaw Acquisition.
The Company recognized an extraordinary charge of $4.0 million ($2.4 million net
of income tax benefit), in the fourth quarter.
On January 24, 1996, the Company completed a public offering of its
Common Stock. It issued 7.6 million shares for approximately $48 million net of
$5.2 million in underwriter discounts, commissions and offering costs. The net
proceeds from the offering were used to repay amounts outstanding under the
Company's outstanding credit agreement and for other general corporate purposes.
During 1995, the Company offered to holders of all of its Series D, 9%
and $90 convertible preferred stock and its 6% Convertible Subordinated notes an
inducement to exercise their conversion option to receive Allied Common Stock.
The inducement consisted of the payment of dividends and interest that the
holders of these securities would have received from the date of conversion
through the first call or redemption date of each security. In total, 7,757,056
shares of Common Stock were issued upon conversion. Substantially all of the
Series D preferred stock and 6% Convertible Subordinated notes were converted,
all but 5,029 shares of the 9% preferred stock was converted and all of the $90
preferred stock was converted. Accordingly, the Company's annual dividend and
interest requirements decreased by approximately $2.7 million and $0.8 million,
respectively. The inducement resulted in a 1996 conversion fee charge of
approximately $2.2 million paid in 285,000 shares of Common Stock.
24
<PAGE> 25
On January 30, 1995, the Company obtained stockholder approval of the
issuance of 11,709,602 shares of Common Stock to TPG and an affiliate, for $50
million (less approximately $5.0 million of direct offering costs and other
costs related to an amendment to the 1994 Notes).
DISCLOSURE REGARDING FORWARD LOOKING STATEMENTS
This quarterly report includes forward looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended ("Forward Looking
Statements"). All statements other than statements of historical fact included
in this section, are Forward Looking Statements. Although the Company believes
that the expectations reflected in such Forward Looking Statements are
reasonable, it can give no assurance that such expectations will prove to have
been correct. Generally, these statements relate to business plans or
strategies, projected or anticipated benefits or other consequences of such
plans or strategies, number of acquisitions and projected or anticipated
benefits from acquisitions made by or to be made by the Company, or projections
involving anticipated revenues, earnings, levels of capital expenditures or
other aspects of operating results. All phases of the Company operations are
subject to a number of uncertainties, risks and other influences, many of which
are outside the control of the Company and any one of which, or a combination of
which, could materially affect the results of the Company's operations and
whether Forward Looking Statements made by the Company ultimately prove to be
accurate. Such important factors ("Important Factors") that could cause actual
results to differ materially from the Company's expectations are disclosed in
this section and elsewhere in this report. All subsequent written and oral
Forward Looking Statements attributable to the Company or persons acting on its
behalf are expressly qualified in their entirety by the Important Factors
described below that could cause actual results to differ from the Company's
expectations.
Competition. The solid waste collection and disposal business is highly
competitive and requires substantial amounts of capital. The Company competes
with numerous waste management companies, a number of which have significantly
larger operations and greater resources than the Company. The Company also
competes with those counties and municipalities that maintain their own waste
collection and disposal operations. Forward Looking Statements assume that the
Company will be able to effectively compete with the other waste management
companies.
Availability of Acquisition Targets. The Company's ongoing acquisition
program is a key element of its expansion strategy. In addition, obtaining
landfill permits has become increasingly difficult, time consuming and
expensive. There can be no assurance, however, that the Company will succeed in
obtaining landfill permits or locating appropriate acquisition candidates that
can be acquired at price levels that the Company considers appropriate and that
reflects historical prices. The Forward Looking Statements assume that a number
of acquisition candidates and landfill properties sufficient to meet the
Company's goals will be available for purchase and that the Company will be able
to complete the acquisition at prices that the Company has experienced in the
past two years.
Integration. The Company's financial position and results of operations
depend to a large extent on the integration of recently acquired businesses. The
Forward Looking Statements assume that integration of acquired companies,
including the internalization of waste, will require from three to nine months
from the date the acquisition closes. Failure to achieve effective integration
in the anticipated time period or at all could have an adverse effect on the
Company's future results of operations.
Ongoing Capital Requirements. To the extent that internally generated
cash and cash available under the Company's existing credit facilities are not
sufficient to provide the cash required for future operations, capital
expenditures, acquisitions, debt repayment obligations and/or financial
assurance obligations, the Company will require additional equity and/or debt
financing in order to provide such cash. The Company has incurred significant
debt obligations in the last two years, which entail substantial debt service
costs. The Forward Looking Statements assume that the Company will be able to
raise the capital necessary to finance such requirements at rates that are as
good as or better than those it is currently experiencing. There can be no
assurance, however, that such financing will be available or, if available, will
be available on terms satisfactory to the Company.
25
<PAGE> 26
Economic Conditions. The Company's business is affected by general
economic conditions. The Forward Looking Statements assume that the Company will
be able to achieve internal volume and price growth which is not impacted by an
economic downturn. (As revenue of the Company continues to grow it is likely
that the rates of internal growth will reflect growth rates which are less than
those experienced in 1996.) There can be no assurance that an economic downturn
will not result in a reduction in the volume of waste being disposed of at the
Company's operations and/or the price that the Company can charge for its
services.
Weather Conditions. Protracted periods of inclement weather may
adversely affect the Company's operations by interfering with collection and
landfill operations, delaying the development of landfill capacity and/or
reducing the volume of waste generated by the Company's customers. In addition,
particularly harsh weather conditions may result in the temporary suspension of
certain of the Company's operations. The Forward Looking Statements do not
assume that such weather conditions will occur.
Dependence on Senior Management. The Company is highly dependent upon
its senior management team. In addition, as the Company continues to grow, its
requirements for operations management with waste industry experience will also
increase. The availability of such experienced management is not known. The
Forward Looking Statements assume that experienced management will be available
when needed by the Company at compensation levels that are within industry
norms. The loss of the services of any member of senior management or the
inability to hire experienced operations management could have a material
adverse effect on the Company.
Influence of Government Regulation. The Company's operations are
subject to and substantially affected by extensive federal, state and local
laws, regulations, orders and permits, which govern environmental protection,
health and safety, zoning and other matters. These regulations may impose
restrictions on operations that could adversely affect the Company's results,
such as limitations on the expansion of disposal facilities, limitations on or
the banning of disposal of out-of-state waste or certain categories of waste or
mandates regarding the disposal of solid waste. Because of heightened public
concern, companies in the waste management business may become subject to
judicial and administrative proceedings involving federal, state or local
agencies. These governmental agencies may seek to impose fines or to revoke or
deny renewal of operating permits or licenses for violations of environmental
laws or regulations or to require remediation of environmental problems at sites
or nearby properties, or resulting from transportation or predecessors'
transportation and collection operations, all of which could have a material
adverse effect on the Company. Liability may also arise from actions brought by
individuals or community groups in connection with the permitting or licensing
of operations, any alleged violations of such permits and licenses or other
matters. The Forward Looking Statements assume that there will be no materially
negative impact on its operations due to government regulation.
Potential Environmental Liability. The Company may incur liabilities
for the deterioration of the environment as a result of its operations. Any
substantial liability for environmental damage could materially adversely affect
the operating results and financial condition of the Company. Due to the limited
nature of the Company's insurance coverage of environmental liability, if the
Company were to incur liability for environmental damage, its business and
financial condition could be materially adversely affected. The Forward Looking
Statements assume that the Company will not incur any material environmental
liabilities other than those for which a provision has been recorded in the
consolidated financial statements and disclosed in the notes thereto.
INFLATION AND PREVAILING ECONOMIC CONDITIONS
To date, inflation has not had a significant impact on the Company's
operations. Consistent with industry practice, most of the Company's contracts
provide for a pass through of certain costs, including increases in landfill
tipping fees and, in some cases, fuel costs. The Company therefore believes it
should be able to implement price increases sufficient to offset most cost
increases resulting from inflation. However, competitive factors may require the
Company to absorb cost increases, resulting from inflation. The Company is
unable to determine the future impact of a sustained economic slowdown.
26
<PAGE> 27
SEASONALITY
The Company believes that its collection and landfill operations can be
adversely affected by protracted periods of inclement weather which could delay
the development of landfill capacity or transfer of waste and/or reduce the
volume of waste generated.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
In connection with the financing of the Senior Credit Facility, the
Company has entered into interest rate swap agreements (the "Agreements") with
reputable national banks and investment banking institutions to reduce its
exposure to market changes in interest rates. See footnote 1 to Condensed
Consolidated Financial Statements. The Company's use of the Agreements has not
been and is not expected to be material with respect to its financial position
or results of operations.
27
<PAGE> 28
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
No changes to previously reported information.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On July 2, 1997, the annual meeting of the stockholders of the Company was held.
The holders of 69,165,671 shares of Common Stock were present in person or
represented by proxy at the meeting. At the meeting, the stockholders took the
following action:
Election of Directors
The stockholders elected the following persons to serve as directors of
the Company until the next annual meeting of stockholders, and until
their successors are duly elected and qualified. Votes were cast as
follows:
<TABLE>
<CAPTION>
Number of Number of
Votes for Votes Withheld
---------- --------------
<S> <C> <C>
Roger A. Ramsey 69,074,095 91,577
Thomas H. Van Weelden 69,074,111 91,560
Nolan Lehmann 69,074,111 91,560
Alan B. Shepard 69,074,111 91,560
Brian A. O'Leary 69,073,911 91,760
Michael Gross 69,074,111 91,560
David B. Kaplan 69,074,111 91,560
Antony P. Ressler 69,074,111 91,560
Howard A. Lipson 69,074,111 91,560
Dennis Hendrix 69,073,911 91,760
Warren B. Rudman 69,073,711 91,960
Vincent Tese 69,073,911 91,760
</TABLE>
ITEM 5. OTHER INFORMATION
None.
28
<PAGE> 29
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit
Number Description
------- -----------
3.1 -- Restated Articles of Incorporation of Allied
Waste Industries, Inc. dated August 8, 1997.
Exhibit 3.1 to the Company's Current Report
on Form 10-K/A-2 dated August 8, 1997, is
incorporated herein by reference.
3.2 -- Amended and Restated Bylaws of Allied Waste
Industries, Inc. as of May 13, 1997.
10.1 -- Amended and Restated Credit Agreement dated
as of June 5, 1997 among the Company, Allied
Waste North America, the Lenders referred to
therein and Credit Suisse First Boston,
Goldman Sachs Credit Partners L.P., and
Citibank, N.A., as agents.
10.2 -- Executive Employment Agreement between the
Company and Henry L. Hirvela dated
June 6, 1997.
10.3 -- Third Amendment to Executive Employment
Agreement between the Company and Thomas H.
Van Weelden dated January 30, 1997.
10.4 -- Executive Employment Agreement between the
Company and Larry D. Henk dated June 6,
1997.
10.5 -- Executive Employment Agreement between the
Company and Steven M. Helm dated June 6,
1997.
10.6 -- Third Amendment to Executive Employment
Agreement between the Company and Roger A.
Ramsey dated January 30, 1997.
11.1 -- Statement regarding the computation of per
share earnings - primary.
11.2 -- Statement regarding the computation of per
share earnings - fully diluted.
12 -- Ratio of earnings to fixed charges.
27 -- Financial data schedule.
(b) Reports on Form 8-K
May 2, 1997 The Company's current report on Form 8-K
reporting the commencement by the Company of
the offering of $418 million of 11.3% Senior
Discount Notes.
29
<PAGE> 30
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant, Allied Waste Industries, Inc., has caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
ALLIED WASTE INDUSTRIES, INC.
By:/s/ HENRY L. HIRVELA
------------------------------------------
Henry L. Hirvela
Vice President and Chief Financial Officer
(Principal Financial Officer)
By:/s/ PETER S. HATHAWAY
------------------------------------------
Peter S. Hathaway
Vice President, Chief Accounting Officer
(Principal Accounting Officer)
Date: August 14, 1997
30
<PAGE> 1
AMENDED AND RESTATED
BYLAWS
OF
ALLIED WASTE INDUSTRIES, INC.
as of May 13, 1997
ARTICLE I
STOCKHOLDERS
Section 1.1. Annual Meetings. An annual meeting of stockholders shall
be held for the election of directors at such date, time and place, either
within or without the State of Delaware, as may be designated by resolution of
the Board of Directors from time to time; provided, that each successive annual
meeting shall be held on a date within 13 months after the date of the preceding
annual meeting. Any other proper business may be transacted at the annual
meeting.
Section 1.2. Special Meetings. Special meetings of stockholders for any
purpose or purposes may be called at any time by the Board of Directors, or by a
committee of the Board of Directors which has been duly designated by the Board
of Directors, and whose powers and authority, as expressly provided in a
resolution of the Board of Directors, include the power to call such meetings,
but such special meetings may not be called by a stockholder, or any other
person or persons.
Section 1.3. Notice of Meeting; Waiver of Notice. Whenever stockholders
are required or permitted to take any action at a meeting, a written notice of
the meeting shall be given which shall state the place, date and hour of the
meeting, and, in the case of a special meeting, the purpose or purposes for
which the meeting is called. Unless otherwise provided by law, the written
notice of any meeting shall be given not less than ten nor more than 60 days
before the date of the meeting to each stockholder entitled to vote at such
meeting. If mailed, such notice shall be deemed to be given when deposited in
the mail, postage prepaid, directed to the stockholder at his address as it
appears on the records of the Corporation. Notice need not be given to any
stockholder who submits a written waiver of notice, signed by such stockholder,
whether before or after the time stated therein. Attendance of a person at a
meeting of the stockholders shall constitute a waiver of notice of such meeting,
except when the stockholder attends a meeting for the express purpose of
objecting, at the beginning of the meeting, to the transaction of any business
because the meeting is not lawfully called or convened. Neither the business to
be transacted at, nor the purpose of, any regular or special meeting of the
stockholders need be specified in any written waiver of notice.
Section 1.4. Adjournments. Any meeting of stockholders, annual or
special, may adjourn from time to time to reconvene at the same or some other
place, and notice need not be given of any such adjourned meeting if the time
and place thereof are announced at the meeting at which the
1
<PAGE> 2
adjournment is taken. At the adjourned meeting the Corporation may transact any
business which might have been transacted at the original meeting. If the
adjournment is for more than 30 days, or if after the adjournment a new record
date is fixed for the adjourned meeting, a notice of the adjourned meeting shall
be given to each stockholder of record entitled to vote at the meeting.
Section 1.5. Quorum. At each meeting of stockholders, except as
otherwise provided by law, the Certificate of Incorporation, or these Bylaws,
the holders of a majority of the votes entitled to be cast at the meeting,
present in person or by proxy, shall constitute a quorum. In the absence of a
quorum, the stockholders so present may, by majority vote, adjourn the meeting
from time to time in the manner provided in Section 1.4 of these bylaws until a
quorum shall attend. Shares of its own stock belonging to the Corporation or to
another corporation, if a majority of the shares entitled to vote in the
election of directors of such other corporation is held, directly or indirectly,
by the Corporation, shall neither be entitled to vote nor be counted for
purposes of determining the existence of a quorum; provided, however, that the
foregoing shall not limit the right of any corporation to vote stock, including
but not limited to its own stock, held by it in a fiduciary capacity.
Section 1.6. Organization. Meetings of stockholders shall be presided
over by the Chairman of the Board, if any, or in his absence by the Vice
Chairman of the Board, if any, or in his absence by the President, or in his
absence by a vice president, or in the absence of the foregoing persons by a
chairman designated by the Board of Directors, or in the absence of such
designation by a chairman chosen at the meeting. The Secretary shall act as
secretary of the meeting, but in his absence the chairman of the meeting may
appoint any person to act as secretary of the meeting.
Section 1.7. Voting; Proxies. Each stockholder entitled to vote at any
meeting of stockholders shall be entitled to the number of votes designated by
the Certificate of Incorporation, except as otherwise provided by law or these
Bylaws, for each share of stock held by him which has voting power upon the
matter in question. Each stockholder entitled to vote at a meeting of
stockholders may authorize another person or persons to act for him by proxy,
but no such proxy shall be voted or acted upon after three years from its date,
unless the proxy provides for a longer period. A duly executed proxy shall be
irrevocable if it states that it is irrevocable and if, and only as long as, it
is coupled with an interest sufficient in law to support an irrevocable power. A
stockholder may revoke any proxy which is not irrevocable by attending the
meeting and voting in person or by filing an instrument in writing revoking the
proxy or another duly executed proxy bearing a later date with the Secretary of
the Corporation. Voting at meetings of stockholders need not be by written
ballot unless the holders of a majority of the outstanding shares of all classes
of stock entitled to vote thereon present in person or by proxy at such meeting
shall so determine; provided, however, that all elections of directors must be
by written ballot. The Corporation shall, in advance of any meeting of
stockholders, appoint one or more inspectors to act at the meeting and make a
written report thereof. At all meetings of stockholders for the election of
directors a plurality of the votes cast shall be sufficient to elect any
nominee. All other elections and questions shall, unless otherwise provided by
law or by the Certificate of Incorporation or these Bylaws, be decided by the
vote of the holders of a majority of the votes entitled to be cast thereon
present in person or
2
<PAGE> 3
by proxy at the meeting, provided that (except as otherwise required by law or
by the certificate of incorporation) the Board of Directors may require a larger
vote upon any election or question.
Section 1.8. Record Dates.
(a) Meetings. In order that the Corporation may determine the
stockholders entitled to notice of, or to vote at, any meeting of stockholders
or any adjournment thereof, or entitled to receive payment of any dividend or
other distribution or allotment of any rights, or entitled to exercise any
rights in respect of any change, conversion or exchange of stock or for the
purpose of any other lawful action, the Board of Directors may fix, in advance,
a record date, which shall not be more than 60 nor less than ten days before the
date of such meeting, nor more than 60 days prior to any other action. If no
record date is fixed: (1) the record date for determining stockholders entitled
to notice of, or to vote at, a meeting of stockholders shall be at the close of
business on the day next preceding the day on which notice is given, or, if
notice is waived, at the close of business on the day next preceding the day on
which the meeting is held; and (2) the record date for determining stockholders
for any other purpose shall be at the close of business on the day on which the
Board of Directors adopts the resolution relating thereto. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board of Directors may fix a new record date for the adjourned meeting.
(b) Action by Written Consent. In order that the Corporation
may determine the stockholders entitled to consent to corporate action in
writing without a meeting, the Board of Directors may fix a record date, which
record date shall not precede the date upon which the resolution fixing the
record date is adopted by the Board of Directors, and which date shall not be
more than ten days after the date upon which the resolution fixing the record
date is adopted by the Board of Directors. Any stockholder of record seeking to
have the stockholders authorize or take corporate action by written consent
shall, by written notice to the Secretary, request the Board of Directors to fix
a record date. The Board of Directors shall promptly, but in all events within
ten days after the date on which such a request is received, adopt a resolution
fixing the record date (unless a record date has previously been fixed by the
Board of Directors pursuant to the first sentence of this Section 1.8(b)). If no
record date has been fixed by the Board of Directors pursuant to the first
sentence of this Section 1.8(b) or otherwise within ten days of the date on
which such a request is received, the record date for determining stockholders
entitled to consent to corporate action in writing without a meeting, when no
prior action by the Board of Directors is required by applicable law, shall be
the first date on which a signed written consent setting forth the action taken
or proposed to be taken is delivered to the Corporation by delivery to its
registered office in Delaware, its principal place of business, or to any
officer or agent of the Corporation having custody of the book in which
proceedings of meetings of stockholders are recorded. Delivery shall be by hand
or by certified or registered mail, return receipt requested. If no record date
has been fixed by the Board of Directors and prior action by the Board of
Directors is required by applicable law, the record date for determining
stockholders entitled to consent to corporate action in writing without
3
<PAGE> 4
a meeting shall be at the close of business on the date on which the Board of
Directors adopts the resolution taking such prior action.
(c) Inspectors of Written Consent. In the event of the
delivery, in the manner provided by Section 1.8(b), to the Corporation of the
requisite written consent or consents to take corporate action and/or any
related revocation or revocations, the Corporation may engage independent
inspectors of elections for the purpose of performing promptly a ministerial
review of the validity of the consents and revocations. For the purpose of
permitting the inspectors to perform such review, no action by written consent
without a meeting shall be effective until such date as the independent
inspectors certify to the Corporation that the consents delivered to the
Corporation in accordance with Section 1.8(b) represent at least the minimum
number of votes that would be necessary to take the corporate action. Nothing
contained in this Section 1.8(c) shall in any way be construed to suggest or
imply that the Board of Directors or any stockholder shall not be entitled to
contest the validity of any consent or revocation thereof, whether before or
after such certification by the independent inspectors, or to take any other
action (including, without limitation, the commencement, prosecution, or defense
of any litigation with respect thereto, and the seeking of injunctive relief in
such litigation).
(d) Effectiveness of Written Consent. Every written consent
shall bear the date of signature of each stockholder who signs the consent and
no written consent shall be effective to take the corporate action referred to
therein unless, within sixty days of the earliest dated written consent received
in accordance with Section 1.8(b), a written consent or consents signed by a
sufficient number of holders to take such action are delivered to the
Corporation in the manner prescribed in Section 1.8(b).
Section 1.9. List of Stockholders Entitled to Vote. The Secretary shall
prepare and make, at least ten days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof and may be inspected by any stockholder who is present. The stock ledger
shall be the only evidence as to who are the stockholders or the books of the
Corporation, or to vote in person or by proxy at any meeting of stockholders.
Section 1.10. Director Nominees. Only persons who are nominated in
accordance with the procedures set forth in this paragraph shall be eligible for
election as directors of the Corporation. Nominations of persons for election to
the Board of Directors of the Corporation may be made at a meeting of
stockholders (a) by or at the direction of the Board of Directors or (b) by any
stockholder of the Corporation entitled to vote for the election of directors at
such meeting who complies with
4
<PAGE> 5
the procedures set forth in this paragraph. All nominations by stockholders
shall be made pursuant to timely notice in proper written form to the Secretary
of the Corporation. To be timely, a stockholder's notice shall be delivered to,
or mailed and received at, the principal executive offices of the Corporation
not less than 75 days nor more than 120 days prior to the anniversary date of
the immediately preceding annual meeting of stockholders (the "Anniversary
Date"); provided, however, that in the event the annual meeting is scheduled to
be held on a date more than 30 days before the Anniversary Date or more than 60
days after the Anniversary Date, notice by the stockholder to be timely must be
delivered not later than the close of business on the later of (a) the 75th day
prior to the scheduled date of such annual meeting or (b) the 15th day following
the day on which public announcement of the date of such annual meeting is first
made by the Corporation. In no event shall the public announcement of an
adjournment of an annual meeting commence a new time period for the giving of a
stockholder's notice under these Bylaws. Notwithstanding anything to the
contrary in this paragraph, in the event that the number of directors to be
elected to the Board of Directors or the Corporation is increased and there is
no public announcement by the Corporation naming all of the nominees for
director or specifying the size of the increased Board of Directors at least 75
days prior to the Anniversary date, a stockholder's notice required by this
paragraph shall also be considered timely, but only with respect to nominees for
any new position created by such increase, if such notice shall be delivered to,
or mailed to and received by the Corporation at its principal executive office
not later than the close of business on the 15th day following the day on which
such public announcement is first made by the Corporation. To be in proper
written form, such stockholder's notice to the Secretary shall set forth in
writing (a) as to each person whom such stockholder proposes to nominate for
election or re-election as a director, (i) the name, age, business address and
residence address of such person, (ii) the principle occupation or employment of
such person, (iii) the class and number of shares of the Corporation which are
beneficially owned by such person, and (iv) all information relating to such
person that is required to be disclosed in solicitations of proxies for election
of directors, or is otherwise required, in each case pursuant to Regulation 14A
under the Securities Exchange Act of 1934, as amended, including, without
limitation, such person's written consent to being named in the proxy statement
as a nominee and to serving as a director if elected; and (b) as to such
stockholder giving notice, (i) his or her name and address, as they appear on
the Corporation's books, (ii) the class and number of shares of stock of the
Corporation which are beneficially owned by such stockholder, and (iii) a
description of all arrangements or understandings between such stockholder and
each nominee and any other person or persons pursuant to which the nomination or
nominations are to be made by such stockholder. At the request of the Board of
Directors, any person nominated by the Board of Directors for election as a
director shall furnish to the Secretary of the Corporation that information
required to be set forth in a stockholder's notice of nomination which pertains
to the nominee. No person shall be eligible for election as a director unless
nominated in accordance with the procedures set forth in the Bylaws of the
Corporation. The chairman of the meeting shall, if the facts warrant, determine
and declare to the meeting that a nomination was not made in accordance with the
procedures prescribed by the Bylaws of the Corporation, and if he shall so
determine, he shall so declare to the meeting and the defective nomination shall
be disregarded.
5
<PAGE> 6
Section 1.11. Stockholder Proposals. At any special meeting of the
stockholders, only such business shall be conducted as shall have been brought
before the meeting by or at the direction of the Board of Directors. At any
annual meeting of the stockholders, only such business shall be conducted as
shall have been brought before the meeting (a) by or at the direction of the
Board of Directors or (b) by any stockholder who complies with the procedures
set forth in this paragraph. For business properly to be brought before an
annual meeting by a stockholder, the stockholder must have given timely notice
thereof in proper written form to the Secretary of the Corporation. To be
timely, a stockholder's notice must be delivered to, or mailed and received at,
the principal executive offices of the Corporation not less than 75 days nor
more than 120 days prior to the Anniversary Date; provided, however, that in the
event the annual meeting is scheduled to be held on a date more than 30 days
before the Anniversary Date or more than 60 days after the Anniversary Date,
timely notice by the stockholder must be delivered not later than the close of
business on the later of (a) the 75th day prior to the scheduled date of such
annual meeting or (b) the 15th day following the day on which the public
announcement of the date of such annual meeting is first made by the
Corporation. In no event shall the public announcement of an adjournment of an
annual meeting commence a new time period for the giving of a stockholder's
notice under these Bylaws. To be in proper written form, such stockholder's
notice to the Secretary shall set forth in writing as to each matter such
stockholder proposes to bring before the annual meeting (a) a brief description
of the business desired to be brought before the annual meeting and the reasons
for conducting such business at the annual meeting, (b) his or her name and
address, as they appear on the Corporation's books, (c) the class and number of
shares of stock of the Corporation which are beneficially owned by such
stockholder, (d) the names and addresses of other stockholders known by the
stockholder proposing such business to support such proposal, and the class and
number of shares of the Corporation's capital stock beneficially owned by such
other stockholders, and (e) any material interest on such stockholder in such
business. Notwithstanding anything in these Bylaws to the contrary, no business
shall be conducted at any annual meeting except in accordance with the
procedures set forth in this paragraph. The chairman of an annual meeting shall,
if the facts warrant, determine and declare to the meeting that business was not
properly brought before the meeting in accordance with the provisions of this
paragraph, and, if he should so determine, he shall so declare to the meeting
and any such business not properly brought before the meeting shall not be
transacted.
ARTICLE II
Board of Directors
Section 2.1. General Powers. The property, affairs and business of the
Corporation shall be managed by, or under the direction of, the Board of
Directors.
Section 2.2. Number. As of the Second Closing Date (as defined in the
Amended and Restated Shareholders Agreement (the "Shareholders Agreement"),
dated as of April 21, 1997, among Apollo Investment Fund III, L.P., a Delaware
limited partnership, Apollo Overseas Partners III, a Delaware limited
partnership, Apollo (U.K.) Partners III, L.P., an English limited partnership,
Blackstone Capital Partners II Merchant Banking Fund, L.P., a Delaware limited
partnership,
6
<PAGE> 7
Blackstone Offshore Capital Partners II, L.P., a Cayman Islands limited
partnership, and Blackstone Family Investment Partnership II, L.P., a Delaware
limited partnership (collectively, "Shareholders"), Laidlaw, Inc., a Canadian
corporation ("Laidlaw"), Laidlaw Transportation, Inc., a Delaware corporation
and wholly-owned subsidiary of Laidlaw, and the Company), and until the earlier
to occur of the sixth anniversary of the Second Closing Date and the date on
which Shareholders own, collectively, less than 20% of the Shares (as defined in
the Shareholders Agreement) (the "Shareholder Designee Period"), the board of
directors shall consist of no more than twelve (12) directors; provided,
however, that if Mr. O'Leary ceases to serve as a director, the board of
directors shall thereafter consist of no more than (11) directors during the
Shareholder Designee Period.
Section 2.3. Election; Resignation; Removal; Vacancies. The Board of
Directors shall initially consist of the persons so designated in the
certificate of incorporation. At the first annual meeting of stockholders and at
each annual meeting thereafter, the stockholders shall elect directors to
replace those directors whose terms then expire. Any director may resign at any
time upon written notice to the Corporation. Any director may be removed, for
cause, at any time by the affirmative vote of a majority in interest of the
holders of record of stock entitled to vote at an election of directors, at an
annual meeting or at a special meeting of the stockholders called for that
purpose. Any vacancy occurring in the Board of Directors, for whatever reason,
may be filled by a majority of the remaining members of the Board of Directors,
although such majority is less than a quorum, or by a plurality of the votes
cast at a meeting of stockholders, and each director so elected shall hold
office until the expiration of the term of the director whom he has replaced.
At all times during the Shareholder Designee Period, subject to Section
3.1(d) of the Shareholders Agreement, the Company shall support the nomination
of, and the Company's Nominating Committee (as defined in Section III.3) shall
recommend to the board of directors the inclusion in the slate of nominees
recommended by the board of directors to shareholders for election as directors
at each annual meeting of shareholders of the Company: (i) no more than two
persons who are executive officers of the Company ("Management Directors"), (ii)
(A) four Shareholder Designees (as defined in the Shareholders Agreement), so
long as Shareholders beneficially own 75% or more of the Shares, (B) three
Shareholder Designees, so long as Shareholders beneficially own 50% or more but
less than 75% of the Shares, (C) two Shareholder Designees, so long as
Shareholders beneficially own 25% or more but less than 50% of the Shares and
(D) one Shareholder Designee, so long as Shareholders beneficially own 20% or
more but less than 25% of the Shares (each a "Beneficial Ownership Threshold"),
provided that if at any time as a result of the Company's issuance of Voting
Securities (as defined in the Shareholders Agreement) Shareholders beneficially
own 9% or less of the Actual Voting Power (as defined in the Shareholders
Agreement) (the "Actual Voting Power Threshold"), Shareholders shall be entitled
to no more than one Shareholder Designee, and (iii) such other persons, each of
whom is (A) recommended by the Nominating Committee and (B) not an employee or
officer of or outside counsel to the Company or a partner, employee, director,
officer, affiliate or associate (as defined in Rule 12b-2 under the Exchange
Act) of any Shareholder or any affiliate of a Shareholder or as to which the
Shareholders or their affiliates own at lest ten percent of the voting equity
securities ("Unaffiliated Directors"). If any vacancy (whether by death,
retirement, disqualification, removal from office or other cause, or by increase
in number of
7
<PAGE> 8
directors) occurs prior to a meeting of the Company's stockholders, the Board
(i) may appoint a member of management to fill a vacancy caused by a Management
Director ceasing to serve as a director, (ii) shall appoint, subject to Section
3.1(d) of the Shareholders Agreement, a person designated by the Shareholders to
fill a vacancy created by a Shareholder Designee ceasing to serve as a director
(except as a result of the reduction of the number of Shareholder Designees
entitled to be included on the Board of Directors by reason of a decrease in
Shareholders beneficial ownership of Common Stock below any Beneficial Ownership
Threshold or Voting Securities below the Actual Voting Power Threshold), and
(iii) may appoint a person who qualifies as an Unaffiliated Director and is
recommended by the Nominating Committee pursuant to the procedures set forth in
the following paragraph to fill a vacancy created by an Unaffiliated Director
ceasing to serve as a director (provided that in the case of a vacancy relating
to an Unaffiliated Director, if a majority of the Nominating Committee is unable
to recommend a replacement, then the Board seat with respect to this vacancy
shall remain vacant), and each such person shall be a Management Designee,
Shareholder Designee or Unaffiliated Director, as the case may be, for purposes
of this Agreement. Upon any decrease in Shareholders' beneficial ownership of
Common Stock below any Beneficial Ownership Threshold or Voting Securities below
the actual Voting Power Threshold, Shareholders shall cause a number of
Shareholder Designees to offer to immediately resign from the Board of Directors
such that the number of Shareholder Designees serving on the Board of Directors
immediately thereafter will be equal to the number of Shareholder Designees
which Shareholders would then be entitled to designate under Section 3.1(b) of
the Shareholders Agreement. Upon termination of the Shareholder Designee Period,
Shareholders shall promptly offer to cause all of the Shareholder Designees to
resign from the Board of Directors and any committees thereof.
Section 2.4. Regular Meetings. Regular meetings of the Board of
Directors may be held at such places within or without the State of Delaware and
at such times as the Board of Directors may from time to time determine, and if
so determined notices thereof need not be given.
Section 2.5. Special Meetings. Special meetings of the Board of
Directors may be held at any time or place within or without the State of
Delaware whenever called by the President, any Vice President, the Secretary, or
by any member of the Board of Directors. Reasonable notice thereof shall be
given by the person or persons calling the meeting, set at least two days before
the date of the special meeting or by causing the same to be delivered to each
director personally or to be transmitted by telegraph, cable, wireless,
telephone or orally at least 24 hours before the meeting is schedule to
commence.
Section 2.6. Telephonic Meetings Permitted. Members of the Board of
Directors, or any committee designated by the Board of Directors, may
participate in a meeting of such Board of Directors or committee by means of
conference telephone or similar communications equipment by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation in a meeting
pursuant to this bylaw shall constitute presence in person at such meeting.
8
<PAGE> 9
Section 2.7. Quorum; Vote Required for Action. At all meetings of the
Board of Directors a majority of the Board of Directors shall constitute a
quorum for the transaction of business. Except as otherwise provided by the
Certificate of Incorporation or these Bylaws, the vote of a majority of the
directors present at a meeting at which a quorum is present shall be the act of
the Board of Directors. In the absence of a quorum a majority of the directors
present may adjourn any meeting from time to time until a quorum be had.
Section 2.8. Organization. Meetings of the Board of Directors shall be
presided over by the Chairman of the Board of Directors, if any, or in his
absence by the Vice Chairman of the Board of Directors, if any, or in his
absence by the President, or in their absence by a chairman chosen at the
meeting. The Secretary shall act as secretary of the meeting, but in his absence
the chairman of the meeting may appoint any person to act as secretary of the
meeting.
Section 2.9. Informal Action by Directors. Unless otherwise restricted
by the Certificate of Incorporation or these Bylaws, any action required or
permitted to be taken at any meeting of the Board of Directors or of any
committee thereof, may be taken without a meeting if all members of the Board of
Directors or of such committee, as the case may be, consent thereto in writing,
and the writing or writings are filed with the minutes of proceedings of the
Board of Directors or of such committee.
Section 2.10. Compensation of Directors. Directors may receive such
sums as compensation for their services and expenses as may be directed by
resolution of the Board of Directors; provided that nothing herein contained
shall be construed to preclude any director from serving the Corporation in any
other capacity, and receiving compensation therefor. Members of special or
standing committees may be allowed like compensation for their service and
expenses.
ARTICLE III
COMMITTEES
Section 3.1. Committees. The Board of Directors may, by resolution
passed by a majority thereof, designate one or more committees, each committee
to consist of one or more of the directors of the Corporation. The Board of
Directors may designate one or more directors as alternate members of any
committee, who may replace any absent or disqualified member at any meeting of
the committee. In the absence or disqualification of a member of the committee,
the members thereof present at any meeting and not disqualified from voting,
whether or not they constitute a quorum, may unanimously appoint another member
of the Board of Directors to act at the meeting in place of any such absent or
disqualified member. Any such committee, to the extent provided in the
resolution of the Board of Directors, shall have and may exercise all the power
and authority of the Board of Directors in the management of the business and
affairs of the Corporation, and may authorize the seal of the Corporation to be
affixed to all papers which may require it; provided, however, that no such
committee shall have the power or authority in reference to amending the
Certificate of Incorporation (except that a committee may, to the extent
authorized in the resolution
9
<PAGE> 10
or resolutions providing for the issuance of shares of stock adopted by the
Board of Directors as provided in Section 151(a) of the General Corporation Law,
fix any of the preferences or rights of the shares), adopting an agreement of
merger or consolidation, recommending to the stockholders a dissolution of the
Corporation or a revocation of dissolution, or amending these Bylaws; provided
further, that unless the resolution expressly so provides, no such committee
shall have the power or authority to declare a dividend or to authorize the
issuance of stock.
Section 3.2. Committee Rules. Unless the Board of Directors otherwise
provides, each committee designated by the Board of Directors may make, alter
and repeal rules for the conduct of its business. In the absence of such rules
each committee shall conduct its business in the same manner as the Board of
Directors conducts its business pursuant to Article II of these Bylaws.
Section 3.3. For so long as Shareholders are entitled to two
Shareholder Designees under the Shareholders Agreement, Shareholders shall be
entitled to have one Shareholder Designee serve on each committee of the board
of directors other than any committee formed for the purpose of considering
matters relating to the Shareholders. At all times during the Shareholder
Designee Period, Unaffiliated Directors shall be designated exclusively by a
majority of a nominating committee (the "Nominating Committee"), which shall at
all times during the Shareholder Designee Period consist of not more than four
persons, two of whom shall be Shareholder Designees (or such lesser number of
Shareholder Designees as then serves on the Board of Directors) and two of whom
shall be either Management Directors or Unaffiliated Directors. If the
Nominating Committee is unable to recommend one or more persons to serve as
Unaffiliated Directors (except with respect to any vacancy created by an
Unaffiliated Director ceasing to serve as such), then the Board of Directors
shall nominate and recommend for election by stockholders an Unaffiliated
Director then serving on the Board of Directors. Notwithstanding the foregoing,
if the Shareholders beneficially own less than 50% of the Shares, the Nominating
Committee shall be comprised of individuals only one of whom is a Shareholder
Designee.
ARTICLE IV
OFFICERS
Section 4.1. Executive Officers; Election; Qualifications; Term of
Office; Resignation; Removal; Vacancies. The Board of Directors shall elect a
President and Secretary, and it may, if it so determines, elect a Chairman of
the Board of Directors and a Vice Chairman of the Board of Directors from among
its members. The Board of Directors may also elect one or more Vice Presidents,
one or more Assistant Secretaries, a Treasurer and one or more Assistant
Treasurers. Unless otherwise provided in the resolution of election or
appointment each such officer shall hold office until his successor is elected
and qualified or until his earlier resignation or removal. Any officer may
resign at any time upon written notice to the Corporation. The Board of
Directors may remove any officer with or without cause at any time, but such
removal shall be without prejudice to the contractual rights of such officer, if
any, with the Corporation. Any number of offices may be held by the same person.
Any vacancy occurring in any office of the Corporation by death,
10
<PAGE> 11
resignation, removal or otherwise may be filled for the unexpired portion of the
term by the Board of Directors at any regular or special meeting.
Section 4.2. Powers and Duties of Executive Officers Generally. The
officers of the Corporation shall have such powers and duties in the management
of the Corporation as may be prescribed herein or by resolution of the Board of
Directors. The Board of Directors may require any officer, agent or employee to
give security for the faithful performance of his duties.
Section 4.3. Duties of Chief Executive Officer. The chief executive
officer shall preside at all meetings of the stockholders, and shall see that
all orders and resolutions of the Board of Directors are carried into effect. He
shall execute bonds, mortgages and other contracts requiring a seal, under the
seal of the Company, except where required or permitted by law to be otherwise
signed and executed and except where the signing and execution thereof shall be
expressly delegated by the Board of Directors to some other officer or agent of
the Company. To the extent permitted by law, his signature upon bonds or
debentures authenticated by the signature of a trustee may be by facsimile. He
shall perform such other duties and have such other duties as may be prescribed
from time to time by the Board of Directors and the Corporation.
Section 4.4. Duties of President. The president shall be the chief
operating officer of the Company. He shall, in the absence or disability of, or
in the event of a vacancy in the office of, the chief executive officer, perform
the duties and exercise the powers of such chief executive officer. He shall be
responsible for the general and active management of the business of the
Company, and shall see that all orders and resolutions of the Board of Directors
are carried into effect. He shall perform such other duties and have such other
duties as may be prescribed from time to time by the Board of Directors of the
Corporation.
Section 4.5. Duties of the Vice President. The vice presidents shall,
in the order of their organizational ranking, in the absence or disability, or
in the event of a vacancy in the office, of the president, perform the duties
and exercise the powers of the president, and shall perform such other duties
and have such other powers as may from time to time be prescribed by the Board
of Directors of the Corporation.
Section 4.6. Duties of the Secretary. The secretary shall keep, or
cause to be kept, in books provided for that purpose, the minutes of the
meetings of the stockholders, the Board of Directors, or any committee thereof,
and shall see that all notices are duly given in accordance with the provisions
of these Bylaws and, as required by law, shall be custodian of the records of
the Corporation. He shall keep in safe custody the seal of the Corporation and,
when authorized by the board, affix such seal to any document requiring it, and
when so affixed, it shall be attested by his signature, or by the signature of
the treasurer or an assistant secretary. He shall perform such duties and have
such powers incident to the office of the secretary, and shall perform such
other duties and have such other powers as may be prescribed from time to time
by the Board of Directors of the Corporation.
11
<PAGE> 12
Section 4.7. Duties of the Assistant Secretary. Any assistant secretary
shall, at the request of the Secretary, in his absence or disability, or in the
event of a vacancy in such office, perform the duties and be vested with the
powers of the Secretary. Each assistant secretary shall perform such other
duties and have such other powers as may be prescribed from time to time by the
Board of Directors of the Corporation.
Section 4.8. Duties of the Treasurer. The treasurer shall have charge
and custody of, and be responsible for, all funds and securities of the
Corporation, and shall deposit all such funds in the name of the Corporation in
such banks, trust companies and other depositories as shall be designated by the
Board of Directors. He shall render a statement of the condition of the finances
of the Corporation at all meetings of the Board of Directors, and a full
financial report at any annual meeting of the stockholders. He shall exhibit to
any director of the Corporation, the books of account and records of the
Corporation, or of any corporation controlled by the Corporation, upon
reasonable request and during normal business hours at the executive offices of
the Corporation. He shall perform such other duties and have such other powers
as may be prescribed from time to time by the Board of Directors of the
Corporation.
ARTICLE V
STOCK
Section 5.1. Certificates. Certificates for shares of the capital stock
of the Corporation shall be in such form not inconsistent with law as shall be
approved by the Board of Directors. Every holder of stock shall be entitled to
have a certificate signed by or in the name of the Corporation by the Chairman
or Vice Chairman of the Board of Directors, if any, or the President or Vice
President, and by the Treasurer or an Assistant Treasurer, or the Secretary or
an Assistant Secretary, of the Corporation, certifying the number of shares
owned by him in the Corporation. Any of the signatures on the certificate may be
a facsimile. In case any officer, transfer agent, or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent, or registrar before such certificate is
issued, it may be issued by the Corporation with the same effect as if he were
such officer, transfer agent, or registrar at the date of issuance.
Section 5.2. Lost, Stolen or Destroyed Stock Certificates; Issuance of
New Certificates. The Corporation may issue a new certificate of stock in the
place of any certificate theretofore issued by it, which certificate is alleged
to have been lost, stolen or destroyed, and the Corporation may require the
owner of the lost, stolen or destroyed certificate, or his legal representative,
to give the Corporation a bond sufficient to indemnify it against any claim that
may be made against it on account of the alleged loss, theft or destruction of
any such certificate or the issuance of such new certificate.
12
<PAGE> 13
ARTICLE VI
INDEMNIFICATION
Section 6.1. Indemnification in Non-Derivative Proceedings. The
Corporation shall indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (other than
an action by or in the right of the Corporation) by reason of the fact that he
is or was a director, officer, employee or agent of the Corporation, or is or
was serving at the request of the Corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with such action, suit or proceeding if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
Section 6.2. Indemnification in Derivative Proceedings. The Corporation
shall indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action or suit by or in the right
of the Corporation to procure a judgment in its favor by reason of the fact that
he is or was a director, officer, employee or agent of the Corporation, or is or
was serving at the request of the Corporation as a director, officer, employee
or agent of another Corporation, partnership, joint venture, trust or other
enterprise against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection with the defense or settlement of such action or
suit if he acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the Corporation; provided, however, that
no indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the Corporation
unless, and only to the extent that, the court in which such action or suit was
brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the court
shall deem proper.
Section 6.3. Indemnification when Director, Officer or Employee
Successful in Defense of Action. To the extent that a director, officer,
employee or agent of a corporation has been successful on the merits or
otherwise in defense of any action, suit or proceeding referred to in Sections
6.1 and 6.2 of this Article, or in defense of any claim, issue or matter
therein, the Corporation shall indemnify such director, officer, employee or
agent against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith.
13
<PAGE> 14
Section 6.4. Determination of Right to Indemnification. Any
indemnification under Sections 6.1 and 6.2 of this Article (unless ordered by a
court) shall be made by the Corporation only as authorized in the specific case
upon a determination that indemnification of the director, officer, employee or
agent is proper in the circumstances because he has met the applicable standard
of conduct set forth in Sections 6.1 and 6.2 of this Article. Such determination
shall be made (1) by the Board of Directors, by a majority vote of a quorum
consisting of directors who were not parties to such action, suit or proceeding,
or (2) if such a quorum is not obtainable, or, even if obtainable a quorum of
disinterested directors so directs, by independent legal counsel in a written
opinion, or (3) by the stockholders.
Section 6.5. Advancement of Expenses. Expenses incurred by an officer
or director in defending a civil or criminal action, suit or proceeding shall be
paid by the Corporation in advance of the final disposition of such action, suit
or proceeding upon receipt of an undertaking by or on behalf of such director or
officer to repay such amount if it shall ultimately be determined that he is not
entitled to be indemnified by the Corporation as authorized in this Article.
Such expenses incurred by other employees and agents shall be so paid upon such
terms and conditions, if any, as the Board of Directors deems appropriate.
Section 6.6. Rights Hereunder Not Exclusive. The indemnification and
advancement of expenses provided by, or granted pursuant to, this Article shall
not be deemed exclusive of any other rights to which those seeking
indemnification or advancement of expenses may be entitled under any bylaw,
agreement, vote of stockholders or disinterested directors or otherwise, both as
to action in an official capacity and as to action in another capacity while
holding such office.
Section 6.7. Insurance. The Corporation shall have the power to
purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the Corporation, or is or was serving at
the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the Corporation
would have the power to indemnify him against such liability under the General
Corporation Law of the State of Delaware or this Article.
Section 6.8. Definition of Corporation. For purposes of this Article,
references to "the Corporation" shall include, in addition to the resulting
corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers and employees or agents, so that any person who is or was a
director, officer, employee or agent of such constituent corporation, or is or
was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, shall stand in the same position under the provisions
of this Article with respect to the resulting or surviving corporation as he
would have with respect to such constituent corporation if its separate
existence had continued.
14
<PAGE> 15
Section 6.9. Certain Definitions. For purposes of this Article,
references to "other enterprises" shall include employee benefit plans;
references to "fines" shall include any excise taxes assessed on a person with
respect to any employee benefit plan; and references to "serving at the request
of the Corporation" shall include any service as a director, officer, employee
or agent of the Corporation which imposes duties on, or involves services by,
such director, officer, employee or agent with respect to an employee benefit
plan, its participants or beneficiaries; and a person who acted in good faith
and in a manner he reasonably believed to be in the interest of the participants
and beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of the Corporation" as referred to in
this section.
Section 6.10. Continuation of Rights. The indemnification and
advancement of expenses provided by, or granted pursuant to, this Article shall
continue as to a person who has ceased to be a director, officer, employee or
agent and shall inure to the benefit of the heirs, executors and administrators
of such a person.
ARTICLE VII
MISCELLANEOUS
Section 7.1. Fiscal Year. The fiscal year of the Corporation shall
begin on the first day of January in each year and shall end on the last day of
December next following.
Section 7.2. Seal. The corporate seal shall have the name of the
Corporation inscribed thereon and shall be in such form as may be approved from
time to time by the Board of Directors.
Section 7.3. Interested Directors; Quorum. No contract or transaction
between the Corporation and one or more of its directors or officers, or between
the Corporation and any other corporation, partnership, association, or other
organization in which one or more of its directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
this reason, or solely because the director or officer is present at or
participates in the meeting of the Board of Directors or committee thereof which
authorizes the contract or transaction, or solely because his or their votes are
counted for such purpose, if: (1) the material facts as to his relationship or
interest and as to the contract or transaction are disclosed or are known to the
Board of Directors or the committee, and the Board of Directors or committee in
good faith authorizes the contract or transaction by the affirmative votes of a
majority of the disinterested directors, even though the disinterested directors
be less than a quorum; or (2) the material facts as to his relationship or
interest and as to the contract or transaction are disclosed or are known to the
stockholders entitled to vote thereon, and the contract or transaction is
specifically approved in good faith by vote of the stockholders; or (3) the
contract or transaction is fair as to the Corporation as of the time it is
15
<PAGE> 16
authorized, approved or ratified, by the Board of Directors, a committee
thereof, or the stockholders. Common or interested directors may be counted in
determining the presence of a quorum at a meeting of the Board of Directors or a
committee which authorizes the contract or transaction.
Section 7.4. Form of Records. Any records maintained by the Corporation
in the regular course of its business, including its stock ledger, books of
account, and minutes books, may be kept on, or be in the form of, punch cards,
magnetic tape, photographs, microphotographs, or any other information storage
device, provided that the records so kept can be converted into clearly legible
form within a reasonable time. The Corporation shall so convert any records so
kept upon the request of any person entitled to inspect the same.
Section 7.5. Amendment of Bylaws. These bylaws may be altered or
repealed, and new bylaws made, by the Board of Directors. Notwithstanding
anything to the contrary that may be contained herein, Section 2.2, the last
sentence of Section 2.11 and the second sentence of Section 7.5 may only be
amended with the affirmative vote of seven members of the Corporation's Board of
Directors.
16
<PAGE> 1
EXHIBIT A TO THE AMENDMENT AGREEMENT
------------------------------------------------------------------------------
AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of June 5, 1997,
among
ALLIED WASTE NORTH AMERICA, INC.,
ALLIED WASTE INDUSTRIES, INC.,
THE LENDERS REFERRED TO HEREIN,
CREDIT SUISSE FIRST BOSTON,
as Swingline Lender, Issuing Bank, Administrative Agent
and Collateral Agent
GOLDMAN SACHS CREDIT PARTNERS L.P.,
as Syndication Agent
and
CITIBANK, N.A.,
as Documentation Agent
------------------------------------------------------------------------------
[CS&M Ref. No. 5865-017]
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
ARTICLE I
Definitions
<S> <C> <C>
SECTION 1.01. Defined Terms....................................................................2
SECTION 1.02. Terms Generally.................................................................22
ARTICLE II
The Credits
SECTION 2.01. Commitments......................................................................23
SECTION 2.02. Loans............................................................................23
SECTION 2.03. Borrowing Procedure..............................................................25
SECTION 2.04. Evidence of Debt; Repayment of Loans.............................................25
SECTION 2.05. Fees.............................................................................26
SECTION 2.06. Interest on Loans................................................................27
SECTION 2.07. Default Interest.................................................................27
SECTION 2.08. Alternate Rate of Interest.......................................................27
SECTION 2.09. Termination and Reduction of Commitments.........................................28
SECTION 2.10. Conversion and Continuation of Borrowings........................................28
SECTION 2.11. Repayment of Term Borrowings.....................................................29
SECTION 2.12. Optional Prepayments.............................................................31
SECTION 2.13. Mandatory Prepayments............................................................31
SECTION 2.14. Reserve Requirements; Change in Circumstances....................................33
SECTION 2.15. Change in Legality...............................................................34
SECTION 2.16. Indemnity........................................................................35
SECTION 2.17. Pro Rata Treatment...............................................................35
SECTION 2.18. Sharing of Setoffs...............................................................36
SECTION 2.19. Payments.........................................................................36
SECTION 2.20. Taxes............................................................................36
SECTION 2.21. Assignment of Commitments Under Certain
Circumstances; Duty to Mitigate.....................................38
SECTION 2.22. Swingline Loans..................................................................39
SECTION 2.23. Letters of Credit................................................................41
ARTICLE III
Representations and Warranties
SECTION 3.01. Organization; Powers.............................................................45
</TABLE>
<PAGE> 3
Contents, p. 2
<TABLE>
<CAPTION>
<S> <C> <C>
SECTION 3.02. Authorization....................................................................45
SECTION 3.03. Enforceability...................................................................45
SECTION 3.04. Governmental Approvals...........................................................46
SECTION 3.05. Financial Statements.............................................................46
SECTION 3.06. No Material Adverse Change.......................................................46
SECTION 3.07. Title to Properties; Possession Under Leases.....................................46
SECTION 3.08. Subsidiaries.....................................................................46
SECTION 3.09. Litigation; Compliance with Laws.................................................46
SECTION 3.10. Agreements.......................................................................47
SECTION 3.11. Federal Reserve Regulations......................................................47
SECTION 3.12. Investment Company Act; Public Utility
Holding Company Act.................................................47
SECTION 3.13. Use of Proceeds..................................................................47
SECTION 3.14. Tax Returns......................................................................47
SECTION 3.15. No Material Misstatements........................................................47
SECTION 3.16. Employee Benefit Plans...........................................................48
SECTION 3.17. Environmental Matters............................................................48
SECTION 3.18. Insurance........................................................................49
SECTION 3.19. Security Documents...............................................................49
SECTION 3.20. Labor Matters....................................................................49
SECTION 3.21. Solvency.........................................................................50
ARTICLE IV
Conditions of Lending
ARTICLE V
Affirmative Covenants
SECTION 5.01. Existence; Businesses and Properties.............................................51
SECTION 5.02. Insurance........................................................................51
SECTION 5.03. Obligations and Taxes............................................................52
SECTION 5.04. Financial Statements, Reports, etc...............................................52
SECTION 5.05. Litigation and Other Notices.....................................................53
SECTION 5.06. Employee Benefits................................................................54
SECTION 5.07. Maintaining Records; Access to Properties and Inspections........................54
SECTION 5.08. Use of Proceeds..................................................................54
SECTION 5.09. Environmental Laws...............................................................54
SECTION 5.10. Preparation of Environmental Reports.............................................55
SECTION 5.11. Further Assurances...............................................................55
SECTION 5.12. Compliance with Terms of Leaseholds..............................................55
SECTION 5.13. Performance of Material Agreements...............................................56
SECTION 5.14. Senior Convertible Debentures....................................................56
SECTION 5.15. Concentration and Disbursement Accounts..........................................56
</TABLE>
<PAGE> 4
Contents, p. 3
<TABLE>
<CAPTION>
ARTICLE VI
Negative Covenants
<S> <C> <C>
SECTION 6.01. Indebtedness.....................................................................57
SECTION 6.02. Liens............................................................................59
SECTION 6.03. No Other Negative Pledge.........................................................60
SECTION 6.04. Sale and Lease-Back Transactions.................................................60
SECTION 6.05. Investments, Loans and Advances..................................................61
SECTION 6.06. Mergers, Consolidations, Sales of Assets and Acquisitions........................62
SECTION 6.07. Dividends and Distributions; Restrictions on Ability
of Subsidiaries to Pay Dividends....................................63
SECTION 6.08. Transactions with Affiliates.....................................................63
SECTION 6.09. Business of Allied, Borrower, Allied Finance and Subsidiaries....................64
SECTION 6.10. Other Indebtedness and Agreements................................................64
SECTION 6.11. Capital Expenditures.............................................................65
SECTION 6.12. Fixed Charge Coverage Ratio......................................................65
SECTION 6.13. Leverage Ratio...................................................................65
SECTION 6.14. Senior Debt Ratio................................................................66
SECTION 6.15. Interest Expense Coverage Ratio..................................................66
ARTICLE VII
Events of Default
ARTICLE VIII
The Administrative Agent, the Syndication Agent,
the Documentation Agent and the Collateral Agent
ARTICLE IX
Miscellaneous
SECTION 9.01. Notices..........................................................................71
SECTION 9.02. Survival of Agreement............................................................71
SECTION 9.03. Binding Effect...................................................................72
SECTION 9.04. Successors and Assigns...........................................................72
SECTION 9.05. Expenses; Indemnity..............................................................74
SECTION 9.06. Right of Setoff..................................................................75
SECTION 9.07. APPLICABLE LAW...................................................................76
SECTION 9.08. Waivers; Amendment...............................................................76
SECTION 9.09. Interest Rate Limitation.........................................................77
SECTION 9.10. Entire Agreement.................................................................77
SECTION 9.11. WAIVER OF JURY TRIAL.............................................................77
</TABLE>
<PAGE> 5
Contents, p. 4
<TABLE>
<CAPTION>
<S> <C> <C>
SECTION 9.12. Severability.....................................................................77
SECTION 9.13. Counterparts.....................................................................78
SECTION 9.14. Headings.........................................................................78
SECTION 9.15. Jurisdiction; Consent to Service of Process......................................78
SECTION 9.16. Confidentiality..................................................................78
SECTION 9.17. Modification of Existing Credit Agreement........................................79
</TABLE>
Exhibits and Schedules
<TABLE>
<CAPTION>
<S> <C>
Exhibit A Form of Administrative Questionnaire
Exhibit B Form of Allied Finance Guarantee Agreement
Exhibit C Form of Allied Finance Pledge Agreement
Exhibit D Form of Allied Guarantee Agreement
Exhibit E Form of Assignment and Acceptance
Exhibit F Form of Borrowing Request
Exhibit G Form of Indemnity, Subrogation and Contribution Agreement
Exhibit H Form of Pledge Agreement
Exhibit I Form of Security Agreement
Exhibit J Form of Subsidiary Guarantee Agreement
Exhibit K-1 Form of Opinion of Porter & Hedges, L.L.P., counsel for Allied,
the Borrower and the Subsidiaries
Exhibit K-2 Form of Opinion of Thomas K. Kehoe, Esq., internal counsel for Allied,
the Borrower and the Subsidiaries
Exhibit L Form of Subordination Provisions
Exhibit M Amendment Certificate
Schedule 1.01(a) Back-up Letters of Credit
Schedule 1.01(b) Existing Letters of Credit
Schedule 1.01(c) Subsidiary Guarantors
Schedule 2.01 Lenders
Schedule 3.08 Subsidiaries
Schedule 3.09 Litigation
Schedule 3.17 Environmental Matters
Schedule 3.18 Insurance
Schedule 4.02(p) Existing Preferred Stock
Schedule 6.01(a) Indebtedness
Schedule 6.02(a) Liens
</TABLE>
<PAGE> 6
CREDIT AGREEMENT dated as of June 5, 1997,
among ALLIED WASTE NORTH AMERICA, INC. (formerly
known as Allied Holdings (United States), Inc.), a
Delaware corporation (the "Borrower"), ALLIED WASTE
INDUSTRIES, INC., a Delaware corporation ("Allied"),
the Lenders (as defined in Article I), CREDIT SUISSE
FIRST BOSTON, a bank organized under the laws of
Switzerland, acting through its New York branch, as
swingline lender (in such capacity, the "Swingline
Lender"), as issuing bank (in such capacity, the
"Issuing Bank"), as administrative agent (in such
capacity, the "Administrative Agent") and as
collateral agent (in such capacity, the "Collateral
Agent") for the Lenders GOLDMAN SACHS CREDIT PARTNERS
L.P., a New York limited partnership, as syndication
agent (in such capacity, the "Syndication Agent") for
the Lenders, and CITIBANK, N.A., a national banking
association, as documentation agent (in such
capacity, the "Documentation Agent") for the Lenders.
The Borrower has requested the Lenders to extend credit in the form of
(a) Term Loans (such term and each other capitalized term used but not defined
herein having the meaning given it in Article I) on the Closing Date, in an
aggregate principal amount of $500,000,000 and (b) Revolving Loans at any time
and from time to time prior to the Maturity Date, in an aggregate principal
amount at any time outstanding not in excess of $400,000,000. The Borrower has
requested the Swingline Lender to extend credit, at any time and from time to
time prior to the Maturity Date, in the form of Swingline Loans in an aggregate
principal amount at any time outstanding not in excess of $50,000,000. The
Borrower has requested the Issuing Bank to issue letters of credit, in an
aggregate face amount at any time outstanding not in excess of $175,000,000 to
support payment obligations incurred in the ordinary course of business by the
Borrower and the Subsidiaries, and to provide financial assurance as required by
regulators for Allied's, the Borrower's and the Subsidiaries' closure and
post-closure obligations.
On the Restatement Closing Date, the proceeds of the Term Loans are to
be used solely to refinance the principal of, and to pay all interest, fees and
other amounts payable in respect of, the outstanding AXELs Loans under the
Existing Credit Agreement in accordance with the Amendment Agreement. The
proceeds of the Revolving Loans and the Swingline Loans are to be used solely
for general corporate purposes (including to finance capital expenditures and
acquisitions permitted under this Agreement and the Canada Debenture
Refinancing).
The Lenders and the Swingline Lender are willing to extend such credit
to the Borrower and the Issuing Bank is willing to issue letters of credit for
the account of Allied, the Borrower and the
<PAGE> 7
2
Subsidiaries on the terms and subject to the conditions set forth herein.
Accordingly, the parties hereto agree as follows:
ARTICLE I
Definitions
SECTION 1.01. Defined Terms. As used in this Agreement, the following
terms shall have the meanings specified below:
"Account Parties" shall mean (a) the Borrower, (b) Allied and (c) each
other Subsidiary of the Borrower on whose behalf a Letter of Credit is requested
pursuant to Section 2.23.
"Accounts" shall have the meaning assigned to such term in the Security
Agreement.
"Acquired Business" shall mean (a) any person at least a majority of
the capital stock of which is acquired on or after January 1, 1997, by the
Borrower or a wholly owned subsidiary of the Borrower and (b) any assets
constituting a discrete business or operating unit acquired on or after January
1, 1997, by the Borrower or a wholly owned subsidiary of the Borrower.
"Acquired Entity" shall have the meaning assigned to such term in
Section 6.05(j).
"Acquired Indebtedness" shall have the meaning assigned to such term in
Section 6.01(d).
"Acquired Revenues" shall mean, with respect to any period, the
revenues attributable to Acquired Businesses during such period; provided that,
in the event the Borrower acquires, directly or indirectly, less than all the
capital stock of an Acquired Business, only the percentage of revenues of such
Acquired Business attributable to the Borrower's interest in such Acquired
Business shall be deemed "Acquired Revenues" for purposes of this Agreement.
"Additional Facility Amount" shall mean $142,000,000 or such amount as
may be adjusted in accordance with Section 9.08(c).
"Additional Facility Loan" shall mean any Revolving Loan made in
reliance upon Section 1008(ix) of the Senior Subordinated Notes Indenture, as
set forth in the applicable Borrowing Request.
"Adjusted LIBO Rate" shall mean, with respect to any Eurodollar
Borrowing for any Interest Period, an interest rate per annum (rounded upwards,
if necessary, to the next 1/16 of 1%) equal to the product of (a) the LIBO Rate
in effect for such Interest Period and (b) Statutory Reserves.
"Administrative Agent Fees" shall have the meaning assigned to such
term in Section 2.05(b).
"Administrative Questionnaire" shall mean an Administrative
Questionnaire in the form of Exhibit A.
<PAGE> 8
3
"Affiliate" shall mean, when used with respect to a specified person,
another person that directly, or indirectly through one or more intermediaries,
Controls or is Controlled by or is under common Control with the person
specified.
"Aggregate Revolving Credit Exposure" shall mean the aggregate amount
of the Lenders' Revolving Credit Exposures.
"Allied Canada" shall mean Allied Waste Holdings (Canada) Ltd., a
Canadian corporation and a wholly owned subsidiary of the Borrower.
"Allied Canada Debentures" shall mean the Allied Canada Junior
Debenture and the Allied Canada Zero Debenture.
"Allied Canada Junior Debenture" shall mean the 7% Junior Subordinated
Debenture due 2008 of Allied Canada held by Allied Finance issued on December
30, 1996, in an aggregate principal amount of $150,000,000.
"Allied Canada Zero Debenture" shall mean the Zero Coupon Junior
Subordinated Debenture due 2008 of Allied Canada held by Allied Finance issued
on December 30, 1996, in an aggregate principal amount of $168,300,000.
"Allied Finance" shall mean Allied Waste Finance (Canada) Ltd., a
Canadian corporation and wholly owned Subsidiary of Allied.
"Allied Finance Guarantee Agreement" shall mean the Allied Finance
Amended and Restated Guarantee Agreement substantially in the form of Exhibit B,
given by Allied Finance in favor of the Collateral Agent for the benefit of the
Secured Parties.
"Allied Finance Pledge Agreement" shall mean the Allied Finance Amended
and Restated Pledge Agreement substantially in the form of Exhibit C, between
Allied Finance and the Collateral Agent for the benefit of the Secured Parties.
"Allied Guarantee Agreement" shall mean the Allied Amended and Restated
Guarantee Agreement, substantially in the form of Exhibit D, made by Allied in
favor of the Collateral Agent for the benefit of the Secured Parties.
"Allied Senior Notes" shall mean the 11.30% Senior Discount Notes due
2007 of Allied in an aggregate principal amount at maturity of $418,000,000.
"Amendment Agreement" shall mean the Amendment Agreement dated as of
June 5, 1997, among the Borrower, Allied, the Lenders, the Departing Lenders (as
defined therein), the Administrative Agent, the Syndication Agent and the
Documentation Agent.
"Amendment Certificate" shall mean the certificate of Allied, signed by
a Financial Officer, substantially in the form of Exhibit M.
"Applicable Percentage" shall mean, for any day, with respect to (a)
any Eurodollar Term Loans, Eurodollar Revolving Loans or L/C Participation Fees,
(b) any Base Rate Term Loans or Base
<PAGE> 9
4
Rate Revolving Loans or (c) the Commitment Fees, as the case may be, the
applicable percentage set forth below under the caption (i) "Eurodollar Spread",
(ii) "Base Rate Spread" or (iii) "Fee Percentage", respectively, based upon the
Leverage Ratio as of the relevant date of determination:
<TABLE>
<CAPTION>
Eurodollar Base Rate Fee
Leverage Ratio Spread Spread Percentage
- -------------- ------ ------ ----------
<S> <C> <C> <C>
Category 1
Greater than or equal
to 4.50 to 1.00 1.75% .75% .50%
Category 2
Less than 4.50 to 1.00
but greater than or
equal to 4.00 to 1.00 1.50% .50% .50%
Category 3
Less than 4.00 to 1.00
but greater than or
equal to 3.50 to 1.00 1.25% .25% .375%
Category 4
Less than 3.50 to 1.00
but greater than or
equal to 3.00 to 1.00 1.00% .00% .375%
Category 5
Less than 3.00 to 1.00 .75% .00% .250%
</TABLE>
In addition, if on any date of determination, the Senior Debt Ratio is
greater than 2.50 to 1.00, the Eurodollar Spread and the Base Rate Spread
otherwise applicable as set forth above shall be increased by .25% for purposes
of determining Applicable Percentage. Notwithstanding the foregoing, until the
Borrower has delivered the financial statements for the fiscal quarter ending
immediately after the Closing Date, in accordance with Section 5.04(a) or (b),
the Leverage Ratio shall be deemed to be in Category 1 for purposes of
determining the Applicable Percentage. Each change in the Applicable Percentage
resulting from a change in the Leverage Ratio and, if applicable, the Senior
Debt Ratio shall be effective with respect to all Term Loans, all Revolving
Loans, all Letters of Credit outstanding and Commitment Fees on and after the
date the financial statements and certificates required by Section 5.04(a) or
(b) indicating such change are delivered to the Administrative Agent until the
date immediately preceding the next date such financial statements and
certificates indicating another such change are delivered to the Administrative
Agent. Notwithstanding the foregoing, (a) at any time during which the Borrower
has failed to deliver the financial statements and certificates required by
Section 5.04(a) or (b), or (b) at any time after the occurrence and during the
continuance of an Event of Default, the Leverage Ratio shall be deemed to be in
Category 1 for purposes of determining the Applicable Percentage.
<PAGE> 10
5
"Asset Sale" shall mean the sale, lease, transfer or other disposition
in one transaction or a series of related transactions (by way of merger or
otherwise but excluding a sale in connection with a sale and leaseback
transaction) by Allied, the Borrower or any of the Subsidiaries to any person
other than Allied, the Borrower or any wholly owned Subsidiary of (a) any
capital stock of any of the Subsidiaries or (b) any other assets of Allied, the
Borrower or any of the Subsidiaries (other than inventory, obsolete or worn out
assets, scrap, Permitted Investments and cash and cash equivalents, in each case
disposed of in the ordinary course of business for fair value), except for (i)
the sale of Specialized Waste, (ii) sales, leases, transfers or other
dispositions in one transaction or a series of related transactions during any
fiscal year having an aggregate value not in excess of $2,500,000 and (iii) any
substantially contemporaneous exchange (including by way of a substantially
contemporaneous purchase and sale) of discrete assets of Allied, the Borrower or
any Subsidiary for one or more other assets used for similar purposes, in each
case to the extent that the amount of net cash proceeds received by Allied, the
Borrower or any Subsidiary as consideration in connection with such exchange
sale do not exceed amounts paid by the Borrower, Allied or any Subsidiary with
respect to such exchange purchase, provided that Allied, the Borrower or such
Subsidiary complies with Section 5.11 with respect to the property received by
Allied, the Borrower or such Subsidiary pursuant to such exchange.
"Assignment and Acceptance" shall mean an assignment and acceptance
entered into by a Lender and an assignee, and accepted by the Administrative
Agent, in the form of Exhibit E or such other form as shall be approved by the
Administrative Agent.
"AXELs Loans" shall have the meaning assigned to such term in the
Existing Credit Agreement.
"Back-up Letter of Credit" shall mean any Letter of Credit issued to
support any letter of credit that (a) exists on the Closing Date and (b) is set
forth on Schedule 1.01(a).
"Bank Facility Amount" shall mean $258,000,000 or such amount as may be
adjusted in accordance with Section 9.08(c).
"Bank Facility Loan" shall mean any Revolving Loan made in reliance
upon Section 1008(i) of Senior Subordinated Notes Indenture, as set forth on the
applicable Borrowing Request.
"Base Rate" shall mean, for any day, a rate per annum (rounded upwards,
if necessary, to the next 1/16 of 1%) equal to the greater of (a) the Prime Rate
in effect on such day and (b) the Federal Funds Effective Rate in effect on such
day plus 1/2 of 1%. If for any reason the Administrative Agent shall have
determined (which determination shall be conclusive absent manifest error) that
it is unable to ascertain the Federal Funds Effective Rate, including the
inability or failure of the Administrative Agent to obtain sufficient quotations
in accordance with the terms of the definition thereof, the Base Rate shall be
determined without regard to clause (b), of the preceding sentence until the
circumstances giving rise to such inability no longer exist. Any change in the
Base Rate due to a change in the Prime Rate or the Federal Funds Effective Rate
shall be effective on the effective date of such change in the Prime Rate or the
Federal Funds Effective Rate, respectively. The term "Prime Rate" shall mean the
rate of interest per annum publicly announced from time to time by the
Administrative Agent as its prime rate in effect at its principal office in New
York City; each change in the Prime Rate shall be effective on the date such
change is publicly announced as being effective. The term "Federal Funds
Effective Rate" shall mean, for any day, the weighted average of the rates
<PAGE> 11
6
on overnight Federal funds transactions with members of the Federal Reserve
System arranged by Federal funds brokers, as published on the next succeeding
Business Day by the Federal Reserve Bank of New York, or, if such rate is not so
published for any day that is a Business Day, the average of the quotations for
the day for such transactions received by the Administrative Agent from three
Federal funds brokers of recognized standing selected by it.
"Base Rate Borrowing" shall mean a Borrowing comprised of Base Rate
Loans.
"Base Rate Loan" shall mean any Base Rate Term Loan or Base Rate
Revolving Loan.
"Base Rate Revolving Loan" shall mean any Revolving Loan bearing
interest at a rate determined by reference to the Base Rate in accordance with
the provisions of Article II.
"Base Rate Term Borrowing" shall mean a Borrowing comprised of Base
Rate Term Loans.
"Base Rate Term Loan" shall mean any Term Loan bearing interest at a
rate determined by reference to the Base Rate in accordance with the provisions
of Article II.
"Board" shall mean the Board of Governors of the Federal Reserve System
of the United States of America.
"Borrowing" shall mean a group of Loans of a single Type made by the
Lenders on a single date and as to which a single Interest Period is in effect.
"Borrowing Request" shall mean a request by the Borrower in accordance
with the terms of Section 2.03 and substantially in the form of Exhibit F.
"Business Day" shall mean any day other than a Saturday, Sunday or day
on which banks in New York City are authorized or required by law to close;
provided, however, that when used in connection with a Eurodollar Loan, the term
"Business Day" shall also exclude any day on which banks are not open for
dealings in dollar deposits in the London interbank market.
"Canada Debenture Refinancing" shall mean (a) the repayment by the
Borrower with the proceeds of a Revolving Loan of certain intercompany advances
made to the Borrower by Allied Canada in an aggregate principal amount not to
exceed $330,000,000 and (b) the repayment of the Allied Canada Debentures by
Allied Canada with the proceeds from the repayment of the advances described in
clause (a) above; provided, however, that no later than three Business Days
following the date such Revolving Loan is borrowed, Allied, Allied Finance and
the Borrower shall cause such Revolving Loan to be repaid in full in accordance
with the Loan Documents.
"Capital Expenditures" shall mean, for any period, the aggregate amount
of all expenditures (whether paid in cash or other consideration or accrued as a
liability) by Allied, the Borrower and its Subsidiaries during such period that,
in accordance with GAAP, are or should be included in "additions to property,
plant or equipment" or similar items reflected in the consolidated statement of
cash flows of Allied, the Borrower and its Subsidiaries for such period;
provided, however, that Capital Expenditures shall not include (i) expenditures
made to consummate the Transactions, (ii) expenditures classified as a Permitted
Acquisition or (iii) expenditures made by an Acquired Entity
<PAGE> 12
7
prior to the time such Acquired Entity was acquired by the Borrower or any
Subsidiary pursuant to a Permitted Acquisition.
"Capital Lease Obligations" of any person shall mean the obligations of
such person to pay rent or other similar amounts under any lease of (or other
arrangement conveying the right to use) real or personal property, or a
combination thereof, which obligations are required to be classified and
accounted for as capital leases on a balance sheet of such person under GAAP,
and the amount of such obligations shall be the capitalized amount thereof
determined in accordance with GAAP.
"Casualty Event" shall mean an event pursuant to which Allied, the
Borrower or any of the Subsidiaries has the right to collect insurance proceeds
under any insurance policies with respect to any insured casualty or other
insured damage to any property of Allied, the Borrower or any of the
Subsidiaries.
A "Change in Control" shall be deemed to have occurred if (a) any
person or group (within the meaning of Rule 13d-5 promulgated under the
Securities Exchange Act of 1934 as in effect on the date hereof) shall have
acquired directly or indirectly, beneficial ownership of shares representing
more than 35% of the aggregate ordinary voting power represented by the issued
and outstanding capital stock of Allied; (b) a majority of the seats (other than
vacant seats) on the board of directors of Allied shall at any time be occupied
by persons who were neither (i) nominated by the board of directors of Allied,
nor (ii) appointed by directors so nominated; (c) any change in control (or
similar event, however denominated) with respect to Allied shall occur under and
as defined in any indenture or agreement in respect of Indebtedness in an
aggregate principal amount in excess of $10,000,000 (so long as the aggregate
amount of individual items of Indebtedness less than $10,000,000 with respect to
which any change of control event has occurred does not exceed in the aggregate
$25,000,000) to which Allied, the Borrower or any Subsidiary is a party; or (d)
Allied shall cease to own and control, directly, beneficially and of record,
100% of the outstanding capital stock of the Borrower or Allied Finance, free
and clear of all Liens (other than Liens under the Loan Documents).
"Closing Date" shall mean the date of the first Credit Event.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
"Collateral" shall mean all the "Collateral" as defined in any Security
Document.
"Commitment" shall mean, with respect to any Lender, such Lender's
Revolving Credit Commitment, Term Loan Commitment and Swingline Commitment.
"Commitment Fee" shall have the meaning assigned to such term in
Section 2.05(a).
"Condemnation Event" shall mean an event pursuant to which Allied, the
Borrower or any of the Subsidiaries has the right to collect and receive
proceeds as a result of any action or proceeding for the taking of any property
of Allied, the Borrower or any Subsidiary, or any part thereof or interest
therein, for public or quasi-public use under the power of eminent domain, by
reason of any public improvement or condemnation proceeding, or in any other
manner.
"Confidential Information Memorandum" shall mean the Confidential
Information Memorandum of the Borrower dated April, 1997.
<PAGE> 13
8
"Consolidated Current Assets" shall mean, at any date of determination,
all assets (other than cash and cash-equivalents) that would, in accordance with
GAAP, be classified on a consolidated balance sheet of Allied, the Borrower and
the Subsidiaries as current assets at such date of determination.
"Consolidated Current Liabilities" shall mean, at any date of
determination, all liabilities (other than, without duplication (x) the current
portion of long-term Indebtedness and (y) outstanding Swingline Loans and
Revolving Loans) that would, in accordance with GAAP, be classified on a
consolidated balance sheet of Allied, the Borrower and the Subsidiaries as
current liabilities at such date of determination.
"Consolidated EBITDA" of any person for any period shall mean
Consolidated Net Income of such person for such period, plus, without
duplication and to the extent deducted from revenues in determining such
Consolidated Net Income, the sum of (a) the aggregate amount of Consolidated
Interest Expense for such period, (b) the aggregate amount of letter of credit
fees paid during such period, (c) the aggregate amount of income tax expense for
such period, (d) all amounts attributable to depreciation and amortization for
such period, (e) all non-cash non-recurring charges during such period,
including charges for costs related to acquisitions (it being understood that
non-cash non-recurring charges shall not include accruals for closure and
post-closure liabilities and that charges shall be deemed non-cash charges until
the period that cash disbursements attributable to such charges are made, at
which point such charges shall be deemed cash charges), (f) all cash charges
attributable to the Transactions and (g) all non-recurring cash charges related
to acquisitions (including the acquisition contemplated by the Stock Purchase
Agreement) or financings (including amendments thereto), in each case during
such period, and minus, without duplication and to the extent included in
determining Consolidated Net Income for such period, all non-cash non-recurring
gains during such period, all as determined on a consolidated basis with respect
to Allied, the Borrower and the Subsidiaries in accordance with GAAP.
"Consolidated Interest Expense" of any person for any period shall mean
the gross interest expense, whether expensed or capitalized (including the
interest component in respect of Capital Lease Obligations) accrued or paid by
such person and its consolidated subsidiaries during such period, minus any
interest income of such person and its consolidated subsidiaries, in each case,
as determined on a consolidated basis in accordance with GAAP; provided, that
"Consolidated Interest Expense" shall not include any interest expense accrued
and not paid in respect of the Allied Senior Notes prior to the date of the
first cash interest payment due thereunder.
"Consolidated Net Income" of any person for any period shall mean the
net income or loss of such person and its consolidated subsidiaries for such
period determined on a consolidated basis in accordance with GAAP.
"Consolidated Working Capital" shall mean, at any date of
determination, Consolidated Current Assets at such date of determination minus
Consolidated Current Liabilities at such date of determination.
"Control" shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of a
person, whether through the ownership of voting securities, by contract or
otherwise, and the terms "Controlling" and "Controlled" shall have meanings
correlative thereto.
<PAGE> 14
9
"Credit Event" shall have the meaning assigned to such term in Section
4.01.
"Default" shall mean any event or condition which upon notice, lapse of
time or both would constitute an Event of Default.
"Designated Preferred Stock" shall mean the 7% Cumulative Convertible
Preferred Stock of Allied in existence on the Closing Date.
"dollars" or "$" shall mean lawful money of the United States of
America.
"Domestic Subsidiaries" shall mean all Subsidiaries incorporated or
organized under the laws of the United States of America, any State thereof or
the District of Columbia.
"environment" shall mean ambient air, surface water and groundwater
(including potable water, navigable water and wetlands), the land surface or
subsurface strata or as otherwise defined in any Environmental Law.
"Environmental Claim" shall mean any written accusation, allegation,
notice of violation, claim, demand, order, directive, cost recovery action or
other cause of action by, or on behalf of, any Governmental Authority or any
person for damages, injunctive or equitable relief, personal injury (including
sickness, disease or death), Remedial Action costs, tangible or intangible
property damage, natural resource damages, nuisance, pollution, any adverse
effect on the environment caused by any Hazardous Material, or for fines,
penalties or restrictions, resulting from or based upon (a) the threat, the
existence, or the continuation of the existence, of a Release (including sudden
or non-sudden, accidental or non-accidental Releases), (b) exposure to any
Hazardous Material, (c) the presence, use, handling, transportation, storage,
treatment or disposal of any Hazardous Material or (d) the violation or alleged
violation of any Environmental Law or Environmental Permit.
"Environmental Law" shall mean any and all applicable present and
future treaties, laws, rules, regulations, codes, ordinances, orders, decrees,
judgments, injunctions, notices or binding agreements issued, promulgated or
entered into by any Governmental Authority, relating in any way to the
environment, preservation or reclamation of natural resources, the management,
Release or threatened Release of any Hazardous Material or to health and safety
matters, including the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended by the Superfund Amendments and
Reauthorization Act of 1986, 42 U.S.C. Sections 9601 et seq. (collectively
"CERCLA"), the Solid Waste Disposal Act, as amended by the Resource Conservation
and Recovery Act of 1976 and Hazardous and Solid Waste Amendments of 1984, 42
U.S.C. Sections 6901 et seq., the Federal Water Pollution Control Act, as
amended, 33 U.S.C. Sections 1251 et seq., the Clean Air Act of 1970, as amended,
42 U.S.C. Sections 7401 et seq., the Toxic Substances Control Act of 1976, 15
U.S.C. Sections 2601 et seq., the Occupational Safety and Health Act of 1970, as
amended, 29 U.S.C. Sections 651 et seq., the Emergency Planning and Community
Right-to-Know Act of 1986, 42 U.S.C. Sections 11001 et seq., the Safe Drinking
Water Act of 1974, as amended, 42 U.S.C. Sections 300(f) et seq., the Hazardous
Materials Transportation Act, 49 U.S.C. Sections 5101 et seq., and all
amendments or regulations promulgated under any of the foregoing.
"Environmental Permit" shall mean any permit, approval, authorization,
certificate, license, variance, filing or permission required by or from any
Governmental Authority pursuant to any Environmental Law.
<PAGE> 15
10
"Equity Issuance" shall mean any issuance or sale by Allied, the
Borrower or any of their respective subsidiaries of any shares of capital stock
or other equity securities of Allied, the Borrower or any such subsidiary or any
obligations convertible into or exchangeable for, or giving any person a right,
option or warrant to acquire such securities or such convertible or exchangeable
obligations, except in each case for (a) any issuance or sale to Allied, the
Borrower or any wholly owned Subsidiary, (b) any issuance of directors'
qualifying shares, and (c) sales or issuances of common stock (i) to management
or key employees of Allied under any employee stock option or stock purchase
plan in existence from time to time or (ii) pursuant to other employee benefit
plans in existence from time to time.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as the same may be amended from time to time.
"ERISA Affiliate" shall mean any trade or business (whether or not
incorporated) that, together with the Borrower, is treated as a single employer
under Section 414(b) or (c) of the Code, or solely for purposes of Section 302
of ERISA and Section 412 of the Code, is treated as a single employer under
Section 414 of the Code.
"ERISA Event" shall mean (a) any "reportable event", as defined in
Section 4043 of ERISA or the regulations issued thereunder, with respect to a
Plan; (b) the adoption of any amendment to a Plan that would require the
provision of security pursuant to Section 401(a)(29) of the Code or Section 307
of ERISA; (c) the existence with respect to any Plan of an "accumulated funding
deficiency" (as defined in Section 412 of the Code or Section 302 of ERISA),
whether or not waived; (d) the filing pursuant to Section 412(d) of the Code or
Section 303(d) of ERISA of an application for a waiver of the minimum funding
standard with respect to any Plan; (e) the incurrence of any liability under
Title IV of ERISA with respect to the termination of any Plan or the withdrawal
or partial withdrawal of the Borrower or any of its ERISA Affiliates from any
Plan or Multiemployer Plan; (f) the receipt by the Borrower or any ERISA
Affiliate from the PBGC or a plan administrator of any notice relating to the
intention to terminate any Plan or Plans or to appoint a trustee to administer
any Plan; (g) the receipt by the Borrower or any ERISA Affiliate of any notice
concerning the imposition of Withdrawal Liability or a determination that a
Multiemployer Plan is, or is expected to be, insolvent or in reorganization,
within the meaning of Title IV of ERISA; (h) the occurrence of a "prohibited
transaction" with respect to which the Borrower or any of its Subsidiaries is a
"disqualified person" (within the meaning of Section 4975 of the Code) or with
respect to which the Borrower or any such Subsidiary could otherwise be liable;
and (i) any other event or condition with respect to a Plan or Multiemployer
Plan that could reasonably be expected to result in liability of the Borrower.
"Eurodollar Borrowing" shall mean a Borrowing comprised of Eurodollar
Loans.
"Eurodollar Loan" shall mean any Eurodollar Revolving Loan or
Eurodollar Term Loan.
"Eurodollar Revolving Loan" shall mean any Revolving Loan bearing
interest at a rate determined by reference to the Adjusted LIBO Rate in
accordance with the provisions of Article II.
"Eurodollar Term Borrowing" shall mean a Borrowing comprised of
Eurodollar Term Loans.
"Eurodollar Term Loan" shall mean any Term Loan bearing interest at a
rate determined by reference to the Adjusted LIBO Rate in accordance with the
provisions of Article II.
<PAGE> 16
11
"Event of Default" shall have the meaning assigned to such term in
Article VII.
"Excess Cash Flow" shall mean, for any fiscal year, the excess of (a)
the sum, without duplication, of (i) Allied's Consolidated EBITDA, (ii) the net
cash proceeds received by Allied, the Borrower and its consolidated Subsidiaries
in connection with the issuance of debt or equity securities, the sale or other
disposition of assets or condemnation, casualty or other extraordinary events to
the extent not included in Allied's Consolidated EBITDA and to the extent used
for mandatory prepayments of the principal of the Loans in accordance with
Section 2.13 and (iii) an amount equal to any decrease in Consolidated Working
Capital during such fiscal year over (b) the sum, without duplication, of (i)
taxes paid or payable in cash by Allied, the Borrower and the Subsidiaries on a
consolidated basis during such fiscal year, (ii) Consolidated Interest Expense
paid in cash by Allied during such fiscal year, (iii) Capital Expenditures made
in cash and in accordance with Section 6.11 during such fiscal year, (iv)
expenditures made in cash for Permitted Acquisitions during such fiscal year to
the extent not made from the proceeds of other Indebtedness, (v) scheduled and,
in the case of purchase money Indebtedness only, mandatory principal repayments
of Indebtedness made by Allied, the Borrower and the Subsidiaries during such
fiscal year, (vi) optional and mandatory prepayments of the principal of Loans
during such period, but only to the extent that such prepayments cannot by their
terms be reborrowed or redrawn and do not occur in connection with a refinancing
of all or any portion of such Loans, (vii) an amount equal to any increase in
Consolidated Working Capital during such fiscal year, (viii) dividends or other
distributions made by Allied in cash that are permitted by Section 6.07, (ix) to
the extent not taken into account in determining Consolidated EBITDA, waste
disposal based royalty payments made in cash during such fiscal year by Allied,
the Borrower and the Subsidiaries, (x) an amount equal to any increase in
deferred acquisition costs and closure and post-closure obligations during such
fiscal year and (xi) extraordinary cash expenses (including extraordinary cash
expenses arising from acquisition and financing transactions) paid, if any, by
Allied, the Borrower and the Subsidiaries and not included in Allied's
Consolidated EBITDA.
"Existing Credit Agreement" shall have the meaning assigned to such
term in the Amendment Agreement.
"Existing Letter of Credit" shall mean each Letter of Credit previously
issued for the account of Allied or a Domestic Subsidiary that (a) is
outstanding on the Closing Date and (b) is listed on Schedule 1.01(b).
"Extraordinary Amount" shall mean any cash received by or paid to or
for the account of Allied, the Borrower or the Subsidiaries consisting of tax
refunds, pension plan reversions, proceeds of insurance, including as a result
of a Casualty Event, condemnation awards, including as a result of a
Condemnation Event (and payments in lieu thereof), indemnity payments and
payments in respect of judgments (including punitive damages); provided,
however, that an Extraordinary Amount shall not include (a) cash receipts
received from proceeds of insurance, condemnation awards (or payments in lieu
thereof), indemnity payments or payments in respect of judgments or settlements
to the extent that such proceeds, awards or payments in respect of loss or
damage to equipment, fixed assets or real property are applied to replace or
repair such equipment, fixed assets or real property or to acquire other assets
in the business of the Borrower and any of its subsidiaries to the extent such
replacement, repair or acquisition is not prohibited under the terms of the Loan
Documents, so long as (i) such application is commenced within 180 days after
the later of the occurrence of such loss or damage and the receipt of such
proceeds, awards or payments in respect thereof or (ii) there is a binding
agreement in effect as of the end of such 180 day period committing Allied, the
Borrower or any such Subsidiary,
<PAGE> 17
12
as applicable, to complete such application within a reasonable time after the
date of such agreement, (b) cash receipts received in the ordinary course of
business or (c) cash receipts received as a result of a tax refund relating to a
tax period prior to December 30, 1996 that are refunded to Laidlaw pursuant to
the terms of the Stock Purchase Agreement.
"Fee Letter" shall mean the Fee Letter dated April, 1997, between
Allied and the Administrative Agent.
"Fees" shall mean the Commitment Fees, the Administrative Agent's Fees,
the LC Participation Fees and the Issuing Bank Fees.
"Financial Officer" of any corporation shall mean the chief financial
officer, principal accounting officer, Treasurer or Controller of such
corporation.
"Fixed Charge Coverage Ratio" shall mean, as of the last day of any
fiscal quarter, the ratio of (a) the sum of (i) Allied's Consolidated EBITDA for
the period of four consecutive fiscal quarters ending on such day and (ii) Lease
Expense for such period to (b) the sum of (i) Allied's Consolidated Interest
Expense for such period, (ii) the aggregate amount of cash taxes paid by Allied,
the Borrower and the Subsidiaries, on a consolidated basis, during such period,
(iii) Lease Expense for such period, (iv) cash dividends on capital stock
declared by Allied, the Borrower or any Subsidiary during such period (other
than any such dividend payable to Allied, the Borrower or any wholly owned
Subsidiary) and (v) principal amounts that became payable (whether or not paid
and whether at the stated maturity, by acceleration or by reason of optional
prepayment or redemption or otherwise) by Allied, the Borrower or any Subsidiary
in respect of Indebtedness of Allied, the Borrower or the Subsidiaries (other
than (x) Indebtedness refinanced with Refinancing Indebtedness or with any Loan,
(y) principal or interest payments that are paid with the common stock of Allied
or (z) principal amounts of Loans that are prepaid pursuant to paragraph (b),
(c), (d), (e) or (f) of Section 2.13) during such period.
"Foreign Subsidiary" shall mean any Subsidiary that is not a Domestic
Subsidiary.
"GAAP" shall mean generally accepted accounting principles applied on a
consistent basis.
"Governmental Authority" shall mean any Federal, state, provincial,
municipal, local or foreign court or governmental agency, authority,
instrumentality or regulatory body.
"Guarantee" of or by any person shall mean any obligation, contingent
or otherwise, of such person guaranteeing or having the economic effect of
guaranteeing any Indebtedness of any other person (the "primary obligor") in any
manner, whether directly or indirectly, and including any obligation of such
person, direct or indirect, (a) to purchase or pay (or advance or supply funds
for the purchase or payment of) such Indebtedness or to purchase (or to advance
or supply funds for the purchase of) any security for the payment of such
Indebtedness, (b) to purchase or lease property, securities or services for the
purpose of assuring the owner of such Indebtedness of the payment of such
Indebtedness or (c) to maintain working capital, equity capital or any other
financial statement condition or liquidity of the primary obligor so as to
enable the primary obligor to pay such Indebtedness; provided, however, that the
term "Guarantee" shall not include endorsements for collection or deposit in the
ordinary course of business.
<PAGE> 18
13
"Guarantee Agreements" shall mean the Allied Finance Guarantee
Agreement, the Allied Guarantee Agreement and the Subsidiary Guarantee
Agreement.
"Guarantors" shall mean Allied, Allied Finance and the Subsidiary
Guarantors.
"Hazardous Materials" shall mean all explosive or radioactive
substances or wastes; hazardous or toxic substances or wastes; pollutants; and
solid, liquid or gaseous wastes, including petroleum or petroleum distillates,
asbestos or asbestos-containing materials, polychlorinated biphenyls ("PCBs") or
PCB-containing materials or equipment, radon gas, infectious or medical wastes
and all other substances or wastes of any nature to the extent regulated
pursuant to any Environmental Law.
"Indebtedness" of any person shall mean, without duplication, (a) all
obligations of such person for borrowed money, (b) all obligations of such
person evidenced by bonds, debentures, notes or similar instruments, (c) all
obligations of such person under conditional sale or other title retention
agreements relating to property or assets purchased by such person, (d) all
obligations of such person issued or assumed as the deferred purchase price of
property or services (excluding trade accounts payable and accrued obligations
incurred in the ordinary course of business and waste disposal based royalties),
(e) all Indebtedness of others secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any Lien on property owned or acquired by such person, whether or not the
obligations secured thereby have been assumed, (f) all Guarantees by such person
of Indebtedness of others, (g) all Capital Lease Obligations of such person, (h)
all net payment obligations of such person in respect of interest rate
protection agreements, foreign currency exchange agreements or other interest or
exchange rate hedging arrangements and (i) all obligations of such person as an
account party in respect of letters of credit and bankers' acceptances. The
Indebtedness of any person shall include the Indebtedness of any partnership in
which such person is a general partner.
"Indemnity, Subrogation and Contribution Agreement" shall mean the
Amended and Restated Indemnity, Subrogation and Contribution Agreement,
substantially in the form of Exhibit G, among the Borrower, the Subsidiary
Guarantors and the Collateral Agent.
"Indenture Trustee" shall mean First Bank National Association, as
trustee under the Senior Subordinated Notes Indenture.
"Interest Expense Coverage Ratio" shall mean, as of the last day of any
fiscal quarter, the ratio of (a) Allied's Consolidated EBITDA for the period of
four consecutive fiscal quarters ended on such day to (b) Allied's Consolidated
Interest Expense for such period; provided, however, that (i) for the fiscal
quarter ended June 30, 1997, "Interest Expense Coverage Ratio" shall mean, as of
the last day of such fiscal quarter, the ratio of (x) Allied's Consolidated
EBITDA for the two fiscal quarter period ending on such date to (y) Allied's
Consolidated Interest Expense for the two fiscal quarter period ending on such
date; and (ii) for the fiscal quarter ended September 30, 1997, "Interest
Expense Coverage Ratio" shall mean, as of the last day of such fiscal quarter,
the ratio of (x) Allied's Consolidated EBITDA for the three fiscal quarter
period ending on such date to (y) Allied's Consolidated Interest Expense for the
three fiscal quarter period ending on such date.
"Interest Payment Date" shall mean, with respect to any Loan, the last
day of the Interest Period applicable to the Borrowing of which such Loan is a
part and, in the case of a Eurodollar
<PAGE> 19
14
Borrowing with an Interest Period of more than three months' duration, each day
that would have been an Interest Payment Date had successive Interest Periods of
three months' duration been applicable to such Borrowing, and, in addition, the
date of any prepayment of such Borrowing or conversion of such Borrowing to a
Borrowing of a different Type.
"Interest Period" shall mean (a) as to any Eurodollar Borrowing, the
period commencing on the date of such Borrowing and ending on the numerically
corresponding day (or, if there is no numerically corresponding day, on the last
day) in the calendar month that is 1, 2, 3 or 6 months thereafter, as the
Borrower may elect and (b) as to any Base Rate Borrowing, the period commencing
on the date of such Borrowing and ending on the earliest of (i) the last
Business Day of the next succeeding March, June, September or December, (ii) the
Maturity Date and (iii) the date such Borrowing is converted to a Borrowing of a
different Type in accordance with Section 2.10 or repaid or prepaid in
accordance with Section 2.11, 2.12 or 2.13; provided, however, that if any
Interest Period would end on a day other than a Business Day, such Interest
Period shall be extended to the next succeeding Business Day unless, in the case
of a Eurodollar Borrowing only, such next succeeding Business Day would fall in
the next calendar month, in which case such Interest Period shall end on the
next preceding Business Day. Interest shall accrue from and including the first
day of an Interest Period to but excluding the last day of such Interest Period.
"Interest Rate Protection Agreement" shall mean any interest rate swap,
cap or other agreement satisfactory to the Administrative Agent entered into by
the Borrower with a counterparty that, as of the date of such swap, cap or other
agreement, is a Lender (or an affiliate of a Lender) and is designed to protect
the Borrower against fluctuations in interest rates and not for speculation.
"Issuing Bank" shall mean, as the context may require, (a) (i) Credit
Suisse First Boston, with respect to Letters of Credit issued by Credit Suisse
First Boston pursuant to this Agreement, (ii) any Lender, with respect to the
applicable Letters of Credit, appointed by the Administrative Agent in
accordance with the last paragraph of Section 2.23(i) and (iii) with respect to
each Existing Letter of Credit, the issuer thereof, or (b) collectively, all the
foregoing.
"Issuing Bank Fees" shall have the meaning assigned to such term in
Section 2.05(c).
"Junior Exchange Indebtedness" shall mean Indebtedness of Allied, the
Borrower or any Subsidiary incurred after the Closing Date in exchange for
Designated Preferred Stock and that (i) requires no payment of principal prior
to a date that is at least one year after the Maturity Date, (ii) provides for
interest payments not to exceed the existing dividends on the Designated
Preferred Stock exchanged therefor and (iii) contains subordination language and
intercreditor provisions no more favorable to the holders thereof than the
provisions attached hereto as Exhibit L. Notwithstanding the foregoing, without
the consent of the Required Lenders, the terms of any Junior Exchange
Indebtedness shall prohibit the holders of such Indebtedness from (A) increasing
the interest payments thereof or causing the same to occur more frequently, (B)
accelerating or amending the scheduled maturity to a date earlier than scheduled
at the time of the incurrence of such Indebtedness or (C) otherwise exercising
any remedy upon any default under such Indebtedness.
"Laidlaw" shall mean Laidlaw Inc., a Canadian corporation.
"Laidlaw Debentures" shall mean the debentures issued by Allied Finance
to Laidlaw on December 30, 1996, and purchased by Allied from Laidlaw on May 15,
1997.
<PAGE> 20
15
"L/C Commitment" shall mean the commitment of the Issuing Bank to issue
Letters of Credit pursuant to Section 2.23.
"L/C Disbursement" shall mean a payment or disbursement made by the
Issuing Bank pursuant to a Letter of Credit.
"L/C Exposure" shall mean at any time the sum of (a) the aggregate
undrawn amount of all outstanding Letters of Credit at such time plus (b) the
aggregate principal amount of all L/C Disbursements that have not yet been
reimbursed at such time. The L/C Exposure of any Revolving Credit Lender at any
time shall mean its Pro Rata Percentage of the aggregate L/C Exposure at such
time.
"L/C Participation Fee" shall have the meaning assigned to such term in
Section 2.05(c).
"Lease Expense" shall mean, for any period, the aggregate amount of
fixed and contingent rentals payable by Allied, the Borrower and the
Subsidiaries, on a consolidated basis, for such period with respect to operating
leases of real and personal property.
"Lenders" shall mean (a) the financial institutions listed on Schedule
2.01 (other than any such financial institution that has ceased to be a party
hereto pursuant to an Assignment and Acceptance) and (b) any financial
institution that has become a party hereto pursuant to an Assignment and
Acceptance. Unless the context clearly indicates otherwise, the term "Lenders"
shall include the Swingline Lender.
"Letter of Credit" shall mean, unless the context otherwise requires,
(a) any letter of credit issued pursuant to Section 2.23 and (b) any Existing
Letter of Credit.
"Leverage Ratio" shall mean, as of the last day of any fiscal quarter,
the ratio of (a) Total Debt as of such date to (b) Allied's Consolidated EBITDA
for the period of four consecutive fiscal quarters ended on such date. For
purposes of this definition, Allied's Consolidated EBITDA for each of the four
fiscal quarter periods ending June 30, 1997, and September 30, 1997, shall be
deemed to equal Allied's Consolidated EBITDA for the period commencing on
January 1, 1997, and ending on (i) June 30, 1997, multiplied by 2 and (ii)
September 30, 1997, multiplied by 4/3, as applicable.
"LIBO Rate" shall mean, with respect to any Eurodollar Borrowing for
any Interest Period, the rate per annum determined by the Administrative Agent
at approximately 11:00 a.m. (London time) on the applicable interest rate date
of determination by reference to the British Bankers' Association Interest
Settlement Rates for deposits in Dollars (as set forth by any service selected
by the Administrative Agent that has been nominated by the British Bankers'
Association as an authorized information vendor for the purpose of displaying
such rates) for a period equal to the relevant Interest Period (rounded upward
to the nearest whole multiple of one-sixteenth of one percent (0.0625%));
provided that to the extent that an interest rate is not ascertainable pursuant
to the foregoing provisions of this definition, the "LIBO Rate" shall be the
interest rate per annum determined by the Administrative Agent to be the average
(rounded upward to the nearest whole multiple of one-sixteenth of one percent
(0.0625%) per annum, if such average is not a multiple) of the rates per annum
at which deposits in dollars are offered to major banks in the London interbank
market in London, England by the Reference Banks at approximately 11:00 a.m.
(London time) on the applicable interest rate date of determination for such
Interest Period.
<PAGE> 21
16
"Lien" shall mean, with respect to any asset, (a) any mortgage, deed of
trust, lien, pledge, encumbrance, charge (fixed or floating) or security
interest in or on such asset, (b) the interest of a vendor or a lessor under any
conditional sale agreement, capital lease or title retention agreement (or any
financing lease having substantially the same economic effect as any of the
foregoing) relating to such asset and (c) in the case of securities, any
purchase option, call or similar right of a third party with respect to such
securities.
"Loan Documents" shall mean this Agreement, the Letters of Credit (and
any related Letter of Credit application or reimbursement agreement), the
Guarantee Agreements, the Security Documents and the Indemnity, Subrogation and
Contribution Agreement.
"Loan Parties" shall mean the Borrower and the Guarantors.
"Loans" shall mean the Revolving Loans, the Term Loans, and the
Swingline Loans.
"Margin Stock" shall have the meaning assigned to such term in
Regulation U.
"Material Adverse Effect" shall mean (a) a materially adverse effect on
the business, assets, operations, prospects or condition, financial or
otherwise, of Allied, the Borrower and the Subsidiaries, taken as a whole, (b)
material impairment of the ability of the Borrower to perform its obligations
under the Loan Documents to which it is or will be a party or (c) material
impairment of the rights of or benefits available to the Lenders under the Loan
Documents.
"Material Agreements" shall have the meaning assigned to such term in
Section 5.13.
"Maturity Date" shall mean the date that is six years and six months
after the Closing Date.
"Multiemployer Plan" shall mean a multiemployer plan as defined in
Section 4001(a)(3) of ERISA.
"Net Cash Proceeds" shall mean (a) with respect to any Asset Sale, the
cash proceeds thereof (including cash and cash equivalents and cash payments
received by way of deferred payment of principal pursuant to a note or
installment receivable or otherwise, but only as and when received), net of (i)
costs of sale (including payment of the outstanding principal amount of, premium
or penalty, if any, interest and other amounts on any Indebtedness (other than
Loans) secured by a Lien permitted pursuant to Section 6.02 on such assets and
required to be repaid under the terms thereof as a result of such Asset Sale),
(ii) taxes paid or payable in the year such Asset Sale occurs or in the
following year as a result thereof and (iii) amounts provided as a reserve, in
accordance with GAAP, against any liabilities under any indemnification
obligations associated with such Asset Sale (except that, to the extent and at
the time any such amounts are released from such reserve, such amounts shall
constitute Net Cash Proceeds); provided, however, that, with respect to any
Asset Sale, the proceeds of which are equal to or less than $25,000,000 (or if
the Senior Debt Ratio as of the last fiscal quarter for which financial
statements have been delivered to the Administrative Agent preceding such Asset
Sale is less than 2.50 to 1.00, $50,000,000), if the Borrower shall deliver a
certificate of a Financial Officer to the Administrative Agent at the time of
any Asset Sale setting forth the Borrower's intent to use the proceeds of such
Asset Sale to replace or repair the assets that are the subject of such Asset
Sale within 180 days of receipt of such proceeds and no Default shall have
occurred and shall be continuing at the time of such certificate or at the
proposed time of the application of such proceeds,
<PAGE> 22
17
such proceeds shall not constitute Net Cash Proceeds except to the extent not so
used within such 180-day period, at which time such proceeds shall be deemed Net
Cash Proceeds, and (b) with respect to any Equity Issuance or any issuance or
other disposition of Indebtedness for borrowed money, the cash proceeds thereof
net of (i) underwriting commissions or placement fees and expenses directly
incurred in connection therewith and (ii) the outstanding principal amount of,
premium or penalty, if any, interest and other amounts paid on Indebtedness
refinanced with the proceeds of such Equity Issuance or such Indebtedness,
provided such Indebtedness, by its terms, cannot be reborrowed.
"Obligation Currency" shall have the meaning assigned to such term in
Section 9.16.
"Obligations" shall mean all obligations defined as "Obligations" in
the Guarantee Agreements and the Security Documents.
"PBGC" shall mean the Pension Benefit Guaranty Corporation referred to
and defined in ERISA.
"Perfection Schedule" shall mean the Perfection Schedule substantially
in the form of Annex 1 to the Security Agreement.
"Permitted Acquisition" shall have the meaning assigned to such term in
Section 6.05(j).
"Permitted Capital Expenditures" shall mean Capital Expenditures not in
excess of:
(a) for the fiscal year ending December 31, 1997, $134,000,000
(the "1997 Base Amount");
(b) for the fiscal year ending December 31, 1998, $177,000,000
(the "1998 Base Amount");
(c) for the fiscal year ending December 31, 1999, $212,000,000
(the "1999 Base Amount");
(d) for the fiscal year ending December 31, 2000, the sum of
(i) $212,000,000 (the "2000 Base Amount"), plus (ii) 25% of Acquired
Revenues for the fiscal year ending December 31, 2000, with respect to
Acquired Businesses acquired during such fiscal year;
(e) for the fiscal year ending December 31, 2001, the sum of
(i) $212,000,000 (the "2001 Base Amount"), plus (ii) 25% of Acquired
Revenues for the fiscal year ending December 31, 2001, with respect to
Acquired Businesses acquired during such fiscal year, plus (iii) 15% of
Acquired Revenues for the fiscal year ending December 31, 2000, with
respect to Acquired Businesses acquired during such fiscal year;
(f) for the fiscal year ending December 31, 2002, the sum of
(i) $212,000,000 (the "2002 Base Amount"), plus (ii) 25% of Acquired
Revenues for the fiscal year ending December 31, 2002, with respect to
Acquired Businesses acquired during such fiscal year, plus (iii) 15% of
Acquired Revenues for the two fiscal year period ending December 31,
2001, with respect to Acquired Businesses acquired during such period;
and
<PAGE> 23
18
(g) for the fiscal year ending December 31, 2003, the sum of
(i) $212,000,000 (the "2003 Base Amount"), plus (ii) 25% of Acquired
Revenues for the fiscal year ending December 31, 2003, with respect to
Acquired Businesses acquired during such fiscal year, plus (iii) 15% of
Acquired Revenues for the three fiscal year period ending December 31,
2002, with respect to Acquired Businesses acquired during such period.
The 1997, 1998, 1999, 2000, 2001, 2002 and 2003 Base Amounts referred to above
shall be referred to herein collectively as the "Base Amounts".
"Permitted Dividend" shall mean cash dividends or advances to Allied so
long as Allied promptly, and in any event within five Business Days, utilizes
the full amount of such cash dividends or advances, as applicable, for the sole
purpose of paying interest as and when due with respect to the Allied Senior
Notes then outstanding to the extent required to be made in accordance with the
terms of the Allied Senior Notes as in effect on the Closing Date and without
giving effect to any amendment or modification thereof unless agreed to in
writing by the Required Lenders; provided, that (a) the amount of such cash
dividends or advances, as applicable, paid pursuant to this definition shall not
exceed the amount necessary to make such required interest payment in accordance
with the terms of the Allied Senior Notes, (b) no such payment shall be made at
any time when the payment of cash interest on the Allied Senior Notes is not
required to be made pursuant to the provisions thereof and (c) after giving
effect to any such dividend or advances, as applicable, (i) the Borrower shall
be in compliance with all covenants set forth in this Agreement and (ii) no
Default or Event of Default shall have occurred and be continuing.
"Permitted Investments" shall mean:
(a) direct obligations of, or obligations the principal of and
interest on which are unconditionally guaranteed by, the United States
of America (or by any agency thereof to the extent such obligations are
backed by the full faith and credit of the United States of America),
in each case maturing within one year from the date of acquisition
thereof;
(b) investments in commercial paper maturing within 270 days
from the date of acquisition thereof and having, at such date of
acquisition, the highest credit rating obtainable from Standard &
Poor's Ratings Service or from Moody's Investors Service, Inc.;
(c) investments in certificates of deposit, banker's
acceptances, time deposits and demand deposits maturing within one year
from the date of acquisition thereof issued or guaranteed by or placed
with, and money market deposit accounts issued or offered by, any
domestic office of any commercial bank organized under the laws of the
United States of America or any State thereof that has a combined
capital and surplus and undivided profits of not less than
$500,000,000;
(d) demand deposits made in the ordinary course of business
and consistent with the Borrower'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;
(e) insured deposits issued by commercial banks of the type
described in clause (d) above;
<PAGE> 24
19
(f) repurchase obligations with a term of not more than 90
days for, and secured by, underlying securities of the types described
in clauses (a) through (c) above entered into with a bank meeting the
qualifications described in clause (c) above.
(g) mutual funds whose investment guidelines restrict such
funds' investments primarily to those satisfying the provisions of
clauses (a) through (c) above; and
(h) other investment instruments approved in writing by the
Administrative Agent and offered by financial institutions which have a
combined capital and surplus and undivided profits of not less than
$500,000,000.
"person" shall mean any natural person, corporation, business trust,
joint venture, association, company (including limited liability company),
partnership or government, or any agency or political subdivision thereof.
"Plan" shall mean any employee pension benefit plan (other than a
Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section
412 of the Code or Section 307 of ERISA, and in respect of which the Borrower or
any ERISA Affiliate is (or, if such plan were terminated, would under Section
4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of
ERISA.
"Pledge Agreement" shall mean the Amended and Restated Pledge
Agreement, substantially in the form of Exhibit H, between the Borrower, Allied,
the Subsidiaries party thereto and the Collateral Agent for the benefit of the
Secured Parties.
"Pledge Intercreditor Agreement" shall mean the Pledge Intercreditor
Agreement, dated as of December 30, 1996, between the Collateral Agent and the
Indenture Trustee.
"Preferred Stock" shall mean the preferred stock of the Borrower set
forth on Schedule 4.02(p).
"Pro Rata Percentage" of any Revolving Credit Lender at any time shall
mean the percentage of the Total Revolving Credit Commitment represented by such
Lender's Revolving Credit Commitment.
"Properties" shall have the meaning assigned to such term in Section
3.17.
"Reference Banks" shall mean Credit Suisse First Boston, Citibank, N.A.
and Bank Boston N.A.
"Refinancing Indebtedness" shall have the meaning assigned to such term
in Section 6.01(n).
"Register" shall have the meaning given such term in Section 9.04(d).
"Regulation G" shall mean Regulation G of the Board as from time to
time in effect and all official rulings and interpretations thereunder or
thereof.
<PAGE> 25
20
"Regulation T" shall mean Regulation T of the Board as from time to
time in effect and all official rulings and interpretations thereunder or
thereof.
"Regulation U" shall mean Regulation U of the Board as from time to
time in effect and all official rulings and interpretations thereunder or
thereof.
"Regulation X" shall mean Regulation X of the Board as from time to
time in effect and all official rulings and interpretations thereunder or
thereof.
"Related Fund" shall mean, with respect to any Lender that is a fund
which invests in loans, any other fund that invests in loans and is managed by
the same investment advisor as such Lender or by an Affiliate of such investment
advisor.
"Release" shall mean any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping, disposing,
depositing, dispersing, emanating or migrating of any Hazardous Material in,
into, onto or through the environment.
"Remedial Action" shall mean (a) "remedial action" as such term is
defined in CERCLA, 42 U.S.C. Section 9601(24), and (b) all other actions
required by any Governmental Authority or voluntarily undertaken to: (i)
cleanup, remove, treat, abate or in any other way address any Hazardous Material
in the environment; (ii) prevent the Release or threat of Release, or minimize
the further Release of any Hazardous Material so it does not migrate or endanger
or threaten to endanger public health, welfare or the environment; or (iii)
perform studies and investigations in connection with, or as a precondition to,
(i) or (ii) above.
"Required Lenders" shall mean, at any time, Lenders having Revolving
Loans, Term Loans (or, prior to the Closing Date, Term Loan Commitments), L/C
Exposure, Swingline Exposure and unused Revolving Credit Commitments
representing at least a majority of the sum of all Revolving Loans outstanding,
Term Loans (or, prior to the Closing Date, Term Loan Commitments) outstanding,
L/C Exposure, Swingline Exposure and unused Revolving Credit Commitments at such
time.
"Responsible Officer" of any corporation shall mean any executive
officer or Financial Officer of such corporation and any other officer or
similar official thereof responsible for the administration of the obligations
of such corporation in respect of this Agreement.
"Restatement Closing Date" shall have the meaning assigned to such term
in the Amendment Agreement.
"Revolving Credit Borrowing" shall mean a Borrowing comprised of
Revolving Loans.
"Revolving Credit Commitment" shall mean, with respect to each Lender,
the commitment of such Lender to make Revolving Loans hereunder as set forth on
Schedule 2.01, or in the Assignment and Acceptance pursuant to which such Lender
assumed its Revolving Credit Commitment, as applicable, as the same may be (a)
reduced from time to time pursuant to Section 2.09, 2.11(a)(v), 2.12 or 2.13 and
(b) reduced or increased from time to time pursuant to assignments by or to such
Lender pursuant to Section 9.04.
<PAGE> 26
21
"Revolving Credit Exposure" shall mean, with respect to any Lender at
any time, the aggregate principal amount at such time of all outstanding
Revolving Loans of such Lender, plus the aggregate amount at such time of such
Lender's L/C Exposure, plus the aggregate amount at such time of such Lender's
Swingline Exposure.
"Revolving Credit Lender" shall mean a Lender with a Revolving Credit
Commitment.
"Revolving Loans" shall mean the revolving loans made by the Lenders to
the Borrower pursuant to clause (e) of Section 2.01. Each Revolving Loan shall
be a Eurodollar Revolving Loan or a Base Rate Revolving Loan.
"Secured Parties" shall have the meaning assigned to such term in the
Security Agreement.
"Security Agreement" shall mean the Amended and Restated Security
Agreement, substantially in the form of Exhibit I, between the Borrower, the
Subsidiaries party thereto and the Collateral Agent for the benefit of the
Secured Parties.
"Security Documents" shall mean (a) the Security Agreement, the Pledge
Agreement, the Allied Finance Pledge Agreement and (b) each other security
agreement, mortgage or other instrument or document executed and delivered by
Allied, the Borrower or a Domestic Subsidiary pursuant to any of the foregoing
or pursuant to Section 5.11.
"Senior Convertible Debentures" shall mean the 8-1/2% Senior
Convertible Subordinated Debentures due 2002 of Allied.
"Senior Debt" shall mean Total Debt but excluding (a) the Senior
Subordinated Notes , (b) the Senior Convertible Debentures, (c) the Allied
Senior Notes and (d) other Indebtedness that is permitted hereunder and is
subordinated to the Obligations substantially to the same extent as the Senior
Subordinated Notes.
"Senior Debt Ratio" shall mean, as of the last day of any fiscal
quarter, the ratio of (a) Senior Debt as of such date to (b) Allied's
Consolidated EBITDA for the period of four consecutive fiscal quarters ended on
such date. For purposes of this definition, Allied's Consolidated EBITDA for
each of the four fiscal quarter periods ending March 31, 1997, June 30, 1997,
and September 30, 1997, shall be deemed to equal Allied's Consolidated EBITDA
for the period commencing on January 1, 1997, and ending on (i) March 31, 1997,
multiplied by 4, (ii) June 30, 1997, multiplied by 2 and (iii) September 30,
1997, multiplied by 4/3, as applicable.
"Senior Subordinated Notes" shall mean the 10-1/4% Senior Subordinated
Notes due 2006 issued by the Borrower on December 5, 1996, in an aggregate
principal amount of $525,000,000.
"Senior Subordinated Notes Indenture" shall mean the Indenture dated as
of December 1, 1996, as amended, among the Borrower, Allied, the Subsidiaries
party thereto and the Indenture Trustee.
"Specialized Waste" shall mean Specialized Waste Systems, Inc., a Texas
corporation.
<PAGE> 27
22
"Statutory Reserves" shall mean a fraction (expressed as a decimal),
the numerator of which is the number one and the denominator of which is the
number one minus the aggregate of the applicable reserve percentages (including
any marginal, special, emergency or supplemental reserves) expressed as a
decimal established by the Board and any other banking authority, domestic or
foreign, to which the Administrative Agent (including any branch, Affiliate, or
other fronting office making or holding a Loan) is subject (a) with respect to
the Base CD Rate, for new negotiable nonpersonal time deposits in dollars of
over $100,000 with maturities approximately equal to three months, and (b) with
respect to the Adjusted LIBO Rate, for Eurocurrency Liabilities (as defined in
Regulation D of the Board). Such reserve percentages shall include those imposed
pursuant to such Regulation D. Eurodollar Loans shall be deemed to constitute
Eurocurrency Liabilities and to be subject to such reserve requirements without
benefit of or credit for proration, exemptions or offsets that may be available
from time to time to any Lender under such Regulation D. Statutory Reserves
shall be adjusted automatically on and as of the effective date of any change in
any reserve percentage.
"Stock Purchase Agreement" shall mean the stock purchase agreement
dated as of September 17, 1996, as amended, among Allied, certain subsidiaries
of Allied, Laidlaw and certain subsidiaries of Laidlaw.
"subsidiary" shall mean, with respect to any person (herein referred to
as the "parent"), any corporation, partnership, association or other business
entity of which securities or other ownership interests representing more than
50% of the equity or more than 50% of the ordinary voting power or more than 50%
of the general partnership interests are, at the time any determination is being
made, owned, controlled or held.
"Subsidiary" shall mean any subsidiary of Allied (other than the
Borrower, unless the context otherwise requires).
"Subsidiary Guarantee Agreement" shall mean the Amended and Restated
Subsidiary Guarantee Agreement, substantially in the form of Exhibit J, made by
the Subsidiary Guarantors in favor of the Collateral Agent for the benefit of
the Secured Parties.
"Subsidiary Guarantor" shall mean each Subsidiary listed on Schedule
1.01(c), and each other Subsidiary that becomes a party to the Subsidiary
Guarantee Agreement.
"Swingline Commitment" shall mean the commitment of the Swingline
Lender to make loans pursuant to Section 2.22, as the same may be reduced from
time to time pursuant to Section 2.09.
"Swingline Exposure" shall mean at any time the aggregate principal
amount at such time of all outstanding Swingline Loans. The Swingline Exposure
of any Revolving Credit Lender at any time shall equal its Pro Rata Percentage
of the aggregate Swingline Exposure at such time.
"Swingline Loan" shall mean any loan made by the Swingline Lender
pursuant to Section 2.22.
"Term Borrowing" shall mean a Borrowing comprised of Term Loans.
"Term Loan Commitments" shall mean, with respect to each Lender, the
commitment of such Lender to make Term Loans hereunder as set forth on Schedule
2.01, or in the Assignment and
<PAGE> 28
23
Acceptance pursuant to which such Lender assumed its Term Loan Commitment, as
applicable, as the same may be (a) reduced from time to time pursuant to Section
2.09 and (b) reduced or increased from time to time pursuant to assignments by
or to such Lender pursuant to Section 9.04.
"Term Loan Repayment Amounts" shall have the meaning assigned to such
term in Section 2.11(a)(i).
"Term Loan Repayment Date" shall have the meaning assigned to such term
in Section 2.11(a)(i).
"Term Loans" shall mean the term loans made by the Lenders to the
Borrower pursuant to clause (a) of Section 2.01. Each Term Loan shall be either
a Eurodollar Term Loan or a Base Rate Term Loan.
"Total Debt" shall mean, with respect to Allied, the Borrower and the
Subsidiaries on a consolidated basis at any time, all Indebtedness (other than
Junior Exchange Indebtedness, the Laidlaw Debentures and Indebtedness described
in clause (h) of the definition of the term "Indebtedness") of Allied, the
Borrower and the Subsidiaries which at such time, would be required to be
reflected as a liability for borrowed money on a consolidated balance sheet of
Allied, the Borrower and the Subsidiaries prepared in accordance with GAAP.
"Total Revolving Credit Commitment" shall mean, at any time, the
aggregate amount of the Revolving Credit Commitments, as in effect at such time.
"Transactions" shall have the meaning assigned to such term in Section
3.02.
"Type", when used in respect of any Loan or Borrowing, shall refer to
the Rate by reference to which interest on such Loan or on the Loans comprising
such Borrowing is determined. For purposes hereof, the term "Rate" shall include
the Adjusted LIBO Rate and the Base Rate.
"wholly owned Subsidiary" of any person shall mean a subsidiary of such
person of which securities (except for directors' qualifying shares) or other
ownership interests representing 100% of the equity or 100% of the ordinary
voting power or 100% of the general partnership interests are, at the time any
determination is being made, owned, controlled or held by such person or one or
more wholly owned subsidiaries of such person or by such person and one or more
wholly owned subsidiaries of such person.
"Withdrawal Liability" shall mean liability to a Multiemployer Plan as
a result of a complete or partial withdrawal from such Multiemployer Plan, as
such terms are defined in Part I of Subtitle E of Title IV of ERISA.
SECTION 1.02. Terms Generally. The definitions in Section 1.01 shall
apply equally to both the singular and plural forms of the terms defined.
Whenever the context may require, any pronoun shall include the corresponding
masculine, feminine and neuter forms. The words "include", "includes" and
"including" shall be deemed to be followed by the phrase "without limitation".
All references herein to Articles, Sections, Exhibits and Schedules shall be
deemed references to Articles and Sections of, and Exhibits and Schedules to,
this Agreement unless the context shall otherwise require. Except as otherwise
expressly provided herein, (a) any reference in this Agreement to any
<PAGE> 29
24
Loan Document shall mean such document as amended, restated, supplemented or
otherwise modified from time to time and (b) all terms of an accounting or
financial nature shall be construed in accordance with GAAP, as in effect from
time to time; provided, however, that for purposes of determining compliance
with the covenants contained in Article VI, all accounting terms herein shall be
interpreted and all accounting determinations hereunder shall be made in
accordance with GAAP as in effect on the date of this Agreement and applied on a
basis consistent with the application used in the financial statements referred
to in Section 3.05(a).
ARTICLE II
The Credits
SECTION 2.01. Commitments. Subject to the terms and conditions and
relying upon the representations and warranties herein set forth, each Lender
agrees, severally and not jointly, (a) to make Term Loans to the Borrower on the
Closing Date in an aggregate principal amount not to exceed its Term Loan
Commitment and (b) to make Revolving Loans to the Borrower, at any time and from
time to time on or after the date hereof, and until the earlier of the Maturity
Date and the termination of the Revolving Credit Commitment of such Lender in
accordance with the terms hereof, in an aggregate principal amount at any time
outstanding that will not result in (i) such Lender's Revolving Credit Exposure
exceeding (ii) such Lender's Revolving Credit Commitment. Within the limits set
forth in clause (b) of the preceding sentence and subject to the terms,
conditions and limitations set forth herein, the Borrower may borrow, pay or
prepay and reborrow Revolving Loans. Amounts paid or prepaid in respect of Term
Loans may not be reborrowed.
SECTION 2.02. Loans. (a) Each Loan (other than Swingline Loans) shall
be made as part of a Borrowing consisting of Loans made by the Lenders ratably
in accordance with their respective Revolving Credit Commitments or Term Loan
Commitments, as applicable; provided, however, that the failure of any Lender to
make any Loan shall not in itself relieve any other Lender of its obligation to
lend hereunder (it being understood, however, that no Lender shall be
responsible for the failure of any other Lender to make any Loan required to be
made by such other Lender). Except for Loans deemed made pursuant to Section
2.02(f), the Loans comprising any Borrowing shall be in an aggregate principal
amount that is (i) an integral multiple of $1,000,000 and not less than
$5,000,000 or (ii) equal to the remaining available balance of the applicable
Commitments.
(b) Subject to Sections 2.08 and 2.15, each Borrowing shall be
comprised entirely of Base Rate Loans or Eurodollar Loans as the Borrower may
request pursuant to Section 2.03. Each Lender may at its option make any
Eurodollar Loan by causing any domestic or foreign branch or Affiliate of such
Lender to make such Loan; provided that any exercise of such option shall not
affect the obligation of the Borrower to repay such Loan in accordance with the
terms of this Agreement. Borrowings of more than one Type may be outstanding at
the same time; provided, however, that the Borrower shall not be entitled to
request any Borrowing that, if made, would result in more than 20 Eurodollar
Borrowings outstanding hereunder at any time. For purposes of the foregoing,
Borrowings having different Interest Periods, regardless of whether they
commence on the same date, shall be considered separate Borrowings.
(c) Except with respect to Loans made pursuant to Section 2.02(f), each
Lender shall make each Loan to be made by it hereunder on the proposed date
thereof by wire transfer of immediately
<PAGE> 30
25
available funds to such account in New York City as the Administrative Agent may
designate not later than 12:00 (noon), New York City time, and the
Administrative Agent shall by 1:00 p.m., New York City time, credit the amounts
so received to an account in the name of the Borrower designated by the Borrower
in the applicable Borrowing Request or, if a Borrowing shall not occur on such
date because any condition precedent herein specified shall not have been met,
return the amounts so received to the respective Lenders.
(d) Unless the Administrative Agent shall have received notice from a
Lender prior to the date of any Borrowing that such Lender will not make
available to the Administrative Agent such Lender's portion of such Borrowing,
the Administrative Agent may assume that such Lender has made such portion
available to the Administrative Agent on the date of such Borrowing in
accordance with paragraph (c) above and the Administrative Agent may, in
reliance upon such assumption, make available to the Borrower on such date a
corresponding amount. If the Administrative Agent shall have so made funds
available then, to the extent that such Lender shall not have made such portion
available to the Administrative Agent, such Lender and the Borrower severally
agree to repay to the Administrative Agent forthwith on demand such
corresponding amount together with interest thereon, for each day from the date
such amount is made available to the Borrower until the date such amount is
repaid to the Administrative Agent at (i) in the case of the Borrower, the
interest rate applicable at the time to the Loans comprising such Borrowing and
(ii) in the case of such Lender, for the first such day, the Federal Funds
Effective Rate, and for each day thereafter, the Base Rate. If such Lender shall
repay to the Administrative Agent such corresponding amount, such amount shall
constitute such Lender's Loan as part of such Borrowing for purposes of this
Agreement, and the Borrower shall be relieved of its obligation pursuant to the
preceding sentence to repay such amount or, if such amount has theretofore been
repaid by the Borrower to the Administrative Agent, the Administrative Agent
shall make such corresponding amount available to the Borrower.
(e) Notwithstanding any other provision of this Agreement, the Borrower
shall not be entitled to request any Revolving Credit Borrowing or Term
Borrowing if the Interest Period requested with respect thereto would end after
the Maturity Date.
(f) If the Issuing Bank shall not have received from the Borrower or
Allied, as the case may be, the payment required to be made by Section 2.23(e)
within the time specified in such Section, the Issuing Bank will promptly notify
the Administrative Agent of the L/C Disbursement and the Administrative Agent
will promptly notify each Revolving Credit Lender of such L/C Disbursement and
its Pro Rata Percentage thereof. Each Revolving Credit Lender shall pay by wire
transfer of immediately available funds to the Administrative Agent not later
than 2:00 p.m., New York City time, on such date (or, if such Revolving Credit
Lender shall have received such notice later than 12:00 (noon), New York City
time, on any day, not later than 12:00 (noon), New York City time, on the
immediately following Business Day), an amount equal to such Lender's Pro Rata
Percentage of such L/C Disbursement (it being understood that such amount shall
be deemed to constitute a Base Rate Revolving Loan of such Lender and such
payment shall be deemed to have reduced the L/C Exposure), and the
Administrative Agent will promptly pay to the Issuing Bank amounts so received
by it from the Revolving Credit Lenders. The Administrative Agent will promptly
pay to the Issuing Bank any amounts received by it from the Borrower pursuant to
Section 2.23(e) prior to the time that any Revolving Credit Lender makes any
payment pursuant to this paragraph (f); any such amounts received by the
Administrative Agent thereafter will be promptly remitted by the Administrative
Agent to the Revolving Credit Lenders that shall have made such payments and to
the Issuing Bank, as their interests may appear. If any Revolving Credit Lender
shall not have made its Pro Rata Percentage of
<PAGE> 31
26
such L/C Disbursement available to the Administrative Agent as provided above,
such Lender and the Borrower or Allied, as the case may be, severally agree to
pay interest on such amount, for each day from and including the date such
amount is required to be paid in accordance with this paragraph to but excluding
the date such amount is paid, to the Administrative Agent for the account of the
Issuing Bank at (i) in the case of the Borrower or Allied, as the case may be, a
rate per annum equal to the interest rate applicable to Revolving Loans pursuant
to Section 2.06(a), and (ii) in the case of such Lender, for the first such day,
the Federal Funds Effective Rate, and for each day thereafter, the Base Rate.
SECTION 2.03. Borrowing Procedure. In order to request a Borrowing
(other than a Swingline Loan or a deemed Borrowing pursuant to Section 2.02(f),
as to which this Section 2.03 shall not apply), the Borrower shall hand deliver
or telecopy to the Administrative Agent a duly completed Borrowing Request (a)
in the case of a Eurodollar Borrowing, not later than 11:00 a.m., New York City
time, three Business Days before a proposed Borrowing, and (b) in the case of a
Base Rate Borrowing, not later than 1:00 p.m., New York City time, one Business
Day before a proposed Borrowing. Each Borrowing Request shall be irrevocable,
shall be signed by or on behalf of the Borrower and shall specify the following
information: (i) whether the Borrowing then being requested is to be a Term
Borrowing or a Revolving Credit Borrowing, and whether such Borrowing is to be a
Eurodollar Borrowing or a Base Rate Borrowing, provided that any Borrowing on
the Closing Date shall be a Base Rate Borrowing; (ii) the date of such Borrowing
(which shall be a Business Day), (iii) the number and location of the account to
which funds are to be disbursed (which shall be an account that complies with
the requirements of Section 2.02(c)); (iv) the amount of such Borrowing; (v) if
such Borrowing is to be a Eurodollar Borrowing, the Interest Period with respect
thereto; and (vi) if applicable, whether the Borrowing then being requested is a
Bank Facility Loan or an Additional Facility Loan (it being understood that no
Borrowing shall be comprised of any Additional Facility Loans until the
Aggregate Revolving Credit Exposures exceed the Bank Facility Amount); provided,
however, that, (x) notwithstanding any contrary specification in any Borrowing
Request, each requested Borrowing shall comply with the requirements set forth
in Section 2.02 and (y) upon the request of the Administrative Agent, during the
period from and including the Closing Date to but excluding a date not more than
60 days after the Closing Date, the Borrower shall not be entitled to elect to
make Eurodollar Borrowings. If no election as to the Type of Borrowing is
specified in any such notice, then the requested Borrowing shall be a Base Rate
Borrowing. If no Interest Period with respect to any Eurodollar Borrowing is
specified in any such notice, then the Borrower shall be deemed to have selected
an Interest Period of one month's duration. The Administrative Agent shall
promptly advise the applicable Lenders of any notice given pursuant to this
Section 2.03 (and the contents thereof), and of each Lender's portion of the
requested Borrowing.
SECTION 2.04. Evidence of Debt; Repayment of Loans. (a) The Borrower
hereby unconditionally promises to pay to the Administrative Agent for the
account of each Lender (i) the then unpaid principal amount of each Swingline
Loan, on the last day of the Interest Period applicable to such Loan or, if
earlier, on the Maturity Date, (ii) the principal amount of each Term Loan of
such Lender as provided in Section 2.11 and (iii) the then unpaid principal
amount of each Revolving Loan on the Maturity Date.
(b) Each Lender shall maintain in accordance with its usual practice an
account or accounts evidencing the indebtedness of the Borrower to such Lender
resulting from each Loan made by such Lender from time to time, including the
amounts of principal and interest payable and paid such Lender from time to time
under this Agreement.
<PAGE> 32
27
(c) The Administrative Agent shall maintain accounts in which it will
record (i) the amount of each Loan made hereunder, the Type thereof and the
Interest Period applicable thereto, (ii) the amount of any principal or interest
due and payable or to become due and payable from the Borrower to each Lender
hereunder and (iii) the amount of any sum received by the Administrative Agent
hereunder from the Borrower or any Guarantor and each Lender's share thereof.
(d) The entries made in the accounts maintained pursuant to paragraphs
(b) and (c) above shall be prima facie evidence of the existence and amounts of
the obligations therein recorded; provided, however, that the failure of any
Lender or the Administrative Agent to maintain such accounts or any error
therein shall not in any manner affect the obligations of the Borrower to repay
the Loans in accordance with their terms.
(e) Notwithstanding any other provision of this Agreement, in the event
any Lender shall request and receive a promissory note payable to such Lender
and its registered assigns, the interests represented by such note shall at all
times (including after any assignment of all or part of such interests pursuant
to Section 9.04) be represented by one or more promissory notes payable to the
payee named therein or its registered assigns.
SECTION 2.05. Fees. (a) The Borrower agrees to pay to each Lender,
through the Administrative Agent, on the Closing Date and on the last Business
Day of March, June, September and December in each year, commencing the last
Business Day of June 1997, and on each date on which any Commitment of such
Lender shall expire or be terminated as provided herein, a commitment fee (a
"Commitment Fee") equal to the Applicable Percentage per annum in effect from
time to time on the average daily unused amount of the Commitments of such
Lender (other than the Swingline Commitment) during the preceding quarter (or
other period commencing with the date of acceptance by the Borrower of the
Commitment of such Lender or ending with the Maturity Date or the date on which
the Commitments of such Lender shall expire or be terminated). All Commitment
Fees shall be computed on the basis of the actual number of days elapsed in a
year of 360 days. The Commitment Fee due to each Lender shall commence to accrue
on the Closing Date and shall cease to accrue on the date on which the
Commitment of such Lender shall expire or be terminated as provided herein. For
purposes of calculating Commitment Fees only, no portion of the Revolving Credit
Commitments shall be deemed utilized under Section 2.17 as a result of
outstanding Swingline Loans.
(b) The Borrower agrees to pay to the Administrative Agent, for its own
account, the administrative fees set forth in the Fee Letter at the times and in
the amounts specified therein (the "Administrative Agent Fees").
(c) The Borrower agrees to pay (i) to each Revolving Credit Lender,
through the Administrative Agent, on the last Business Day of March, June,
September and December of each year, commencing the last Business Day of June
1997, and on the date on which the Revolving Credit Commitment of such Lender
shall be terminated as provided herein, a fee (an "L/C Participation Fee")
calculated on such Lender's Pro Rata Percentage of the average daily aggregate
L/C Exposure (excluding the portion thereof attributable to unreimbursed L/C
Disbursements) during the quarter ending on such date (or shorter period
commencing with the date hereof or ending with the Maturity Date or the date on
which all Letters of Credit have been canceled or have expired and the Revolving
Credit Commitments of all Lenders shall have been terminated) at a rate equal to
the Applicable Percentage from time to time used to determine the interest rate
on Revolving Credit Borrowings
<PAGE> 33
28
comprised of Eurodollar Loans pursuant to Section 2.06, and (ii) to the Issuing
Bank with respect to each Letter of Credit (x) a fronting fee equal to 1/4 of 1%
per annum of the outstanding face amount of such Letter of Credit, payable
quarterly in arrears and (y) the standard issuance and drawing fees specified
from time to time by the Issuing Bank (the "Issuing Bank Fees"). All L/C
Participation Fees and Issuing Bank Fees shall be computed on the basis of the
actual number of days elapsed in a year of 360 days.
All Fees shall be paid on the dates due, in immediately available
funds, to the Administrative Agent for distribution, if and as appropriate,
among the Lenders, except that the Issuing Bank Fees shall be paid directly to
the Issuing Bank. Once paid, none of the Fees shall be refundable under any
circumstances.
SECTION 2.06. Interest on Loans. (a) Subject to the provisions of
Section 2.07, the Loans comprising each Base Rate Borrowing, including each
Swingline Loan, shall bear interest (computed on the basis of the actual number
of days elapsed over a year of 365 or 366 days, as the case may be, when the
Base Rate is determined by reference to the Prime Rate and over a year of 360
days at all other times) at a rate per annum equal to the Base Rate plus the
Applicable Percentage in effect from time to time.
(b) Subject to the provisions of Section 2.07, the Loans comprising
each Eurodollar Borrowing shall bear interest (computed on the basis of the
actual number of days elapsed over a year of 360 days) at a rate per annum equal
to the Adjusted LIBO Rate for the Interest Period in effect for such Borrowing
plus the Applicable Percentage in effect from time to time.
(c) Interest on each Loan shall be payable on the Interest Payment
Dates applicable to such Loan except as otherwise provided in this Agreement.
The applicable Base Rate or Adjusted LIBO Rate for each Interest Period or day
within an Interest Period, as the case may be, shall be determined by the
Administrative Agent, and such determination shall be conclusive absent manifest
error.
SECTION 2.07. Default Interest. If the Borrower shall default in the
payment of the principal of or interest on any Loan or any other amount becoming
due hereunder, by acceleration or otherwise, or under any other Loan Document,
the Borrower shall on demand from time to time pay interest, to the extent
permitted by law, on such defaulted amount to but excluding the date of actual
payment (after as well as before judgment) (a) in the case of overdue principal,
at the rate otherwise applicable to such Loan pursuant to Section 2.06 plus
2.00% per annum and (b) in all other cases, a rate per annum (computed on the
basis of the actual number of days elapsed over a year of 365 or 366 days, as
the case may be, when determined by reference to the Prime Rate and over a year
of 360 days at all other times) equal to the sum of the Base Rate plus the
Applicable Percentage applicable to Base Rate Loans plus 2.00%.
SECTION 2.08. Alternate Rate of Interest. In the event, and on each
occasion, that on the day two Business Days prior to the commencement of any
Interest Period for a Eurodollar Borrowing the Administrative Agent shall have
determined that dollar deposits in the principal amounts of the Loans comprising
such Borrowing are not generally available in the London interbank market, or
that the rates at which such dollar deposits are being offered will not
adequately and fairly reflect the cost to any Lender of making or maintaining
its Eurodollar Loan during such Interest Period, or that reasonable means do not
exist for ascertaining the Adjusted LIBO Rate, the Administrative Agent shall,
as soon as practicable thereafter, give written or telecopy notice of such
determination to the
<PAGE> 34
29
Borrower and the Lenders. In the event of any such determination, until the
Administrative Agent shall have advised the Borrower and the Lenders that the
circumstances giving rise to such notice no longer exist, any request by the
Borrower for a Eurodollar Borrowing pursuant to Section 2.03 or 2.10 shall be
deemed to be a request for a Base Rate Borrowing. Each determination by the
Administrative Agent hereunder shall be conclusive absent manifest error.
SECTION 2.09. Termination and Reduction of Commitments. (a) Each
Lender's Term Loan Commitment shall terminate (i) at the time such Lender makes
the Term Loans to be made by it on the Closing Date in accordance with Section
2.01 or (ii) in the event any such Lender reasonably determines that the
conditions precedent set forth in Section 4.02 have not be satisfied on or prior
to the Closing Date, at 5:00 p.m., New York City time, on the Closing Date. The
Revolving Credit Commitments, the Swingline Commitment and the L/C Commitment
shall automatically terminate on the Maturity Date. Notwithstanding the
foregoing, all the Commitments shall automatically terminate at 5:00 p.m., New
York City time, on June 16, 1997, if the initial Credit Event shall not have
occurred by such time.
(b) Upon at least five Business Days' prior irrevocable written or
telecopy notice to the Administrative Agent, the Borrower may at any time in
whole permanently terminate, or from time to time in part permanently reduce,
the Term Loan Commitments or the Revolving Credit Commitments; provided,
however, that (i) each partial reduction of the Term Loan Commitments or the
Revolving Credit Commitments shall be in an integral multiple of $1,000,000 and
in a minimum amount of $5,000,000 and (ii) the Total Revolving Credit Commitment
shall not be reduced to an amount that is less than the Aggregate Revolving
Credit Exposure at the time.
(c) Each reduction in the Term Loan Commitments or the Revolving Credit
Commitments hereunder shall be made ratably among the Lenders in accordance with
their respective applicable Commitments. The Borrower shall pay to the
Administrative Agent for the account of the applicable Lenders, on the date of
each termination or reduction, the Commitment Fees on the amount of the
Commitments so terminated or reduced accrued to but excluding the date of such
termination or reduction.
SECTION 2.10. Conversion and Continuation of Borrowings. The Borrower
shall have the right at any time upon prior irrevocable notice to the
Administrative Agent (a) not later than 12:00 (noon), New York City time, one
Business Day prior to conversion, to convert any Eurodollar Borrowing into a
Base Rate Borrowing, (b) not later than 11:00 a.m., New York City time, three
Business Days prior to conversion or continuation, to convert any Base Rate
Borrowing into a Eurodollar Borrowing or to continue any Eurodollar Borrowing as
a Eurodollar Borrowing for an additional Interest Period, and (c) not later than
11:00 a.m., New York City time, three Business Days prior to conversion, to
convert the Interest Period with respect to any Eurodollar Borrowing to another
permissible Interest Period, subject in each case to the following:
(i) each conversion or continuation shall be made pro rata
among the Lenders in accordance with the respective principal amounts
of the Loans comprising the converted or continued Borrowing;
(ii) if less than all the outstanding principal amount of any
Borrowing shall be converted or continued, then each resulting
Borrowing shall satisfy the limitations specified
<PAGE> 35
30
in Sections 2.02(a) and 2.02(b) regarding the principal amount and
maximum number of Borrowings of the relevant Type;
(iii) each conversion shall be effected by each Lender and the
Administrative Agent by recording for the account of such Lender the
new Loan of such Lender resulting from such conversion and reducing the
Loan (or portion thereof) of such Lender being converted by an
equivalent principal amount; accrued interest on any Eurodollar Loan
(or portion thereof) being converted shall be paid by the Borrower at
the time of conversion;
(iv) if any Eurodollar Borrowing is converted at a time other
than the end of the Interest Period applicable thereto, the Borrower
shall pay, upon demand, any amounts due to the Lenders pursuant to
Section 2.16;
(v) any portion of a Borrowing maturing or required to be
repaid in less than one month may not be converted into or continued as
a Eurodollar Borrowing;
(vi) any portion of a Eurodollar Borrowing that cannot be
converted into or continued as a Eurodollar Borrowing by reason of the
immediately preceding clause shall be automatically converted at the
end of the Interest Period in effect for such Borrowing into a Base
Rate Borrowing;
(vii) no Interest Period may be selected for any Eurodollar
Term Borrowing that would end later than a Term Loan Repayment Date
occurring on or after the first day of such Interest Period if, after
giving effect to such selection, the aggregate outstanding amount of
(A) the Eurodollar Term Borrowings with Interest Periods ending on or
prior to such Term Loan Repayment Date and (B) the Base Rate Term
Borrowings, would not be at least equal to the principal amount of Term
Borrowings to be paid on such Term Loan Repayment Date;
(viii) after the occurrence and during the continuance of a
Default or Event of Default, no outstanding Loan may be converted into,
or continued as, a Eurodollar Loan; and
(ix) upon the request of the Administrative Agent, during the
period from and including the Closing Date to but excluding a date not
more than 60 days after the Closing Date, no Borrowing may be converted
into a Eurodollar Borrowing.
Each notice pursuant to this Section 2.10 shall be irrevocable and
shall refer to this Agreement and specify (i) the identity and amount of the
Borrowing that the Borrower requests be converted or continued, (ii) whether
such Borrowing is to be converted to or continued as a Eurodollar Borrowing or a
Base Rate Borrowing, (iii) if such notice requests a conversion, the date of
such conversion (which shall be a Business Day) and (iv) if such Borrowing is to
be converted to or continued as a Eurodollar Borrowing, the Interest Period with
respect thereto. If no Interest Period is specified in any such notice with
respect to any conversion to or continuation as a Eurodollar Borrowing, the
Borrower shall be deemed to have selected an Interest Period of one month's
duration. The Administrative Agent shall advise the Lenders of any notice given
pursuant to this Section 2.10 and of each Lender's portion of any converted or
continued Borrowing. If the Borrower shall not have given notice in accordance
with this Section 2.10 to continue any Borrowing into a subsequent Interest
Period (and shall not otherwise have given notice in accordance with this
Section 2.10 to convert such Borrowing),
<PAGE> 36
31
such Borrowing shall, at the end of the Interest Period applicable thereto
(unless repaid pursuant to the terms hereof), automatically be continued into a
new Interest Period as a Base Rate Borrowing.
SECTION 2.11. Repayment of Term Borrowings. (a) (i) The Borrower shall
pay to the Administrative Agent, for the account of the Lenders, on the dates
set forth below, or if any such date is not a Business Day, on the next
succeeding Business Day (each such date being a "Term Loan Repayment Date"), a
principal amount of the Term Loans (such amount, as adjusted from time to time
pursuant to Sections 2.11(b), 2.12 and 2.13, being called the "Term Loan
Repayment Amount") equal to the amount set forth below for such date, together
in each case with accrued and unpaid interest on the principal amount to be paid
to but excluding the date of such payment:
<TABLE>
<CAPTION>
Date Amount
---- ------
<S> <C>
September 30, 1997 $5,000,000
December 31, 1997 5,000,000
March 31, 1998 8,750,000
June 30, 1998 8,750,000
September 30, 1998 8,750,000
December 31, 1998 8,750,000
March 31, 1999 13,750,000
June 30, 1999 13,750,000
September 30, 1999 13,750,000
December 31, 1999 13,750,000
March 31, 2000 25,000,000
June 30, 2000 25,000,000
September 30, 2000 25,000,000
December 31, 2000 25,000,000
March 31, 2001 25,000,000
June 30, 2001 25,000,000
September 30, 2001 25,000,000
December 31, 2001 25,000,000
March 31, 2002 25,000,000
June 30, 2002 25,000,000
September 30, 2002 25,000,000
December 31, 2002 25,000,000
March 31, 2003 25,000,000
June 30, 2003 25,000,000
September 30, 2003 25,000,000
Maturity Date 25,000,000
</TABLE>
(b) In the event and on each occasion that any Term Loan Commitments
shall be reduced or shall expire or terminate other than as a result of the
making of a Term Loan, the installments payable
<PAGE> 37
32
on each Term Loan Repayment Date shall be reduced pro rata by an aggregate
amount equal to the amount of such reduction, expiration or termination.
(c) To the extent not previously paid, all Term Loans shall be due and
payable on the Maturity Date, together with accrued and unpaid interest on the
principal amount to be paid to but excluding the date of payment.
(d) All repayments pursuant to this Section 2.11 shall be subject to
Section 2.16, but shall otherwise be without premium or penalty.
SECTION 2.12. Optional Prepayments. (a) The Borrower shall have the
right at any time and from time to time to prepay any Borrowing, in whole or in
part, upon at least three Business Days' prior written or telecopy notice (or
telephone notice promptly confirmed by written or telecopy notice) to the
Administrative Agent before 11:00 a.m., New York City time; provided, however,
that each partial prepayment and reduction shall be in an amount that is an
integral multiple of $1,000,000 and not less than $5,000,000.
(b) Optional prepayments of Term Loans shall be applied pro rata
against the remaining scheduled installments of principal due in respect of the
Term Loans under Section 2.11(a).
(c) Each notice of prepayment shall specify the prepayment date,
whether the Borrowing being prepaid is a Term Borrowing or a Revolving Credit
Borrowing and the principal amount of each Borrowing (or portion thereof) to be
prepaid, shall be irrevocable and shall commit the Borrower to prepay such
Borrowing by the amount stated therein on the date stated therein. All
prepayments under this Section 2.12 shall be subject to Section 2.16, but
otherwise without premium or penalty. All prepayments of Eurodollar Loans under
this Section 2.12 shall be accompanied by accrued interest on the principal
amount being prepaid to the date of payment.
SECTION 2.13. Mandatory Prepayments. (a) In the event of any
termination of all the Revolving Credit Commitments, the Borrower shall repay or
prepay all its outstanding Revolving Credit Borrowings and all outstanding
Swingline Loans on the date of such termination. In the event of any partial
reduction of the Revolving Credit Commitments, then (i) at or prior to the
effective date of such reduction, the Administrative Agent shall notify the
Borrower and the Revolving Credit Lenders of the Aggregate Revolving Credit
Exposure after giving effect thereto and (ii) if such Aggregate Revolving Credit
Exposure would exceed the Total Revolving Credit Commitment after giving effect
to such reduction or termination, then the Borrower shall, on the date of such
reduction or termination, repay or prepay Revolving Credit Borrowings or
Swingline Loans (or a combination thereof) in an amount sufficient to eliminate
such excess. If following any reduction of the Total Revolving Credit Commitment
and the payments required by this Section 2.13(a), the Total Revolving Credit
Commitment is less than the aggregate L/C Exposure, the Borrower shall, on the
date of such reduction, provide cash collateral, in accordance with Section
2.23(j), in an amount equal to the amount that the aggregate L/C Exposure
exceeds the Total Revolving Credit Commitment.
(b) Not later than the third Business Day following the later of (i)
the completion of any Asset Sale and (ii) the receipt of the Net Cash Proceeds
with respect thereto, the Borrower shall apply 100% of the Net Cash Proceeds
received with respect thereto to prepay outstanding Term Loans in accordance
with Section 2.13(g).
<PAGE> 38
33
(c) Not later than the third Business Day following receipt of any
Extraordinary Amount, the Borrower shall apply 100% of such Extraordinary Amount
received to prepay outstanding Term Loans in accordance with Section 2.13(g).
(d) In the event and on each occasion that an Equity Issuance occurs,
the Borrower shall, substantially simultaneously with (and in any event not
later than the third Business Day next following) the occurrence of such Equity
Issuance, apply 50% of the Net Cash Proceeds therefrom to prepay outstanding
Term Loans in accordance with Section 2.13(g).
(e) No later than the earlier of (i) 100 days after the end of each
fiscal year of the Borrower, commencing with the fiscal year ending on December
31, 1997, and (ii) the day that is five Business Days after the date on which
the financial statements with respect to such period are delivered pursuant to
Section 5.04(a), the Borrower shall prepay outstanding Term Loans in accordance
with Section 2.13(g) in an aggregate principal amount equal to 50% of Excess
Cash Flow for the fiscal year then ended; provided, however, that no prepayment
shall be required pursuant to this Section 2.13(e), if the Senior Debt Ratio at
the end of such fiscal year then ended is less than 2.00 to 1.00.
(f) In the event that Allied, the Borrower or any Subsidiary shall
receive Net Cash Proceeds from the issuance or other disposition of Indebtedness
for money borrowed (other than Indebtedness the issuance of which also
constitutes an Equity Issuance), of Allied, the Borrower or any Subsidiary
(other than Indebtedness for money borrowed permitted pursuant to Section 6.01),
the Borrower shall, substantially simultaneously with (and in any event not
later than the third Business Day next following) the receipt of such Net Cash
Proceeds by Allied, the Borrower or the Subsidiaries, apply an amount equal to
100% of such Net Cash Proceeds to prepay outstanding Term Loans in accordance
with Section 2.13(g).
(g) Mandatory prepayments of outstanding Term Loans under this
Agreement shall be applied pro rata against the remaining scheduled installments
of principal due in respect of Term Loans under Section 2.11(a).
(h) The Borrower shall deliver to the Administrative Agent, at the time
of each prepayment required under this Section 2.13, (i) a certificate signed by
a Financial Officer of the Borrower setting forth in reasonable detail the
calculation of the amount of such prepayment and (ii) to the extent practicable,
at least three days prior written notice of such prepayment. Each notice of
prepayment shall specify the prepayment date, the Type of each Loan being
prepaid and the principal amount of each Loan (or portion thereof) to be
prepaid. All prepayments under this Section 2.13 shall be subject to Section
2.16, but shall otherwise be without premium or penalty.
(i) Amounts to be applied pursuant to this Section 2.13 to the
prepayment of Term Loans shall be applied, as applicable, first to reduce
outstanding Base Rate Term Loans. Any amounts remaining after each such
application shall, at the option of the Borrower, be applied to prepay
Eurodollar Term Loans immediately and/or shall be deposited in the Prepayment
Account (as defined below). The Administrative Agent shall apply any cash
deposited in the Prepayment Account allocable to Term Loans to prepay Eurodollar
Term Loans on the last day of their respective Interest Periods (or, at the
direction of the Borrower, on any earlier date) until all outstanding Term Loans
have been prepaid or until all the allocable cash on deposit with respect to
such Loans has been exhausted. For purposes of this Agreement, the term
"Prepayment Account" shall mean an account established by the Borrower with the
Administrative Agent and over which the Administrative Agent
<PAGE> 39
34
shall have exclusive dominion and control, including the exclusive right of
withdrawal for application in accordance with this paragraph (i). The
Administrative Agent will, at the request of the Borrower, invest amounts on
deposit in the Prepayment Account in Permitted Investments that mature prior to
the last day of the applicable Interest Periods of the Eurodollar Term
Borrowings; provided, however, that (i) the Administrative Agent shall not be
required to make any investment that, in its sole judgment, would require or
cause the Administrative Agent to be in, or would result in any, violation of
any law, statute, rule or regulation and (ii) the Administrative Agent shall
have no obligation to invest amounts on deposit in the Prepayment Account if a
Default or Event of Default shall have occurred and be continuing. The Borrower
shall indemnify the Administrative Agent for any losses relating to the
investments so that the amount available to prepay Eurodollar Borrowings on the
last day of the applicable Interest Period is not less than the amount that
would have been available had no investments been made pursuant thereto. Other
than any interest earned on such investments, the Prepayment Account shall not
bear interest. Interest or profits, if any, on such investments shall be
deposited in the Prepayment Account and reinvested and disbursed as specified
above. If the maturity of the Loans has been accelerated pursuant to Article
VII, the Administrative Agent may, in its sole discretion, apply all amounts on
deposit in the Prepayment Account to satisfy any of the Obligations. The
Borrower hereby grants to the Administrative Agent, for its benefit and the
benefit of the Issuing Bank, the Swingline Lender and the Lenders, a security
interest in the Prepayment Account to secure the Obligations.
(j) In the event that, upon the occurrence of any event described in
Section 2.13(b), (c), (d), (e) or (f), no Term Loans are outstanding that are
required to be prepaid pursuant to Section 2.13(b), (c), (d), (e) or (f) the
Borrower shall reduce the Revolving Credit Commitments in accordance with
paragraph (a) above by the amount of the applicable Net Cash Proceeds,
Extraordinary Amounts or Excess Cash Flow, as the case may be; provided,
however, that the Total Revolving Credit Commitment shall not be reduced to less
than $300,000,000 as a result of reductions required pursuant to this Section
2.13(j).
(k) At any time that the Swingline Exposure exceeds $25,000,000, the
Borrower shall repay or prepay outstanding Swingline Loans in an amount
sufficient to eliminate such excess no later than three Business Days after the
date the Borrower has knowledge (actual or constructive) that the Swingline
Exposure exceeds $25,000,000.
(l) No later than three Business Days after the date that the Revolving
Loan relating to the Canada Debenture Refinancing is borrowed, the Borrower,
Allied and Allied Finance shall cause such Revolving Loan to be repaid or
prepaid in full with the proceeds from repayment of the Allied Canada
Debentures.
SECTION 2.14. Reserve Requirements; Change in Circumstances. (a)
Notwithstanding any other provision of this Agreement, if after the date of this
Agreement any change in applicable law or regulation or in the interpretation or
administration thereof by any Governmental Authority charged with the
interpretation or administration thereof (whether or not having the force of
law) shall change the basis of taxation of payments to any Lender or the Issuing
Bank of the principal of or interest on any Eurodollar Loan made by such Lender
or any Fees or other amounts payable hereunder (other than changes in respect of
taxes imposed on the overall net income of such Lender or the Issuing Bank by
the jurisdiction in which such Lender or the Issuing Bank has its principal
office or by any political subdivision or taxing authority therein), or shall
impose, modify or deem applicable any reserve, special deposit or similar
requirement against assets of, deposits with or for the account of or credit
<PAGE> 40
35
extended by any Lender or the Issuing Bank (except any such reserve requirement
which is reflected in the Adjusted LIBO Rate) or shall impose on such Lender or
the Issuing Bank or the London interbank market any other condition affecting
this Agreement or Eurodollar Loans made by such Lender or any Letter of Credit
or participation therein, and the result of any of the foregoing shall be to
increase the cost to such Lender or the Issuing Bank of making or maintaining
any Eurodollar Loan or increase the cost to any Lender of issuing or maintaining
any Letter of Credit or purchasing or maintaining a participation therein or to
reduce the amount of any sum received or receivable by such Lender or the
Issuing Bank hereunder (whether of principal, interest or otherwise) by an
amount deemed by such Lender or the Issuing Bank to be material, then the
Borrower will pay to such Lender or the Issuing Bank, as the case may be, upon
demand such additional amount or amounts as will compensate such Lender or the
Issuing Bank, as the case may be, for such additional costs incurred or
reduction suffered.
(b) If any Lender or the Issuing Bank shall have determined that the
adoption after the date hereof of any law, rule, regulation, agreement or
guideline regarding capital adequacy, or any change after the date hereof in any
such law, rule, regulation, agreement or guideline (whether such law, rule,
regulation, agreement or guideline has been adopted) or in the interpretation or
administration thereof by any Governmental Authority charged with the
interpretation or administration thereof, or compliance by any Lender (or any
lending office of such Lender) or the Issuing Bank or any Lender's or the
Issuing Bank's holding company with any request or directive regarding capital
adequacy (whether or not having the force of law) of any Governmental Authority
has or would have the effect of reducing the rate of return on such Lender's or
the Issuing Bank's capital or on the capital of such Lender's or the Issuing
Bank's holding company, if any, as a consequence of this Agreement or the Loans
made or participations in Letters of Credit purchased by such Lender pursuant
hereto or the Letters of Credit issued by the Issuing Bank pursuant hereto to a
level below that which such Lender or the Issuing Bank or such Lender's or the
Issuing Bank's holding company would have achieved but for such applicability,
adoption, change or compliance (taking into consideration such Lender's or the
Issuing Bank's policies and the policies of such Lender's or the Issuing Bank's
holding company with respect to capital adequacy) by an amount deemed by such
Lender or the Issuing Bank to be material, then from time to time the Borrower
shall pay to such Lender or the Issuing Bank, as the case may be, such
additional amount or amounts as will compensate such Lender or the Issuing Bank
or such Lender's or the Issuing Bank's holding company for any such reduction
suffered.
(c) A certificate of a Lender or the Issuing Bank setting forth the
amount or amounts necessary to compensate such Lender or the Issuing Bank or its
holding company, as applicable, as specified in paragraph (a) or (b) above shall
be delivered to the Borrower and shall be conclusive absent manifest error. The
Borrower shall pay such Lender or the Issuing Bank the amount shown as due on
any such certificate delivered by it within 10 days after its receipt of the
same.
(d) Failure or delay on the part of any Lender or the Issuing Bank to
demand compensation for any increased costs or reduction in amounts received or
receivable or reduction in return on capital shall not constitute a waiver of
such Lender's or the Issuing Bank's right to demand such compensation. The
protection of this Section shall be available to each Lender and the Issuing
Bank regardless of any possible contention of the invalidity or inapplicability
of the law, rule, regulation, agreement, guideline or other change or condition
that shall have occurred or been imposed.
SECTION 2.15. Change in Legality. (a) Notwithstanding any other
provision of this Agreement, if, after the date hereof, any change in any law or
regulation or in the interpretation thereof
<PAGE> 41
36
by any Governmental Authority charged with the administration or interpretation
thereof shall make it unlawful for any Lender to make or maintain any Eurodollar
Loan or to give effect to its obligations as contemplated hereby with respect to
any Eurodollar Loan, then, by written notice to the Borrower and to the
Administrative Agent:
(i) such Lender may declare that Eurodollar Loans will not
thereafter (for the duration of such unlawfulness) be made by such
Lender hereunder (or be continued for additional Interest Periods and
Base Rate Loans will not thereafter (for such duration) be converted
into Eurodollar Loans), whereupon any request for a Eurodollar
Borrowing (or to convert a Base Rate Borrowing to a Eurodollar
Borrowing or to continue a Eurodollar Borrowing for an additional
Interest Period) shall, as to such Lender only, be deemed a request for
a Base Rate Loan (or a request to continue a Base Rate Loan as such for
an additional Interest Period or to convert a Eurodollar Loan into a
Base Rate Loan, as the case may be), unless such declaration shall be
subsequently withdrawn; and
(ii) such Lender may require that all outstanding Eurodollar
Loans made by it be converted to Base Rate Loans, in which event all
such Eurodollar Loans shall be automatically converted to Base Rate
Loans as of the effective date of such notice as provided in paragraph
(b) below.
In the event any Lender shall exercise its rights under (i) or (ii) above, all
payments and prepayments of principal that would otherwise have been applied to
repay the Eurodollar Loans that would have been made by such Lender or the
converted Eurodollar Loans of such Lender shall instead be applied to repay the
Base Rate Loans made by such Lender in lieu of, or resulting from the conversion
of, such Eurodollar Loans.
(b) For purposes of this Section 2.15, a notice to the Borrower by any
Lender shall be effective as to each Eurodollar Loan made by such Lender, if
lawful, on the last day of the Interest Period currently applicable to such
Eurodollar Loan; in all other cases such notice shall be effective on the date
of receipt by the Borrower.
SECTION 2.16. Indemnity. The Borrower shall indemnify each Lender
against any loss or expense that such Lender may sustain or incur as a
consequence of (a) any event, other than a default by such Lender in the
performance of its obligations hereunder, which results in (i) such Lender
receiving or being deemed to receive any amount on account of the principal of
any Eurodollar Loan prior to the end of the Interest Period in effect therefor,
(ii) the conversion of any Eurodollar Loan to a Base Rate Loan, or the
conversion of the Interest Period with respect to any Eurodollar Loan, in each
case other than on the last day of the Interest Period in effect therefor, or
(iii) any Eurodollar Loan to be made by such Lender (including any Eurodollar
Loan to be made pursuant to a conversion or continuation under Section 2.10) not
being made after notice of such Loan shall have been given by the Borrower
hereunder (any of the events referred to in this clause (a) being called a
"Breakage Event") or (b) any default in the making of any payment or prepayment
required to be made hereunder. In the case of any Breakage Event, such loss
shall include an amount equal to the excess, as reasonably determined by such
Lender, of (i) its cost of obtaining funds for the Eurodollar Loan that is the
subject of such Breakage Event for the period from the date of such Breakage
Event to the last day of the Interest Period in effect (or that would have been
in effect) for such Loan over (ii) the amount of interest likely to be realized
by such Lender in redeploying the funds released or not utilized by reason of
such Breakage Event for such period. A certificate of any Lender setting forth
any
<PAGE> 42
37
amount or amounts which such Lender is entitled to receive pursuant to this
Section 2.16 shall be delivered to the Borrower and shall be conclusive absent
manifest error.
SECTION 2.17. Pro Rata Treatment. Except as provided below in this
Section 2.17 with respect to Swingline Loans and as required under Section 2.15,
each Borrowing, each payment or prepayment of principal of any Borrowing, each
payment of interest on the Loans, each payment of the Commitment Fees, each
reduction of the Term Loan Commitments or the Revolving Credit Commitments and
each conversion of any Borrowing to or continuation of any Borrowing as a
Borrowing of any Type shall be allocated pro rata among the Lenders in
accordance with their respective applicable Commitments (or, if such Commitments
shall have expired or been terminated, in accordance with the respective
principal amounts of their outstanding Loans). For purposes of determining the
available Revolving Credit Commitments of the Lenders at any time, each
outstanding Swingline Loan shall be deemed to have utilized the Revolving Credit
Commitments of the Lenders (including those Lenders which shall not have made
Swingline Loans) pro rata in accordance with such respective Revolving Credit
Commitments. Each Lender agrees that in computing such Lender's portion of any
Borrowing to be made hereunder, the Administrative Agent may, in its discretion,
round each Lender's percentage of such Borrowing to the next higher or lower
whole dollar amount.
SECTION 2.18. Sharing of Setoffs. Each Lender agrees that if it shall,
through the exercise of a right of banker's lien, setoff or counterclaim against
the Borrower or any other Loan Party, or pursuant to a secured claim under
Section 506 of Title 11 of the United States Code or other security or interest
arising from, or in lieu of, such secured claim, received by such Lender under
any applicable bankruptcy, insolvency or other similar law or otherwise, or by
any other means, obtain payment (voluntary or involuntary) in respect of any
Loan or Loans or L/C Disbursement as a result of which the unpaid principal
portion of its Term Loans, Revolving Loans and participations in L/C
Disbursements shall be proportionately less than the unpaid principal portion of
the Term Loans and Revolving Loans and participations in L/C Disbursements of
any other Lender, it shall be deemed simultaneously to have purchased from such
other Lender at face value, and shall promptly pay to such other Lender the
purchase price for, a participation in the Term Loans and Revolving Loans and
L/C Exposure, as the case may be of such other Lender, so that the aggregate
unpaid principal amount of the Term Loans and Revolving Loans and L/C Exposure
and participations in Term Loans and Revolving Loans and L/C Exposure held by
each Lender shall be in the same proportion to the aggregate unpaid principal
amount of all Term Loans and Revolving Loans and L/C Exposure then outstanding
as the principal amount of its Term Loans and Revolving Loans and L/C Exposure
prior to such exercise of banker's lien, setoff or counterclaim or other event
was to the principal amount of all Term Loans and Revolving Loans and L/C
Exposure outstanding prior to such exercise of banker's lien, setoff or
counterclaim or other event; provided, however, that if any such purchase or
purchases or adjustments shall be made pursuant to this Section 2.18 and the
payment giving rise thereto shall thereafter be recovered, such purchase or
purchases or adjustments shall be rescinded to the extent of such recovery and
the purchase price or prices or adjustment restored without interest. The
Borrower and Allied expressly consent to the foregoing arrangements and agree
that any Lender holding a participation in a Term Loan or Revolving Loan or L/C
Disbursement deemed to have been so purchased may exercise any and all rights of
banker's lien, setoff or counterclaim with respect to any and all moneys owing
by the Borrower and Allied to such Lender by reason thereof as fully as if such
Lender had made a Loan directly to the Borrower in the amount of such
participation.
SECTION 2.19. Payments. (a) The Borrower shall make each payment
(including principal of or interest on any Borrowing or any L/C Disbursement or
any Fees or other amounts) hereunder and
<PAGE> 43
38
under any other Loan Document not later than 12:00 (noon), New York City time,
on the date when due in immediately available dollars, without setoff, defense
or counterclaim. Each such payment (other than (i) Issuing Bank Fees, which
shall be paid directly to the Issuing Bank, and (ii) principal of and interest
on Swingline Loans, which shall be paid directly to the Swingline Lender except
as otherwise provided in Section 2.22(e)) shall be made to the Administrative
Agent at its offices at 11 Madison Avenue, New York, New York.
(b) Whenever any payment (including principal of or interest on any
Borrowing or any Fees or other amounts) hereunder or under any other Loan
Document shall become due, or otherwise would occur, on a day that is not a
Business Day, such payment may be made on the next succeeding Business Day, and
such extension of time shall in such case be included in the computation of
interest or Fees, if applicable.
SECTION 2.20. Taxes. (a) Any and all payments by or on behalf of the
Borrower or any Loan Party hereunder and under any other Loan Document shall be
made, in accordance with Section 2.19, free and clear of and without deduction
for any and all current or future taxes, levies, imposts, deductions, charges or
withholdings, and all liabilities with respect thereto, excluding (i) income
taxes imposed on the net income of the Administrative Agent, the Syndication
Agent, the Documentation Agent, any Lender or the Issuing Bank (or any
transferee or assignee thereof, including a participation holder (any such
entity a "Transferee")) and (ii) franchise taxes imposed on the net income of
the Administrative Agent, the Syndication Agent, the Documentation Agent, any
Lender or the Issuing Bank (or Transferee), in each case by the jurisdiction
under the laws of which the Administrative Agent, the Syndication Agent, the
Documentation Agent, such Lender or the Issuing Bank (or Transferee) is
organized or in which the principal office or applicable lending office of the
Administrative Agent, the Syndication Agent, the Documentation Agent, such
Lender or the Issuing Bank (or Transferee) is located or any political
subdivision thereof (all such nonexcluded taxes, levies, imposts, deductions,
charges, withholdings and liabilities, collectively or individually, being
called "Taxes"). If the Borrower or any Loan Party shall be required to deduct
any Taxes from or in respect of any sum payable hereunder or under any other
Loan Document to the Administrative Agent, the Syndication Agent, the
Documentation Agent, any Lender or the Issuing Bank (or any Transferee), (i) the
sum payable shall be increased by the amount (an "additional amount") necessary
so that after making all required deductions (including deductions applicable to
additional sums payable under this Section 2.20) the Administrative Agent, the
Syndication Agent, the Documentation Agent, such Lender or the Issuing Bank (or
Transferee), as the case may be, shall receive an amount equal to the sum it
would have received had no such deductions been made, (ii) the Borrower or such
Loan Party shall make such deductions and (iii) the Borrower or such Loan Party
shall pay the full amount deducted to the relevant Governmental Authority in
accordance with applicable law.
(b) In addition, the Borrower agrees to pay to the relevant
Governmental Authority in accordance with applicable law any current or future
stamp or documentary taxes or any other excise or property taxes, charges or
similar levies (including, without limitation, mortgage recording taxes and
similar fees) that arise from any payment made hereunder or under any other Loan
Document or from the execution, delivery or registration of, or otherwise with
respect to, this Agreement or any other Loan Document ("Other Taxes").
(c) The Borrower will indemnify the Administrative Agent, the
Syndication Agent, the Documentation Agent, each Lender and the Issuing Bank (or
Transferee) for the full amount of Taxes and Other Taxes paid by the
Administrative Agent, such Lender or the Issuing Bank (or Transferee),
<PAGE> 44
39
as the case may be, and any liability (including penalties, interest and
expenses (including reasonable attorney's fees and expenses but excluding
penalties, interest and expenses arising as a result of the gross negligence of
such Lender)) arising therefrom or with respect thereto, whether or not such
Taxes or Other Taxes were correctly or legally asserted by the relevant
Governmental Authority (it being understood that such indemnification shall not
impair any right that the Borrower may have to contest with the relevant
Governmental Authority such Taxes or Other Taxes). A certificate as to the
amount of such payment or liability prepared by the Administrative Agent, the
Syndication Agent, the Documentation Agent, a Lender or the Issuing Bank (or
Transferee), or the Administrative Agent on its behalf, absent manifest error,
shall be final, conclusive and binding for all purposes. Such indemnification
shall be made within 30 days after the date the Administrative Agent, any
Lender, the Syndication Agent, the Documentation Agent, or the Issuing Bank (or
Transferee), as the case may be, makes written demand therefor.
(d) As soon as practicable after the date of any payment of Taxes or
Other Taxes by the Borrower or any other Loan Party to the relevant Governmental
Authority, the Borrower or such other Loan Party will deliver to the
Administrative Agent, at its address referred to in Section 9.01, the original
or a certified copy of a receipt issued by such Governmental Authority
evidencing payment thereof.
(e) Each Lender (or Transferee) that is organized under the laws of a
jurisdiction other than the United States, any State thereof or the District of
Columbia (a "Non-U.S. Lender") shall deliver to the Borrower and the
Administrative Agent two copies of either United States Internal Revenue Service
Form 1001 or Form 4224, or, in the case of a Non-U.S. Lender claiming exemption
from U.S. Federal withholding tax under Section 871(h) or 881(c) of the Code
with respect to payments of "portfolio interest", a Form W-8, or any subsequent
versions thereof or successors thereto (and, if such Non-U.S. Lender delivers a
Form W-8, a certificate representing that such Non-U.S. Lender is not a bank for
purposes of Section 881(c) of the Code, is not a 10-percent shareholder (within
the meaning of Section 871(h)(3)(B) of the Code) of the Borrower and is not a
controlled foreign corporation related to the Borrower (within the meaning of
Section 864(d)(4) of the Code)), properly completed and duly executed by such
Non-U.S. Lender claiming complete exemption from, or reduced rate of, U.S.
Federal withholding tax on payments by the Borrower under this Agreement and the
other Loan Documents. Such forms shall be delivered by each Non-U.S. Lender on
or before the date it becomes a party to this Agreement (or, in the case of a
Transferee that is a participation holder, on or before the date such
participation holder becomes a Transferee hereunder) and on or before the date,
if any, such Non-U.S. Lender changes its applicable lending office by
designating a different lending office (a "New Lending Office"). In addition,
each Non-U.S. Lender shall deliver such forms promptly upon the obsolescence or
invalidity of any form previously delivered by such Non-U.S. Lender.
Notwithstanding any other provision of this Section 2.20(e), a Non-U.S. Lender
shall not be required to deliver any form pursuant to this Section 2.20(e) that
such Non-U.S. Lender is not legally able to deliver.
(f) The Borrower shall not be required to indemnify any Non-U.S. Lender
or to pay any additional amounts to any Non-U.S. Lender, in respect of United
States Federal withholding tax pursuant to paragraph (a) or (c) above to the
extent that (i) the obligation to withhold amounts with respect to United States
Federal withholding tax existed on the date such Non-U.S. Lender became a party
to this Agreement (or, in the case of a Transferee that is a participation
holder, on the date such participation holder became a Transferee hereunder) or,
with respect to payments to a New Lending Office, the date such Non-U.S. Lender
designated such New Lending Office with respect to a Loan;
<PAGE> 45
40
provided, however, that this paragraph (f) shall not apply (x) to any Transferee
or New Lending Office that becomes a Transferee or New Lending Office as a
result of an assignment, participation, transfer or designation made at the
request of the Borrower and (y) to the extent the indemnity payment or
additional amounts any Transferee, or any Lender (or Transferee), acting through
a New Lending Office, would be entitled to receive (without regard to this
paragraph (f)) do not exceed the indemnity payment or additional amounts that
the person making the assignment, participation or transfer to such Transferee,
or Lender (or Transferee) making the designation of such New Lending Office,
would have been entitled to receive in the absence of such assignment,
participation, transfer or designation or (ii) the obligation to pay such
additional amounts would not have arisen but for a failure by such Non-U.S.
Lender to comply with the provisions of paragraph (e) above.
(g) Nothing contained in this Section 2.20 shall require any Lender or
the Issuing Bank (or any Transferee) or the Administrative Agent, the
Syndication Agent or the Documentation Agent to make available any of its tax
returns (or any other information that it deems to be confidential or
proprietary).
SECTION 2.21. Assignment of Commitments Under Certain Circumstances;
Duty to Mitigate. (a) In the event (i) any Lender or the Issuing Bank delivers a
certificate requesting compensation pursuant to Section 2.14, (ii) any Lender or
the Issuing Bank delivers a notice described in Section 2.15 or (iii) the
Borrower is required to pay any additional amount to any Lender or the Issuing
Bank or any Governmental Authority on account of any Lender or the Issuing Bank
pursuant to Section 2.20, the Borrower may, at its sole expense and effort
(including with respect to the processing and recordation fee referred to in
Section 9.04(b)), upon notice to such Lender or the Issuing Bank and the
Administrative Agent, require such Lender or the Issuing Bank to transfer and
assign, without recourse (in accordance with and subject to the restrictions
contained in Section 9.04), all of its interests, rights and obligations under
this Agreement to an assignee that shall assume such assigned obligations (which
assignee may be another Lender, if a Lender accepts such assignment); provided
that (x) such assignment shall not conflict with any law, rule or regulation or
order of any court or other Governmental Authority having jurisdiction, (y) the
Borrower shall have received the prior written consent of the Administrative
Agent (and, if a Revolving Credit Commitment is being assigned, of the Issuing
Bank and the Swingline Lender), which consent shall not unreasonably be
withheld, and (z) the Borrower or such assignee shall have paid to the affected
Lender or the Issuing Bank in immediately available funds an amount equal to the
sum of the principal of and interest accrued to the date of such payment on the
outstanding Loans or L/C Disbursements of such Lender or the Issuing Bank,
respectively, plus all Fees and other amounts accrued for the account of such
Lender or the Issuing Bank hereunder (including any amounts under Section 2.14
and Section 2.16); provided further that, if prior to the giving of such notice
the circumstances or event that resulted in such Lender's or the Issuing Bank's
claim for compensation under Section 2.14 or notice under Section 2.15 or the
amounts paid pursuant to Section 2.20, as the case may be, cease to cause such
Lender or the Issuing Bank to suffer increased costs or reductions in amounts
received or receivable or reduction in return on capital, or cease to have the
consequences specified in Section 2.15, or cease to result in amounts being
payable under Section 2.20, as the case may be (including as a result of any
action taken by such Lender or the Issuing Bank pursuant to paragraph (b)
below), or if such Lender or the Issuing Bank shall waive its right to claim
further compensation under Section 2.14 in respect of such circumstances or
event or shall withdraw its notice under Section 2.15 or shall waive its right
to further payments under Section 2.20 in respect of such circumstances or
event, as the case may be, then such Lender or the Issuing Bank shall not
thereafter be required to make any such transfer and assignment hereunder.
<PAGE> 46
41
(b) If (i) any Lender or the Issuing Bank shall request compensation
under Section 2.14, (ii) any Lender or the Issuing Bank delivers a notice
described in Section 2.15 or (iii) the Borrower is required to pay any
additional amount to any Lender or the Issuing Bank or any Governmental
Authority on account of any Lender or the Issuing Bank, pursuant to Section
2.20, then such Lender or the Issuing Bank shall use reasonable efforts (which
shall not require such Lender or the Issuing Bank to incur an unreimbursed loss
or unreimbursed cost or expense or otherwise take any action inconsistent with
its internal policies or legal or regulatory restrictions or suffer any
disadvantage or burden deemed by it to be significant) (x) to file any
certificate or document reasonably requested in writing by the Borrower or (y)
to assign its rights and delegate and transfer its obligations hereunder to
another of its offices, branches or affiliates, if such filing or assignment
would reduce its claims for compensation under Section 2.14 or enable it to
withdraw its notice pursuant to Section 2.15 or would reduce amounts payable
pursuant to Section 2.20, as the case may be, in the future. The Borrower hereby
agrees to pay all reasonable costs and expenses incurred by any Lender or the
Issuing Bank in connection with any such filing or assignment, delegation and
transfer.
SECTION 2.22. Swingline Loans. (a) Swingline Commitment. Subject to the
terms and conditions and relying upon the representations and warranties herein
set forth, the Swingline Lender agrees to make loans to the Borrower at any time
and from time to time on and after the Closing Date and until the earlier of the
Maturity Date and the termination of the Revolving Credit Commitments in
accordance with the terms hereof, in an aggregate principal amount at any time
outstanding that will not result in (i) the aggregate principal amount of all
Swingline Loans exceeding $50,000,000 or (ii) the Aggregate Revolving Credit
Exposure, after giving effect to any Swingline Loan, exceeding the Total
Revolving Credit Commitment. Each Swingline Loan shall be in a minimum principal
amount of $1,000,000 that is an integral multiple of $250,000. The Swingline
Commitment may be terminated or reduced from time to time as provided herein.
Within the foregoing limits, the Borrower may borrow, pay or prepay and reborrow
Swingline Loans hereunder, subject to the terms, conditions and limitations set
forth herein.
(b) Swingline Loans. The Borrower shall notify the Administrative Agent
by telecopy, or by telephone (confirmed by telecopy), not later than 1:00 p.m.,
New York City time, on the day of a proposed Swingline Loan. Such notice shall
be delivered on a Business Day, shall be irrevocable and shall refer to this
Agreement and shall specify the requested date (which shall be a Business Day)
and amount of such Swingline Loan. The Administrative Agent will promptly advise
the Swingline Lender of any notice received from the Borrower pursuant to this
paragraph (b). The Swingline Lender shall make each Swingline Loan available to
the Borrower by means of a credit to an account in the name of the Borrower
designated by the Borrower by 3:00 p.m. on the date such Swingline Loan is so
requested.
(c) Prepayment. The Borrower shall have the right at any time and from
time to time to prepay any Swingline Loan, in whole or in part, upon giving
written or telecopy notice (or telephone notice promptly confirmed by written,
or telecopy notice) to the Swingline Lender and to the Administrative Agent
before 12:00 (noon), New York City time on the date of prepayment at the
Swingline Lender's address for notices specified on Schedule 2.01. All principal
payments of Swingline Loans shall be accompanied by accrued interest on the
principal amount being repaid, but not including, to the date of payment.
(d) Interest. Each Swingline Loan shall be a Base Rate Loan and,
subject to the provisions of Section 2.07, shall bear interest as provided in
Section 2.06(a).
<PAGE> 47
42
(e) Participations. The Swingline Lender may by written notice given to
the Administrative Agent not later than 1:00 p.m., New York City time, on any
Business Day require the Revolving Credit Lenders to acquire participations on
such Business Day in all or a portion of the Swingline Loans outstanding. Such
notice shall specify the aggregate amount of Swingline Loans in which Revolving
Credit Lenders will participate. The Administrative Agent will, promptly upon
receipt of such notice, give notice to each Revolving Credit Lender, specifying
in such notice such Lender's Pro Rata Percentage of such Swingline Loan or
Loans. In furtherance of the foregoing, each Revolving Credit Lender hereby
absolutely and unconditionally agrees, upon receipt of notice as provided above,
to pay to the Administrative Agent, for the account of the Swingline Lender,
such Revolving Credit Lender's Pro Rata Percentage of such Swingline Loan or
Loans. Each Revolving Credit Lender acknowledges and agrees that its obligation
to acquire participations in Swingline Loans pursuant to this paragraph is
absolute and unconditional and shall not be affected by any circumstance
whatsoever, including the occurrence and continuance of a Default or an Event of
Default, and that each such payment shall be made without any offset, abatement,
withholding or reduction whatsoever. Each Revolving Credit Lender shall comply
with its obligation under this paragraph by wire transfer of immediately
available funds, in the same manner as provided in Section 2.02(c) with respect
to Loans made by such Lender (and Section 2.02(c) shall apply, mutatis mutandis,
to the payment obligations of the Lenders) and the Administrative Agent shall
promptly pay to the Swingline Lender the amounts so received by it from the
Lenders. The Administrative Agent shall notify the Borrower of any
participations in any Swingline Loan acquired pursuant to this paragraph and
thereafter payments in respect of such Swingline Loan shall be made to the
Administrative Agent and not to the Swingline Lender. Any amounts received by
the Swingline Lender from the Borrower (or other party on behalf of the
Borrower) in respect of a Swingline Loan after receipt by the Swingline Lender
of the proceeds of a sale of participations therein shall be promptly remitted
to the Administrative Agent; any such amounts received by the Administrative
Agent shall be promptly remitted by the Administrative Agent to the Lenders that
shall have made their payments pursuant to this paragraph and to the Swingline
Lender, as their interests may appear. The purchase of participations in a
Swingline Loan pursuant to this paragraph shall not relieve the Borrower (or
other party liable for obligations of the Borrower) of any default in the
payment thereof.
SECTION 2.23. Letters of Credit. (a) General. The Borrower may request
the issuance of a Letter of Credit for its own account or the account of any
other Account Party (provided that the Borrower shall be a co-applicant and
co-obligor with respect to each Letter of Credit issued for the account of any
other Account Party), in a form reasonably acceptable to the Administrative
Agent and the Issuing Bank, at any time and from time to time while the
Revolving Credit Commitments remain in effect. This Section shall not be
construed to impose an obligation upon the Issuing Bank to issue any Letter of
Credit that is inconsistent with the terms and conditions of this Agreement.
(b) Notice of Issuance, Amendment, Renewal, Extension; Certain
Conditions. In order to request the issuance of a Letter of Credit (or to amend,
renew or extend an existing Letter of Credit), the Borrower shall hand deliver
or telecopy to the Issuing Bank and the Administrative Agent (reasonably in
advance of the requested date of issuance, amendment, renewal or extension) a
notice requesting the issuance of a Letter of Credit, or identifying the Letter
of Credit to be amended, renewed or extended, the date of issuance, amendment,
renewal or extension, the date on which such Letter of Credit is to expire
(which shall comply with paragraph (c) below), the amount of such Letter of
Credit, the name and address of the beneficiary thereof and such other
information as shall be necessary to prepare such Letter of Credit. Following
receipt of such notice and prior to the issuance of the requested Letter of
Credit or the applicable amendment, renewal or extension, the
<PAGE> 48
43
Administrative Agent shall notify the Issuing Bank of the amount of the
Aggregate Revolving Credit Exposure after giving effect to (i) the issuance,
amendment, renewal or extension of such Letter of Credit, (ii) the issuance or
expiration of any other Letter of Credit that is to be issued or will expire
prior to the requested date of issuance of such Letter of Credit and (iii) the
borrowing or repayment of any Revolving Credit Loans or Swingline Loans that
(based upon notices delivered to the Administrative Agent by the Borrower) are
to be borrowed or repaid prior to the requested date of issuance of such Letter
of Credit. A Letter of Credit shall be issued, amended, renewed or extended only
if, and upon issuance, amendment, renewal or extension of each Letter of Credit
the Borrower shall be deemed to represent and warrant that, after giving effect
to such issuance, amendment, renewal or extension (A) the L/C Exposure shall not
exceed $175,000,000 and (B) the Aggregate Revolving Credit Exposure shall not
exceed the Total Revolving Credit Commitment.
(c) Expiration Date. Each Letter of Credit shall expire at the close of
business on the date one year after the date of the issuance of such Letter of
Credit (other than any Back-up Letter of Credit, which shall expire on the
expiry date of the letter of credit that such Back-up Letter of Credit supports,
as set forth on Schedule 1.01(a)), unless such Letter of Credit expires by its
terms on an earlier date; provided, however, that each Letter of Credit may,
upon the request of the Borrower, include a provision whereby such Letter of
Credit shall be renewed automatically for additional consecutive periods 12
months or less unless the Issuing Bank notifies the beneficiary thereof not more
than 45, nor fewer than 30, days prior to the then applicable expiry date (or
such other notification periods as set forth in the Back-up Letters of Credit as
set forth on Schedule 1.01(a)) that such Letter of Credit will not be renewed;
provided further, however, that no Letter of Credit may expire or be extended
beyond the date that is five Business Days prior to the Maturity Date unless, on
or prior to the date such Letter of Credit is issued or extended, the Borrower
shall have deposited with the Collateral Agent an amount equal to 110% of the
face amount of such Letter of Credit in a cash collateral account established
with the Collateral Agent for the benefit of the Secured Parties.
(d) Participations. By the issuance of a Letter of Credit and without
any further action on the part of the Issuing Bank or the Lenders, the Issuing
Bank hereby grants to each Revolving Credit Lender, and each such Lender hereby
acquires from the applicable Issuing Bank, a participation in such Letter of
Credit equal to such Lender's Pro Rata Percentage of the aggregate amount
available to be drawn under such Letter of Credit, effective upon the issuance
of such Letter of Credit. In addition, the Issuing Bank hereby grants to each
Lender, and each Lender hereby acquires from the Issuing Bank, a participation
in each Existing Letter of Credit equal to such Lender's Pro Rata Percentage of
the face amount of such Existing Letter of Credit, effective on the Closing
Date. In consideration and in furtherance of the foregoing, each Revolving
Credit Lender hereby absolutely and unconditionally agrees to pay to the
Administrative Agent, for the account of the Issuing Bank, such Lender's Pro
Rata Percentage of each L/C Disbursement made by the Issuing Bank and not
reimbursed by the applicable Account Party (or, if applicable, another party
pursuant to its obligations under any other Loan Document) forthwith on the date
due as provided in Section 2.02(f). Each Revolving Credit Lender acknowledges
and agrees that its obligation to acquire participations pursuant to this
paragraph in respect of Letters of Credit is absolute and unconditional and
shall not be affected by any circumstance whatsoever, including the occurrence
and continuance of a Default or an Event of Default, and that each such payment
shall be made without any offset, abatement, withholding or reduction
whatsoever.
(e) Reimbursement. If the Issuing Bank shall make any L/C Disbursement
in respect of a Letter of Credit, the applicable Account Party shall pay to the
Administrative Agent an amount equal
<PAGE> 49
44
to such L/C Disbursement not later than two hours after such Account Party shall
have received notice from the Issuing Bank that payment of such draft will be
made, or, if such Account Party shall have received such notice later than 10:00
a.m., New York City time, on any Business Day, not later than 10:00 a.m., New
York City time, on the immediately following Business Day.
(f) Obligations Absolute. Each Account Party's obligations to reimburse
L/C Disbursements as provided in paragraph (e) above shall be absolute,
unconditional and irrevocable, and shall be performed strictly in accordance
with the terms of this Agreement, under any and all circumstances whatsoever,
and irrespective of:
(i) any lack of validity or enforceability of any Letter of
Credit or any Loan Document, or any term or provision therein;
(ii) any amendment or waiver of or any consent to departure
from all or any of the provisions of any Letter of Credit or any Loan
Document;
(iii) the existence of any claim, setoff, defense or other
right that the Account Party, any other party guaranteeing, or
otherwise obligated with, the Account Party, any Subsidiary or other
Affiliate thereof or any other person may at any time have against the
beneficiary under any Letter of Credit, the Issuing Bank, the
Administrative Agent or any Lender or any other person, whether in
connection with this Agreement, any other Loan Document or any other
related or unrelated agreement or transaction;
(iv) any draft or other document presented under a Letter of
Credit proving to be forged, fraudulent, invalid or insufficient in any
respect or any statement therein being untrue or inaccurate in any
respect;
(v) payment by the Issuing Bank under a Letter of Credit
against presentation of a draft or other document that does not comply
with the terms of such Letter of Credit; and
(vi) any other act or omission to act or delay of any kind of
the Issuing Bank, the Lenders, the Administrative Agent or any other
person or any other event or circumstance whatsoever (other than
payment against presentation of drafts or documents that, as a result
of the Issuing Bank's negligence, do not comply with the terms of such
Letter of Credit), whether or not similar to any of the foregoing, that
might, but for the provisions of this Section, constitute a legal or
equitable discharge of the Account Party's obligations hereunder.
Without limiting the generality of the foregoing, it is expressly
understood and agreed that the absolute and unconditional obligation of each
Account Party hereunder to reimburse L/C Disbursements will not be excused by
the gross negligence or wilful misconduct of the Issuing Bank. However, the
foregoing shall not be construed to excuse the Issuing Bank from liability to
such Account Party to the extent of any direct damages (as opposed to
consequential damages, claims in respect of which are hereby waived by the
Borrower, Allied and the other Account Parties to the extent permitted by
applicable law) suffered by such Account Party that are caused by the Issuing
Bank's gross negligence or wilful misconduct in determining whether drafts and
other documents presented under a Letter of Credit comply with the terms
thereof; it is understood that the Issuing Bank may accept documents that appear
on their face to be in order, without responsibility for further investigation,
regardless of any notice or information to the contrary and, in making any
payment
<PAGE> 50
45
under any Letter of Credit (i) the Issuing Bank's exclusive reliance on the
documents presented to it under such Letter of Credit as to any and all matters
set forth therein, including reliance on the amount of any draft presented under
such Letter of Credit, whether or not the amount due to the beneficiary
thereunder equals the amount of such draft and whether or not any document
presented pursuant to such Letter of Credit proves to be insufficient in any
respect, if such document on its face appears to be in order, and whether or not
any other statement or any other document presented pursuant to such Letter of
Credit proves to be forged or invalid or any statement therein proves to be
inaccurate or untrue in any respect whatsoever and (ii) any noncompliance in any
immaterial respect of the documents presented under such Letter of Credit with
the terms thereof shall, in each case, be deemed not to constitute wilful
misconduct or gross negligence of the Issuing Bank.
(g) Disbursement Procedures. The Issuing Bank shall, promptly following
its receipt thereof, examine all documents purporting to represent a demand for
payment under a Letter of Credit. The Issuing Bank shall as promptly as possible
give telephonic notification, confirmed by telecopy, to the Administrative Agent
and the applicable Account Party of such demand for payment and whether the
Issuing Bank has made or will make an L/C Disbursement thereunder; provided that
any failure to give or delay in giving such notice shall not relieve the Account
Party of its obligation to reimburse the Issuing Bank and the Revolving Credit
Lenders with respect to any such L/C Disbursement. The Administrative Agent
shall promptly give each Revolving Credit Lender notice thereof if the
applicable Account Party does not pay the applicable reimbursement amount in
accordance with paragraph (e) above.
(h) Interim Interest. If the Issuing Bank shall make any L/C
Disbursement in respect of a Letter of Credit, then, unless the applicable
Account Party shall reimburse such L/C Disbursement in full on such date, the
unpaid amount thereof shall bear interest for the account of the Issuing Bank,
for each day from and including the date of such L/C Disbursement, to but
excluding the earlier of the date of payment by the applicable Account Party or
the date on which interest shall commence to accrue thereon as provided in
Section 2.02(f), at the rate per annum that would apply to such amount if such
amount were a Base Rate Loan.
(i) Resignation or Removal of the Issuing Bank. The Issuing Bank may
resign at any time by giving 180 days' prior written notice to the
Administrative Agent, the Lenders and the Borrower, and may be removed at any
time by the Borrower by notice to the Issuing Bank, the Administrative Agent and
the Lenders. Subject to the next succeeding paragraph, upon the acceptance of
any appointment as the Issuing Bank hereunder by a Lender that shall agree to
serve as successor Issuing Bank, such successor shall succeed to and become
vested with all the interests, rights and obligations of the retiring Issuing
Bank and the retiring Issuing Bank shall be discharged from its obligations to
issue additional Letters of Credit hereunder. At the time such removal or
resignation shall become effective, the Borrower shall pay all accrued and
unpaid fees pursuant to Section 2.05(c)(ii). The acceptance of any appointment
as the Issuing Bank hereunder by a successor Lender shall be evidenced by an
agreement entered into by such successor, in a form satisfactory to the Borrower
and the Administrative Agent, and, from and after the effective date of such
agreement, (i) such successor Lender shall have all the rights and obligations
of the previous Issuing Bank under this Agreement and the other Loan Documents
and (ii) references herein and in the other Loan Documents to the term "Issuing
Bank" shall be deemed to refer to such successor or to any previous Issuing
Bank, or to such successor and all previous Issuing Banks, as the context shall
require. After the resignation or removal of the Issuing Bank hereunder, the
retiring Issuing Bank shall remain a party hereto and shall continue to have all
the rights and obligations of an Issuing Bank under this Agreement and the other
Loan
<PAGE> 51
46
Documents with respect to Letters of Credit issued by it prior to such
resignation or removal, but shall not be required to issue additional Letters of
Credit.
The Administrative Agent shall, at the reasonable request of the
Borrower, appoint a Lender to issue a specific Letter of Credit under this
Agreement in accordance with the terms hereof, provided that such appointment
shall in no way be deemed a resignation or removal of the Issuing Bank under
this Agreement. Such appointment shall be subject to the consent of the
applicable Lender. Unless the context otherwise requires, references herein and
in the other Loan Documents to the term Issuing Bank shall refer to the Issuing
Bank hereunder and such Lender appointed by the Administrative Agent to issue a
Letter of Credit.
(j) Cash Collateralization. If any Event of Default shall occur and be
continuing, or if the Total Revolving Credit Commitment is less than the
aggregate L/C Exposure, the Borrower shall, on the Business Day following which
it receives notice from the Administrative Agent or the Required Lenders (or, if
the maturity of the Loans has been accelerated, Revolving Credit Lenders holding
participations in outstanding Letters of Credit representing greater than 50% of
the aggregate undrawn amount of all outstanding Letters of Credit) thereof and
of the amount to be deposited, deposit in an account with the Collateral Agent,
for the benefit of the Revolving Credit Lenders, an amount in cash equal to the
L/C Exposure as of such date. Such deposit shall be held by the Collateral Agent
as collateral for the payment and performance of the Obligations. The Collateral
Agent shall have exclusive dominion and control, including the exclusive right
of withdrawal, over such account. Other than any interest earned on the
investment of such deposits in Permitted Investments, which investments shall be
made at the option and sole discretion of the Collateral Agent, such deposits
shall not bear interest. Interest or profits, if any, on such investments shall
accumulate in such account. Moneys in such account shall (i) automatically be
applied by the Administrative Agent to reimburse the Issuing Bank for L/C
Disbursements (and all accrued interest thereon) for which it has not been
reimbursed, (ii) be held for the satisfaction of the reimbursement obligations
of the Borrower for the L/C Exposure at such time and (iii) if the maturity of
the Loans has been accelerated (but subject to the consent of Revolving Credit
Lenders holding participations in outstanding Letters of Credit representing
greater than 50% of the aggregate undrawn amount of all outstanding Letters of
Credit), be applied to satisfy the Obligations. If the Borrower is required to
provide an amount of cash collateral hereunder as a result of the occurrence of
an Event of Default, such amount (to the extent not applied as aforesaid) shall
be returned to the Borrower within three Business Days after all Events of
Default have been cured or waived. If the Borrower is required to provide an
amount of cash collateral hereunder pursuant to Section 2.13(a), such amount
shall be returned to the Borrower from time to time to the extent that the
amount of such cash collateral held by the Collateral Agent exceeds the excess,
if any, of the aggregate L/C Exposure over the Total Revolving Credit
Commitment; provided, that such return shall not be required at any time that an
Event of Default has occurred and is continuing.
<PAGE> 52
47
ARTICLE III
Representations and Warranties
Each of Allied and the Borrower represents and warrants to the
Administrative Agent, the Syndication Agent, the Documentation Agent, the
Collateral Agent, the Issuing Bank and each of the Lenders that:
SECTION 3.01. Organization; Powers. Each of Allied, the Borrower and
each of the Subsidiaries (a) is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its organization, (b)
has all requisite power and authority to own its property and assets and to
carry on its business as now conducted and as proposed to be conducted, (c) is
qualified to do business in, and is in good standing in, every jurisdiction
where such qualification is required, except where the failure so to qualify
could not reasonably be expected to result in a Material Adverse Effect, and (d)
has the corporate power and authority to execute, deliver and perform its
obligations under each of the Loan Documents and each other agreement or
instrument contemplated hereby to which it is or will be a party and, in the
case of the Borrower, to borrow hereunder.
SECTION 3.02. Authorization. The execution, delivery and performance by
each Loan Party of each of the Loan Documents to which such Loan Party is a
party, and in the case of the Borrower the borrowings hereunder (collectively,
the "Transactions") (a) have been duly authorized by all requisite corporate
and, if required, stockholder action and (b) will not (i) violate (A) any
provision of law, statute, rule or regulation, or of the certificate or articles
of incorporation or other constitutive documents or by-laws of Allied, the
Borrower or any Subsidiary, (B) any order of any Governmental Authority or (C)
any provision of any indenture, agreement or other instrument to which Allied,
the Borrower or any Subsidiary is a party or by which any of them or any of
their property is or may be bound, (ii) be in conflict with, result in a breach
of or constitute (alone or with notice or lapse of time or both) a default
under, or give rise to any right to accelerate or to require the prepayment,
repurchase or redemption of any obligation under any such indenture, agreement
or other instrument or (iii) result in the creation or imposition of any Lien
upon or with respect to any property or assets now owned or hereafter acquired
by Allied, the Borrower or any Subsidiary (other than any Lien created hereunder
or under the Security Documents).
SECTION 3.03. Enforceability. This Agreement has been duly executed and
delivered by Allied and the Borrower and constitutes, and each other Loan
Document when executed and delivered by each Loan Party party thereto will
constitute, a legal, valid and binding obligation of such Loan Party enforceable
against such Loan Party in accordance with its terms.
SECTION 3.04. Governmental Approvals. No action, consent or approval
of, registration or filing with or any other action by any Governmental
Authority is or will be required in connection with the Transactions, except for
(a) the filing of Uniform Commercial Code financing statements and other similar
filings to perfect the interests of the Secured Parties in the Collateral, (b)
such as will have been made or obtained and will be in full force and effect as
of the Closing Date and (c) such as may be required in the ordinary course of
business in connection with the performance of the obligations of Allied and the
Borrower hereunder and in connection with the Transactions.
SECTION 3.05. Financial Statements. Allied has heretofore furnished to
the Lenders its consolidated balance sheets and statements of operations, cash
flows and stockholders' equity (i) as
<PAGE> 53
48
of and for each of the three fiscal years ended December 31, 1996, audited by
and accompanied by the opinion of Arthur Andersen LLP, independent public
accountants, and (ii) as of and for the fiscal quarter and the portion of the
fiscal year ended March 31, 1997, certified by a Financial Officer of Allied.
Such financial statements present fairly in all material respects the financial
condition and results of operations and cash flows of Allied and its
consolidated Subsidiaries as of such dates and for such periods. Such financial
statements were prepared in accordance with GAAP applied on a consistent basis.
SECTION 3.06. No Material Adverse Change. There has been no material
adverse change in the business, assets, operations, prospects, condition,
financial or otherwise, or material agreements of Allied, the Borrower and the
Subsidiaries, taken as a whole, since December 31, 1996.
SECTION 3.07. Title to Properties; Possession Under Leases. (a) Each of
Allied, the Borrower and the Subsidiaries has good and indefeasible title to, or
valid leasehold interests in, all its material properties and assets, except for
minor defects in title that do not materially interfere with its ability to
conduct its business as currently conducted or to utilize such properties and
assets for their intended purposes. All such material properties and assets are
free and clear of Liens, other than Liens expressly permitted by Section 6.02.
(b) Each of Allied, the Borrower and the Subsidiaries has complied with
all obligations under all material leases to which it is a party and all such
leases are in full force and effect, except where failure to do so could not
reasonably be expected to have a Material Adverse Effect. Each of Allied, the
Borrower and the Subsidiaries enjoys peaceful and undisturbed possession under
all such material leases, except where failure to do so could not reasonably be
expected to have a Material Adverse Effect.
SECTION 3.08. Subsidiaries. Schedule 3.08 sets forth as of the Closing
Date a list of all Subsidiaries. Each such Subsidiary is a wholly owned
Subsidiary except as otherwise indicated on Schedule 3.08. The shares of capital
stock or other ownership interests issued by the Borrower and the Subsidiaries
and owned by Allied, the Borrower or the Subsidiaries are fully paid and
non-assessable and are owned by Allied or the Borrower, directly or indirectly,
free and clear of all Liens (other than Liens permitted by this Agreement).
SECTION 3.09. Litigation; Compliance with Laws. (a) Except as set forth
on Schedule 3.09, there are not any actions, suits or proceedings at law or in
equity or by or before any Governmental Authority now pending or, to the
knowledge of Allied or the Borrower, threatened against or affecting Allied or
the Borrower or any Subsidiary or any business, property or rights of any such
person (i) that involve any Loan Document or the Transactions or (ii) as to
which there is a reasonable possibility of an adverse determination and that,
if adversely determined, could reasonably be expected, individually or in the
aggregate, to result in a Material Adverse Effect.
(b) None of Allied, the Borrower or any of the Subsidiaries or any of
their respective material properties or assets is in violation of, nor will the
continued operation of their material properties and assets as currently
conducted violate, any law, rule or regulation (including any zoning, building,
Environmental Law, ordinance, code or approval or any building permits), or is
in default with respect to any judgment, writ, injunction, decree or order of
any Governmental Authority, where such violation or default could reasonably be
expected to result in a Material Adverse Effect.
<PAGE> 54
49
SECTION 3.10. Agreements. (a) None of Allied, the Borrower or any of
the Subsidiaries is a party to any agreement or instrument or subject to any
corporate restriction that has resulted or could reasonably be expected to
result in a Material Adverse Effect.
(b) None of Allied, the Borrower or any of the Subsidiaries is in
default in any manner under any provision of any indenture or other agreement or
instrument evidencing Indebtedness, or any other material agreement or
instrument to which it is a party or by which it or any of its properties or
assets are or may be bound, where such default could reasonably be expected to
result in a Material Adverse Effect.
(c) The Borrower is permitted to borrow up to the lesser of (i)
$80,000,000 and (ii) the Additional Facility Amount in reliance upon Section
1008(ix) of the Senior Subordinated Notes Indenture, and all Loans made
hereunder and Letters of Credit issued hereunder are "Senior Debt" as such term
is defined in the Senior Subordinated Notes Indenture.
SECTION 3.11. Federal Reserve Regulations. (a) None of Allied, the
Borrower or any of the Subsidiaries is engaged principally, or as one of its
important activities, in the business of extending credit for the purpose of
buying or carrying Margin Stock.
(b) No part of the proceeds of any Loan or any Letter of Credit will be
used, whether directly or indirectly, and whether immediately, incidentally or
ultimately, for any purpose that entails a violation of, or that is inconsistent
with, the provisions of the Regulations of the Board, including Regulation G, T,
U or X.
SECTION 3.12. Investment Company Act; Public Utility Holding Company
Act. None of Allied, the Borrower or any Subsidiary is (a) an "investment
company" as defined in, or subject to regulation under, the Investment Company
Act of 1940 or (b) a "holding company" as defined in, or subject to regulation
under, the Public Utility Holding Company Act of 1935.
SECTION 3.13. Use of Proceeds. The Borrower will use the proceeds of
the Loans and will request the issuance of Letters of Credit only for the
purposes specified in the preamble to this Agreement.
SECTION 3.14. Tax Returns. Each of Allied, the Borrower and the
Subsidiaries has filed or caused to be filed all Federal, state and other
material tax returns or materials required to have been filed by it and has paid
or caused to be paid all taxes due and payable by it and all assessments
received by it, except taxes that are being contested in good faith by
appropriate proceedings and for which Allied, the Borrower or such Subsidiary,
as applicable, shall have set aside on its books adequate reserves.
SECTION 3.15. No Material Misstatements. None of (a) the Confidential
Information Memorandum or (b) any other information, report, financial
statement, exhibit or schedule furnished by or on behalf of Allied or the
Borrower to the Administrative Agent, the Syndication Agent, the Documentation
Agent or any Lender in connection with the negotiation of any Loan Document or
included therein or delivered pursuant thereto contained, contains or will
contain any material misstatement of fact or omitted, omits or will omit to
state any material fact necessary to make the statements therein, in the light
of the circumstances under which they were, are or will be made, not misleading;
provided that to the extent any such information, report, financial statement,
exhibit or
<PAGE> 55
50
schedule was based upon or constitutes a forecast, projection or expressions of
opinion, each of Allied and the Borrower represents only that it acted in good
faith and utilized reasonable assumptions and due care in the preparation of
such information, report, financial statement, exhibit or schedule.
SECTION 3.16. Employee Benefit Plans. Each of the Borrower and its
ERISA Affiliates is in compliance in all material respects with the applicable
provisions of ERISA and the Code and the regulations and published
interpretations thereunder, except where non-compliance could not reasonably be
expected to have a Material Adverse Effect. No ERISA Event has occurred or is
reasonably expected to occur that, when taken together with all other such ERISA
Events, could reasonably be expected to result in material liability of the
Borrower or any of its ERISA Affiliates, except where such liability could not
reasonably be expected to have a Material Adverse Effect. The present value of
all benefit liabilities under each Plan (based on those assumptions used to fund
such Plan) did not, as of the last annual valuation date applicable thereto,
exceed by more than $3,000,000 the fair market value of the assets of such Plan,
and the present value of all benefit liabilities of all underfunded Plans (based
on those assumptions used to fund each such Plan) did not, as of the last annual
valuation dates applicable thereto, exceed by more than $3,000,000 fair market
value of the assets of all such underfunded Plans.
SECTION 3.17. Environmental Matters. Except as set forth in Schedule
3.17:
(a) The facilities and properties owned, leased or operated by Allied,
the Borrower and the Subsidiaries (the "Properties") do not contain, and have
not previously contained, to the Borrower's best knowledge (actual or
constructive) any Hazardous Materials in amounts or concentrations which (i)
constitute, or constituted a violation of, (ii) require Remedial Action under,
or (iii) could give rise to liability under, Environmental Laws, which
violations, Remedial Actions and liabilities, in the aggregate, could reasonably
be expected to result in a Material Adverse Effect;
(b) The Properties and all operations of the Borrower and the
Subsidiaries are in compliance, and in the last five years have been in
compliance, with all Environmental Laws and all necessary Environmental Permits
have been obtained and are in effect, except to the extent that such
non-compliance or failure to obtain any necessary permits, in the aggregate,
could not reasonably be expected to result in a Material Adverse Effect;
(c) There have been no Releases or threatened Releases at, from, under
or proximate to the Properties or otherwise in connection with the operations of
the Borrower or the Subsidiaries, which Releases or threatened Releases, in the
aggregate, could reasonably be expected to result in a Material Adverse Effect;
(d) None of Allied, the Borrower or any of the Subsidiaries has
received any notice of an Environmental Claim in connection with the Properties
or the operations of the Borrower or the Subsidiaries or with regard to any
person whose liabilities for environmental matters Allied, the Borrower or the
Subsidiaries has retained or assumed, in whole or in part, contractually, by
operation of law or otherwise, which, in the aggregate, could reasonably be
expected to result in a Material Adverse Effect, nor do Allied, the Borrower or
the Subsidiaries have reason to believe that any such notice will be received or
is being threatened; and
(e) Hazardous Materials have not been transported from the Properties,
nor have Hazardous Materials been generated, treated, stored or disposed of at,
on or under any of the Properties in a
<PAGE> 56
51
manner that could give rise to liability under any Environmental Law, nor have
the Borrower or the Subsidiaries retained or assumed any liability,
contractually, by operation of law or otherwise, with respect to the generation,
treatment, storage or disposal of Hazardous Materials, which transportation,
generation, treatment, storage or disposal, or retained or assumed liabilities,
in the aggregate, could reasonably be expected to result in a Material Adverse
Effect.
SECTION 3.18. Insurance. Schedule 3.18 sets forth a true, complete and
correct description of all insurance maintained by Allied, the Borrower or by
Allied or the Borrower for its Subsidiaries as of the date hereof and the
Closing Date. As of each such date, such insurance is in full force and effect
and all premiums have been duly paid. Allied, the Borrower and its Subsidiaries
have insurance in such amounts and covering such risks and liabilities as are in
accordance with normal industry practice.
SECTION 3.19. Security Documents. (a) On and after the Closing Date,
each of the Pledge Agreement and the Allied Finance Pledge Agreement will be
effective to create in favor of the Collateral Agent, for the ratable benefit of
the Secured Parties, a legal, valid and enforceable security interest in the
Collateral (as defined in the Pledge Agreement and the Allied Finance Pledge
Agreement, as applicable) and, when the certificates evidencing the investment
securities that constitute the Pledged Securities (as defined in the Pledge
Agreement and the Allied Finance Pledge Agreement, as applicable) are delivered
to the Collateral Agent, the Collateral Agent shall have a fully perfected first
priority Lien on, and security interest in, all right, title and interest of the
pledgors thereunder in such Collateral, in each case prior and superior in right
to any other person.
(b) On and after the Closing Date, the Security Agreement will be
effective to create in favor of the Collateral Agent, for the ratable benefit of
the Secured Parties, a legal, valid and enforceable security interest in the
Collateral (as defined in the Security Agreement) and, when financing statements
in appropriate form are filed in the offices specified in the Perfection
Schedule, the Security Agreement shall constitute a fully perfected Lien on, and
security interest in, all right, title and interest of the grantors thereunder
in all such Collateral in which a security interest may be perfected by filing,
each case prior and superior in right to any other person, other than with
respect to Liens expressly permitted by Section 6.02.
SECTION 3.20. Labor Matters. As of the date hereof and the Closing
Date, there are no strikes, lockouts or slowdowns against Allied, the Borrower
or any Subsidiary pending or, to the knowledge of Allied or the Borrower,
threatened, which could reasonably be expected to result in a Material Adverse
Effect. The hours worked by and payments made to employees of Allied, the
Borrower and the Subsidiaries have not been in violation of the Fair Labor
Standards Act or any other applicable Federal, state, local or foreign law
dealing with such matters, which could reasonably be expected to result in a
Material Adverse Effect. All payments due from Allied, the Borrower or any
Subsidiary, or for which any claim may be made against Allied, the Borrower or
any Subsidiary, on account of wages and employee health and welfare insurance
and other benefits, have been paid or accrued as a liability on the books of
Allied, the Borrower or such Subsidiary, except where the failure to do so could
not reasonably be expected to result in a Material Adverse Effect. The
consummation of the Transactions will not give rise to any right of termination
or right of renegotiation on the part of any union under any collective
bargaining agreement to which Allied, the Borrower or any Subsidiary is bound,
except where such event could not reasonably be expected to result in a Material
Adverse Effect.
<PAGE> 57
52
SECTION 3.21. Solvency. Immediately after the consummation of the
Transactions to occur on the Closing Date and immediately following the making
of each Loan made on the Closing Date and after giving effect to the application
of the proceeds of such Loans, and taking into account all rights of indemnity,
subrogation and contribution of the Loan Parties under applicable law and under
the Indemnity, Subrogation and Contribution Agreement, (i) the fair value of the
assets of Allied, the Borrower and the other Loan Parties, on a consolidated
basis, at a fair valuation, will exceed its debts and liabilities, subordinated,
contingent or otherwise; (ii) the present fair saleable value of the property of
Allied, the Borrower and the other Loan Parties, on a consolidated basis, will
be greater than the amount that will be required to pay the probable liability
of its debts and other liabilities, subordinated, contingent or otherwise, as
such debts and other liabilities become absolute and matured; (iii) Allied, the
Borrower and the other Loan Parties, on a consolidated basis, will be able to
pay its debts and liabilities, subordinated, contingent or otherwise, as such
debts and liabilities become absolute and matured; and (iv) Allied, the Borrower
and the other Loan Parties, on a consolidated basis, will not have unreasonably
small capital with which to conduct the business in which it is engaged as such
business is now conducted and is proposed to be conducted following the Closing
Date.
ARTICLE IV
Conditions of Lending
The obligations of the Lenders to make Loans and of the Issuing Bank to
issue Letters of Credit hereunder (each such event being called a "Credit
Event") are subject to the satisfaction of the following conditions:
(a) The Administrative Agent shall have received a notice of such
Borrowing as required by Section 2.03 (or such notice shall have been deemed
given in accordance with Section 2.03) or, in the case of the issuance,
amendment, renewal or extension of a Letter of Credit, the Issuing Bank and the
Administrative Agent shall have received a notice requesting the issuance,
amendment, renewal or extension of such Letter of Credit as required by Section
2.23(b) or, in the case of the Borrowing of a Swingline Loan, the Swingline
Lender and the Administrative Agent shall have received a notice requesting such
Swingline Loan as required by Section 2.22(b).
(b) Except in the case of a Borrowing that does not increase the
aggregate principal amount of Loans outstanding of any Lender, the
representations and warranties set forth in Article III hereof shall be true and
correct in all material respects on and as of the date of such Credit Event with
the same effect as though made on and as of such date, except to the extent such
representations and warranties expressly relate to an earlier date.
(c) The Borrower and each other Loan Party shall be in compliance with
all the terms and provisions set forth herein and in each other Loan Document on
its part to be observed or performed, and at the time of and immediately after
such Credit Event, no Event of Default or Default shall have occurred and be
continuing.
Each Credit Event shall be deemed to constitute a representation and warranty by
the Borrower and Allied on the date of such Credit Event as to the matters
specified in paragraphs (b) (except as aforesaid) and (c) of this Article IV.
<PAGE> 58
53
ARTICLE V
Affirmative Covenants
Each of Allied and the Borrower covenants and agrees with each Lender
that so long as this Agreement shall remain in effect and until the Commitments
have been terminated and the principal of and interest on each Loan, all Fees
and all other expenses or amounts payable under any Loan Document shall have
been paid in full and all Letters of Credit have been canceled or have expired
and all amounts drawn thereunder have been reimbursed in full, unless the
Required Lenders shall otherwise consent in writing, each of Allied and the
Borrower will, and will cause each of the Subsidiaries to:
SECTION 5.01. Existence; Businesses and Properties. (a) Do or cause to
be done all things necessary to preserve, renew and keep in full force and
effect its legal existence, except as otherwise expressly permitted under
Section 6.06, except that, after notice to and consultation with the
Administrative Agent, any Subsidiary may terminate its existence.
(b) Do or cause to be done all things necessary to obtain, preserve,
renew, extend and keep in full force and effect the rights, licenses, permits,
franchises, authorizations, patents, copyrights, trademarks and trade names
material to the conduct of its business; maintain and operate such business in
substantially the manner in which it is presently conducted and operated; comply
in all material respects with all applicable laws, rules, regulations and
decrees and orders of any Governmental Authority, whether now in effect or
hereafter enacted; and at all times maintain and preserve all property material
to the conduct of such business and keep such property in good repair, working
order and condition and from time to time make, or cause to be made, all needful
and proper repairs, renewals, additions, improvements and replacements thereto
necessary in order that the business carried on in connection therewith may be
properly conducted at all times.
SECTION 5.02. Insurance. (a) Keep its insurable properties adequately
insured at all times by financially sound and reputable insurers; maintain such
other insurance, to such extent and against such risks, including fire and other
risks insured against by extended coverage, as is customary with companies in
the same or similar businesses operating in the same or similar locations,
including public liability insurance against claims for personal injury or death
or property damage occurring upon, in, about or in connection with the use of
any properties owned, occupied or controlled by it; and maintain such other
insurance as may be required by law.
(b) Cause all such policies to be endorsed or otherwise amended to
include a "standard" or "New York" lender's loss payable endorsement, in form
and substance satisfactory to the Administrative Agent and the Collateral Agent,
which endorsement shall provide that, from and after the Closing Date, if the
insurance carrier shall have received written notice from the Administrative
Agent or the Collateral Agent of the occurrence of an Event of Default, the
insurance carrier shall pay all proceeds otherwise payable to the Borrower or
the Loan Parties under such policies directly to the Collateral Agent; cause all
such policies to provide that neither the Borrower, the Administrative Agent,
the Collateral Agent nor any other party shall be a coinsurer thereunder and to
contain a "Replacement Cost Endorsement", without any deduction for
depreciation, and such other provisions as the Administrative Agent or the
Collateral Agent may reasonably require from time to time to protect their
interests; deliver original or certified copies of all such policies to the
Collateral Agent; cause each such policy to provide that it shall not be
canceled, modified or not renewed (i) by reason
<PAGE> 59
54
of nonpayment of premium upon not less than 10 days' prior written notice
thereof by the insurer to the Administrative Agent and the Collateral Agent
(giving the Administrative Agent and the Collateral Agent the right to cure
defaults in the payment of premiums) or (ii) for any other reason upon not less
than 30 days' prior written notice thereof by the insurer to the Administrative
Agent and the Collateral Agent; deliver to the Administrative Agent and the
Collateral Agent, prior to the cancelation, modification or nonrenewal of any
such policy of insurance, a copy of a renewal or replacement policy (or other
evidence of renewal of a policy previously delivered to the Administrative Agent
and the Collateral Agent) together with evidence satisfactory to the
Administrative Agent and the Collateral Agent of payment of the premium
therefor.
(c) Notify the Administrative Agent and the Collateral Agent
immediately whenever any separate insurance concurrent in form or contributing
in the event of loss with that required to be maintained under this Section 5.02
is taken out by the Borrower; and promptly deliver to the Administrative Agent
and the Collateral Agent a duplicate original copy of such policy or policies.
SECTION 5.03. Obligations and Taxes. Pay its Indebtedness and other
obligations promptly and in accordance with their terms and pay and discharge
promptly when due all taxes, assessments and governmental charges or levies
imposed upon it or upon its income or profits or in respect of its property,
before the same shall become delinquent or in default, as well as all lawful
claims for labor, materials and supplies or otherwise that, if unpaid, might
give rise to a Lien upon such properties or any part thereof; provided, however,
that such payment and discharge shall not be required with respect to any such
tax, assessment, charge, levy or claim so long as the validity or amount thereof
shall be contested in good faith by appropriate proceedings and the Borrower
shall have set aside on its books adequate reserves with respect thereto in
accordance with GAAP and such contest operates to suspend collection of the
contested obligation, tax, assessment or charge and enforcement of a Lien.
SECTION 5.04. Financial Statements, Reports, etc. In the case of the
Borrower, furnish to the Administrative Agent and each Lender:
(a) within 95 days after the end of each fiscal year, its
consolidated balance sheet and related statements of operations,
stockholders' equity and cash flows showing the financial condition of
Allied and its consolidated Subsidiaries as of the close of such fiscal
year and the results of its operations and the operations of such
Subsidiaries during such year, all audited by Arthur Andersen LLP or
other independent public accountants of recognized national standing
acceptable to the Administrative Agent and accompanied by an opinion of
such accountants (which shall not be qualified in any material respect)
to the effect that such consolidated financial statements fairly
present the financial condition and results of operations of Allied and
its consolidated Subsidiaries on a consolidated basis in accordance
with GAAP consistently applied and annual consolidating income
statements for Allied and its operating regions;
(b) within 50 days after the end of each of the first three
fiscal quarters of each fiscal year, its consolidated balance sheet and
related statements of operations, stockholders' equity and cash flows
showing the financial condition of Allied and its consolidated
Subsidiaries as of the close of such fiscal quarter and the results of
its operations and the operations of such Subsidiaries during such
fiscal quarter and the then elapsed portion of the fiscal year, all
certified by one of its Financial Officers as fairly presenting the
financial condition and results of operations of Allied and its
consolidated Subsidiaries on a consolidated basis in accordance
<PAGE> 60
55
with GAAP consistently applied, subject to normal year-end audit
adjustments and quarterly consolidating income statements for Allied
and its operating regions;
(c) concurrently with any delivery of financial statements
under sub-paragraph (a) or (b) above, a certificate of the accounting
firm or Financial Officer opining on or certifying such statements
(which certificate, when furnished by an accounting firm, may be
limited to accounting matters and disclaim responsibility for legal
interpretations) (i) certifying that in making its examination in
connection with rendering such opinion or certificate with respect to
such statements, such person has not obtained knowledge that an Event
of Default or Default has occurred or, if such Financial Officer has
obtained knowledge that an Event of Default or Default has occurred,
specifying the nature and extent thereof and any corrective action
taken or proposed to be taken with respect thereto, (ii) setting forth
computations in reasonable detail satisfactory to the Administrative
Agent demonstrating compliance with the covenants contained in Section
6.01, 6.02, 6.04, 6.05, 6.11, 6.12, 6.13, 6.14 and 6.15 and (iii)
setting forth any change in the Applicable Percentage;
(d) promptly after the same become publicly available, copies
of all periodic and other reports, proxy statements and other materials
filed by Allied, the Borrower or any Subsidiary with the Securities and
Exchange Commission, or any Governmental Authority succeeding to any or
all of the functions of said Commission, or with any national
securities exchange, or distributed to its shareholders, as the case
may be;
(e) as soon as available but in any event not later than 50
days after the end of each fiscal quarter, a report in form and
substance satisfactory to the Administrative Agent of all Permitted
Acquisitions consummated during such quarter with total consideration
of $3,000,000 or more, which report shall include a description of the
total consideration by acquisition (including a breakdown of
Indebtedness permitted under Section 6.01(e), Acquired Indebtedness and
contingent payments);
(f) promptly, from time to time, such other information
regarding the operations, business affairs and financial condition of
Allied, the Borrower or any Subsidiary, or compliance with the terms of
any Loan Document, as the Administrative Agent or any Lender may
reasonably request;
(g) within fifteen days after the beginning of each fiscal
year, a copy of the annual business plan of Allied and forecasts,
prepared by management of Allied, in each case in form and detail
satisfactory to the Administrative Agent, of Allied's consolidated
balance sheets and related statements of operations and cash flows on a
quarterly basis for such fiscal year and on an annual basis for each of
the following fiscal years remaining during the term of this Agreement;
and
(h) concurrently with the delivery of the financial statements
under sub-paragraph (a) above, a schedule of all real property then
owned by Allied, the Borrower or the Subsidiaries, which schedule shall
include, in detail satisfactory to the Administrative Agent, the
location of, description of, fair market or assessed value of and any
Liens securing Indebtedness on, each such owned real property.
<PAGE> 61
56
SECTION 5.05. Litigation and Other Notices. Furnish to the
Administrative Agent, the Issuing Bank and each Lender prompt written notice of
the following:
(a) any Event of Default or Default, specifying the nature and
extent thereof and the corrective action (if any) taken or proposed to
be taken with respect thereto;
(b) the filing or commencement of, or any threat or notice of
intention of any person to file or commence, any action, suit or
proceeding, whether at law or in equity or by or before any
Governmental Authority, against the Borrower or any Affiliate thereof
that could reasonably be expected to result in a Material Adverse
Effect; and
(c) any development that has resulted in, or could reasonably
be expected to result in, a Material Adverse Effect.
SECTION 5.06. Employee Benefits. (a) Comply in all material respects
with the applicable provisions of ERISA and the Code and (b) furnish to the
Administrative Agent (i) as soon as possible after, and in any event within 10
days after any Responsible Officer of the Borrower or any ERISA Affiliate knows
or has reason to know that, any ERISA Event has occurred that, alone or together
with any other ERISA Event could reasonably be expected to result in liability
of the Borrower in an aggregate amount exceeding $5,000,000 or (ii) requiring
payments exceeding $2,500,000 in any year, a statement of a Financial Officer of
the Borrower setting forth details as to such ERISA Event and the action, if
any, that the Borrower proposes to take with respect thereto.
SECTION 5.07. Maintaining Records; Access to Properties and
Inspections. Keep proper books of record and account in which full, true and
correct entries in conformity with GAAP and all requirements of law are made of
all dealings and transactions in relation to its business and activities. Each
Loan Party will, and will cause each of its Subsidiaries to, permit any
representatives designated by the Administrative Agent or any Lender to visit
and inspect the financial records and the properties of Allied, the Borrower or
any Subsidiary at reasonable times and as often as reasonably requested and to
make extracts from and copies of such financial records, and permit any
representatives designated by the Administrative Agent or any Lender to discuss
the affairs, finances and condition of Allied, the Borrower or any Subsidiary
with the officers thereof and independent accountants therefor. Without limiting
the foregoing, the Administrative Agent and its representatives may inspect, and
may cause an environmental assessment to be made of, any real property owned or
leased by Allied, the Borrower or any Subsidiary with a view toward securing the
Obligations by a Lien on such property pursuant to Section 5.11, in each case at
the Borrower's sole cost and expense (not to exceed $100,000 in any fiscal
year).
SECTION 5.08. Use of Proceeds. Use the proceeds of the Loans and
request the issuance of Letters of Credit only for the purposes set forth in the
preamble to this Agreement.
SECTION 5.09. Environmental Laws. (a) Comply, and cause all lessees and
other persons occupying its Properties to comply, in all respects with all
Environmental Laws and Environmental Permits applicable to its operations and
Properties; obtain and renew all Environmental Permits necessary for its
operations and Properties; and conduct any Remedial Action in accordance with
Environmental Laws, except where such non-compliance or failure to obtain or
renew Environmental Permits or to conduct any Remedial Action could not
reasonably be expected to result in a Material Adverse Effect; provided,
however, that none of Allied, the Borrower or any of the Subsidiaries shall
<PAGE> 62
57
be required to undertake any Remedial Action to the extent that any applicable
obligation to do so is being contested in good faith and by proper proceedings
and appropriate reserves are being maintained with respect to such
circumstances.
(b) With respect to any Permitted Acquisition and any acquisition of
any other ownership or leasehold interest in, or the entry into any agreement to
conduct operations of, any landfill, transfer station or other waste treatment
or disposal facility: (i) prior to consummating any such acquisition or
commencement of any operations under any such agreement or lease, obtain and
review a favorable written assessment, prepared by an environmental consulting
firm recognized within the municipal solid waste industry and among
environmental professionals as competent and reputable and which the Borrower
has reasonably determined to be suitable, that reasonably addresses the
environmental compliance and liability issues associated with the subject of
such acquisition, agreement or lease (an "Environmental Assessment"); and (ii)
furnish such Environmental Assessment to the Administrative Agent promptly
following such acquisition or the commencement of any operations under such an
agreement or lease with respect to a Permitted Acquisition, the total
consideration of which is greater than $5,000,000.
SECTION 5.10. Preparation of Environmental Reports. If a Default caused
by reason of a breach of Section 3.17 or 5.09 shall have occurred and be
continuing, at the request of the Required Lenders through the Administrative
Agent, provide to the Lenders within 45 days after such request, at the expense
of the Borrower, an environmental site assessment report for the Properties
which are the subject of such default prepared by an environmental consulting
firm acceptable to the Administrative Agent and indicating the presence or
absence of Hazardous Materials and the estimated cost of any compliance or
Remedial Action in connection with such Properties.
SECTION 5.11. Further Assurances. Execute any and all further
documents, financing statements, agreements and instruments, and take all
further action (including filing Uniform Commercial Code and other financing
statements, mortgages and deeds of trust) that may be required under applicable
law, or that the Required Lenders, the Administrative Agent or the Collateral
Agent may reasonably request, in order to effectuate the transactions
contemplated by the Loan Documents and in order to grant, preserve, protect and
perfect the validity and first priority of the security interests created or
intended to be created by the Security Documents. Allied and the Borrower will
cause any subsequently acquired or organized Subsidiary (other than a Subsidiary
that conducts no operations, has total assets not in excess of $5,000 and has no
Indebtedness) to execute a Subsidiary Guarantee Agreement, Indemnity Subrogation
and Contribution Agreement and each applicable Security Document in favor of the
Collateral Agent, except to the extent any such execution by a Foreign
Subsidiary would have any adverse tax consequences for the Borrower or any of
the Subsidiaries. In addition, from time to time, Allied and the Borrower will,
at their own cost and expense, promptly secure the Obligations by pledging or
creating, or causing to be pledged or created, perfected security interests with
respect to such of its assets and properties (including real property) as the
Administrative Agent or the Required Lenders shall designate (it being
understood that it is the intent of the parties that the Obligations shall be
secured by, among other things, substantially all the assets of Allied and the
Borrower (including real and other properties acquired subsequent to the Closing
Date)). Such security interests and Liens will be created under the Security
Documents and other security agreements, mortgages, deeds of trust and other
instruments and documents in form and substance satisfactory to the Collateral
Agent, and Allied and the Borrower shall deliver or cause to be delivered to the
Collateral Agent all such instruments and documents (including legal opinions,
title insurance policies and lien searches) as the Collateral Agent shall
reasonably request to evidence compliance
<PAGE> 63
58
with this Section. Allied and the Borrower agree to provide such evidence as the
Collateral Agent shall reasonably request as to the perfection and priority
status of each such security interest and Lien.
SECTION 5.12. Compliance with Terms of Leaseholds. Make all payments
and otherwise perform all obligations in respect of all leases of real property
to which Allied, the Borrower or any of the Subsidiaries is a party, keep such
leases in full force and effect and not allow such leases to lapse or be
terminated or any rights to renew such leases to be forfeited or canceled,
notify the Administrative Agent of any default by any party with respect to such
leases and cooperate with the Administrative Agent in all respects to cure any
such default, and cause each of the Subsidiaries to do so, except, in any case,
where the failure to do so, either individually or in the aggregate, could not
be reasonably expected to have a Material Adverse Effect.
SECTION 5.13. Performance of Material Agreements. Perform and observe
all of the terms and provisions of each agreement that is material to the
conduct of the Borrower's and the Subsidiaries' business to be performed or
observed by it (collectively, the "Material Agreements"), maintain each such
Material Agreement in full force and effect, enforce such Material Agreement in
accordance with its terms, take all action to such end as may be from time to
time requested by the Administrative Agent and, upon request of the
Administrative Agent, make to each other party to each such Material Agreement
such demands and requests for information and reports or for action as Allied or
the Borrower is entitled to make under such Material Agreement, and cause each
of the Subsidiaries to do so, except, in any case, where the failure to do so,
either individually or in the aggregate, could not be reasonably expected to
have a Material Adverse Effect.
SECTION 5.14. Senior Convertible Debentures. Prior to the end of each
fiscal year, commencing with the fiscal year ending on December 31, 1997, the
Borrower shall deliver to the Administrative Agent evidence reasonably
satisfactory to the Administrative Agent that the Borrower will be in compliance
with the financial covenants of the Senior Convertible Debentures (including
compliance as a result of a waiver or amendment of the terms thereof), provided
that the Borrower shall not be obligated to deliver such evidence if prior to
any such fiscal year-end, the Borrower shall have prepaid all Senior Convertible
Debentures not converted prior to such prepayment, in each case in accordance
with the terms thereof.
SECTION 5.15. Concentration and Disbursement Accounts. (a) Except to
the extent permitted by paragraph (b) below, the Borrower shall maintain with a
financial institution that is a Lender one or more accounts to be used by the
Borrower as its principal concentration and disbursement accounts and will not,
and will not permit any Subsidiary to, maintain more than an aggregate of
$1,000,000 for more than two Business Days in bank accounts with any person that
is not a Lender.
(b) Notwithstanding the foregoing, with respect to the accounts of the
Domestic Subsidiaries that were acquired from Laidlaw pursuant to the Stock
Purchase Agreement, (a) the Borrower shall be in compliance with paragraph (a)
within 90 days after the Closing Date. The Borrower and the Subsidiaries shall
be deemed to be in compliance with this Section 5.15 at any time that a lockbox
arrangement in accordance with Section 4.09(b) of the Security Agreement is in
effect.
<PAGE> 64
59
ARTICLE VI
Negative Covenants
Each of Allied and the Borrower covenants and agrees with each Lender
that, so long as this Agreement shall remain in effect and until the Commitments
have been terminated and the principal of and interest on each Loan, all Fees
and all other expenses or amounts payable under any Loan Document have been paid
in full and all Letters of Credit have been canceled or have expired and all
amounts drawn thereunder have been reimbursed in full, unless the Required
Lenders shall otherwise consent in writing, neither Allied nor the Borrower
will, nor will they cause or permit any of the Subsidiaries to:
SECTION 6.01. Indebtedness. Incur, create, assume or permit to exist
any Indebtedness, except:
(a) Indebtedness for borrowed money existing on the date
hereof and set forth on Schedule 6.01(a);
(b) Indebtedness created hereunder and under the other Loan
Documents.
(c) in the case of the Borrower, Indebtedness under the
Interest Rate Protection Agreements;
(d) Indebtedness of a Subsidiary acquired after the date
hereof and Indebtedness of a corporation merged or consolidated with or
into the Borrower or a Subsidiary after the date hereof ("Acquired
Indebtedness"), which Indebtedness in each case exists at the time of
such acquisition, merger, consolidation or conversion into a Subsidiary
and is not created in contemplation of such event and where such
acquisition, merger or consolidation is permitted by this Agreement,
provided that the Borrower and the Subsidiaries comply with the
provisions of Section 5.11 with respect to such acquired or newly
formed Subsidiary;
(e) Indebtedness of Allied, the Borrower or any Subsidiary
that is issued to a seller of an Acquired Entity and incurred in
connection with a Permitted Acquisition, provided that the aggregate
principal amount of Indebtedness incurred pursuant to this paragraph
(e) shall not exceed (i) $7,500,000 with respect to any Permitted
Acquisition and (ii) $50,000,000 at any time outstanding;
(f) Guarantees in respect of Indebtedness permitted pursuant
to this Section 6.01 (except for Guarantees of the Allied Senior
Notes), provided that any Guarantees in respect of Indebtedness that
are subordinated to the Obligations shall also be subordinated to the
Guarantees in favor of the Lenders under the Loan Documents and to the
Obligations to the same extent as such Indebtedness is subordinated to
the Obligations;
(g) Indebtedness of the Borrower or any wholly owned
Subsidiary to any other wholly owned Subsidiary or the Borrower, so
long as such Indebtedness is subordinated to all Indebtedness incurred
pursuant hereto and pursuant to the Guarantee Agreements;
<PAGE> 65
60
(h) Indebtedness (i) of Allied (A) to the Borrower or any
wholly owned Subsidiary, so long as the proceeds of such Indebtedness
are used by Allied solely for purposes permitted under Section 6.09 (it
being understood that such proceeds may not be used to pay any interest
or any other amount in respect of the Allied Senior Notes) and (B) to
the Borrower in the form of an advance in respect of a Permitted
Dividend, or (ii) of the Borrower or any wholly owned Subsidiary to
Allied;
(i) the Senior Subordinated Notes and Guarantees thereof, all
in accordance with the Indenture dated as of December 1, 1996,
governing the Senior Subordinated Notes;
(j) Indebtedness of the Borrower or the Subsidiaries
(including tax exempt financings and Capital Lease Obligations) to
purchase, construct, develop or improve assets in the ordinary course
of business after the Closing Date incurred in the ordinary course of
business after the Closing Date to finance Capital Expenditures
permitted under Section 6.11, provided that the aggregate principal
amount of any Indebtedness incurred pursuant to this paragraph (j)
outstanding at any time shall not exceed (i) at any time that the
Senior Debt Ratio as of the last fiscal quarter for which financial
statements have been delivered pursuant to Section 5.04(a) or (b) is
greater than or equal to 2.50 to 1.00 (after giving pro forma effect to
each proposed incurrence of Indebtedness under this paragraph (j)), 5%
of the consolidated net fixed assets of Allied, the Borrower and the
Subsidiaries as of such time and (ii) at any time that such Senior Debt
Ratio is less than 2.50 to 1.00 (after giving pro forma effect to each
proposed incurrence of Indebtedness under this paragraph (j)), 10% of
the consolidated net fixed assets of Allied, the Borrower and the
Subsidiaries as of such time;
(k) Indebtedness incurred pursuant to any sale and leaseback
transaction permitted by Section 6.04;
(l) Junior Exchange Indebtedness;
(m) the Allied Senior Notes and the Allied Canada Debentures;
(n) extensions, renewals or refinancings of Indebtedness under
paragraphs (a) and (d) so long as (i) such Indebtedness ("Refinancing
Indebtedness") is in an aggregate principal amount not greater than the
aggregate principal amount of the Indebtedness being extended, renewed
or refinanced plus the amount of any premiums required to be paid
thereon and fees and expenses associated therewith, (ii) such
Refinancing Indebtedness has a later or equal final maturity and a
longer or equal weighted average life than the Indebtedness being
extended, renewed or refinanced, (iii) the interest rate applicable to
such Refinancing Indebtedness shall be a market interest rate (as
determined in good faith by the Board of Directors of the Borrower) as
of the time of such extension, renewal or refinancing, (iv) if the
Indebtedness being extended, renewed or refinanced is subordinated to
the Obligations, such Refinancing Indebtedness is subordinated to the
Obligations to the extent of the Indebtedness being extended, renewed
or refinanced, (v) the covenants, events of default and other
provisions thereof (including any Guarantees thereof), taken as a
whole, shall be no less favorable to the Lenders than those contained
in the Indebtedness being refinanced and (vi) at the time and after
giving effect to such extension, renewal or refinancing, no Default or
Event of Default shall have occurred and be continuing; and
<PAGE> 66
61
(o) unsecured Indebtedness in addition to that permitted by
paragraphs (a) through (n) above in an aggregate principal amount not
to exceed (i) at any time that the Senior Debt Ratio as of the last
fiscal quarter for which financial statements are available is greater
than or equal to 2.50 to 1.00 (after giving pro forma effect to each
proposed incurrence of Indebtedness under this paragraph (p)),
$25,000,000 and (ii) at any time that such Senior Debt Ratio is less
than 2.50 to 1.00 (after giving pro forma effect to each proposed
incurrence of Indebtedness under this paragraph (p)), $75,000,000.
Notwithstanding anything to the contrary, the Borrower shall not incur
any Indebtedness (other than Revolving Loans or Letters of Credit but only to
the extent that the Aggregate Revolving Credit Exposure outstanding at any time
exceeds the Bank Facility Amount) in reliance upon Section 1008(ix) of the
Senior Subordinated Notes Indenture to the extent that the incurrence of such
Indebtedness would result in there being less than the lesser of (a) $80,000,000
and (b) the Additional Facility Amount in effect at the time of determination
available to be borrowed in reliance upon such Section 1008(ix).
SECTION 6.02. Liens. Create, incur, assume or permit to exist any Lien
on any property or assets (including stock or other securities of any person,
including any Subsidiary) now owned or hereafter acquired by it or on any income
or revenues or rights in respect of any thereof, except:
(a) Liens on property or assets of Allied, the Borrower and
the Subsidiaries existing on the date hereof and set forth in Schedule
6.02(a); provided that such Liens shall secure only those obligations
which they secure on the date hereof;
(b) any Lien created under the Loan Documents;
(c) any Lien existing on any property or asset prior to the
acquisition thereof by the Borrower or any Subsidiary; provided that
(i) such Lien is not created in contemplation of or in connection with
such acquisition and (ii) such Lien does not apply to any other
property or assets of the Borrower or any Subsidiary (other than
proceeds of the property or asset subject to the Lien);
(d) Liens for taxes not yet due or which are being contested
in compliance with Section 5.03;
(e) carriers', warehousemen's, mechanics', materialmen's,
repairmen's or other like Liens arising in the ordinary course of
business and securing obligations that are not due and payable or which
are being contested in compliance with Section 5.03;
(f) pledges and deposits made in the ordinary course of
business in compliance with workmen's compensation, unemployment
insurance and other social security laws or regulations;
(g) deposits to secure the performance of bids, trade
contracts (other than for Indebtedness), leases (other than Capital
Lease Obligations), statutory obligations, surety and appeal bonds,
performance bonds and other obligations of a like nature incurred in
the ordinary course of business;
<PAGE> 67
62
(h) zoning restrictions, easements, rights-of-way,
restrictions on use of real property and other similar encumbrances
incurred in the ordinary course of business which, in the aggregate,
are not substantial in amount and do not materially detract from the
value of the property subject thereto or interfere with the ordinary
conduct of the business of the Borrower or any of its Subsidiaries;
(i) purchase money security interests in real property,
improvements thereto equipment or other fixed assets hereafter acquired
(or, in the case of improvements, equipment or other fixed assets,
constructed) by the Borrower or any Subsidiary; provided that (i) such
security interests secure Indebtedness permitted by Section 6.01, (ii)
such security interests are incurred, and the Indebtedness secured
thereby is created, within 90 days after such acquisition (or
completion of such construction), (iii) the Indebtedness secured
thereby does not exceed 100% of the cost of such real property,
improvements or equipment at the time of such acquisition (or
construction) and (iv) such security interests do not apply to any
other property or assets of the Borrower or any Subsidiary (other than
the proceeds of the real property, improvements, equipment or other
fixed assets subject to the Lien);
(j) Liens securing Refinancing Indebtedness, to the extent
that the Indebtedness being refinanced was originally secured in
accordance with this Section 6.02, provided that such Lien does not
apply to any additional property or assets of Allied, the Borrower or
any Subsidiary (other than the proceeds of the property or asset
subject to the Lien);
(k) Liens arising out of Capitalized Lease Obligations
permitted under Section 6.01(j), so long as such Liens (i) attach only
to the property subject to such capitalized lease and (ii) do not
interfere with the business of the Borrower or any of the Subsidiaries
in any material respect;
(l) Liens arising out of judgments or awards (other than any
judgment that is described in clause (i) of Article VII which
constitutes an Event of Default thereunder) in respect of which the
Borrower shall in good faith be prosecuting an appeal or proceedings
for review and in respect of which it shall have secured a subsisting
stay of execution pending such appeal or proceedings for review,
provided the Borrower shall have set aside on its books adequate
reserves, in accordance with GAAP, with respect to such judgment or
award; and
(m) any Lien on the property or assets of an Acquired Entity
or the stock of an Acquired Entity securing Indebtedness permitted by
Section 6.01(e); provided that the aggregate amount of Indebtedness
secured by such Liens shall not exceed $35,000,000 at any time
outstanding.
SECTION 6.03. No Other Negative Pledge. Enter into any agreement
prohibiting or conditioning the creation or assumption of any Lien upon any of
its property or assets other than (i) in favor of the Secured Parties, (ii) in
favor of the holders of the Senior Subordinated Notes and the holders of the
Allied Senior Notes or any trustee for such holders, (iii) in connection with
Indebtedness that may be secured by a Lien in compliance with Section 6.02(a),
(c), (j) or (m), provided that such prohibition or condition does not apply to
any property or assets of Allied, the Borrower or the Subsidiaries not subject
to such Lien, (iv) in connection with any lease permitted under Section 6.03
solely to the extent that such lease prohibits a Lien on the lease or the
property
<PAGE> 68
63
subject to such lease or (v) pursuant to any agreement entered into by Allied,
the Borrower or any Subsidiary in connection with an Asset Sale for the period
beginning with the date such agreement is entered into through the date that
such Asset Sale is consummated, provided that (x) such negative pledge shall
only relate to the property being sold pursuant to such Asset Sale and (y) such
Asset Sale is permitted hereunder.
SECTION 6.04. Sale and Lease-Back Transactions. Enter into any
arrangement, directly or indirectly, with any person whereby it shall sell or
transfer any property, real or personal, used or useful in its business, whether
now owned or hereafter acquired, and thereafter rent or lease such property or
other property which it intends to use for substantially the same purpose or
purposes as the property being sold or transferred; provided that the Borrower
may enter into any such transaction with respect to any lease that is required
to be capitalized in accordance with GAAP, and in compliance with Section
6.02(k), so long as the aggregate principal amount of Capital Lease Obligations
associated therewith does not exceed $25,000,000 at any time outstanding.
SECTION 6.05. Investments, Loans and Advances. Purchase, hold or
acquire any capital stock, evidences of indebtedness or other securities of,
make or permit to exist any loans or advances to, or make or permit to exist any
investment or any other interest in, any other person, except:
(a) investments by Allied and the Borrower (i) existing on the
date hereof in the capital stock of the Subsidiaries (including
investments made in connection with the Acquisition) and (ii) after the
date hereof in the capital stock of the Borrower and the Guarantors, as
applicable;
(b) Permitted Investments;
(c) loans and advances to employees of Allied, the Borrower or
its Subsidiaries for travel, entertainment and relocation expenses in
the ordinary course of business for Allied, the Borrower and its
Subsidiaries;
(d) loans by Allied, the Borrower or any Subsidiary to its
employees in connection with management incentive plans not to exceed
$5,000,000 at any time outstanding; provided, however, that such
limitation shall not apply to loans the proceeds of which are used to
purchase common stock of Allied so long as Allied uses the proceeds
thereof to acquire common stock of the Borrower;
(e) investments constituting Capital Expenditures permitted
under Section 6.11;
(f) loans or advances by the Borrower or any wholly owned
Subsidiary to the Borrower or any wholly owned Subsidiary that are
permitted under Section 6.01(g);
(g) loans or advances by the Borrower or any wholly owned
Subsidiary to Allied or by Allied to the Borrower or any wholly owned
Subsidiary that are permitted by Section 6.01(h);
(h) the capital stock or other ownership interests of any
Subsidiary formed after the date hereof by the Borrower, provided that
(i) such capital stock or interest is pledged to the Collateral Agent
(for the benefit of the Lenders) pursuant to the Pledge Agreement and
(ii) the
<PAGE> 69
64
Borrower and such Subsidiary comply with the applicable provisions of
Section 5.11 with respect to such newly formed Subsidiary;
(i) Interest Rate Protection Agreements permitted under
Section 6.01(c); and
(j) one or more non-hostile acquisitions by the Borrower or
any Subsidiary after the Closing Date in which the Borrower or any
Subsidiary is the surviving entity of a business unit (with any
associated assets) located in the United States or Canada or capital
stock or other equity interests (other than Margin Stock) of any other
person organized under the laws of (x) the United States, any State
thereof or the District of Columbia or (y) Canada or any political
subdivision thereof (such assets, in the case of an asset acquisition,
or person, in the case of the acquisition of capital stock or other
equity interests, is referred to herein as the "Acquired Entity") so
long as (i) in the case of an acquisition of assets, such assets are to
be used, and in the case of an acquisition of capital stock or other
equity interests, the person so acquired is engaged in, the same line
of business as the Borrower and the Subsidiaries and other business
activities incidental thereto, (ii) the Acquired Entity conducts its
business exclusively in the United States and/or Canada, (iii)
immediately prior to and after giving effect to such acquisition, no
Default or Event of Default shall exist, (iv) promptly after any such
acquisition, the Collateral Agent for the benefit of the Secured
Parties shall be granted a first priority security interest in all
personal property (including capital stock and other securities or
interests, but subject to Liens permitted by Sections 6.02(c), 6.02(j)
and 6.02(m) and other customary and reasonable permitted encumbrances),
except as otherwise provided by the Security Agreement, acquired by the
Borrower as part of such acquisition, and the Borrower shall, and shall
cause any applicable Subsidiary to, execute any documents (including
supplements to the Subsidiary Guarantee Agreement, Security Agreement
and Indemnity, Subrogation and Contribution Agreement, financing
statements, agreements and instruments, and take all action (including
filing financing statements and obtaining and providing consents and
legal opinions) that may be required under applicable law, or that the
Collateral Agent may request, in order to grant, preserve, protect and
perfect such security interests and (v) in the case of an acquisition
of capital stock or other equity interests of a person, the Borrower
acquires a majority of the capital stock or other equity interests of
such person,
provided, however, that if the consideration (including assumption of
indebtedness and other contingent payments other than waste disposal-based
royalties, Acquired Indebtedness and Indebtedness issued pursuant Section
6.01(e) but excluding capital stock issued by Allied) in any such acquisition
exceeds $50,000,000, the prior written consent of the Administrative Agent and
the Required Lenders shall be required with respect to such acquisition. Any
acquisition satisfying each of the criteria set forth in the preceding sentence
is referred to herein as a "Permitted Acquisition"; and
(k) investments in joint ventures engaged in the same line of
business as the Borrower and the Subsidiary or other business
activities incidental thereto in an aggregate amount of not to exceed
$10,000,000.
SECTION 6.06. Mergers, Consolidations, Sales of Assets and
Acquisitions. Merge into or consolidate with any other person, or permit any
other person to merge into or consolidate with it, or conduct any Asset Sale of
(in one transaction or in a series of transactions) all or any substantial part
<PAGE> 70
65
of its assets (whether now owned or hereafter acquired), or purchase, lease or
otherwise acquire (in one transaction or a series of transactions) all or any
substantial part of the assets of any other person, except that:
(a) if at the time thereof and immediately after giving effect
thereto no Event of Default or Default shall have occurred and be
continuing (i) any wholly owned Subsidiary may merge into the Borrower
in a transaction in which the Borrower is the surviving corporation and
(ii) any Subsidiary (including Allied Finance) may merge into or
consolidate with any other Subsidiary in a transaction in which the
surviving entity is a wholly owned Subsidiary and no person other than
the Borrower or a wholly owned Subsidiary receives any consideration;
(b) any Subsidiary may change the jurisdiction in which it is
incorporated so long as the new jurisdiction is in the United States;
(c) the Borrower or any Subsidiary (other than Allied Finance)
may make Permitted Acquisitions; and
(d) the Borrower or any Subsidiary (other than Allied Finance)
may conduct an Asset Sale of a type not described in this Section 6.06,
provided that the Net Cash Proceeds of such Asset Sale shall be applied
in the manner set forth under Section 2.13;
provided, further, that any sale, transfer or other disposition of assets or
stock with a fair market value in excess of $5,000,000 and not otherwise
prohibited by this Section 6.06 shall not be permitted unless (A) such sale,
transfer or other disposition is for consideration at least 75% of which is cash
and (B) such consideration is at least equal to the fair market value of the
assets, transferred or disposed of (as determined in good faith by the board of
directors or officers of the Borrower).
SECTION 6.07. Dividends and Distributions; Restrictions on Ability of
Subsidiaries to Pay Dividends. (a) Declare or pay, directly or indirectly, any
dividend or make any other distribution (by reduction of capital or otherwise),
whether in cash, property, securities or a combination thereof, with respect to
any shares of its capital stock or directly or indirectly redeem, purchase,
retire or otherwise acquire for value (or permit any Subsidiary to purchase or
acquire) any shares of any class of its capital stock or set aside any amount
for any such purpose; provided, however, that (i) any Subsidiary may declare and
pay dividends or make other distributions to the Borrower, (ii) Allied, the
Borrower or any Subsidiary may declare and pay dividends solely in shares of its
common stock; (iii) Allied may issue Junior Exchange Indebtedness in exchange
for Designated Preferred Stock; (iv) the Borrower may declare and pay to Allied
(A) Permitted Dividends and (B) other dividends solely to the extent necessary
for Allied to pay for administrative expenses to conduct its business in
accordance with Section 6.09; and (v) so long as no Default or Event of Default
shall have occurred and be continuing, (A) Allied may declare and pay any cash
dividend on any shares of Preferred Stock outstanding on the Closing Date in an
amount not to exceed the stated dividend rate on the Closing Date on such
Preferred Stock (which payments in the aggregate shall not exceed $700,000 for
each fiscal year) and (B) may call for redemption any convertible preferred
stock if the conversion price for such preferred stock is no greater than 80% of
the then market price of the stock into which such preferred stock is redeemable
and may redeem any such shares not converted prior to the applicable date of
redemption.
<PAGE> 71
66
(b) Permit its subsidiaries to, directly or indirectly, create or
otherwise cause or suffer to exist or become effective any encumbrance or
restriction on the ability of any such subsidiary to (i) pay any dividends or
make any other distributions on its capital stock or any other interest or (ii)
make or repay any loans or advances to the Borrower or the parent of such
subsidiary, except for (x) restrictions under the Senior Subordinated Notes and
the Allied Senior Notes but only to the extent such restriction restricts
dividend payments to Allied by the Borrower or any Subsidiary and (y) pursuant
to any agreement entered into by Allied, the Borrower or any of the Subsidiaries
in connection with an Asset Sale for the period beginning with the date such
agreement is entered into through the date that such Asset Sale is consummated,
provided that (A) such restrictions only restrict dividends to be paid by any
Subsidiary in respect of the capital stock or assets that are being sold
pursuant to such Asset Sale and (B) such Asset Sale is permitted hereunder.
SECTION 6.08. Transactions with Affiliates. Sell or transfer any
property or assets to, or purchase or acquire any property or assets from, or
otherwise engage in any other transactions with, any of its Affiliates, except
(a) with Allied, the Borrower or any wholly owned Subsidiary or (b) that Allied,
the Borrower or any Subsidiary may (i) engage in any of the foregoing
transactions in the ordinary course of business at prices and on terms and
conditions not less favorable to the Borrower or such Subsidiary than could be
obtained on an arm's-length basis from unrelated third parties and (ii)
consummate or enter into, as the case may be, the agreements relating to the
Transactions.
SECTION 6.09. Business of Allied, Borrower, Allied Finance and
Subsidiaries. (a) Engage at any time, (i) in the case of the Borrower and each
of its Subsidiaries, in any business or business activity other than the
business currently conducted by them and business activities reasonably
incidental thereto, (ii) in the case of Allied, in any business or business
activity other than the ownership of all the outstanding stock of the Borrower
and Allied Finance and all activities reasonably incidental thereto and other
than being an obligor under the Allied Senior Notes and (iii) in the case of
Allied Finance, in any business or business activity other than being the
obligor in respect of the Laidlaw Debentures, holding the Allied Canada
Debentures or any activity reasonably related to the repayment or termination of
the Laidlaw or the Allied Canada Debentures (including changing the jurisdiction
of its incorporation or merging into Allied or the Borrower or with or into any
other Subsidiary).
(b) Enter into any general partnership arrangement other than through a
special purpose wholly owned Subsidiary, provided that any investments
associated with such general partnership shall be permitted hereunder.
SECTION 6.10. Other Indebtedness and Agreements. (a) Permit any waiver,
supplement, modification, amendment, termination or release of (i) any Material
Agreement or (ii) any indenture, instrument or agreement pursuant to which any
Indebtedness or preferred stock of Allied, the Borrower or any Subsidiary is
outstanding in an aggregate outstanding principal amount in excess of
$10,000,000, or modify its charter or by-laws, in each case to the extent that
any such waiver, supplement, modification, amendment, termination or release
would be adverse to the Lenders in any material respect; provided, however, that
this Section 6.10(a) shall not apply to any waiver, supplement, amendment,
termination or release with respect to any activity reasonably related to the
repayment or termination of the Allied Canada Debentures.
(b) (i) Make any distribution, whether in cash, property, securities or
a combination thereof, other than scheduled (or with respect to senior
indebtedness held by a person that is not an Affiliate
<PAGE> 72
67
of the obligor, mandatory) payments of principal and interest as and when due
(to the extent not prohibited by applicable subordination provisions), in
respect of, or pay, or offer or commit to pay, or directly or indirectly redeem,
repurchase, retire or otherwise acquire for consideration, or set apart any sum
for the aforesaid purposes, any Indebtedness for borrowed money (other than
Indebtedness permitted under Section 6.01(a), (d), (e) or (o) and intercompany
Indebtedness permitted under Section 6.01(g)) of any Loan Party or any
Subsidiary in an outstanding principal amount exceeding $5,000,000, except for
(x) refinancings permitted by Section 6.01(o) and (y) the Loans, (ii) make any
payment or prepayment of any such Indebtedness that would violate the terms of
this Agreement or of such Indebtedness, any agreement or document evidencing,
related to or securing the payment or performance of such Indebtedness or any
subordination agreement or provision applicable to such Indebtedness or (iii)
pay in cash any amount in respect of such Indebtedness that may at the
applicable Loan Party's or Subsidiary's option be paid in kind or in other
securities.
(c) Notwithstanding anything contained in this Section 6.10 to the
contrary,
(i) the Borrower shall be permitted to exchange the Senior
Subordinated Notes for substantially identical notes in accordance with
the Exchange and Registration Rights Agreement dated as of December 5,
1996, relating to the Senior Subordinated Notes; and
(ii) Allied shall be permitted to exchange the Allied Senior
Notes for substantially identical notes in accordance with the Exchange
and Registration Rights Agreement dated as of May 15, 1997, relating to
the Allied Senior Notes.
SECTION 6.11. Capital Expenditures. Permit the aggregate amount of
Capital Expenditures made by Allied, the Borrower and the Subsidiaries, taken as
a whole, in any fiscal year to exceed the amount of Permitted Capital
Expenditures for such fiscal year; provided, however, that (a) the applicable
Base Amount of Permitted Capital Expenditures as set forth in the definition
thereof in any fiscal year ending after December 31, 1997, shall be increased by
the excess, if any, of the Base Amount for the immediately preceding year
(without giving effect to this proviso) over the total amount of Capital
Expenditures made during such immediately preceding year, and (b) in any fiscal
year, the applicable Base Amount as set forth in the definition of Permitted
Capital Expenditure may be increased, at the option of the Borrower, by up to
15% of the applicable Base Amount for the immediately following fiscal year,
provided that to the extent the Borrower so increases the Base Amount in any
such fiscal year, the applicable Base Amount in the immediately following fiscal
year shall be decreased by the amount of such increase.
SECTION 6.12. Fixed Charge Coverage Ratio. Permit the Fixed Charge
Coverage Ratio as of the end of any fiscal quarter falling in any period set
forth below to be less than the ratio set forth below for such period.
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
From and including the Closing Date 1.10 to 1.00
through and including December 31, 1997
Thereafter 1.25 to 1.00
</TABLE>
<PAGE> 73
68
SECTION 6.13. Leverage Ratio. Permit the Leverage Ratio as of the end
of any fiscal quarter falling in any period set forth below to be in excess of
the ratio set forth below for such period.
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
From and including the Closing Date
through and including June 30, 1997 5.50 to 1.00
From and including September 30, 1997
through and including December 31, 1997 5.25 to 1.00
From and including March 31, 1998
through and including December 31, 1998 4.75 to 1.00
From and including March 31, 1999
through and including December 31, 1999 4.00 to 1.00
From and including March 31, 2000
through and including December 31, 2000 3.50 to 1.00
Thereafter 3.00 to 1.00
</TABLE>
SECTION 6.14. Senior Debt Ratio. Permit the Senior Debt Ratio as of the
end of any fiscal quarter falling in any period set forth below to be in excess
of the ratio set forth below for such period.
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
From and including the Closing Date
through and including December 31, 1997 2.75 to 1.00
From and including March 31, 1998
through and including December 31, 1998 2.50 to 1.00
From and including March 31, 1999
through and including December 31, 1999 2.25 to 1.00
Thereafter 2.00 to 1.00
</TABLE>
<PAGE> 74
69
SECTION 6.15. Interest Expense Coverage Ratio. Permit the Interest
Expense Coverage Ratio as of the end of any fiscal quarter falling in any period
set forth below to be less than the ratio set forth below for such period.
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
From and including the Closing Date
through and including December 31, 1997 2.35 to 1.00
From and including March 31, 1998
through and including December 31, 1998 2.75 to 1.00
From and including March 31, 1999
through and including December 31, 1999 3.25 to 1.00
Thereafter 3.50 to 1.00
</TABLE>
ARTICLE VII
Events of Default
In case of the happening of any of the following events ("Events of
Default"):
(a) any representation or warranty made or deemed made in or in
connection with any Loan Document or the borrowings or issuances of Letters of
Credit hereunder, or any representation, warranty, statement or information
contained in any report, certificate, financial statement or other instrument
furnished in connection with or pursuant to any Loan Document, shall prove to
have been false or misleading in any material respect when so made, deemed made
or furnished;
(b) default shall be made in the payment of any principal of any Loan
or the reimbursement with respect to any L/C Disbursement when and as the same
shall become due and payable, whether at the due date thereof or at a date fixed
for prepayment thereof or by acceleration thereof or otherwise;
(c) default shall be made in the payment of any interest on any Loan or
L/C Disbursement or any Fee or any other amount (other than an amount referred
to in (b) above) due under any Loan Document, when and as the same shall become
due and payable, and such default shall continue unremedied for a period of
three Business Days;
(d) default shall be made in the due observance or performance by
Allied, the Borrower or any Subsidiary of any covenant, condition or agreement
contained in Section 5.01(a), 5.05, 5.08 or 5.15 or in Article VI;
(e) default shall be made in the due observance or performance by
Allied, the Borrower or any Subsidiary of any covenant, condition or agreement
contained in any Loan Document (other than those specified in (b), (c) or (d)
above) and such default shall continue unremedied for a period of 15 days after
notice thereof from the Administrative Agent or any Lender to the Borrower;
<PAGE> 75
70
(f) Allied, the Borrower or any Subsidiary shall (i) fail to pay any
principal or interest, regardless of amount, due in respect of any Indebtedness
in a principal amount in excess of $5,000,000, when and as the same shall become
due and payable, or (ii) fail to observe or perform any other term, covenant,
condition or agreement contained in any agreement or instrument evidencing or
governing any such Indebtedness if the effect of any failure referred to in this
clause (ii) is to cause, or to permit the holder or holders of such Indebtedness
or a trustee on its or their behalf (with or without the giving of notice, the
lapse of time or both) to cause, such Indebtedness to become due prior to its
stated maturity;
(g) an involuntary proceeding shall be commenced or an involuntary
petition shall be filed in a court of competent jurisdiction seeking (i) relief
in respect of Allied, the Borrower or any Subsidiary, or of a substantial part
of the property or assets of Allied, the Borrower or a Subsidiary, under Title
11 of the United States Code, as now constituted or hereafter amended, or any
other Federal, state or foreign bankruptcy, insolvency, receivership or similar
law, (ii) the appointment of a receiver, trustee, custodian, sequestrator,
conservator or similar official for Allied, the Borrower or any Subsidiary or
for a substantial part of the property or assets of Allied, the Borrower or a
Subsidiary or (iii) the winding-up or liquidation of Allied, the Borrower or any
Subsidiary; and such proceeding or petition shall continue undismissed for 60
days or an order or decree approving or ordering any of the foregoing shall be
entered;
(h) Allied, the Borrower or any Subsidiary shall (i) voluntarily
commence any proceeding or file any petition seeking relief under Title 11 of
the United States Code, as now constituted or hereafter amended, or any other
Federal, state or foreign bankruptcy, insolvency, receivership or similar law,
(ii) consent to the institution of, or fail to contest in a timely and
appropriate manner, any proceeding or the filing of any petition described in
(g) above, (iii) apply for or consent to the appointment of a receiver, trustee,
custodian, sequestrator, conservator or similar official for Allied, the
Borrower or any Subsidiary or for a substantial part of the property or assets
of Allied, the Borrower or any Subsidiary, (iv) file an answer admitting the
material allegations of a petition filed against it in any such proceeding, (v)
make a general assignment for the benefit of creditors, (vi) become unable,
admit in writing its inability or fail generally to pay its debts as they become
due or (vii) take any action for the purpose of effecting any of the foregoing;
(i) one or more judgments for the payment of money in an aggregate
amount in excess of $5,000,000 shall be rendered against Allied, the Borrower,
any Subsidiary or any combination thereof and the same shall remain undischarged
for a period of 30 consecutive days during which execution shall not be
effectively stayed, or any action shall be legally taken by a judgment creditor
to levy upon assets or properties of Allied, the Borrower or any Subsidiary to
enforce any such judgment;
(j) any security interest purported to be created by any Security
Document shall cease to be, or shall be asserted by the Borrower or any other
Loan Party not to be, a valid, perfected, first priority (except as otherwise
expressly provided in this Agreement or such Security Document) security
interest in the securities, assets or properties covered thereby, except to the
extent that any such loss of perfection or priority results from the failure of
the Collateral Agent to maintain possession of certificates representing
securities pledged under the Pledge Agreement and except to the extent that such
loss is covered by a lender's title insurance policy and the related insurer
promptly after such loss shall have acknowledged in writing that such loss is
covered by such title insurance policy;
<PAGE> 76
71
(k) any Loan Document shall not be for any reason, or shall be asserted
by any Loan Party not to be, in full force and effect and enforceable in
accordance with its terms; or
(l) there shall have occurred a Change in Control;
then, and in every such event (other than an event with respect to the Borrower
described in paragraph (g) or (h) above), and at any time thereafter during the
continuance of such event, the Administrative Agent may, and at the request of
the Required Lenders shall, by notice to the Borrower, take either or both of
the following actions, at the same or different times: (i) terminate forthwith
the Commitments and (ii) declare the Loans then outstanding to be forthwith due
and payable in whole or in part (to the Administrative Agent for the account of
each Lender as provided in this Agreement and the Borrower acknowledges that it
shall have an obligation to pay to the Administrative Agent all accrued amounts
owed by the Borrower under this Agreement and under any other Loan Document),
whereupon the principal of the Loans so declared to be due and payable, together
with accrued interest thereon and any unpaid accrued Fees and all other
liabilities of the Borrower accrued hereunder and under any other Loan Document,
shall become forthwith due and payable, without presentment, demand, protest or
any other notice of any kind, all of which are hereby expressly waived by the
Borrower, anything contained herein or in any other Loan Document to the
contrary notwithstanding; and in any event with respect to the Borrower
described in paragraph (g) or (h) above, the Commitments shall automatically
terminate and the principal of the Loans then outstanding, together with accrued
interest thereon and any unpaid accrued Fees and all other liabilities of the
Borrower accrued hereunder and under any other Loan Document, shall
automatically become due and payable (to the Administrative Agent for the
account of each Lender as provided in this Agreement and the Borrower
acknowledges that it shall have an obligation to pay to the Administrative Agent
all accrued amounts owed by the Borrower under this Agreement and under any
other Loan Document), without presentment, demand, protest or any other notice
of any kind, all of which are hereby expressly waived by the Borrower, anything
contained herein or in any other Loan Document to the contrary notwithstanding.
ARTICLE VIII
The Administrative Agent, the Syndication Agent,
the Documentation Agent and the Collateral Agent
In order to expedite the transactions contemplated by this Agreement,
Credit Suisse First Boston is hereby appointed to act as Administrative Agent
and Collateral Agent on behalf of the Lenders and the Issuing Bank, Goldman
Sachs Credit Partners L.P. is hereby appointed to act as Syndication Agent and
Citibank, N.A. is hereby appointed to act as Documentation Agent (for purposes
of this Article VIII, the Administrative Agent, the Syndication Agent, the
Documentation Agent and the Collateral Agent are referred to collectively as the
"Agents"). Each of the Lenders and each assignee of any such Lender, hereby
irrevocably authorizes the Agents to take such actions on behalf of such Lender
or assignee or the Issuing Bank and to exercise such powers as are specifically
delegated to the Agents by the terms and provisions hereof and of the other Loan
Documents, together with such actions and powers as are reasonably incidental
thereto. The Administrative Agent is hereby expressly authorized by the Lenders
and the Issuing Bank, without hereby limiting any implied authority, (a) to
receive on behalf of the Lenders and the Issuing Bank all payments of principal
of and interest on the Loans, all payments in respect of L/C Disbursements and
all other amounts due to the
<PAGE> 77
72
Lenders hereunder, and promptly to distribute to each Lender or the Issuing Bank
its proper share of each payment so received; (b) to give notice on behalf of
each of the Lenders to the Borrower of any Event of Default specified in this
Agreement of which the Administrative Agent has actual knowledge acquired in
connection with its agency hereunder; and (c) to distribute to each Lender
copies of all notices, financial statements and other materials delivered by the
Borrower or any other Loan Party pursuant to this Agreement or the other Loan
Documents as received by the Administrative Agent. Without limiting the
generality of the foregoing, the Administrative Agent and Collateral Agent are
hereby expressly authorized to execute any and all documents (including
releases) with respect to the Collateral and the rights of the Secured Parties
with respect thereto, as contemplated by and in accordance with the provisions
of this Agreement and the Security Documents.
Neither the Agents nor any of their respective directors, officers,
employees or agents shall be liable as such for any action taken or omitted by
any of them except for its or his own gross negligence or wilful misconduct, or
be responsible for any statement, warranty or representation herein or the
contents of any document delivered in connection herewith, or be required to
ascertain or to make any inquiry concerning the performance or observance by the
Borrower or any other Loan Party of any of the terms, conditions, covenants or
agreements contained in any Loan Document. The Agents shall not be responsible
to the Lenders for the due execution, genuineness, validity, enforceability or
effectiveness of this Agreement or any other Loan Documents, instruments or
agreements. The Agents shall in all cases be fully protected in acting, or
refraining from acting, in accordance with written instructions signed by the
Required Lenders and, except as otherwise specifically provided herein, such
instructions and any action or inaction pursuant thereto shall be binding on all
the Lenders. Each Agent shall, in the absence of knowledge to the contrary, be
entitled to rely on any instrument or document believed by it in good faith to
be genuine and correct and to have been signed or sent by the proper person or
persons. Neither the Agents nor any of their respective directors, officers,
employees or agents shall have any responsibility to the Borrower or any other
Loan Party on account of the failure of or delay in performance or breach by any
Lender or the Issuing Bank of any of its obligations hereunder or to any Lender
or the Issuing Bank on account of the failure of or delay in performance or
breach by any other Lender or the Issuing Bank or the Borrower or any other Loan
Party of any of their respective obligations hereunder or under any other Loan
Document or in connection herewith or therewith. Each of the Agents may execute
any and all duties hereunder by or through agents or employees and shall be
entitled to rely upon the advice of legal counsel selected by it with respect to
all matters arising hereunder and shall not be liable for any action taken or
suffered in good faith by it in accordance with the advice of such counsel.
The Lenders hereby acknowledge that no Agent shall be under any duty to
take any discretionary action permitted to be taken by it pursuant to the
provisions of this Agreement unless it shall be requested in writing to do so by
the Required Lenders.
Subject to the appointment and acceptance of a successor Agent as
provided below, any Agent may resign at any time by notifying the Lenders and
the Borrower. Upon any such resignation, the Required Lenders shall have the
right to appoint a successor. If no successor shall have been so appointed by
the Required Lenders and shall have accepted such appointment within 30 days
after the retiring Agent gives notice of its resignation, then the retiring
Agent may, on behalf of the Lenders, appoint a successor Agent which shall be a
bank with an office in New York, New York, having a combined capital and surplus
of at least $500,000,000 or an Affiliate of any such bank. Upon the acceptance
of any appointment as Agent hereunder by a successor bank, such successor shall
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring Agent and the
<PAGE> 78
73
retiring Agent shall be discharged from its duties and obligations hereunder.
After the Agent's resignation hereunder, the provisions of this Article and
Section 9.05 shall continue in effect for its benefit in respect of any actions
taken or omitted to be taken by it while it was acting as Agent.
With respect to the Loans made by it hereunder, each Agent in its
individual capacity and not as Agent shall have the same rights and powers as
any other Lender and may exercise the same as though it were not an Agent, and
the Agents and their Affiliates may accept deposits from, lend money to and
generally engage in any kind of business with Allied, the Borrower or any
Subsidiary or other Affiliate thereof as if it were not an Agent.
Each Lender agrees to reimburse the Agents and each Revolving Credit
Lender agrees to reimburse the Issuing Bank, in each case, on demand, in the
amount of its pro rata share (based on its Commitments hereunder) of any
expenses incurred for the benefit of the Lenders by the Issuing Bank or the
Agents, as applicable, including counsel fees and compensation of agents and
employees paid for services rendered on behalf of the Lenders or the Revolving
Credit Lenders, as applicable, that shall not have been reimbursed by the
Borrower, and each Lender agrees to indemnify and hold harmless each Agent and
any of their respective directors, officers, employees or agents, and each
Revolving Credit Lender agrees to indemnify and hold harmless the Issuing Bank
and any of its respective directors, officers, employees or agents, in each case
on demand, in the amount of such pro rata share, from and against any and all
liabilities, taxes, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature whatsoever that
may be imposed on, incurred by or asserted against it in its capacity as the
Issuing Bank or Agent, as applicable, or any of them in any way relating to or
arising out of this Agreement or any other Loan Document or any action taken or
omitted by it or any of them under this Agreement or any other Loan Document, to
the extent the same shall not have been reimbursed by the Borrower or any other
Loan Party, provided that no Lender shall be liable to the Issuing Bank or an
Agent, as applicable, or any such other indemnified person for any portion of
such liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements are determined by a court of competent
jurisdiction by final and nonappealable judgment to have resulted from the gross
negligence or wilful misconduct of the Issuing Bank or such Agent, as
applicable, or any of their respective directors, officers, employees or agents.
Each Lender acknowledges that it has, independently and without
reliance upon the Agents or any other Lender and based on such documents and
information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement. Each Lender also acknowledges that it
will, independently and without reliance upon the Agents or any other Lender and
based on such documents and information as it shall from time to time deem
appropriate, continue to make its own decisions in taking or not taking action
under or based upon this Agreement or any other Loan Document, any related
agreement or any document furnished hereunder or thereunder.
<PAGE> 79
74
ARTICLE IX
Miscellaneous
SECTION 9.01. Notices. Notices and other communications provided for
herein shall be in writing and shall be delivered by hand or overnight courier
service, mailed by certified or registered mail or sent by telecopy, as follows:
(a) if to the Borrower or Allied, to it at 15880 North Greenway-Hayden
Loop, Scottsdale, Arizona 85260, Attention of Mr. Henry Hirvela (Telecopy No.
602-423-9424);
(b) if to the Administrative Agent or the Collateral Agent, to Credit
Suisse First Boston, 11 Madison Avenue, New York, New York 10010, Attention of
Ms. Lisa Perrotto (Telecopy No. (212) 325-8304);
(c) if to the Syndication Agent, to Goldman Sachs Credit Partners L.P.,
85 Broad Street, New York, New York 10004, Attention of Mr. James Halka
(Telecopy No. (212) 357-4597);
(d) if to the Documentation Agent, to Citibank, N.A., 399 Park Avenue,
New York, New York 10043, Attention of Mr. Greg Williams (Telecopy No.
212-793-4806);
(e) if to an Issuing Bank (other than Credit Suisse First Boston), to
the address of such Issuing Bank set forth on Schedule 2.01 or in the Assignment
and Acceptance pursuant to which such Issuing Bank shall have become a party
hereto; and if to Credit Suisse First Boston, as Issuing Bank, to the address
set forth in paragraph (c) above; and
(f) if to a Lender, to it at its address (or telecopy number) set forth
on Schedule 2.01 or in the Assignment and Acceptance pursuant to which such
Lender shall have become a party hereto.
All notices and other communications given to any party hereto in accordance
with the provisions of this Agreement shall be deemed to have been given on the
date of receipt if delivered by hand or overnight courier service or sent by
telecopy or on the date five Business Days after dispatch by certified or
registered mail if mailed, in each case delivered, sent or mailed (properly
addressed) to such party as provided in this Section 9.01 or in accordance with
the latest unrevoked direction from such party given in accordance with this
Section 9.01.
SECTION 9.02. Survival of Agreement. All covenants, agreements,
representations and warranties made by the Borrower or Allied herein and in the
certificates or other instruments prepared or delivered in connection with or
pursuant to this Agreement or any other Loan Document shall be considered to
have been relied upon by the Lenders and the Issuing Bank and shall survive the
making by the Lenders of the Loans and the issuance of Letters of Credit by the
Issuing Bank, regardless of any investigation made by the Lenders or the Issuing
Bank or on their behalf, and shall continue in full force and effect as long as
the principal of or any accrued interest on any Loan or any Fee or any other
amount payable under this Agreement or any other Loan Document is outstanding
and unpaid or any Letter of Credit is outstanding and so long as the Commitments
have not been terminated. The provisions of Sections 2.14, 2.16, 2.20 and 9.05
shall remain operative and in full force and effect regardless of the expiration
of the term of this Agreement, the consummation of the transactions contemplated
hereby, the repayment of any of the Loans, the expiration of the Commitments,
the
<PAGE> 80
75
expiration of any Letter of Credit, the invalidity or unenforceability of any
term or provision of this Agreement or any other Loan Document, or any
investigation made by or on behalf of the Administrative Agent, the Syndication
Agent, the Documentation Agent, the Collateral Agent, any Lender or the Issuing
Bank.
SECTION 9.03. Binding Effect. This Agreement shall become effective
when it shall have been executed by the Borrower, Allied and the Administrative
Agent, the Syndication Agent and the Documentation Agent and when the
Administrative Agent shall have received counterparts hereof which, when taken
together, bear the signatures of each of the other parties hereto, and
thereafter shall be binding upon and inure to the benefit of the parties hereto
and their respective permitted successors and assigns.
SECTION 9.04. Successors and Assigns. (a) Whenever in this Agreement
any of the parties hereto is referred to, such reference shall be deemed to
include the permitted successors and assigns of such party; and all covenants,
promises and agreements by or on behalf of the Borrower, Allied, the
Administrative Agent, the Syndication Agent, the Documentation Agent, the
Issuing Bank or the Lenders that are contained in this Agreement shall bind and
inure to the benefit of their respective successors and assigns.
(b) Each Lender may assign to one or more assignees all or a portion of
its interests, rights and obligations under this Agreement (including all or a
portion of its Commitment and the Loans at the time owing to it); provided,
however, that (i) except in the case of an assignment to a Lender, an Affiliate
of such Lender or a Related Fund, (x) the Borrower (so long as no Event of
Default shall have occurred and be continuing) and the Administrative Agent
(and, in the case of any assignment of a Revolving Credit Commitment, the
Issuing Bank and the Swingline Lender) must give their prior consent to such
assignment (which consent shall not be unreasonably withheld or delayed) and (y)
the amount of the unused Commitment and Loans of the assigning Lender subject to
each such assignment (determined as of the date the Assignment and Acceptance
with respect to such assignment is delivered to the Administrative Agent) shall
not be less than $5,000,000 (or, if less, the entire remaining amount of such
Lender's Commitment) (it being understood that separate assignments that are
made contemporaneously to persons that are Affiliates or a Related Fund shall be
deemed a single assignment for purposes of this sub-clause (y)), (ii) the
parties to each such assignment shall execute and deliver to the Administrative
Agent an Assignment and Acceptance, together with a processing and recordation
fee of $3,500 and (iii) the assignee, if it shall not be a Lender, shall deliver
to the Administrative Agent an Administrative Questionnaire. Upon acceptance and
recording pursuant to paragraph (e) of this Section 9.04, from and after the
effective date specified in each Assignment and Acceptance, which effective date
shall be at least five Business Days after the execution thereof, (A) the
assignee thereunder shall be a party hereto and, to the extent of the interest
assigned by such Assignment and Acceptance, have the rights and obligations of a
Lender under this Agreement and (B) the assigning Lender thereunder shall, to
the extent of the interest assigned by such Assignment and Acceptance, be
released from its obligations under this Agreement (and, in the case of an
Assignment and Acceptance covering all or the remaining portion of an assigning
Lender's rights and obligations under this Agreement, such Lender shall cease to
be a party hereto but shall continue to be entitled to the benefits of Sections
2.14, 2.16, 2.20 and 9.05, as well as to any Fees accrued for its account and
not yet paid).
(c) By executing and delivering an Assignment and Acceptance, the
assigning Lender thereunder and the assignee thereunder shall be deemed to
confirm to and agree with each other and
<PAGE> 81
76
the other parties hereto as follows: (i) such assigning Lender warrants that it
is the legal and beneficial owner of the interest being assigned thereby free
and clear of any adverse claim and that its Term Loan Commitment and Revolving
Credit Commitment, and the outstanding balances of its Term Loans and Revolving
Loans, in each case without giving effect to assignments thereof which have not
become effective, are as set forth in such Assignment and Acceptance, (ii)
except as set forth in (i) above, such assigning Lender makes no representation
or warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with this Agreement, or
the execution, legality, validity, enforceability, genuineness, sufficiency or
value of this Agreement, any other Loan Document or any other instrument or
document furnished pursuant hereto, or the financial condition of the Borrower
or any Subsidiary or the performance or observance by the Borrower or any
Subsidiary of any of its obligations under this Agreement, any other Loan
Document or any other instrument or document furnished pursuant hereto; (iii)
such assignee represents and warrants that it is legally authorized to enter
into such Assignment and Acceptance; (iv) such assignee confirms that it has
received a copy of this Agreement, together with copies of the most recent
financial statements referred to in Section 3.05(a) or delivered pursuant to
Section 5.04 and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into such
Assignment and Acceptance; (v) such assignee will independently and without
reliance upon the Administrative Agent, the Syndication Agent, the Documentation
Agent, the Collateral Agent, such assigning Lender or any other Lender and based
on such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
this Agreement; (vi) such assignee appoints and authorizes the Administrative
Agent, the Syndication Agent, the Documentation Agent and the Collateral Agent
to take such action as agent on its behalf and to exercise such powers under
this Agreement as are delegated to the Administrative Agent, the Syndication
Agent, the Documentation Agent and the Collateral Agent, respectively, by the
terms hereof, together with such powers as are reasonably incidental thereto;
and (vii) such assignee agrees that it will perform in accordance with their
terms all the obligations which by the terms of this Agreement are required to
be performed by it as a Lender.
(d) The Administrative Agent, acting for this purpose as an agent of
the Borrower, shall maintain at one of its offices in The City of New York a
copy of each Assignment and Acceptance delivered to it and a register for the
recordation of the names and addresses of the Lenders, and the Commitment of,
and principal amount of the Loans owing to, each Lender pursuant to the terms
hereof from time to time (the "Register"). The entries in the Register shall be
conclusive and the Borrower, the Administrative Agent, the Syndication Agent,
the Documentation Agent, the Issuing Bank, the Collateral Agent and the Lenders
may treat each person whose name is recorded in the Register pursuant to the
terms hereof as a Lender hereunder for all purposes of this Agreement,
notwithstanding notice to the contrary. The Register shall be available for
inspection by the Borrower, the Issuing Bank, the Collateral Agent and any
Lender, at any reasonable time and from time to time upon reasonable prior
notice.
(e) Upon its receipt of a duly completed Assignment and Acceptance
executed by an assigning Lender and an assignee, an Administrative Questionnaire
completed in respect of the assignee (unless the assignee shall already be a
Lender hereunder), the processing and recordation fee referred to in paragraph
(b) above and, if required, the written consent of the Borrower, the Swingline
Lender, the Issuing Bank and the Administrative Agent to such assignment, the
Administrative Agent shall (i) accept such Assignment and Acceptance, (ii)
record the information contained therein in the Register and (iii) give prompt
notice thereof to the Lenders, the Issuing Bank and the Swingline
<PAGE> 82
77
Lender. No assignment shall be effective unless and until it has been recorded
in the Register as provided in this paragraph (e).
(f) Each Lender may without the consent of the Borrower, the Swingline
Lender, the Issuing Bank or the Administrative Agent sell participations to one
or more banks or other entities in all or a portion of its rights and
obligations under this Agreement (including all or a portion of its Commitment
and the Loans owing to it); provided, however, that (i) such Lender's
obligations under this Agreement shall remain unchanged, (ii) such Lender shall
remain solely responsible to the other parties hereto for the performance of
such obligations, (iii) the participating banks or other entities shall be
entitled to the benefit of the cost protection provisions contained in Sections
2.14, 2.16 and 2.20 to the same extent as if they were Lenders and (iv) the
Borrower, the Administrative Agent, the Syndication Agent, the Documentation
Agent, the Issuing Bank and the Lenders shall continue to deal solely and
directly with such Lender in connection with such Lender's rights and
obligations under this Agreement, and such Lender shall retain the sole right to
enforce the obligations of the Borrower relating to the Loans or L/C
Disbursements and to approve any amendment, modification or waiver of any
provision of this Agreement (other than amendments, modifications or waivers
decreasing any fees payable hereunder or the amount of principal of or the rate
at which interest is payable on the Loans, extending any scheduled principal
payment date or date fixed for the payment of interest on the Loans or
increasing or extending the Commitments).
(g) Any Lender or participant may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this Section
9.04, disclose to the assignee or participant or proposed assignee or
participant any information relating to the Borrower furnished to such Lender by
or on behalf of the Borrower; provided that, prior to any such disclosure of
information designated by the Borrower as confidential, each such assignee or
participant or proposed assignee or participant shall execute an agreement
whereby such assignee or participant shall agree (subject to customary
exceptions) to preserve the confidentiality of such confidential information on
terms no less restrictive than those applicable to the Lenders pursuant to
Section 9.17.
(h) Any Lender may at any time assign all or any portion of its rights
under this Agreement to a Federal Reserve Bank to secure extensions of credit by
such Federal Reserve Bank to such Lender; provided that no such assignment shall
release a Lender from any of its obligations hereunder or substitute any such
third party for such Lender as a party hereto. In order to facilitate such an
assignment, the Borrower shall, at the request of the assigning Lender, duly
execute and deliver to the assigning Lender a promissory note or notes
evidencing the Loans made to the Borrower by the assigning Lender hereunder.
(i) Neither Allied nor the Borrower shall assign or delegate any of its
rights or duties hereunder without the prior written consent of the
Administrative Agent, the Issuing Bank and each Lender, and any attempted
assignment without such consent shall be null and void.
SECTION 9.05. Expenses; Indemnity. (a) The Borrower and Allied agree,
jointly and severally, to pay all out-of-pocket expenses incurred by the
Administrative Agent, the Syndication Agent, the Documentation Agent, the
Collateral Agent, the Issuing Bank and the Swingline Lender in connection with
the syndication of the credit facilities provided for herein and the preparation
and administration of this Agreement and the other Loan Documents or in
connection with any amendments, modifications or waivers of the provisions
hereof or thereof (whether or not the transactions hereby or thereby
contemplated shall be consummated) or incurred by the Administrative
<PAGE> 83
78
Agent, the Syndication Agent, the Documentation Agent, the Collateral Agent or
any Lender in connection with the enforcement or protection of its rights in
connection with this Agreement and the other Loan Documents or in connection
with the Loans made or Letters of Credit issued hereunder, including the fees,
charges and disbursements of Cravath, Swaine & Moore for the Administrative
Agent, the Syndication Agent, the Documentation Agent and the Collateral Agent,
and, in connection with any such enforcement or protection, the fees, charges
and disbursements of any other counsel for the Administrative Agent, the
Syndication Agent, the Documentation Agent, the Collateral Agent or any Lender.
(b) The Borrower and Allied agree, jointly and severally, to indemnify
the Administrative Agent, the Syndication Agent, the Documentation Agent, the
Collateral Agent, each Lender and the Issuing Bank, each Affiliate of any of the
foregoing persons and each of their respective directors, officers, employees,
trustees and agents (each such person being called an "Indemnitee") against, and
to hold each Indemnitee harmless from, any and all losses, claims, damages,
liabilities and related expenses, including reasonable counsel fees, charges and
disbursements, incurred by or asserted against any Indemnitee arising out of, in
any way connected with, or as a result of (i) the execution or delivery of this
Agreement or any other Loan Document or any agreement or instrument contemplated
thereby, the performance by the parties thereto of their respective obligations
thereunder or the consummation of the Transactions and the other transactions
contemplated thereby (whether or not the Transactions are consummated), (ii) the
use of the proceeds of the Loans or issuance of Letters of Credit, (iii) any
claim, litigation, investigation or proceeding relating to any of the foregoing,
whether or not any Indemnitee is a party thereto, or (iv) any actual or alleged
presence or Release or threatened Release of Hazardous Materials on any Property
or any property owned, leased or operated by any predecessor of Allied, the
Borrower or the Subsidiaries, or any Environmental Claim related in any way to
Allied, the Borrower or the Subsidiaries; provided that such indemnity shall
not, as to any Indemnitee, be available to the extent that such losses, claims,
damages, liabilities or related expenses are determined by a court of competent
jurisdiction by final and nonappealable judgment to have resulted from the gross
negligence or wilful misconduct of such Indemnitee.
(c) The provisions of this Section 9.05 shall remain operative and in
full force and effect regardless of the expiration of the term of this
Agreement, the consummation of the transactions contemplated hereby, the
repayment of any of the Loans, the expiration of the Commitments, the expiration
of any Letter of Credit, the invalidity or unenforceability of any term or
provision of this Agreement or any other Loan Document, or any investigation
made by or on behalf of the Administrative Agent, the Syndication Agent, the
Documentation Agent, the Collateral Agent, any Lender or the Issuing Bank. All
amounts due under this Section 9.05 shall be payable on written demand therefor.
SECTION 9.06. Right of Setoff. If an Event of Default shall have
occurred and be continuing, each Lender is hereby authorized at any time and
from time to time, except to the extent prohibited by law, to set off and apply
any and all deposits (general or special, time or demand, provisional or final)
at any time held and other indebtedness at any time owing by such Lender to or
for the credit or the account of the Borrower or Allied against any of and all
the obligations of the Borrower or Allied now or hereafter existing under this
Agreement and other Loan Documents held by such Lender, irrespective of whether
or not such Lender shall have made any demand under this Agreement or such other
Loan Document and although such obligations may be unmatured. The rights of each
Lender under this Section 9.06 are in addition to other rights and remedies
(including other rights of setoff) which such Lender may have.
<PAGE> 84
79
SECTION 9.07. APPLICABLE LAW. THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS (OTHER THAN LETTERS OF CREDIT AND AS EXPRESSLY SET FORTH IN OTHER LOAN
DOCUMENTS) SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE
STATE OF NEW YORK. EACH LETTER OF CREDIT SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED IN ACCORDANCE WITH, THE LAWS OR RULES DESIGNATED IN SUCH LETTER OF
CREDIT, OR IF NO SUCH LAWS OR RULES ARE DESIGNATED, THE UNIFORM CUSTOMS AND
PRACTICE FOR DOCUMENTARY CREDITS (1993 REVISION), INTERNATIONAL CHAMBER OF
COMMERCE, PUBLICATION NO. 500 (THE "UNIFORM CUSTOMS") AND, AS TO MATTERS NOT
GOVERNED BY THE UNIFORM CUSTOMS, THE LAWS OF THE STATE OF NEW YORK.
SECTION 9.08. Waivers; Amendment. (a) No failure or delay of the
Administrative Agent, the Syndication Agent, the Documentation Agent, the
Collateral Agent, any Lender or the Issuing Bank in exercising any power or
right hereunder or under any other Loan Document shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right or power, or
any abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. The rights and remedies of the Administrative Agent, the
Syndication Agent, the Documentation Agent, the Collateral Agent, the Issuing
Bank and the Lenders hereunder and under the other Loan Documents are cumulative
and are not exclusive of any rights or remedies that they would otherwise have.
No waiver of any provision of this Agreement or any other Loan Document or
consent to any departure by the Borrower or any other Loan Party therefrom shall
in any event be effective unless the same shall be permitted by paragraph (b)
below, and then such waiver or consent shall be effective only in the specific
instance and for the purpose for which given. No notice or demand on the
Borrower or Allied in any case shall entitle the Borrower or Allied to any other
or further notice or demand in similar or other circumstances.
(b) Neither this Agreement nor any provision hereof may be waived,
amended or modified except pursuant to an agreement or agreements in writing
entered into by the Borrower, Allied and the Required Lenders; provided,
however, that no such agreement shall (i) decrease the principal amount of, or
extend the maturity of or any scheduled principal payment date or extend the
date of any mandatory prepayment of principal, or date for the payment of any
interest on any Loan or any date for reimbursement of an L/C Disbursement, or
waive or excuse any such payment or any part thereof, or decrease the rate of
interest on any Loan or L/C Disbursement, without the prior written consent of
each Lender directly affected thereby, (ii) change or extend the Commitment or
decrease or extend the date for payment of the Commitment Fees or L/C
Participation Fees of any Lender without the prior written consent of such
Lender, (iii) decrease the amount or extend the date for payment of the Issuing
Bank Fees without the prior written consent of each affected Issuing Bank or
(iv) amend or modify the provisions of Section 2.13, 2.17 or 9.04(i), the
provisions of this Section, the definition of the term "Required Lenders" or
release any Guarantor or all or any substantial part of the Collateral, without
the prior written consent of each Lender; provided further that no such
agreement shall amend, modify or otherwise affect the rights or duties of the
Administrative Agent, the Syndication Agent, the Documentation Agent, the
Collateral Agent, the Issuing Bank or the Swingline Lender hereunder or under
any other Loan Document without the prior written consent of the Administrative
Agent, the Syndication Agent, the Documentation Agent, the Collateral Agent, the
Issuing Bank or the Swingline Lender, respectively.
<PAGE> 85
80
(c) Notwithstanding anything to the contrary, upon delivery of any
Amendment Certificate, each Lender hereby authorizes the Administrative Agent to
enter into on its behalf an amendment to this Agreement that (i) increases the
Bank Facility Amount to the applicable amount set forth in such Amendment
Certificate and (ii) decreases the Additional Facility Amount by the amount that
the Bank Facility Amount is increased in accordance with subclause (i) above. In
the event that the Bank Facility Amount is increased to $400,000,000 and the
Additional Facility Amount is decreased to zero as a result of any amendment
pursuant to this Section 9.08(c), such amendment shall also delete (i) Section
3.10(c) in its entirety and (ii) the last sentence of Section 6.01 in its
entirety.
SECTION 9.09. Interest Rate Limitation. Notwithstanding anything herein
to the contrary, if at any time the interest rate applicable to any Loan or
participation in any L/C Disbursement, together with all fees, charges and other
amounts which are treated as interest on such Loan or participation in such L/C
Disbursement under applicable law (collectively the "Charges"), shall exceed the
maximum lawful rate (the "Maximum Rate") which may be contracted for, charged,
taken, received or reserved by the Lender holding such Loan or participation in
accordance with applicable law, the rate of interest payable in respect of such
Loan or participation hereunder, together with all Charges payable in respect
thereof, shall be limited to the Maximum Rate and, to the extent lawful, the
interest and Charges that would have been payable in respect of such Loan or
participation but were not payable as a result of the operation of this Section
9.09 shall be cumulated and the interest and Charges payable to such Lender in
respect of other Loans or participations or periods shall be increased (but not
above the Maximum Rate therefor) until such cumulated amount, together with
interest thereon at the Federal Funds Effective Rate to the date of repayment,
shall have been received by such Lender.
SECTION 9.10. Entire Agreement. This Agreement, the Fee Letter and the
other Loan Documents constitute the entire contract between the parties relative
to the subject matter hereof. Any other previous agreement among the parties
with respect to the subject matter hereof is superseded by this Agreement and
the other Loan Documents. Nothing in this Agreement or in the other Loan
Documents, expressed or implied, is intended to confer upon any party other than
the parties hereto and thereto any rights, remedies, obligations or liabilities
under or by reason of this Agreement or the other Loan Documents.
SECTION 9.11. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL
BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF,
UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS.
EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B)
ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER
INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.11.
SECTION 9.12. Severability. In the event any one or more of the
provisions contained in this Agreement or in any other Loan Document should be
held invalid, illegal or unenforceable in any respect, the validity, legality
and enforceability of the remaining provisions contained herein and
<PAGE> 86
81
therein shall not in any way be affected or impaired thereby (it being
understood that the invalidity of a particular provision in a particular
jurisdiction shall not in and of itself affect the validity of such provision in
any other jurisdiction). The parties shall endeavor in good-faith negotiations
to replace the invalid, illegal or unenforceable provisions with valid
provisions the economic effect of which comes as close as possible to that of
the invalid, illegal or unenforceable provisions.
SECTION 9.13. Counterparts. This Agreement may be executed in
counterparts (and by different parties hereto on different counterparts), each
of which shall constitute an original but all of which when taken together shall
constitute a single contract, and shall become effective as provided in Section
9.03. Delivery of an executed signature page to this Agreement by facsimile
transmission shall be as effective as delivery of a manually signed counterpart
of this Agreement.
SECTION 9.14. Headings. Article and Section headings and the Table of
Contents used herein are for convenience of reference only, are not part of this
Agreement and are not to affect the construction of, or to be taken into
consideration in interpreting, this Agreement.
SECTION 9.15. Jurisdiction; Consent to Service of Process. (a) Each of
Allied and the Borrower hereby irrevocably and unconditionally submits, for
itself and its property, to the nonexclusive jurisdiction of any New York State
court or Federal court of the United States of America sitting in New York City,
and any appellate court from any thereof, in any action or proceeding arising
out of or relating to this Agreement or the other Loan Documents, or for
recognition or enforcement of any judgment, and each of the parties hereto
hereby irrevocably and unconditionally agrees that all claims in respect of any
such action or proceeding may be heard and determined in such New York State or,
to the extent permitted by law, in such Federal court. Each of the parties
hereto agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law. Nothing in this Agreement shall affect any
right that the Administrative Agent, the Collateral Agent, the Issuing Bank or
any Lender may otherwise have to bring any action or proceeding relating to this
Agreement or the other Loan Documents against the Borrower, Allied or their
respective properties in the courts of any jurisdiction.
(b) Each of Allied and the Borrower hereby irrevocably and
unconditionally waives, to the fullest extent it may legally and effectively do
so, any objection which it may now or hereafter have to the laying of venue of
any suit, action or proceeding arising out of or relating to this Agreement or
the other Loan Documents in any New York State or Federal court. Each of the
parties hereto hereby irrevocably waives, to the fullest extent permitted by
law, the defense of an inconvenient forum to the maintenance of such action or
proceeding in any such court.
(c) Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 9.01. Nothing in this
Agreement will affect the right of any party to this Agreement to serve process
in any other manner permitted by law.
SECTION 9.16. Confidentiality. The Administrative Agent, the
Syndication Agent, the Documentation Agent, the Collateral Agent, the Issuing
Bank and each of the Lenders agrees to keep confidential (and to use its best
efforts to cause its respective agents and representatives to keep confidential)
the Information (as defined below) and all copies thereof, extracts therefrom
and analyses or other materials based thereon, except that the Administrative
Agent, the Syndication Agent, the Documentation Agent, the Collateral Agent, the
Issuing Bank or any Lender shall be permitted to
<PAGE> 87
82
disclose Information (a) to such of its respective officers, directors,
employees, agents, professional advisors, affiliates and representatives as need
to know such Information, (b) to the extent requested by any regulatory
authority, (c) to the extent otherwise required by applicable laws and
regulations or by any subpoena or similar legal process, (d) in connection with
any suit, action or proceeding relating to the enforcement of its rights
hereunder or under the other Loan Documents, (e) to any direct or indirect
contractual counterparties in swap agreements as long as such contractual
counterparty shall agree to keep such Information confidential, (f) to the
National Association of Insurance Commissioners or any similar organization or
any nationally recognized rating agency that requires access to information
about such Lender's investment portfolio in connection with ratings issued with
respect to such Lender or (g) to the extent such Information (i) becomes
publicly available other than as a result of a breach of this Section 9.16 or
(ii) becomes available to the Administrative Agent, the Syndication Agent, the
Documentation Agent, the Issuing Bank, any Lender or the Collateral Agent on a
nonconfidential basis from a source other than the Borrower or Allied. For the
purposes of this Section, "Information" shall mean all financial statements,
certificates, reports, agreements and information (including all analyses,
compilations and studies prepared by the Administrative Agent, the Syndication
Agent, the Documentation Agent, the Collateral Agent, the Issuing Bank or any
Lender based on any of the foregoing) that are received from the Borrower or
Allied and related to the Borrower or Allied, any shareholder of the Borrower or
Allied or any employee, customer or supplier of the Borrower or Allied, other
than any of the foregoing that were available to the Administrative Agent, the
Syndication Agent, the Documentation Agent, the Collateral Agent, the Issuing
Bank or any Lender on a nonconfidential basis prior to its disclosure thereto by
the Borrower or Allied, and which are in the case of Information provided after
the date hereof, clearly identified at the time of delivery as confidential. The
provisions of this Section 9.16 shall remain operative and in full force and
effect regardless of the expiration and term of this Agreement.
SECTION 9.17. Modification of Existing Credit Agreement.
Notwithstanding anything to the contrary, the parties hereto acknowledge and
agree that the Total Revolving Credit Commitments being provided hereunder are
set forth in a single agreement for convenience only, and any Loans outstanding
in excess of the Bank Facility Amount are considered by the parties hereto as a
separate credit facility.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
ALLIED WASTE NORTH AMERICA, INC.,
by
-------------------------
Name:
Title:
by
-------------------------
Name:
Title:
<PAGE> 88
83
ALLIED WASTE INDUSTRIES, INC.,
by
-------------------------
Name:
Title:
by
-------------------------
Name:
Title:
<PAGE> 89
84
CREDIT SUISSE FIRST BOSTON, as Issuing
Bank and individually, as a Lender,
by
-------------------------
Name:
Title:
by
-------------------------
Name:
Title:
CREDIT SUISSE FIRST BOSTON, as
Administrative Agent,
by
-------------------------
Name:
Title:
by
-------------------------
Name:
Title:
CREDIT SUISSE FIRST BOSTON, as Collateral
Agent,
by
-------------------------
Name:
Title:
by
-------------------------
Name:
Title:
<PAGE> 90
85
CREDIT SUISSE FIRST BOSTON, as Swingline
Lender,
by
-------------------------
Name:
Title:
by
-------------------------
Name:
Title:
<PAGE> 91
86
GOLDMAN SACHS CREDIT PARTNERS L.P.,
as Syndication Agent and individually,
as a Lender,
by
-------------------------
Name:
Title:
CITIBANK, N.A., as Documentation Agent,
by
-------------------------
Name:
Title:
CITICORP USA, INC., individually, as a
Lender,
by
-------------------------
Name:
Title:
<PAGE> 92
87
(OTHER BANKS)
by
-------------------------
Name:
Title:
<PAGE> 1
EXECUTIVE EMPLOYMENT AGREEMENT
This EXECUTIVE EMPLOYMENT AGREEMENT is made and entered into this 6th day
of June, 1997, by and between ALLIED WASTE INDUSTRIES, INC., a Delaware
corporation having its principal executive office at 15880 North Greenway Hayden
Loop, Suite 100, Scottsdale, Arizona 85260, (hereinafter referred to as
"COMPANY"), and HENRY L. HIRVELA (hereinafter referred to as the "EXECUTIVE").
WITNESSETH:
WHEREAS, the Company desires to employ the Executive in an executive
capacity and the Executive desires to enter the Company's employ.
NOW, THEREFORE, for and in consideration of the mutual promises, covenants
and obligations contained herein, and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the Company and the
Executive hereby agree as follows:
1. CERTAIN DEFINITIONS. As used in this Agreement, the following
terms have the meanings prescribed below:
ACCOUNTING FIRM shall have the meaning, assigned thereto in Section 11
hereof.
AFFILIATE is used in this Agreement to define a relationship to a person
or entity and means a person or entity who, directly or indirectly through one
or more intermediaries, controls, is controlled by, or is under common control
with, such person or entity.
AGREEMENT PAYMENTS shall have the meaning, assigned thereto in Section 11
hereof. Annual Bonus shall have the meaning, assigned thereto in Section 4.2
hereof. Base Salary shall have the meaning, assigned thereto in Section 4.1
hereof.
<PAGE> 2
BENEFICIAL OWNER shall have the meaning assigned thereto in Rule 13(d)-3
under the Exchange Act; provided, however, and without limitation, that any
individual, corporation, partnership, group, association or other person or
entity that has the right to acquire any Voting Stock at any time in the future,
whether such right is (a) contingent or absolute or (b) exercisable presently or
at any time in the future, pursuant to any agreement or understanding or upon
the exercise or conversion of rights, options or warrants, or otherwise, shall
be the Beneficial Owner of such Voting Stock.
CAUSE shall have the meaning assigned thereto in Section 5.3 hereof.
CHANGE IN CONTROL of the Company shall be deemed to have occurred if (i)
the Company merges or consolidates, or agrees to merge or to consolidate, with
any other corporation (other than a wholly-owned direct or indirect subsidiary
of the Company) and is not the surviving corporation (or survives as a
subsidiary of another corporation), (ii) the Company sells, or agrees to sell,
all or substantially all of its assets to any other person or entity, (iii) the
Company is dissolved, (iv) any third person or entity (other than a trustee or
committee of any qualified employee benefit plan of the Company) together with
its Affiliates shall become or shall have publicly announced its intention to
become (by tender offer or otherwise), directly or indirectly, the Beneficial
Owner of at least 30% of the Voting Stock of the Company or (v) the individuals
who constitute the Board of Directors of the Company as of the Effective Date
(the "Incumbent Board") shall cease for any reason to constitute at least a
majority of the Board of Directors; provided, that any person becoming a
director whose election or nomination for election was approved by a majority of
the members of the Incumbent Board shall be considered, for the purposes of this
Agreement, a member of the Incumbent Board.
CODE means the Internal Revenue Code of 1986, as amended, and the rules
and regulations promulgated by the Internal Revenue Service thereunder, all as
in effect from time to time during the Employment Period.
COMMON STOCK means the Company's common stock, par value $.0l per share.
2
<PAGE> 3
COMPANY means Allied Waste Industries, Inc., a Delaware corporation. the
principal executive office of which is located at 15880 North Greenway Hayden
Loop, Suite 100, Scottsdale, Arizona 85260.
CONFIDENTIAL INFORMATION shall have the meaning assigned thereto in
Section 8.2 hereof.
DATE OF TERMINATION means the earliest to occur of (i) the date of the
Executive's death, (ii) the date on which the Executive terminates this
Agreement for any reason other than Good Reason or (iii) the date of receipt of
the Notice of Termination, or such later date as may be prescribed in the Notice
of Termination in accordance with Section 5.6 hereof.
DISABILITY means an illness or other disability which prevents the
Executive from discharging his responsibilities under this Agreement for a
period of 180 consecutive calendar days, or an aggregate of 180 calendar days in
any calendar year, during the Employment Period, all as determined in good faith
by the Board of Directors of the Company (or a committee thereof).
EFFECTIVE DATE means June 6, 1997.
EMPLOYMENT PERIOD shall have the meaning assigned thereto in Section 3
hereof.
EXCHANGE ACT means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated by the Securities and Exchange Commission
thereunder, all as in effect from time to time during the Employment Period.
EXECUTIVE means HENRY L. HIRVELA, an individual residing at 3427 East
Rancho Drive, Paradise Valley, Arizona, 85253.
GOOD REASON shall have the meaning assigned thereto in Section 5.5 hereof.
NOTICE OF TERMINATION shall have the meaning assigned thereto in Section
5.6 hereof.
3
<PAGE> 4
OVERPAYMENT shall have the meaning assigned thereto in Section 11 hereof.
PAYMENT shall have the meaning, assigned thereto in Section 11 hereof.
REDUCED AMOUNT shall have the meaning, assigned thereto in Section 11
hereof.
UNDERPAYMENT shall have the meaning assigned thereto in Section 11 hereof.
VACATION TIME shall have the meaning assigned thereto in Section 4.3
hereof.
VOTING STOCK means all outstanding shares of capital stock of the Company
entitled to vote generally in an election of directors; provided, however, that
if the Company has shares of Voting Stock entitled to more or less than one vote
per share, each reference to a proportion of the issued and outstanding shares
of Voting Stock shall be deemed to refer to the proportion of the aggregate
votes entitled to be cast by the issued and outstanding shares of Voting Stock.
WITHOUT CAUSE shall have the meaning assigned thereto in Section 5.4
hereof.
2. GENERAL DUTIES OF COMPANY AND EXECUTIVE.
2.1 The Company agrees to employ the Executive, and the Executive agrees
to accept employment by the Company and to serve the Company as its Vice
President, Chief Financial Officer. The authority, duties and responsibilities
of the Executive shall include those described in Schedule A to this Agreement,
and such other or additional duties as may from time to time be assigned to the
Executive by the Board of Directors (or a committee thereof and agreed to by the
Executive. While employed hereunder, the Executive shall devote reasonable time
and attention during normal business hours to the affairs of the Company and use
his best efforts to perform faithfully and efficiently his duties and
responsibilities. The Executive may (i) serve on corporate, civic or charitable
boards or committees, (ii) deliver lectures, fulfill speaking engagements or
teach at educational institutions, and (iii) manage personal investments, so
long as such
4
<PAGE> 5
activities do not significantly interfere with the performance of the
Executive's duties and responsibilities.
2.2 The Executive agrees and acknowledges that he owes a fiduciary duty of
loyalty, fidelity and allegiance to act at all times in the best interests of
the Company and to do no act and to make no statement, oral or written, which
would injure Company's business, its interests or its reputation.
2.3 The Executive agrees to comply at all times during the Employment
Period with all applicable policies, rules and regulations of the Company,
including, without limitation, the Company's Code of Ethics and the Company's
policy regarding, trading, in the Common Stock, as each is in effect from time
to time during the Employment Period.
3. TERM. Unless sooner terminated pursuant to Section 5 of this Agreement, the
Executive's Employment Period under this Agreement shall be a period of three
(3) years beginning on the Effective Date, provided that, beginning on the first
anniversary of the Effective Date, the Employment Period shall be for a
continuous period of two (2) years, such that on any given date thereafter, the
Executive's Employment Period shall always be two (2) years from the date in
question.
4. COMPENSATION AND BENEFITS.
4.1 BASE SALARY. As compensation for services to the Company, the Company
shall pay to the Executive until the Date of Termination an annual base salary
of $275,000 (the "Base Salary"). The Board of Directors (or a committee
thereof), in its discretion, may increase the Base Salary based upon relevant
circumstances. The Base Salary shall be payable in equal semimonthly
installments or in accordance with the Company's established policy, subject
only to such payroll and withholding deductions as may be required by law and
other deductions applied generally to employees of the Company for insurance and
other employee benefit plans.
5
<PAGE> 6
4.2 BONUS. In addition to the Base Salary, the Executive shall be awarded,
for each fiscal year until the Date of Termination, an annual bonus (either
pursuant to a bonus or incentive plan or program of the Company or otherwise) in
an amount to be determined by the Board of Directors (or a committee thereof, in
its sole discretion (the "Annual Bonus"). Each such Annual Bonus shall be
payable at a time to be determined by the Board of Directors (or a committee
thereof) in its sole discretion.
4.3 VACATION. Until the Date of Termination, the Executive shall be
entitled to four weeks paid vacation during each one year period commencing on
the Effective Date (the "Vacation Time"). Any Vacation Time not taken during the
applicable one year period will not accrue and will expire on the applicable
anniversary of the Effective Date.
4.4 AUTOMOBILE ALLOWANCE. Until the Date of Termination, the Executive
shall receive an automobile allowance of $600.00 per month (the "Automobile
Allowance"). The Board of Directors (or a committee thereof), in its discretion,
may increase the Automobile Allowance based upon relevant circumstances.
4.5 CLUB MEMBERSHIP DUES. Until the Date of Termination, the Executive
shall receive an amount per month equal to the monthly membership dues which the
Executive pays for one club or organization of Executive's choice.
4.6 INCENTIVE, SAVINGS, RETIREMENT AND STOCK OPTION PLANS. Until the Date
of Termination, the Executive shall participate in and be eligible to receive
all benefits under all executive incentive, savings, retirement and stock option
plans and programs currently maintained or hereinafter established by the
Company for the benefit of its executive officers and/or employees.
4.7 WELFARE BENEFIT PLAN. Until the Date of Termination, the Executive
and/or the Executive's family, as the case may be, shall be eligible to
participate in and shall receive all benefits under each welfare benefit plan of
the Company currently maintained or hereinafter established by the Company for
the benefit of its employees. Such welfare benefit plans may include, without
limitation, medical, dental, disability, group life, accidental death and travel
accident insurance plans and programs.
6
<PAGE> 7
4.8 REIMBURSEMENT OF EXPENSES. The Executive may from time to time until
the Date of Termination incur various business expenses customarily incurred by
persons holding positions of like responsibility, including, without limitation,
travel, entertainment and similar expenses incurred for the benefit of the
Company. Subject to the Company's policy regarding the reimbursement of such
expenses as in effect from time to time during the Employment Period, which does
not necessarily allow reimbursement of all such expenses, the Company shall
reimburse the Executive for such expenses from time to time, at the Executive's
request, and the Executive shall account to the Company for all such expenses.
5. TERMINATION.
5.1 DEATH. This Agreement shall terminate automatically upon the Death of
the Executive.
5.2 DISABILITY. The Company may terminate this Agreement, upon written
notice to the Executive delivered in accordance with Sections 5.6 and 13.1
hereof, upon the Disability of the Executive.
5.3 CAUSE. The Company may terminate this Agreement, upon written notice
to the Executive delivered in accordance with Sections 5.6 and 13.1 hereof, for
Cause. For purposes of this Agreement, "Cause" means (i) the conviction of the
Executive for a felony, (ii) the Executive's willful refusal, without proper
legal cause, to perform his duties and responsibilities as contemplated in this
Agreement or (iii) the Executive's willful engaging in activities which would
(A) constitute a breach of any term of this Agreement, the Company's Code of
Ethics, the Company's policies regarding trading in the Common Stock or
reimbursement of business expenses or any other applicable policies, rules or
regulations of the Company, or (B) result in a material injury to the business,
condition (financial or otherwise), results of operations or prospects of the
Company or its Affiliates (as determined in good faith by the Board of Directors
of the Company or a committee thereof.
5.4 WITHOUT CAUSE. The Company may terminate this Agreement Without Cause,
upon written notice to the Executive delivered in accordance with Sections 5.6
and 13.1 hereof. For purposes of this Agreement, the Executive will be deemed to
have been terminated "Without Cause" if the Executive is terminated by the
Company for any reason other than Cause, Disability or Death.
7
<PAGE> 8
5.5 GOOD REASON. The Executive may terminate this Agreement for Good
Reason, upon written notice to the Company delivered in accordance with Sections
5.6 and 13.1 hereof. For purposes of this Agreement, "Good Reason" means (i) the
assignment to the Executive of any duties inconsistent in any respect with the
Executive's duties or responsibilities as contemplated in this Agreement, (ii)
any other action by the Company which results in a diminishment in the
Executive's position (including status, offices, titles and reporting,
requirements), authority, duties or responsibilities, (iii) any breach by the
Company of any of the provisions of this Agreement, (iv) requiring the Executive
to relocate permanently to any office or location other than the
Phoenix-Scottsdale metropolitan area, without his consent, or (v) any reduction,
or attempted reduction, at any time during the Employment Period, of the Base
Salary of the Executive.
5.6 NOTICE OF TERMINATION. Any termination of this Agreement by the
Company for Cause, Without Cause or as a result of the Executive's Disability,
or by the Executive for Good Reason, shall be communicated by Notice of
Termination to the other party hereto given in accordance with this Agreement.
For purposes of this Agreement, a "Notice of Termination" means a written notice
which (i) indicates the specific termination provision in this Agreement relied
upon, (ii) sets forth in reasonable detail the facts and circumstances claimed
to provide a basis for termination of the Executive's employment under the
provision so indicated and (iii) specifies the termination date, if such date is
other than the date of receipt of such notice (which termination date shall not
be more than 15 days after the giving of such notice).
6. OBLIGATIONS OF COMPANY UPON TERMINATION.
6.1 CAUSE, OTHER THAN GOOD REASON. If this Agreement shall be terminated
either by the Company for Cause or by the Executive for any reason other than
Good Reason, the Company shall pay to the Executive, in a lump sum in cash
within 30 days after the Date of Termination, the aggregate of the Executive's
Base Salary (as in effect on the Date of Termination) through the Date of
Termination, if not theretofore paid, and, in the case of compensation
previously deferred by the Executive, all amounts of such compensation
previously deferred and not yet paid by the Company. All other obligations of
the Company and rights of the Executive hereunder shall terminate effective as
of the Date of Termination.
8
<PAGE> 9
6.2 DEATH OR DISABILITY. (a) Subject to the provisions of this Section
6.2, if this Agreement is terminated as a result of the Executive's Death or
Disability, the Company shall pay to the Executive or his estate, in a lump sum
in cash within 30 days of the Date of Termination, the greater of (i) that
portion of the Executive's Base Salary (as in effect on the Date of Termination)
owing in respect of the balance of the Employment Period pursuant to Section 3
hereof or (ii) the Executive's Base Salary (as in effect on the Date of
Termination). The Company may purchase insurance to cover all or any part of the
obligation contemplated in the foregoing sentence, and the Executive agrees to
submit to a physical examination to facilitate the procurement of such
insurance. If the physical examination reveals that the Executive is
uninsurable, such Death or Disability benefit referred to in the first sentence
of this Section 6.2 shall not be provided, and the Executive shall be entitled
to receive only those Death and Disability benefits to which the Executive is
entitled under the Company's benefit plans.
(b) Whenever compensation is payable to the Executive hereunder during a
period in which he is partially or totally disabled, and such Disability would
(except for the provisions hereof) entitle the Executive to Disability income or
salary continuation payments from the Company according to the terms of any plan
or program presently maintained or hereafter established by the Company, the
Disability income or salary continuation paid to the Executive pursuant to any
such plan or program shall be considered a portion of the payment to be made to
the Executive pursuant to this Section 6.2 and shall not be in addition hereto.
If Disability income is payable directly to the Executive by an insurance
company under tile terms of an insurance policy paid for by the Company, the
amounts paid to the Executive by such insurance company shall be considered a
portion of the payment to be made to the Executive pursuant to this Section 6.2
and shall not be in addition hereto.
6.3 GOOD REASON; WITHOUT CAUSE. If this Agreement shall be
terminated either by the Executive for Good Reason or by the Company Without
Cause:
(a) the Company shall pay to the Executive, in a lump sum in cash within
30 days after the Date of Termination, the aggregate of the following amounts:
(1) if not theretofore paid, the Executive's Base Salary (as in
effect
9
<PAGE> 10
on the Date of Termination) through the Date of Termination;
(2) in an amount equal to the largest Annual Bonus paid to the
Executive out of the last three fiscal years preceding the Date of
Termination; and
(3) in the case of compensation previously deferred by the
Executive, all amounts of such compensation previously deferred and not
yet paid by the Company;
(b) the Company shall, promptly upon submission by the Executive of
supporting, documentation, pay or reimburse to the Executive any costs and
expenses (including, moving and relocation expenses) paid or incurred by the
Executive which would have been payable under Section 4.8 of this Agreement if
the Executive's employment had not terminated; and
(c) until the expiration of the Employment Period or any renewal period
pursuant to Section 3 hereof or of the 12 month period commencing on the Date of
Termination, whichever is longer, the Company shall continue benefits to the
Executive and/or the Executive's family at least equal to those which would have
been provided to them under Section 4.7 if the Executive's employment had not
been terminated; provided that if subsequent to the Date of Termination the
Executive becomes an employee, consultant, agent, officer or director of any
person or business entity that competes with, directly or indirectly, the
Company, then the obligations of the Company under this subparagraph will
terminate in all respects as of the date such relationship commences; and
(d) the Company shall pay to the Executive, in equal semi-monthly
installments the greater of (i) that portion of the Executive's Base Salary (as
in effect on the Date of Termination) owing, in respect of the balance of the
Employment Period pursuant to Section 3 hereof or (ii) the Executive's Base
Salary (as in effect on the Date of Termination); provided that if subsequent to
the Date of Termination the Executive becomes an employee, consultant, agent,
officer or director of any person or business entity that competes with,
directly or indirectly, the Company then the obligations of the Company under
this subparagraph will terminate in all respects as of the date such
relationship commences.
10
<PAGE> 11
6.4 CHANGE IN CONTROL. If (a) this Agreement shall be terminated either by
the Executive for Good Reason or by the Company Without Cause and (b) a Change
in Control of the Company has occurred within the two-year period preceding, the
Date of Termination, then, in addition to the obligations of the Company set
forth in Section 6.3 hereof, the Company shall pay to the Executive, in a lump
sum in cash within 30 days after the Date of Termination, two times the sum of
(x) the Executive's Base Salary (as in effect on the Date of Termination or such
higher rate as may have been in effect at any time during the 90-day period
preceding the Date of Termination) and (y) the Annual Bonus paid to the
Executive for the last full fiscal year. The rights given to the Executive
herein do not apply to the Change of Control of the Company which occurred when
Apollo Advisors, L.P. and The Blackstone Group acquired the Common Stock of
Laidlaw Transportation, Inc.
7. EXECUTIVE'S OBLIGATION TO AVOID CONFLICTS OF
INTEREST.
7.1 In keeping with the Executive's fiduciary duties to the Company, the
Executive agrees that he shall not knowingly become involved in a conflict of
interest with the Company, or upon discovery thereof, allow such a conflict to
continue. The Executive further agrees to disclose to the Company, promptly
after discovery, any facts or circumstances which might involve a conflict of
interest with the Company.
7.2 The Company and the Executive recognize that it is impossible to
provide an exhaustive list of actions or interests which constitute a "conflict
of interest". Moreover, the Company and the Executive recognize that there are
many borderline situations. In some instances, full disclosure of facts by the
Executive to the Company is all that is necessary to enable the Company to
protect its interests. In others, if no improper motivation appears to exist and
the Company's interests have not suffered, prompt elimination of the outside
interest will suffice. In still others, it may be necessary for the Company to
terminate the employment relationship. The Company and the Executive agree that
the Company's determination as to whether or not a conflict of interest exists
shall be conclusive. The Company reserves the right to take such action as, in
its judgment, will end the conflict of interest.
11
<PAGE> 12
7.3 In this connection, it is agreed that any direct or indirect interest
in, connection with or benefit from any outside activities, particularly
commercial activities, which interest might in any way adversely affect the
Company or its Affiliates, involves a possible conflict of interest.
Circumstances in which a conflict of interest on the part of the Executive would
or might arise, and which should be reported immediately to the Company,
include, but are not limited to, the following:
(a) Ownership of a material interest in any lender, supplier, contractor,
subcontractor, customer or other entity with which the Company does business.
(b) Acting in any capacity, including director, officer, partner,
consultant, employee, distributor, agent or the like, for any lender, supplier,
contractor, subcontractor, customer or other entity with which the Company does
business.
(c) Acceptance, directly or indirectly, of payments, services or loans
from a lender, supplier, contractor, subcontractor, customer or other entity
with which the Company does business, including, without limitation, gifts,
trips, entertainment or other favors of more than a nominal value, but
excluding, loans from publicly held insurance companies and commercial or
savings banks at market rates of interest.
(d) Use of information or facilities to which the Executive has access in
a manner which will be detrimental to the Company's interests, such as use for
the Executive's own benefit of know-how or information developed through the
Company's business activities.
(e) Disclosure or other misuse of information of any kind obtained through
the Executive's connection with the Company.
(f) Acquiring or trading in, directly or indirectly, other properties or
interests connected with the design or marketing of products or services
designed or marketed by the Company.
8. EXECUTIVE'S CONFIDENTIALITY OBLIGATION.
8.1 The Executive hereby acknowledges, understands and agrees that all
Confidential Information is the exclusive and confidential property of the
Company
12
<PAGE> 13
and its Affiliates which shall at all times be regarded, treated and protected
as such in accordance with this Section 8. The Executive acknowledges that all
such Confidential Information is in the nature of a trade secret.
8.2 For purposes of this Agreement, "Confidential Information" means
information, which is used in the business of the Company or its Affiliates and
(i) is proprietary to, about or created by the Company or its Affiliates, (ii)
gives the Company or its Affiliates some competitive business advantage or the
opportunity of obtaining such advantage or the disclosure of which could be
detrimental to the interests of the Company or its Affiliates, (iii) is
designated as Confidential Information by the Company or its Affiliates, is
known by the Executive to be considered confidential by the Company or its
Affiliates, or from all the relevant circumstances should reasonably be assumed
by the Executive to be confidential and proprietary to the Company or its
Affiliates, or (iv) is not generally known by non-Company personnel. Such
Confidential Information includes, without limitation, the following types of
information and other information of a similar nature (whether or not reduced to
writing or designated as confidential):
(a) Internal personnel and financial information of the Company or its
Affiliates, vendor information (including vendor characteristics, services,
prices, lists and agreements), purchasing, and internal cost information,
internal service and operational manuals, and the manner and methods of
conducting the business of the Company or its Affiliates;
(b) Marketing and development plans, price and cost data, price and fee
amounts, pricing, and billing, policies, quoting procedures, marketing
techniques, forecasts and forecast assumptions and volumes, and future plans and
potential strategies (including, without limitation, all information relating to
any acquisition prospect and the identity of any key contact within the
organization of any acquisition prospect) of the Company or its Affiliates which
have been or are being discussed;
(c) Names of customers and their representatives, contracts (including
their contents and parties), customer services, and the type, quantity,
specifications and content of products and services purchased, leased, licensed
or received by customers of the Company or its Affiliates; and
(d) Confidential and proprietary information provided to the Company or
13
<PAGE> 14
its Affiliates by any actual or potential customer, government agency or other
third party (including businesses, consultants and other entities and
individuals).
8.3 As a consequence of the Executive's acquisition or anticipated
acquisition of Confidential Information, the Executive shall occupy a position
of trust and confidence with respect to the affairs and business of the Company
and its Affiliates. In view of the foregoing, and of the consideration to be
provided to the Executive, the Executive agrees that it is reasonable and
necessary that the Executive make each of the following covenants:
(a) At any time during the Employment Period and thereafter, the Executive
shall not disclose Confidential Information to any person or entity, either
inside or outside of the Company, other than as necessary in carrying out his
duties and responsibilities as set forth in Section 2 hereof, without first
obtaining the Company's prior written consent (unless such disclosure is
compelled pursuant to court orders or subpoena, and at which time the Executive
shall give notice of such proceedings to the Company).
(b) At any time during the Employment Period and thereafter, the Executive
shall not use, copy or transfer Confidential Information other than as necessary
in carrying out his duties and responsibilities as set forth in Section 2
hereof, without first obtaining the Company's prior written consent.
(c) On the Date of Termination, the Executive shall promptly deliver to
the Company (or its designee) all written materials, records and documents made
by the Executive or which came into his possession prior to or during the
Employment Period concerning, the business or affairs of the Company or its
Affiliates, including, without limitation, all materials containing Confidential
Information.
9. DISCLOSURE OF INFORMATION, IDEAS, CONCEPTS,
IMPROVEMENTS, DISCOVERIES AND INVENTIONS.
As part of the Executive's fiduciary duties to the Company, the Executive agrees
that during his employment by the Company and for a period of three years
following the Date of Termination, the Executive shall promptly disclose in
writing, to the Company all information, ideas, concepts, improvements,
discoveries and inventions, whether patentable or not, and whether or not
reduced
14
<PAGE> 15
to practice, which are conceived, developed, made or acquired by the Executive,
either individually or jointly with others, and which relate to the business,
products or services of the Company or its Affiliates, irrespective of whether
the Executive used the Company's time or facilities and irrespective of whether
such information, idea, concept, improvement, discovery or invention was
conceived, developed, discovered or acquired by the Executive on the job, at
home, or elsewhere. This obligation extends to all types of information, ideas
and concepts, including, information, ideas and concepts relating to new types
of services, corporate opportunities, acquisition prospects, the identity of key
representatives within acquisition prospect organizations, prospective names or
service marks for the Company's business activities, and the like.
10. OWNERSHIP OF INFORMATION, IDEAS, CONCEPTS,
IMPROVEMENTS, DISCOVERIES AND INVENTIONS AND ALL
ORIGINAL WORKS OF AUTHORSHIP.
10.1 All information, ideas, concepts, improvements, discoveries and
inventions, whether patentable or not, which are conceived, made, developed or
acquired by the Executive or which are disclosed or made known to the Executive,
individually or in conjunction with others, during the Executive's employment by
the Company and which relate to the business, products or services of the
Company or its Affiliates (including, without limitation, all such information
relating to corporate opportunities, research, financial and sales data, pricing
and trading terms, evaluations, opinions, interpretations, acquisition
prospects, the identity of customers or their requirements, the identity of key
contacts within the customers' organizations or within the organization of
acquisition prospects, marketing and merchandising techniques, and prospective
names and service marks) are and shall be the sole and exclusive property of the
Company. Furthermore, all drawings, memoranda, notes, records, files,
correspondence, manuals, models, specifications, computer programs, maps and all
other writings or materials of any type embodying, any of such information,
ideas, concepts, improvements, discoveries and inventions are and shall be the
sole and exclusive property of the Company.
10.2 In particular, the Executive hereby specifically sells, assigns,
transfers and conveys to the Company all of his worldwide right, title and
interest in and to all such information, ideas, concepts, improvements,
discoveries or inventions, and any United States or foreign applications for
patents, inventor's certificates or
15
<PAGE> 16
other industrial rights which may be filed in respect thereof, including
divisions, continuations, continuations-in-part, reissues and/or extensions
thereof, and applications for registration of such names and service marks. The
Executive shall assist the Company and its nominee at all times, during the
Employment Period and thereafter, in the protection of such information, ideas,
concepts, improvements, discoveries or inventions, both in the United States and
all foreign countries, which assistance shall include, but shall not be limited
to, the execution of all lawful oaths and all assignment documents requested by
the Company or its nominee in connection with the preparation, prosecution,
issuance or enforcement of any applications for United States or foreign letters
patent, including divisions, continuations, continuations-in-part, reissues
and/or extensions thereof, and any application for the registration of such
names and service marks.
10.3 In the event the Executive creates, during the Employment Period, any
original work of authorship fixed in any tangible medium of expression which is
the subject matter of copyright (such as, videotapes, written presentations on
acquisitions, computer programs, drawings, maps, architectural renditions,
models, manuals, brochures or the like) relating to the Company's business
products or services, whether such work is created solely by the Executive or
jointly with others, the Company) shall be deemed the author of such work if the
work is prepared by the Executive in the scope of his employment; or, if the
work is not prepared by the Executive within the scope of his employment but is
specially ordered by the Company as a contribution to a collective work, as a
part of a motion picture or other audiovisual work, as a translation, as a
supplementary work, as a compilation or as an instructional text, then the work
shall be considered to be work made for hire, and the Company shall be the
author of such work. If such work is neither prepared by the Executive within
the scope of his employment nor a work specially ordered and deemed to be a work
made for hire, then the Executive hereby agrees to sell, transfer, assign and
convey, and by these presents, does sell, transfer, assign and convey, to the
Company all of the Executive's worldwide right, title and interest in and to
such work and all rights of copyright therein. The Executive agrees to assist
the Company and its Affiliates, at all times, during the Employment Period and
thereafter, in the protection of the Company's worldwide right, title and
interest in and to such work and all rights of copyright therein, which
assistance shall include, but shall not be limited to, the execution of all
documents requested by the Company or its nominee and the execution of all
lawful oaths and applications for registration of copyright in the United States
and foreign countries.
16
<PAGE> 17
11. CERTAIN REDUCTION OF PAYMENTS BY THE COMPANY.
Anything in this Agreement to the contrary notwithstanding, in the event it
shall be determined that any payment or distribution by the Company to or for
the benefit of the Executive (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise) (a
"Payment") would be nondeductible by the Company for federal income tax purposes
because of Section 28OG of the Code, then the aggregate present value of amounts
payable or distributable to or for the benefit of the Executive pursuant to this
Agreement (such payments or distributions pursuant to this Agreement are
hereinafter referred to as "Agreement Payments") shall be reduced (but not below
zero) to the Reduced Amount. The "Reduced Amount" shall be an amount expressed
in present value which maximizes the aggregate present value of Agreement
Payments without causing any Payment to be nondeductible by the Company because
of Section 28OG of the Code. Anything in this Agreement to the contrary
notwithstanding, if the Reduced Amount is zero and it is determined further that
any Payment which is not an Agreement Payment would nevertheless be
nondeductible by the Company for federal income tax purposes because of Section
28OG of the Code. then the aggregate present value of Payments, which are not
Agreement Payments, shall also be reduced (but not below zero) to an amount
expressed in present value which maximizes the aggregate present value of
Payments without causing any Payment to be nondeductible by the Company because
of Section 28OG of the Code. For purposes of this Section 11, present value
shall be determined in accordance with Section 28OG(d)(4) of the Code. All
determinations required to be made under this Section 11 shall be made by the
Company's independent certified public accountant (the "Accounting Firm") which
shall provide detailed supporting calculations both to the Company and the
Executive within 15 business days of the Date of Termination. Any such
determination by the Accounting Firm shall be binding upon the Company and the
Executive. The Executive shall determine which and how much of the Agreement
Payments (or, at the election of the Executive, other Payments) shall be
eliminated or reduced consistent with the requirements of this Section 11
provided, that if the Executive does not make such determination within ten
business days of the receipt of the calculations made by the Accounting Firm,
the Company shall elect which and how much of the Agreement Payments shall be
eliminated or reduced consistent with the requirements of this Section 11 and
shall notify the Executive promptly of such election. Within five business days
thereafter, the Company shall pay to or distribute for the benefit of the
Executive such amounts as are then due to the
17
<PAGE> 18
Executive under this Agreement and shall promptly pay to or distribute for the
benefit of the Executive in the future such amounts as become due to the
Executive under this Agreement. As a result of the uncertainty in the
application of Section 28OG of the Code at the time of the initial determination
by the Accounting Firm hereunder, it is possible that Agreement Payments will
have been made by the Company which should not have been made ("Overpayment") or
that additional Agreement Payments which have not been made by the Company could
have been made ("Underpayment"), in each case, consistent with the calculations
required to be made hereunder. In the event that the Accounting Firm determines
that an Overpayment has been made, any such Overpayment shall be treated for all
purposes as a loan to the Executive which the Executive shall repay to the
Company, together with interest at the applicable federal rate provided for in
Section 7872(E)(2) of the Code; provided, however, that no amount shall be
payable by the Executive to the Company if and to the extent such payment would
not reduce the amount which is subject to taxation under Section 4999 of the
Code. In the event that the Accounting Firm determines that an Underpayment has
occurred, any such Underpayment shall be promptly paid by the Company to or for
the benefit of the Executive, together with interest at the applicable federal
rate provided for in Section 7872(f(2) of the Code.
12. EXECUTIVE'S NON-COMPETITION OBLIGATION.
12.1 (a) Until the Date of Termination, the Executive shall not, acting
alone or in conjunction with others, directly or indirectly, in any of the
business territories in which the Company or any of its Affiliates is presently
or from time to time during the Employment Period conducting business, invest or
engage, directly or indirectly, in any business which is competitive with that
of the Company or accept employment with or render services to such a competitor
as a director, officer, agent, employee or consultant, or take any action
inconsistent with the fiduciary relationship of an employee to his employer;
provided, however, that the beneficial ownership by the Executive of up to three
percent of the Voting-Stock of any corporation subject to the periodic reporting
requirements of the Exchange Act shall not violate this Section 12.1 (a).
(b) In addition to the other obligations agreed to by the Executive in
this Agreement, the Executive agrees that until the Date of Termination, he
shall not at any time, directly or indirectly, (i) induce, entice or solicit any
employee of the Company to leave his employment, (ii) contact, communicate or
solicit any
18
<PAGE> 19
customer or acquisition prospect of the Company derived from any customer list,
customer lead, mail, printed matter or other information secured from the
Company or its present or past employees or (iii) in any other manner use any
customer lists or customer leads, mail, telephone numbers, printed material or
other information of the Company relating thereto.
12.2 (a) If this Agreement is terminated either by the Company for Cause
or by the Executive for any reason other than Good Reason, then for a period of
three years following, the Date of Termination, the Executive shall not, acting
alone or in conjunction with others, directly or indirectly, in any of the
business territories in which the Company or any of its Affiliates is presently
or at the Date of Termination conducting, business, invest or engage, directly
or indirectly, in any business which is competitive with that of the Company as
of the Date of Termination or accept employment with or render services to such
a competitor as a director, officer, agent, employee or consultant, or take any
action inconsistent with the fiduciary relationship of an employee to his
employer; provided, however, that the beneficial ownership by the Executive of
up to three percent of the Voting Stock of any corporation subject to the
periodic reporting requirements of the Exchange Act shall not violate this
Section 12.2(a).
(b) In addition to the other obligations agreed to by the Executive in
this Agreement, the Executive agrees that if this Agreement is terminated either
by the Company for Cause or by the Executive for any reason other than Good
Reason, then for a period of three years following, the Date of Termination, he
shall not at any time, directly or indirectly, (i) induce, entice or solicit any
employee of the Company, to leave his employment, (ii) contact, communicate or
solicit any customer or acquisition prospect of the Company derived from any
customer list, customer lead, mail, printed matter or other information secured
from the Company or its present or past employees or (iii) in any other manner
use any customer lists or customer leads, mail, telephone numbers, printed
material or other information of the Company relating thereto.
12.3 (a) If this Agreement is terminated either by the Executive for Good
Reason or by the Company Without Cause, provided that no Change in Control of
the Company has occurred during, the two-year period preceding the Date of
Termination, then during balance of the Employment Period or the 12-month period
commencing on the Date of Termination, whichever is longer, the Executive shall
not, acting alone or in conjunction with others, directly or
19
<PAGE> 20
indirectly, in any of the business territories in which the Company or any of
its Affiliates is presently or at the Date of Termination conducting business,
invest or engage, directly or indirectly, in any business which is competitive
with that of the Company as of the Date of Termination or accept employment with
or render services to such a competitor as a director, officer, agent, employee
or consultant, or take any action inconsistent with the fiduciary relationship
of an employee to his employer; provided, however, that the beneficial ownership
by the Executive of up to three percent of the Voting Stock of any corporation
subject to the periodic reporting, requirements of the Exchange Act shall not
violate this Section 12.3(a).
(b) In addition to the other obligations agreed to by the Executive in
this Agreement, the Executive agrees that if this Agreement is terminated either
by Executive for Good Reason or by the Company Without Cause, provided that no
Change in Control of the Company has occurred during the two year period
preceding the Date of Termination then during the balance of the Employment
Period or the 12-month period commencing on the Date of Termination, whichever
is longer, he shall not at any time, directly or indirectly (i) induce. entice
or solicit any employee of the Company to leave his employment, (ii) contact,
communicate or solicit any customer or acquisition prospect of the Company
derived from any customer list, customer lead, mail, printed matter or other
information secured from the Company or its present or past employees or (iii)
in any other manner use any customer lists or customer leads, mail, telephone
numbers, printed material or other information of the Company relating thereto.
12.4 If this Agreement is terminated (a) either by the Executive for Good
Reason or by the Company Without Cause and (b) a Chance in Control of the
Company has occurred during the two-year period preceding the Date of
Termination, or if this Agreement is terminated as a result of the Executive's
Disability, then the Executive shall not be subject to any noncompetition
obligation.
13. MISCELLANEOUS.
13.1 NOTICES. All notices and other communications required or permitted
hereunder or necessary or convenient in connection herewith shall be in writing
and shall be deemed to have been given when delivered by hand or mailed by
registered or certified mail, return receipt requested, as follows (provided
that
20
<PAGE> 21
notice of chance of address shall be deemed given only when received):
If to the Company to:
Allied Waste Industries, Inc.
15880 North Greenway Hayden Loop, Suite 100
Scottsdale, Arizona 85260
If to the Executive to:
Henry L. Hirvela
3427 East Rancho Drive
Paradise Valley, Arizona 85253
or to such other names or addresses as the Company or the Executive, as the case
may be, shall designate by notice to the other party hereto in the manner
specified in this Section 13.1.
13.2 WAIVER OF BREACH. The waiver by any party hereto of a breach of any
provision of this Agreement shall neither operate nor be construed as a waiver
of any subsequent breach by any party.
13.3 ASSIGNMENT. This Agreement shall be binding, upon and inure to the
benefit of the Company, its successors, legal representatives and assigns, and
upon the Executive, his heirs, executors, administrators, representatives and
assigns; provided, however, the Executive agrees that his rights and obligations
hereunder are personal to him and may not be assigned without the express
written consent of the Company.
13.4 ENTIRE AGREEMENT, NO ORAL AMENDMENTS. This Agreement, together with
any exhibit attached hereto and any document, policy, rule or regulation
referred to herein, replaces and merges all previous agreements and discussions
relating to the same or similar subject matter between the Executive and the
Company and constitutes the entire agreement between the Executive and the
Company with respect to the subject matter of this Agreement. This Agreement may
not be modified in any respect by any verbal statement, representation or
agreement made by any employee, officer, or representative of the Company or by
any written agreement unless signed by an officer of the
21
<PAGE> 22
Company who is expressly authorized by the Company to execute such document.
13.5 ENFORCEABILITY. If any provision of this Agreement or application
thereof to anyone or under any circumstances shall be determined to be invalid
or unenforceable, such invalidity or unenforceability shall not affect any other
provisions or applications of this Agreement which can be given effect without
the invalid or unenforceable provision or application.
13.6 JURISDICTION, VENUE. The laws of the State of Arizona shall govern
the interpretation, validity and effect of this Agreement without regard to the
place of execution or the place for performance thereof, and the Company and the
Executive agree that the courts situated in Maricopa County, Arizona shall have
personal jurisdiction over the Company and the Executive to hear all disputes
arising under this Agreement. This Agreement is to be at least partially
performed in Maricopa County, Arizona, and as such, the Company and the
Executive agree that venue shall be proper with the courts in Maricopa County,
Arizona to hear such disputes. In the event either the Company or the Executive
is not able to effect service of process upon the other party hereto with
respect to such disputes, the Company and the Executive expressly agree that the
Secretary of State for the State of Arizona shall be an agent of the Company
and/or the Executive to receive service of process on behalf of the Company
and/or the Executive with respect to such disputes.
13.7 INJUNCTIVE RELIEF. The Company and the Executive agree that a breach
of any term of this Agreement by the Executive would cause irreparable damage to
the Company and that, in the event of such breach, the Company shall have, in
addition to any and all remedies of law, the right to any injunction, specific
performance and other equitable relief to prevent or to redress the violation of
the Executive's duties or responsibilities hereunder.
22
<PAGE> 23
IN WITNESS WHEREOF, the undersigned, intending to be early bound, have
executed this Agreement as of the date first written above.
ALLIED WASTE INDUSTRIES, INC.
By /s/ THOMAS H. VAN WEELDEN
________________________________
Its: ______________________________
EXECUTIVE
/s/ HENRY L. HIRVELA
___________________________________
HENRY L. HIRVELA
23
<PAGE> 24
SCHEDULE A
24
<PAGE> 1
THIRD AMENDMENT
TO EXECUTIVE EMPLOYMENT AGREEMENT
This THIRD AMENDMENT TO EXECUTIVE EMPLOYMENT AGREEMENT
("AMENDMENT") is made and entered into this 30th day of January, 1997, by and
between THOMAS VAN WEELDEN, a resident of Arizona (the "EXECUTIVE"), and ALLIED
WASTE INDUSTRIES, INC., a Delaware corporation (the "COMPANY").
W I T N E S S E T H:
WHEREAS, the Company and Executive have entered into an Executive
Employment Agreement, dated October 20, 1993 (the "EMPLOYMENT AGREEMENT"),
pursuant to which the Company has employed Executive; and
WHEREAS, the Company and Executive desire to amend the terms of the
Executive Employment Agreement.
NOW, THEREFORE, the Company and Executive hereby amend the Executive
Employment Agreement, as follows:
The following change is made to Paragraph 4.1 Base Salary of the
Executive Employment Agreement between Company and Executive;
The Base Salary is increased to the sum of FIVE HUNDRED THOUSAND DOLLARS
($500,000) per year effective as of the 1st day of January, 1997.
The Amendment contained herein shall not affect the validity of any of
the provisions, covenants or agreements contained in the Executive Employment
Agreement, and all other terms and provisions contained in the Executive
Employment Agreement shall have full force and effect notwithstanding the
execution of this Amendment.
<PAGE> 2
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
day and date first above written.
EXECUTIVE:
/s/ THOMAS H. VAN WEELDEN
------------------------------------
THOMAS VAN WEELDEN
COMPANY:
ALLIED WASTE INDUSTRIES, INC.
/s/ ROGER A. RAMSEY
------------------------------------
By: ____________________________
Its: ____________________________
2
<PAGE> 1
EXECUTIVE EMPLOYMENT AGREEMENT
This EXECUTIVE EMPLOYMENT AGREEMENT is made and entered into this 6th day
of June, 1997, by and between ALLIED WASTE INDUSTRIES, INC., a Delaware
corporation having its principal executive office at 15880 North Greenway Hayden
Loop, Suite 100, Scottsdale, Arizona 85260 (hereinafter referred to as
"COMPANY"), and LARRY D. HENK (hereinafter referred to as the "EXECUTIVE").
WITNESSETH:
WHEREAS, the Company desires to employ the Executive in an executive
capacity and the Executive desires to enter the Company's employ.
NOW, THEREFORE, for and in consideration of the mutual promises, covenants
and obligations contained herein, and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the Company and the
Executive hereby agree as follows:
1. CERTAIN DEFINITIONS. As used in this Agreement, the following
terms have the meanings prescribed below:
ACCOUNTING FIRM shall have the meaning, assigned thereto in Section 11
hereof.
AFFILIATE is used in this Agreement to define a relationship to a person
or entity and means a person or entity who, directly or indirectly through one
or more intermediaries, controls, is controlled by, or is under common control
with, such person or entity.
AGREEMENT PAYMENTS shall have the meaning, assigned thereto in Section 11
hereof. Annual Bonus shall have the meaning, assigned thereto in Section 4.2
hereof. Base Salary shall have the meaning, assigned thereto in Section 4.1
hereof.
<PAGE> 2
BENEFICIAL OWNER shall have the meaning assigned thereto in Rule 13(d)-3
under the Exchange Act; provided, however, and without limitation, that any
individual, corporation, partnership, group, association or other person or
entity that has the right to acquire any Voting Stock at any time in the future,
whether such right is (a) contingent or absolute or (b) exercisable presently or
at any time in the future, pursuant to any agreement or understanding or upon
the exercise or conversion of rights, options or warrants, or otherwise, shall
be the Beneficial Owner of such Voting Stock.
CAUSE shall have the meaning assigned thereto in Section 5.3 hereof.
CHANGE IN CONTROL of the Company shall be deemed to have occurred if (i)
the Company merges or consolidates, or agrees to merge or to consolidate, with
any other corporation (other than a wholly-owned direct or indirect subsidiary
of the Company) and is not the surviving corporation (or survives as a
subsidiary of another corporation), (ii) the Company sells, or agrees to sell,
all or substantially all of its assets to any other person or entity, (iii) the
Company is dissolved, (iv) any third person or entity (other than a trustee or
committee of any qualified employee benefit plan of the Company) together with
its Affiliates shall become or shall have publicly announced its intention to
become (by tender offer or otherwise), directly or indirectly, the Beneficial
Owner of at least 30% of the Voting Stock of the Company or (v) the individuals
who constitute the Board of Directors of the Company as of the Effective Date
(the "Incumbent Board") shall cease for any reason to constitute at least a
majority of the Board of Directors; provided, that any person becoming a
director whose election or nomination for election was approved by a majority of
the members of the Incumbent Board shall be considered, for the purposes of this
Agreement, a member of the Incumbent Board.
CODE means the Internal Revenue Code of 1986, as amended, and the rules
and regulations promulgated by the Internal Revenue Service thereunder, all as
in effect from time to time during the Employment Period.
COMMON STOCK means the Company's common stock, par value $.0l per share.
2
<PAGE> 3
COMPANY means Allied Waste Industries, Inc., a Delaware corporation. the
principal executive office of which is located at 15880 North Greenway Hayden
Loop, Suite 100, Scottsdale, Arizona 85260.
CONFIDENTIAL INFORMATION shall have the meaning assigned thereto in
Section 8.2 hereof.
DATE OF TERMINATION means the earliest to occur of (i) the date of the
Executive's death, (ii) the date on which the Executive terminates this
Agreement for any reason other than Good Reason or (iii) the date of receipt of
the Notice of Termination, or such later date as may be prescribed in the Notice
of Termination in accordance with Section 5.6 hereof.
DISABILITY means an illness or other disability which prevents the
Executive from discharging his responsibilities under this Agreement for a
period of 180 consecutive calendar days, or an aggregate of 180 calendar days in
any calendar year, during the Employment Period, all as determined in good faith
by the Board of Directors of the Company (or a committee thereof).
EFFECTIVE DATE means June 6, 1997.
EXECUTIVE means LARRY D. HENK, an individual residing at 11821 North 96th
Place, Scottsdale, Arizona, 85260.
EXCHANGE ACT means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated by the Securities and Exchange Commission
thereunder, all as in effect from time to time during the Employment Period.
EMPLOYMENT PERIOD shall have the meaning assigned thereto in Section 3
hereof.
GOOD REASON shall have the meaning assigned thereto in Section 5.5 hereof.
NOTICE OF TERMINATION shall have the meaning assigned thereto in Section
5.6 hereof.
3
<PAGE> 4
OVERPAYMENT shall have the meaning assigned thereto in Section 11 hereof.
PAYMENT shall have the meaning, assigned thereto in Section 11 hereof.
REDUCED AMOUNT shall have the meaning, assigned thereto in Section 11
hereof.
UNDERPAYMENT shall have the meaning assigned thereto in Section 11 hereof.
VACATION TIME shall have the meaning assigned thereto in Section 4.3
hereof.
VOTING STOCK means all outstanding shares of capital stock of the Company
entitled to vote generally in an election of directors; provided, however, that
if the Company has shares of Voting Stock entitled to more or less than one vote
per share, each reference to a proportion of the issued and outstanding shares
of Voting Stock shall be deemed to refer to the proportion of the aggregate
votes entitled to be cast by the issued and outstanding shares of Voting Stock.
WITHOUT CAUSE shall have the meaning assigned thereto in Section 5.4
hereof.
2. GENERAL DUTIES OF COMPANY AND EXECUTIVE.
2.1 The Company agrees to employ the Executive, and the Executive agrees
to accept employment by the Company and to serve the Company as its Vice
President, Operations. The authority, duties and responsibilities of the
Executive shall include those described in Schedule A to this Agreement, and
such other or additional duties as may from time to time be assigned to the
Executive by the Board of Directors (or a committee thereof and agreed to by the
Executive. While employed hereunder, the Executive shall devote reasonable time
and attention during normal business hours to the affairs of the Company and use
his best efforts to perform faithfully and efficiently his duties and
responsibilities. The Executive may (i) serve on corporate, civic or charitable
boards or committees, (ii) deliver lectures, fulfill speaking engagements or
teach at educational institutions, and (iii) manage personal investments, so
long as such activities do not significantly interfere with the performance of
the Executive's duties and
4
<PAGE> 5
responsibilities.
2.2 The Executive agrees and acknowledges that he owes a fiduciary duty of
loyalty, fidelity and allegiance to act at all times in the best interests of
the Company and to do no act and to make no statement, oral or written, which
would injure Company's business, its interests or its reputation.
2.3 The Executive agrees to comply at all times during the Employment
Period with all applicable policies, rules and regulations of the Company,
including, without limitation, the Company's Code of Ethics and the Company's
policy regarding, trading, in the Common Stock, as each is in effect from time
to time during the Employment Period.
3. TERM. Unless sooner terminated pursuant to Section 5 of this Agreement, the
Executive's Employment Period under this Agreement shall be a period of three
(3) years beginning on the Effective Date, provided that, beginning on the first
anniversary of the Effective Date, the Employment Period shall be for a
continuous period of two (2) years, such that on any given date thereafter, the
Executive's Employment Period shall always be two (2) years from the date in
question.
4. COMPENSATION AND BENEFITS.
4.1 BASE SALARY. As compensation for services to the Company, the Company
shall pay to the Executive until the Date of Termination an annual base salary
of $260,000 (the "Base Salary"). The Board of Directors (or a committee
thereof), in its discretion, may increase the Base Salary based upon relevant
circumstances. The Base Salary shall be payable in equal semimonthly
installments or in accordance with the Company's established policy, subject
only to such payroll and withholding deductions as may be required by law and
other deductions applied generally to employees of the Company for insurance and
other employee benefit plans.
4.2 BONUS. In addition to the Base Salary, the Executive shall be awarded,
for each fiscal year until the Date of Termination, an annual bonus (either
pursuant to a bonus or incentive plan or program of the Company or otherwise) in
an amount to be determined by the Board of Directors (or a committee thereof, in
its sole discretion (the "Annual Bonus"). Each such Annual
5
<PAGE> 6
Bonus shall be payable at a time to be determined by the Board of Directors (or
a committee thereof) in its sole discretion.
4.3 VACATION. Until the Date of Termination, the Executive shall be
entitled to four weeks paid vacation during each one year period commencing on
the Effective Date (the "Vacation Time"). Any Vacation Time not taken during the
applicable one year period will not accrue and will expire on the applicable
anniversary of the Effective Date.
4.4 AUTOMOBILE ALLOWANCE. Until the Date of Termination, the Executive
shall receive an automobile allowance of $600.00 per month (the "Automobile
Allowance"). The Board of Directors (or a committee thereof), in its discretion,
may increase the Automobile Allowance based upon relevant circumstances.
4.5 CLUB MEMBERSHIP DUES. Until the Date of Termination, the Executive
shall receive an amount per month equal to the monthly membership dues which the
Executive pays for one club or organization of Executive's choice.
4.6 INCENTIVE, SAVINGS, RETIREMENT AND STOCK OPTION PLANS. Until the Date
of Termination, the Executive shall participate in and be eligible to receive
all benefits under all executive incentive, savings, retirement and stock option
plans and programs currently maintained or hereinafter established by the
Company for the benefit of its executive officers and/or employees.
4.7 WELFARE BENEFIT PLAN. Until the Date of Termination, the Executive
and/or the Executive's family, as the case may be, shall be eligible to
participate in and shall receive all benefits under each welfare benefit plan of
the Company currently maintained or hereinafter established by the Company for
the benefit of its employees. Such welfare benefit plans may include, without
limitation, medical, dental, disability, group life, accidental death and travel
accident insurance plans and programs.
4.8 REIMBURSEMENT OF EXPENSES. The Executive may from time to time until
the Date of Termination incur various business expenses customarily incurred by
persons holding positions of like responsibility, including, without limitation,
travel, entertainment and similar expenses incurred for the benefit of the
Company. Subject to the Company's policy regarding the reimbursement of such
expenses as
6
<PAGE> 7
in effect from time to time during the Employment Period, which does not
necessarily allow reimbursement of all such expenses, the Company shall
reimburse the Executive for such expenses from time to time, at the Executive's
request, and the Executive shall account to the Company for all such expenses.
5. TERMINATION.
5.1 DEATH. This Agreement shall terminate automatically upon the death of
the Executive.
5.2 DISABILITY. The Company may terminate this Agreement, upon written
notice to the Executive delivered in accordance with Sections 5.6 and 13.1
hereof, upon the Disability of the Executive.
5.3 CAUSE. The Company may terminate this Agreement, upon written notice
to the Executive delivered in accordance with Sections 5.6 and 13.1 hereof, for
Cause. For purposes of this Agreement, "Cause" means (i) the conviction of the
Executive for a felony, (ii) the Executive's willful refusal, without proper
legal cause, to perform his duties and responsibilities as contemplated in this
Agreement or (iii) the Executive's willful engaging in activities which would
(A) constitute a breach of any term of this Agreement, the Company's Code of
Ethics, the Company's policies regarding trading in the Common Stock or
reimbursement of business expenses or any other applicable policies, rules or
regulations of the Company, or (B) result in a material injury to the business,
condition (financial or otherwise), results of operations or prospects of the
Company or its Affiliates (as determined in good faith by the Board of Directors
of the Company or a committee thereof.
5.4 WITHOUT CAUSE. The Company may terminate this Agreement Without Cause,
upon written notice to the Executive delivered in accordance with Sections 5.6
and 13.1 hereof. For purposes of this Agreement, the Executive will be deemed to
have been terminated "Without Cause" if the Executive is terminated by the
Company for any reason other than Cause, Disability or death.
7
<PAGE> 8
5.5 GOOD REASON. The Executive may terminate this Agreement for Good
Reason, upon written notice to the Company delivered in accordance with Sections
5.6 and 13.1 hereof. For purposes of this Agreement, "Good Reason" means (i) the
assignment to the Executive of any duties inconsistent in any respect with the
Executive's duties or responsibilities as contemplated in this Agreement, (ii)
any other action by the Company which results in a diminishment in the
Executive's position (including status, offices, titles and reporting,
requirements), authority, duties or responsibilities, (iii) any breach by the
Company of any of the provisions of this Agreement, (iv) requiring the Executive
to relocate permanently to any office or location other than the
Phoenix-Scottsdale metropolitan area, without his consent, or (v) any reduction,
or attempted reduction, at any time during the Employment Period, of the Base
Salary of the Executive.
5.6 NOTICE OF TERMINATION. Any termination of this Agreement by the
Company for Cause, Without Cause or as a result of the Executive's Disability,
or by the Executive for Good Reason, shall be communicated by Notice of
Termination to the other party hereto given in accordance with this Agreement.
For purposes of this Agreement, a "Notice of Termination" means a written notice
which (i) indicates the specific termination provision in this Agreement relied
upon, (ii) sets forth in reasonable detail the facts and circumstances claimed
to provide a basis for termination of the Executive's employment under the
provision so indicated and (iii) specifies the termination date, if such date is
other than the date of receipt of such notice (which termination date shall not
be more than 15 days after the giving of such notice).
6. OBLIGATIONS OF COMPANY UPON TERMINATION.
6.1 CAUSE, OTHER THAN GOOD REASON. If this Agreement shall be terminated
either by the Company for Cause or by the Executive for any reason other than
Good Reason, the Company shall pay to the Executive, in a lump sum in cash
within 30 days after the Date of Termination, the aggregate of the Executive's
Base Salary (as in effect on the Date of Termination) through the Date of
Termination, if not theretofore paid, and, in the case of compensation
previously deferred by the Executive, all amounts of such compensation
previously deferred and not yet paid by the Company. All other obligations of
the Company and rights of the Executive hereunder shall terminate effective as
of the Date of Termination.
8
<PAGE> 9
6.2 DEATH OR DISABILITY. (a) Subject to the provisions of this Section
6.2, if this Agreement is terminated as a result of the Executive's death or
Disability, the Company shall pay to the Executive or his estate, in a lump sum
in cash within 30 days of the Date of Termination, the greater of (i) that
portion of the Executive's Base Salary (as in effect on the Date of Termination)
owing in respect of the balance of the Employment Period pursuant to Section 3
hereof or (ii) the Executive's Base Salary (as in effect on the Date of
Termination). The Company may purchase insurance to cover all or any part of the
obligation contemplated in the foregoing sentence, and the Executive agrees to
submit to a physical examination to facilitate the procurement of such
insurance. If the physical examination reveals that the Executive is
uninsurable, such death or Disability benefit referred to in the first sentence
of this Section 6.2 shall not be provided, and the Executive shall be entitled
to receive only those death and Disability benefits to which the Executive is
entitled under the Company's benefit plans.
(b) Whenever compensation is payable to the Executive hereunder during a
period in which he is partially or totally disabled, and such Disability would
(except for the provisions hereof) entitle the Executive to Disability income or
salary continuation payments from the Company according to the terms of any plan
or program presently maintained or hereafter established by the Company, the
Disability income or salary continuation paid to the Executive pursuant to any
such plan or program shall be considered a portion of the payment to be made to
the Executive pursuant to this Section 6.2 and shall not be in addition hereto.
If Disability income is payable directly to the Executive by an insurance
company under tile terms of an insurance policy paid for by the Company, the
amounts paid to the Executive by such insurance company shall be considered a
portion of the payment to be made to the Executive pursuant to this Section 6.2
and shall not be in addition hereto.
6.3 GOOD REASON; WITHOUT CAUSE. If this Agreement shall be
terminated either by the Executive for Good Reason or by the Company Without
Cause:
(a) the Company shall pay to the Executive, in a lump sum in cash within
30 days after the Date of Termination, the aggregate of the following amounts:
(1) if not theretofore paid, the Executive's Base Salary (as in
effect
9
<PAGE> 10
on the Date of Termination) through the Date of Termination;
(2) in an amount equal to the largest Annual Bonus paid to the
Executive out of the last three fiscal years preceding the Date of
Termination; and
(3) in the case of compensation previously deferred by the
Executive, all amounts of such compensation previously deferred and not
yet paid by the Company;
(b) the Company shall, promptly upon submission by the Executive of
supporting, documentation, pay or reimburse to the Executive any costs and
expenses (including, moving and relocation expenses) paid or incurred by the
Executive which would have been payable under Section 4.8 of this Agreement if
the Executive's employment had not terminated; and
(c) until the expiration of the Employment Period pursuant to Section 3
hereof or of the 12 month period commencing on the Date of Termination,
whichever is longer, the Company shall continue benefits to the Executive and/or
the Executive's family at least equal to those which would have been provided to
them under Section 4.7 if the Executive's employment had not been terminated;
provided that if subsequent to the Date of Termination the Executive becomes an
employee, consultant, agent, officer or director of any person or business
entity that competes with, directly or indirectly, the Company, then the
obligations of the Company under this subparagraph will terminate in all
respects as of the date such relationship commences; and
(d) the Company shall pay to the Executive, in equal semi-monthly
installments the greater of (i) that portion of the Executive's Base Salary (as
in effect on the Date of Termination) owing, in respect of the balance of the
Employment Period pursuant to Section 3 hereof or (ii) the Executive's Base
Salary (as in effect on the Date of Termination); provided that if subsequent to
the Date of Termination the Executive becomes an employee, consultant, agent,
officer or director of any person or business entity that competes with,
directly or indirectly, the Company then the obligations of the Company under
this subparagraph will terminate in all respects as of the date such
relationship commences.
10
<PAGE> 11
6.4 CHANGE IN CONTROL. If (a) this Agreement shall be terminated either by
the Executive for Good Reason or by the Company Without Cause and (b) a Change
in Control of the Company has occurred within the two-year period preceding, the
Date of Termination, then, in addition to the obligations of the Company set
forth in Section 6.3 hereof, the Company shall pay to the Executive, in a lump
sum in cash within 30 days after the Date of Termination, two times the sum of
(x) the Executive's Base Salary (as in effect on the Date of Termination or such
higher rate as may have been in effect at any time during the 90-day period
preceding the Date of Termination) and (y) the Annual Bonus paid to the
Executive for the last full fiscal year. The rights given to the Executive
herein do not apply to the Change of Control of the Company which occurred when
Apollo Advisors, L.P. and The Blackstone Group acquired the Common Stock of
Laidlaw Transportation, Inc.
7. EXECUTIVE'S OBLIGATION TO AVOID CONFLICTS OF
INTEREST.
7.1 In keeping with the Executive's fiduciary duties to the Company, the
Executive agrees that he shall not knowingly become involved in a conflict of
interest with the Company, or upon discovery thereof, allow such a conflict to
continue. The Executive further agrees to disclose to the Company, promptly
after discovery, any facts or circumstances which might involve a conflict of
interest with the Company.
7.2 The Company and the Executive recognize that it is impossible to
provide an exhaustive list of actions or interests which constitute a "conflict
of interest". Moreover, the Company and the Executive recognize that there are
many borderline situations. In some instances, full disclosure of facts by the
Executive to the Company is all that is necessary to enable the Company to
protect its interests. In others, if no improper motivation appears to exist and
the Company's interests have not suffered, prompt elimination of the outside
interest will suffice. In still others, it may be necessary for the Company to
terminate the employment relationship. The Company and the Executive agree that
the Company's determination as to whether or not a conflict of interest exists
shall be conclusive. The Company reserves the right to take such action as, in
its judgment, will end the conflict of interest.
11
<PAGE> 12
7.3 In this connection, it is agreed that any direct or indirect interest
in, connection with or benefit from any outside activities, particularly
commercial activities, which interest might in any way adversely affect the
Company or its Affiliates, involves a possible conflict of interest.
Circumstances in which a conflict of interest on the part of the Executive would
or might arise, and which should be reported immediately to the Company,
include, but are not limited to, the following:
(a) Ownership of a material interest in any lender, supplier, contractor,
subcontractor, customer or other entity with which the Company does business.
(b) Acting in any capacity, including director, officer, partner,
consultant, employee, distributor, agent or the like, for any lender, supplier,
contractor, subcontractor, customer or other entity with which the Company does
business.
(c) Acceptance, directly or indirectly, of payments, services or loans
from a lender, supplier, contractor, subcontractor, customer or other entity
with which the Company does business, including, without limitation, gifts,
trips, entertainment or other favors of more than a nominal value, but
excluding, loans from publicly held insurance companies and commercial or
savings banks at market rates of interest.
(d) Use of information or facilities to which the Executive has access in
a manner which will be detrimental to the Company's interests, such as use for
the Executive's own benefit of know-how or information developed through the
Company's business activities.
(e) Disclosure or other misuse of information of any kind obtained through
the Executive's connection with the Company.
(f) Acquiring or trading in, directly or indirectly, other properties or
interests connected with the design or marketing of products or services
designed or marketed by the Company.
8. EXECUTIVE'S CONFIDENTIALITY OBLIGATION.
8.1 The Executive hereby acknowledges, understands and agrees that all
Confidential Information is the exclusive and confidential property of the
Company
12
<PAGE> 13
and its Affiliates which shall at all times be regarded, treated and protected
as such in accordance with this Section 8. The Executive acknowledges that all
such Confidential Information is in the nature of a trade secret.
8.2 For purposes of this Agreement, "Confidential Information" means
information, which is used in the business of the Company or its Affiliates and
(i) is proprietary to, about or created by the Company or its Affiliates, (ii)
gives the Company or its Affiliates some competitive business advantage or the
opportunity of obtaining such advantage or the disclosure of which could be
detrimental to the interests of the Company or its Affiliates, (iii) is
designated as Confidential Information by the Company or its Affiliates, is
known by the Executive to be considered confidential by the Company or its
Affiliates, or from all the relevant circumstances should reasonably be assumed
by the Executive to be confidential and proprietary to the Company or its
Affiliates, or (iv) is not generally known by non-Company personnel. Such
Confidential Information includes, without limitation, the following types of
information and other information of a similar nature (whether or not reduced to
writing or designated as confidential):
(a) Internal personnel and financial information of the Company or its
Affiliates, vendor information (including vendor characteristics, services,
prices, lists and agreements), purchasing, and internal cost information,
internal service and operational manuals, and the manner and methods of
conducting the business of the Company or its Affiliates;
(b) Marketing and development plans, price and cost data, price and fee
amounts, pricing, and billing, policies, quoting procedures, marketing
techniques, forecasts and forecast assumptions and volumes, and future plans and
potential strategies (including, without limitation, all information relating to
any acquisition prospect and the identity of any key contact within the
organization of any acquisition prospect) of the Company or its Affiliates which
have been or are being discussed;
(c) Names of customers and their representatives, contracts (including
their contents and parties), customer services, and the type, quantity,
specifications and content of products and services purchased, leased, licensed
or received by customers of the Company or its Affiliates; and
(d) Confidential and proprietary information provided to the Company or
13
<PAGE> 14
its Affiliates by any actual or potential customer, government agency or other
third party (including businesses, consultants and other entities and
individuals).
8.3 As a consequence of the Executive's acquisition or anticipated
acquisition of Confidential Information, the Executive shall occupy a position
of trust and confidence with respect to the affairs and business of the Company
and its Affiliates. In view of the foregoing, and of the consideration to be
provided to the Executive, the Executive agrees that it is reasonable and
necessary that the Executive make each of the following covenants:
(a) At any time during the Employment Period and thereafter, the Executive
shall not disclose Confidential Information to any person or entity, either
inside or outside of the Company, other than as necessary in carrying out his
duties and responsibilities as set forth in Section 2 hereof, without first
obtaining the Company's prior written consent (unless such disclosure is
compelled pursuant to court orders or subpoena, and at which time the Executive
shall give notice of such proceedings to the Company).
(b) At any time during the Employment Period and thereafter, the Executive
shall not use, copy or transfer Confidential Information other than as necessary
in carrying out his duties and responsibilities as set forth in Section 2
hereof, without first obtaining the Company's prior written consent.
(c) On the Date of Termination, the Executive shall promptly deliver to
the Company (or its designee) all written materials, records and documents made
by the Executive or which came into his possession prior to or during the
Employment Period concerning, the business or affairs of the Company or its
Affiliates, including, without limitation, all materials containing Confidential
Information.
9. DISCLOSURE OF INFORMATION, IDEAS, CONCEPTS,
IMPROVEMENTS, DISCOVERIES AND INVENTIONS.
As part of the Executive's fiduciary duties to the Company, the Executive agrees
that during his employment by the Company and for a period of three years
following the Date of Termination, the Executive shall promptly disclose in
writing, to the Company all information, ideas, concepts, improvements,
discoveries and inventions, whether patentable or not, and whether or not
reduced
14
<PAGE> 15
to practice, which are conceived, developed, made or acquired by the Executive,
either individually or jointly with others, and which relate to the business,
products or services of the Company or its Affiliates, irrespective of whether
the Executive used the Company's time or facilities and irrespective of whether
such information, idea, concept, improvement, discovery or invention was
conceived, developed, discovered or acquired by the Executive on the job, at
home, or elsewhere. This obligation extends to all types of information, ideas
and concepts, including, information, ideas and concepts relating to new types
of services, corporate opportunities, acquisition prospects, the identity of key
representatives within acquisition prospect organizations, prospective names or
service marks for the Company's business activities, and the like.
10. OWNERSHIP OF INFORMATION, IDEAS, CONCEPTS,
IMPROVEMENTS, DISCOVERIES AND INVENTIONS AND ALL
ORIGINAL WORKS OF AUTHORSHIP.
10.1 All information, ideas, concepts, improvements, discoveries and
inventions, whether patentable or not, which are conceived, made, developed or
acquired by the Executive or which are disclosed or made known to the Executive,
individually or in conjunction with others, during the Executive's employment by
the Company and which relate to the business, products or services of the
Company or its Affiliates (including, without limitation, all such information
relating to corporate opportunities, research, financial and sales data, pricing
and trading terms, evaluations, opinions, interpretations, acquisition
prospects, the identity of customers or their requirements, the identity of key
contacts within the customers' organizations or within the organization of
acquisition prospects, marketing and merchandising techniques, and prospective
names and service marks) are and shall be the sole and exclusive property of the
Company. Furthermore, all drawings, memoranda, notes, records, files,
correspondence, manuals, models, specifications, computer programs, maps and all
other writings or materials of any type embodying, any of such information,
ideas, concepts, improvements, discoveries and inventions are and shall be the
sole and exclusive property of the Company.
10.2 In particular, the Executive hereby specifically sells, assigns,
transfers and conveys to the Company all of his worldwide right, title and
interest in and to all such information, ideas, concepts, improvements,
discoveries or inventions, and any United States or foreign applications for
patents, inventor's certificates or
15
<PAGE> 16
other industrial rights which may be filed in respect thereof, including
divisions, continuations, continuations-in-part, reissues and/or extensions
thereof, and applications for registration of such names and service marks. The
Executive shall assist the Company and its nominee at all times, during the
Employment Period and thereafter, in the protection of such information, ideas,
concepts, improvements, discoveries or inventions, both in the United States and
all foreign countries, which assistance shall include, but shall not be limited
to, the execution of all lawful oaths and all assignment documents requested by
the Company or its nominee in connection with the preparation, prosecution,
issuance or enforcement of any applications for United States or foreign letters
patent, including divisions, continuations, continuations-in-part, reissues
and/or extensions thereof, and any application for the registration of such
names and service marks.
10.3 In the event the Executive creates, during the Employment Period, any
original work of authorship fixed in any tangible medium of expression which is
the subject matter of copyright (such as, videotapes, written presentations on
acquisitions, computer programs, drawings, maps, architectural renditions,
models, manuals, brochures or the like) relating to the Company's business
products or services, whether such work is created solely by the Executive or
jointly with others, the Company) shall be deemed the author of such work if the
work is prepared by the Executive in the scope of his employment; or, if the
work is not prepared by the Executive within the scope of his employment but is
specially ordered by the Company as a contribution to a collective work, as a
part of a motion picture or other audiovisual work, as a translation, as a
supplementary work, as a compilation or as an instructional text, then the work
shall be considered to be work made for hire, and the Company shall be the
author of such work. If such work is neither prepared by the Executive within
the scope of his employment nor a work specially ordered and deemed to be a work
made for hire, then the Executive hereby agrees to sell, transfer, assign and
convey, and by these presents, does sell, transfer, assign and convey, to the
Company all of the Executive's worldwide right, title and interest in and to
such work and all rights of copyright therein. The Executive agrees to assist
the Company and its Affiliates, at all times, during the Employment Period and
thereafter, in the protection of the Company's worldwide right, title and
interest in and to such work and all rights of copyright therein, which
assistance shall include, but shall not be limited to, the execution of all
documents requested by the Company or its nominee and the execution of all
lawful oaths and applications for registration of copyright in the United States
and foreign countries.
16
<PAGE> 17
11. CERTAIN REDUCTION OF PAYMENTS BY THE COMPANY.
Anything in this Agreement to the contrary notwithstanding, in the event it
shall be determined that any payment or distribution by the Company to or for
the benefit of the Executive (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise) (a
"Payment") would be nondeductible by the Company for federal income tax purposes
because of Section 28OG of the Code, then the aggregate present value of amounts
payable or distributable to or for the benefit of the Executive pursuant to this
Agreement (such payments or distributions pursuant to this Agreement are
hereinafter referred to as "Agreement Payments") shall be reduced (but not below
zero) to the Reduced Amount. The "Reduced Amount" shall be an amount expressed
in present value which maximizes the aggregate present value of Agreement
Payments without causing any Payment to be nondeductible by the Company because
of Section 28OG of the Code. Anything in this Agreement to the contrary
notwithstanding, if the Reduced Amount is zero and it is determined further that
any Payment which is not an Agreement Payment would nevertheless be
nondeductible by the Company for federal income tax purposes because of Section
28OG of the Code. then the aggregate present value of Payments, which are not
Agreement Payments, shall also be reduced (but not below zero) to an amount
expressed in present value which maximizes the aggregate present value of
Payments without causing any Payment to be nondeductible by the Company because
of Section 28OG of the Code. For purposes of this Section 11, present value
shall be determined in accordance with Section 28OG(d)(4) of the Code. All
determinations required to be made under this Section 11 shall be made by the
Company's independent certified public accountant (the "Accounting Firm") which
shall provide detailed supporting calculations both to the Company and the
Executive within 15 business days of the Date of Termination. Any such
determination by the Accounting Firm shall be binding upon the Company and the
Executive. The Executive shall determine which and how much of the Agreement
Payments (or, at the election of the Executive, other Payments) shall be
eliminated or reduced consistent with the requirements of this Section 11
provided, that if the Executive does not make such determination within ten
business days of the receipt of the calculations made by the Accounting Firm,
the Company shall elect which and how much of the Agreement Payments shall be
eliminated or reduced consistent with the requirements of this Section 11 and
shall notify the Executive promptly of such election. Within five business days
thereafter, the Company shall pay to or distribute for the benefit of the
Executive such amounts as are then due to the
17
<PAGE> 18
Executive under this Agreement and shall promptly pay to or distribute for the
benefit of the Executive in the future such amounts as become due to the
Executive under this Agreement. As a result of the uncertainty in the
application of Section 28OG of the Code at the time of the initial determination
by the Accounting Firm hereunder, it is possible that Agreement Payments will
have been made by the Company which should not have been made ("Overpayment") or
that additional Agreement Payments which have not been made by the Company could
have been made ("Underpayment"), in each case, consistent with the calculations
required to be made hereunder. In the event that the Accounting Firm determines
that an Overpayment has been made, any such Overpayment shall be treated for all
purposes as a loan to the Executive which the Executive shall repay to the
Company, together with interest at the applicable federal rate provided for in
Section 7872(E)(2) of the Code; provided, however, that no amount shall be
payable by the Executive to the Company if and to the extent such payment would
not reduce the amount which is subject to taxation under Section 4999 of the
Code. In the event that the Accounting Firm determines that an Underpayment has
occurred, any such Underpayment shall be promptly paid by the Company to or for
the benefit of the Executive, together with interest at the applicable federal
rate provided for in Section 7872(f(2) of the Code.
12. EXECUTIVE'S NON-COMPETITION OBLIGATION.
12.1 (a) Until the Date of Termination, the Executive shall not, acting
alone or in conjunction with others, directly or indirectly, in any of the
business territories in which the Company or any of its Affiliates is presently
or from time to time during the Employment Period conducting business, invest or
engage, directly or indirectly, in any business which is competitive with that
of the Company or accept employment with or render services to such a competitor
as a director, officer, agent, employee or consultant, or take any action
inconsistent with the fiduciary relationship of an employee to his employer;
provided, however, that the beneficial ownership by the Executive of up to three
percent of the Voting-Stock of any corporation subject to the periodic reporting
requirements of the Exchange Act shall not violate this Section 12.1 (a).
(b) In addition to the other obligations agreed to by the Executive in
this Agreement, the Executive agrees that until the Date of Termination, he
shall not at any time, directly or indirectly, (i) induce, entice or solicit any
employee of the Company to leave his employment, (ii) contact, communicate or
solicit any
18
<PAGE> 19
customer or acquisition prospect of the Company derived from any customer list,
customer lead, mail, printed matter or other information secured from the
Company or its present or past employees or (iii) in any other manner use any
customer lists or customer leads, mail, telephone numbers, printed material or
other information of the Company relating thereto.
12.2 (a) If this Agreement is terminated either by the Company for Cause
or by the Executive for any reason other than Good Reason, then for a period of
three years following, the Date of Termination, the Executive shall not, acting
alone or in conjunction with others, directly or indirectly, in any of the
business territories in which the Company or any of its Affiliates is presently
or at the Date of Termination conducting, business, invest or engage, directly
or indirectly, in any business which is competitive with that of the Company as
of the Date of Termination or accept employment with or render services to such
a competitor as a director, officer, agent, employee or consultant, or take any
action inconsistent with the fiduciary relationship of an employee to his
employer; provided, however, that the beneficial ownership by the Executive of
up to three percent of the Voting Stock of any corporation subject to the
periodic reporting requirements of the Exchange Act shall not violate this
Section 12.2(a).
(b) In addition to the other obligations agreed to by the Executive in
this Agreement, the Executive agrees that if this Agreement is terminated either
by the Company for Cause or by the Executive for any reason other than Good
Reason, then for a period of three years following, the Date of Termination, he
shall not at any time, directly or indirectly, (i) induce, entice or solicit any
employee of the Company, to leave his employment, (ii) contact, communicate or
solicit any customer or acquisition prospect of the Company derived from any
customer list, customer lead, mail, printed matter or other information secured
from the Company or its present or past employees or (iii) in any other manner
use any customer lists or customer leads, mail, telephone numbers, printed
material or other information of the Company relating thereto.
12.3 (a) If this Agreement is terminated either by the Executive for Good
Reason or by the Company Without Cause, provided that no Change in Control of
the Company has occurred during the two-year period preceding the Date of
Termination, then during the balance of the Employment Period or the 12-month
period commencing on the Date of Termination, whichever is longer, the Executive
shall not, acting alone or in conjunction with others, directly or
19
<PAGE> 20
indirectly, in any of the business territories in which the Company or any of
its Affiliates is presently or at the Date of Termination conducting business,
invest or engage, directly or indirectly, in any business which is competitive
with that of the Company as of the Date of Termination or accept employment with
or render services to such a competitor as a director, officer, agent, employee
or consultant, or take any action inconsistent with the fiduciary relationship
of an employee to his employer; provided, however, that the beneficial ownership
by the Executive of up to three percent of the Voting Stock of any corporation
subject to the periodic reporting, requirements of the Exchange Act shall not
violate this Section 12.3(a).
(b) In addition to the other obligations agreed to by the Executive in
this Agreement, the Executive agrees that if this Agreement is terminated either
by Executive for Good Reason or by the Company Without Cause, provided that no
Change in Control of the Company has occurred during the two year period
preceding the Date of Termination then during the balance of the Employment
Period or the 12-month period commencing on the Date of Termination, whichever
is longer, he shall not at any time, directly or indirectly (i) induce. entice
or solicit any employee of the Company to leave his employment, (ii) contact,
communicate or solicit any customer or acquisition prospect of the Company
derived from any customer list, customer lead, mail, printed matter or other
information secured from the Company or its present or past employees or (iii)
in any other manner use any customer lists or customer leads, mail, telephone
numbers, printed material or other information of the Company relating thereto.
12.4 If this Agreement is terminated (a) either by the Executive for Good
Reason or by the Company Without Cause and (b) a Chance in Control of the
Company has occurred during the two-year period preceding the Date of
Termination, or if this Agreement is terminated as a result of the Executive's
Disability, then the Executive shall not be subject to any noncompetition
obligation.
13. MISCELLANEOUS.
13.1 NOTICES. All notices and other communications required or permitted
hereunder or necessary or convenient in connection herewith shall be in writing
and shall be deemed to have been given when delivered by hand or mailed by
registered or certified mail, return receipt requested, as follows (provided
that
20
<PAGE> 21
notice of chance of address shall be deemed given only when received):
If to the Company to:
Allied Waste Industries, Inc.
15880 North Greenway Hayden Loop, Suite 100
Scottsdale, Arizona 85260
If to the Executive to:
Larry D. Henk
11821 North 96th Place
Scottsdale, Arizona 85260
or to such other names or addresses as the Company or the Executive, as the case
may be, shall designate by notice to the other party hereto in the manner
specified in this Section 13.1.
13.2 WAIVER OF BREACH. The waiver by any party hereto of a breach of any
provision of this Agreement shall neither operate nor be construed as a waiver
of any subsequent breach by any party.
13.3 ASSIGNMENT. This Agreement shall be binding, upon and inure to the
benefit of the Company, its successors, legal representatives and assigns, and
upon the Executive, his heirs, executors, administrators, representatives and
assigns; provided, however, the Executive agrees that his rights and obligations
hereunder are personal to him and may not be assigned without the express
written consent of the Company.
13.4 ENTIRE AGREEMENT, NO ORAL AMENDMENTS. This Agreement, together with
any exhibit attached hereto and any document, policy, rule or regulation
referred to herein, replaces and merges all previous agreements and discussions
relating to the same or similar subject matter between the Executive and the
Company and constitutes the entire agreement between the Executive and the
Company with respect to the subject matter of this Agreement. This Agreement may
not be modified in any respect by any verbal statement, representation or
agreement made by any employee, officer, or representative of the Company or by
any written agreement unless signed by an officer of the
21
<PAGE> 22
Company who is expressly authorized by the Company to execute such document.
13.5 ENFORCEABILITY. If any provision of this Agreement or application
thereof to anyone or under any circumstances shall be determined to be invalid
or unenforceable, such invalidity or unenforceability shall not affect any other
provisions or applications of this Agreement which can be given effect without
the invalid or unenforceable provision or application.
13.6 JURISDICTION, VENUE. The laws of the State of Arizona shall govern
the interpretation, validity and effect of this Agreement without regard to the
place of execution or the place for performance thereof, and the Company and the
Executive agree that the courts situated in Maricopa County, Arizona shall have
personal jurisdiction over the Company and the Executive to hear all disputes
arising under this Agreement. This Agreement is to be at least partially
performed in Maricopa County, Arizona, and as such, the Company and the
Executive agree that venue shall be proper with the courts in Maricopa County,
Arizona to hear such disputes. In the event either the Company or the Executive
is not able to effect service of process upon the other party hereto with
respect to such disputes, the Company and the Executive expressly agree that the
Secretary of State for the State of Arizona shall be an agent of the Company
and/or the Executive to receive service of process on behalf of the Company
and/or the Executive with respect to such disputes.
13.7 INJUNCTIVE RELIEF. The Company and the Executive agree that a breach
of any term of this Agreement by the Executive would cause irreparable damage to
the Company and that, in the event of such breach, the Company shall have, in
addition to any and all remedies of law, the right to any injunction, specific
performance and other equitable relief to prevent or to redress the violation of
the Executive's duties or responsibilities hereunder.
13.8 TERMINATION OF PRIOR AGREEMENTS. The Company and the Executive hereby
terminate that certain Employment Agreement dated _________________ entered into
by the Company and Executive, and further agrees that each of them has complied
with said Employment Agreement in all respects.
22
<PAGE> 23
IN WITNESS WHEREOF, the undersigned, intending to be early bound, have
executed this Agreement as of the date first written above.
ALLIED WASTE INDUSTRIES, INC.
By /s/ THOMAS H. VAN WEELDEN
________________________________
Its: ______________________________
EXECUTIVE
/s/ LARRY D. HENK
____________________________________
LARRY D. HENK
23
<PAGE> 24
SCHEDULE A
24
<PAGE> 1
EXECUTIVE EMPLOYMENT AGREEMENT
This EXECUTIVE EMPLOYMENT AGREEMENT is made and entered into this 6th day
of June, 1997, by and between ALLIED WASTE INDUSTRIES, INC., a Delaware
corporation having its principal executive office at 15880 North Greenway Hayden
Loop, Suite 100, Scottsdale, Arizona 85260 (hereinafter referred to as
"COMPANY"), and STEVEN M. HELM (hereinafter referred to as the "EXECUTIVE").
WITNESSETH:
WHEREAS, the Company desires to employ the Executive in an executive
capacity and the Executive desires to enter the Company's employ.
NOW, THEREFORE, for and in consideration of the mutual promises, covenants
and obligations contained herein, and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the Company and the
Executive hereby agree as follows:
1. CERTAIN DEFINITIONS. As used in this Agreement, the following
terms have the meanings prescribed below:
ACCOUNTING FIRM shall have the meaning, assigned thereto in Section 11
hereof.
AFFILIATE is used in this Agreement to define a relationship to a person
or entity and means a person or entity who, directly or indirectly through one
or more intermediaries, controls, is controlled by, or is under common control
with, such person or entity.
AGREEMENT PAYMENTS shall have the meaning, assigned thereto in Section 11
hereof. Annual Bonus shall have the meaning, assigned thereto in Section 4.2
hereof. Base Salary shall have the meaning, assigned thereto in Section 4.1
hereof.
<PAGE> 2
BENEFICIAL OWNER shall have the meaning assigned thereto in Rule 13(d)-3
under the Exchange Act; provided, however, and without limitation, that any
individual, corporation, partnership, group, association or other person or
entity that has the right to acquire any Voting Stock at any time in the future,
whether such right is (a) contingent or absolute or (b) exercisable presently or
at any time in the future, pursuant to any agreement or understanding or upon
the exercise or conversion of rights, options or warrants, or otherwise, shall
be the Beneficial Owner of such Voting Stock.
CAUSE shall have the meaning assigned thereto in Section 5.3 hereof.
CHANGE IN CONTROL of the Company shall be deemed to have occurred if (i)
the Company merges or consolidates, or agrees to merge or to consolidate, with
any other corporation (other than a wholly-owned direct or indirect subsidiary
of the Company) and is not the surviving corporation (or survives as a
subsidiary of another corporation), (ii) the Company sells, or agrees to sell,
all or substantially all of its assets to any other person or entity, (iii) the
Company is dissolved, (iv) any third person or entity (other than a trustee or
committee of any qualified employee benefit plan of the Company) together with
its Affiliates shall become or shall have publicly announced its intention to
become (by tender offer or otherwise), directly or indirectly, the Beneficial
Owner of at least 30% of the Voting Stock of the Company or (v) the individuals
who constitute the Board of Directors of the Company as of the Effective Date
(the "Incumbent Board") shall cease for any reason to constitute at least a
majority of the Board of Directors; provided, that any person becoming a
director whose election or nomination for election was approved by a majority of
the members of the Incumbent Board shall be considered, for the purposes of this
Agreement, a member of the Incumbent Board.
CODE means the Internal Revenue Code of 1986, as amended, and the rules
and regulations promulgated by the Internal Revenue Service thereunder, all as
in effect from time to time during the Employment Period.
COMMON STOCK means the Company's common stock, par value $.0l per share.
2
<PAGE> 3
COMPANY means Allied Waste Industries, Inc., a Delaware corporation. the
principal executive office of which is located at 15880 North Greenway Hayden
Loop, Suite 100, Scottsdale, Arizona 85260.
CONFIDENTIAL INFORMATION shall have the meaning assigned thereto in
Section 8.2 hereof.
DATE OF TERMINATION means the earliest to occur of (i) the date of the
Executive's death, (ii) the date on which the Executive terminates this
Agreement for any reason other than Good Reason or (iii) the date of receipt of
the Notice of Termination, or such later date as may be prescribed in the Notice
of Termination in accordance with Section 5.6 hereof.
DISABILITY means an illness or other disability which prevents the
Executive from discharging his responsibilities under this Agreement for a
period of 180 consecutive calendar days, or an aggregate of 180 calendar days in
any calendar year, during the Employment Period, all as determined in good faith
by the Board of Directors of the Company (or a committee thereof).
EFFECTIVE DATE means June 6, 1997.
EXECUTIVE means STEVEN M. HELM, an individual residing at 10474 East
Candlewood, Scottsdale, Arizona, 85255.
EXCHANGE ACT means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated by the Securities and Exchange Commission
thereunder, all as in effect from time to time during the Employment Period.
EMPLOYMENT PERIOD shall have the meaning assigned thereto in Section 3
hereof.
GOOD REASON shall have the meaning assigned thereto in Section 5.5 hereof.
NOTICE OF TERMINATION shall have the meaning assigned thereto in Section
5.6 hereof.
3
<PAGE> 4
OVERPAYMENT shall have the meaning assigned thereto in Section 11 hereof.
PAYMENT shall have the meaning, assigned thereto in Section 11 hereof.
REDUCED AMOUNT shall have the meaning, assigned thereto in Section 11
hereof.
UNDERPAYMENT shall have the meaning assigned thereto in Section 11 hereof.
VACATION TIME shall have the meaning assigned thereto in Section 4.3
hereof.
VOTING STOCK means all outstanding shares of capital stock of the Company
entitled to vote generally in an election of directors; provided, however, that
if the Company has shares of Voting Stock entitled to more or less than one vote
per share, each reference to a proportion of the issued and outstanding shares
of Voting Stock shall be deemed to refer to the proportion of the aggregate
votes entitled to be cast by the issued and outstanding shares of Voting Stock.
WITHOUT CAUSE shall have the meaning assigned thereto in Section 5.4
hereof.
2. GENERAL DUTIES OF COMPANY AND EXECUTIVE.
2.1 The Company agrees to employ the Executive, and the Executive agrees
to accept employment by the Company and to serve the Company as its Vice
President, Legal and Corporate Secretary. The authority, duties and
responsibilities of the Executive shall include those described in Schedule A to
this Agreement, and such other or additional duties as may from time to time be
assigned to the Executive by the Board of Directors (or a committee thereof and
agreed to by the Executive. While employed hereunder, the Executive shall devote
reasonable time and attention during normal business hours to the affairs of the
Company and use his best efforts to perform faithfully and efficiently his
duties and responsibilities. The Executive may (i) serve on corporate, civic or
charitable boards or committees, (ii) deliver lectures, fulfill speaking
engagements or teach at educational institutions, and (iii) manage personal
investments, so long as such
4
<PAGE> 5
activities do not significantly interfere with the performance of the
Executive's duties and responsibilities.
2.2 The Executive agrees and acknowledges that he owes a fiduciary duty of
loyalty, fidelity and allegiance to act at all times in the best interests of
the Company and to do no act and to make no statement, oral or written, which
would injure Company's business, its interests or its reputation.
2.3 The Executive agrees to comply at all times during the Employment
Period with all applicable policies, rules and regulations of the Company,
including, without limitation, the Company's Code of Ethics and the Company's
policy regarding, trading, in the Common Stock, as each is in effect from time
to time during the Employment Period.
3. TERM. Unless sooner terminated pursuant to Section 5 of this Agreement,
the Executive's Employment Period under this Agreement shall be a period of
three (3) years beginning on the Effective Date, provided that, beginning on the
first anniversary of the Effective Date, the Employment Period shall be for a
continuous period of two (2) years, such that on any given date thereafter, the
Executive's Employment Period shall always be two (2) years from the date in
question.
4. COMPENSATION AND BENEFITS.
4.1 BASE SALARY. As compensation for services to the Company, the Company
shall pay to the Executive until the Date of Termination an annual base salary
of $225,000 (the "Base Salary"). The Board of Directors (or a committee
thereof), in its discretion, may increase the Base Salary based upon relevant
circumstances. The Base Salary shall be payable in equal semimonthly
installments or in accordance with the Company's established policy, subject
only to such payroll and withholding deductions as may be required by law and
other deductions applied generally to employees of the Company for insurance and
other employee benefit plans.
5
<PAGE> 6
4.2 BONUS. In addition to the Base Salary, the Executive shall be awarded,
for each fiscal year until the Date of Termination, an annual bonus (either
pursuant to a bonus or incentive plan or program of the Company or otherwise) in
an amount to be determined by the Board of Directors (or a committee thereof, in
its sole discretion (the "Annual Bonus"). Each such Annual Bonus shall be
payable at a time to be determined by the Board of Directors (or a committee
thereof) in its sole discretion.
4.3 VACATION. Until the Date of Termination, the Executive shall be
entitled to four weeks paid vacation during each one year period commencing on
the Effective Date (the "Vacation Time"). Any Vacation Time not taken during the
applicable one year period will not accrue and will expire on the applicable
anniversary of the Effective Date.
4.4 AUTOMOBILE ALLOWANCE. Until the Date of Termination, the Executive
shall receive an automobile allowance of $600 per month (the "Automobile
Allowance"). The Board of Directors (or a committee thereof), in its discretion,
may increase the Automobile Allowance based upon relevant circumstances.
4.5 CLUB MEMBERSHIP DUES. Until the Date of Termination, the Executive
shall receive an amount per month equal to the monthly membership dues which the
Executive pays for one club or organization of Executive's choice. It is
specifically agreed that the membership dues reimbursement shall include health
related and physical rehabilitation services, and training services provided to
the Executive in light of the Executive's current health. This reimbursement
shall be in addition to any club dues.
4.6 INCENTIVE, SAVINGS, RETIREMENT AND STOCK OPTION PLANS. Until the Date
of Termination, the Executive shall participate in and be eligible to receive
all benefits under all executive incentive, savings, retirement and stock option
plans and programs currently maintained or hereinafter established by the
Company for the benefit of its executive officers and/or employees.
4.7 WELFARE BENEFIT PLAN. Until the Date of Termination, the Executive
and/or the Executive's family, as the case may be, shall be eligible to
participate in and shall receive all benefits under each welfare benefit plan of
the Company
6
<PAGE> 7
currently maintained or hereinafter established by the Company for the benefit
of its employees. Such welfare benefit plans may include, without limitation,
medical, dental, disability, group life, accidental death and travel accident
insurance plans and programs.
4.8 REIMBURSEMENT OF EXPENSES. The Executive may from time to time until
the Date of Termination incur various business expenses customarily incurred by
persons holding positions of like responsibility, including, without limitation,
travel, entertainment and similar expenses incurred for the benefit of the
Company. Subject to the Company's policy regarding the reimbursement of such
expenses as in effect from time to time during the Employment Period, which does
not necessarily allow reimbursement of all such expenses, the Company shall
reimburse the Executive for such expenses from time to time, at the Executive's
request, and the Executive shall account to the Company for all such expenses.
5. TERMINATION.
5.1 DEATH. This Agreement shall terminate automatically upon the death of
the Executive.
5.2 DISABILITY. The Company may terminate this Agreement, upon written
notice to the Executive delivered in accordance with Sections 5.6 and 13.1
hereof, upon the Disability of the Executive.
5.3 CAUSE. The Company may terminate this Agreement, upon written notice
to the Executive delivered in accordance with Sections 5.6 and 13.1 hereof, for
Cause. For purposes of this Agreement, "Cause" means (i) the conviction of the
Executive for a felony, (ii) the Executive's willful refusal, without proper
legal cause, to perform his duties and responsibilities as contemplated in this
Agreement or (iii) the Executive's willful engaging in activities which would
(A) constitute a breach of any term of this Agreement, the Company's Code of
Ethics, the Company's policies regarding trading in the Common Stock or
reimbursement of business expenses or any other applicable policies, rules or
regulations of the Company, or (B) result in a material injury to the business,
condition (financial or otherwise), results of operations or prospects of the
Company or its Affiliates (as determined in good faith by the Board of Directors
of the Company or a committee thereof.
7
<PAGE> 8
5.4 WITHOUT CAUSE. The Company may terminate this Agreement Without Cause,
upon written notice to the Executive delivered in accordance with Sections 5.6
and 13.1 hereof. For purposes of this Agreement, the Executive will be deemed to
have been terminated "Without Cause" if the Executive is terminated by the
Company for any reason other than Cause, Disability or death.
5.5 GOOD REASON. The Executive may terminate this Agreement for Good
Reason, upon written notice to the Company delivered in accordance with Sections
5.6 and 13.1 hereof. For purposes of this Agreement, "Good Reason" means (i) the
assignment to the Executive of any duties inconsistent in any respect with the
Executive's duties or responsibilities as contemplated in this Agreement, (ii)
any other action by the Company which results in a diminishment in the
Executive's position (including status, offices, titles and reporting,
requirements), authority, duties or responsibilities, (iii) any breach by the
Company of any of the provisions of this Agreement, (iv) requiring the Executive
to relocate permanently to any office or location other than the
Phoenix-Scottsdale metropolitan area, without his consent, or (v) any reduction,
or attempted reduction, at any time during the Employment Period, of the Base
Salary of the Executive.
5.6 NOTICE OF TERMINATION. Any termination of this Agreement by the
Company for Cause, Without Cause or as a result of the Executive's Disability,
or by the Executive for Good Reason, shall be communicated by Notice of
Termination to the other party hereto given in accordance with this Agreement.
For purposes of this Agreement, a "Notice of Termination" means a written notice
which (i) indicates the specific termination provision in this Agreement relied
upon, (ii) sets forth in reasonable detail the facts and circumstances claimed
to provide a basis for termination of the Executive's employment under the
provision so indicated and (iii) specifies the termination date, if such date is
other than the date of receipt of such notice (which termination date shall not
be more than 15 days after the giving of such notice).
6. OBLIGATIONS OF COMPANY UPON TERMINATION.
6.1 CAUSE, OTHER THAN GOOD REASON. If this Agreement shall be
terminated either by the Company for Cause or by the Executive for any reason
other than Good Reason, the Company shall pay to the Executive, in a lump sum
in cash within 30 days after the Date of Termination, the aggregate of the
8
<PAGE> 9
Executive's Base Salary (as in effect on the Date of Termination) through the
Date of Termination, if not theretofore paid, and, in the case of compensation
previously deferred by the Executive, all amounts of such compensation
previously deferred and not yet paid by the Company. All other obligations of
the Company and rights of the Executive hereunder shall terminate effective as
of the Date of Termination.
6.2 DEATH OR DISABILITY. (a) Subject to the provisions of this Section
6.2, if this Agreement is terminated as a result of the Executive's death or
Disability, the Company shall pay to the Executive or his estate, in a lump sum
in cash within 30 days of the Date of Termination, the greater of (i) that
portion of the Executive's Base Salary (as in effect on the Date of Termination)
owing in respect of the balance of the Employment Period pursuant to Section 3
hereof or (ii) the Executive's Base Salary (as in effect on the Date of
Termination). The Company may purchase insurance to cover all or any part of the
obligation contemplated in the foregoing sentence, and the Executive agrees to
submit to a physical examination to facilitate the procurement of such
insurance. If the physical examination reveals that the Executive is
uninsurable, such death or Disability benefit referred to in the first sentence
of this Section 6.2 shall not be provided, and the Executive shall be entitled
to receive only those death and Disability benefits to which the Executive is
entitled under the Company's benefit plans.
(b) Whenever compensation is payable to the Executive hereunder during a
period in which he is partially or totally disabled, and such Disability would
(except for the provisions hereof) entitle the Executive to Disability income or
salary continuation payments from the Company according to the terms of any plan
or program presently maintained or hereafter established by the Company, the
Disability income or salary continuation paid to the Executive pursuant to any
such plan or program shall be considered a portion of the payment to be made to
the Executive pursuant to this Section 6.2 and shall not be in addition hereto.
If Disability income is payable directly to the Executive by an insurance
company under tile terms of an insurance policy paid for by the Company, the
amounts paid to the Executive by such insurance company shall be considered a
portion of the payment to be made to the Executive pursuant to this Section 6.2
and shall not be in addition hereto.
6.3 GOOD REASON; WITHOUT CAUSE. If this Agreement shall be
9
<PAGE> 10
terminated either by the Executive for Good Reason or by the Company Without
Cause:
(a) the Company shall pay to the Executive, in a lump sum in cash within
30 days after the Date of Termination, the aggregate of the following amounts:
(1) if not theretofore paid, the Executive's Base Salary (as in
effect on the Date of Termination) through the Date of Termination;
(2) in an amount equal to the largest Annual Bonus paid to the
Executive out of the last three fiscal years preceding the Date of
Termination; and
(3) in the case of compensation previously deferred by the
Executive, all amounts of such compensation previously deferred and not
yet paid by the Company;
(b) the Company shall, promptly upon submission by the Executive of
supporting, documentation, pay or reimburse to the Executive any costs and
expenses (including, moving and relocation expenses) paid or incurred by the
Executive which would have been payable under Section 4.8 of this Agreement if
the Executive's employment had not terminated; and
(c) until the expiration of the Employment Period pursuant to Section 3
hereof (such period is sometimes referred to herein as the "Unexpired Term") or
of the 12 month period commencing on the Date of Termination, whichever is
longer, the Company shall continue benefits to the Executive and/or the
Executive's family at least equal to those which would have been provided to
them under Section 4.7 if the Executive's employment had not been terminated;
provided that if subsequent to the Date of Termination the Executive becomes an
employee, consultant, agent, officer or director of any person or business
entity that competes with, directly or indirectly, the Company, then the
obligations of the Company under this subparagraph will terminate in all
respects as of the date such relationship commences; and
(d) the Company shall pay to the Executive, in equal semi-monthly
installments the greater of (i) that portion of the Executive's Base Salary (as
in effect on the Date of Termination) owing, in respect of the balance of the
10
<PAGE> 11
Employment Period pursuant to Section 3 hereof or (ii) the Executive's Base
Salary (as in effect on the Date of Termination); provided that if subsequent to
the Date of Termination the Executive becomes an employee, consultant, agent,
officer or director of any person or business entity that competes with,
directly or indirectly, the Company then the obligations of the Company under
this subparagraph will terminate in all respects as of the date such
relationship commences.
6.4 CHANGE IN CONTROL. If (a) this Agreement shall be terminated either by
the Executive for Good Reason or by the Company Without Cause and (b) a Change
in Control of the Company has occurred within the two-year period preceding, the
Date of Termination, then, in addition to the obligations of the Company set
forth in Section 6.3 hereof, the Company shall pay to the Executive, in a lump
sum in cash within 30 days after the Date of Termination, two times the sum of
(x) the Executive's Base Salary (as in effect on the Date of Termination or such
higher rate as may have been in effect at any time during the 90-day period
preceding the Date of Termination) and (y) the Annual Bonus paid to the
Executive for the last full fiscal year. The rights given to the Executive
herein do not apply to the Change of Control of the Company which occurred when
Apollo Advisors, L.P. and The Blackstone Group acquired the Common Stock of
Laidlaw Transportation, Inc.
7. EXECUTIVE'S OBLIGATION TO AVOID CONFLICTS OF INTEREST.
7.1 In keeping with the Executive's fiduciary duties to the Company, the
Executive agrees that he shall not knowingly become involved in a conflict of
interest with the Company, or upon discovery thereof, allow such a conflict to
continue. The Executive further agrees to disclose to the Company, promptly
after discovery, any facts or circumstances which might involve a conflict of
interest with the Company.
7.2 The Company and the Executive recognize that it is impossible to
provide an exhaustive list of actions or interests which constitute a "conflict
of interest". Moreover, the Company and the Executive recognize that there are
many borderline situations. In some instances, full disclosure of facts by the
Executive to the Company is all that is necessary to enable the Company to
protect
11
<PAGE> 12
its interests. In others, if no improper motivation appears to exist and the
Company's interests have not suffered, prompt elimination of the outside
interest will suffice. In still others, it may be necessary for the Company to
terminate the employment relationship. The Company and the Executive agree that
the Company's determination as to whether or not a conflict of interest exists
shall be conclusive. The Company reserves the right to take such action as, in
its judgment, will end the conflict of interest.
7.3 In this connection, it is agreed that any direct or indirect interest
in, connection with or benefit from any outside activities, particularly
commercial activities, which interest might in any way adversely affect the
Company or its Affiliates, involves a possible conflict of interest.
Circumstances in which a conflict of interest on the part of the Executive would
or might arise, and which should be reported immediately to the Company,
include, but are not limited to, the following:
(a) Ownership of a material interest in any lender, supplier, contractor,
subcontractor, customer or other entity with which the Company does business.
(b) Acting in any capacity, including director, officer, partner,
consultant, employee, distributor, agent or the like, for any lender, supplier,
contractor, subcontractor, customer or other entity with which the Company does
business.
(c) Acceptance, directly or indirectly, of payments, services or loans
from a lender, supplier, contractor, subcontractor, customer or other entity
with which the Company does business, including, without limitation, gifts,
trips, entertainment or other favors of more than a nominal value, but
excluding, loans from publicly held insurance companies and commercial or
savings banks at market rates of interest.
(d) Use of information or facilities to which the Executive has access in
a manner which will be detrimental to the Company's interests, such as use for
the Executive's own benefit of know-how or information developed through the
Company's business activities.
(e) Disclosure or other misuse of information of any kind obtained through
the Executive's connection with the Company.
12
<PAGE> 13
(f) Acquiring or trading in, directly or indirectly, other properties or
interests connected with the design or marketing of products or services
designed or marketed by the Company.
8. EXECUTIVE'S CONFIDENTIALITY OBLIGATION.
8.1 The Executive hereby acknowledges, understands and agrees that all
Confidential Information is the exclusive and confidential property of the
Company and its Affiliates which shall at all times be regarded, treated and
protected as such in accordance with this Section 8. The Executive acknowledges
that all such Confidential Information is in the nature of a trade secret.
8.2 For purposes of this Agreement, "Confidential Information" means
information, which is used in the business of the Company or its Affiliates and
(i) is proprietary to, about or created by the Company or its Affiliates, (ii)
gives the Company or its Affiliates some competitive business advantage or the
opportunity of obtaining such advantage or the disclosure of which could be
detrimental to the interests of the Company or its Affiliates, (iii) is
designated as Confidential Information by the Company or its Affiliates, is
known by the Executive to be considered confidential by the Company or its
Affiliates, or from all the relevant circumstances should reasonably be assumed
by the Executive to be confidential and proprietary to the Company or its
Affiliates, or (iv) is not generally known by non-Company personnel. Such
Confidential Information includes, without limitation, the following types of
information and other information of a similar nature (whether or not reduced to
writing or designated as confidential):
(a) Internal personnel and financial information of the Company or its
Affiliates, vendor information (including vendor characteristics, services,
prices, lists and agreements), purchasing, and internal cost information,
internal service and operational manuals, and the manner and methods of
conducting the business of the Company or its Affiliates;
(b) Marketing and development plans, price and cost data, price and fee
amounts, pricing, and billing, policies, quoting procedures, marketing
techniques, forecasts and forecast assumptions and volumes, and future plans and
potential strategies (including, without limitation, all information relating to
any acquisition prospect and the identity of any key contact within the
organization of any acquisition prospect) of the Company or its Affiliates which
have been or are being
13
<PAGE> 14
discussed;
(c) Names of customers and their representatives, contracts (including
their contents and parties), customer services, and the type, quantity,
specifications and content of products and services purchased, leased, licensed
or received by customers of the Company or its Affiliates; and
(d) Confidential and proprietary information provided to the Company or
its Affiliates by any actual or potential customer, government agency or other
third party (including businesses, consultants and other entities and
individuals).
8.3 As a consequence of the Executive's acquisition or anticipated
acquisition of Confidential Information, the Executive shall occupy a position
of trust and confidence with respect to the affairs and business of the Company
and its Affiliates. In view of the foregoing, and of the consideration to be
provided to the Executive, the Executive agrees that it is reasonable and
necessary that the Executive make each of the following covenants:
(a) At any time during the Employment Period and thereafter, the Executive
shall not disclose Confidential Information to any person or entity, either
inside or outside of the Company, other than as necessary in carrying out his
duties and responsibilities as set forth in Section 2 hereof, without first
obtaining the Company's prior written consent (unless such disclosure is
compelled pursuant to court orders or subpoena, and at which time the Executive
shall give notice of such proceedings to the Company).
(b) At any time during the Employment Period and thereafter, the Executive
shall not use, copy or transfer Confidential Information other than as necessary
in carrying out his duties and responsibilities as set forth in Section 2
hereof, without first obtaining the Company's prior written consent.
(c) On the Date of Termination, the Executive shall promptly deliver to
the Company (or its designee) all written materials, records and documents made
by the Executive or which came into his possession prior to or during the
Employment Period concerning, the business or affairs of the Company or its
Affiliates, including, without limitation, all materials containing Confidential
Information.
14
<PAGE> 15
9. DISCLOSURE OF INFORMATION, IDEAS, CONCEPTS,
IMPROVEMENTS, DISCOVERIES AND INVENTIONS.
As part of the Executive's fiduciary duties to the Company, the Executive agrees
that during his employment by the Company and for a period of three years
following the Date of Termination, the Executive shall promptly disclose in
writing, to the Company all information, ideas, concepts, improvements,
discoveries and inventions, whether patentable or not, and whether or not
reduced to practice, which are conceived, developed, made or acquired by the
Executive, either individually or jointly with others, and which relate to the
business, products or services of the Company or its Affiliates, irrespective of
whether the Executive used the Company's time or facilities and irrespective of
whether such information, idea, concept, improvement, discovery or invention was
conceived, developed, discovered or acquired by the Executive on the job, at
home, or elsewhere. This obligation extends to all types of information, ideas
and concepts, including, information, ideas and concepts relating to new types
of services, corporate opportunities, acquisition prospects, the identity of key
representatives within acquisition prospect organizations, prospective names or
service marks for the Company's business activities, and the like.
10. OWNERSHIP OF INFORMATION, IDEAS, CONCEPTS,
IMPROVEMENTS, DISCOVERIES AND INVENTIONS AND ALL
ORIGINAL WORKS OF AUTHORSHIP.
10.1 All information, ideas, concepts, improvements, discoveries and
inventions, whether patentable or not, which are conceived, made, developed or
acquired by the Executive or which are disclosed or made known to the Executive,
individually or in conjunction with others, during the Executive's employment by
the Company and which relate to the business, products or services of the
Company or its Affiliates (including, without limitation, all such information
relating to corporate opportunities, research, financial and sales data, pricing
and trading terms, evaluations, opinions, interpretations, acquisition
prospects, the identity of customers or their requirements, the identity of key
contacts within the customers' organizations or within the organization of
acquisition prospects, marketing and merchandising techniques, and prospective
names and service marks) are and shall be the sole and exclusive property of the
Company. Furthermore, all drawings, memoranda, notes, records, files,
correspondence,
15
<PAGE> 16
manuals, models, specifications, computer programs, maps and all other writings
or materials of any type embodying, any of such information, ideas, concepts,
improvements, discoveries and inventions are and shall be the sole and exclusive
property of the Company.
10.2 In particular, the Executive hereby specifically sells, assigns,
transfers and conveys to the Company all of his worldwide right, title and
interest in and to all such information, ideas, concepts, improvements,
discoveries or inventions, and any United States or foreign applications for
patents, inventor's certificates or other industrial rights which may be filed
in respect thereof, including divisions, continuations, continuations-in-part,
reissues and/or extensions thereof, and applications for registration of such
names and service marks. The Executive shall assist the Company and its nominee
at all times, during the Employment Period and thereafter, in the protection of
such information, ideas, concepts, improvements, discoveries or inventions, both
in the United States and all foreign countries, which assistance shall include,
but shall not be limited to, the execution of all lawful oaths and all
assignment documents requested by the Company or its nominee in connection with
the preparation, prosecution, issuance or enforcement of any applications for
United States or foreign letters patent, including divisions, continuations,
continuations-in-part, reissues and/or extensions thereof, and any application
for the registration of such names and service marks.
10.3 In the event the Executive creates, during the Employment Period, any
original work of authorship fixed in any tangible medium of expression which is
the subject matter of copyright (such as, videotapes, written presentations on
acquisitions, computer programs, drawings, maps, architectural renditions,
models, manuals, brochures or the like) relating to the Company's business
products or services, whether such work is created solely by the Executive or
jointly with others, the Company) shall be deemed the author of such work if the
work is prepared by the Executive in the scope of his employment; or, if the
work is not prepared by the Executive within the scope of his employment but is
specially ordered by the Company as a contribution to a collective work, as a
part of a motion picture or other audiovisual work, as a translation, as a
supplementary work, as a compilation or as an instructional text, then the work
shall be considered to be work made for hire, and the Company shall be the
author of such work. If such work is neither prepared by the Executive within
the scope of his employment nor a work specially ordered and deemed to be a work
made for hire, then the Executive hereby agrees to sell, transfer, assign and
convey, and by these
16
<PAGE> 17
presents, does sell, transfer, assign and convey, to the Company all of the
Executive's worldwide right, title and interest in and to such work and all
rights of copyright therein. The Executive agrees to assist the Company and its
Affiliates, at all times, during the Employment Period and thereafter, in the
protection of the Company's worldwide right, title and interest in and to such
work and all rights of copyright therein, which assistance shall include, but
shall not be limited to, the execution of all documents requested by the Company
or its nominee and the execution of all lawful oaths and applications for
registration of copyright in the United States and foreign countries.
11. CERTAIN REDUCTION OF PAYMENTS BY THE COMPANY.
Anything in this Agreement to the contrary notwithstanding, in the event it
shall be determined that any payment or distribution by the Company to or for
the benefit of the Executive (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise) (a
"Payment") would be nondeductible by the Company for federal income tax purposes
because of Section 28OG of the Code, then the aggregate present value of amounts
payable or distributable to or for the benefit of the Executive pursuant to this
Agreement (such payments or distributions pursuant to this Agreement are
hereinafter referred to as "Agreement Payments") shall be reduced (but not below
zero) to the Reduced Amount. The "Reduced Amount" shall be an amount expressed
in present value which maximizes the aggregate present value of Agreement
Payments without causing any Payment to be nondeductible by the Company because
of Section 28OG of the Code. Anything in this Agreement to the contrary
notwithstanding, if the Reduced Amount is zero and it is determined further that
any Payment which is not an Agreement Payment would nevertheless be
nondeductible by the Company for federal income tax purposes because of Section
28OG of the Code. then the aggregate present value of Payments, which are not
Agreement Payments, shall also be reduced (but not below zero) to an amount
expressed in present value which maximizes the aggregate present value of
Payments without causing any Payment to be nondeductible by the Company because
of Section 28OG of the Code. For purposes of this Section 11, present value
shall be determined in accordance with Section 28OG(d)(4) of the Code. All
determinations required to be made under this Section 11 shall be made by the
Company's independent certified public accountant (the "Accounting Firm") which
shall provide detailed supporting calculations both to the Company and the
Executive within 15 business
17
<PAGE> 18
days of the Date of Termination. Any such determination by the Accounting Firm
shall be binding upon the Company and the Executive. The Executive shall
determine which and how much of the Agreement Payments (or, at the election of
the Executive, other Payments) shall be eliminated or reduced consistent with
the requirements of this Section 11 provided, that if the Executive does not
make such determination within ten business days of the receipt of the
calculations made by the Accounting Firm, the Company shall elect which and how
much of the Agreement Payments shall be eliminated or reduced consistent with
the requirements of this Section 11 and shall notify the Executive promptly of
such election. Within five business days thereafter, the Company shall pay to or
distribute for the benefit of the Executive such amounts as are then due to the
Executive under this Agreement and shall promptly pay to or distribute for the
benefit of the Executive in the future such amounts as become due to the
Executive under this Agreement. As a result of the uncertainty in the
application of Section 28OG of the Code at the time of the initial determination
by the Accounting Firm hereunder, it is possible that Agreement Payments will
have been made by the Company which should not have been made ("Overpayment") or
that additional Agreement Payments which have not been made by the Company could
have been made ("Underpayment"), in each case, consistent with the calculations
required to be made hereunder. In the event that the Accounting Firm determines
that an Overpayment has been made, any such Overpayment shall be treated for all
purposes as a loan to the Executive which the Executive shall repay to the
Company, together with interest at the applicable federal rate provided for in
Section 7872(E)(2) of the Code; provided, however, that no amount shall be
payable by the Executive to the Company if and to the extent such payment would
not reduce the amount which is subject to taxation under Section 4999 of the
Code. In the event that the Accounting Firm determines that an Underpayment has
occurred, any such Underpayment shall be promptly paid by the Company to or for
the benefit of the Executive, together with interest at the applicable federal
rate provided for in Section 7872(f)(2) of the Code.
12. EXECUTIVE'S NON-COMPETITION OBLIGATION.
12.1 (a) Until the Date of Termination, the Executive shall not, acting
alone or in conjunction with others, directly or indirectly, in any of the
business territories in which the Company or any of its Affiliates is presently
or from time to time during the Employment Period conducting business, invest or
engage,
18
<PAGE> 19
directly or indirectly, in any business which is competitive with that of the
Company or accept employment with or render services to such a competitor as a
director, officer, agent, employee or consultant, or take any action
inconsistent with the fiduciary relationship of an employee to his employer;
provided, however, that the beneficial ownership by the Executive of up to three
percent of the Voting-Stock of any corporation subject to the periodic reporting
requirements of the Exchange Act shall not violate this Section 12.1 (a).
(b) In addition to the other obligations agreed to by the Executive in
this Agreement, the Executive agrees that until the Date of Termination, he
shall not at any time, directly or indirectly, (i) induce, entice or solicit any
employee of the Company to leave his employment, (ii) contact, communicate or
solicit any customer or acquisition prospect of the Company derived from any
customer list, customer lead, mail, printed matter or other information secured
from the Company or its present or past employees or (iii) in any other manner
use any customer lists or customer leads, mail, telephone numbers, printed
material or other information of the Company relating thereto.
12.2 (a) If this Agreement is terminated either by the Company for Cause
or by the Executive for any reason other than Good Reason, then for a period of
three years following, the Date of Termination, the Executive shall not, acting
alone or in conjunction with others, directly or indirectly, in any of the
business territories in which the Company or any of its Affiliates is presently
or at the Date of Termination conducting, business, invest or engage, directly
or indirectly, in any business which is competitive with that of the Company as
of the Date of Termination or accept employment with or render services to such
a competitor as a director, officer, agent, employee or consultant, or take any
action inconsistent with the fiduciary relationship of an employee to his
employer; provided, however, that the beneficial ownership by the Executive of
up to three percent of the Voting Stock of any corporation subject to the
periodic reporting requirements of the Exchange Act shall not violate this
Section 12.2(a).
(b) In addition to the other obligations agreed to by the Executive in
this Agreement, the Executive agrees that if this Agreement is terminated either
by the Company for Cause or by the Executive for any reason other than Good
Reason, then for a period of three years following, the Date of Termination, he
shall not at any time, directly or indirectly, (i) induce, entice or solicit any
employee of the Company, to leave his employment, (ii) contact, communicate or
solicit any
19
<PAGE> 20
customer or acquisition prospect of the Company derived from any customer list,
customer lead, mail, printed matter or other information secured from the
Company or its present or past employees or (iii) in any other manner use any
customer lists or customer leads, mail, telephone numbers, printed material or
other information of the Company relating thereto.
12.3 (a) If this Agreement is terminated either by the Executive for Good
Reason or by the Company Without Cause, provided that no Change in Control of
the Company has occurred during, the two-year period preceding the Date of
Termination, then during, the balance of the Employment Period or the 12-month
period commencing, on the Date of Termination, whichever is longer, the
Executive shall not, acting alone or in conjunction with others, directly or
indirectly, in any of the business territories in which the Company or any of
its Affiliates is presently or at the Date of Termination conducting business,
invest or engage, directly or indirectly, in any business which is competitive
with that of the Company as of the Date of Termination or accept employment with
or render services to such a competitor as a director, officer, agent, employee
or consultant, or take any action inconsistent with the fiduciary relationship
of an employee to his employer; provided, however, that the beneficial ownership
by the Executive of up to three percent of the Voting Stock of any corporation
subject to the periodic reporting, requirements of the Exchange Act shall not
violate this Section 12.3(a).
(b) In addition to the other obligations agreed to by the Executive in
this Agreement, the Executive agrees that if this Agreement is terminated either
by Executive for Good Reason or by the Company Without Cause, provided that no
Change in Control of the Company has occurred during the two year period
preceding the Date of Termination then during the balance of the Employment
Period or the 12-month period commencing on the Date of Termination, whichever
is longer, he shall not at any time, directly or indirectly (i) induce, entice
or solicit any employee of the Company to leave his employment, (ii) contact,
communicate or solicit any customer or acquisition prospect of the Company
derived from any customer list, customer lead, mail, printed matter or other
information secured from the Company or its present or past employees or (iii)
in any other manner use any customer lists or customer leads, mail, telephone
numbers, printed material or other information of the Company relating thereto.
12.4 If this Agreement is terminated (a) either by the Executive for Good
20
<PAGE> 21
Reason or by the Company Without Cause and (b) a Chance in Control of the
Company has occurred during the two-year period preceding the Date of
Termination, or if this Agreement is terminated as a result of the Executive's
Disability, then the Executive shall not be subject to any noncompetition
obligation.
13. MISCELLANEOUS.
13.1 NOTICES. All notices and other communications required or permitted
hereunder or necessary or convenient in connection herewith shall be in writing
and shall be deemed to have been given when delivered by hand or mailed by
registered or certified mail, return receipt requested, as follows (provided
that notice of chance of address shall be deemed given only when received):
If to the Company to:
Allied Waste Industries, Inc.
15880 North Greenway Hayden Loop, Suite 100
Scottsdale, Arizona 85260
If to the Executive to:
Steven M. Helm
10474 East Candlewood
Scottsdale, Arizona 85255
or to such other names or addresses as the Company or the Executive, as the case
may be, shall designate by notice to the other party hereto in the manner
specified in this Section 13.1.
13.2 WAIVER OF BREACH. The waiver by any party hereto of a breach of any
provision of this Agreement shall neither operate nor be construed as a waiver
of any subsequent breach by any party.
13.3 ASSIGNMENT. This Agreement shall be binding, upon and inure to the
benefit of the Company, its successors, legal representatives and assigns, and
upon the Executive, his heirs, executors, administrators, representatives and
assigns; provided, however, the Executive agrees that his rights and obligations
hereunder
21
<PAGE> 22
are personal to him and may not be assigned without the express written consent
of the Company.
13.4 ENTIRE AGREEMENT, NO ORAL AMENDMENTS. This Agreement, together with
any exhibit attached hereto and any document, policy, rule or regulation
referred to herein, replaces and merges all previous agreements and discussions
relating to the same or similar subject matter between the Executive and the
Company and constitutes the entire agreement between the Executive and the
Company with respect to the subject matter of this Agreement. This Agreement may
not be modified in any respect by any verbal statement, representation or
agreement made by any employee, officer, or representative of the Company or by
any written agreement unless signed by an officer of the Company who is
expressly authorized by the Company to execute such document.
13.5 ENFORCEABILITY. If any provision of this Agreement or application
thereof to anyone or under any circumstances shall be determined to be invalid
or unenforceable, such invalidity or unenforceability shall not affect any other
provisions or applications of this Agreement which can be given effect without
the invalid or unenforceable provision or application.
13.6 JURISDICTION, VENUE. The laws of the State of Arizona shall govern
the interpretation, validity and effect of this Agreement without regard to the
place of execution or the place for performance thereof, and the Company and the
Executive agree that the courts situated in Maricopa County, Arizona shall have
personal jurisdiction over the Company and the Executive to hear all disputes
arising under this Agreement. This Agreement is to be at least partially
performed in Maricopa County, Arizona, and as such, the Company and the
Executive agree that venue shall be proper with the courts in Maricopa County,
Arizona to hear such disputes. In the event either the Company or the Executive
is not able to effect service of process upon the other party hereto with
respect to such disputes, the Company and the Executive expressly agree that the
Secretary of State for the State of Arizona shall be an agent of the Company
and/or the Executive to receive service of process on behalf of the Company
and/or the Executive with respect to such disputes.
13.7 INJUNCTIVE RELIEF. The Company and the Executive agree that
a breach of any term of this Agreement by the Executive would cause irreparable
damage to the Company and that, in the event of such breach, the Company shall
22
<PAGE> 23
have, in addition to any and all remedies of law, the right to any injunction,
specific performance and other equitable relief to prevent or to redress the
violation of the Executive's duties or responsibilities hereunder.
13.8 TERMINATION OF PRIOR AGREEMENTS. The Company and the Executive hereby
terminate that certain Employment Agreement dated _________________ entered into
by the Company and Executive, and further agrees that each of them has complied
with said Employment Agreement in all respects.
IN WITNESS WHEREOF, the undersigned, intending to be early bound, have
executed this Agreement as of the date first written above.
ALLIED WASTE INDUSTRIES, INC.
By /s/ THOMAS H. VAN WEELDEN
________________________________
Its: ______________________________
EXECUTIVE
/s/ STEVEN M. HELM
___________________________________
Steven M. Helm
23
<PAGE> 24
SCHEDULE A
24
<PAGE> 1
THIRD AMENDMENT TO
EXECUTIVE EMPLOYMENT AGREEMENT
This THIRD AMENDMENT TO EXECUTIVE EMPLOYMENT AGREEMENT
("AMENDMENT") is made and entered into this 30th day of January, 1997, by and
between ROGER A. RAMSEY, a resident of Texas (the "EXECUTIVE"), and ALLIED WASTE
INDUSTRIES, INC., a Delaware corporation (the "COMPANY").
W I T N E S S E T H:
WHEREAS, the Company and Executive have entered into an Executive
Employment Agreement, dated May 18, 1992 (the "EMPLOYMENT AGREEMENT"), pursuant
to which the Company has employed Executive; and
WHEREAS, the Company and Executive desire to amend the terms of the
Executive Employment Agreement.
NOW, THEREFORE, the Company and Executive hereby amend the Executive
Employment Agreement, as follows:
The following change is made to Paragraph 4.1 Base Salary of the
Executive Employment Agreement between Company and Executive;
The Base Salary is increased to the sum of FIVE HUNDRED THOUSAND DOLLARS
($500,000) per year effective as of the 1st day of January, 1997.
The Amendment contained herein shall not affect the validity of any of
the provisions, covenants or agreements contained in the Executive Employment
Agreement, and all other terms and provisions contained in the Executive
Employment Agreement shall have full force and effect notwithstanding the
execution of this Amendment.
<PAGE> 2
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
day and date first above written.
EXECUTIVE:
/s/ ROGER A. RAMSEY
_____________________________________
ROGER A. RAMSEY
COMPANY:
ALLIED WASTE INDUSTRIES, INC.
/s/ THOMAS H. VAN WEELDEN
_____________________________________
By: _________________________________
Its: ________________________________
2
<PAGE> 1
EXHIBIT 11.1
ALLIED WASTE INDUSTRIES, INC.
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS - PRIMARY
(IN THOUSANDS EXCEPT FOR PER SHARE AMOUNTS AND NUMBER OF SHARES)
<TABLE>
<CAPTION>
Six Months Three Months
Ended June 30, Ended June 30,
-------------------------------- --------------------------------
1996 1997 1996 1997
------------ ------------ ------------ ------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Income before extraordinary item ............. $ 4,237 $ 18,597 $ 1,431 $ 12,729
Extraordinary loss due to early extinguishment
of debt, net of benefit ................... -- 52,412 -- 52,412
------------ ------------ ------------ ------------
Net income (loss) ............................ 4,237 (33,815) $ 1,431 (39,683)
Dividends on preferred stock ................. (575) (337) (287) (166)
------------ ------------ ------------ ------------
Adjusted net income (loss)
to common shareholders .................... $ 3,662 $ (34,152) $ 1,144 $ (39,849)
============ ============ ============ ============
Historical weighted average common
shares outstanding ........................ 55,911,835 76,187,144 57,425,575 77,074,817
Common stock equivalents -
Stock options and warrants ................ 2,166,106 7,761,939 1,968,150 6,204,901
Issuable pursuant to
earn-out agreements ...................... 795,274 746,289 802,249 746,289
------------ ------------ ------------ ------------
Weighted average common and
common equivalent shares ................. 58,873,215 84,695,372 60,195,974 84,026,007
============ ============ ============ ============
Primary net income (loss) per share:
Income before extraordinary loss .......... $ 0.06 $ 0.22 $ 0.02 $ 0.15
Extraordinary loss ........................ -- (0.62) -- (0.62)
------------ ------------ ------------ ------------
Adjusted net income (loss) ................ $ 0.06 $ (0.40) $ 0.02 $ (0.47)
============ ============ ============ ============
</TABLE>
<PAGE> 1
EXHIBIT 11.2
ALLIED WASTE INDUSTRIES, INC.
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS - FULLY DILUTED
(IN THOUSANDS EXCEPT FOR PER SHARE AMOUNTS AND NUMBER OF SHARES)
<TABLE>
<CAPTION>
Six Months Three Months
Ended June 30, Ended June 30,
-------------------------------- --------------------------------
1996 1997 1996 1997
------------ ------------ ------------ ------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Income before extraordinary item ............. $ 4,237 $ 18,597 $ 1,431 $ 12,729
Extraordinary loss due to early extinguishment
of debt, net of benefit ................... -- 52,412 -- 52,412
------------ ------------ ------------ ------------
Net income (loss) ............................ 4,237 (33,815) 1,431 (39,683)
Dividends on preferred stock ................. (575) (337) (287) (166)
Interest savings upon conversion of
convertible securities .................... -- 17 -- 184
------------ ------------ ------------ ------------
Adjusted net income (loss) to
common shareholders ....................... $ 3,662 $ (34,135) $ 1,144 $ (39,665)
============ ============ ============ ============
Historical weighted average
common shares outstanding ................. 55,911,835 76,187,144 57,425,575 77,074,817
Common stock equivalents -
Stock options and warrants ................ 2,166,106 11,279,994 2,224,135 8,454,788
Assumed conversions -
Series D preferred ........................ --(*) -- -- --
9% cumulative convertible preferred ....... --(*) -- -- (*) --
7% cumulative convertible preferred ....... --(*) --(*) -- (*) 1,356,572
Convertible notes ......................... --(*) 162,500 -- (*) 239,145
Issuable pursuant to earn-out
agreements ................................ 795,274 746,289 802,249 746,289
------------ ------------ ------------ ------------
Weighted average common and
common equivalent shares .................. 58,873,215 88,375,927 60,451,959 87,871,611
============ ============ ============ ============
Fully diluted net income (loss) per share:
Income before extraordinary loss .......... $ 0.06 $ 0.21 $ 0.02 $ 0.15
Extraordinary loss ........................ -- (0.60) -- (0.60)
------------ ------------ ------------ ------------
Adjusted net income (loss) ................ $ 0.06 $ (0.39) $ 0.02 $ (0.45)
============ ============ ============ ============
</TABLE>
- ----------
(*) Assumed conversion of each of these securities, on an individual basis,
has an anti-dilutive effect on earnings per share.
<PAGE> 1
EXHIBIT 12
ALLIED WASTE INDUSTRIES, INC.
RATIO OF EARNINGS TO FIXED CHARGES
(IN THOUSANDS EXCEPT FOR RATIOS)
<TABLE>
<CAPTION>
Six Months
Ended June 30,
------------------------
1996 1997
-------- --------
(unaudited)
<S> <C> <C>
Fixed Charges:
Interest expensed ........................... $ 4,033 $ 44,602
Interest capitalized ........................ 6,893 15,223
-------- --------
Total interest expense .................. 10,926 59,825
Interest component of rent expense ............. 755 1,679
Amortization/write-off of debt issuance costs .. 422 2,104
-------- --------
Total Fixed Charges ..................... $ 12,103 $ 63,608
======== ========
Earnings:
Income (loss) from continuing operations
before income taxes ..................... $ 8,272 $ 32,626
Plus fixed charges .......................... 12,103 63,608
Less interest capitalized ................... (6,893) (15,223)
-------- --------
Total Earnings .......................... $ 13,482 $ 81,011
======== ========
Ratio of earnings to fixed charges ............. 1.1x 1.3x
======== ========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 14,641
<SECURITIES> 0
<RECEIVABLES> 124,353
<ALLOWANCES> 5,618
<INVENTORY> 7,327
<CURRENT-ASSETS> 167,652
<PP&E> 1,004,936
<DEPRECIATION> 107,850
<TOTAL-ASSETS> 2,008,837
<CURRENT-LIABILITIES> 175,750
<BONDS> 1,416,706
0
1
<COMMON> 777
<OTHER-SE> 207,434
<TOTAL-LIABILITY-AND-EQUITY> 2,008,837
<SALES> 395,184
<TOTAL-REVENUES> 395,184
<CGS> 218,282
<TOTAL-COSTS> 218,282
<OTHER-EXPENSES> 98,673
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 46,707
<INCOME-PRETAX> 32,626
<INCOME-TAX> 14,029
<INCOME-CONTINUING> 18,597
<DISCONTINUED> 0
<EXTRAORDINARY> 52,412
<CHANGES> 0
<NET-INCOME> (33,815)
<EPS-PRIMARY> (0.40)
<EPS-DILUTED> (0.39)
</TABLE>
