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, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ___________
Commission File Number: 0-19285
ALLIED WASTE INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 88-0228636
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization.) Identification No.)
15880 North Greenway-Hayden Loop, Suite 100, Scottsdale, Arizona 85260
(Address of principal executive offices and zip code)
Registrant's telephone number, including area code: (602) 423-2946
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No ___
Indicate the number of shares outstanding of the issuer's class of common
stock, as of the latest practicable date.
Class Outstanding as of August 13, 1998
----- ---------------------------------
Common Stock............................ 135,706,021
<PAGE>
<TABLE>
<CAPTION>
ALLIED WASTE INDUSTRIES, INC.
FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1998
INDEX
Page
Part I Financial Information
<S> <C>
Item 1 -- Financial Statements
Condensed Consolidated Balance Sheets.................................... 3
Condensed Consolidated Statements of Operations.......................... 4
Condensed Consolidated Statements of Cash Flows.......................... 5
Notes to Condensed Consolidated Financial Statements..................... 6
Item 2 -- Management's Discussion and Analysis of Financial Condition and
Results of Operations.................................................... 14
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 Security Holders........................ 28
Item 5-- Other Information.......................................................... 29
Item 6-- Exhibits and Reports on Form 8-K........................................... 43
Signature .......................................................................... 48
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
ALLIED WASTE INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
December 31, June 30,
1997 1998
--------------- ----------
(unaudited)
ASSETS
<S> <C> <C>
Current Assets --
Cash and cash equivalents...................................... $ 23,836 $ 14,494
Accounts receivable, net of allowance of
$7,087 and $7,080, respectively.............................. 177,410 197,233
Prepaid and other current assets............................... 18,549 33,682
Inventories.................................................... 6,567 7,473
Deferred income taxes.......................................... 5,317 --
--------------- ----------------
Total current assets....................................... 231,679 252,882
Property and equipment, net....................................... 1,372,260 1,424,986
Goodwill, net..................................................... 899,158 915,479
Other assets...................................................... 88,442 81,698
--------------- ----------------
Total assets............................................... $ 2,591,539 $ 2,675,045
=============== ================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities --
Current portion of long-term debt.............................. $ 58,923 $ 43,601
Accounts payable............................................... 76,458 62,201
Accrued liabilities............................................ 99,076 126,661
Unearned income................................................ 38,033 40,290
--------------- ----------------
Total current liabilities.................................. 272,490 272,753
Long-term debt, less current portion.............................. 1,400,896 1,474,851
Deferred income taxes............................................. 14,759 20,517
Accrued closure, post-closure and environmental costs............. 212,084 213,812
Other long-term obligations....................................... 46,619 36,929
Commitments and contingencies.....................................
Stockholders' Equity .......................................... 644,691 656,183
--------------- ----------------
Total liabilities and stockholders' equity................. $ 2,591,539 $ 2,675,045
=============== ================
<FN>
The accompanying Notes to Condensed Consolidated Financial Statements are an
integral part of these balance sheets.
</FN>
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
ALLIED WASTE INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except for per share amounts; unaudited)
Six Months Ended Three Months Ended
June 30, June 30,
---------------------------- ---------------------------------
1997 1998 1997 1998
------------ ------------ ------------- -------------
<S> <C> <C> <C> <C>
Revenues...................................... $ 523,218 $ 576,350 $ 278,230 $ 299,692
Cost of operations............................ 308,559 320,370 160,594 164,596
Selling, general
and administrative expenses................. 61,947 56,296 31,762 28,163
Depreciation and amortization................. 61,353 68,768 32,073 36,196
Acquisition related and
non-recurring costs......................... -- 45,143 -- 42,687
------------ ------------ ------------- -------------
Operating income............................ 91,359 85,773 53,801 28,050
Interest income............................... (1,464) (1,167) (698) (870)
Interest expense.............................. 49,562 41,451 26,232 20,355
------------ ------------ ------------- -------------
Income before income taxes.................. 43,261 45,489 28,267 8,565
Income tax expense.......................... 14,749 26,611 10,022 14,973
------------ ------------ ------------- -------------
Income (loss) before extraordinary items...... 28,512 18,878 18,245 (6,408)
Extraordinary items,
net of income tax benefit................... 52,412 3,093 52,412 3,093
------------ ------------ ------------- -------------
Net income (loss)........................... (23,900) 15,785 (34,167) (9,501)
Dividends on preferred stock................ (337) -- (166) --
------------ ------------ ------------- -------------
Net income (loss) to common
shareholders................................ $ (24,237) $ 15,785 $ (34,333) $ (9,501)
============ ============ ============= =============
Basic earnings per share:
Income (loss) before extraordinary items.... 0.28 0.15 0.18 (0.05)
Extraordinary items......................... (0.52) (0.02) (0.52) (0.03)
------------ ------------ ------------- -------------
Net income (loss)........................... $ (0.24) $ 0.13 $ (0.34) $ (0.08)
============ ============ ============= =============
Weighted average common shares
outstanding................................. 99,981 124,293 100,869 124,502
============ ============ ============= =============
Diluted earnings per share:
Income (loss) before extraordinary items.... 0.26 0.15 0.17 (0.05)
Extraordinary items......................... (0.49) (0.03) (0.48) (0.02)
------------ ------------ ------------- -------------
Net income (loss)........................... $ (0.23) $ 0.12 $ (0.31) $ (0.07)
============ ============ ============= =============
Weighted average common and
common equivalent shares
outstanding................................. 107,328 128,380 110,097 128,633
=========== ============ ============= =============
<FN>
The accompanying Notes to Condensed Consolidated Financial Statements
are an integral part of these statements.
</FN>
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
ALLIED WASTE INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands; unaudited)
Six Months Ended
June 30,
--------------------------
1997 1998
------------- --------
<S> <C> <C>
Operating Activities --
Net income (loss)............................................................ $ (23,900) $ 15,785
Adjustments to reconcile net income (loss) to cash
provided by (used for) operating activities --
Extraordinary items.......................................................... 17,252 5,103
Provisions for:
Depreciation and amortization.............................................. 61,353 68,768
Closure and post-closure costs............................................. 5,158 5,864
Acquisition related and non-recurring costs................................ -- 26,288
Doubtful accounts.......................................................... 1,629 827
Accretion of senior discount notes......................................... 9,204 14,390
Deferred income taxes...................................................... (31,103) 11,075
Gain on sale of fixed assets............................................... (561) (700)
Change in operating assets and liabilities,
excluding the effects of purchase acquisitions --
Accounts receivable, prepaid expenses, inventories and other............... (56,381) (31,699)
Accounts payable, accrued liabilities and unearned income.................. 22,361 (4,302)
Closure and post-closure costs and other................................... (11,163) (8,425)
-------------- ------------
Cash provided by (used for) operating activities................................ (6,151) 102,974
-------------- ------------
Investing Activities --
Cash expenditures for acquisitions, net of cash acquired..................... (100,500) (32,171)
Capital expenditures, other than for acquisitions............................ (68,458) (61,356)
Capitalized interest......................................................... (15,223) (30,933)
Proceeds from sale of assets................................................. 527,144 1,902
Change in deferred acquisition costs and notes receivable.................... (23,395) 7,705
-------------- ------------
Cash provided by (used for) investing activities................................ 319,568 (114,853)
-------------- ------------
Financing activities --
Net proceeds from sale of common stock,
stock options and warrants................................................. 1,873 437
Proceeds from long-term debt, net of issuance costs.......................... 881,711 570,693
Repayments of long-term debt................................................. (1,180,916) (543,638)
Repurchase of warrant........................................................ (49,000) --
Change in other long-term obligations........................................ 4,939 (10,031)
Dividends paid............................................................... (352) --
Equity transactions of pooled companies...................................... (4,799) (14,924)
-------------- ------------
Cash provided by (used for) financing activities................................ (346,544) 2,537
-------------- ------------
Decrease in cash and cash equivalents........................................... (33,127) (9,342)
Cash and cash equivalents, beginning of period.................................. 61,613 23,836
-------------- ------------
Cash and cash equivalents, end of period........................................ $ 28,486 $ 14,494
============== ============
<FN>
The accompanying Notes to Condensed Consolidated Financial Statements are an
integral part of these statements.
</FN>
</TABLE>
5
<PAGE>
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, 1997, 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 conjunction with the Company's Annual Report on Form
10-K. The condensed consolidated financial statements as of June 30, 1998 and
for the three months and six months ended June 30, 1997 and 1998 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. These condensed consolidated financial statements
should be read in conjunction with the consolidated financial statements of
Allied for the year ended December 31, 1997 and the related notes thereto
included in the Company's Annual Report on Form 10-K filed with the SEC on March
31, 1998.
There have been no significant additions to or changes in accounting
policies of the Company since December 31, 1997. For a description of these
policies, see Note 1 of Notes to Consolidated Financial Statements for the year
ended December 31, 1997 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.
Accounting pronouncement not yet required to be adopted
In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133, Accounting for Derivative Instruments
and Hedging Activities ("Statement 133"). Statement 133 establishes accounting,
and reporting standards requiring that every derivative instrument (including
certain derivative instruments embedded in other contracts) be recorded in the
balance sheet as either an asset or liability measured at its fair value.
Statement 133 requires that changes in the derivative's fair value be recognized
currently in earnings unless specific hedge accounting criteria are met. Special
accounting for qualifying hedges allows a derivative's gains and losses to
offset related results on the hedged item in the income statement, and requires
that a company formally document, designate, and assess the effectiveness of
transactions that receive hedge accounting.
6
<PAGE>
ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
Statement 133 is effective for fiscal years beginning after June 15,
1999. A company may also implement Statement 133 as of the beginning of any
fiscal quarter after issuance (that is, fiscal quarters beginning June 16, 1998
and thereafter).
The Company has not yet quantified the impacts of adopting Statement
133 on its financial statements and has not determined the timing or method of
adoption. However, Statement 133 could increase volatility in earnings and other
comprehensive income.
Acquisition related and non-recurring costs
Acquisition related and non-recurring costs of $45.1 million were
incurred in 1998 for transaction and integration costs directly related to
acquisitions. During the second quarter of 1998, the Company recorded a $42.7
million acquisition related and non-recurring charge associated primarily with
acquisitions accounted for as poolings- of-interest. The charge is comprised of
$14.6 million of termination, severance and retention bonuses, $9.8 million of
asset impairments and abandonments, $8.3 million of transaction related costs,
$7.9 million of environmental and compliance related costs and $2.1 million of
other acquisition related costs.
Extraordinary items, net
In June 1998, the Company replaced its credit facility and recognized
an extraordinary charge of approximately $5.1 million ($3.1 million net of
income tax benefit) related to the write-off of previously deferred debt
issuance costs.
On May 15, 1997, the Company repurchased (the "Repurchase") from the
Laidlaw Inc. ("Laidlaw") and Laidlaw Transportation, Inc. (collectively the
"Laidlaw Group") a $150 million 7% junior subordinated debenture ($81.6 million
book value), a $168.3 million zero coupon debenture ($34.9 million book value,
collectively the "Allied Debentures") and a warrant to purchase 20.4 million
shares of common stock ($49.0 million book value, the "Warrant"), used as
partial consideration for the purchase of Laidlaw's solid waste business in 1996
(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.
7
<PAGE>
ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
Statements of cash flows
The supplemental cash flow disclosures and non-cash transactions for
the six months ended June 30, 1997 and 1998 are as follows (in thousands):
<TABLE>
<CAPTION>
Six Months Ended
June 30,
-------------------------
1997 1998
------- -------
(unaudited)
Supplemental Disclosures:
<S> <C> <C>
Interest paid................................................... $ 61,394 $ 57,503
Income taxes paid............................................... 10,083 20,981
Non Cash Transactions:
Common stock issued in acquisitions
accounted for as purchases................................... $ 12,730 $ 7,051
Capital leases.................................................. 6,701 1,187
Debt and liabilities incurred or assumed in acquisitions........ 47,246 17,684
Debt converted to common stock.................................. 535 --
Non cash purchase and sale of operating assets.................. 61,300 --
</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.
The following table summarizes acquisitions for the six months ended
June 30, 1997 and 1998. In March 1998, the Company acquired two collection
companies in transactions accounted for as a poolings-of-interests. As the
effect of these two business combinations was not significant, prior period
financial statements were not restated to include historical operating results
of the acquired companies. In the first six months of 1998, the Company acquired
nine collection companies in transactions accounted for as a
poolings-of-interests. Prior period financial statements have been restated to
include historical operating results of these nine companies acquired in the
first half of 1998 that were accounted for as a pooling-of-interests.
Six Months
Ended June 30,
-------------------------
1997 1998
------- -----
(unaudited)
Number of businesses acquired and accounted for as:
Poolings-of-interests .................. 1 11
Purchases .............................. 11 15
Total consideration (in millions) ........ $ 226.4 $ 647.6
Shares of common stock issued ............ 1,675,470(1) 21,006,446(2)
- ----------
(1) Includes 288,505 shares of contingently issuable common stock.
(2) Includes 563,160 shares of contingently issuable common stock.
8
<PAGE>
ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
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; unaudited):
Before After
Pooling Effect of Pooling
Effects Poolings Effects
------------ ------------ ----------
Three months ended June 30, 1998
Revenues ........................ $ 246,825 $ 52,867 $ 299,692
Net income (loss) ............... (16,220) 6,719 (9,501)
Six months ended June 30, 1998
Revenues ........................ 468,553 107,797 576,350
Net income ...................... 624 15,161 15,785
Three months ended June 30, 1997
Revenues ........................ 222,279 55,951 278,230
Net loss ........................ (38,997) 4,830 (34,167)
Six months ended June 30, 1997
Revenues ........................ 417,141 106,077 523,218
Net loss ........................ (32,606) 8,706 (23,900)
Year ended December 31, 1997
Revenues ........................ 875,028 223,501 1,098,529
Net income ...................... 412 17,478 17,890
Year ended December 31, 1996
Revenues ........................ 291,685 197,334 489,019
Net loss ........................ (80,582) 13,055 (67,527)
Year ended December 31, 1995
Revenues ........................ 262,243 199,598 461,841
Net income ...................... 13,130 16,112 29,242
Unaudited pro forma income statement data
The following unaudited pro forma consolidated data for the year ended
December 31, 1997 and the six months ended June 30, 1998 presents the results of
operations of Allied as if the companies purchased and sold in 1997 and through
June 30, 1998, had all occurred as of January 1, 1997 (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.
December 31, 1997
------------------------------
Reported ProForma
--------- ----------
(unaudited)
Revenues ....................................... $1,098,529 $1,169,807
Operating income ............................... 202,660 209,419
Net income before extraordinary items .......... 71,095 70,210
Net income before extraordinary items
to common shareholders ....................... 70,714 70,271
Net income before extraordinary items
per common share ............................. 0.62 0.54
9
<PAGE>
ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
June 30, 1998
--------------------------
Reported ProForma
--------- --------
(unaudited)
Revenues ......................................... $576,350 $579,794
Operating income ................................. 85,773 86,192
Net income before extraordinary items ............ 18,878 26,918
Net income before extraordinary items
to common shareholders ......................... 18,878 26,918
Net income before extraordinary items
per common share ............................... 0.15 0.21
3. PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1997 and June 30, 1998 was as follows
(in thousands):
1997 1998
--------- --------
(unaudited)
Land and improvements ................. $ 108,493 $ 111,604
Land held for permitting as landfills(1) 79,253 85,768
Landfills ............................. 797,230 853,777
Buildings and improvements ............ 120,515 122,153
Vehicles and equipment ................ 360,078 392,871
Containers and compactors ............. 182,570 195,950
Furniture and office equipment ........ 12,613 14,812
----------- -----------
1,660,752 1,776,935
Accumulated depreciation and amortization (288,492) (351,949)
----------- -----------
$ 1,372,260 $ 1,424,986
=========== ===========
- -----------
(1) These properties have been approved for use as landfills, and the
Company is currently in the process of obtaining permits.
10
<PAGE>
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 basic earnings per share and diluted
earnings per share is as follows (in thousands, except per share data;
unaudited):
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
June 30, June 30,
--------------------------- -------------------------
1997 1998 1997 1998
----------- ------------- ----------- ----------
Basic earnings (loss) per share computation:
Net income (loss)
<S> <C> <C> <C> <C>
before extraordinary items......... $ 28,512 $ 18,878 $ 18,245 $ (6,408)
Less: Preferred stock dividends...... (337) -- (166) --
----------- ------------- ----------- -----------
Income (loss)
before extraordinary items
available to common shareholders... $ 28,175 $ 18,878 $ 18,079 $ (6,408)
=========== ============= =========== ===========
Weighted average common shares
outstanding........................ 99,981 124,293 100,869 124,502
=========== ============= =========== ===========
Basic earnings (loss) per share
before extraordinary items............ $ 0.28 $ 0.15 $ 0.18 $ (0.05)
=========== ============= =========== ===========
Diluted earnings (loss) per share computation:
Net income (loss)
before extraordinary items......... $ 28,512 $ 18,878 $ 18,245 $ (6,408)
Less: Preferred stock dividends...... (337) -- (166) --
Interest savings upon conversion
of convertible securities.......... -- -- 184 --
----------- ------------- ----------- -----------
Income (loss)
before extraordinary items
available to common shareholders... $ 28,175 $ 18,878 $ 18,263 $ (6,408)
=========== ============= =========== ===========
Weighted average common
shares outstanding ................... 99,981 124,293 100,869 124,502
Effect of stock options and warrants,
assumed exercisable................... 5,919 3,208 6,205 3,231
Assumed conversions:
7% cumulative convertible
preferred............................. -- -- 1,356 --
Convertible notes..................... -- -- 239 --
Effect of shares assumed issued
pursuant to earn-out agreements....... 1,428 879 1,428 900
----------- ------------- ----------- -----------
Weighted average common
and common equivalent
shares outstanding.................... 107,328 128,380 110,097 128,633
=========== ============= =========== ===========
Diluted earnings (loss) per share before
extraordinary items................... $ 0.26 $ 0.15 $ 0.17 $ (0.05)
=========== ============= =========== ===========
<FN>
Conversion has not been assumed for 7% preferred stock for the six
months ended June 30, 1997, as the effects would not be dilutive.
</FN>
</TABLE>
11
<PAGE>
ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
In 1997, the Company adopted SFAS No. 128 "Earnings per Share," which
required restatement of the prior period earnings per share amounts. The effect
of this accounting change on previously reported earnings per share data for the
three months and six months ended June 30, 1997 was as follows:
Six Months Ended Three Months Ended
----------------- ------------------
June 30, 1997
------------------------------------------
Per share amounts:
Primary earnings per share $ 0.26 $ 0.17
Effect of SFAS No. 128 0.02 0.01
------------------ --------------------
Basic earnings per share $ 0.28 $ 0.18
================== ====================
Fully diluted earnings per share $ 0.25 $ 0.16
Effect of SFAS No. 128 0.01 0.01
------------------ --------------------
Diluted earnings per share $ 0.26 $ 0.17
================== ====================
5. SUMMARIZED FINANCIAL INFORMATION OF ALLIED WASTE NORTH AMERICA, INC.
As discussed in Note 5 of the Company's Annual Report on Form 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 wholly owned,
consolidated subsidiary of the Company) are guaranteed by Allied and
substantially all subsidiaries of the Company. 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, 1997 and June 30,
1998 is as follows (in thousands):
Summarized Consolidated Balance Sheet Information
December 31, 1997 June 30, 1998
----------------- -------------
(unaudited)
Current assets ................................ $ 231,679 $ 252,882
Property and equipment, net ................... 1,372,260 1,424,986
Goodwill, net ................................. 899,158 915,479
Other non-current assets ...................... 88,442 81,698
Current liabilities ........................... 263,044 263,408
Long-term debt, net of current portion ........ 1,146,206 1,220,161
Due to parent ................................. 752,368 903,091
Due to Allied Canada Finance, Ltd. ............ 152,825 --
Other long-term obligations ................... 278,736 275,450
Retained earnings (deficit) ................... (1,640) 12,935
Summarized Statement of Operations Information
Six Months
Ended June 30,
----------------------
1997 1998
-------- ------
(unaudited)
Revenue ............................................... $523,218 $ 576,350
Operating costs and expenses ........................... 308,559 320,370
Operating income ....................................... 91,359 85,773
Income before extraordinary items ...................... 30,482 27,673
Extraordinary items, net of income tax benefit ......... 52,412 3,093
Net income (loss) ...................................... (21,931) 24,581
12
<PAGE>
ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
6. SUBSEQUENT EVENTS
On August 7, 1998 the Company acquired Illinois Recycling Services,
Inc. and its affiliates ("IRS"). IRS generates approximately $80 million in
annual revenue. These Chicago-based operations provide solid waste collection,
recycling, and transportation services primarily in the Chicago metro area and
northern Indiana. The transaction will be accounted for using the pooling of
interests method of business combinations.
In August 1998, the Company signed a definitive merger agreement with
American Disposal Services, Inc. ("ADSI"). Under the terms of the agreement,
ADSI shareholders will receive 1.65 shares of Allied common stock for each share
of ADSI common stock or approximately 40.7 million shares. The merger, which is
subject to shareholder approval, is expected to be completed in the fourth
quarter 1998 and will be accounted for as a pooling- of-interest.
13
<PAGE>
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, 1993, the Company has completed over 140 acquisitions. In 1997, the
Company acquired 35 businesses and subsequent to 1997 it has acquired 32
businesses. The Company's Condensed 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 in 1997 were accounted for under the purchase method for business
combinations and, accordingly, the results of operations for such acquired
businesses are included in the Company's financial statements only from the
applicable date of acquisition. As a result, the Company believes its historical
results of operations for the periods presented are not directly comparable.
On December 30, 1996, the Company completed the acquisition of
substantially all of the non-hazardous solid waste management business conducted
by Laidlaw Inc. ("Laidlaw") in the United States and Canada, for total
consideration of approximately $1.5 billion comprised of cash, the Company's
common stock, $0.01 par value, (the "Common Stock"), warrants, and subordinated
debentures (the "Laidlaw Acquisition"). The cash consideration was financed from
the proceeds of its $1.275 billion senior credit facility (the "Bank Agreement")
and the sale of $525 million of 10.25% senior subordinated notes due 2006 (the
"1996 Notes"). In March 1997, pursuant to a Share Purchase Agreement with USA
Waste, the Company sold to USA Waste all of the Canadian non-hazardous solid
waste management operations of the Company, acquired in the Laidlaw Acquisition,
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 Bank Agreement.
In May 1997, the Company repurchased from the Laidlaw and Laidlaw
Transportation, Inc. (collectively the "Laidlaw Group") the subordinated
debentures and warrants issued in the Laidlaw Acquisition for an aggregate
purchase price of $230 million in cash (the "Repurchase"). Net proceeds of $230
million from the $418 million face value 11.3% senior discount notes (the
"Senior Discount Notes") were used to fund the Repurchase. Additionally, certain
private securities investment funds purchased all of the Common Stock of Allied
held by Laidlaw.
In June 1998, the Company completed the acquisition of the Rabanco
Companies ("Rabanco") in a transaction accounted for using the
pooling-of-interests method for business combinations. Rabanco generates annual
revenue of approximately $175 million excluding the effects of the
internalization of waste volumes. Rabanco provides solid waste collection,
recycling, transportation and disposal services in the Pacific Northwest through
a network of approximately 160 collection routes, 3 transfer stations, an
extensive intermodal rail transportation system and a major regional landfill.
In August 1998, the Company acquired the Illinois Recycling Services,
Inc. and its affiliates ("IRS") in a transaction accounted for using the
pooling-of-interests method for business combinations. IRS provides solid waste
collection, recycling and transportation services primarily in the Chicago metro
area and northern Indiana and generates annual revenue of approximately $80
million excluding the effects of the internalization of waste volumes.
14
<PAGE>
In August 1998, the Company signed a definitive merger agreement with
American Disposal Services, Inc. ("ADSI"). Under the terms of the agreement,
ADSI shareholders will receive 1.65 shares of Allied common stock for each share
of ADSI common stock or approximately 40.7 million shares. The merger, which is
subject to shareholder approval, is expected to be completed in the fourth
quarter 1998 and will be accounted for as a pooling- of-interest.
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 revenues
attributable to geographic region (unaudited):
Six Months
Year Ended December 31, Ended
---------------------- -------------
1995 1996 1997 June 30, 1998
---- ---- ---- -------------
Collection(1) .................. 60% 59% 56% 55%
Transfer ....................... 7 7 7 6
Landfill(1) .................... 25 26 27 33
Other .......................... 8 8 10 6
---- ---- ---- ----
Total Revenues 100% 100% 100% 100%
==== ==== ==== ====
Six Months
Year Ended December 31, Ended
---------------------- -------------
1995 1996 1997 June 30, 1998
---- ---- ---- -------------
Great Lakes .................... 21% 20% 26% 26%
Midwest ........................ 9 10 12 12
Northeast ...................... 10 10 12 10
Southeast ...................... 15 18 12 13
Southwest ...................... 2 2 12 11
West ........................... 43 40 26 28
---- ---- ---- ----
Total Revenues 100% 100% 100% 100%
==== ==== ==== ====
- ---------
(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 67% of
Company-collected waste is disposed of at Company-owned and/or operated
landfills as measured using volume in the first six months of 1998. 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 or railcars and transported to its landfills.
15
<PAGE>
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 costs which include stock registration, legal,
accounting, consulting, engineering and other direct costs to complete the
acquisitions. Additionally, the Company incurs charges for integration costs
which include uncollectible accounts receivable write-offs, employee termination
and relocation, write down of fixed assets, lease termination, and other one
time charges related to the acquisitions. 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 of the Company, 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 to the landfill
base. Additionally, the Company capitalizes interest on the costs associated
with landfills under development using the Company's average interest rate on
its outstanding debt. As the development process is completed, on a cell by cell
basis, these costs are excluded from the capitalizable base. All such costs are
amortized based on consumed airspace. The Company believes that the costs
associated with engineering, owning and operating landfills will increase in the
future as a result of federal, state and local regulation and a growing
community awareness of the landfill permitting process. Although there can be no
assurance, the Company believes that it will be able to implement price
increases sufficient to offset these increased expenses. All indirect landfill
development costs, such as executive salaries, general corporate overhead,
public affairs and other corporate services, are expensed as incurred.
Accrued closure and post-closure costs represent an estimate of the
current value of the future obligation associated with closure and post-closure
monitoring of non-hazardous solid waste landfills currently owned and/or
operated by the Company. Site specific closure and post-closure engineering cost
estimates are prepared annually for landfills owned and/or operated by the
Company for which it is responsible for closure and post-closure. The present
value of estimated future costs are accrued based on accepted tonnage as
landfill airspace is consumed. Discounting of future costs is applied where the
Company believes that both the amounts and timing of related payments are
reliably determinable. The Company periodically updates its estimates of future
closure and post- closure costs. The impact of changes which are determined to
be changes in estimates are accounted for on a prospective basis.
16
<PAGE>
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 $1.0 billion while the present value of
such estimate is $245.3 million. At December 31, 1997 and June 30, 1998,
accruals for landfill closure and post-closure costs (including costs assumed
through acquisitions) were approximately $149.6 million and $151.3 million. The
accruals reflect relatively young landfills with estimated remaining lives,
based on current waste flows, that range from approximately 1 to over 75 years,
and an estimated average remaining life of greater than 30 years.
Year 2000 Systems Modifications. Allied is modifying its computer system
programming to be able to process transactions in the year 2000. Anticipated
spending for this modification will be expensed as incurred and is not expected
to have a significant impact on the Company's ongoing operations or the results
thereof.
17
<PAGE>
RESULTS OF OPERATIONS
Three Months Ended June 30, 1997 and 1998
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,
-----------------------------------
1998
Compared
to 1997
% Change
1997 1998 in Amounts
---------- --------- ----------
(unaudited)
Statement of Operations Data:
<S> <C> <C> <C>
Revenues....................................... 100.0% 100.0% 7.7%
Cost of operations............................. 57.7 54.9 2.5
Selling, general and administrative expenses... 11.4 9.4 (11.3)
Depreciation and amortization.................. 11.6 12.1 12.8
Acquisition related and non-recurring costs.... -- 14.2 --
------ -------
Operating income............................... 19.3 9.4 (47.9)
Interest expense, net.......................... 9.2 6.5 (23.5)
Income tax provision........................... 3.6 5.0 49.4
Extraordinary items............................ 18.8 1.0 (94.1)
------- -------
Net loss..................................... (12.3)% (3.1)% 72.2%
====== ======
</TABLE>
Revenues. Revenues in 1998 were $299.7 million compared to $278.2 million in
1997, an increase of 7.7%. Revenues of approximately $11.0 million in the second
quarter of 1998 were generated from companies acquired, net of revenues sold,
subsequent to the end of the same period in the prior year. Increases in
revenues attributable to operations owned as of June 30, 1997 ("Internal
Growth") was 8% adjusted for the loss of certain volumes between 1997 and 1998.
Internal volume growth was negatively impacted by the expiration of the disposal
contract with the City of St. Louis, acquired in the Laidlaw Acquisition, and
the closing of the Plainville Landfill which, combined, amounted to a decline in
revenue of approximately $5.8 million. Internal volume growth was approximately
5% and price increases were 3%.
Cost of Operations. Cost of operations in 1998 was $164.6 million compared
to $160.6 million in 1997, an increase of 2.5%. 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 54.9% in
1998 from 57.7% in 1997. Operating margins were favorably impacted by an
increase in internalization of third-party disposal volumes to 66% in 1998 from
58% in 1997 and increased volumes at the landfills.
Selling, General and Administrative Expenses. SG&A expenses in 1998 were
$28.2 million compared to $31.8 million in 1997, a decrease of 11.3%. As a
percentage of revenues, SG&A decreased to 9.4% in 1998 compared to 11.4% in
1997. The decrease in SG&A expenses is primarily a result of the reduction in
certain sales and administrative functions and related facilities completed at
the beginning of the second quarter of 1998 in accordance with the Company's
continuing acquisition integration plan. Additionally, the decrease in SG&A as a
percentage of revenues can also be attributed to the continued increase in
revenues.
18
<PAGE>
Depreciation and amortization. Depreciation and amortization in 1998 was
$36.2 million compared to $32.1 million in 1997, an increase of 12.8%. The
increase in depreciation and amortization expense is due to a 34% increase in
internalized landfill tonnage, increased capital expenditures and acquisitions.
As a percentage of revenues, depreciation and amortization has increased due to
increased landfill volumes.
Acquisition related and non-recurring costs. During the second quarter of
1998, the Company recorded a $42.7 million acquisition related and non-recurring
charge for transaction and integration costs associated primarily with
acquisitions accounted for as poolings-of-interest. 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, compliance related
costs and other one-time charges related to the acquisitions. The charge is
comprised of $14.6 million of termination, severance and retention bonuses, $9.8
million of asset impairments and abandonments, $8.3 million of transaction
related costs, $7.9 million of environmental and compliance related costs and
$2.1 million of other acquisition related costs.
Interest expense, net. Net interest expense was $19.5 million in 1998
compared to $25.5 million in 1997, a decrease of 23.5%. The decrease in interest
expense was due to an overall reduction in the average interest rate, partially
offset by an increase in outstanding debt. Additionally, capitalized interest
increased to $15.7 million in 1998 compared to $9.3 million in 1997, due to the
acquisition of landfill assets and increases in landfills under development.
Income taxes. Income taxes reflect a 174.8% effective income tax rate in 1998
and 35.5% in 1997. The increase is primarily caused by the income tax accounting
treatment of S-Corporations when the pooling-of-interests method of accounting
is used and the effects of one-time non-deductible acquisition related costs.
This resulted in a one-time impact and had the effect of increasing the total
income tax provision by $11.5 million. Without considering the effect of pooled
companies, the 1998 effective tax rate is 41%. The Company's effective tax rate
in 1998 and 1997 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 items, net. In June 1998, the Company replaced its credit
facility and recognized an extraordinary charge of approximately $5.1 million
($3.1 million net of income tax benefit) related to the write-off of previously
deferred debt issuance costs.
On May 15, 1997, the Company repurchased from the Laidlaw Group a $150
million 7% junior subordinated debenture ($81.6 million book value), a $168.3
million zero coupon debenture ($34.9 million book value, collectively the
"Allied Debentures") and a warrant to purchase 20.4 million shares of Common
Stock ($49.0 million book value, 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
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.
19
<PAGE>
Six Months Ended June 30, 1997 and 1998
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>
Six Months Ended June 30,
------------------------------------
1998
Compared
to 1997
% Change
1997 1998 in Amounts
---------- -------- ----------
(unaudited)
Statement of Operations Data:
<S> <C> <C> <C>
Revenues........................................ 100.0% 100.0 % 10.2%
Cost of operations.............................. 59.0 55.6 3.8
Selling, general and administrative expenses.... 11.8 9.8 (9.0)
Depreciation and amortization................... 11.7 11.9 12.1
Acquisition related and non-recurring costs..... -- 7.8 --
------ -------
Operating income................................ 17.5 14.9 (6.1)
Interest expense, net........................... 9.2 7.0 (16.2)
Income tax provision............................ 2.8 4.6 80.4
Extraordinary items............................. 10.0 0.5 (94.1)
------- -------
Net income (loss)............................. (4.5)% 2.8 % 166.0%
====== =======
</TABLE>
Revenues. Revenues in 1998 were $576.4 million compared to $523.2 million in
1997, an increase of 10.2%. Revenues of approximately $22.0 million in the first
six months of 1998 were generated from companies acquired, net of revenues sold,
subsequent to the end of the same period in the prior year. Internal Growth was
8% adjusted for the loss of certain volumes between 1997 and 1998. Internal
volume growth was negatively impacted by the expiration of the disposal contract
with the City of St. Louis, acquired in the Laidlaw Acquisition, and the closing
of the Plainville Landfill which, combined, amounted to a decline in revenue of
approximately $10.9 million. Internal volume growth was approximately 5% and
price increases were 3%.
Cost of Operations. Cost of operations in 1998 was $320.4 million compared
to $308.6 million in 1997, an increase of 3.8%. 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 55.6% in
1998 from 59.0% in 1997. Operating cost margins were favorably impacted by an
increase in internalization of third-party disposal volumes to 67% in 1998 from
59% in 1997 and increased volumes at the landfills.
Selling, General and Administrative Expenses. SG&A expenses in 1998 were
$56.3 million compared to $61.9 million in 1997, a decrease of 9.0%. As a
percentage of revenues, SG&A decreased to 9.8% in 1998 compared to 11.8% in
1997. The decrease in SG&A expenses is primarily a result of the reduction in
certain sales and administrative functions and related facilities completed at
the beginning of the second quarter of 1998 in accordance with the Company's
continuing acquisition integration plan. Additionally, the decrease in SG&A as a
percentage of revenues can also be attributed to the continued increase in
revenues.
Depreciation and amortization. Depreciation and amortization in 1998 was
$68.8 million compared to $61.4 million in 1997, an increase of 12.1%. The
increase in depreciation and amortization expense is due to a 39% increase in
internalized landfill tonnage, increased capital expenditures and acquisitions.
As a percentage of revenues, depreciation and amortization has remained
relatively flat.
20
<PAGE>
Acquisition related and non-recurring costs. During the first six months of
1998, the Company recorded a $45.1 million acquisition related and non-recurring
charge for transaction and integration costs associated primarily with
acquisitions accounted for as poolings-of-interest. 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, compliance related
costs and other one time charges related to the acquisitions. The charge is
comprised of $15.1 million of termination, severance and retention bonuses, $9.8
million of asset impairments and abandonments, $8.3 million of transaction
related costs, $7.9 million of environmental and compliance related costs and
$4.0 million of other acquisition related costs.
Interest expense, net. Net interest expense was $40.3 million in 1998
compared to $48.1 million in 1997, a decrease of 16.2%. The decrease in interest
expense was due to an overall reduction in the average interest rate, partially
offset by an increase in outstanding debt. Additionally, capitalized interest
increased to $30.9 million in 1998 compared to $15.2 million in 1997, due to the
acquisition of landfill assets and increases in landfills under development.
Income taxes. Income taxes reflect a 58.5% effective income tax rate in 1998
and 34.1% 1997. The increase is primarily caused by the income tax accounting
treatment of S-Corporations when the pooling-of-interests method of accounting
is used and the effects of one-time non-deductible acquisition costs. This
resulted in a one-time impact and had the effect of increasing the total income
tax provision $8.0 million. Without considering the effect of pooled companies,
the 1998 effective tax rate is 41%. The Company's effective tax rate in 1998 and
1997 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 items, net. In June 1998, the Company replaced its credit
facility and recognized an extraordinary charge of approximately $5.1 million
($3.1 million net of income tax benefit) related to the write-off of previously
deferred debt issuance costs.
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 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, 1998, the Company has completed debt and equity financings
in excess of $3 billion. Due to the acquisition driven and the capital intensive
nature of the Company's growth objectives, the Company has used, and believes
that it will likely continue using amounts in excess of the cash generated from
operations to fund the growth component of its business including acquisitions
and capital expenditures. In connection with acquisitions, the Company has
assumed or incurred indebtedness with relatively short-term repayment schedules,
which have been refinanced under the Revolving Credit Facility and operating
equipment has been acquired using financing leases which have medium-term
maturities. Additionally, the Company uses excess cash generated from operations
to pay down amounts owed on its revolving line of credit which is classified as
long-term debt. As a result, the Company has periodically had low levels of
working capital or working capital deficits. However, the Company has
approximately $494.5 million in undrawn, committed capacity available under the
Revolving Credit Facility at June 30, 1998.
21
<PAGE>
During the six months ended June 30, 1997 and 1998, 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,
-------------------
1997 1998
------ -----
<S> <C> <C>
Operating Activities:
Net income (loss) ....................................... $ (23.9) $ 15.8
Non-cash operating expenses ............................. 62.9 131.6
Change in operating assets and liabilities, net ......... (45.2) (44.4)
-------- ------
Cash provided by (used for) operating activities ........ (6.2) 103.0
-------- ------
Investing Activities:
Cash expenditures for acquisitions, net of cash acquired (100.5) (32.2)
Capital expenditures, other than for acquisitions ....... (68.5) (61.3)
Capitalized interest .................................... (15.2) (30.9)
Proceeds from sale of fixed assets ...................... 527.2 1.9
Other ................................................... (23.4) 7.7
-------- ------
Cash provided by (used for) investing activities ........ 319.6 (114.8)
-------- ------
Financing Activities:
Net proceeds from sale and redemption of preferred stock,
common stock, stock options and warrants ............. 1.9 0.4
Net proceeds from long-term debt ........................ 881.7 570.7
Repayments of long-term debt ............................ (1,180.9) (543.6)
Other ................................................... (49.2) (25.0)
-------- ------
Cash provided by (used for) financing activities ........ (346.5) 2.5
-------- ------
Decrease in cash and cash equivalents ................... $ (33.1) $ (9.3)
======== ======
</TABLE>
As of June 30, 1998, the Company had cash and cash equivalents of $14.5
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 likely increase further as
the Company continues to pursue its growth objectives. During 1997, the Company
acquired solid waste operations representing approximately $369.1 million in
annual revenues, and sold operations representing approximately $127.9 million
in annual revenue. Both acquisitions and sales included landfill assets. Net
consideration of approximately $528.3 million (including $10.5 million for
landfills under development) comprised of cash, notes and 7,038,456 shares of
Common Stock, was paid in these transactions. Subsequent to December 31, 1997,
the Company acquired 32 operating solid waste businesses with annual revenues of
approximately $355.2 million for consideration of approximately $947.2 million,
of which $805.9 million consists of approximately 31.7 million shares of Common
Stock. For the calendar year 1998, the Company expects to spend approximately
$224.0 million for capital, closure and post-closure, and remediation
expenditures. As the Company continues to acquire waste operations during 1998,
additional capital amounts will be required to fund the acquisition of
businesses and the related capital expenditure requirements.
On June 30, 1998, the Company's debt structure consisted primarily of $525
million of the 1996 Notes, $497.7 million outstanding under the Credit
Agreement, and approximately $268.9 million of accreted value on the Senior
Discount Notes ($418 million aggregate face amount). As of June 30, 1998 there
was aggregate availability under the Revolving Credit Facility of approximately
$494.5 million to be used for working capital, letters of credit, acquisitions
and other general corporate purposes. In October 1997, the Company amended the
Credit Agreement, increasing the amount of the Senior Credit Facility from $900
million to $1.1 billion. In June 1998, the Company replaced the amended Credit
Agreement with a new Credit Agreement, consisting of a $300 million Term Loan,
which is fully drawn, and a $800 million Revolving Credit Facility. The
Revolving Credit Facility includes a $250
22
<PAGE>
million sublimit for the issuance of letters of credit. The indentures relating
to the 1996 Notes, the Senior Discount Notes and the Credit Agreement contain
financial and operating covenants and 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, including
indebtedness incurred to finance the Laidlaw Acquisition. Currently, on an
annualized basis, this is expected to include approximately $146.7 million in
mandatory annual principal and interest payments.
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 or 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, 1998, the Company had outstanding
approximately $340.5 million in financial assurance instruments, represented by
$200.1 million of performance bonds, $1.5 million of letters of credit, $127.4
million of insurance policies and $11.5 million of trust deposits. 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 1.5% to 2.0% for terms of 36 to 84 months. In addition to equipment
leases outstanding at December 31, 1997 and June 30, 1998 of $62.9 million and
$85.7 million, respectively, the Company had available lease commitments of
$32.4 million and $65.0 million, respectively.
Subtitle D and other regulations that apply to the non-hazardous waste
disposal industry have required the Company, as well as others in the industry,
to alter operations and to modify or replace pre-Subtitle D landfills. Such
expenditures have been and will continue to be substantial. Further regulatory
changes could accelerate expenditures for closure and post-closure monitoring
and obligate the Company to spend sums in addition to those presently reserved
for such purposes. These factors, together with the other factors discussed
above, could substantially increase the Company's operating costs and impair the
Company's ability to invest in its facilities.
The Company's ability to meet future capital expenditure and working
capital requirements, to make scheduled payments of principal, to pay interest,
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. 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 and interest on debt incurred
under the Credit Agreement, 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. 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 Credit Agreement, 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.
23
<PAGE>
Terms of Outstanding Debt
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 Waste North America, Inc. ("AWNA"), at the
greater of (i) 100% of the principal amount or (ii) the sum of the present
values of the remaining scheduled payments of principal and interest thereon
discounted to maturity on a semi-annual basis at a comparable treasury yield
plus 75 basis points, plus in each case accrued and unpaid interest to the date
of redemption. At any time prior to December 1, 1999, up to 33% of principal
amount of 1996 Notes will be redeemable, at the option of AWNA, 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 AWNA's current and
future subsidiaries, the guarantees of which are expressly subordinated to the
guarantees of AWNA's Senior Credit Facility.
The Senior Discount Notes were issued at a discount of principal amount
and, unless certain provisions are triggered, there will be no periodic cash
payments of interest before June 1, 2002. Thereafter, the Senior Discount Notes
will accrue cash interest at the rate of 11.30% per annum, payable semi-annually
on June 1 and December 1 of each year, commencing December 1, 2002. The Senior
Discount Notes cannot be redeemed until December 1, 2001, except under certain
circumstances. Prior to June 1, 2000, up to 33% of principal amount of Senior
Discount Notes will be redeemable, at the option of Allied, from the proceeds of
one or more public offerings of capital stock by Allied at a premium to their
accreted value, plus accrued interest.
The Credit Agreement also provides for a five year senior secured $300
million term loan facility (the "Term Loan Facility"). The Term Loan Facility is
an amortizing senior secured term loan with annual principal payments increasing
from $75 million in 2001 to $105 million in 2002, and to $120 million in 2003.
Principal under the Revolving Credit Facility is due upon maturity in June 2003.
In addition to the scheduled principal payments above, the Company is
also required to make mandatory prepayments on the Senior Credit Facilities from
the proceeds from certain asset sales and the issuance of new debt securities
and cash-pay preferred stock. The amount of the mandatory prepayment is based
upon the ratio of total debt to EBITDA (the "Ratio"); prepayments equal 75% of
the net proceeds when the Ratio exceeds 4.50 to 1.00, 50% of the net proceeds
when the Ratio exceeds 4.00 to 1.00 but is less than 4.50 to 1.00 and 0% when
the Ratio is less than 4.00 to 1.00. Proceeds from new equity issues are exempt
from mandatory prepayment requirements. Mandatory prepayments are applied first
to repay outstanding Revolving Credit Facility advances (but not to reduce
commitments under the Revolving Credit Facility) and the Term Loan pro rata
based on amount outstanding, until no Revolving Credit advances are outstanding,
and then to repay the outstanding Term Loan.
Borrowings under the Revolving Credit Facility may be used for
acquisitions, the issuance of letters of credit, working capital and other
general corporate purposes.
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 Total Debt to EBITDA ratio, as defined in the Credit
Agreement, and varies between zero percent and 0.50% for Base Rate loans, and
0.75% and 1.75% for Eurodollar loans.
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.
24
<PAGE>
The Credit Agreement contains certain financial covenants including,
but not limited to, a Total 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 is
in compliance with all applicable covenants at June 30, 1998.
The Company has entered into interest rate protection agreements (the
"Agreements"), with commercial 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, 1998 is as follows:
Notional Amount Fixed Rate Period
- ---------------- ----------- ----------------------------------------
(in millions)
$ 50 6.08 September 1997 - September 2000
50 6.06 September 1997 - March 2000
50 5.12 February 1998 - April 1999
50 6.02 October 1997 - October 1999
50 5.90 November 1997 - November 1999
50 5.91 November 1997 - November 1999
130 6.06 May 1998 - May 2001
The Agreements effectively change the Company's interest rate paid on
its floating rate long-term debt to a weighted average fixed rate of
approximately 5.91% plus applicable margins imposed by the terms of the Credit
Agreement at June 30, 1998.
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. The forward- looking statements made herein are only made as of
the date of this filing and the Company undertakes no obligation to publicly
update such forward-looking statements to reflect subsequent events or
circumstances.
25
<PAGE>
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 that the Company will succeed in obtaining
landfill permits or locating appropriate acquisition candidates that can be
acquired at price levels that the Company considers appropriate and that
reflects historical prices. The Forward Looking Statements assume that a number
of acquisition candidates and landfill properties sufficient to meet the
Company's goals will be available for purchase and that the Company will be able
to complete the acquisition at prices that the Company has experienced in the
past two years.
Integration. The Company's financial position and results of operations
depend to a large extent on the integration of recently acquired businesses. The
Forward Looking Statements assume that integration of acquired companies,
including the internalization of waste, will require from three to nine months
from the date the acquisition closes. Failure to achieve effective integration
in the anticipated time period or at all could have an adverse effect on the
Company's future results of operations.
Ongoing Capital Requirements. To the extent that internally generated cash
and cash available under the Company's existing credit facilities are not
sufficient to provide the cash required for future operations, capital
expenditures, acquisitions, debt repayment obligations and/or financial
assurance obligations, the Company will require additional equity and/or debt
financing in order to provide such cash. The Company has incurred significant
debt obligations in the last two years, which entail substantial debt service
costs. The Forward Looking Statements assume that the Company will be able to
raise the capital necessary to finance such requirements at rates that are as
good as or better than those it is currently experiencing. There can be no
assurance, however, that such financing will be available or, if available, will
be available on terms satisfactory to the Company.
Economic Conditions. The Company's business is affected by general economic
conditions. The Forward Looking Statements assume that the Company will be able
to achieve internal volume and price growth which is not impacted by an economic
downturn. (As revenue of the Company continues to grow it is likely that the
rates of internal growth will reflect growth rates which are less than those
experienced in 1997.) 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.
26
<PAGE>
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.
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.
27
<PAGE>
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 May 28, 1998, the annual meeting of the stockholders of the Company was
held. The holders of 90,967,956 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:
Number of Number of
Votes for Votes Withheld
---------- ---------------
Thomas H. Van Weelden 90,495,982 471,974
Roger A. Ramsey 90,494,623 473,333
Nolan Lehmann 90,495,982 471,974
Alan B. Shepard 90,489,462 478,494
Michael Gross 90,495,982 471,974
David B. Kaplan 90,495,982 471,974
Antony P. Ressler 90,495,982 471,974
Howard A. Lipson 90,489,462 478,494
Dennis Hendrix 90,495,982 471,974
Warren B. Rudman 90,495,982 471,974
Vincent Tese 90,495,982 471,974
28
<PAGE>
Item 5. Other Information
On June 25, 1998, Allied Waste Industries, Inc. ("Allied") purchased
the Rabanco Companies in an acquisition accounted for using the
pooling-of-interest method for business combinations. The financial
statements and pro forma combined financial statements filed herein are
filed for informational purposes.
(a) Financial Statements of the Rabanco Companies
(i) Report of Independent Public Accountants
(ii) Balance Sheets - December 31, 1997 and March 31, 1998
(unaudited)
(iii) Statements of Operations for the Year Ended December
31, 1997 and for the Three Months Ended March 31,
1997 and 1998 (unaudited)
(iv) Statements of Cash Flows for the Year Ended December
31,1997 and for the Three months ended March 31, 1997
and 1998 (unaudited)
(v) Notes to Financial Statements
29
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Rabanco Companies and Allied Waste Industries, Inc.:
We have audited the accompanying combined balance sheet of the companies
identified in Note 1 to the combined financial statements, as of December 31,
1997, and the related combined statements of operations, stockholders' equity
and cash flows for the year then ended. These financial statements are the
responsibility of the companies' management. Our responsibility is to express an
opinion on these combined financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of the companies
identified in Note 1 to the combined financial statements as of December 31,
1997, and the results of their operations and their cash flows for the year then
ended in conformity with generally accepted accounting principles.
Phoenix, Arizona, /s/ARTHUR ANDERSEN LLP
June 25, 1998.
30
<PAGE>
<TABLE>
<CAPTION>
RABANCO COMPANIES
COMBINED BALANCE SHEETS
ASSETS
December 31, March 31,
-------------- -----------
1997 1998
-------------- -----------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 1,610,756 $ 3,669,742
Restricted cash 1,840,000 560,000
Accounts receivable, net of allowance of $599,820 and $685,284 22,043,731 19,949,438
Prepaid expenses and other 1,702,579 1,440,477
Due from related parties 1,176,721 1,608,367
-------------- --------------
Total current assets 28,373,787 27,228,024
PROPERTY AND EQUIPMENT, net 69,280,439 68,826,816
OTHER ASSETS, net 7,614,314 7,934,625
-------------- --------------
Total assets $ 105,268,540 $ 103,989,465
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 7,571,670 $ 7,559,018
Line of credit 1,700,000 -
Notes payable to shareholders 2,820,010 2,820,010
Notes payable to related parties 5,459,480 5,459,480
Accounts payable 11,279,029 10,581,193
Accrued business taxes 3,716,492 3,689,825
Other accrued liabilities 1,620,913 1,810,844
Advances from related parties 3,449,348 6,281,965
Unearned income 2,300,694 2,147,283
-------------- --------------
Total current liabilities 39,917,636 40,349,618
LONG-TERM DEBT, less current portion 30,627,704 27,355,179
ACCRUED CLOSURE AND POST-CLOSURE COSTS 3,665,615 3,831,984
MINORITY INTERESTS 977,483 1,150,234
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock 260,685 260,685
Contributed capital 22,272,753 22,272,753
Retained earnings 7,546,664 8,769,012
-------------- --------------
Total stockholders' equity 30,080,102 31,302,450
-------------- --------------
Total liabilities and stockholders' equity $ 105,268,540 $ 103,989,465
============== ==============
<FN>
The accompanying notes to combined financial statements are an integral
part of these balance sheets.
</FN>
</TABLE>
31
<PAGE>
<TABLE>
<CAPTION>
RABANCO COMPANIES
COMBINED STATEMENTS OF OPERATIONS
Three Months Ended
December 31, March 31,
---------------- -------------------------------
1997 1998 1997
---------------- -------------- --------------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
Revenues $ 166,528,227 $ 39,186,402 $ 37,068,077
Cost of operations 122,788,306 28,595,518 27,758,011
Selling, general and administrative expenses 16,817,102 4,461,238 3,556,084
Depreciation and amortization 12,422,176 3,159,684 2,915,759
---------------- -------------- --------------
Operating income 14,500,643 2,969,962 2,838,223
Interest income 544,937 161,290 88,545
Interest expense (4,044,863) (998,283) (902,152)
Other income (expense) (114,502) 103,714 (12,316)
----------------- -------------- --------------
Income before minority interests 10,886,215 2,236,683 2,012,300
Minority interests in income 753,360 254,155 197,374
---------------- -------------- --------------
Net income $ 10,132,855 $ 1,982,528 $ 1,814,926
================ ============== ==============
<FN>
The accompanying notes to combined financial statements are an integral
part of these statements.
</FN>
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
RABANCO COMPANIES
COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY
Total
Common Contributed Retained Stockholders'
Stock Capital Earnings Equity
----------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
BALANCE, January 1, 1997 $ 260,685 $ 22,116,579 $ 2,068,644 $ 24,445,908
Distributions to stockholders - - (4,654,835) (4,654,835)
Contributions - 156,174 - 156,174
Net income - - 10,132,855 10,132,855
----------- ------------- ------------- -------------
BALANCE, December 31, 1997 260,685 22,272,753 7,546,664 30,080,102
Distributions to stockholders
(unaudited) - - (760,180) (760,180)
Net income (unaudited) - - 1,982,528 1,982,528
----------- ------------- ------------- -------------
BALANCE, March 31, 1998
(unaudited) $ 260,685 $ 22,272,753 $ 8,769,012 $ 31,302,450
=========== ============= ============= =============
<FN>
The accompanying notes to combined financial statements are an
integral part of these statements.
</FN>
</TABLE>
33
<PAGE>
<TABLE>
<CAPTION>
RABANCO COMPANIES
COMBINED STATEMENTS OF CASH FLOWS
Three Months Ended
December 31, March 31,
-------------- --------------------------
1997 1998 1997
------------ --------- ----------
(Unaudited) (Unaudited)
OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net income $ 10,132,855 $ 1,982,528 $ 1,814,926
Adjustments to reconcile net income to cash
provided by operating activities-
Provisions for:
Depreciation and amortization 12,422,176 3,159,684 2,915,759
Minority interest in income 753,360 254,155 197,374
Distributions to minority interests (661,212) (81,404) (123,100)
Closure and post-closure 780,836 166,369 163,423
Gain on sale of assets (70,809) (35,389) (29,665)
Change in operating assets and liabilities:
Accounts receivable, net, prepaid expenses and
other, due from related parties and other assets (5,055,867) 1,513,890 (1,175,566)
Accounts payable, accrued business taxes, other
accrued liabilities, and unearned income 643,833 (687,983) (546,728)
--------------- ------------- -------------
Cash provided by operating activities 18,945,172 6,271,850 3,216,423
--------------- ------------- -------------
INVESTING ACTIVITIES:
Capital expenditures (15,061,956) (2,678,951) (2,432,177)
Proceeds from sale of assets 151,706 98,827 34,945
--------------- ------------- -------------
Cash used for investing activities (14,910,250) (2,580,124) (2,397,232)
--------------- ------------- -------------
FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt 6,012,282 - 288,589
Repayments of long-term debt (5,827,878) (1,585,177) (1,392,000)
Net borrowings (repayments) on line of credit (650,000) (1,700,000) 850,000
Payments into IRB Sinking Fund (1,700,000) (420,000) (420,000)
Advances from related parties 3,130,084 2,832,617 403,702
Distributions to stockholders (4,654,835) (760,180) (1,659,489)
Contributions 156,174 - -
--------------- ------------- ------------
Cash used for financing activities (3,534,173) (1,632,740) (1,929,198)
--------------- ------------- -------------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 500,749 2,058,986 (1,110,007)
CASH AND CASH EQUIVALENTS, beginning of period 1,110,007 1,610,756 1,110,007
--------------- ------------- -------------
CASH AND CASH EQUIVALENTS, end of period $ 1,610,756 $ 3,669,742 $ -
=============== ============= ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for interest $ 3,654,662 $ 855,993 $ 823,020
=============== ============= =============
<FN>
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: For the
year ended December 31, 1997 and the three months ended March 31, 1997, the
Company entered into capital lease agreements totaling $2,915,143 and $442,208,
respectively. For the year ended December 31, 1997 and the three months ended
March 31,1998 and 1997, IRB redemptions totaled $1,700,000 in each of these
periods.
The accompanying notes to combined financial statements are an integral
part of these statements.
</FN>
</TABLE>
34
<PAGE>
RABANCO COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND MARCH 31, 1998 (UNAUDITED)
(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Rabanco Companies combined financial statements include the accounts of the
companies listed below (collectively, the Company):
Rabanco Companies (a Washington general partnership)
United Waste Control Corp. (a Washington corporation)
U.S. Disposal Service II (a Washington joint venture)
Recycle Seattle II (a Washington joint venture)
Kent-Meridian Disposal Company (a Washington joint venture)
Regional Disposal Company (a Washington general partnership)
Paper Fibers, Inc. (a Washington corporation)
Paper Fibers Company (a Washington general partnership)
Rabanco, Ltd. and its wholly-owned subsidiary,
Rabanco Regional Landfill Corp. (Washington corporations)
Rabanco Recycling, Inc. (a Washington corporation)
WJR Environmental, Inc. (a Washington corporation)
Waste Associates, Inc. (a Washington corporation)
MJS Associates, Inc. (a Washington corporation)
Rabanco Intermodal/B.C., Inc. (a Washington corporation)
S&L, Inc. (a Washington corporation)
Alaska Street Associates, Inc. (a Washington corporation)
Alaska Street Associates (a Washington general partnership)
The companies, as listed above, combined in these financial statements are
majority owned or are controlled by one family. Three of the companies are
partially owned by persons not related to this family. These latter ownership
interests have been accounted for as minority interests in the combined
financial statements.
The Company is a solid waste management company providing non-hazardous waste
collection, transfer, recycling and disposal services in selected markets in the
Pacific Northwest.
All significant intercompany balances and transactions have been eliminated. The
unaudited interim financial information included herein has 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 from the combined condensed unaudited interim financial information as
of March 31, 1998. The Company believes that the presentations and disclosures
herein are adequate. The unaudited combined financial information as of March
31, 1998 and for the three months ended March 31, 1998 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. Operating results for interim periods are not
necessarily indicative of the results for full years.
Cash and Cash Equivalents
Cash equivalents are investments with original maturities of less than 90 days
and are stated at quoted market prices.
Restricted Cash
Restricted cash is amounts placed in the Industrial Development Revenue Bond
Sinking fund. See additional discussion of the bond requirements in Note 3.
35
<PAGE>
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of
credit risk consist of cash and cash equivalents and trade receivables. The
Company places its cash and cash equivalents with high quality financial
institutions and limits the amount of credit exposure to any one financial
institution.
Concentrations of credit risk with respect to trade receivables are limited due
to the number of customers comprising the Company's customer base. The Company
performs ongoing credit evaluations of its customers, but does not require
collateral to support customer receivables.
Property and Equipment
Property and equipment are recorded at cost. Depreciation is provided on the
straight-line method over the estimated useful lives of buildings and
improvements (30-40 years), vehicles and equipment (5-15 years), containers and
compactors (5-10 years), and furniture and office equipment (5 years). The cost
of landfill airspace, including original acquisition cost and incurred and
projected landfill preparation costs, is amortized based on tonnage as landfill
airspace is consumed. Management periodically reviews the realizability of its
investment in its landfill. Should events and circumstances indicate that the
Company's landfill be reviewed for possible impairment, such review for
recoverability will be made in accordance with Emerging Issues and Task Force
Discussion Issue (EITF) 95-23. The EITF outlines how cash flows for
environmental exit costs should be determined and measured.
Expenditures for major renewals and betterments are capitalized, while
expenditures for maintenance and repairs which do not improve assets or extend
their useful lives are charged to expense as incurred. For the year ended
December 31, 1997, maintenance and repair expenses charged to cost of operations
were $8,013,942. When property is retired, the related cost and accumulated
depreciation are removed from the accounts and any resulting gain or loss is
recognized.
Impairment of Long-Lived Assets
The Company reviews long-lived assets for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable. In the opinion of management, no such events or changes in
circumstances have occurred.
Other Assets
Other assets include notes receivable, landfill closure deposits, permits, and
miscellaneous noncurrent assets. Permits and other intangibles are recorded at
cost and amortized over their useful lives of 5 to 40 years. Additionally, the
Company has capitalized the issuance costs related to the Industrial Revenue
Bonds. These costs are being amortized over the ten-year life of the bonds. At
December 31, 1997, accumulated amortization of other assets totaled $1,392,387.
Accrued Closure and Post-Closure Costs
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 the non-hazardous solid waste landfill currently owned by the
Company. The present value of estimated future costs are accrued based on
accepted tonnage as landfill airspace is consumed. The Company periodically
updates its estimates of future closure and post-closure costs. The impact of
changes determined to be changes in estimates are accounted for on a prospective
basis. Additionally, the Company is required to set aside cash for landfill
closure costs and landfill post-closure costs. This cash is classified as
current or noncurrent based on the maturity of the corresponding liability.
36
<PAGE>
Environmental Costs
The Company accrues for costs associated with environmental remediation
obligations when such costs are probable and reasonably estimable. Accruals for
estimated losses from environmental remediation obligations generally are
recognized no later than completion of the remedial feasibility study. Such
accruals are adjusted as further information develops or circumstances change.
Costs of future expenditures for environmental remediation obligations are not
discounted to their present value. Recoveries of environmental remediation costs
from other parties are recorded when their receipts are deemed probable.
Revenue
Advance billings are recorded as unearned income, and revenue is recognized as
income when services are provided.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, disclosures of contingent
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting periods. Final settlement
amounts could differ from those estimates.
Fair Value of Financial Instruments
The following disclosure of the estimated fair value of financial instruments is
made in accordance with the requirements of Statement of Financial Accounting
Standards (SFAS) No. 107, Disclosures About Fair Value of Financial Instruments.
The Company's financial instruments as defined by SFAS No. 107 include cash and
cash equivalents, accounts receivable, line of credit borrowings, notes payable,
accounts payable and long-term debt. The estimated fair value amounts have been
determined by the Company at December 31, 1997, using available market
information and valuation methodologies described below and in Note 3.
Considerable judgment is required in interpreting market data to develop the
estimates of fair value. Accordingly, the estimates may not be indicative of the
amounts that could be realized in a current market exchange. The use of
different market assumptions or valuation methodologies could have a material
effect on the estimated fair value amounts.
The carrying value of cash and cash equivalents, accounts receivable, line of
credit borrowings, and accounts payable approximate fair values due to the
short-term maturities of these instruments.
Interest Rate Protection Agreements
Interest rate protection agreements are used to reduce interest rate risks and
interest costs of the Company's debt portfolio. The Company enters into these
agreements to change the fixed/variable interest rate mix of the portfolio to
reduce the Company's aggregate exposure to increases in interest rates. The
Company does not hold or issue derivative financial instruments for trading
purposes. Hedge accounting treatment is applied to interest rate derivative
contracts that are designated as hedges of specified debt positions. Amounts
payable or receivable under interest rate swap agreements are recognized as
adjustments to interest expense in the periods in which they accrue. Net
premiums paid for derivative financial instruments are deferred and recognized
ratably over the life of the instruments. Under hedge accounting treatment,
current period income is not affected by the increase or decrease in the fair
market value of derivative instruments as interest rates change and these
instruments are not reflected in the financial statements at fair market value.
Early termination of a hedging instrument does not result in recognition of
immediate gain or loss except in those cases when the debt instruments to which
a contract is specifically linked is terminated.
37
<PAGE>
Income Taxes
The Corporations in the combined company group have elected S corporation status
under the Internal Revenue Code. All remaining entities in the combined company
group are partnerships; therefore, the tax effects of the Company's operations
will be reflected in the individual tax returns of the stockholders and
partners.
Accounting Pronouncements Not Yet Required to be Adopted
During 1997, the Financial Accounting Standards Board issued SFAS No. 130,
Reporting Comprehensive Income and SFAS No. 131, Disclosures About Segments of
an Enterprise and Related Information. The new statements are effective for
fiscal years beginning after December 15, 1997, and are not expected to have a
material impact on the Company's financial statements.
(2) PROPERTY AND EQUIPMENT:
Property and equipment consists of the following at December 31, 1997 and March
31, 1998:
1997 1998
-------------- --------------
(Unaudited)
Land and improvements $ 6,783,177 $ 6,783,177
Landfills 33,896,368 33,963,260
Buildings and improvements 20,303,674 20,521,377
Vehicles and equipment 47,687,297 48,417,513
Containers and compactors 38,758,693 38,965,999
Furniture and office equipment 2,041,417 2,056,998
Construction in progress 696,321 1,921,010
---------------- --------------
150,166,947 152,629,334
Accumulated depreciation and amortization (80,886,508) (83,802,518)
---------------- --------------
$ 69,280,439 $ 68,826,816
- --------- ================ ==============
(3) LINE OF CREDIT, NOTES PAYABLE AND LONG-TERM DEBT:
The Company has a $12,000,000 revolving line of credit with a commercial bank.
Draws on the line are limited to 80% of qualified trade accounts receivable. The
line of credit bears interest at the bank's prime rate (8.50% at December 31,
1997) and expires June 30, 1998. Subsequent to yearend, the line was renewed on
substantially similar terms and expires January 31, 1999. Outstanding borrowings
under this line of credit were $1,700,000 at December 31, 1997.
Notes payable to shareholders and notes payable to related parties consist of
the following at December 31, 1997:
<TABLE>
<CAPTION>
Notes payable to shareholders, interest only payments at rates ranging
from 9% to the bank's prime rate plus 1%,
<S> <C>
due on demand $ 2,820,010
==============
Unsecured notes to related parties, interest only payments at rates
ranging from 7.87% to the bank's prime rate plus 1%,
due on demand $ 5,459,480
==============
</TABLE>
38
<PAGE>
Long-term debt consists of the following at December 31, 1997:
<TABLE>
<CAPTION>
<S> <C>
Note to bank, monthly payments of principal plus interest
at 8.28%, due April 2003 $ 2,647,390
Capital lease obligations, monthly payments of principal plus interest
at rates ranging from 6.75% to 11.15% through
December 2002 7,512,396
Note to bank, monthly payments of principal plus interest
at prime plus 1/2%, due October 2002 973,668
Industrial development revenue bonds (IRBs), monthly payment of
interest at the available rate (4.05% at December 31, 1997), based on
rates for similar bonds as determined by bank, due
January 2002 10,200,000
Note to bank, interest at 8.69%, due April 2003 6,469,195
Note to bank, interest at 8.43%, due January 2002 4,083,333
Note to bank, interest at the bank's prime rate plus 1/2%,
due October 2002 4,869,490
Notes to institutional lender, monthly payments
of principal plus interest at 8.8%, due November 1999 835,461
Other notes payable, interest ranging from 6.9% to
13.15%, through 2000 608,441
--------------
38,199,374
Less - current portion (7,571,670)
--------------
Long-term debt, less current portion $ 30,627,704
==============
</TABLE>
Substantially all assets of the Company are pledged as security for the debt and
$1,700,000 of the notes to shareholders are subordinated to amounts owed to the
bank.
The Company is required to comply with certain restrictive loan covenants which
include requirements with respect to current ratio, debt to equity ratio, total
equity and capital spending. At December 31, 1997, the Company was in compliance
with all covenants except for the capital spending limitation covenant which was
waived by the bank subsequent to yearend.
Assets held under capital lease arrangements at December 31, 1997, had a cost of
$14,006,100 and accumulated amortization of $4,268,600.
The IRBs were issued to fund the cost of acquiring land and constructing and
equipping the landfill. The IRBs require that monthly principal payments of
$141,667 be paid into a sinking fund account controlled by a trustee. A portion
of the bonds may be redeemed annually, at the trustee's option, with cash from
the sinking fund. At December 31, 1997, the balance in this account was
$1,840,000 and the trustee elected to redeem $1,700,000 in bonds in early 1998.
39
<PAGE>
At December 31, 1997, the Company had standby letters of credit totaling
$8,650,900 used to guarantee payment of the IRBs. Additionally, at December 31,
1997, the Company had other standby letters of credit totaling $1,100,000 used
as performance guarantees. These financial instruments are issued in the normal
course of business and are not reflected in the accompanying balance sheets. The
underlying obligations of the financial instruments are valued based on the
likelihood of performance being required. Management does not expect any
material losses to result from these off balance sheet instruments based on
historical results, and therefore, is of the opinion that the fair value of
these instruments is zero.
The Company has entered into interest rate protection agreements with reputable
commercial banks to reduce its exposure to fluctuations in variable interest
rate. The Company has interest rate swap agreements the effect of which is to
fix the interest rates on the $2,647,390 note payable to a bank at 8.28% and the
$6,469,195 note payable to a bank at 8.69%. In addition, the Company has an
interest rate swap agreement the effect of which is to fix the interest rate on
a portion of the IRBs at 4%.
The carrying value of notes payable and long-term debt approximates fair value
as these instruments are indexed to the current prime lending rate established
by the lender or currently available market rates.
At December 31, 1997, the future payments of long-term debt are as follows:
<TABLE>
<CAPTION>
Capital Long-Term
Leases Debt Total
------------ --------------- ------------
<S> <C> <C> <C>
1998 $ 2,554,092 $ 5,708,715 $ 8,262,807
1999 2,491,431 6,125,215 8,616,646
2000 1,484,204 5,603,245 7,087,449
2001 1,364,979 5,820,172 7,185,151
2002 881,086 6,728,297 7,609,383
Thereafter - 701,334 701,334
------------- --------------- --------------
8,775,792 30,686,978 39,462,770
Less - amounts representing interest (1,263,396) - (1,263,396)
------------- --------------- --------------
$ 7,512,396 $ 30,686,978 $ 38,199,374
============= =============== ==============
</TABLE>
(4) ADVANCES FROM RELATED PARTIES:
Advances from related parties are due on demand and interest is accrued at prime
plus 1%. During 1997, interest of $109,411 was expensed related to these
advances.
(5) CLOSURE AND POST-CLOSURE COSTS:
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, in accordance with Subtitle D, is $120,310,455 as shown below,
while the present value of such estimate is $21,224,705.
The Company's estimate of total future payments for closure and post-closure
liabilities for its landfill is as follows:
2000 $ 733,700
2001 -
2002 7,525,208
Thereafter 112,051,547
---------------
$ 120,310,455
===============
40
<PAGE>
(6) STOCKHOLDERS' EQUITY:
The authorized, issued and outstanding shares of the Company's capital stock are
as follows:
<TABLE>
<CAPTION>
Issued and Outstanding at
----------------------------------
Authorized December 31, March 31,
Shares 1997 1998
------------- ------------------ -------------
(Unaudited)
<S> <C> <C> <C>
Rabanco, Ltd. 50,000 352 352
Rabanco Recycling, Inc. 50,000 6,667 6,667
United Waste Control Corp. 500 105 105
S&L, Inc. 10 4 4
Rabanco Intermodal/B.C., Inc. 50,000 10,000 10,000
WJR Environmental, Inc. 1,000 1,000 1,000
Waste Associates, Inc. 1,000 1,000 1,000
Paper Fibers, Inc. 10,000 100 100
MJS Associates, Inc. 1,000 1,000 1,000
Alaska Street Associates, Inc. 10,000 9,000 9,000
----------- ------------- -----------
173,510 29,228 29,228
=========== ============= ===========
</TABLE>
(7) COMMITMENTS AND CONTINGENCIES:
The Company is subject to extensive and evolving laws and regulations and has
implemented its own environmental safeguards to respond to regulatory
requirements. In the normal course of conducting its operations, the Company may
become involved in certain legal and administrative proceedings. Some of these
actions may result in fines, penalties or judgments against the Company which
may have an impact on earnings for a particular period. Management expects that
such matters in process at December 31, 1997 and March 31, 1998, which have not
been accrued in the combined balance sheets will not have a material adverse
effect on the Company's combined liquidity, financial position or results from
operations.
Operating Leases
The Company has operating lease agreements for service facilities, office space
and equipment. At December 31, 1997, future minimum payments under noncancelable
operating leases with terms in excess of one year are as follows:
Unrelated Related
Parties Parties Total
------------- ------------ --------------
1998 $ 368,484 $ 530,059 $ 898,543
1999 368,484 530,059 898,543
2000 260,485 968,712 1,229,197
2001 202,578 1,066,589 1,269,167
2002 195,846 915,078 1,110,924
Thereafter 1,626,203 6,405,549 8,031,752
-------------- --------------- --------------
$ 3,022,080 $ 10,416,046 $ 13,438,126
============== =============== ==============
The minimum lease payments are net of sublease income from unrelated parties of
$1,013,000. Rental expense under operating leases was $1,155,000 for the year
ended December 31, 1997.
41
<PAGE>
Uncertainties Regarding Environmental Actions
Certain individual members of the shareholder family and the Company have been
notified that they were potentially responsible parties in an environmental
matter. The Company believes it does not have any liability related to the
matter; however, in exchange for releases from potential claims, the Company has
agreed to pay $1,000,000 towards a settlement. A final settlement and the
release of claims were obtained in March 1998. The settlement amount is recorded
as a liability and expense in the 1997 financial statements.
Administrative Proceeding
The Company is involved in an administrative proceeding with the Equal
Employment Opportunity Commission regarding charges filed by a former employee.
Outside counsel for the Company has advised that the parties have agreed to a
$200,000 lump sum settlement. The settlement amount is recorded as a liability
and expense in the 1997 financial statements.
Other Commitments
The Company has ongoing arrangements with certain companies that were affiliates
prior to July 1991. These arrangements include noncompetition and supply and
delivery agreements having terms of up to four years at December 31, 1997.
Included in the financial statements for 1997, is a net of approximately $10
million in revenue governed by these arrangements.
Additionally, the Company is a guarantor on a $1,600,000 mortgage of a building
owned by a related party.
Hauling and Disposal Contracts
The Company has entered into numerous contracts with counties and commercial
customers for the hauling and disposal of refuse. The terms of major contracts
have initial expiration dates beginning in 1999 and provide for renewal periods
ranging from 5 to 20 years.
Landfill Operation
The Company has entered into an agreement with Klickitat County governing the
operations of the Company's landfill. At December 31, 1997, the agreement has 16
years remaining with an option for three five-year renewals. The Company is
obligated to pay the county quarterly fees ranging from $2.07 to $3.55 per ton.
Additionally, the Company pays $75,000 per year to fund certain items such as
scholarships and economic development and provides certain disposal services
within the county free of charge.
(8) RETIREMENT PLAN:
Through December 31, 1996, the Company participated in a defined benefit plan
(the "Plan") which covered substantially all employees of the Company. Effective
December 31, 1996, the Plan benefits were frozen and the Company announced its
intention to terminate the Plan. During 1997, the Plan was terminated and
distributions were made to the Plan participants.
Effective October 1996, the Company adopted a defined contribution 401(k) plan
(the "401(k)") covering substantially all employees not covered by collective
bargaining agreements. Employees are eligible to participate in the 401(k) after
one year of service. The Company contributes 3% of eligible employee
compensation to the 401(k) and will match employee contributions to a maximum of
2% of compensation. During 1997, total contributions and costs incurred by the
Company under the 401(k) were $480,000.
(9) SUBSEQUENT EVENTS:
On June 25, 1998, shareholders of the Company exchanged with Allied Waste
Industries, Inc. (Allied) all outstanding shares of the Company's common stock
and the partnership interests described in Note 1 for shares of Allied's common
stock.
42
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Description
-------- -----------------------------------------------------------
<S> <C> <C>
2.1 Stock Purchase Agreement dated September 17, 1996 among
the Company, Allied, NA, 3294862 Canada Inc., Laidlaw Inc.,
Laidlaw Transportation, Inc., Laidlaw Waste Systems, Inc.,
Laidlaw Waste Systems (Canada) Ltd. and Laidlaw Medical
Services Ltd. Exhibit 2.1 to the Company's Current Report
on Form 8-K dated October 2, 1996, is incorporated herein
by reference.
2.2 Purchase Agreement relating to the 1996 Notes dated November
25, 1996. Exhibit 2.1 to the Company's Current Report on
Form 8-K dated December 19, 1996, is incorporated herein
by reference.
2.3 Share Purchase Agreement dated January 15, 1997 among the
Company, Allied Waste Holdings (Canada) Ltd., Laidlaw Waste
Systems, Inc., USA Waste Services, Inc. and Canadian Waste
Services, Inc. Exhibit 10.0 to the Company's Current Report
on Form 8-K dated January 30, 1997, is incorporated herein
by reference.
2.4* Amended and Restated Agreement and Plan of Reorganization
between Allied Waste Industries, Inc. and Rabanco Acquisition Company,
Rabanco Acquisition Company Two, Rabanco Acquisition Company Three,
Rabanco Acquisition Company Four, Rabanco Acquisition Company Five,
Rabanco Acquisition Company Six, Rabanco Acquisition Company Seven,
Rabanco Acquisition Company Eight, Rabanco Acquisition Company Nine,
Rabanco Acquisition Company Ten, Rabanco Acquisition Company Eleven,
and Rabanco Acquisition Company Twelve.
3.1 Amended Certificate of Incorporation of the Company (Incorporated
herein by reference to Exhibit 3.1 to the Company's report on Form
10-K for the fiscal year ended December 31, 1996).
3.2 Certificate of Designation, Preferences, Rights and Limitations of 7%
Cumulative Convertible Preferred Stock, par value $.10 per share
dated April 27, 1994. Exhibit 3.2 to Post-Effective Amendment
Number 1 to the Company's Registration Statement on Form S-1
(No. 33-75070) is incorporated herein by reference.
3.3 Amended and Restated Bylaws of the Company as of May 13, 1997.
Exhibit 3.2 to the Company's report on Form 10-Q for the quarter
ended June 30, 1997 is incorporated herein by reference.
4.1 Specimen certificate for shares of Common Stock par value $.01 per
share. Exhibit 4.2 of the Company's Registration Statement on Form
S-1 (No. 33-48507) is incorporated herein by reference.
4.2 Indenture relating to the 1994 Notes dated January 15, 1994 between
the Company and First Trust National Association, as trustee ("First Trust").
Exhibit 4.1 to the Company's Registration Statement on Form S-1
(No. 33-73110) is incorporated herein by reference.
4.3 Specimen certificate representing the 1994 Notes. Exhibit 4.2 of the
Company's Registration Statement on Form S-1 (No. 33-48507) is
incorporated herein by reference.
</TABLE>
43
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
4.4 Second Supplemental Indenture relating to the 1994 Notes dated
June 30, 1994 between the Company and First Trust. Exhibit 1.1 to the
Company's Current Report on Form 8-K dated December 29, 1994,
is incorporated herein by reference.
4.5 Third Supplemental Indenture relating to the 1994 Notes dated January 31,
1995 between the Company and First Trust, Exhibit 10.3 to the Company's
Quarterly Report on Form 10-Q dated August 10, 1995, is incorporated
herein by reference.
4.6 Fourth Supplemental Indenture relating to the 1994 Notes dated January 23,
1996, between the Company and First Trust. Exhibit 10.1 to the Company's
Current Report on Form 8-K dated January 22, 1996, is incorporated herein by
reference.
4.7 Fifth Supplemental Indenture relating to the 1994 Notes dated July 30, 1996
between the Company and First Trust, Exhibit 10.2 to the Company's Quarterly
Report on Form 10-Q dated August 14, 1996, is incorporated herein by reference.
4.8 Indenture relating to the 1996 Notes dated February 28, 1997 between the
Company and First Trust. Exhibit 4.1 to the Company's Registration Statement on
Form S-4 (No. 333-22575) is incorporated herein by reference.
4.9 1991 Incentive Stock Plan of the Company. Exhibit 10.T to the Company's Form 10 dated May 14, 1991,
is incorporated herein by reference.
4.10 1991 Non-Employee Director Stock Plan of the Company. Exhibit 10.U to the Company's Form 10
dated May 14, 1991, is incorporated herein by reference.
4.11 1993 Incentive Stock Plan of the Company. Exhibit 10.3 to the Company's
Registration Statement on Form S-1 (No. 33-73110) is incorporated herein
by reference.
4.12 1994 Amended and Restated Non-Employee Director Stock Option Plan of
the Company. Exhibit B to the Company's Definitive Proxy Statement in
accordance with Schedule 14A dated April 28, 1994, is incorporated herein
by reference.
4.13 Amendment to the 1994 Amended and Restated Non-Employee Director
Stock Option Plan. Exhibit 10.2 to the Company's Quarterly Report on Form
10-Q dated August 10, 1995, is incorporated herein by reference.
4.14 Amended and Restated 1994 Incentive Stock Plan. Exhibit 10.1 to the Company's
Quarterly Report on Form 10-Q dated May 31, 1996, is incorporated herein
by reference.
4.15 Indenture, dated as of May 15, 1997, by and among the Company and First
Bank National Association with respect to the Senior Discount Notes and
Exchange Notes. Exhibit 4.1 to the Company's Registration Statement on
Form S-4 (No. 333-31231) is incorporated herein by reference.
4.16 Indenture, dated as of December 1, 1996, by and among the Company, the
Guarantors and First Bank National Association with respect to the 1996
Notes and Exchange Notes. Exhibit 4.1 to the Company's Registration
Statement on Form S-4 (No. 333-22575) is incorporated herein by reference.
4.17 First Supplemental Indenture dated December 30, 1996 related to the 1996
Notes. Exhibit 4.2 to the Company's Registration Statement on Form S-4
(No. 333-22575) is incorporated herein by reference.
4.18 Second Supplemental Indenture dated April 30, 1997 related to the 1996
Notes. Exhibit 4.3 to the Company's Registration Statement on Form S-4
(No. 333-22575) is incorporated herein by reference.
4.19 Senior Subordinated Guarantee dated as of December 1, 1996 related
to the 1996 Notes. Exhibit 4.5 to the Company's Registration Statement
on Form S-4 (No. 333-22575) is incorporated herein by reference.
</TABLE>
44
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
4.20 Amendment No. 1 to the 1991 Incentive Stock Plan dated November 1,
1996. Exhibit 4.20 to the Company's Annual Report on Form 10-K dated
March 31, 1998 is incorporated herein by reference.
10.1** Credit Agreement dated as of June 18, 1998 among Allied Waste North America
Inc., Allied Waste Industries, Inc., certain lenders, Credit Suisse, First
Boston and Goldman Sachs Credit Partners L.P., as Co-Syndication Agents,
Citibank, N.A., as Issuing Bank and Citicorp USA, Inc., as Administrative
Agent
10.2 Agreement dated September 17, 1996, between Allied Waste Industries,
Inc., and the Laidlaw Group. Exhibit 10.1 to the Company's Current
Report on Form 8-K dated October 2, 1996, is incorporated herein by
reference.
10.3 Credit Agreement among the Company, Allied NA, and the various lenders
represented by Goldman Sachs Credit Partners, L.P., Credit Suisse and
Citibank, N.A. dated December 30, 1996. Exhibit 10.11 to the Company's
report on Form 10-K for the year ended December 31, 1996 is incorporated
herein by reference.
10.4 Securities Purchase Agreement dated April 21, 1997 between Apollo Investment
Fund III, L.P., Apollo Overseas Partners III, L.P., and Apollo (U.K.) Partners III,
L.P.; Blackstone Capital Partners II Merchant Banking Fund L.P., Blackstone
Offshore Capital Partners II L.P. and Blackstone Family Investment Partnership
II L.P;Laidlaw Inc. and Laidlaw Transportation, Inc.; and Allied Waste Industries,
Exhibit 10.1 to the Company's report on Form 10-Q for the quarter ended
March 31, 1997 is incorporated herein by reference.
10.5 Shareholders Agreement dated as of April 14, 1997 between Allied Waste Industries,
Inc. and Apollo Investment Fund III, L.P., Apollo Overseas Partners III, L.P., and
Apollo (U.K.) Partners III, L.P.; Blackstone Capital Partners II Merchant Banking Fund
L.P., Blackstone Offshore Capital Partners II L.P. and Blackstone Family Investment
Partnership II L.P. Exhibit 10.2 to the Company's report on Form 10-Q for the quarter
ended March 31, 1997 is incorporated herein
by reference.
10.6 Amended and Restated Shareholders Agreement dated as of April 21, 1997 between
Allied Waste Industries, Inc. and Apollo Investment Fund III, L.P., Apollo Overseas
Partners III, L.P., and Apollo (U.K.) Partners III, L.P.; Blackstone Capital Partners II
Merchant Banking Fund L.P., Blackstone Offshore Capital Partners II L.P. and
Blackstone Family Investment Partnership II L.P. Exhibit 10.3 to the Company's
report on form 10-Q for the quarter ended March 31, 1997 is incorporated herein
by reference.
10.7 Registration Rights Agreement dated as of April 21, 1997 between Allied Waste
Industries, Inc. and Apollo Investment Fund III, L.P., Apollo Overseas Partners
III, L.P., and Apollo (U.K.) Partners III, L.P.; Blackstone Capital Partners
II Merchant Banking Fund L.P., Blackstone Offshore Capital Partners II
L.P. and Blackstone Family Investment Partnership II L.P. Exhibit 10.4 to the
Company's report on Form 10-Q for the quarter ended March 31, 1997 is
incorporated herein by reference.
10.8 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. Exhibit 10.1 to the Company's report on Form 10-Q for the
quarter ended June 30, 1997 is incorporated herein by reference.
10.9 Executive Employment Agreement between the Company and with Henry L. Hirvela
dated June 6, 1997. Exhibit 10.2 to the Company's report on Form 10-Q for the
quarter ended June 30, 1997 is incorporated herein by reference.
</TABLE>
45
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
10.10 Third Amendment to Executive Employment Agreement between the Company and with
Thomas H. Van Weelden dated January 30, 1997. Exhibit 10.3 to the Company's
report on form 10-Q for the quarter ended June 30, 1997 is incorporated
herein by reference.
10.11 Executive Employment Agreement between the Company and with Larry D. Henk dated
June 6, 1997. Exhibit 10.4 to the Company's report on Form 10-Q for the quarter
ended June 30, 1997 is incorporated herein by reference.
10.12 Executive Employment Agreement between the Company and with Steven M. Helm
dated June 6, 1997. Exhibit 10.5 to the Company's report on Form 10-Q for the
quarter ended June 30, 1997 is incorporated herein by reference.
10.13 Third Amendment to Executive Employment Agreement between the Company and
with Roger A. Ramsey dated January 30, 1997, Exhibit 10.6 to the Company's
report on Form 10-Q for the quarter ended June 30, 1997 is incorporated
herein by reference.
10.14 Registration Rights Agreement, dated as of December 5, 1996, by and among the
Company, Goldman, Sachs & Co., Merrill Lynch & Co., and Credit Suisse First
Boston. Exhibit 10.1 to the Company's Registration Statement on Form S-4 (No.
333-31231) is incorporated herein by reference.
10.15 Executive Employment Agreement between the Company and with Peter S. Hathaway
dated June 6, 1997. Exhibit 10.14 to the Company's Annual Report on Form 10-K
dated March 31, 1998 is incorporated herein by reference.
10.16 Executive Employment Agreement between the Company and with Michael G. Hannon
dated June 6, 1997. Exhibit 10.15 to the Company's Annual Report on Form 10-K
dated March 31, 1998 is incorporated herein by reference.
10.17 Share Purchase Agreement between Allied Waste Industries, Inc. and Allied Waste
Holdings (Canada) Ltd. and Laidlaw Waste Systems, Inc. and USA Waste Services, Inc.
and Canadian Waste Services Inc. dated January 15, 1997. Exhibit 10.0 to the Company's
report on Form 8-K dated January 30, 1997 is incorporated herein by reference.
12 Ratio of earnings to fixed charges.
23 Consent of Arthur Andersen LLP
27.1 Financial data schedule for the six months ended June 30, 1998.
27.2 Restated financial data schedule for the six months ended June 30, 1997.
</TABLE>
* The Agreement omits certain exhibits as
set forth in this quarterly report. The
Company will provide a copy of any
omitted exhibit upon request of the
Securities and Exchange Commission,
subject to the Company's right to
request confidential treatment of any
requested exhibit.
Brief Description of Omitted Exhibits
EXHIBIT 2.1 (a) Agreement and Plan of Merger
EXHIBIT 2.1 (b) Articles of Merger
EXHIBIT 5.8 Josie Agreement
EXHIBIT 7.10 (b)(iv) Attachment to Form 1120
EXHIBIT 7.10 (b)(v) Consent to Election Under IRC Section 1362 (c)(3)
EXHIBIT 7.10 (d) Partnership Tax Returns
EXHIBIT 7.3 Affiliates Investment Agreement
EXHIBIT 8.2.5 Opinion of Companies'Counsel
EXHIBIT 8.3.4 Opinion of Parent Counsel
** The Agreement omits certain exhibits as
set forth in this quarterly report. The
Company will provide a copy of any
omitted exhibit upon request of the
Securities and Exchange Commission,
subject to the Company's right to
request confidential treatment of any
requested exhibit.
46
<PAGE>
Brief Description of Omitted Exhibits
Schedule I Subsidiary Guarantors
Schedule 2.01 List of commitments
Schedule 2.13 Existing Letters of Credit
Schedule 4.08 Subsidiaries; other Equity Investments;
Inactive Subsidiaries
Schedule 4.09 Litigation
Schedule 4.16 Environmental Matters
Schedule 4.17 Insurance
Schedule 6.02 Liens
EXHIBIT A-1 Form of Revolving Credit Note
EXHIBIT A-2 Form of Term Note
EXHIBIT B-1 Form of Pledge Agreement
EXHIBIT B-2 Form of Security Agreement
EXHIBIT C Form of Notice of Borrowing
EXHIBIT D-1 Form of Opinion of Counsel to the Obligors
EXHIBIT D-2 Form of Opinion of General Counsel of the Company
EXHIBIT E Form of Opinion of Special New York Counsel to CUSA
EXHIBIT F Form of Assignment and Acceptance
EXHIBIT G Form of Assumption Agreement
(b) Reports on Form 8-K
May 18, 1998 The Company's Current Report on Form 8-K reports the
signing of an agreement to acquire the Rabanco Companies.
47
<PAGE>
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/ JAMES S. ENG
------------------------------
James S. Eng
Corporate Controller
(Principal Accounting Officer)
Date: August 14, 1998
48
================================================================================
AMENDED AND RESTATED
AGREEMENT AND PLAN OF REORGANIZATION
================================================================================
ALLIED WASTE INDUSTRIES, INC., RABANCO ACQUISITION COMPANY, RABANCO
ACQUISITION COMPANY TWO, RABANCO ACQUISITION COMPANY THREE, RABANCO ACQUISITION
COMPANY FOUR, RABANCO ACQUISITION COMPANY FIVE, RABANCO ACQUISITION COMPANY SIX,
RABANCO ACQUISITION COMPANY SEVEN, RABANCO ACQUISITION COMPANY EIGHT, RABANCO
ACQUISITION COMPANY NINE, RABANCO ACQUISITION COMPANY TEN, RABANCO ACQUISITION
COMPANY ELEVEN, AND RABANCO ACQUISITION COMPANY TWELVE
and
RABANCO, LTD.,
RABANCO RECYCLING, INC.,
UNITED WASTE CONTROL CORP.,
RABANCO INTERMODAL/B.C., INC.,
WJR ENVIRONMENTAL, INC.,
WASTE ASSOCIATES, INC.,
PAPER FIBERS, INC.
MJS ASSOCIATES, INC.
S&L, INC.
ALASKA STREET ASSOCIATES, INC.
SSWI, INC.
AND
CCAI, INC.
Dated as of June 25, 1998
<PAGE>
iii
Table of Contents
Page
ARTICLE I DEFINITIONS........................................................2
ARTICLE II THE MERGERS.......................................................9
2.1 EFFECTIVE TIME OF THE MERGERS.......................................9
2.2 CLOSING.............................................................9
2.3 EFFECTS OF THE MERGERS..............................................9
2.4 CONVERSION OF STOCK OF COMPANIES....................................9
2.5 DELIVERY OF CERTIFICATES...........................................10
2.6 TAX-DEFERRED REORGANIZATION........................................10
2.7 ACCOUNTING TREATMENT...............................................10
2.8 NO FURTHER OWNERSHIP RIGHTS IN CAPITAL STOCK OF THE COMPANIES......10
2.9 POST-CLOSING ADJUSTMENTS...........................................11
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANIES.................12
3.1 ORGANIZATION AND STANDING; SUBSIDIARIES............................12
3.2 CAPITAL STRUCTURE..................................................12
3.3 AUTHORITY..........................................................13
3.4 COMPLIANCE WITH LAWS AND OTHER INSTRUMENTS.........................13
3.5 FINANCIAL STATEMENTS...............................................14
3.6 ABSENCE OF UNDISCLOSED LIABILITIES.................................15
3.7 NO MATERIAL ADVERSE CHANGE.........................................15
3.8 TAXES..............................................................15
3.9 LABOR CONTROVERSIES................................................16
3.10 EMPLOYEE BENEFIT PLANS.............................................17
3.11 CERTAIN AGREEMENTS.................................................17
3.12 LITIGATION.........................................................17
3.13 TITLE TO AND CONDITION OF ASSETS...................................18
3.14 MAJOR CONTRACTS....................................................18
3.15 MATERIAL RELATIONS.................................................19
3.16 REAL PROPERTY......................................................19
3.17 ENVIRONMENTAL MATTERS..............................................20
3.18 TECHNOLOGY.........................................................21
3.19 QUESTIONABLE PAYMENTS..............................................22
3.20 BROKERS AND FINDERS................................................22
3.21 ACCOUNTING MATTERS.................................................22
3.22 BOOKS AND RECORDS..................................................22
3.23 INSURANCE..........................................................22
3.24 COMPLETE DISCLOSURE................................................23
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND SUBS................23
4.1 ORGANIZATION; STANDING AND POWER...................................23
4.2 CAPITAL STRUCTURE..................................................23
4.3 AUTHORITY..........................................................24
4.4 SEC DOCUMENTS AND FINANCIAL STATEMENTS.............................24
4.5 NO MATERIAL ADVERSE CHANGE.........................................25
4.6 COMPLIANCE WITH LAWS AND OTHER INSTRUMENTS.........................25
4.7 INTERIM OPERATION OF SUBS..........................................25
4.8 ACCOUNTING MATTERS.................................................25
4.9 BROKERS AND FINDERS................................................26
ARTICLE V COVENANTS OF COMPANIES............................................26
5.1 CONDUCT OF BUSINESS................................................26
5.1.1 Ordinary Course...............................................26
5.1.2 Dividends: Changes in Stock..................................27
5.1.3 Issuance of Securities........................................27
5.1.4 Governing Documents...........................................27
5.1.5 No Acquisitions...............................................27
5.1.6 No Dispositions...............................................27
5.1.7 Indebtedness..................................................27
5.1.8 Plans; Employees..............................................27
5.1.9 Claims........................................................28
5.1.10 Agreement.....................................................28
5.2 BREACH OF REPRESENTATION AND WARRANTIES............................28
5.3 CONSENTS...........................................................28
5.4 REASONABLE EFFORTS.................................................28
5.5 TAX RETURNS........................................................28
5.7 POOLING............................................................28
5.7 AUDITOR'S CONSENT..................................................28
5.8 ACQUISITION OF ESSENTIAL ASSETS....................................29
ARTICLE VI COVENANTS OF PARENT..............................................29
6.1 BREACH OF REPRESENTATIONS AND WARRANTIES...........................29
6.2 CONSENTS...........................................................29
6.3 REASONABLE EFFORTS.................................................29
6.4 POOLING............................................................29
6.5 SEVERANCE..........................................................29
6.6 COMBINED FINANCIAL RESULTS.........................................29
ARTICLE VII ADDITIONAL AGREEMENTS...........................................30
7.1 ACCESS TO INFORMATION..............................................30
7.2 LEGAL CONDITIONS TO THE MERGERS....................................30
7.3 AFFILIATES.........................................................30
7.4 HSR ACT FILINGS....................................................31
7.5 EMPLOYEE BENEFITS..................................................31
7.6 OFFICERS AND DIRECTORS.............................................32
7.7 EXPENSES...........................................................32
7.8 ADDITIONAL AGREEMENTS..............................................32
7.9 PUBLIC ANNOUNCEMENTS...............................................32
7.10 TAXES..............................................................32
7.11 CERTAIN INSURANCE POLICIES.........................................35
ARTICLE VIII CONDITIONS PRECEDENT...........................................35
8.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGERS........35
8.1.1 Consents......................................................36
8.1.2 No Restraints.................................................36
8.1.3 No Burdensome Condition.......................................36
8.2 CONDITIONS OF OBLIGATIONS OF PARENT AND SUBS.......................36
8.2.1 Representations and Warranties of Company.....................36
8.2.2 Performance of Obligations of Companies.......................36
8.2.3 Affiliates....................................................36
8.2.4 Pooling of Interests..........................................37
8.2.5 Opinion of Companies' Counsel.................................37
8.3 CONDITIONS OF OBLIGATIONS OF COMPANIES.............................37
8.3.1 Representations and Warranties of Parent and Subs.............37
8.3.2 Performance of Obligations of Parent and Subs.................37
8.3.3 Pooling of Interests..........................................37
8.3.4 Opinion of Parent Counsel.....................................37
ARTICLE IX INDEMNIFICATION................................................38
9.1 INDEMNIFICATION BY SHAREHOLDERS....................................38
9.2 INDEMNIFICATION BY PARENT..........................................38
9.3 NOTICE OF CLAIMS...................................................39
9.4 DEFENSE OF THIRD PARTY CLAIMS......................................39
9.5 TIME LIMIT.........................................................40
9.6 LIMITATIONS........................................................40
9.7 TAX CONSEQUENCES..................................................41
9.8 SPECIAL INDEMNITY FOR PERMIT MATTER...............................41
ARTICLE X TERMINATION, AMENDMENT AND WAIVER.................................41
10.1 TERMINATION........................................................41
10.2 EFFECT OF TERMINATION..............................................42
10.3 AMENDMENT..........................................................42
10.4 EXTENSION, WAIVER..................................................42
ARTICLE XI GENERAL PROVISIONS...............................................42
11.1 NONSURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS..........42
11.2 NOTICES............................................................43
11.3 INTERPRETATION.....................................................45
11.4 COUNTERPARTS.......................................................45
11.5 MISCELLANEOUS......................................................45
11.6 NO JOINT VENTURE...................................................45
11.7 TRANSACTIONAL EXPENSES.............................................45
11.8 GOVERNING LAW......................................................45
<PAGE>
EXHIBIT 2.1 (a)...Agreement and Plan of Merger
EXHIBIT 2.1 (b)...Articles of Merger
EXHIBIT 5.8....... Josie Agreement
EXHIBIT 7.3....... Affiliates Agreement
EXHIBIT 8.2.5..... Opinion of Companies' Counsel
EXHIBIT 8.3.4..... Opinion of Parent Counsel
<PAGE>
AMENDED AND RESTATED
AGREEMENT AND PLAN OF REORGANIZATION
THIS AMENDED AND RESTATED AGREEMENT AND PLAN OF REORGANIZATION, is made
and entered into as of June 25, 1998, by and among Allied Waste Industries,
Inc., a Delaware corporation ("Parent"); Rabanco Acquisition Company, Rabanco
Acquisition Company Two, Rabanco Acquisition Company Three, Rabanco Acquisition
Company Four, Rabanco Acquisition Company Five, Rabanco Acquisition Company Six,
Rabanco Acquisition Company Seven, Rabanco Acquisition Company Eight, Rabanco
Acquisition Company Nine, Rabanco Acquisition Company Ten, Rabanco Acquisition
Company Eleven, and Rabanco Acquisition Company Twelve, each of which is a
Washington corporation and a wholly-owned subsidiary of Parent (each a "Sub" and
together the "Subs"); Rabanco, Ltd., a Washington corporation, ("Limited"),
Rabanco Recycling, Inc., a Washington corporation ("Recycling"), United Waste
Control Corp., a Washington corporation ("United"), Rabanco Intermodal/B.C.,
Inc., a Washington corporation ("Intermodal"), WJR Environmental, Inc., a
Washington corporation ("WJR"), Waste Associates, Inc., a Washington corporation
("Waste Associates"), Paper Fibers, Inc., a Washington corporation ("Paper
Fibers"), MJS Associates, Inc., a Washington corporation ("MJS"), Alaska Street
Associates, Inc., a Washington corporation ("Alaska Street"), S&L, Inc., a
Washington corporation ("S&L"), SSWI, Inc., a Washington QSSS corporation
("SSWI"), and CCAI, inc., a Washington QSSS corporation ("CCAI") (each a
"Company" and collectively, the "Companies"); and Warren J. Razore, Josie
Razore, Marie Schulze, and Carmen Sepic (collectively the "Razore
Shareholders"), and Sphere Solid Waste, Inc., a Washington corporation and CCA,
inc., a Washington corporation (collectively the "Non-Razore Shareholders") (The
Razore Shareholders and the Non-Razore Shareholders are sometimes referred to
herein individually as a "Shareholder" and collectively as the "Shareholders").
RECITALS
WHEREAS, Parent, Rabanco Acquisition Company, Limited, Recycling,
United, Intermodal, WJR, Waste Associates, Paper Fibers, MJS, and the Razore
Shareholders entered into an Agreement and Plan of Reorganization dated as of
April 23, 1998 (the "First Agreement");
WHEREAS, Section 7.13 of the First Agreement provided for its amendment
to include Alaska Street, S&L, SSWI, CCAI, and the Non-Razore Shareholders;
WHEREAS, Alaska Street, S&L, SSWI, CCAI, and the Non-Razore
Shareholders desire to become parties to the First Agreement; and
WHEREAS, the parties hereto desire to amend and restate the First
Agreement in its entirety, with the intent that the First Agreement be
superseded by this Agreement;
INTENDING TO BE LEGALLY BOUND, and in consideration of the foregoing
premises and the mutual representations, warranties, covenants and agreements
contained herein, Parent, Subs, the Companies, and the Shareholders hereby agree
as follows:
ARTICLE I
DEFINITIONS
For purposes of this Agreement, capitalized terms shall have the
following meanings:
"Aboveground Storage Tank" shall have the meaning ascribed to such term
in RCRA or any applicable state or local statute, law, ordinance, code, rule,
regulation, or Order.
"Adjustment Amount" shall have the meaning given in Section 2.9(c).
"Affiliate" shall mean any person or entity that is an affiliate for
purposes of pooling regulations.
"Affiliate Agreements" shall have the meaning given in Section 7.3.
"Agreement" shall mean this Amended and Restated Agreement and Plan of
Reorganization.
"Alaska Street" shall mean Alaska Street Associates, Inc., a Washington
corporation.
"Antitrust Laws" shall mean the HSR Act, the Sherman Act, as amended,
the Clayton Act, as amended, the Federal Trade Commission Act, as amended, and
any other federal, state or foreign statutes, rules, regulations, or Orders that
are designed to prohibit, restrict or regulate actions having the purpose or
effect of monopolization or restraint of trade.
"Assets" shall mean all of the properties and assets owned or leased by
any Company or Subsidiary, except for the Owned Properties and the Leased
Premises, whether personal or mixed, tangible or intangible, wherever located.
"Business Condition" with respect to any entity shall mean the
business, financial condition, results of operations or assets (without giving
effect to the consequences of the transactions contemplated by this Agreement)
of such entity and its subsidiaries taken as a whole.
"CCAI" shall mean CCAI, inc., a Washington QSSS corporation.
"CERCLA" shall mean the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended by the Superfund Amendment
and Reauthorization Act of 1986, 42 U.S.C. ss.ss. 9601, et. seq.
"Claim Notice" shall mean a written notice in reasonable detail of the
facts and circumstances that form the basis of an indemnification claim
hereunder and setting forth an estimated amount of the potential Losses, if
possible, and the sections of this Agreement upon which the claim for
indemnification for such Losses is based.
"Closing" shall mean the closing of the Merger.
"Closing Date" shall have the meaning given in Section 2.2.
"Closing Date Working Capital" shall have the meaning given in Section
2.9.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Company" and "Companies" shall mean any and all, respectively, of the
following companies: Limited, Recycling, United, Intermodal, WJR, Waste
Associates, Paper Fibers, MJS, Alaska Street, S&L, CCAI, and SSWI.
"Companies' Disclosure Schedule" shall mean a document referring
specifically to the representations and warranties in this Agreement that is
delivered by the Companies to Parent prior to the execution of this Agreement.
"Company Percentages" shall have the meaning given in Section 2.4.
"Companies' Required Statutory Approvals" shall have the meaning given
in Section 3.4(c).
"Company Shares" shall mean the issued and outstanding shares of
capital stock of the Companies.
"Company Voting Debt" shall mean bonds, debentures, notes, or other
indebtedness the holders of which have the right to vote (or convertible or
exercisable into securities having the right to vote) with holders of Company
Shares on any matter.
"Confidentiality Agreement" shall mean that certain Confidentiality and
Nonsolicitation Agreement entered into between Rabanco Companies and Parent.
"Consent" shall mean a consent, approval, Order or authorization of or
registration, declaration or filing with or exemption by a Governmental Entity.
"Counternotice" shall mean a written objection to a claim or payment
setting forth the basis for disputing such claim or payment.
"Current Balance Sheets" shall have the meaning given in Section 3.5.
"Discharge" shall mean any manner of spilling, leaking, dumping,
discharging, releasing or emitting, as any of such terms may further be defined
in any Environmental Law, into ground water, surface water, or soil.
"Effective Time" shall have the meaning given in Section 2.1.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
"Environmental Audits" shall mean studies or investigations undertaken
to assess compliance with Environmental Laws.
"Environmental Laws" means all federal, state, regional or local
statutes, laws, rules, regulations, codes, Orders, plans, or ordinances, or
similar laws of foreign jurisdictions where any Company or Subsidiary conducts
business, any of which govern (or purport to govern) or relate to pollution,
protection of the environment, public health and safety, air emissions,
water discharges, hazardous or toxic substances, solid or hazardous waste or
occupational health and safety, as any of these terms are defined in such
statutes, laws, rules, regulations, codes, Orders, or ordinances, including
without limitation CERCLA; RCRA; the Hazardous Materials Transportation Act,
as amended, 49 U.S.C. ss.ss.1801, et. seq.; the Clean Water Act, as amended, 33
U.S.C. ss.ss. 1311, et. seq. ("CWA"); the Clean Air Act, as amended, 42 U.S.C.
ss.ss. 7401-7642; the Toxic Substances Control Act, as amended, 15 U.S.C.
ss.ss. 2601 et. seq.; FIFRA; EPCRA; and OSHA.
"Environmental Site Assessment" shall mean a study or investigation
undertaken to determine if a particular parcel of real property is subject to a
"recognized environmental condition", as defined by ASTM E 1527-97.
"EPCRA" shall mean the Emergency Planning and Community Right-to-Know
Act of 1986 as amended, 42 U.S.C. ss.ss.11001, et. seq. (Title III of SARA).
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"FIFRA" shall mean the Federal Insecticide, Fungicide, and
Rodenticide Act as amended, 7 U.S.C. ss.ss. 136-136y.
"Financial Statements" shall have the meaning given in Section 3.5.
"First Agreement" shall mean that certain Agreement and Plan of
Reorganization dated as of April 23, 1998, by and among Parent, Rabanco
Acquisition Company, Limited, Recycling, United, Intermodal, WJR, Waste
Associates, Paper Fibers, MJS, and the Razore Shareholders.
"Fixed Assets" shall mean all vehicles, machinery, equipment, tools,
supplies, leasehold improvements, furniture, and fixtures used by or located on
the premises of any Company or Subsidiary or set forth in the Current Balance
Sheets or acquired by any Company or Subsidiary since the date of the Current
Balance Sheets.
"Funded Debt" shall have the meaning given in Section 2.9.
"GAAP" shall have the meaning given in Section 2.9.
"Governmental Entity" shall mean a court, administrative agency or
commission or other governmental authority or instrumentality, whether domestic
or foreign.
"Handle" means any manner of generating, accumulating, storing,
treating, disposing of, transporting, transferring, labeling, handling,
manufacturing or using, as any of such terms may further be defined in any
Environmental Law, of any Hazardous Substances or Waste.
"Hazardous Substances" shall be construed broadly to include any toxic
or hazardous substance, material, or waste, and any other contaminant, pollutant
or constituent thereof, whether liquid, solid, semi-solid, sludge and/or
gaseous, including without limitation, chemicals, compounds, by-products,
pesticides, asbestos-containing materials, petroleum or petroleum products, and
polychlorinated biphenyls, the presence of which requires investigation or
remediation under any Environmental Laws, or which are or become regulated,
listed or controlled by, under or pursuant to any Environmental Laws.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended.
"Income Taxes" shall mean any and all federal, state, local, or foreign
Taxes imposed on net income.
"Intellectual Property Rights" shall mean the rights to all patents,
trademarks, trade names, service marks, copyrights and any applications
therefor, and tangible or intangible proprietary information or material that in
any material respect are used in the business of such Company or Subsidiary as
currently conducted.
"Intermodal" shall mean Rabanco Intermodal/B.C., Inc., a Washington
corporation.
"Knowledge of the Companies" shall mean the actual knowledge, without
further inquiry, of the following individuals: Michael L. Windus, James
Sepic, Stephen O. Simmons, James D. Garrison, Richard H. Morck, Mark W.
Wolken, Frank G. Lingenbrink, Julie Atwood, Nelson A. Johnson, Robert W.
Evans, Robert S. Jaffe, Jeffrey A. Williamson, Harley Bird and Cathleen Carr.
"Liabilities" shall mean liabilities, obligations, or contingencies.
"Leased Premises" shall mean all parcels of real estate subject to
Leases to which any Company or Subsidiary is a party as a lessee.
"Leases" shall mean leases, licenses, or similar agreements.
"Licenses" means all licenses, certificates, permits, approvals and
registrations as are required by any Governmental Entity.
"Limited" shall mean Rabanco, Ltd., a Washington corporation.
"Losses" shall mean direct and actual losses, damages, liabilities,
claims, judgments, settlements, fines, costs, and expenses (including reasonable
attorneys' fees) of any kind, but excluding all indirect and/or consequential
damages of any kind.
"Material Adverse Effect" shall mean a material adverse effect other
than resulting from (i) changes attributable to conditions affecting the
disposal, collection, or recycling business generally, (ii) changes in general
economic conditions, or (iii) changes attributable to the announcement or
pendency of the Merger.
"Mergers" shall have the meaning given in Section 2.1.
"Merger Documents" shall mean an Agreement and Plan of Merger and
Articles of Merger with respect to each of the Mergers substantially in the form
of Exhibits 2.1(A)-(B).
"Merger Shares" shall have the meaning given in Section 6.6.
"MJS" shall mean MJS Associates, Inc., a Washington corporation.
"Non-Razore Shareholders" shall mean Sphere Solid Waste, Inc., a
Washington corporation and CCA, inc., a Washington corporation.
"Notice of Objection" shall have the meaning given in Section 2.9.
"Notices" shall mean non-compliance orders and notices of violation.
"Order" shall mean a decree, judgment, injunction, ruling, or other
order of a Governmental Entity having jurisdiction, whether temporary,
preliminary, or permanent.
"OSHA" shall mean the Occupational Safety and Health Act of 1970, as
amended, 29 U.S.C. ss.ss. 651, et. seq.
"Owned Property" shall mean a parcel of real estate owned by a Company
or Subsidiary as of the date hereof.
"Paper Fibers" shall mean Paper Fibers, Inc., a Washington corporation.
"Parent" shall mean Allied Waste Industries, Inc., a Delaware
corporation.
"Parent Average Closing Price" shall mean the average closing price as
publicly reported for the Nasdaq Stock Market as of 4:00 p.m. Eastern Time of
Parent Common Shares over the last twenty (20) trading days ending two (2)
trading days prior to the agreed Closing Date.
"Parent Common Shares" shall have the meaning given in Section 2.4.
"Parent Common Stock" shall have the meaning given in Section 4.2.
"Parent Financial Statements" shall mean the financial statements of
Parent included in the Parent SEC Documents.
"Parent Notice" shall have the meaning given in Section 7.10(d).
"Parent Required Statutory Approvals" shall have the meaning given in
Section 4.6.
"Parent SEC Documents" shall mean all statements, reports, schedules,
registration statements, and definitive proxies or information statements filed
by Parent with the SEC since July 1, 1995.
"Parent Voting Debt" shall mean bonds, debentures, notes, or other
indebtedness the holders of which have the right to vote (or convertible or
exercisable into securities having the right to vote) with holders of Parent
Common Stock on any matter.
"Payment Certificate" shall mean a written claim for payment of Losses,
in reasonable detail and specifying the amount of such Losses.
"Permitted Exceptions" shall have the meaning given in Section 3.16(a)
(i).
"Plan" shall mean an employee bonus, profit sharing, retirement, stock
purchase, stock option, recapitalization, insurance, medical, life, disability,
severance, or other benefit plan.
"Proceedings" shall mean claims, suits, actions, or administrative or
judicial proceedings.
"Proceeding Notice" shall have the meaning given in Section 7.10(d).
"Rabanco Companies & Affiliates" shall mean the following Company
and Subsidiaries: United, Rabanco Companies, U.S. Disposal II, Recycle
Seattle II, and Kent-Meridian Disposal.
"Razore Shareholders" shall mean Warren J. Razore, Josie Razore, Marie
Schulze, and Carmen Sepic.
"RCRA" shall mean the Solid Waste Disposal Act, as amended by the
Resource Conservation and Recovery Act of 1976 and subsequent Hazardous and
Solid Waste Amendments of 1984, 42 U.S.C. ss.ss. 6901 et. seq.
"Recycling" shall mean Rabanco Recycling, Inc., a Washington
corporation.
"Regional Disposal Company & Affiliates" shall mean the following
Subsidiaries: Regional Disposal Company and Roosevelt Associates.
"Required Statutory Approvals" shall mean the Parent Required Statutory
Approvals and the Companies' Required Statutory Approvals.
"Return Periods" shall have the meaning given in Section 3.8(a).
"Rights of First Offer Claims" shall have the meaning given in Section
9.2.
"S&L" shall mean S&L, Inc., a Washington corporation.
"S Corporation Taxable Periods" shall mean the taxable periods for
which each Company is a valid S corporation under Section 1361(a) of the Code,
including the taxable period ending at the close of business the day before the
Closing Date.
"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Settlement Statement" shall have the meaning given in Section 2.9.
"Shareholders" shall mean Warren J. Razore, Josie Razore, Marie
Schulze, Carmen Sepic, Sphere Solid Waste, Inc., a Washington corporation, and
CCA, inc., a Washington corporation.
"SSWI" shall mean SSWI, Inc., a Washington QSSS corporation.
"Sub" or "Subs" shall mean any or all of Rabanco Acquisition Company,
Rabanco Acquisition Company Two, Rabanco Acquisition Company Three, Rabanco
Acquisition Company Four, Rabanco Acquisition Company Five, Rabanco Acquisition
Company Six, Rabanco Acquisition Company Seven, Rabanco Acquisition Company
Eight, Rabanco Acquisition Company Nine, Rabanco Acquisition Company Ten,
Rabanco Acquisition Company Eleven, and Rabanco Acquisition Company Twelve, all
of which are Washington corporations and wholly-owned subsidiaries of Parent.
"Subsidiary" means Rabanco Companies, a Washington general partnership,
Regional Disposal Company, a Washington general partnership, Rabanco Regional
Landfill Corporation, a Washington QSSS corporation, Roosevelt Associates, a
Washington partnership, Paper Fibres Company, a Washington partnership,
Kent-Meridian Disposal Company, a Washington joint venture, Recycle Seattle II,
a Washington joint venture, and US Disposal II, a Washington joint venture.
"Surviving Corporations" shall mean the Companies after the Mergers.
"Tax" and "Taxes" shall mean any and all taxes, charges, fees, levies,
or other assessments of whatever kind or nature, including without limitation
any federal, state, local, or foreign net income, gross income, gross receipts,
unitary, license, payroll, unemployment, excise, severance, stamp, premium,
windfall profits, environmental (including without limitation taxes under
section 59A of the Code), occupational, lease, fuel, customs, duties, capital
stock, franchise, profits, withholding, Social Security, disability, real
property, personal property (tangible and intangible), sales, use, transfer,
registration, value added, alternative or minimum, estimated, or any other kind
of tax whatsoever (whether computed on a separate, consolidated, unitary,
combined or other basis), including the recapture of any tax items, and
including any interest, addition, penalty or other associated charge thereto,
whether disputed or not. The term "Taxes" includes any liability for the payment
of any amounts of any of the foregoing types as a result of being a member of an
affiliated, consolidated, combined or unitary group, or being a party to any
agreement or arrangement whereby liability for payment of such amounts was
determined or taken into account with reference to the liability of any other
person.
"Tax Returns" shall mean any returns, informational returns, reports,
declarations, estimates, or statements with respect to Taxes that are required
to be filed with any taxing authority.
"Threshold Amount" shall have the meaning given in Section 9.6.
"Underground Storage Tank" shall have the meaning ascribed to such term
in Section 6901 et seq., as amended, of RCRA, or any applicable state or local
statute, law, ordinance, code, rule, regulation, or Order.
"United" shall mean United Waste Control Corp., a Washington
corporation.
"Violation" shall have the meaning given in Section 3.4(b).
"Waste" shall be construed broadly to include agricultural wastes,
biomedical wastes, biological wastes, bulky wastes, construction and demolition
debris, garbage, household wastes, industrial solid wastes, liquid wastes,
recyclable materials, sludge, solid wastes, special wastes, used oils, white
goods, and yard trash as those terms are defined under any applicable
Environmental Laws.
"Waste Associates" shall mean Waste Associates, Inc., a Washington
corporation.
"WBCA" shall mean the Washington Business Corporation Act.
"WJR" shall mean WJR Environmental, Inc., a Washington corporation.
ARTICLE II
THE MERGERS
2.1 Effective Time of the Mergers. Subject to the provisions of this
Agreement, each Sub will be merged into its corresponding Company as indicated
on the attached Schedule 2.1 (the "Mergers"). The Merger Documents shall be duly
prepared, executed, and acknowledged by the parties and thereafter delivered to
the Secretary of State of the State of Washington, for filing, as provided in
the WBCA as soon as practicable on or after the Closing Date. The Mergers shall
become effective upon the filing of the Merger Documents with the Secretary of
State of the State of Washington or at such time thereafter as is provided in
the Merger Documents (the "Effective Time").
2.2 Closing. The Closing will take place as soon as practicable on the
first business day after satisfaction or waiver of the last to be fulfilled of
the conditions set forth in Article VIII that by their terms are not to occur at
the Closing (the "Closing Date"), at the offices of Preston Gates & Ellis LLP,
Seattle, Washington, unless another date or place is agreed to in writing by the
parties hereto.
2.3 Effects of the Mergers. At the Effective Time, (i) the separate
existence of each Sub shall cease and each Sub shall be merged with and into the
corresponding Company, (ii) the Articles of Incorporation of each Sub shall be
the Articles of Incorporation of the corresponding Surviving Corporation, until
duly amended, (iii) the Bylaws of each Sub shall be the Bylaws of the
corresponding Surviving Corporation until duly amended, (iv) the directors of
each Sub shall be the directors of the corresponding Surviving Corporation, (v)
the officers of each Sub shall be the officers of the corresponding Surviving
Corporation, (vi) the issued and outstanding capital stock of each Sub shall
continue to be the issued and outstanding capital stock of the corresponding
Surviving Corporation, (vii) all contracts, agreements, purchase orders, leases,
licenses, permits, and authorizations affecting or relating to each of the
Companies shall continue unimpaired as to the corresponding Surviving
Corporation, (viii) all debts, liabilities, and obligations of each Company,
whether known or unknown, fixed or contingent, shall accede to the corresponding
Surviving Corporation, and (ix) the Mergers shall, from and after the Effective
Time, have all the effects provided by applicable law.
2.4 Conversion of Stock of Companies.
(a) Subject to adjustment as set forth in Section 2.9, at and
as of the Effective Time and by virtue of the Mergers, the issued and
outstanding shares of the capital stock of each Company (except for CCAI and
SSWI) shall be converted, without any action on the part of the holders thereof,
into the right of the Razore Shareholders to receive an aggregate of Fourteen
Million (14,000,000) shares of Parent Common Stock (the "Parent Common Shares"),
in proportion to their respective ownership interests in the Companies and in
proportion to the value of each of the Companies in relation to the transactions
contemplated hereby as expressed in a percentage (the "Company Percentages") and
as set forth on Schedule 2.4(a); provided, however, that in the event that the
Parent Average Closing Price is less than Twenty Five Dollars and Twenty-One
cents ($25.21) per share, the Razore Shareholders shall instead receive that
number of shares equal to Three Hundred Fifty Three Million Dollars
($353,000,000) divided by the Parent Average Closing Price. Appropriate
adjustments shall be made for any stock-splits, stock dividends or other capital
adjustments. No fractional shares of Parent Common Stock will be issued in the
Mergers. In lieu of such issuance, the shares of Parent Common Stock issued to
the Razore Shareholders pursuant to the terms of this Agreement shall be rounded
at each incident of issuance to the closest whole share of Parent Common Stock.
(b) Subject to adjustment as set forth in Section 2.9, at and
as of the Effective Time and by virtue of the Mergers, the issued and
outstanding shares of the capital stock of SSWI and CCAI shall be converted,
without any action on the part of the holders thereof, into the right of the
Non-Razore Shareholders to receive at Closing cash or immediately available
funds in proportion to their respective Company Percentages as set forth on
Schedule 2.4(b). In no event shall the amount of cash paid pursuant to this
Section 2.4(b) be in an amount that would disqualify the entire business
combination to be effected by the Mergers from being treated as a "pooling of
interests" for accounting purposes.
2.5 Delivery of Certificates. Each holder of a certificate or
certificates representing shares of the capital stock of the Companies shall
surrender such certificates to Parent, together with such duly executed
documentation as may be reasonably required by Parent to effect a transfer of
such shares, and upon such surrender each Razore Shareholder shall be entitled
to receive the shares of Parent Common Stock as indicated on Schedule 2.4(a).
2.6 Tax-Deferred Reorganizations. Each of the Mergers (except for the
two Mergers involving SSWI and CCAI) is intended to be a reorganization within
the meaning of Section 368 of the Code and this Agreement is intended to be a
"plan of reorganization" within the meaning of the regulations promulgated under
Section 368 of the Code.
2.7 Accounting Treatment. The entire business combination to
be effected by the Mergers is intended to be treated for accounting
purposes as a "pooling of interests".
2.8 No Further Ownership Rights in Capital Stock of the Companies. All
shares of Parent Common Stock issued, and all cash paid, at the Effective Time
upon cancellation of the shares of capital stock of the Companies in accordance
with the terms hereof shall respectively be deemed to have been delivered in
full satisfaction of all rights pertaining to the shares of capital stock of the
Companies. After the Effective Time, there shall be no transfers on the stock
transfer books of the Companies of the shares of the Companies' stock.
<PAGE>
2.9 Post-Closing Adjustments.
(a) The consideration payable pursuant to Section 2.4 shall be
subject to adjustment after the Closing Date as provided in this Section 2.9. On
or before sixty (60) days following the Closing Date, Parent shall calculate and
deliver to the Shareholders a written statement (the "Settlement Statement")
setting forth the amount of the working capital of each of the Companies and
Subsidiaries as of the Closing Date (the "Closing Date Working Capital") and the
total amount of Funded Debt as of the Closing Date. "Closing Date Working
Capital" shall mean the difference obtained by subtracting (a) the amount which
would be reflected in accordance with generally accepted accounting principles
consistently applied ("GAAP") as current operating liabilities of the Companies
and Subsidiaries as of the Closing Date, but excluding Funded Debt, from (b) the
amount that would be reflected in accordance with GAAP as current operating
assets of the Companies and Subsidiaries as of the Closing Date. The Settlement
Statement shall be calculated by Parent and certified in writing by the Chief
Financial Officer of Parent. "Funded Debt" shall mean (i) indebtedness of the
Companies or Subsidiaries for borrowed money, including indebtedness to family
members and non-sale related entities, (ii) indebtedness of the Companies or
Subsidiaries with respect to capitalized lease obligations, in either case
outstanding as of the Closing Date, and (iii) bonus amounts which may be paid as
described in and pursuant to Section 5.1.8.
(b) The Settlement Statement shall be final and binding on the
Shareholders unless, within thirty (30) days following the date of delivery to
them of the Settlement Statement, the Shareholders notify Parent in writing (a
"Notice of Objection") that the Shareholders do not accept as correct the amount
of any calculation reflected in the Settlement Statement. If the Shareholders
timely deliver a Notice of Objection to Parent, then the Shareholders and Parent
shall respectively instruct Sweeney Conrad and Arthur Andersen L.L.P. to attempt
to reach mutual agreement as to each disputed calculation made in the Settlement
Statement. If within ten (10) days after the matter has been referred to such
accounting firms they have not reached agreement as to all disputed
calculations, then Sweeney Conrad and Arthur Andersen L.L.P. shall be promptly
instructed by the Shareholders and Parent, respectively, to designate a third
accounting firm of internationally recognized standing, which (acting as experts
and not as arbitrators) shall be instructed to make, as soon as practicable
after the matter is referred to such firm, all calculations which are in
dispute, and the determination of such third accounting firm in the matter shall
be final and binding on all parties.
(c) Once all amounts required to be calculated under the
preceding provisions of this Section 2.9 have been finally determined under this
Section 2.9, the parties shall calculate the "Adjustment Amount", which shall be
defined as: (i) Funded Debt (reflected as a positive number), plus (ii) Closing
Date Working Capital (reflected as a positive number if a deficit and as a
negative number if a surplus). If the Adjustment Amount exceeds Forty-Five
Million Dollars ($45,000,000), then the Shareholders shall pay to Parent, in the
manner described below the amount of Adjustment Amount in excess of Forty-Five
Million Dollars ($45,000,000), which payment shall be accounted for as a
reduction of the consideration paid pursuant to Sections 2.4(a) and (b). The
Shareholders shall make any payments required by this Section 2.9 by either: (i)
returning that number of Parent Common Shares equal to the amount of the
required payment divided by the closing price of the Parent Common Shares as
publicly reported for the Nasdaq Stock Market on the Closing Date; and/or (ii)
paying cash, in proportion to their percentage ownership in the Companies and
the Company Percentages, within seven (7) days after the amount of the
adjustment has been finally determined as provided by this Section 2.9. Each of
Parent and the Shareholders shall pay its own fees and expenses associated with
the preparation of the Settlement Statement or any other calculations made
hereunder.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANIES
Except as disclosed in the Companies' Disclosure Schedule, the
Companies jointly and severally represent and warrant to Parent and Subs as
follows:
3.1 Organization and Standing; Subsidiaries. Each Company and each of
the Subsidiaries is a corporation, partnership, or other entity duly organized
and validly existing under the laws of the State of Washington, has all
requisite power and authority to own, lease and operate its properties and to
carry on its businesses as now being conducted, and is duly qualified and in
good standing to do business in each jurisdiction in which a failure so to
qualify would have a Material Adverse Effect on the Business Condition of the
Companies. The Subsidiaries are the only entities controlled by the Companies.
Rabanco Companies is a Washington general partnership owned by Limited and
Recycling. Regional Disposal Company is a Washington general partnership owned
33.33% by Rabanco Regional Landfill Corp., a Washington corporation; 46.67% by
WJR, 10% by Waste Associates, and 10% by MJS. Rabanco Regional Landfill Corp. is
a Washington QSSS corporation, 100% of the outstanding shares of which are owned
by Limited. Roosevelt Associates is a Washington partnership owned 50% by
Regional Disposal Company. Paper Fibres Company is a Washington general
partnership owned 33.33% by Paper Fibers and 66.67% by Recycling. Kent-Meridian
Disposal Company is a Washington joint venture 50% of which is owned by Rabanco
Companies. Recycle Seattle II is a Washington joint venture 72% of which is
owned by Paper Fibres Company, 7% of which is owned by CCAI, and 21% of which is
owned by SSWI. US Disposal II is a Washington joint venture 70.5% of which is
owned by United, 20.5% of which is owned by SSWI, and 9% of which is owned by
CCAI. The Companies are the lawful record and beneficial owners of all such
equity interests in the Subsidiaries and have valid title thereto, free and
clear of all liens, pledges, encumbrances, security interests, restrictions on
transfer (other than restrictions under federal and state securities laws),
claims, and equities of every kind. There are no outstanding warrants, options,
or rights of any kind to acquire from the Companies any such equity interests in
any Subsidiary.
3.2 Capital Structure. The authorized capital stock of Limited consists
of Fifty Thousand (50,000) shares of common stock, of which Three Hundred Fifty
Two and Two Tenths (352.2) shares are issued and outstanding. The authorized
capital stock of Recycling consists of Fifty Thousand (50,000) shares of common
stock, of which Six Thousand Six Hundred Sixty Seven (6,667) shares are issued
and outstanding. The authorized capital stock of United consists of Five Hundred
(500) shares of common stock, of which One Hundred Five (105) shares are issued
and outstanding. The authorized capital stock of Intermodal consists of Fifty
Thousand (50,000) shares of common stock, of which Ten Thousand (10,000) shares
are issued and outstanding. The authorized capital stock of WJR consists of One
Thousand (1,000) shares of common stock, of which One Thousand (1,000) shares
are issued and outstanding. The authorized capital stock of Waste Associates
consists of One Thousand (1,000) shares of common stock, of which One Thousand
(1,000) shares are issued and outstanding. The authorized capital stock of Paper
Fibers consists of Ten Thousand (10,000) shares of common stock, of which One
Hundred (100) shares are issued and outstanding. The authorized capital stock of
MJS consists of One Thousand (1,000) shares of common stock, of which One
Thousand (1,000) shares are issued and outstanding. The authorized capital stock
of Alaska Street consists of Ten Thousand (10,000) shares of common stock, of
which Nine Thousand (9,000) shares are issued and outstanding. The authorized
capital stock of S&L consists of Ten (10) shares of common stock, of which Four
(4) shares are issued and outstanding. The authorized capital stock of CCAI
consists of One Hundred Thousand (100,000) shares of common stock, of which One
Thousand (1,000) shares are issued and outstanding. The authorized capital stock
of SSWI consists of One Hundred Thousand (100,000) shares of common stock, of
which One Thousand (1,000) shares are issued and outstanding. All Company Shares
have been duly authorized and validly issued, are fully paid and nonassessable,
and were issued in compliance with applicable federal and state securities laws.
There are not any options, warrants, calls, conversion rights, commitments,
agreements, contracts, understandings, restrictions, arrangements, or rights of
any character to which any Company is a party or by which any Company may be
bound obligating such Company to issue, deliver, or sell, or cause to be issued,
delivered, or sold, additional shares of the capital stock of such Company, or
obligating such Company to grant, extend, or enter into any such option,
warrant, call, conversion right, commitment, agreement, contract, understanding,
restriction, arrangement, or right. None of the Companies has outstanding any
bonds, debentures, notes, or other indebtedness the holders of which have the
right to vote (or convertible or exercisable into securities having the right to
vote) with holders of common stock of any Company on any matter. The
Shareholders are the lawful record and beneficial owners of all of the Company
Shares shown as owned by such Shareholders on Schedules 2.4(a) and (b) and have
valid title thereto, free and clear of all liens, pledges, encumbrances,
security interests, restrictions on transfer (other than restrictions under
federal and state securities laws), claims, and equities of every kind. Except
for this Agreement, there are no outstanding warrants, options, or rights of any
kind to acquire from such Shareholders any Company Shares.
3.3 Authority. Each Company has all requisite corporate power and
authority to enter into this Agreement and, subject to the Companies' Required
Statutory Approvals, to consummate the transactions contemplated hereby. Each of
the Shareholders has the full power and authority to enter into this Agreement
and the transactions contemplated herein. The execution and delivery by each
Company of this Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the part
of each Company, including the unanimous approval of the Board of Directors and
the Shareholders. This Agreement has been duly executed and delivered by each
Company and constitutes a valid and binding obligation of each Company
enforceable in accordance with its terms, except that such enforceability may be
subject to (i) bankruptcy, insolvency, reorganization, or other similar laws
relating to enforcement of creditors' rights generally and (ii) general
equitable principles.
3.4 Compliance with Laws and Other Instruments.
(a) To the Knowledge of the Companies, each Company and each
Subsidiary holds all Licenses necessary for the lawful conduct of their
respective businesses pursuant to all applicable statutes, laws, ordinances,
rules, and regulations of all Governmental Entities having jurisdiction over
them or any part of their operations, excepting, however, when such failure to
hold would not have a Material Adverse Effect on the Business Condition of the
Companies, and excepting Licenses required under Environmental Laws. To the
Knowledge of the Companies, there are no violations or claimed violations of any
such License or any such statute, law, ordinance, rule, or regulation, except
with regard to Environmental Laws and Licenses required thereunder.
(b) Subject to the satisfaction of the conditions set forth in
Sections 8.1 and 8.3, the execution and delivery of this Agreement do not, and
the consummation of the transactions contemplated hereby and thereby will not,
conflict with or result in any violation of, or default (with or without notice
or lapse of time, or both) under, or give rise to a right of termination,
cancellation, or acceleration of any obligation or to loss of a material benefit
under, or the creation of a lien, pledge, security interest, charge, or other
encumbrance on assets (any such conflict, violation, default, right, loss or
creation being referred to herein as a "Violation") pursuant to (i) any
provision of the Articles of Incorporation or Bylaws of any Company or the
comparable governing instruments of any Subsidiary or (ii) any loan or credit
agreement, note, bond, mortgage, indenture, contract, lease, or other agreement
or instrument, permit, concession, franchise, license, Order, statute, law,
ordinance, rule or regulation applicable to any Company or any Subsidiary or
their respective properties or assets, other than, in the case of (ii), any such
Violation which individually or in the aggregate would not have a Material
Adverse Effect on the Business Condition of the Companies.
(c) No Consent of any Governmental Entity is required by or
with respect to any Company in connection with the execution and delivery of
this Agreement or the consummation by the Companies of the transactions
contemplated hereby or thereby, except for Consents, if any, relating to (i) the
filing of a premerger notification report and all other required documents by
Parent and the Companies, and the expiration of all applicable waiting periods,
under the HSR Act, (ii) such filings, authorizations, Orders and approvals as
may be required under foreign laws, state securities laws and the NASD Bylaws or
"blue sky" laws, and (iii) the filing of the Merger Documents with the Secretary
of State of the State of Washington (the filings and approvals referred to in
clauses (i), (ii) and (iii) are collectively referred to as the "Companies'
Required Statutory Approvals") and except for such other Consents which if not
obtained or made would not have a Material Adverse Effect on the Business
Condition of the Companies.
3.5 Financial Statements. Attached as Schedule 3.5 are the following
financial statements: (i) audited combined income statements, changes in equity,
balance sheets, and statements of cash flow of (x) Rabanco Companies &
Affiliates; and (y) Regional Disposal Company & Affiliates as of the close of
the fiscal years ended December 1995 through 1996, and draft audited combined
income statements, changes in equity, balance sheets, and statements of cash
flow of (x) Rabanco Companies & Affiliates; and (y) Regional Disposal Company &
Affiliates as of the close of the fiscal year ended December 1997, (ii) an
interim combined income statements, balance sheets, and statements of cash flow
of Rabanco Companies & Affiliates and Regional Disposal Company & Affiliates for
the period from January 1, 1998 to February 28, 1998 (which balance sheets,
together with the balance sheet referred to in clause (iv) below, shall be
referred to as the "Current Balance Sheets"); (iii) unaudited income statements,
changes in equity, balance sheets, and statements of cash flow of Intermodal as
of the close of the fiscal years from inception through December 31, 1997, (iv)
an interim income statement, balance sheet, and statement of cash flow of
Intermodal for the period from January 1, 1998 to February 28, 1998, (v)
unaudited income statements, changes in equity, balance sheets, and statements
of cash flow of S&L as of the close of the fiscal years from January 1, 1995
through December 31, 1997, (vi) an interim income statement, balance sheet, and
statement of cash flow of S&L for the period from January 1, 1998 to February
28, 1998, (vii) an interim income statement, balance sheet, and statement of
cash flow of Alaska Street for the period from May 18, 1998 to May 22, 1998,
(viii) an interim income statement, balance sheet, and statement of cash flow of
SSWI for the period from May 7, 1998 to May 22, 1998, and (ix) an interim income
statement, balance sheet, and statement of cash flow of CCAI for the period from
May 7, 1998 to May 22, 1998 (the statements in (i) through (ix) above
collectively referred to as the "Financial Statements"). Such Financial
Statements: (i) are in accordance with the books and records of such Companies
and Subsidiaries; (ii) present fairly, in all material respects, the financial
position of such Companies and Subsidiaries as of the dates indicated; and (iii)
have been prepared in accordance with GAAP consistently applied (subject to the
absence of footnote disclosure and year-end adjustments, which will not be
material either individually or in the aggregate).
3.6 Absence of Undisclosed Liabilities. The Companies and the
Subsidiaries, taken as a whole, have no liabilities or obligations (whether
absolute, accrued or contingent) except (i) Liabilities that are accrued or
reserved against in the Current Balance Sheets or (ii) additional Liabilities
reserved against since February 28, 1998 that (x) have arisen in the ordinary
course of business; and (y) are accrued or reserved against on the books and
records of the Companies and the Subsidiaries.
3.7 No Material Adverse Change. Since January 1, 1998, each Company and
each Subsidiary has conducted its business in the ordinary course and there has
not been: (i) to the Knowledge of the Companies, any Material Adverse Effect on
the Business Condition of the Companies or any development or combination of
developments that is reasonably likely to result in such an effect; (ii) any
damage, destruction or loss, whether or not covered by insurance, having a
Material Adverse Effect on the Business Condition of the Companies; (iii) any
declaration, setting aside, or payment of any dividend or other distribution
(whether in cash, stock or property) with respect to the capital stock of any
Company, except as otherwise provided in Section 7.10(a); (iv) any increase or
change in the compensation or benefits payable or to become payable by any
Company or any Subsidiary to any of its employees, except in the ordinary course
of business consistent with past practice; (v) any acquisition or sale of a
material amount of property of any Company or any Subsidiary, except in the
ordinary course of business; (vi) any increase or modification in any bonus,
pension, insurance, or other employee benefit plan, payment or arrangement made
to, for, or with any of its employees; or (vii) the granting of stock options,
restricted stock awards, stock bonuses, stock appreciation rights and similar
equity based awards.
3.8 Taxes.
(a) Each Company and each Subsidiary has timely filed or
caused to be filed (or been included in) all federal, state, local and foreign
tax returns, reports and information statements required to be filed by each of
them (or in which any of them was required to be included), which returns,
reports, and statements are true, correct, and complete in all material
respects, and paid all Taxes required to be paid as shown on such returns,
reports, and statements. All Taxes required to be paid in respect of the periods
covered by such returns ("Return Periods") have either been paid or fully
accrued on the books of each Company or Subsidiary. Each Company and each
Subsidiary has fully accrued all unpaid Taxes in respect of all periods (or the
portion of any such periods) subsequent to the Return Periods. No deficiencies
or adjustments for any material amount of Tax have been claimed, proposed or
assessed, or to the Knowledge of the Companies, threatened. The Companies'
Disclosure Schedule accurately sets forth the years for which Company's federal
and state income tax returns, respectively, have been audited and any years that
are the subject of a pending audit by the Internal Revenue Service and the
applicable state agencies. Except as so disclosed, no Company is subject to any
pending or, to the Knowledge of the Companies, threatened, tax audit or
examination and no Company has waived any statute of limitation with respect to
the assessment of any Tax. The Current Balance Sheets contain adequate accruals
for all unpaid Taxes. The Companies have provided Parent true and correct copies
of all tax returns, information statements, reports, work papers and other tax
data reasonably requested by Parent. No consent or agreement has been made under
Section 341 of the Code by or on behalf of any Company or any predecessor
thereof.
(b) There are no liens for Taxes upon the assets of any
Company or any Subsidiary except for Taxes that are not yet payable. The Company
has not entered into any agreements, waivers, or other arrangements in respect
of the statute of limitations in respect of its Taxes or tax returns. Each
Company and each Subsidiary has complied with all applicable laws, rules and
regulations related to the withholding of Taxes and has timely paid all such
amounts withheld to the proper taxing authority.
(c) No Company and no Subsidiary is required to include in
income any adjustment pursuant to Section 481 of the Code (or similar provisions
of other law or regulations) in its current or in any future taxable period, by
reason of a change in accounting method; nor, to the Knowledge of the Companies,
has the IRS (or other taxing authority) proposed, or is the IRS (or other taxing
authority) considering, any such change in accounting method. No Company and no
Subsidiary is a party to any agreement, contract, or arrangement that would
result in the payment of any "excess parachute payment" within the meaning of
Section 280G of the Code. None of the assets of any Company or of any Subsidiary
is property that is required to be treated as owned by any other person pursuant
to the "safe harbor lease" provisions of former Section 168(f)(8) of the
Internal Revenue Code of 1954 as amended and in effect immediately prior to the
enactment of the Tax Reform Act of 1986 and none of the assets of any Company or
any Subsidiary is "tax exempt use property" within the meaning of Section 168(h)
of the Code. None of the assets of any Company or of any Subsidiary secures any
debt the interest on which is tax exempt under Section 103 of the Code.
(d) No distributions or other transfers of any asset or assets
of any of the Companies or any of the Subsidiaries has occurred, or will occur
prior to the Closing, which would result in Parent failing to acquire
"substantially all of the properties" of such Companies and Subsidiaries within
the meaning of Code Section 368(a)(2)(E).
(e) No Shareholder currently has, or will have as of the
Closing, the plan or intent to transfer any of the Parent Common Shares to be
received by it pursuant to this Agreement to the Parent or any person or entity
related to, affiliated with or, to the knowledge of any Shareholder, acting on
behalf of or in concert with Parent.
(f) Each Company has, for each taxable period since its
inception, been a valid S corporation within the meaning of Section 1361 of the
Code and each Company will continue to be an S corporation through the close of
business on the day immediately prior to the Closing Date. Each current
corporate Subsidiary of each Company is a "qualified subchapter S subsidiary"
within the meaning of Code Section 1361(b)(3).
3.9 Labor Controversies. There are no material controversies pending
or, to the Knowledge of the Companies, threatened between any Company or
Subsidiary and any representatives of any of their employees. To the Knowledge
of the Companies, there are no material organizational efforts presently being
made involving any of the presently unorganized employees of any Company or
Subsidiary, except for such controversies and organizational efforts that
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect on the Business Condition of the Companies.
3.10 Employee Benefit Plans. Each Plan covering active, former, or
retired employees of any Company or any Subsidiary is listed in Schedule 3.10.
(i) Each Plan has been maintained and administered in material compliance with
its terms and with the requirements prescribed by any and all applicable
statutes, Orders, rules, and regulations, and is, to the extent required by
applicable law or contract, fully funded without having any deficit or unfunded
actuarial liability (including but not limited to any contribution to the
Companies' 401(k) Plan to the extent commitments to make any such contributions
have been made by the Companies); (ii) All required employer contributions under
any such plans have been made and the applicable funds have been funded in
accordance with the terms thereof and no past service funding liabilities exist
thereunder; (iii) Each Plan that is required or intended to be qualified under
applicable law or registered or approved by a Governmental Entity has been so
qualified, registered, or approved by the appropriate Governmental Entity, and,
to the Knowledge of the Companies, nothing has occurred since the date of the
last qualification, registration, or approval to affect adversely, or cause the
appropriate Governmental Entity to revoke, such qualification, registration, or
approval; (iv) To the extent applicable, the Plans comply, in all material
respects, with the requirements of ERISA and the Code, and any Plan intended to
be qualified under Section 401(a) of the Code has been determined by the
Internal Revenue Service to be so qualified and, to the Knowledge of the
Companies, nothing has occurred to cause the loss of such qualified status; (v)
No Plan is covered by Title IV of ERISA or Section 412 of the Code; (vi) Neither
any Company nor any Subsidiary has incurred any liability or penalty under
Section 4975 of the Code or Section 502(i) of ERISA; (vii) There are no pending
or anticipated material claims against or otherwise involving any of the Plans
and no suit, action, or other litigation (excluding claims for benefits incurred
in the ordinary course of Plan activities) has been brought against or with
respect to any such Plan; (viii) All material contributions, reserves or premium
payments, required to be made as of the date hereof to the Plans have been made
or provided for; (ix) Neither any Company nor any Subsidiary has incurred any
liability under Subtitle C or D of Title IV of ERISA with respect to any
"single-employer plan," within the meaning of Section 4001(a)(15) of ERISA,
currently or formerly maintained by any Company, any Subsidiary, or any entity
that is considered one employer with Company under Section 4001 of ERISA; (x)
Neither any Company nor any Subsidiary has incurred any withdrawal liability
under Subtitle E of Title IV of ERISA with respect to any "multiemployer plan,"
within the meaning of Section 4001(a)(3) of ERISA; and (ix) Neither any Company
nor any Subsidiary has any obligations for retiree health and life benefits
under any Plan, and there are no restrictions on the rights of the Companies or
the Subsidiaries to amend or terminate any such Plan without incurring any
liability thereunder.
3.11 Certain Agreements. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby or
thereby will (i) result in any payment (including, without limitation,
severance, unemployment compensation, parachute payment, bonus or otherwise)
becoming due to any director, employee, or independent contractor of any Company
or any Subsidiary, from any Company or any Subsidiary under any Plan, agreement,
or otherwise, (ii) materially increase any benefits otherwise payable under any
Plan or agreement, or (iii) result in the acceleration of the time of payment or
vesting of any such benefits.
3.12 Litigation. There is no claim, action, suit or proceeding pending
or, to the Knowledge of Companies, threatened, that would, if adversely
determined, individually or in the aggregate, have a Material Adverse Effect on
the Business Condition of the Companies, nor is there any Order of any
Governmental Entity or arbitrator outstanding against any Company or any
Subsidiary having, or which, insofar as reasonably can be foreseen, in the
future could have, any such effect. To the Knowledge of Companies, there is no
investigation pending or threatened against any Company or any Subsidiary,
before any foreign, federal, state, municipal, or other governmental department,
commission, board, bureau, agency, instrumentality, or other Government Entity.
3.13 Title to and Condition of Assets.
(a) Each Company or Subsidiary has good and marketable title
to all of its Assets, free and clear of any material liens or restrictions that
would preclude the current use, except: (i) liens of current property taxes and
assessments not yet delinquent, (ii) liens imposed by law and incurred in the
ordinary course of business for obligations not yet due to materialmen,
warehousemen and the like, and (iii) liens on the landlord's interest in real
property leased by the Companies as tenants.
(b) The Fixed Assets taken as a whole currently in use or
necessary for the business and operations of any Company or Subsidiary are in
reasonable working condition for operations of the business. Except as set forth
in this Agreement, the Assets are AS IS, WHERE IS, and without representation as
to merchantability or fitness for any particular purpose.
(c) The Assets, the Owned Properties, and the Leased Premises
constitute all of the essential assets used in connection with the businesses of
the Companies and the Subsidiaries as of the date of this Agreement.
3.14 Major Contracts. Schedule 3.14 contains a list of each of
the following agreements to which any Company or any Subsidiary is a party or
subject:
(a) Any union contract, or any employment contract or
arrangement providing for future compensation, written or oral, with any
officer, consultant, director, or employee which (i) exceeds $125,000 per annum,
or (ii) is not terminable by it or its Subsidiary on thirty (30) days' notice or
less without penalty or obligation to make payments related to such termination;
(b) Any joint venture contract or arrangement or any other
agreement that has involved or is expected to involve a sharing of gross
revenues of $1 million per annum or more to other persons;
(c) Any lease for personal property in which the amount of
payments that Company is required to make on an annual basis exceeds $100,000,
which is for a duration of more than one year, and which is not reflected in the
Financial Statements as a capitalized lease;
(d) Any material disposal, collection, or recycling
agreement;
(e) Any contract containing covenants purporting to materially
limit a Company's freedom or that of any Subsidiary to compete in any line of
business in any geographic area;
(f) Any contract granting to a third party any right of first
refusal, right of first offer, or other preferential right to purchase the
Company Shares or the Assets or Owned Properties of any Company or any
Subsidiary; and
(g) Any other contract involving material non-contingent
payment obligations by a Company or Subsidiary.
All contracts, plans, arrangements, agreements, leases, franchises,
indentures, instruments, and other commitments listed in Schedule 3.14 are valid
and in full force and effect and neither any Company nor any Subsidiary has, nor
to the Knowledge of the Companies has any other party thereto, breached any
material provisions of, or is in default in any material respect under the terms
thereof.
To the Knowledge of the Companies, the only contract listed in Schedule
3.14(d) "Collection" ("Collection Contract") subject to adjustment and rebate of
prior charges based on past operating results is that certain Solid Waste,
Recyclables, and Yard Waste Collection Agreement dated April 1, 1994, by and
between Rabanco Companies and the City of Bellevue. To the Knowledge of the
Companies, the Companies have not received any notice of any proposed rate audit
or rate adjustment and there currently are no rate audit or rate adjustment
Proceedings pending or threatened against the Companies with respect to such
contract with the City of Bellevue or any other Collection Contract.
3.15 Material Relations. To the Knowledge of the Companies, none of the
parties to any of the major contracts identified in Schedule 3.14 have
terminated, and no such party has in any way expressed an intent to terminate
its business with any Company in the future or to reduce the amount of such
business in a manner that would have a Material Adverse Effect on the Business
Condition of the Companies.
3.16 Real Property.
(a) Schedule 3.16(a) sets forth the street address and legal
description of each Owned Property. With respect to the Owned Properties:
(i) A Company or Subsidiary has good and
marketable title to each parcel of Owned Properties, free and clear of any
liens, easements, covenants, and restrictions other than: (x) liens for real
estate taxes and assessments not yet delinquent; (y) easements, covenants, and
other restrictions that do not preclude the current use or occupancy of the
property subject thereto; and (z) liens securing indebtedness reflected in the
Current Balance Sheets (collectively, "Permitted Exceptions").
(ii) There are no pending or, to the
Knowledge of the Companies, threatened condemnation proceedings, suits, or
administrative actions relating to any of the Owned Properties affecting
adversely the current use or occupancy thereof;
(iii) There are no contracts granting to any party or
parties the right of use or
occupancy of any portion of the parcels of Owned Properties;
(iv) There are no outstanding options or rights
of first refusal to purchase the parcels of Owned Properties, or any portion
thereof or interest therein;
(v) There are no parties (other than the
Companies or Subsidiaries) in possession of the parcels of Owned Properties;
and
(vi) No owner of a parcel of Owned Properties
has received written notice of: (a) any condemnation proceeding with respect to
any portion of any parcel of Owned Properties or any access thereto; or (b) any
special assessment which may encumber any parcel of Owned Properties.
(b) Schedule 3.16(b) sets forth a list of all Leased Premises,
in each case, setting forth (A) the lessor and lessee thereof and the date and
term of each of the Leases, and (B) the street address of each property covered
thereby. The Leases are in full force and effect and have not been amended, and
no Company or Subsidiary is in material default or breach under any such Lease.
No event has occurred which, with the passage of time or the giving of notice or
both would cause a material breach of or default under any of such Leases. With
respect to each such Leased Premises:
(i) The Company or Subsidiary indicated on
Schedule 3.16(b) has a valid leasehold interest in the Leased Premises and, to
the Knowledge of the Companies, the full right to exercise the renewal options
set forth in the Leases;
(ii) The Leased Premises that are used in the
business of each Company or
Subsidiary are in the aggregate sufficient to meet the requirements of such
Company's or Subsidiary's current normal business activities as conducted
thereat;
(iii) Each of the Leased Premises is served by
utilities in such quantity and
quality as are sufficient to meet the requirements of the current normal
business activities as conducted at such parcel; and
(iv) No Company or Subsidiary has received
notice of: (a) any condemnation proceeding with respect to any portion of
the Leased Premises or any access thereto; or (b) any special assessment
that may encumber any of the Leased Premises.
3.17 Environmental Matters.
(a) To the Knowledge of the Companies, each Company and each
Subsidiary is and has at all times been in material compliance with all
Environmental Laws governing its business, operations, properties, and assets,
including, without limitation: (i) all requirements relating to the Discharge
and Handling of Hazardous Substances or other Waste; (ii) all requirements
relating to notice, record keeping and reporting; (iii) all requirements
relating to obtaining and maintaining Licenses for the ownership of its
properties and assets and the operation of its business as presently conducted,
including Licenses relating to the Handling and Discharge of Hazardous
Substances and other Waste; and (iv) all applicable Licenses and Orders issued
pursuant to any Environmental Laws.
(b) There are no (and, to the Knowledge of the Companies,
there is no reasonable basis for any) Notices or Proceedings pending or, to the
Knowledge of the Companies, threatened against the Companies or the
Subsidiaries, or their respective businesses, operations, properties, or assets,
issued by any Governmental Entity or third party with respect to any
Environmental Laws (or Licenses issued to a Company or Subsidiary thereunder) in
connection with, related to or arising out of the ownership by such Company or
Subsidiary of its properties or assets or the operation of its business, which
have not been resolved to the satisfaction of the issuing Governmental Entity or
third party in a manner that would not impose any obligation, burden or
continuing liability on Parent or the Surviving Corporations in the event that
the transactions contemplated by this Agreement are consummated, or which could
have a Material Adverse Effect on the Companies, including, without limitation,
(i) Notices or Proceedings related to such Company's being a potentially
responsible party for a federal or state environmental cleanup site or for
corrective action under any applicable Environmental Laws; (ii) Notices or
Proceedings in connection with any federal or state environmental cleanup site,
or in connection with any real property or premises where such Company has
transported, transferred or disposed of other Waste; (iii) Notices or
Proceedings relating to such Company's being responsible to undertake any
response or remedial actions or clean-up actions of any kind; or (iv) Notices or
Proceedings related to such Company's being liable under any Environmental Laws
for personal injury, property damage, natural resource damage, or clean up
obligations.
(c) To the Knowledge of the Companies, no Company or
Subsidiary has Discharged, nor has it allowed or arranged for any third party to
Discharge, Hazardous Substances or other Waste to, at, or upon: (i) any location
other than a site lawfully permitted to receive such Hazardous Substances or
other Waste; (ii) any real property currently or previously owned or leased by
any Company or Subsidiary; or (iii) any site which, pursuant to any
Environmental Laws, (x) has been placed on the National Priorities List or its
state equivalent; or (y) the Environmental Protection Agency or the relevant
state agency or other Governmental Entity has notified the Companies that such
Governmental Entity has formally proposed to place on the National Priorities
List or its state equivalent. To the Knowledge of the Companies, there has not
occurred, nor is there presently occurring, a Discharge, or threatened
Discharge, of any Hazardous Substance on, into or beneath the surface of any
real property, currently or previously owned or leased by a Company or a
Subsidiary, in an amount requiring any Company or Subsidiary to make a notice or
report to a Governmental Entity.
(d) No Company or Subsidiary owns or operates, nor has any
Company or Subsidiary owned or operated any Aboveground Storage Tanks or
Underground Storage Tanks, and, to the Knowledge of the Companies, there are not
now nor have there ever been any Underground Storage Tanks beneath any real
property currently or previously owned or leased by a Company or Subsidiary that
are required to be registered under applicable Environmental Laws.
(e) Schedule 3.17 identifies: (i) documented results of all
Environmental Audits or Environmental Site Assessments undertaken by each
Company or Subsidiary or its respective agents or, to the Knowledge of the
Companies, undertaken by any Governmental Entity or any third party and
possessed by any Company or Subsidiary or their agents on behalf of any Company
or Subsidiary, regarding a Company or Subsidiary or any real property currently
or previously owned or leased by a Company or Subsidiary; and (ii) the
documented results of any ground, water, soil, air or asbestos monitoring
undertaken by a Company or Subsidiary or its agents or undertaken by any
Governmental Entity or any third party and in the possession of the Companies,
Subsidiaries, or their agents on behalf of the Company or Subsidiary, regarding
a Company or Subsidiary or any real property currently or previously owned or
leased by the Company which indicate the presence of Hazardous Substances at
levels: (x) requiring a notice or report to be made to a Governmental Entity, or
(y) in violation of any applicable Environmental Laws.
3.18 Technology. Each Company or Subsidiary owns, or is licensed to
use, the Intellectual Property Rights. Schedule 3.18 lists: (i) all material
trademarks, trade names, service marks, registered copyrights, patents, and any
applications therefor included in the Intellectual Property Rights; and (ii) all
material written licenses and other agreements to which any Company or any
Subsidiary is a party and pursuant to which such Company or such Subsidiary is
authorized to use any Intellectual Property Right, and includes the identities
of the parties thereto, a description of the nature and subject matter thereof,
the applicable royalty and the term thereof. Neither any Company nor any
Subsidiary is, or as a result of the execution, delivery, or performance of
Company's obligations hereunder will be, in violation of any material license or
agreement listed in Schedule 3.18. No claims with respect to the Intellectual
Property Rights have been asserted or, to the Knowledge of the Companies, are
threatened by any person nor, to the Knowledge of the Companies, are there any
valid grounds for any bona fide claims against the use by any Company or any
Subsidiary of any trademarks, trade names, trade secrets, copyrights,
technology, know-how, processes, or computer software programs and applications
used in the business of the Companies and the Subsidiaries as currently
conducted or proposed to be conducted. To the Knowledge of the Companies all
registered trademarks listed on Schedule 3.18 are valid, enforceable, and
subsisting. To the Knowledge of the Companies, there is no material unauthorized
use, infringement or misappropriation of any of the Intellectual Property Rights
by any third party, employee, or former employee.
3.19 Questionable Payments. Neither any Company nor any Subsidiary nor,
to the Knowledge of the Companies, any director, officer, employee, or agent of
any Company or any Subsidiary has: (i) made any payment or provided services or
other favors in the United States or any foreign country in order to obtain
preferential treatment or consideration by any Governmental Entity with respect
to any aspect of the business of any Company or any Subsidiary; (ii) made any
political contributions that would not be lawful under the laws of the United
States, any foreign country or any jurisdiction within the United States or any
foreign country; or (iii) otherwise taken any action which would cause it to be
in violation of the Foreign Corrupt Practices Act of 1977, as amended. Neither
any Company nor any Subsidiary, nor, to the Knowledge of the Companies, any
director, officer, employee, or agent of the Companies or the Subsidiaries has
been or is the subject of any investigation by any Governmental Entity in
connection with any such payment, provision of services, or contribution.
3.20 Brokers and Finders. Other than Zachary Scott & Co. in accordance
with the terms of its engagement letter, no Company or Subsidiary nor any of
their respective directors, officers, or employees has employed any broker or
finder or incurred any liability for any financial advisory fees, brokerage
fees, commissions, or similar payments in connection with the transactions
contemplated by this Agreement.
3.21 Accounting Matters. To the Knowledge of the Companies, neither any
Company nor any Subsidiary has taken or agreed to take any action that, without
giving effect to any action taken or agreed to be taken by Parent or any of its
Affiliates, would prevent Parent from accounting for the entire business
combination to be effected by the Mergers as a pooling of interests.
. To the Knowledge of the Companies, the minute books of the Companies contain
accurate records of meetings and accurately reflect all other action taken by
the respective boards of directors and the shareholders of the Companies.
Complete and accurate copies of all such minute books have been made available
by the Companies for inspection by Subs. At the Closing, all of those books and
records will be in the possession of the Companies.
3.23 Insurance. Set forth in Schedule 3.23 is a complete and accurate
list as of the date hereof of all insurance policies carried by the Companies
(as parties, named insureds or otherwise the beneficiaries of coverage) and an
accurate list of all self-insured and insurance-covered losses and workers'
compensation claims since January 1, 1995, excluding any losses or claims below
the deductibles. All insurance policies are in full force and effect and shall
remain in full force and effect through the Closing Date. Neither the Companies
nor, to the Knowledge of the Companies, any other insured party to any insurance
policy, is in breach or default (including any breach or default with respect to
the payment of premiums or the giving of notices), and to the Knowledge of the
Companies, no event has occurred that, with notice or lapse of time or both,
would constitute such a breach or default or permit termination or modification
of any such policy. The Companies have not been denied coverage since January 1,
1995.
3.24 Complete Disclosure. To the Knowledge of the Companies, this
Agreement and the schedules hereto and all other documents and written
information furnished to Subs and Parent and their representatives pursuant
hereto, taken as a whole, do not and will not include any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
therein not misleading. To the Knowledge of the Companies, the Companies are not
aware of any fact or facts pertaining to Companies, the Subsidiaries or their
respective businesses which could have a Material Adverse Effect and which have
not been disclosed to Subs and Parent by the Companies in writing.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUBS
Parent and Subs represent and warrant to the Companies as follows in
this Section 4.
4.1 Organization; Standing and Power. Parent and each of the Subs are
corporations duly organized, validly existing, and in good standing under the
laws of their respective jurisdictions of incorporation, have all requisite
power and authority to own, lease, and operate their respective properties and
to carry on their respective businesses as now being conducted, and are duly
qualified and in good standing to do business in each jurisdiction in which a
failure so to qualify would have a Material Adverse Effect on the Business
Condition of Parent.
4.2 Capital Structure. The authorized capital stock of Parent consists
of 200,000,000 shares of Parent common stock, $0.01 par value ("Parent Common
Stock"), of which there are 105,966,151 shares issued and outstanding at March
31, 1998 and 10,000,000 shares of Parent preferred stock, $0.10 par value, of
which there were no shares issued or outstanding at March 31, 1998. All
outstanding shares of Parent Common Stock are validly issued, fully paid,
nonassessable and not subject to any preemptive rights, or to any agreement to
which Parent is a party or by which Parent may be bound that would conflict with
the obligations of Parent under this Agreement, any ancillary agreements
executed in connection herewith, or the transactions contemplated hereby or
thereby. The shares of Parent Common Stock issuable upon the Mergers: (i) are
duly authorized and reserved for issuance; (ii) will as of the Closing be
registered under the Securities Act and available for sale in the public market
without restriction (other than such restrictions imposed by Rule 145 under the
Securities Act); and (iii) when issued in accordance with the terms of the
Merger Agreements, will be validly issued, fully paid, nonassessable, and not
subject to any preemptive rights. The authorized capital stock of Rabanco
Acquisition Company consists of 1,000 shares of common stock, no par value, of
which 1,000 shares are issued and outstanding. The authorized capital stock of
Rabanco Acquisition Company Two consists of 1,000 shares of common stock, no par
value, of which 1,000 shares are issued and outstanding. The authorized capital
stock of Rabanco Acquisition Company Three consists of 1,000 shares of common
stock, no par value, of which 1,000 shares are issued and outstanding. The
authorized capital stock of Rabanco Acquisition Company Four consists of 1,000
shares of common stock, no par value, of which 1,000 shares are issued and
outstanding. The authorized capital stock of Rabanco Acquisition Company Five
consists of 1,000 shares of common stock, no par value, of which 1,000 shares
are issued and outstanding. The authorized capital stock of Rabanco Acquisition
Company Six consists of 1,000 shares of common stock, no par value, of which
1,000 shares are issued and outstanding. The authorized capital stock of Rabanco
Acquisition Company Seven consists of 1,000 shares of common stock, no par
value, of which 1,000 shares are issued and outstanding. The authorized capital
stock of Rabanco Acquisition Company Eight consists of 1,000 shares of common
stock, no par value, of which 1,000 shares are issued and outstanding. The
authorized capital stock of Rabanco Acquisition Company Nine consists of 1,000
shares of common stock, no par value, of which 1,000 shares are issued and
outstanding. The authorized capital stock of Rabanco Acquisition Company Ten
consists of 1,000 shares of common stock, no par value, of which 1,000 shares
are issued and outstanding. The authorized capital stock of Rabanco Acquisition
Company Eleven consists of 1,000 shares of common stock, no par value, of which
1,000 shares are issued and outstanding. The authorized capital stock of Rabanco
Acquisition Company Twelve consists of 1,000 shares of common stock, no par
value, of which 1,000 shares are issued and outstanding. All such shares of each
of the Subs are validly issued, fully paid, and nonassessable and owned by
Parent. Parent does not have outstanding any Parent Voting Debt.
4.3 Authority. Parent and Subs have all requisite corporate power and
authority to enter into this Agreement, and subject to the Parent Required
Statutory Approvals, to consummate the transactions contemplated hereby and
thereby. The execution and delivery by Parent and Subs of this Agreement and the
consummation of the transactions contemplated hereby and thereby have been duly
authorized by all necessary corporate action on the part of Parent and Subs,
including the unanimous approval of each of the respective Boards of Directors.
This Agreement has been duly executed and delivered by Parent and Subs and
constitutes a valid and binding obligation of Parent and Subs enforceable in
accordance with its terms, except that such enforceability may be subject to (i)
bankruptcy, insolvency, reorganization, or other similar laws relating to
enforcement of creditors' rights generally and (ii) general equitable
principles.
4.4 SEC Documents and Financial Statements. Parent has furnished the
Companies with a true and complete copy of each of the Parent SEC Documents,
which are all the documents (other than preliminary material) that Parent was
required to file with the SEC since such date. As of their respective filing
dates, the Parent SEC Documents complied in all material respects with the
requirements of the Exchange Act or the Securities Act, as the case may be, and
the rules and regulations of the SEC thereunder applicable to such Parent SEC
Documents, and none of the Parent SEC Documents contained any untrue statement
of a material fact or omitted to state a material fact required to be stated
therein or necessary in order to make the statements made therein, in light of
the circumstances under which they were made, not misleading. The Parent
Financial Statements comply as to form in all material respects with all
applicable accounting requirements and with the published rules and regulations
of the SEC with respect thereto and have been prepared in accordance with
generally accepted accounting principles consistently applied (except as may be
indicated in the notes thereto) and fairly present the consolidated financial
position of Parent as at the dates thereof and the results of their operations
and cash flows for the periods then ended (subject, in the case of unaudited
statements, to normal, recurring audit adjustments not material in scope or
amount). There has been no change in Parent's accounting policies or the methods
of making accounting estimates or changes in estimates that are material to
Parent Financial Statements or estimates except as described in the notes
thereto.
4.5 No Material Adverse Change. Since January 1, 1998, Parent has
conducted its businesses in the ordinary course and there has not been a
Material Adverse Effect on the Business Condition of Parent or any development
or combination of developments of which management of Parent has knowledge which
is reasonably likely to result in such an effect.
4.6 Compliance with Laws and Other Instruments.
(a) To the knowledge of Parent and Subs, Parent and Subs hold
all licenses, permits, and authorizations from all Governmental Entities
necessary for the lawful conduct of their businesses pursuant to all applicable
statutes, laws, ordinances, rules, and regulations of all such authorities
having jurisdiction over them or any part of their operations, excepting,
however, when such failure to hold would not have a Material Adverse Effect on
the Business Condition of Parent or Subs. There are no violations or claimed
violations known by Parent or Subs of any such license, permit, or authorization
or any such statute, law, ordinance, rule or regulation.
(b) Subject to satisfaction of the conditions set forth in
Sections 8.1 and 8.2, the execution and delivery of this Agreement, and the
consummation of the transactions contemplated hereby and thereby will not,
conflict with or result in any Violation of (i) any provision of the Articles of
Incorporation or Bylaws of Parent or (ii) any loan or credit agreement note,
bond, mortgage, indenture, contract, lease, or other agreement or instrument,
permit, concession, franchise, license, Order, statute, law, ordinance, rule or
regulation applicable to Parent or its properties or assets, other than, in the
case of (ii), any such Violation, which individually or in the aggregate would
not have a Material Adverse Effect on the Business Condition of Parent.
(c) No Consent is required by or with respect to Parent or
Subs in connection with the execution and delivery of this Agreement by Parent
or Subs or the consummation by Parent and Subs of the transactions contemplated
hereby, except for (i) the filing of a premerger notification report by Parent
and the Companies under the HSR Act, (ii) filing with the SEC with respect to
the Parent Common Shares or the Mergers, and (iii) the filing of the Merger
Documents with the Secretary of State of the State of Washington (the filings
and approvals referred to in clauses (i), (ii) and (iii) are collectively
referred to as the "Parent Required Statutory Approvals") and except for such
other Consents which if not obtained or made would not have a Material Adverse
Effect on the value of the Parent Common Stock and would not have a Material
Adverse Effect on the Business Condition of Parent.
4.7 Interim Operation of Subs. Subs were formed solely for the purpose
of engaging in the transactions contemplated hereby, have engaged in no other
business activities and have conducted their respective operations only as
contemplated hereby.
4.8 Accounting Matters. To the knowledge of Parent, Parent has not
taken or agreed to take any action that, without giving effect to any action
taken or agreed to be taken by the Companies or any of their Affiliates, would
prevent Parent from accounting for the entire business combination to be
effected by the Mergers as a pooling of interests.
4.9 Brokers and Finders. Neither Parent nor any of its directors,
officers or employees has employed any broker or finder or incurred any
liability for any financial advisory fees, brokerage fees, commissions or
similar payments in connection with the transactions contemplated by this
Agreement.
ARTICLE V
COVENANTS OF COMPANIES
During the period from the date of this Agreement and continuing until
the earlier of the termination of this Agreement or the Effective Time, each
Company agrees (except as expressly contemplated by this Agreement or with
Parent's prior written consent, which will not be unreasonably withheld) that:
5.1 Conduct of Business.
5.1.1 Ordinary Course. Each Company and its Subsidiaries shall
carry on their respective businesses in the usual, regular, and ordinary course
in substantially the same manner as heretofore conducted and, to the extent
consistent with such businesses, use all reasonable efforts consistent with past
practice and policies to preserve intact their present business organizations,
keep available the services of their present officers, consultants, and
employees, and preserve their relationships with customers, suppliers,
distributors and others having business dealings with them. The Companies shall
promptly notify Parent of any event or occurrence or emergency not in the
ordinary course of business, of any Company or any of its Subsidiaries, and
material and adverse to the Business Condition of such Company. Neither any
Company nor any Subsidiary shall:
(a) grant any severance or termination pay to any
officer or director or, except in the ordinary course of business
consistent with past practices, to any employee of such Company or
Subsidiary;
(b) commence a lawsuit other than: (i) for the
routine collection of bills; (ii) in such cases where such Company in
good faith determines that failure to commence suit would result in a
material impairment of a valuable aspect of such Company's business,
provided such Company consults with Parent prior to filing such suit;
or (iii) for a breach of this Agreement; or
(c) enter into, without the prior consent of Parent,
which consent shall not be unreasonably withheld, any lease or contract
that involves: (i) in the case of service/customer contracts, a term of
one year or greater and/or greater than $500,000 of annualized revenue;
or (ii) in the case of vendor contracts, a term of six (6) months or
greater and/or the purchase of any non-capitalized item in excess of
$50,000 per purchase.
5.1.2 Dividends; Changes in Stock. No Company shall, and no
Company shall permit any of its Subsidiaries to: (i) declare or pay any
dividends on or make other distributions (whether in cash, stock, or property)
in respect to any of its capital stock, except as otherwise provided in Section
7.10(a); (ii) split, combine, or reclassify any of its capital stock or issue or
authorize the issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock; (iii) repurchase or otherwise
acquire, directly or indirectly, any shares of its capital stock other than
repurchase of vested stock from former employees; or (iv) propose any of the
foregoing.
5.1.3 Issuance of Securities. No Company shall, and no Company
shall permit any of its Subsidiaries to, issue, deliver, or sell, or authorize,
propose, or agree or commit to the issuance, delivery, or sale of any shares of
their capital stock of any class, any Company Voting Debt or any securities
convertible into its capital stock or Company Voting Debt, any options,
warrants, calls, conversion rights, commitments, agreements, contracts,
understandings, restrictions, arrangements or rights of any character obligating
it or any of its Subsidiaries to issue any such shares, Voting Debt or other
convertible securities.
5.1.4 Governing Documents. No Company shall, and no Company
shall permit any of its Subsidiaries to, amend its Articles of Incorporation or
Bylaws or similar governing documents.
5.1.5 No Acquisitions. Except as set forth in Section 5.9, no
Company shall, and no Company shall permit any of its Subsidiaries to, acquire
or agree to acquire by merging or consolidating with, or by purchasing a
substantial portion of the assets of, or by any other manner, any business or
any corporation, partnership, association, or other business organization or
division thereof or otherwise acquire or agree to acquire any assets that are
material, individually or in the aggregate, to the Business Condition of such
Company.
5.1.6 No Dispositions. Except as set forth in Section 5.9 and
except for the sale of Limited's interest in Environmental Security Corporation,
a Washington corporation, and Transwaste, Inc., an Oregon corporation, prior to
the Closing, no Company shall, and no Company shall permit any of its
Subsidiaries to, sell, lease, license, transfer, mortgage, encumber or otherwise
dispose of any of its assets or cancel, release, or assign any indebtedness or
claim, except in the ordinary course of business or in amounts which are not
material, individually or in the aggregate, to the Business Condition of such
Company.
5.1.7 Indebtedness. No Company shall, and no Company shall
permit any of its Subsidiaries to, incur any indebtedness for borrowed money by
way of direct loan, sale of debt securities, purchase money obligation,
conditional sale, guarantee, or otherwise, except in the ordinary course of
business or in amounts that are not material, individually or in the aggregate,
to the Business Condition of such Company.
5.1.8 Plans; Employees. No Company shall, and no Company shall
permit any of its Subsidiaries to, adopt or amend in any material respect any
Plan, or pay any pension or retirement allowance not required by any existing
Plan. No Company shall, and no Company shall permit any of its Subsidiaries to,
enter into any employment contracts, pay any special bonuses or special
remuneration to officers, directors, or employees, or increase the salaries,
wage rates, or fringe benefits of its officers or employees other than pursuant
to scheduled reviews under such Company's normal compensation review cycle, in
all cases consistent with such Company's existing policies and past practice,
except that the Companies owned by the Razore Shareholders may pay bonuses to
certain of their employees and consultants with such amount to be included in
the calculation for Funded Debt.
5.1.9 Claims. No Company shall, and no Company shall permit
any of its Subsidiaries to, settle any claim, action, or proceeding, except in
the ordinary course of business or in amounts that are not material,
individually or in the aggregate, to the Business Condition of such Company.
5.1.10 Agreement. No Company shall, and no Company shall
permit any of its Subsidiaries to, agree to take any of the actions prohibited
by this Section 5.1.
5.2 Breach of Representation and Warranties. No Company will take any
action that would cause or constitute a breach of any of the representations and
warranties set forth in Section 2.1 or that would cause any of such
representations and warranties to be inaccurate in any material respect. In the
event of, and promptly after becoming aware of, the occurrence of or the pending
or threatened occurrence of any event that would cause or constitute such a
breach or inaccuracy, the Companies will give detailed notice thereof to Parent
and will use reasonable efforts to prevent or promptly remedy such breach or
inaccuracy.
5.3 Consents. Each Company will promptly apply for or otherwise seek,
and use reasonable efforts to obtain, all consents and approvals, and make all
filings, required with respect to such Company for the consummation of the
Mergers, except such consents and approvals as Parent and the Companies agree
that such Company shall not seek to obtain.
5.4 Reasonable Efforts. The Companies will use reasonable efforts to
effectuate the transactions contemplated hereby and to fulfill and cause to be
fulfilled the conditions to closing under this Agreement, provided that the
Companies shall in no event be required to agree to the imposition of, or comply
with, any condition, obligation, or restriction on the Companies or any of the
Subsidiaries or on the Surviving Corporations of the type referred to in Section
8.1.3 hereof.
5.5 Tax Returns. The Companies shall promptly provide Parent with
copies of all tax returns, reports, and information statements after their
filing.
5.6 Pooling. The Companies and the Shareholders shall not knowingly
take or cause to be taken any action, whether before or after the Effective
Time, that will disqualify the entire business combination to be effected by the
Mergers as a pooling of interests for accounting purposes.
5.7 Auditor's Consent. The Shareholders and the Companies shall use
reasonable efforts to cause Sweeney Conrad to cooperate with Arthur Andersen LLP
in connection with the audit of the Financial Statements of the Companies and to
provide to Parent any consents requested by Parent in connection with any filing
on Form 8-K or other filing with the Securities and Exchange Commission required
to be made by Parent in connection with the transactions contemplated by this
Agreement.
5.8 Acquisition of Essential Assets. Prior to the Effective Time, the
Razore Shareholders shall or shall cause one or more of the Companies to acquire
the property located at 2733 Third Avenue South, Seattle, WA currently owned by
JR Land Company and the property located at 500 South Sullivan Street, Seattle,
WA currently owned by Razore Enterprises, substantially according to the terms
of the agreement attached hereto as Exhibit 5.8.
ARTICLE VI
COVENANTS OF PARENT
During the period from the date of this Agreement and continuing until
the earlier of the termination of this Agreement or the Effective Time, Parent
agrees (except as expressly contemplated by this Agreement or with the
Companies' prior written consent, which will not be unreasonably withheld) that:
6.1 Breach of Representations and Warranties. Parent will not take any
action which would cause or constitute a breach of any of the representations
and warranties set forth in Article IV or which would cause any of such
representations and warranties to be inaccurate in any material respect. In the
event of, and promptly after becoming aware of, the occurrence of or the pending
or threatened occurrence of any event which would cause or constitute such a
breach or inaccuracy, Parent will give detailed notice thereof to Company and
will use reasonable efforts to prevent or promptly remedy such breach or
inaccuracy.
6.2 Consents. Parent will promptly apply for or otherwise seek, and use
reasonable efforts to obtain, all consents, approvals, and waivers, and make all
filings, required for the consummation of the Mergers.
6.3 Reasonable Efforts. Parent will use its reasonable efforts to
effectuate the transactions contemplated hereby and to fulfill and cause to be
fulfilled the conditions to closing under this Agreement, provided that Parent
shall in no event be required to agree to the imposition of, or to comply with,
any condition, obligation or restriction on Parent or on the Surviving
Corporations of the type referred to in Section 8.1.3 hereof.
6.4 Pooling. Parent shall not knowingly take or cause to be taken any
action, whether before or after the Effective Time, that will disqualify the
entire business combination to be effected by the Mergers as a pooling of
interests for accounting purposes.
6.5 Change in Control Payments. Parent shall assume the obligations of
the Companies to pay any necessary change in control payments as set forth in
the Change in Control Agreements between Rabanco Companies and the employees
listed on Schedule 6.5.
6.6 Combined Financial Results. Parent covenants and agrees that, as
promptly as practicable following the Effective Time and in any event no later
than the earlier of: (i) 51 days after the end of the calendar month in which
the Effective Time occurs, or (ii) 60 days after the Effective Time, it will
publicly release the combined financial results of Parent and the Companies for
the 30-day period following the Effective Time.
ARTICLE VII
ADDITIONAL AGREEMENTS
In addition to the foregoing, Parent and each of the Companies agree to
take the following actions after the execution of this Agreement.
7.1 Access to Information. Subject to the terms of the Confidentiality
Agreement, the Companies and Parent shall, subject to applicable law, each
afford the other and their respective accountants, counsel, and other
representatives, reasonable access during normal business hours during the
period prior to the Effective Time to (a) all of their and their respective
subsidiaries' properties, books, contracts, commitments, and records, and (b)
all other information concerning the business, properties and personnel of the
Companies and Parent and their respective subsidiaries, as the other party may
reasonably request and as is necessary to complete the transaction and prepare
for an orderly transition to operations after the Effective Time. The Companies
and Parent agree to provide to the other and their respective accountants,
counsel, and representatives copies of internal financial statements promptly
upon the request therefore. No information or knowledge obtained in any
investigation pursuant to this Section 7.1 shall affect or be deemed to modify
any representation or warranty contained herein or the conditions to the
obligations of the parties to consummate the Mergers.
7.2 Legal Conditions to the Mergers. Each of Parent, Subs and the
Companies will take all reasonable actions necessary to comply promptly with all
legal requirements which may be imposed on any of them with respect to the
Mergers and will promptly cooperate with and furnish information to each other
in connection with any such requirements imposed upon the other. Each of Parent,
Subs, the Shareholders, and the Companies will take, and will cause its
respective subsidiaries to take, all reasonable actions to obtain (and to
cooperate with the other parties in obtaining) any consent, approval, order, or
authorization of, or any exemption by, any Governmental Entity, or other third
party, required to be obtained or made by the Companies or Parent or their
respective subsidiaries in connection with the Mergers or the taking of any
action contemplated thereby or by this Agreement. The foregoing shall not
require any party to agree to the imposition of, or to comply with, any
condition, obligation, or restriction on Parent or on the Surviving Corporations
of the type referred to in Section 8.1.3 hereof.
7.3 Affiliates. Within ten (10) days of the execution of this
Agreement, the Razore Shareholders will execute affiliate agreements (the
"Affiliate Agreements") substantially in the form attached as Exhibit 7.3.
Parent shall be entitled to place appropriate legends on the certificate
evidencing any shares of Parent Common Stock to be received by the Razore
Shareholders pursuant to the terms of this Agreement and to issue appropriate
stop transfer instructions to the transfer agent for shares of Parent Common
Stock consistent with the terms of the Affiliate Agreements.
7.4 HSR Act Filings.
(a) Each of Parent and the Companies shall (i) promptly make
or cause to be made the filings required of such party or any of its Affiliates
or subsidiaries under the HSR Act with respect to the Mergers and the other
transactions provided for in this Agreement, (ii) comply at the earliest
practicable date with any request under the HSR Act for additional information,
documents, or other material received by such party or any of its Affiliates or
subsidiaries from the Federal Trade Commission or the Department of Justice or
other Governmental Entity in respect of such filings, the Mergers, or such other
transactions, and (iii) cooperate with the other party in connection with any
such filing and in connection with resolving any investigation or other inquiry
of any such agency or other Governmental Entity under any Antitrust Laws with
respect to any such filing, the Mergers, or any such other transaction. Each
party shall promptly inform the other party of any material communication with,
and any proposed understanding, undertaking, or agreement with, any Governmental
Entity regarding any such filings, the Mergers, or any such other transactions.
Neither party shall participate in any meeting with any Governmental Entity in
respect of any such filings, investigation, or other inquiry without giving the
other party notice of the meeting and, to the extent permitted by such
Governmental Entity, the opportunity to attend and participate.
(b) Each of Parent and the Companies shall use its reasonable
efforts to resolve such objections, if any, as may be asserted by any
Governmental Entity with respect to the Mergers or any other transactions
provided for in this Agreement under the Antitrust Laws. In connection
therewith, if any administrative or judicial action or proceeding is instituted
(or threatened to be instituted) challenging any or all of the Mergers as
violative of any Antitrust Law, and, if by mutual agreement, Parent and the
Companies decide that litigation is in their best interests, each of Parent and
the Companies shall cooperate at Parent's sole expense and use reasonable
efforts vigorously to contest and resist any such action or proceeding and to
have vacated, lifted, reversed, or overturned any Order, that is in effect and
that prohibits, prevents, or restricts consummation of any or all of the
Mergers. Each of Parent and the Companies shall use its reasonable efforts to
take such action as may be required to cause the expiration of the notice
periods under the HSR Act or other Antitrust Laws with respect to the Mergers
and such other transactions as promptly as possible after the execution of this
Agreement. Notwithstanding anything to the contrary in this Section 7.4, (x)
Parent shall not be required to divest any of its businesses, product lines, or
assets, or to take or agree to take any other action or agree to any limitation
that would have a Material Adverse Effect on the Business Condition of Parent
combined with the Surviving Corporations after Closing, and (y) neither any
Company nor any Subsidiary shall be required to divest any of their respective
businesses, product lines, or assets, or to take or agree to take any other
action or agree to any limitation that would have a Material Adverse Effect on
the Business Condition of the Companies.
7.5 Employee Benefits. Parent and the Companies agree that the
Surviving Corporations will provide benefits for each Company's or Subsidiary's
employees that are in the aggregate substantially similar to the benefits
provided to Parent employees with prior service considerations as if such
Company employees had been employed by Parent for the period for which they were
employed by such Company; provided, however, that nothing contained herein shall
be considered as requiring Parent or the Surviving Corporations to continue any
specific plan or benefit or as precluding amendments to any specific plan or
benefit (other than for: (i) any change in control payments required under
Section 6.7; and (ii) the period ending eighteen (18) months after the Closing
Date, during which time the Surviving Corporations will continue, or Parent will
provide, salary, wage, and bonus schemes (whether by separate employment
agreement or otherwise) substantially equivalent to the Companies' existing
compensation plans as of the date of this Agreement, provided that in no case
shall Parent be required to continue any such scheme that violates applicable
law or the terms of Parent's Plans); and provided further, that nothing
expressed or implied in this Agreement shall confer upon any employee,
beneficiary, dependent, legal representative, or collective bargaining agent of
such employee any right or remedy of any nature or kind whatsoever under or by
reason of this Agreement, including without limitation any right to employment
or to continued employment for any specified period, at any specified location
or under any specified job category.
7.6 Officers and Directors. Parent agrees that all rights to
indemnification (including advancement of expenses) existing on the date hereof
in favor of the present or former partners, officers, and directors of the
Companies or the Subsidiaries with respect to actions taken in their capacities
as directors or officers of the Companies or the Subsidiaries prior to the
Effective Time as provided in such Company's or Subsidiary's Articles of
Incorporation or Bylaws and indemnification agreements shall survive the Mergers
and continue in full force and effect for a period of six (6) years following
the Effective Time and shall be guaranteed by Parent.
7.7 Expenses. Whether or not the Mergers are consummated, all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby and thereby shall be paid by the party incurring such
expense; provided, however, that Parent shall bear the entire cost of the HSR
Act filing fees and any litigation pursuant to Section 7.4; and provided
further, that the aggregate usual and customary costs and expenses paid by the
Companies in connection with the transactions contemplated hereby will not
exceed Five Million Dollars ($5,000,000) (with any excess being borne by the
Shareholders).
7.8 Additional Agreements. In case at any time after the Effective Time
any further action is reasonably necessary or desirable to carry out the
purposes of this Agreement or to vest the Surviving Corporations with full title
to all properties, assets, rights, approvals, immunities, and franchises of Subs
or the Companies, the proper officers and directors of each party to this
Agreement shall take all such necessary action.
7.9 Public Announcements. Parent and the Companies shall cooperate with
each other in releasing information concerning this Agreement and the
transactions contemplated herein. Each party shall consult with and shall
furnish to the other drafts of all press releases, SEC filings, or other public
statements with respect to this Agreement or the transactions contemplated
hereby and shall provide such other party a reasonable opportunity to comment
thereon prior to publication. Nothing contained herein shall prevent either
party at any time from furnishing any information to any Governmental Entity or
from issuing any release when it believes it is legally required to do so,
provided such party gives the other party prompt notice of such Order and
complies with any protective order (or equivalent) imposed on such disclosure.
7.10 Taxes. The Shareholders and Parent and Subs covenant
with each other regarding Taxes as follows:
(a) Immediately prior to the Closing, the Razore Shareholders
shall cause each Company owned by the Razore Shareholders to make a cash
distribution to such Company's shareholders in an amount equal to the Razore
Shareholders' best estimate of their respective liability for Income Taxes
attributable to their ownership of the stock of such companies for the S
Corporation Taxable Period ending at the close of business on the day before the
Closing Date.
(b) The parties agree as follows with respect to the
consequences of the Mergers on the S corporation status of the Companies for
federal income tax purposes:
(i) The Mergers of each of the Companies with its
corresponding Sub will result in the termination of each Company's status as
an S corporation for federal income tax purposes as of the Closing.
(ii) Each Company's current taxable year will
constitute an "S termination year"
within the meaning of Section 1362(e)(4) of the Code.
(iii) Each Company will experience an "Short S year",
within the meaning of Section
1362(e)(1)(A) of the Code, for that portion of its S termination year beginning
on the first day of its current taxable year and ending on the close of business
on the day before Closing, and each Company will experience a "Short C year",
within the meaning of Section 1362(e)(1)(B) of the Code, for that portion of its
S termination year beginning on the day of Closing and ending on the last day of
the termination year.
(iv) Each Company shall, in accordance with Section
1362(e)(3)(A) of the Code, timely
elect to refrain from having the general rules of Section 1362(e)(2) of the Code
apply to the S termination year of such Company, but shall have items of income,
loss, deduction or credit assigned to the Short S year of each Company under
normal accounting rules (a "closing of the books"). Such election shall be in
the form set out in Exhibit 7.10(b)(iv).
(v) The Shareholders (and the spouses of such
Shareholders, if appropriate) of each
Company (being the persons who owned stock of such Company during the Short S
year), and Parent, and any appropriate affiliate of Parent (being the person who
owns stock of such Company on the first day of the Short C year) shall timely
elect to refrain from having the general rules of Section 1362(e)(2)(A) of the
Code apply to the S termination year of each Company, but shall have items of
income, loss, deduction or credit assigned to the Short S year of each Company
under normal accounting rules (a "closing of the books"). Such election shall be
in the form set out in Exhibit 7.10(b)(v).
(vi) As a result of the election described in
subsections (iv) and (v) of this
subparagraph 7.10(b) and pursuant to Treasury Regulations ss.1.1362-3(c)(1),
solely for purposes of Section 706(c) of the Code, the termination of the S
status of a Company shall be treated as a sale or exchange of such Company's
entire interest in any partnership held by the such Company, resulting in the
close of the taxable year for each Company in each such partnership as required
by Section 706(c) and Treasury Regulations ss. 1.706-1(c)(2). For purposes of
closing the taxable year for each Company in such partnership, each partnership
shall close its books as of the close of each Company's Short S year, and shall
prepare appropriate Tax Returns based on such closing of the taxable year.
(c) The Shareholders shall be liable for any and all Income
Taxes imposed on the Shareholders and attributable to the Shareholders'
ownership of Company Shares for each Company's S Corporation Taxable Period.
Parent shall be liable for any and all state and local sales, use, transfer,
documentary, or similar types of Taxes arising from the transactions
contemplated by this Agreement, including without limitation any Washington
excise tax on real estate sales (RCW 82.45-82.46).
(d) The Shareholders shall cause to be prepared and filed all
Tax Returns for each Company and each Subsidiary for all periods ending on or
prior to the Closing Date, including the Short S year of each Company, taking
into account the effect of the elections described in Section 7.10(b)(iv) and
(v), above. Each Company shall bear the cost of preparing its Tax Returns
described in the preceding sentence. The Shareholders shall permit Parent to
review and comment on each such Tax Returns prior to filing. Parent shall cause
to be prepared and filed all Tax Returns of the Companies, other than those Tax
Returns that are the responsibility of the Shareholders under this Section
7.10(d), including taxable periods beginning prior to but ending after the
Closing Date. The Tax Returns relating to the partnerships in which the
Companies have an interest shall be prepared and filed by the party indicated in
Exhibit 7.10(d). Such partnership Tax Return shall be prepared taking into
account the provisions of subparagraph 7.10(b)(vi), above, and the preparing
party shall permit the other affected parties to review and comments on such Tax
Returns.
(e) In the event Parent or a Company or any of their
affiliates receives notice of any examination, claim, adjustment, or other
proceeding (a "Proceeding Notice") with respect to the liability for Income
Taxes for any S Corporation Taxable Period of a Company for which the
Shareholders are or may be liable under Section 7.10(c), Parent shall notify the
Shareholders in writing thereof (the "Parent Notice") no later than the earlier
of (i) thirty (30) days after the receipt by Parent or any of its affiliates of
the Proceeding Notice, or (ii) ten (10) days prior to the deadline for
responding to the Proceeding Notice. As to any such Income Taxes for which the
Shareholders are solely liable under Section 7.10(c), the Shareholders shall be
entitled at their sole expense to control the contest of such examination,
claim, adjustment, or other proceeding, provided that : (a) the Shareholders
notify Parent in writing that they desire to do so no later than the earlier of
(i) thirty (30) days after receipt of the Parent Notice, or (ii) five (5) days
prior to the deadline for responding to the Proceeding Notice, and (b) the
Shareholders may not, without the consent of Parent, agree to any settlement
that could result in an increase in the amount of Taxes for which Parent is
liable under Section 7.10(c) (including any current or potential increase due to
an adjustment of any tax attributes of any Company or Subsidiary). The parties
shall cooperate with each other and with their respective affiliates, and will
consult with each other, in the negotiation and settlement of any proceeding
described in this Section 7.10(e). Parent will provide, or cause to be provided,
to the Shareholders necessary authorizations, including powers of attorney, to
control any proceedings that the Shareholders are entitled to control pursuant
to this Section 7.10(e). With respect to any examination, claim, adjustment, or
other proceeding with respect to Taxes for any period for which Parent is solely
liable under Section 7.10(c), Parent shall control the contest of such
examination, claim, adjustment, or other proceeding, provided that Parent may
not, without the prior consent of the Shareholders, agree to any settlement that
could result in an increase in the amount of Taxes for which the Shareholders
are liable under Section 7.10(c).
(f) Parent, on the one hand, and the Shareholders, on the
other hand, will provide, or cause to be provided, to the other party copies of
all correspondence received from any taxing authority by such party or any of
its affiliates in connection with the liability of the Companies and
Subsidiaries for Taxes for any period for which such other party is or may be
liable under Section 7.10(c). The Shareholders shall assist each Company to
enable it to file with the Internal Revenue Service notification of termination
of such Company's S corporation status. The parties will provide each other with
such cooperation and information as they may reasonably request of each other in
preparing or filing any return, amended return, or claim for refund, in
determining a liability or a right of refund, or in conducting any audit or
other proceeding, in respect of Taxes imposed on each Company and each
Subsidiary. Parent, on the one hand, and the Shareholders, on the other hand,
and their affiliates will (i) preserve and retain all returns, schedules, work
papers, and all material records or other documents relating to any such
returns, claims, audits, or other proceedings until the expiration of the
statutory period of limitations (including extensions) of the taxable periods to
which such documents relate and until the final determination of any payments
that may be required with respect to such periods under this Agreement, (ii)
shall make such documents available at the then current administrative
headquarters of such party to the other party or any affiliate thereof, and
their respective officers, employees, and agents, upon reasonable notice and at
reasonable times, it being understood that such representatives shall be
entitled to make copies of any such books and records relating to each Company
and each Subsidiary as they shall deem necessary, and (iii) to give the other
parties reasonable written notice prior to transferring, destroying or
discarding any such documents and, if another party so requests, shall allow
that party to take possession of such documents. Parent, on the one hand, and
the Shareholders on the other hand, further agree to permit representatives of
the other party or any affiliate thereof to meet with employees of such party on
a mutually convenient basis in order to enable such representatives to obtain
additional information and explanations of any documents provided pursuant to
this Section 7.10(f). Parent, on the one hand, and the Shareholders on the other
hand, shall make available to the representatives of the other party or any
affiliate thereof sufficient work space and facilities to perform the activities
described in the two preceding sentences. Any information obtained pursuant to
this Section 7.10(f) shall be kept confidential, except as may be otherwise
necessary in connection with the filing of returns or claims for refund or in
conducting any audit or other proceeding. Each party shall provide the
cooperation and information required by this Section 7.10(f) at its own expense.
7.11 Certain Insurance Policies. The parties acknowledge that Josie
Razore has made claims with regard to Losses arising from the operations of JR
Land Company and its predecessors under certain insurance policies (the
"Insurance Policies") under which certain Razore Shareholders, Companies,
Subsidiaries and other entities not involved in the transactions contemplated by
this Agreement are named insureds. The parties covenant and agree that
notwithstanding the Mergers, Josie Razore, for so long as he fulfills his
indemnification obligation under Article IX hereof, may continue to make claims
under and receive proceeds from any such Insurance Policy with respect to any
Losses arising from the operations of JR Land Company and its predecessors, up
to the full value of such Insurance Policies; provided, however, that in no
event shall the Companies' and Subsidiaries' right to make claims unrelated to
JR Land Company under the Insurance Policies be limited. Notwithstanding any
other provision of this Agreement, Josie Razore shall have the sole right to
conduct the prosecution of any such claims.
ARTICLE VIII
CONDITIONS PRECEDENT
8.1 Conditions to Each Party's Obligation to Effect the Mergers. The
respective obligation of each party to effect the Mergers shall be subject to
the satisfaction prior to the Closing Date of the following conditions:
8.1.1 Consents. Other than the filing of the Merger Documents
with the Secretary of State of the State of Washington, all Consents required
for the consummation of the Mergers and the transactions contemplated by this
Agreement, including all Consents to assignment of Contracts, and to the
transfer of environmental permits and all other environmental regulatory
Consents shall have been filed, occurred, or been obtained, other than such
Consents for non-revenue producing contracts, the failure of which to obtain
would not have a Material Adverse Effect on the consummation of the Mergers or
the other transactions contemplated hereby or on the Business Condition of
Parent or the Companies; provided, however, that in the event that any such
Consents required to be obtained pursuant to this Section 8.1.1 have not been
obtained prior to Closing, the parties shall mutually agree on a method for
obtaining such Consents following Closing and the remedy, if any, for the
failure to obtain such Consents.
8.1.2 No Restraints. No statute, rule, regulation, or Order
shall have been enacted, entered, promulgated, or enforced by any United States
court or Governmental Entity of competent jurisdiction that enjoins or prohibits
the consummation of the Mergers and shall then be in effect.
8.1.3 No Burdensome Condition. There shall not be any action
taken, or any statute, rule, regulation, or Order enacted, entered, enforced, or
deemed applicable to the Mergers by any Governmental Entity which, in connection
with the grant of any Required Statutory Approval, imposes any restriction,
condition or obligation upon Parent other than as provided in Section 7.4,
Companies or the Surviving Corporations which would have a Material Adverse
Effect on the economic or business benefits of the transactions contemplated by
this Agreement.
8.2 Conditions of Obligations of Parent and Subs. The obligations of
Parent and Subs to effect the Mergers are subject to the satisfaction of the
following conditions, unless waived by Parent and Subs:
8.2.1 Representations and Warranties of Companies. The
representations and warranties of the Companies set forth in this Agreement
shall be true and correct as of the date of this Agreement and as of the Closing
Date as though made on and as of the Closing Date, except: (i) as otherwise
contemplated by this Agreement, or (ii) in respects that do not have a Material
Adverse Effect on the Companies' Business Condition or on the benefits of the
transactions provided for in this Agreement. Parent shall have received a
certificate signed on behalf of each Company by an authorized officer of such
Company to such effect on the Closing Date.
8.2.2 Performance of Obligations of Companies. Each Company
shall have performed all agreements and covenants required to be performed by it
under this Agreement prior to the Closing Date, except for breaches that do not
have a Material Adverse Effect on the Business Condition of the Companies or on
the benefits of the transactions provided for in this Agreement. Parent shall
have received a certificate signed on behalf of each Company by an authorized
officer of such Company to such effect.
8.2.3 Affiliates. Parent shall have received from each person
or entity who may be deemed pursuant to Section 7.3 hereof to be an Affiliate of
the Companies a duly executed Affiliate Agreement substantially in the form
attached hereto as Exhibit 7.3.
8.2.4 Pooling of Interests. The Companies shall not have
breached their representation in Section 3.21 or their covenant in Section 5.6
with the result that the entire business combination to be effected by the
Mergers will not qualify for pooling of interest accounting treatment. Parent
shall have received a letter from Arthur Andersen LLP addressed to the Companies
to the effect that the entire business combination to be effected by the Mergers
will qualify for pooling of interest accounting treatment, dated as of a date
within two business days prior to Closing.
8.2.5 Opinion of Companies' Counsel. Parent shall have
received an opinion dated the Closing Date of Preston Gates & Ellis LLP, counsel
to the Companies owned by the Razore Shareholders, in substantially the form
attached as Exhibit 8.2.5(a). Parent shall have received an opinion dated the
Closing Date of Ater Wynne Hewitt Dodsen & Skerritt LLP, counsel to the
Companies owned by the Non-Razore Shareholders, in substantially the form
attached as Exhibit 8.2.5(b).
8.3 Conditions of Obligations of Companies. The obligation of the
Companies to effect the Mergers is subject to the satisfaction of the following
conditions unless waived by the Companies:
8.3.1 Representations and Warranties of Parent and Subs. The
representations and warranties of Parent and Subs set forth in this Agreement
shall be true and correct as of the date of this Agreement and as of the Closing
Date as though made on and as of the Closing Date, except: (i) as otherwise
contemplated by this Agreement, or (ii) in respects that do not have a Material
Adverse Effect on the Parent's Business Condition or on the benefits of the
transactions provided for in this Agreement. The Companies shall have received a
certificate signed on behalf of Parent by an authorized officer of Parent to
such effect on the Closing Date.
8.3.2 Performance of Obligations of Parent and Subs. Parent
and Subs shall have performed all agreements and covenants required to be
performed by them under this Agreement prior to the Closing Date except for
breaches that do not have a Material Adverse Effect on Parent's Business
Condition or on the benefits of the transactions provided for in this Agreement,
and the Companies shall have received a certificate signed on behalf of Parent
by an authorized officer of Parent to such effect.
8.3.3 Pooling of Interests. Parent shall not have breached its
representation in Section 4.8 or its covenant in Section 6.4 with the result
that the entire business combination to be effected by the Mergers will not
qualify for pooling of interest accounting treatment. Companies shall have
received a letter from Arthur Andersen LLP addressed to Parent to the effect
that the entire business combination to be effected by the Mergers will qualify
for pooling of interest accounting treatment (without regard to any action or
conduct by the Companies), dated as of a date within two business days prior to
the Closing.
8.3.4 Opinion of Parent Counsel. Company shall have received
an opinion dated the Closing Date of Fennemore Craig, P.C., counsel to Parent
and Subs, substantially in the form of Exhibit 8.3.4.
ARTICLE IX
INDEMNIFICATION
9.1 Indemnification by Shareholders.
(a) Subject to Sections 9.5, 9.6, and 9.8, the Shareholders
shall, severally, defend, indemnify, and hold Parent and Subs harmless from and
against, and reimburse Parent and Subs with respect to, any and all Losses
incurred by Parent or Subs by reason of or arising out of or in connection with
(i) any breach, or any claim (including claims by parties other than Parent or
Subs) that if true, would constitute a breach, by the Shareholders or the
Companies of any representation or warranty of the Shareholders or the Companies
contained in this Agreement or in any certificate delivered to Parent or Subs
pursuant to the provisions of this Agreement, and (ii) the failure, partial or
total, of the Companies or the Shareholders to perform any agreement or covenant
required by this Agreement to be performed by them. There shall be no right of
contribution from any Company or any successor to the Companies.
(b) Josie Razore shall defend, indemnify, and hold Parent and
Subs harmless from and against, and reimburse Parent with respect to, any and
all Losses incurred by Parent or Subs by reason of or arising out of or in
connection with the operations of JR Land Company and its predecessors prior to
the formation of Rabanco Companies on November 25, 1985, including without
limitation the first four claims listed in Schedule 3.12 (Brouhard, Anderson,
Manheimer, and Tulalip) and with respect to any and all Losses, including but
not limited to environmental liabilities, incurred by Parent or Subs by reason
of or arising out of or in connection with Josie Razore's past or present
ownership or other interest in any companies unrelated to the Companies and the
Subsidiaries.
9.2 Indemnification By Parent. Parent shall defend, indemnify, and hold
the Shareholders, the Companies, and their employees, officers, directors and
agents harmless from and against, and reimburse the Shareholders and the
Companies and their employees, officers, directors and agents with respect to,
any and all Losses of every nature whatsoever incurred by the Shareholders, the
Companies, and employees, officers, and directors of the Companies by reason of
or arising out of or in connection with: (i) any breach, or any claim (including
claims by parties other than the Companies or the Shareholders) that if true,
would constitute a breach by Parent or Subs of any representation or warranty of
Parent or Subs contained in this Agreement or in any certificate delivered to
Company pursuant to the provisions of this Agreement and (ii) the failure,
partial or total, of Parent or Subs to perform any agreement or covenant
required by this Agreement to be performed by it. Parent shall also defend,
indemnify, and hold the Shareholders, the Companies, and their employees,
officers, directors and agents harmless from and against, and reimburse the
Shareholders and the Companies and their employees, officers, directors and
agents with respect to, any and all losses, damages, liabilities, claims,
judgments, settlements, fines, costs, and expenses (including reasonable
attorneys' fees) of any kind and of any nature whatsoever, including indirect
and/or consequential damages, incurred by the Shareholders, the Companies, and
employees, officers, directors and agents of the Companies by reason of or
arising out of or in connection with the Razore Shareholders' failure to comply
with and/or perform according to the terms of the rights of first offer
contained in that certain Splitoff Agreement dated effective as of July 1, 1991,
by and among Warren J. Razore, Carmen Sepic, Marie Schulze, and Limited, and
John Banchero, Sr., John Banchero, Jr., Catherine Banchero Malshuk, and
Northwest Waste Industries, Inc.; or that certain Seattle Disposal Partnership
Interest Redemption Agreement dated effective as of July 1, 1991, by and between
Seattle Disposal Company and John Banchero, Sr. (collectively, the "Rights of
First Offer Claims").
9.3 Notice of Claims. All claims for indemnification under this
Agreement shall be resolved in accordance with the following procedures:
(a) If an indemnified party reasonably believes that it may
incur any Losses, it shall deliver a Claim Notice to the indemnifying party for
such Losses. If an indemnified party receives notice of a third-party claim for
which it intends to seek indemnification hereunder, it shall give the
indemnifying party prompt written notice of such claim, so that the indemnifying
party's defense of such claim under Section 9.4 hereunder may be timely
instituted.
(b) When Losses are actually incurred or paid by an
indemnified party or on an indemnified party's behalf or otherwise fixed or
determined, the indemnified party shall deliver a Payment Certificate to the
indemnifying party for such Losses. If a Claim Notice or Payment Certificate
refers to any claim, action, suit, or proceeding made or brought by a third
party, the Claim Notice or Payment Certificate shall include copies of the
claim, any process served, and all legal proceedings with respect thereto.
(c) If, after receiving a Payment Certificate, the
indemnifying party desires to dispute such claim or the amount claimed in the
Payment Certificate, it shall deliver to the indemnified party a Counternotice
as to such claim or amount. Such Counternotice shall be delivered within thirty
(30) days after the date the Payment Certificate to which it relates is received
by the indemnifying party. If no such Counternotice is received within the
aforementioned 30-day period, the indemnified party shall be entitled to prompt
payment for such Losses from the indemnifying party.
(d) If, within thirty (30) days after receipt by the
indemnified party of the Counternotice to a Payment Certificate, the parties
shall not have reached agreement as to the claim or amount in question, the
claim for indemnification shall be decided in accordance with the provisions of
Section 11.8.
(e) With respect to any Losses based upon an asserted
liability or obligation to a person or entity not a party to this Agreement for
which indemnification is being claimed, the obligations of the indemnifying
party hereunder shall not be reduced as a result of any action by the party
furnishing the notice of third party claim responding to such claim if such
action is reasonably required to minimize damages or to avoid a forfeiture or
penalty or to comply with a requirement imposed by law.
9.4 Defense of Third Party Claims. The indemnifying party under this
Article IX shall have the right to conduct and control, through counsel of its
own choosing, any third-party claim, action, or suit or compromise or settlement
thereof. The indemnified party may, at its election, participate in the defense
of any such claim, action, or suit through counsel of its choosing, but the fees
and expenses of such counsel shall be at the expense of the indemnified party,
unless the indemnified party shall have been advised by such counsel that there
may be one or more legal defenses available to it that are different from or in
addition to those available to the indemnifying party (in which case, if the
indemnified party notifies the indemnifying party in writing that it elects
separate counsel at the expense of the indemnifying party, the indemnifying
party shall not have the right to assume the defense of such action on behalf of
the indemnified party with respect to such defenses). If the indemnifying party
shall fail to defend any such third-party action, claim, or suit, then the
indemnified party may defend, through counsel of its own choosing, such action,
claim, or suit and may settle such action, claim, or suit and recover from the
indemnifying party the amount of such settlement or of any judgment and the
costs and expenses of such defense; provided, however, that the indemnifying
party shall not be liable to pay any such settlement unless the indemnified
party shall have given the indemnifying party written notice of the terms of the
proposed settlement and the indemnifying party shall have failed, within twenty
(20) days of receipt of such notice, to undertake the defense of such action,
claim, or suit. The indemnifying party shall not compromise or settle any
third-party action, claim, or suit which includes any term that shall require
any act or forbearance by the indemnified party from all liability in respect of
such claim, action, or suit without the prior written consent of the indemnified
party, which consent shall not be unreasonably withheld. Assumption by an
indemnifying party of control of any such defense, compromise, or settlement
shall not be deemed a waiver by it of its right to challenge its obligation to
indemnify the indemnified party. Parent and the Shareholders shall cooperate in
all reasonable respects with each other in connection with the defense,
negotiation, or settlement of any legal proceeding, claim, or demand referred to
in this Section 9.4.
9.5 Time Limit. The provisions of this Article IX shall apply only to
Losses that are incurred or relate to claims, demands, or liabilities that are
asserted or threatened on or before the date thirty (30) days following the date
of issuance by Parent's independent certified public accountants of the first
audit of Parent's financial statements that contains the combined results of
Parent and the Companies or, to the extent they relate expressly or by
implication to items that would not reasonably be expected to be encountered in
the ordinary process of that audit conducted in accordance with GAAP, the
provisions of this Article IX shall apply only to Losses that are incurred or
relate to claims, demands, or liabilities that are asserted or threatened before
the first anniversary of the Closing Date and as to which Parent shall give the
Shareholders a Claim Notice within thirty (30) calendar days after such
anniversary date; provided, however, that (i) the obligation of the Shareholders
to indemnify Parent and Subs for such claims, demands, or liabilities for which
a Claim Notice is given within the applicable time periods set forth above shall
continue until the final resolution of each such claim; and (ii) the
indemnification obligations of Josie Razore in Section 9.1(b) and of the
Shareholders with regard to disclosure (e) under the Klickitat County Disposal
Agreement exceptions contained in Schedule 3.14, shall not be subject to any
time limits.
9.6 Limitations. Notwithstanding any other provision in this Article IX
except for the indemnity obligations of Josie Razore set forth in Section 9.1(b)
and except for the Rights of First Offer Claims, the indemnified party shall be
entitled to indemnification only if the aggregate Losses exceed Three Million
Dollars ($3,000,000) (the "Threshold Amount"), provided that at such time as the
amount to which such indemnified party is entitled to be indemnified exceeds the
Threshold Amount, such indemnified party shall be entitled to be indemnified up
to the full Losses including the Threshold Amount. The aggregate amount up to
which an indemnified party shall be entitled to be indemnified will be Thirty
Million Dollars ($30,000,000); provided, however that there shall be no cap on
the indemnification obligations of Josie Razore set forth in Section 9.1(b) or
the indemnification obligations of Parent with respect to any Rights of First
Offer Claims. The sole remedy of Parent and the Shareholders for breaches of
this Agreement shall be claims made in accordance with and subject to the
limitations of this Article IX.
9.7 Tax Consequences. As stated in Section 2.6, it is the intent of the
parties that each of the Mergers (except for the Mergers involving SSWI and
CCAI) is intended to be a "reorganization" within the meaning of Section 368 of
the Code, and no party shall take any position inconsistent with this
interpretation. However, except for any damages which may be caused by the
breach of a representation, warranty, or covenant set forth herein by a party
hereto, neither such party nor its counsel shall have any obligation, of
indemnification or otherwise, in the event it is determined that the tax
consequences differ from those intended.
9.8 Special Indemnity for Permit Matter The Shareholders shall
severally pay one half (1/2) of any fines or penalties paid to Governmental
Entities by Parent or Subs (but excluding any consequential or incidental
damages) during the two-year period immediately following the Closing that
result from any discrepancy between the number of trucks utilizing the disposal
facility's access road to support current volumes and the requirements of the
Klickitat County agreement; provided, however, that the obligation of the
Shareholders to indemnify Parent and Subs for such fines or penalties incurred
within the applicable time period set forth above shall continue until the final
resolution of each such claim. Following the Closing, Parent shall use
reasonable efforts to cause the applicable permit to be modified to resolve this
discrepancy. Any indemnification owing under this Section 9.8 shall be subject
to the limitations set forth in Section 9.6 hereof, but shall not be subject to
the limitations set forth in Section 9.5 hereof.
ARTICLE X
TERMINATION, AMENDMENT AND WAIVER
10.1 Termination. This Agreement may be terminated at any time prior to
the Effective Time, whether before or after approval of matters presented in
connection with the Mergers by the stockholders of the Companies or Subs:
(a) by mutual consent of Parent, the
Shareholders, and Companies;
(b) by either Parent or the Companies
(provided that the terminating party is not then in material breach of any
representation, warranty, covenant, or agreement contained in this Agreement)
if there has been a breach of any representation, warranty, covenant, or
agreement that has a Material Adverse Effect on the Business Condition of
the Companies or Parent, as the case may be, or on the benefits of the
transaction provided for in this Agreement, and such breach has not been
cured, or reasonable efforts are not being employed to cure such breach,
within ten (10) days after notice thereof is given to the party
committing such breach;
(c) by Parent, the Shareholders, or the
Companies if the Mergers shall not have been consummated before December 31,
1998; provided, however, that if the parties have agreed to pursue litigation
pursuant to Section 7.4(b), such date shall be extended to April 1, 1999;
(d) by Parent, the Shareholders, or the
Companies if any permanent injunction or other Order of a court or other
competent authority preventing the Mergers shall have become final and
non-appealable; or
(e) by the Shareholders or the Companies in
the event that the rights of first offer described in Section 9.2 are
exercised by the holders of such rights and accepted by the Companies or the
Shareholders.
Where action is taken to terminate this Agreement pursuant to this
Section 10.1, it shall be sufficient for such action to be authorized, in the
case of Parent and the Companies, by the Board of Directors of the party taking
such action without any requirement to submit such action to the stockholders of
such party.
10.2 Effect of Termination. In the event of termination of this
Agreement by the Companies, the Shareholders, or Parent as provided in Section
10.1, this Agreement shall forthwith become void and have no effect, and there
shall be no liability or obligation on the part of the Shareholders, Parent,
Subs, or the Companies or their respective officers or directors, except that
(i) the provisions of Sections 7.7, 10.2, and 11.7 and the Confidentiality
Agreement shall survive any such termination and abandonment, and (ii) no party
shall be released or relieved from any liability arising from the willful breach
by such party of any of its representations, warranties, covenants, or
agreements as set forth in this Agreement.
10.3 Amendment. This Agreement may be amended by the parties hereto, by
action taken by their respective Boards of Directors (in the case of Parent and
the Companies), at any time before or after approval of matters presented in
connection with the Mergers by the stockholders of the Companies or Parent, but
after any such stockholder approval, no amendment shall be made which by law
requires the further approval of stockholders without obtaining such further
approval. This Agreement may not be amended except by an instrument in writing
signed on behalf of each of the parties hereto.
10.4 Extension, Waiver. At any time prior to the Effective Time, any
party hereto, by action taken by its Board of Directors (in the case of Parent
and the Companies) may, to the extent legally allowed, (i) extend the time for
the performance of any of the obligations or other acts of the other parties
hereto, (ii) waive any inaccuracies in the representations and warranties made
to such party contained herein or in any document delivered pursuant hereto and
(iii) waive compliance with any of the agreements, covenants or conditions for
the benefit of such party contained herein. Any agreement on the part of a party
hereto to any such extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such party.
ARTICLE XI
GENERAL PROVISIONS
11.1 Nonsurvival of Representations, Warranties and Agreements. Except
as otherwise provided in Sections 9.5 and 9.8, all representations, warranties,
and agreements in this Agreement or in any instrument delivered pursuant to this
Agreement shall be deemed to be conditions to the Mergers and shall not survive
the Mergers, except for the agreements contained in Sections 7.5, 7.6, 7.7, 7.8,
7.10 and 7.11 and the agreements delivered pursuant to this Agreement.
11.2 Notices. All notices and other communications hereunder shall be
in writing and shall be deemed sufficiently given and served for all purposes
when personally delivered or given by telex or machine-confirmed facsimile or
three business days after a writing is deposited in the United States mail,
first class postage or other charges prepaid and registered, return receipt
requested, addressed as follows (or at such other address for a party as shall
be specified by like notice):
(a) if to Parent or Subs, to:
Allied Waste Industries, Inc.
15580 N. Greenway-Hayden Loop, Ste. 100
Scottsdale, AZ 85260
Attention: Larry D. Henk
Phone: (602) 627-2700
Fax: (602) 627-2704
with a copy to:
Fennemore Craig, P.C.
3003 North Central Avenue, Ste. 2600
Phoenix, AZ 85012-2913
Attention: Karen C. McConnell
Phone: (602) 916-5307
Fax: (602) 916-5507
(b) if to the Companies prior to Closing, to:
Rabanco Companies
200-112th Ave. NE, Suite 300
Bellevue, WA 98004
Telephone: (425) 646-2400
Fax: (425) 646-2440
Attn: Office of the President
with a copy to:
Preston Gates & Ellis LLP
5000 Columbia Center
701 Fifth Ave.
Seattle, WA 98104-7078
Attention: Robert S. Jaffe
Phone: (206) 623-7580
Fax: (206) 623-7022
c) if to the Razore Shareholders, to:
Josie Razore
225 Second Street South, Unit D-6
Kirkland, WA 98033
Warren J. Razore
7613 Overlake Drive West
Medina, WA 98004
Carmen Sepic
6705 West Mercer Way
Mercer Island, WA 98040
Marie Schulze
7432 North Mercer Way
Mercer Island, WA 98040
with a copy to:
Preston Gates & Ellis LLP
5000 Columbia Center
701 Fifth Ave.
Seattle, WA 98104-7078
Attention: Robert S. Jaffe
Phone: (206) 623-7580
Fax: (206) 623-7022
(d) if to the Non-Razore Shareholders, to:
CCA, inc.
911 Western Ave., Ste. 510
Seattle, WA 98104
Attention: Cathleen Carr
Phone: (206) 625-9696
Fax: (206) 625-9795
Sphere Solid Waste, Inc.
500 South Sullivan Street
Seattle, WA 98108
Attention: Harley Bird
Phone: (425) 646-2400
Fax: (425) 646-2440
with a copy to:
Bruce H. Benson
Ater Wynne Hewitt Dodson & Skerritt, LLP
601 Union Square, Suite 5450
Seattle, WA 98101-2327
Phone: (206) 623-4711
Fax: (206) 467-8406
11.3 Interpretation. When a reference is made in this Agreement to
Sections or Exhibits, such reference shall be to a Section or Exhibit to this
Agreement unless otherwise indicated. The words "include", "includes", and
"including" when used therein shall be deemed in each case to be followed by the
words "without limitation". The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. This Agreement has been negotiated
by the respective parties hereto and their attorneys and the language hereof
will not be construed for or against either party. A reference to a Section or
an Exhibit will mean a section in, or exhibit to, this Agreement unless
otherwise explicitly set forth.
11.4 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to each the other parties, it being understood that
all parties need not sign the same counterpart.
11.5 Miscellaneous. This Agreement, the Confidentiality Agreement, and
the documents referred to herein (a) constitute the entire agreement among the
parties with respect to the subject matter hereof and supersede all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof; (b) is not intended to confer upon any
other person any rights or remedies hereunder (except as otherwise expressly
provided herein and except that Section 7.6 is for the benefit of Company's
directors and officers and is intended to confer rights on such persons); and
(c) shall not be assigned by operation of law or otherwise except as otherwise
specifically provided.
11.6 No Joint Venture. Nothing contained in this Agreement will be
deemed or construed as creating a joint venture or partnership between any of
the parties hereto. No party is by virtue of this Agreement authorized as an
agent, employee or legal representative of any other party. No party will have
the power to control the activities and operations of any other and their status
is, and at all times, will continue to be, that of independent contractors with
respect to each other. No party will have any power or authority to bind or
commit any other. No party will hold itself out as having any authority or
relationship in contravention of this Section.
11.7 Transactional Expenses. Whether or not the transactions
contemplated by this Agreement are consummated, each of Parent and the Companies
shall pay its own fees and expenses incident to the negotiation, preparation,
execution, delivery and performance hereof, including, without limitation, the
fees and expenses of its counsel, accountants and other experts; provided that
the aggregate usual and customary costs and expenses paid by the Companies in
connection with the transactions contemplated hereby will not exceed Five
Million Dollars ($5,000,000) (with any excess being borne by the Shareholders).
11.8 Governing Law. This Agreement shall be governed in all respects,
including validity, interpretation and effect, by the laws of the State of
Washington. The parties agree that King County, Washington, shall be the
exclusive proper place of venue for any action, dispute, or controversy arising
from or in connection with this Agreement. The parties irrevocably agree that
any legal or equitable proceeding arising out of or in connection with this
Agreement shall be brought either in the King County Superior Court or in the
United States District Court Division in which King County is located. If any
legal action or any arbitration or other proceeding is brought for the
enforcement of this Agreement or because of an alleged dispute, breach, default
or misrepresentation in connection with any provision of this Agreement, the
successful or prevailing party shall be entitled to recover reasonable
attorneys' fees and other costs incurred in that action or proceeding, in
addition to any other relief to which it may be entitled.
(the remainder of this page has been intentionally left blank)
<PAGE>
SIGNATURE PAGES -
AMENDED AND RESTATED AGREEMENT AND PLAN OF REORGANIZATION
IN WITNESS WHEREOF, Parent, Subs and the Companies have caused this
Amended and Restated Agreement to be signed by their respective officers
thereunder duly authorized, and the Shareholders have duly executed this
Agreement, all as of the date first written above.
PARENT
ALLIED WASTE INDUSTRIES, INC.
By /s/ Thomas H. Van Weelden
---------------------------
Thomas H. Van Weelden
President and CEO
SUBS COMPANIES
RABANCO ACQUISITION COMPANY RABANCO, LTD.
RABANCO RECYCLING, INC.
UNITED WASTE CONTROL CORP.
By /s/ Larry Henk WJR ENVIRONMENTAL, INC.
------------------------
Larry Henk, Vice President
By /s/ Mary Razore
------------------------
Mary Razore, President
RABANCO ACQUISITION COMPANY TWO RABANCO INTERMODAL/B.C., INC.
By /s/ Larry Henk By /s/ Jim Sepic
-------------------------- ------------------------------
Larry Henk, Vice President Jim Sepic, Executive Vice President
RABANCO ACQUISITION COMPANY THREE WASTE ASSOCIATES, INC.
By /s/ Larry Henk By /s/ Jim Sepic
-------------------------- ----------------------
Larry Henk, Vice President Jim Sepic, President
RABANCO ACQUISITION COMPANY FOUR PAPER FIBERS, INC.
By /s/ Larry Henk By /s/ Josie Razore
--------------------------- --------------------------
Larry Henk, Vice President Josie Razore, President
<PAGE>
RABANCO ACQUISITION COMPANY FIVE MJS ASSOCIATES, INC.
By /s/ Larry Henk By /s/ Gary Schulze
--------------------------- ------------------------
Larry Henk, Vice President Gary Schulze, President
RABANCO ACQUISITION COMPANY SIX ALASKA STREET ASSOCIATES, INC.
By /s/ Larry Henk By /s/ Jim Sepic
--------------------------- --------------------------
Larry Henk, Vice President Jim Sepic, Vice President
RABANCO ACQUISITION COMPANY SEVEN S&L, INC.
By /s/ Larry Henk By /s/ Jim Sepic
--------------------------- --------------------------
Larry Henk, Vice President Jim Sepic, Vice President
RABANCO ACQUISITION COMPANY EIGHT SSWI, INC.
By /s/ Larry Henk By /s/ Harley Bird
--------------------------- -----------------------
Larry Henk, Vice President Harley Bird, President
RABANCO ACQUISITION COMPANY NINE CCAI, INC.
By /s/ Larry Henk By /s/ Cathleen Carr
--------------------------- -------------------------
Larry Henk, Vice President Cathleen Carr, President
RABANCO ACQUISITION COMPANY TEN
By /s/ Larry Henk
---------------------------
Larry Henk, Vice President
RABANCO ACQUISITION COMPANY ELEVEN
By /s/ Larry Henk
---------------------------
Larry Henk, Vice President
RABANCO ACQUISITION COMPANY TWELVE
BY /s/ Larry Henk
----------------------------
Larry Henk, Vice President
RAZORE SHAREHOLDERS NON-RAZORE SHAREHOLDERS
SPHERE SOLID WASTE, INC.
/s/ Warren J. Razore
- --------------------
Warren J. Razore By /s/ Harley Bird
-----------------------
Harley Bird, President
CCA, INC.
/s/ Josie Razore
- -----------------
Josie Razore By /s/ Cathleen Carr
------------------------
Cathleen Carr, President
/s/ Marie Schulze
- ------------------
Marie Schulze
/s/ Carmen Sepic
- ------------------
Carmen Sepic
<PAGE>
CONSENT AND PARTICIPATION OF SPOUSE
I, the undersigned spouse of a Shareholder, do hereby approve and join
in the foregoing Amended and Restated Agreement and Plan of Reorganization (this
"Agreement") to the extent of any community property interest that I may have
under the laws of the State of Washington and, to the extent of my interest, if
any, agree to be bound by the provisions contained in this Agreement, including
the Exhibits made part of this Agreement.
/s/ Mary Razore
---------------------------
Mary Razore
<PAGE>
CONSENT AND PARTICIPATION OF SPOUSE
I, the undersigned spouse of a Shareholder, do hereby approve and join
in the foregoing Amended and Restated Agreement and Plan of Reorganization (this
"Agreement") to the extent of any community property interest that I may have
under the laws of the State of Washington and, to the extent of my interest, if
any, agree to be bound by the provisions contained in this Agreement, including
the Exhibits made part of this Agreement.
/s/ Joan Razore
---------------------------
Joan Razore
<PAGE>
CONSENT AND PARTICIPATION OF SPOUSE
I, the undersigned spouse of a Shareholder, do hereby approve and join
in the foregoing Amended and Restated Agreement and Plan of Reorganization (this
"Agreement") to the extent of any community property interest that I may have
under the laws of the State of Washington and, to the extent of my interest, if
any, agree to be bound by the provisions contained in this Agreement, including
the Exhibits made part of this Agreement.
/s/ Jim Sepic
---------------------------
Jim Sepic
<PAGE>
CONSENT AND PARTICIPATION OF SPOUSE
I, the undersigned spouse of a Shareholder, do hereby approve and join
in the foregoing Amended and Restated Agreement and Plan of Reorganization (this
"Agreement") to the extent of any community property interest that I may have
under the laws of the State of Washington and, to the extent of my interest, if
any, agree to be bound by the provisions contained in this Agreement, including
the Exhibits made part of this Agreement.
/s/ Gary Schulze
---------------------------
Gary Schulze
EXHIBIT 10.1
[CONFORMED COPY]
================================================================================
CREDIT AGREEMENT
dated as of June 18, 1998
among
ALLIED WASTE NORTH AMERICA, INC.
ALLIED WASTE INDUSTRIES, INC.
CERTAIN LENDERS
CREDIT SUISSE FIRST BOSTON
and
GOLDMAN SACHS CREDIT PAaRTNERS L.P.,
as Co-Syndication Agents
CITIBANK, N.A.,
as Issuing Bank
and
CITICORP USA, INC.,
as Administrative Agent
================================================================================
<PAGE>
TABLE OF CONTENTS
This Table of Contents is not part of the Agreement to which
it is attached but is inserted for convenience of reference only.
Page
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
Section 1.01. Certain Defined Terms..............................2
Section 1.02. Computation of Time Periods.......................28
Section 1.03. Accounting Terms; Changes in GAAP.................28
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
AND THE LETTERS OF CREDIT
Section 2.01. The Advances......................................29
Section 2.02. Making the Advances...............................30
Section 2.03. Repayment.........................................31
Section 2.04. Termination or Reduction of the Commitments.......32
Section 2.05. Prepayments, Etc..................................32
Section 2.06. Interest..........................................34
Section 2.07. Fees..............................................35
Section 2.08. Conversion and Continuation of Advances...........36
Section 2.09. Increased Costs, Illegality, Etc..................37
Section 2.10. Payments and Computations.........................38
Section 2.11. Taxes.............................................40
Section 2.12. Sharing of Payments, Etc..........................42
Section 2.13. Letters of Credit.................................43
Section 2.14. Replacement of Lender.............................47
ARTICLE III
CONDITIONS OF LENDING
Section 3.01. Initial Extensions of Credit......................48
Section 3.02. Conditions Precedent to Each Borrowing and
Issuance........................................50
Section 3.03. Determinations Under Section 3.01.................51
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.01. Organization; Powers..............................51
Section 4.02. Authorization.....................................51
Section 4.03. Enforceability....................................52
Section 4.04. Governmental Approvals............................52
Section 4.05. Financial Statements..............................53
Section 4.06. No Material Adverse Change........................53
Section 4.07. Title to Properties; Possession Under Leases......53
Section 4.08. Subsidiaries; Other Equity Investments............53
Section 4.09. Litigation; Compliance with Laws..................54
Section 4.10. Agreements........................................54
Section 4.11. Federal Reserve Regulations.......................54
Section 4.12. Investment Company Act; Public Utility
Holding Company Act.............................55
Section 4.13. Tax Returns.......................................55
Section 4.14. No Material Misstatements.........................55
Section 4.15. Employee Benefit Plans............................55
Section 4.16. Environmental Matters.............................55
Section 4.17. Insurance.........................................56
Section 4.18. Labor Matters.....................................56
Section 4.19. Solvency..........................................57
Section 4.20. Intellectual Property.............................57
Section 4.21. Year 2000.........................................57
ARTICLE V
AFFIRMATIVE COVENANTS
Section 5.01. Existence; Businesses and Properties..............58
Section 5.02. Insurance.........................................58
Section 5.03. Obligations and Taxes.............................59
Section 5.04. Financial Statements, Reports, etc................59
Section 5.05. Litigation and Other Notices......................61
Section 5.06. Employee Benefits.................................61
Section 5.07. Maintaining Records; Access to Properties
and Inspections.................................61
Section 5.08. Environmental Laws................................62
Section 5.09. Preparation of Environmental Reports..............62
Section 5.10. Further Assurances................................63
Section 5.11. Compliance with Terms of Leaseholds...............64
Section 5.12. Performance of Material Agreements................64
Section 5.13. Junior Indebtedness...............................65
Section 5.14. Inactive Subsidiaries.............................65
Section 5.15. Year 2000.........................................65
ARTICLE VI
NEGATIVE COVENANTS
Section 6.01. Indebtedness......................................65
Section 6.02. Liens.............................................65
Section 6.03. No Other Negative Pledge..........................67
Section 6.04. Sale and Lease-Back Transactions..................67
Section 6.05. Investments, Loans and Advances...................68
Section 6.06. Mergers, Consolidations, Sales of Assets
and Acquisitions................................70
Section 6.07. Dividends and Distributions; Restrictions
on Ability of Subsidiaries to Pay
Dividends; Preferred Stock......................71
Section 6.08. Transactions with Affiliates......................73
Section 6.09. Business of Allied, Company and Subsidiaries......73
Section 6.10. Other Indebtedness and Agreements.................73
Section 6.11. Capital Expenditures..............................74
Section 6.12. Financial Covenants...............................74
ARTICLE VII
EVENTS OF DEFAULT
Section 7.01. Events of Default.................................75
Section 7.02. Actions in Respect of the Letters of
Credit Upon Default.............................77
ARTICLE VIII
THE ADMINISTRATIVE AGENT
Section 8.01. Authorization and Action..........................78
Section 8.02. Administrative Agent's Reliance, Etc..............78
Section 8.03. CUSA and Affiliates...............................79
Section 8.04. Lender Credit Decision............................79
Section 8.05. Indemnification...................................79
Section 8.06. Collateral Duties.................................80
Section 8.07. Successor Administrative Agent....................80
Section 8.08. Co-Syndication Agents and other Titles............81
ARTICLE IX
THE GUARANTEE
Section 9.01. The Guarantee.....................................81
Section 9.02. Obligations Unconditional.........................82
Section 9.03. Reinstatement.....................................85
Section 9.04. Subrogation.......................................85
Section 9.05. Remedies..........................................85
Section 9.06. Instrument for the Payment of Money...............85
Section 9.07. Continuing Guarantee..............................86
Section 9.08. Rights of Contribution............................86
Section 9.09. General Limitation on Guarantee Obligations.......86
ARTICLE X
MISCELLANEOUS
Section 10.01. Amendments, Consents, Etc........................87
Section 10.02. Notices, Etc.....................................88
Section 10.03. No Waiver; Remedies..............................89
Section 10.04. Costs, Expenses and Indemnification..............89
Section 10.05. Right of Setoff..................................90
Section 10.06. Governing Law; Submission to Jurisdiction........91
Section 10.07. Assignments and Participations...................91
Section 10.08. Execution in Counterparts........................94
Section 10.09. No Liability of the Issuing Banks................94
Section 10.10. Confidentiality..................................95
Section 10.11. WAIVER OF JURY TRIAL.............................95
Section 10.12. Survival.........................................95
Section 10.13. Captions.........................................96
Section 10.14. Successors and Assigns...........................96
<PAGE>
SCHEDULES
Schedule I Subsidiary Guarantors
Schedule 2.01 List of Commitments
Schedule 2.13 Existing Letters of Credit
Schedule 4.08 Subsidiaries; other Equity Investments;
Inactive Subsidiaries
Schedule 4.09 Litigation
Schedule 4.16 Environmental Matters
Schedule 4.17 Insurance
Schedule 6.02 Liens
EXHIBITS
EXHIBIT A-1....... Form of Revolving Credit Note
EXHIBIT A-2....... Form of Term Note
EXHIBIT B-1....... Form of Pledge Agreement
EXHIBIT B-2....... Form of Security Agreement
EXHIBIT C......... Form of Notice of Borrowing
EXHIBIT D-1....... Form of Opinion of Counsel to the Obligors
EXHIBIT D-2....... Form of Opinion of General Counsel of the Company
EXHIBIT E......... Form of Opinion of Special New York Counsel to CUSA
EXHIBIT F......... Form of Assignment and Acceptance
EXHIBIT G......... Form of Assumption Agreement
<PAGE>
- 5 -
CREDIT AGREEMENT
CREDIT AGREEMENT dated as of June 18, 1998 among:
(1) ALLIED WASTE NORTH AMERICA, INC., a Delaware corporation
(the "Company");
(2) ALLIED WASTE INDUSTRIES, INC., a Delaware corporation
("Allied");
(3) each of the SUBSIDIARY GUARANTORS listed on Schedule I hereto
and each Subsidiary of the Company that becomes a "Subsidiary
Guarantor" after the date hereof pursuant to Section 5.10
(individually, a "Subsidiary Guarantor" and, collectively, the
"Subsidiary Guarantors" and, together with Allied, the
"Guarantors"; and the Guarantors collectively with the
Company, the "Obligors");
(4) each of the lenders (the "Initial Lenders") listed on the signature
pages hereof;
(5) CITIBANK, N.A., as Issuing Bank; and
(6) CITICORP USA, INC., as administrative agent (together with its
successor in such capacity, the "Administrative Agent") for
the Lenders and the Issuing Bank hereunder.
PRELIMINARY STATEMENTS:
Capitalized terms used in these Preliminary Statements and not
otherwise defined have the meanings assigned to them in Section 1.01.
(a) The Company and the Subsidiary Guarantors are engaged as
an integrated group in the business of collecting, processing,
recycling and disposing of waste (and in businesses related thereto)
and in furnishing the required supplies, services, equipment, credit
and other facilities for such integrated operation. The integrated
operation requires financing on such a basis that credit supplied to
the Company be made available from time to time to the Subsidiary
Guarantors, as required for the continued successful operation of the
Company and the Subsidiary Guarantors, separately, and the integrated
operation as a whole. In that connection, the Obligors have requested
that the Lenders extend credit to the Company (to be made available by
the Company to the Subsidiary Guarantors) in an aggregate principal or
face amount not exceeding $1,100,000,000 to finance the operations of
the Company and the Subsidiary Guarantors, to refinance certain
existing indebtedness of the Company and the Subsidiary Guarantors, to
finance Permitted Acquisitions and Capital Expenditures, for working
capital and for other general corporate purposes.
(b) To induce the Lenders to extend such credit, the parties
hereto propose to enter into this Agreement pursuant to which the
Lenders will make loans to the Company and the Issuing Bank (and
certain other Lenders) will issue letters of credit for the account of
members of the Allied Group; each Guarantor will guarantee the credit
so extended; and each of the Obligors will agree to execute and deliver
pledge agreements and security agreements providing for security
interests and liens to be granted by the Obligors on certain of their
respective Properties as collateral security for the obligations of the
Obligors to the Lenders and the Administrative Agent hereunder.
(c) Each of the Obligors expects to derive benefit, directly
or indirectly, from the credit so extended to the Company (in the case
of the Company and the Subsidiary Guarantors, both in its separate
capacity and as a member of the integrated group), since the successful
operation of each of the Company and the Subsidiary Guarantors is
dependent on the continued successful performance of the functions of
the integrated group as a whole.
(d) The Company and Allied entered into a Credit Agreement
dated as of December 30, 1996 (the "Original Credit Agreement") with
Goldman Sachs Credit Partners L.P., Credit Suisse First Boston,
Citibank and the other lenders party thereto providing for extensions
of credit to the Obligors, which Credit Agreement was amended and
restated pursuant to the Existing Credit Agreement. This Agreement
replaces the Original Credit Agreement as amended by the Existing
Credit Agreement.
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants and agreements contained herein, the parties hereto hereby
agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
Section 1.01. Certain Defined Terms.
As used in this Agreement, the following terms shall have the following
meanings (such meanings to be equally applicable to both the singular and plural
forms of the terms defined):
"Acquired Business" means (a) any Person at least a majority
of the capital stock or other ownership interests of which is acquired
after the date hereof by the Company or a Subsidiary of the Company and
(b) any assets constituting a discrete business or operating unit
acquired on or after the date hereof by the Company or a Subsidiary of
the Company, in each case in accordance with the terms of this
Agreement.
"Acquired Indebtedness" means Indebtedness of an Acquired
Business outstanding on the date such Acquired Business was acquired by
the Company or one of its wholly owned Subsidiaries.
"Acquired Revenues" means, with respect to any period, the
revenues attributable to Acquired Business during such period, provided
that if the Company acquires, directly or indirectly, less than all of
the capital stock or other ownership interests of an Acquired Business,
only the percentage of revenues of such Acquired Business attributable
to the Allied Group's collective interest in such Acquired Business
shall be deemed to be "Acquired Revenues" for purposes of this
Agreement.
"Acquisition Consideration" means, with respect to any
acquisition, the aggregate amount of consideration paid by the members
of the Allied Group in connection therewith, including, without
limitation (but without duplication):
(1) the aggregate amount of cash paid, the aggregate
fair market value of non-cash property delivered and the
aggregate principal amount of Indebtedness incurred by members
of the Allied Group in connection with such acquisition;
(2) the aggregate amount of Indebtedness and other
liabilities of the Acquired Business assumed by the members of
the Allied Group; and
(3) the aggregate amount of Indebtedness and other
liabilities retained by the Acquired Business,
but in any event excluding (x) common stock, Preferred Stock (other
than Cash-Pay Preferred Stock) and other Non-Cash-Pay equity interests
issued by Allied in connection with such acquisition; (y) payment
obligations of members of the Allied Group based on post-acquisition
performance of the Acquired Business and (z) liabilities for which
members of the Allied Group have received indemnification or other
financial assurances from or on behalf of the transferor (so long as
the obligors on such indemnification or other financial assurances are,
in the reasonable opinions of the Administrative Agent and the Company,
creditworthy).
"Administrative Agent" has the meaning specified in the
recital of parties to this Agreement.
"Administrative Agent's Account" means the account of the
Administrative Agent maintained by the Administrative Agent at Citibank
at its office at 2 Penns Way, Suite 200, New Castle, Delaware, 19720,
Account No. 36852248, Attention: John Williams (or his successor), or
such other account maintained by the Administrative Agent as may be
designated by the Administrative Agent in a written notice to the
Lenders, the Issuing Bank and the Company.
"Administrative Questionnaire" means an administrative
questionnaire in a form supplied by the Administrative Agent.
"Advance" means a Revolving Credit Advance or a Term Advance.
"Affiliate" means, 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.
"Allied" has the meaning specified in the recital of parties
to this Agreement.
"Allied Group" means, collectively, Allied and Allied's
Subsidiaries (including, without limitation, the Company and the
Company's Subsidiaries), and a "member" of the Allied Group means
Allied and each of Allied's Subsidiaries.
"Allied Senior Notes" means the 11.30% Senior Discount Notes
due 2007 of Allied in an aggregate principal amount at maturity of
$418,000,000.
"Allied Senior Notes Indenture" means the Indenture dated as
of May 15, 1997 among Allied and U.S. Bank Trust National Association,
as trustee, relating to the Allied Senior Notes, as from time to time
amended.
"Allied Waste Senior Subordinated Notes" means the 10-1/4%
Senior Subordinated Notes due 2006 issued by the Company on December 5,
1996, in an aggregate principal amount of $525,000,000.
"Allied Waste Senior Subordinated Notes Indenture" means the
Indenture dated as of December 1, 1996 among the Company, Allied, the
Subsidiaries of Allied party thereto and U.S. Bank Trust National
Association, as trustee, as from time to time amended.
"Applicable Commitment Fee Rate" means 0.50% per annum;
provided that (so long as no Event of Default shall have occurred and
be continuing):
(1) the Applicable Commitment Fee Rate shall be 0.25%
per annum during the first Pricing Period; and
(2) if for any Rolling Period ending on or after the
Closing Date the Leverage Ratio as at the end of such Rolling
Period shall be within any of the ranges specified in the
schedule below, then, subject to the delivery to the
Administrative Agent of the Certified Financial Statements
with respect to the fiscal year, or fiscal quarter, ending on
the last day of such Rolling Period prior to the date by which
such Certified Financial Statements are required to be so
delivered, the "Applicable Commitment Fee Rate" for the
related Pricing Period shall be changed to the percentage per
annum set forth opposite the reference to such range in such
schedule:
Applicable
Range of Leverage Ratio Commitment Fee Rate
Greater than or equal to 4.75 to 1.00 0.500%
Greater than or equal to 4.25 to 1.00
but less than 4.75 to 1.00 0.375%
Greater than or equal to 3.50 to 1.00
but less than 4.25 to 1.00 0.250%
Less than 3.50 to 1.00 0.200%
"Applicable Lending Office" means, with respect to each
Lender, such Lender's Domestic Lending Office in the case of a Base
Rate Advance and such Lender's Eurodollar Lending Office in the case of
a Eurodollar Rate Advance.
"Applicable Letter of Credit Fee Rate" means, at any time, a
rate per annum equal to the Applicable Margin for Eurodollar Rate
Advances in effect at such time.
"Applicable Margin" means (a) with respect to all Base Rate
Advances, 0.500% per annum and (b) with respect to all Eurodollar Rate
Advances, 1.750% per annum; provided that (so long as no Event of
Default shall have occurred and be continuing):
(1) during the first Pricing Period, the Applicable
Margin with respect to all Base Rate Advances will be 0.00%
per annum and the Applicable Margin with respect to all
Eurodollar Rate Advances will be 1.125% per annum; and
(2) if for any Rolling Period ending on or after the
Closing Date the Leverage Ratio as at the end of such Rolling
Period shall be within any of the ranges specified in the
schedule below, then, subject to the delivery to the
Administrative Agent of the Certified Financial Statements
with respect to the fiscal year, or fiscal quarter, ending on
the last day of such Rolling Period prior to the date by which
such Certified Financial Statements are required to be so
delivered, the "Applicable Margin" for the related Pricing
Period shall be changed to the percentage per annum set forth
opposite the reference to such range in such schedule:
<TABLE>
<CAPTION>
Applicable Margin (% p.a.)
Range of Leverage Ratio Base Rate Eurodollar Rate
Advances Advances
<S> <C> <C>
Greater than or equal to 4.75 to 1.00 0.500% 1.750%
Greater than or equal to 4.25 to 1.00
but less than 4.75 to 1.00 0.250% 1.500%
Greater than or equal to 3.50 to 1.00
but less than 4.25 to 1.00 0.000% 1.125%
Less than 3.50 to 1.00 0.000% 0.750%
</TABLE>
"Asset Sale" means any sale, lease, assignment, transfer or
other disposition of any property (whether now owned or hereafter
acquired, whether in one transaction or a series of related
transactions and whether by way of merger or otherwise) by any member
of the Allied Group, including, without limitation, any such sale,
assignment, transfer or other disposition of any capital stock or other
ownership interests of any of Allied's Subsidiaries.
"Assignment and Acceptance" means an assignment and acceptance
entered into by a Lender and an Eligible Assignee, and accepted by the
Administrative Agent, in accordance with Section 10.07 and in
substantially the form of Exhibit F.
"Assumption Agreement" means an assumption agreement between a
Specified Subsidiary and the Administrative Agent in substantially the
form of Exhibit G.
"Available Amount" of any Letter of Credit means the maximum
amount available to be drawn under such Letter of Credit (assuming
compliance with all conditions to drawing specified therein).
"Bankruptcy Code" means Title 11 of the United States Code, as
from time to time amended.
"Base Rate" means a fluctuating interest rate per annum in
effect from time to time, which rate per annum shall at all times be
equal to the higher of (a) the rate of interest announced publicly by
Citibank in New York, New York, from time to time, as Citibank's base
rate and (b) 0.50% per annum above the Federal Funds Rate. Each change
in any interest rate provided for herein based upon the Base Rate
resulting from a change in the Base Rate shall take effect at the time
of such change in the Base Rate.
"Base Rate Advance" means an Advance that bears interest as
provided in Section 2.06(a)(i).
"Borrowing" means a Revolving Credit Borrowing or a Term
Borrowing.
"Business Day" means any day on which banks are not required
or authorized to close in New York City and Phoenix, Arizona, and, if
such Business Day relates to a Eurodollar Rate Advance, on which
dealings are carried on in the London interbank market.
"Capital Expenditures" means, for any period, expenditures
(including the aggregate amount of Capital Lease Obligations incurred
during such period) made by Allied or any of its Subsidiaries to
acquire or construct fixed assets, plant and equipment (including
renewals, improvements and replacements, but excluding repairs unless
such repairs are required to be capitalized in accordance with GAAP)
during such period computed in accordance with GAAP; provided that
Capital Expenditures shall not include (a) expenditures classified as
Permitted Acquisitions, (b) expenditures made by an Acquired Business
prior to the time such Acquired Business was acquired by the Company or
any of its Subsidiaries pursuant to a Permitted Acquisition or (c)
expenditures made with the proceeds of condemnation awards or insurance
for fixed assets, plant and equipment.
"Capital Lease Obligations" of any Person means the
obligations of such Person to pay rent or other 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.
"Cash-Pay Preferred Stock" means Preferred Stock (1) that
requires periodic payment of cash dividends or (2) that the issuer
thereof has undertaken to redeem for cash at a fixed or determinable
date or dates prior to the Maturity Date, whether by operation of a
sinking fund or otherwise, or upon the occurrence of a condition not
solely within the control of the issuer or (3) is redeemable for cash
on any date prior to the Maturity Date at the option of the holder
thereof.
"Casualty Event" means, with respect to any property of any
Person, any loss of or damage to, or any condemnation or other taking
of, such property for which such Person or any of its Subsidiaries
receives insurance proceeds, proceeds of a condemnation award or other
compensation.
"Certified Financial Statements" means the certified financial
statements required to be delivered to the Administrative Agent with
respect to a fiscal year pursuant to Section 5.04(a) or with respect to
a fiscal quarter pursuant to Section 5.04(b), in each case setting
forth, inter alia, a calculation of the Leverage Ratio as at the last
day of such fiscal year or fiscal quarter, as the case may be.
"Change in Control" means:
(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) Allied is merged, consolidated or reorganized into or with
another corporation or other Person, and as a result of such merger,
consolidation or reorganization less than a majority of the combined
voting power of the then outstanding securities of the corporation or
other Person that is the survivor of such merger, consolidation or
reorganization immediately after such transaction is held in the
aggregate by the holders of Allied Voting Stock immediately prior to
such transaction (where "Allied Voting Stock" means outstanding
securities of Allied entitled to vote generally in the election of
directors of Allied); or
(c) 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 nominated by the board of directors of Allied nor
appointed by directors so nominated; or
(d) 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 $50,000,000; or
(e) Allied shall cease to own and control, directly,
beneficially and of record, 100% of the outstanding capital stock of
the Company, free and clear of all Liens (other than Liens under the
Pledge Agreement).
"Citibank" means Citibank, N.A., a national banking
association, and its successors.
"Closing Date" means the date upon which the initial extension
of credit hereunder is made.
"Code" means the Internal Revenue Code of 1986, as amended
from time to time, and the regulations promulgated and rulings issued
thereunder.
"Collateral" means all "Collateral" referred to in the
Security Documents and all other property that is subject to any Lien
created by any Security Document in favor of the Administrative Agent.
"Commitment" means a Revolving Credit Commitment or a Term
Commitment.
"Company" has the meaning specified in the recital of parties
to this Agreement.
"Company's Account" means the account of the Company
maintained with Citibank, at its office at 399 Park Avenue, New York,
New York 10043, Account No. 40762931; or such other account maintained
by the Company with Citibank and designated by the Company in a written
notice to the Administrative Agent.
"Confidential Information" means information identified as
being confidential that a member of the Allied Group furnishes to the
Administrative Agent, the Issuing Bank or any Lender, but does not
include any such information once such information has become generally
available to the public or once such information has become available
to the Administrative Agent, the Issuing Bank or any Lender from a
source other than a member of the Allied Group (unless, in either case,
such information becomes so available as a result of the breach by the
Administrative Agent, the Issuing Bank or a Lender of its duty of
confidentiality set forth in Section 10.10).
"Confidential Information Memorandum" means the Confidential
Information Memorandum of the Company dated May 1998.
"Consolidated" refers to the consolidation of accounts in
accordance with GAAP.
"Consolidated EBITDA" shall mean, for any period, the sum, for
Allied and its Subsidiaries (determined on a Consolidated basis without
duplication in accordance with GAAP), of the following:
(a) net operating income (calculated before taxes,
Consolidated Interest Expense and income or loss attributable
to equity in Affiliates that are not Subsidiaries of Allied)
for such period plus
(b) the sum for such period of the following (in each
case to the extent deducted in determining net operating
income):
(1) depreciation and amortization;
(2) the aggregate amount of letter of credit
fees accrued during such period;
(3) all non-cash non-recurring charges
during such period, including charges for costs
related to Permitted Acquisitions (it being
understood that (x) non-cash non-recurring charges
shall not include accruals for closure and
post-closure liabilities and (y) charges shall be
deemed non-cash charges until the period during which
cash disbursements attributable to such charges are
made, at which point such charges shall be deemed
cash charges; provided that, for purposes of this
clause (y), the Company shall be required to monitor
the actual cash disbursements only for those non-cash
charges that exceed $1,000,000 individually or that
exceed $10,000,000 in the aggregate in any fiscal
year);
(4) all cash charges attributable to the
execution, delivery and performance of the Loan
Documents;
(5) all non-recurring cash charges related
to Permitted Acquisitions and financings (including
amendments thereto); and minus
(c) all non-cash non-recurring gains during such
period (to the extent included in determining net operating
income for such period).
If the Company or any of its Subsidiaries acquires any Acquired
Business during any Rolling Period, Consolidated EBITDA for such
Rolling Period will be determined on a pro forma basis as if such
Acquired Business were acquired on the first day thereof. In
determining the pro forma adjustments to Consolidated EBITDA to be made
with respect to any Acquired Business for periods prior to the
acquisition date thereof, actions taken by the Company and its
Subsidiaries prior to the first anniversary of the related acquisition
date that result in cost savings with respect to such Acquired Business
will be deemed to have been taken on the first day of the Rolling
Period for which Consolidated EBITDA is being determined (with the
intent that such cost savings be effectively annualized by
extrapolation from the demonstrated cost savings since the related
acquisition date). Such pro forma adjustments will be subject to
delivery to the Administrative Agent of a certificate of a Financial
Officer of the Company; such certificates may be delivered with respect
to any Acquired Business at any time after the end of the fiscal
quarter of the Company following the related acquisition date and may
be delivered quarterly (but only once per fiscal quarter with respect
to each Acquired Business). Each such certificate shall be accompanied
by supporting information and calculations demonstrating the actual
cost savings with respect to such Acquired Business and such other
information as any Lender, through the Administrative Agent, may
reasonably request.
"Consolidated Interest Expense" means, for any period, the
sum, for Allied and its Subsidiaries (determined on a Consolidated
basis without duplication in accordance with GAAP), of the following:
(a) all interest in respect of Indebtedness
(including the interest component of any payments in respect
of Capital Lease Obligations) accrued or capitalized during
such period (whether or not actually paid during such period),
net of interest income; plus
(b) the net amount due and payable (or minus the net
amount receivable) under Interest Rate Protection Agreements
during such period (whether or not actually paid or received
during such period);
provided that "Consolidated Interest Expense" shall not include any
interest expense accrued and not paid in cash in respect of Non-Cash
Pay Indebtedness.
"Continuation", "Continue" and "Continued" each refers to a
continuation of Eurodollar Rate Advances from one Interest Period to
the next Interest Period pursuant to Section 2.08.
"Control" means 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.
"Conversion", "Convert" and "Converted" each refers to a
conversion of Advances of one Type into Advances of the other Type
pursuant to Section 2.08 or 2.09.
"Credit Agreement Transactions" means the transactions
contemplated by this Agreement and the other Loan Documents (including,
without limitation, the execution, delivery and performance by the
Obligors of the Loan Documents, the incurrence of liabilities by the
Obligors under the Loan Documents and the extensions of credit
hereunder) and any actual or proposed use by the Company of any of its
Subsidiaries of the proceeds of any of the extensions of credit
hereunder.
"CUSA" means Citicorp USA, Inc. and its successors.
"Default" means any event that would constitute an Event of
Default but for the requirement that notice be given or time elapse or
both.
"Domestic Lending Office" means, with respect to any Lender,
the office of such Lender specified as its "Domestic Lending Office" in
the Administrative Questionnaire of such Lender or in the Assignment
and Acceptance pursuant to which it became a Lender, or such other
office of such Lender as such Lender may from time to time specify to
the Administrative Agent.
"Domestic Subsidiary" means a Subsidiary of the Company
organized under the laws of the United States or any state thereof.
"Eligible Assignee" means: (a) any Lender or any Affiliate of
any Lender; (b) a commercial bank organized under the laws of the
United States, or any state thereof, and having total assets in excess
of $1,000,000,000; (c) a savings and loan association or savings bank
organized under the laws of the United States, or any State thereof,
and having a net worth in excess of $100,000,000; (d) a commercial bank
organized under the laws of any other country that is a member of the
OECD or has concluded special lending arrangements with the
International Monetary Fund associated with its General Arrangements to
Borrow, or a political subdivision of any such country, and having
total assets in excess of $1,000,000,000, so long as such bank is
acting through a branch or agency located in the country in which it is
organized or another country that is described in this clause (d); (e)
the central bank of any country that is a member of the OECD; (f) a
finance company, insurance company or other financial institution or
fund (whether a corporation, partnership, trust or other entity) that
is engaged in making, purchasing or otherwise investing in commercial
loans in the ordinary course of its business and having total assets in
excess of $100,000,000; and (g) any other Person (other than an
Affiliate of the Company) approved by the Administrative Agent and the
Company, such approval not to be unreasonably withheld or delayed.
"Environment" means 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" means 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" means 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. ss.ss. 9601 et seq. (collectively "CERCLA"), the Solid
Waste Disposal Act, as amended by the Resource Conservation and
Recovery Action of 1976 and Hazardous and Solid Waste Amendments of
1984, 42 U.S.C. ss.ss. 6901 et seq., the Federal Water Pollution
Control Act, as amended, 33 U.S.C. ss.ss. 1251 et seq., the Clean Air
Act of 1970, as amended, 42 U.S.C. ss.ss. 7401 et seq., the Toxic
Substances Control Act of 1976, 15 U.S.C. ss.ss. 2601 et seq., the
applicable portions of the Occupational Safety and Health Act of 1970,
as amended, 29 U.S.C. ss.ss. 651 et seq., the Emergency Planning and
Community Right-to-Know Act of 1986, 42 U.S.C. ss.ss. 11001 et seq.,
the Safe Drinking Water Act of 1974, as amended, 42 U.S.C. ss.ss.
300(f) et seq., the Hazardous Materials Transportation Act, 49 U.S.C.
ss.ss. 5101 et seq., and all amendments or regulations promulgated
under any of the foregoing.
"Environmental Permit" means any permit, approval,
authorization, certificate, license, variance, filing or permission
required by or from any Government Authority pursuant to any
Environmental Law.
"ERISA" means the Employee Retirement Income Security Act of
1974, as the same may be amended from time to time.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) that, together with the Company, 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" means (a) any "reportable event", as defined in
Section 4043 of ERISA or the regulations issued thereunder, with
respect to a Plan with respect to which notice is required to be given
to the PBGC; (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 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 Company or any of its ERISA Affiliates
from any Plan or Multiemployer Plan; (f) the receipt by the Company 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, in the
case of the PBGC, to appoint a trustee to administer any Plan; (g) the
receipt by the Company or any ERISA Affiliate of any notice concerning
the imposition of Withdrawal Liability or a determination that
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 any
member of the Allied Group is a "disqualified person" (within the
meaning of Section 4975 of the Code) or with respect to which any
member of the Allied Group 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 any member of
the Allied Group.
"Eurocurrency Liabilities" has the meaning specified in
Regulation D of the Board of Governors of the Federal Reserve System,
as in effect from time to time.
"Eurodollar Lending Office" means, with respect to any Lender,
the office of such Lender specified as its "Eurodollar Lending Office"
in the Administrative Questionnaire of such Lender or in the Assignment
and Acceptance pursuant to which it became a Lender (or, if no such
office is specified, its Domestic Lending Office), or such other office
of such Lender as such Lender may from time to time specify to the
Administrative Agent.
"Eurodollar Rate" means, for any Interest Period for each
Eurodollar Rate Advance comprising part of the same Borrowing, an
interest rate per annum equal to the rate per annum obtained by
dividing (a) the average (rounded upward to the nearest whole multiple
of 1/16 of 1% per annum, if such average is not such a multiple) of the
rates per annum at which deposits in U.S. Dollars are offered by the
principal office of each of the Reference Banks in London, England to
prime banks in the London interbank market at approximately 10:00 A.M.
(New York time) two Business Days before the first day of such Interest
Period in an amount substantially equal to such Reference Bank's (or in
the case of Citibank, CUSA's) Eurodollar Rate Advance comprising part
of such Borrowing (determined without giving effect to any assignments
or participations by such Reference Bank) and for a period equal to
such Interest Period by (b) a percentage equal to 100% minus the
Eurodollar Rate Reserve Percentage for such Interest Period. The
Eurodollar Rate for each Interest Period for each Eurodollar Rate
Advance comprising part of the same Borrowing shall be determined by
the Administrative Agent on the basis of applicable rate furnished to
and received by the Administrative Agent from the Reference Banks two
Business Days before the first day of such Interest Period, subject,
however, to the provisions of Section 2.09.
"Eurodollar Rate Advance" means an Advance that bears interest
as provided in Section 2.06(a)(ii).
"Eurodollar Rate Reserve Percentage" for any Interest Period
for each Eurodollar Rate Advance comprising part of the same Borrowing
means the reserve percentage (if any) applicable two Business Days
before the first day of such Interest Period under regulations issued
from time to time by the Board of Governors of the Federal Reserve
System (or any successor) for determining the maximum reserve
requirement (including, without limitation, any emergency, supplemental
or other marginal reserve requirement) for a member bank of the Federal
Reserve System in New York City with deposits exceeding $1,000,000,000
with respect to liabilities or assets consisting of or including
Eurocurrency Liabilities (or with respect to any other category of
liabilities that includes deposits by reference to which the interest
rate on Eurodollar Rate Advances is determined) having a term equal to
such Interest Period.
"Events of Default" has the meaning specified in Section 7.01.
"Excluded Period" means, with respect to any additional amount
payable under Section 2.09 or 2.13, the period ending 180 days prior to
the applicable Lender's delivery of a certificate referenced in Section
2.09(a), 2.09(b) or 2.13(d), as applicable, with respect to such
additional amount.
"Existing Credit Agreement" means the Amended and Restated
Credit Agreement dated as of June 5, 1997 among the Company, Allied,
the lenders party thereto, the agents party thereto, and Credit Suisse
First Boston, as Administrative Agent, as amended and in effect on the
Closing Date.
"Existing Letters of Credit" means the letters of credit
outstanding under the Existing Credit Agreement on the Closing Date and
identified on Schedule 2.13.
"Facility" means the Revolving Credit Facility or the Term
Facility.
"Federal Funds Rate" means, for any period, a fluctuating
interest rate per annum equal for each day during such period to the
weighted average of the rates on overnight Federal funds transactions
with members of the Federal Reserve System arranged by Federal funds
brokers, as published for such day (or, if such day is not a Business
Day, for the next preceding 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 such day for such
transactions received by the Administrative Agent from three Federal
funds brokers of recognized standing selected by it.
"Financial Officer" of any Person means the chief financial
officer, chief accounting officer, treasurer or controller of such
Person.
"Fixed Charges" means, for any period, the sum, for Allied and
its Subsidiaries (determined on a Consolidated basis without
duplication in accordance with GAAP), of the following:
(a) all regularly scheduled payments of principal of
Indebtedness (including the principal component of any
payments in respect of Capital Lease Obligations, but
excluding (1) payments on Indebtedness financed through the
incurrence of new Indebtedness or the issuance of Preferred
Stock or common stock of Allied and (2) optional prepayments
of Advances made pursuant to Section 2.05(a) or mandatory
prepayments of Advances made pursuant to Section 2.05(b)) made
during such period plus
(b) Consolidated Interest Expense for such period; plus
(c) the aggregate amount of cash taxes paid by
members of the Allied Group, on a Consolidated basis, during
such period; plus
(d) the aggregate amount of cash dividends paid by
members of the Allied Group in respect of their common and
Preferred Stock (other than (x) cash dividends paid by members
of the Allied Group to Allied, the Company or wholly owned
Subsidiaries of Allied in accordance with Section 6.07 and (y)
cash dividends in respect of Cash-Pay Preferred Stock to the
extent the same are included in Consolidated Interest
Expense); plus
(e) Lease Expense for such period.
"Fixed Charges Ratio" means, as at any date, the ratio of (a)
Consolidated EBITDA for the Rolling Period ending on or most recently
ended prior to such date plus Lease Expense for such Rolling Period to
(b) Fixed Charges for such Rolling Period.
"GAAP" means generally accepted accounting principles in the
United States of America as in effect as of the date of, and used in,
the preparation of the audited financial statements referred to in
Section 4.05.
"Governmental Authority" means any Federal, state, provincial,
municipal, local or foreign court or governmental agency, authority,
instrumentality or regulatory body.
"Guarantee" of or by any Person means any obligation,
contingent or otherwise, of such Person 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 that the term
"Guarantee" shall not include endorsements for collection or deposit in
the ordinary course of business.
"Guaranteed Obligations" has the meaning specified in Section
9.01.
"Guarantors" has the meaning specified in the recital of
parties to this Agreement.
"Hazardous Materials" means 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.
"Hedging Agreement" means any Interest Rate Protection
Agreement, foreign currency exchange agreement, commodity price
protection agreement or other interest or currency exchange rate or
commodity price hedging arrangement.
"Inactive Subsidiaries" has the meaning specified in Section
4.08(c).
"Indebtedness" of any Person means, 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 and other Hedging Agreements;
(i) all obligations of such Person with respect to Cash-Pay
Preferred Stock issued by such Person; and
(j) 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.
"Indemnified Party" means the Administrative Agent, each
Issuing Bank, each Co-Syndication Agent named on the cover page of this
Agreement, each Lender and each of their respective Affiliates and
their officers, partners, directors, employees, agents and advisors.
"Initial Lenders" has the meaning specified in the recital of
the parties to this Agreement.
"Intellectual Property" has the meaning specified in the
Security Agreement.
"Interest Expense Coverage Ratio" means, as at any date, the
ratio of (a) Consolidated EBITDA for the Rolling Period ending on or
most recently ended prior to such date to (b) Consolidated Interest
Expense for such Rolling Period.
"Interest Period" means, for each Eurodollar Rate Advance
comprising part of the same Borrowing, the period commencing on the
date of such Eurodollar Rate Advance or the date of the Conversion of
any Base Rate Advance into such Eurodollar Rate Advance, and ending on
the last day of the period selected by the Company pursuant to the
provisions below and, thereafter, each subsequent period commencing on
the last day of the immediately preceding Interest Period and ending on
the last day of the period selected by the Company pursuant to the
provisions below. The duration of each such Interest Period shall be
one, two, three or six months, as the Company may, upon notice received
by the Administrative Agent not later than 10:00 A.M. (New York City
time) on the third Business Day prior to the first day of such Interest
Period, select; provided that:
(a) with respect to Term Advances, the Company may
not select any Interest Period that ends after any Principal
Payment Date unless, after giving effect thereto, the
aggregate principal amount of Term Advances having Interest
Periods that end after such Principal Payment Date shall be
equal to or less than the aggregate principal amount of Term
Advances scheduled to be outstanding after giving effect to
the payments of principal required to be made on such
Principal Payment Date;
(b) with respect to Revolving Credit Advances, no
Interest Period for any Revolving Credit Advance may end after
the Revolving Credit Commitment Termination Date;
(c) whenever the last day of any Interest Period
would otherwise occur on a day other than a Business Day, the
last day of such Interest Period shall be extended to occur on
the next succeeding Business Day, provided that, if such
extension would cause the last day of such Interest Period to
occur in the next following calendar month, the last day of
such Interest Period shall occur on the next preceding
Business Day; and
(d) whenever the first day of any Interest Period
occurs on the last day of a calendar month (or on any day for
which there is no numerically corresponding day in the
appropriate subsequent calendar month), such Interest Period
shall end on the last Business Day of the appropriate
subsequent calendar month.
"Interest Rate Protection Agreement" means any interest rate
swap, cap or other agreement satisfactory to the Administrative Agent
entered into by the Company that is designed to protect the Company
against fluctuations in interest rates and not for speculation.
"Issuing Bank" means Citibank, together with its successors in
such capacity, and any other Lender (or Affiliate thereof) appointed to
issue one or more specific Letters of Credit pursuant to Section
2.13(f).
"Junior Indebtedness" means:
(a) Indebtedness of members of the Allied Group in respect of
the Allied Senior Notes and Allied Waste Senior Subordinated Notes; and
(b) Indebtedness of members of the Allied Group the payment of
which is contractually subordinated to the obligations of the Obligors
hereunder.
"L/C Cash Collateral Account" means the "L/C Cash Collateral
Account" under the Security Agreement.
"L/C Related Documents" means this Agreement and each other
agreement or instrument relating to any Letter of Credit, in each case
as hereafter amended, supplemented or otherwise modified from time to
time.
"Lease Expense" means, for any period, for Allied and its
Subsidiaries (determined on a Consolidated basis without duplication in
accordance with GAAP) the aggregate amount of fixed and contingent
rentals payable with respect to operating leases of real and personal
property (other than Capital Lease Obligations).
"Lenders" means the Initial Lenders and each Eligible Assignee
that becomes a party hereto pursuant to Section 10.07. When reference
is made in this Agreement or any other Loan Document to any
"relevant" Lender in connection with either Facility, such
reference shall be deemed to refer to a Lender that has a Commitment
or outstanding Advances under such Facility. Unless the context
clearly indicates otherwise, the term "Lenders" shall include the
Issuing Banks.
"Letter of Credit" has the meaning specified in Section
2.13(a).
"Letter of Credit Liability" means, at any time, all of the
liabilities of the Company to the Issuing Banks in respect of Letters
of Credit, whether such liability is contingent or fixed, and shall
consist of the sum of (a) the aggregate Available Amount of all Letters
of Credit then outstanding plus (b) the aggregate amount that has then
been paid by, and has not been reimbursed to, the Issuing Banks under
Letters of Credit.
"Letter of Credit Sublimit" means $250,000,000.
"Leverage Ratio" means, as at any date, the ratio of (a) Total
Indebtedness as of such date to (b) Consolidated EBITDA for the Rolling
Period ending on or most recently ended prior to such date.
"Lien" means any lien, security interest or other charge or
encumbrance of any kind, or any other type of preferential arrangement,
including, without limitation, the lien or retained security title of a
conditional vendor and any easement, right of way or other encumbrance
on title to real property.
"Loan Documents" means, collectively, this Agreement, the
Notes and the Security Documents.
"Margin Stock" has the meaning specified in Regulations U
and X.
"Material Adverse Effect" means (a) a materially adverse
effect on the business, condition (financial or otherwise), operations,
performance, properties or prospects of Allied and its Subsidiaries,
taken as a whole, (b) a material impairment of the ability of Allied or
the Company to perform their respective obligations under the Loan
Documents, (c) a material impairment of the ability of the members of
the Allied Group, taken as a whole, to perform their collective
obligations under the Loan Documents, or (d) a material impairment of
the rights of or benefits available to the Administrative Agent and the
Lenders under the Loan Documents.
"Material Agreement" means an agreement that is material to
the conduct of the business of the Company and its Subsidiaries, taken
as a whole.
"Maturity Date" means June 18, 2003, provided that if such
date is not a Business Day, the Maturity Date shall be the immediately
preceding Business Day.
"Moody's" means Moody's Investors Service, Inc. and its
successors.
"Multiemployer Plan" means a multiemployer plan as defined in
Section 4001(a)(3) of ERISA.
"Net Available Proceeds" means:
(a) In the case of any Asset Sale, the aggregate amount of all
cash payments as and when received by the members of the Allied Group
directly or indirectly in connection with such Asset Sale; provided
that:
(1) such Net Available Proceeds shall be net of (x)
the amount of any legal, title and recording tax expenses,
commissions and other reasonable fees and expenses (including
reasonable expenses of preparing the relevant property for
sale) paid by the members of the Allied Group in connection
with such Asset Sale, (y) any Federal, state and local income
or other taxes estimated in good faith to be payable by the
members of the Allied Group as a result of such Asset Sale and
(z) the aggregate amount of reserves taken by the members of
the Allied Group in accordance with GAAP against
indemnification obligations incurred by them in connection
with such Asset Sale;
(2) such Net Available Proceeds shall be net of any
repayments of Indebtedness by members of the Allied Group to
the extent that (x) such Indebtedness is secured by a Lien on
the property that is the subject of such Asset Sale and (y)
the transferee of (or holder of a Lien on) such property
requires that such Indebtedness be repaid as a condition to
the purchase of such property; and
(3) in the case of an Asset Sale consisting of a
substantially contemporaneous exchange (including by way of a
substantially contemporaneous purchase and sale) of discrete
assets of members of the Allied Group for one or more other
assets used for similar purposes, Net Available Proceeds shall
be net of cash payments made by members of the Allied Group in
connection with such exchange.
(b) In the case of any Casualty Event, the aggregate amount of
proceeds of insurance, condemnation awards and other compensation
received by members of the Allied Group in respect of such Casualty
Event net of (1) reasonable expenses incurred by them in connection
therewith, (2) contractually required repayments of Indebtedness to the
extent secured by a Lien on the property suffering such Casualty Event
and any income and transfer taxes payable by members of the Allied
Group in respect of such Casualty Event and (3) amounts promptly
applied to or set aside for the repair or replacement of the property
suffering such Casualty Event.
(c) In the case of any Specified Issuance, the aggregate
amount of all cash received by members of the Allied Group in respect
of such Specified Issuance, net of:
(1) reasonable expenses incurred by them in
connection therewith;
(2) payments of principal on Junior Indebtedness
outstanding on the date of such Specified Issuance and made
with proceeds thereof, so long as the terms of the
Indebtedness or Cash-Pay Preferred Stock issued as part of
such Specified Issuance are no less favorable to the Lenders
(as reasonably determined by the Administrative Agent) than
the Junior Indebtedness so paid; and
(3) payments of principal on Acquired Indebtedness
outstanding on the date of such Specified Issuance in an
aggregate amount, for such Specified Issuance, not exceeding
$25,000,000, so long as the terms of the Indebtedness or
Cash-Pay Preferred Stock issued as part of such Specified
Issuance are no less favorable to the Lenders (as reasonably
determined by the Administrative Agent) than the Acquired
Indebtedness so paid.
"non-appealable" includes, for purposes of Sections 2.11(c), 2.13(e),
7.01(j) and 10.04(b), any judgment as to which all appeals have been
taken or as to which the time for taking an appeal shall have expired.
"Non-Cash-Pay" means:
(a) with respect to any Preferred Stock, that such
Preferred Stock is not Cash-Pay Preferred Stock; and
(b) with respect to any Indebtedness or equity
interest (other than Preferred Stock), that such Indebtedness
or equity interest does not require any cash payments to be
made thereon prior to the Maturity Date, whether by operation
of a sinking fund or otherwise.
"Notes" means the Revolving Credit Notes and the Term Notes.
"Notice of Borrowing" has the meaning specified in Section
2.02(a).
"Notice of Issuance" has the meaning specified in Section
2.13(b)(i).
"Obligations" means, collectively, the Guaranteed Obligations,
the "Secured Obligations" (as defined in the Pledge Agreement) and the
"Secured Obligations" (as defined in the Security Agreement).
"Obligors" has the meaning assigned to such term in the
recitals of parties to this Agreement.
"OECD" means the Organization for Economic Cooperation and
Development.
"Other Taxes" has the meaning specified in Section 2.11(b).
"Permitted Acquisition" has the meaning assigned to such term
in Section 6.05(m).
"Permitted Call/Option Agreements" means one or more swap,
cap, collar or option agreements pursuant to which one or more members
of the Allied Group effectively monetize the value of call rights with
respect to Junior Indebtedness, so long as such swap, cap, collar or
option agreements are designed to protect the members of the Allied
Group against increases in the cost to them of calling such Junior
Indebtedness and such agreements are not for speculation.
"Permitted Capital Expenditures" means:
(a) for the fiscal year ending December 31, 1998, the sum of
(1) $200,000,000 plus (2) 25% of Acquired Revenues for the fiscal year
ending December 31, 1998 with respect to Acquired Businesses acquired
during such fiscal year; and
(b) for any fiscal year ending after December 31, 1998, the
sum of (1) the amount of Permitted Capital Expenditures for the prior
fiscal year plus (2) 25% of Acquired Revenues for the then-current
fiscal year with respect to Acquired Businesses acquired during such
then-current fiscal year.
"Permitted Investments" means:
(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 or from Moody's;
(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 Company's customary cash management policy in
any domestic office of any commercial bank organized under the laws of
the United States of America or any state thereof;
(e) insured deposits issued by commercial banks of the type
described in clause (d) above;
(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" means any individual, corporation (including a
business trust), company, voluntary association, partnership, limited
liability company, joint venture, trust, unincorporated organization or
Governmental Authority or other entity of whatever nature.
"Plan" means 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 Company 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" means a Pledge Agreement substantially in
the form of Exhibit B-1 between Allied and the Administrative Agent.
"Post-Default Rate" means a rate per annum equal to 2% plus
the Applicable Margin plus the Base Rate as in effect from time to
time.
"Preferred Stock" means, with respect to any corporation,
capital stock issued by such corporation that is entitled to a
preference or priority over any other capital stock issued by such
corporation upon any distribution of such corporation's assets, whether
by dividend or upon liquidation.
"Pricing Period" means a period from the date on which
Certified Financial Statements are delivered to the Administrative
Agent until the earlier of (x) the date on which the next Certified
Financial Statements are so delivered and (y) the date by which the
next Certified Financial Statements are required to be so delivered;
provided that the first Pricing Period shall be the period from the
Closing Date until the earlier of (1) the delivery of the first
Certified Financial Statements to the Administrative Agent and (2) the
date by which the Certified Financial Statements for the fiscal quarter
ending June 30, 1998 are required to be so delivered.
"Principal Payment Date" means June 30, 2001, June 30, 2002
and June 18, 2003, provided that, if any such day is not a Business
Day, the relevant Principal Payment Date shall be the immediately
preceding Business Day.
"Pro Rata Share" of any amount means, with respect to any
Lender under either Facility at any time, the product of (a) a fraction
the numerator of which is the amount of such Lender's Commitments under
such Facility (or, if such Commitments shall have expired or been
terminated, the amount of such Lender's Advances under such Facility),
and the denominator of which is the aggregate Commitments or Advances,
as the case may be, under such Facility at such time, multiplied by (b)
such amount.
"Properties" has the meaning assigned to such term in Section
4.16.
"Quarterly Dates" means March 31, June 30, September 30 and
December 31 in each year, the first of which shall be the first such
day after the Closing Date, provided that, if any such day is not a
Business Day, the relevant Quarterly Date shall be the immediately
preceding Business Day.
"Reference Banks" means Citibank, Credit Suisse First Boston,
BankBoston and Bank One (or their respective Applicable Lending
Offices, as the case may be).
"Register" has the meaning specified in Section 10.07(c).
"Regulation U" and "Regulation X" mean Regulations U and X of
the Board of Governors of the Federal Reserve System, respectively, as
in effect from time to time.
"Release" means 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.
"Relevant Percentage" means (1) if the Leverage Ratio exceeds
4.50 to 1.00, 75%; (2) if the Leverage Ratio exceeds 4.00 to 1.00 but
does not exceed 4.50 to 1.00, 50%; and (3) if the Leverage Ratio does
not exceed 4.00 to 1.00, 0%. For purposes of clauses (1), (2) and (3)
above:
(x) for prepayments under Section 2.05(b)(i) with
respect to any Asset Sale, the Leverage Ratio shall be
determined as of the date immediately prior to the date of
such Asset Sale;
(y) for prepayments under Section 2.05(b)(ii) with
respect to any Casualty Event, the Leverage Ratio shall be
determined as of the date immediately prior to the receipt of
the Net Available Proceeds of such Casualty Event; and
(z) for prepayments under Section 2.05(b)(iii) with
respect to any Specified Issuance, the Leverage Ratio shall be
determined on a pro forma basis after giving effect to such
Specified Issuance.
"Reliant Insurance" means Reliant Insurance Company, an
insurance company organized under the laws of the State of Vermont and,
as at the Closing Date, a wholly owned Subsidiary of the Company.
"Remedial Action" means (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 by any member of the Allied Group, 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, the actions referred to in clause (i) or
(ii) above.
"Required Lenders" means at any time Lenders owed or holding
in the aggregate more than 50% of the sum of (1) the then aggregate
unpaid principal amount of the Advances, (2) the then aggregate Unused
Revolving Credit Commitments and (3) the then aggregate amount of all
outstanding Letter of Credit Liabilities.
"Required Period" means:
(a) with respect to any Permitted Acquisition having
Acquisition Consideration (or the formation of any Specified Subsidiary
having assets comprising) less than 2% of Total Assets as at the most
recently ended fiscal quarter, the period ending on the last day of the
fiscal quarter during which such acquisition or formation occurs; and
(b) with respect to any other Permitted Acquisition or the
formation of any other Specified Subsidiary, promptly following the
occurrence thereof.
"Responsible Officer" means any officer of Allied or the
Company (including, without limitation, any Financial Officer of Allied
or the Company).
"Revolving Credit Advance" means an Advance made pursuant to
Section 2.01(a).
"Revolving Credit Borrowing" means a borrowing consisting of
simultaneous Revolving Credit Advances of the same Type.
"Revolving Credit Commitment" means, with respect to each
Lender, the commitment, if any, of such Lender to make Revolving Credit
Advances (expressed as the maximum aggregate amount of such Lender's
Revolving Credit Advances and the aggregate amount of such Lender's Pro
Rata Shares of the Letter of Credit Liabilities that may be outstanding
at any time), as such commitment may be (a) reduced from time to time
pursuant to Section 2.04 or 2.05 and (b) reduced or increased from time
to time pursuant to assignments by or to such Lender pursuant to
Section 10.07. The initial amount of each Lender's Revolving Credit
Commitment is set forth on Schedule 2.01 or in the Assignment and
Acceptance pursuant to which such Lender shall have assumed its
Revolving Credit Commitment, as applicable. The initial aggregate
amount of the Lenders' Revolving Credit Commitments is $800,000,000.
"Revolving Credit Commitment Termination Date" means the
earlier of (a) the Maturity Date and (b) the termination or
cancellation of the Revolving Credit Commitments pursuant to the terms
of this Agreement.
"Revolving Credit Facility" means the revolving credit
facility provided hereunder in respect of the aggregate Revolving
Credit Commitments.
"Revolving Credit Lender" means each Lender specified in
Schedule 2.01 (or in an Assignment and Acceptance pursuant to which it
becomes a Lender hereunder) as having a Revolving Credit Commitment
and, after the expiration or termination of the Revolving Credit
Commitments, each Lenders holding a Revolving Credit Advance.
"Revolving Credit Note" means a promissory note of the Company
payable to the order of a Lender, in substantially the form of Exhibit
A-1, as from time to time amended.
"Rolling Period" means any period of four consecutive fiscal
quarters of Allied.
"Secured Parties" has the meaning assigned to such term in the
Security Agreement.
"Security Agreement" means a Security Agreement substantially
in the form of Exhibit B-2 between the Company, the Subsidiary
Guarantors and the Administrative Agent, as from time to time amended.
"Security Documents" means the Pledge Agreement, the Security
Agreement, each security agreement or other grant of security now or
hereafter made by any Obligor to secure any of the Obligations
hereunder and under the other Loan Documents, and all Uniform
Commercial Code financing statements required by this Agreement or any
of the foregoing to be filed with respect to the security interests in
personal property created pursuant thereto.
"Solvent" and "Solvency" mean, with respect to any Person on a
particular date, that on such date (a) the fair value of the property
of such Person is greater than the total amount of liabilities,
including, without limitation, contingent liabilities, of such Person,
(b) the present fair salable value of the assets of such Person on a
going concern basis is not less than the amount that will be required
to pay the probable liability of such Person on its Indebtedness as
they become absolute and matured, (c) such Person does not intend to,
and does not believe that it will, incur Indebtedness or liabilities
beyond such Person's ability to pay as such Indebtedness and
liabilities mature and (d) such Person is not engaged in business or a
transaction, and is not about to engage in business or a transaction,
for which such Person's property would constitute an unreasonably small
amount of capital. The portion of contingent liabilities of any Person
at any time that shall be included for purposes of the above
determinations shall be the amount of such contingent liabilities that,
in light of all facts and circumstances existing at such time, could
reasonably be expected to become actual matured liabilities of such
Person.
"Specialized Waste" means Specialized Waste Systems, Inc., a
Texas corporation.
"Specified Issuance" means (a) any issuance of Indebtedness
for borrowed money by members of the Allied Group; and (b) any issuance
of Cash-Pay Preferred Stock by members of the Allied Group.
"Specified Subsidiary" means a Domestic Subsidiary of the
Company (including Domestic Subsidiaries formed or acquired pursuant to
Permitted Acquisitions), but in any event excluding Inactive
Subsidiaries and Reliant Insurance.
"Standard & Poor's" means Standard & Poor's Ratings Services,
a division of The McGraw-Hill Companies, Inc., and its successors.
"Subsidiary" means, with respect to any Person (herein
referred to as the "parent"), any corporation, partnership, limited
liability company, 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 directly or
indirectly by the parent.
"Subsidiary Guarantor" has the meaning specified in the
recital of parties to this Agreement.
"Tax Indemnitee" means each Issuing Bank, each Lender and the
Administrative Agent.
"Term Advance" means an advance made pursuant to Section
2.01(b).
"Term Borrowing" means a borrowing consisting of simultaneous
Term Advances of the same Type.
"Term Commitment" means, with respect to each Lender, the
commitment, if any, of such Lender to make a Term Advance on the
Closing Date (expressed as the maximum principal amount of the Term
Advance to be made by such Lender hereunder), as such commitment may be
(a) reduced from time to time pursuant to Section 2.04 or 2.05 and (b)
reduced or increased from time to time pursuant to assignments by or to
such Lender pursuant to Section 10.07. The initial amount of each
Lender's Term Commitment is set forth on Schedule 2.01, or in the
Assignment and Acceptance pursuant to which such Lender shall have
assumed its Term Commitment, as applicable. The initial aggregate
amount of the Lenders' Term Commitments is $300,000,000.
"Term Facility" means the term loan facility provided
hereunder in respect of the aggregate Term Commitments.
"Term Lender" means each Lender specified in Schedule 2.01 (or
in an Assignment and Acceptance pursuant to which it becomes a Lender
hereunder) as having a Term Commitment and, after the termination or
expiration of the Term Commitments, each Lender holding a Term Advance.
"Term Note" means a promissory note of the Company payable to
the order of a Lender, in substantially the form of Exhibit A-2, as
from time to time amended.
"Total Assets" means, at any time, the aggregate amount of
assets which at such time would be reflected as assets on a
Consolidated balance sheet of Allied and its Subsidiaries prepared in
accordance with GAAP.
"Total Indebtedness" means, at any time, the sum of :
(a) all Indebtedness (other than Indebtedness
described in clauses (h) and (i) of the definition of the term
"Indebtedness") of members of the Allied Group which at such
time would be required to be reflected as liabilities for
borrowed money on a Consolidated balance sheet of Allied and
its Subsidiaries prepared in accordance with GAAP; and
(b) the face amount of Cash-Pay Preferred Stock of
members of the Allied Group outstanding at such time.
"Type" refers to the distinction between Advances bearing
interest at the Base Rate and Advances bearing interest at the
Eurodollar Rate.
"Unused Revolving Credit Commitment" means, with respect to
any Lender at any time, (a) such Lender's Revolving Credit Commitment
at such time minus (without duplication) (b) the sum of (i) the
aggregate outstanding principal amount of all Revolving Credit Advances
made by such Lender and (ii) such Lender's Pro Rata Share of the
aggregate amount of all Letter of Credit Liabilities.
"U.S. Dollars" and "$" means lawful money of the United States
of America.
"Withdrawal Liability" means 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. Computation of Time Periods.
In this Agreement in the computation of periods of time from a specified date
to a later specified date, the word "from" means "from and including" and the
words "to" and "until" mean "to but excluding".
Section 1.03. Accounting Terms; Changes in GAAP.
Except as otherwise expressly provided herein, all terms of an accounting or
financial nature shall be construed in accordance with GAAP. If the Company
notifies the Administrative Agent that the Company requests an amendment to any
provision hereof to eliminate the effect of any change occurring after the date
hereof in GAAP or in the application thereof on the operation of such provision
(or if the Administrative Agent notifies the Company that the Required Lenders
request an amendment to any provision hereof for such purpose), regardless of
whether any such notice is given before or after such change in GAAP or in the
application thereof, then such provision shall be interpreted on the basis of
GAAP as in effect and applied immediately before such change shall have become
effective until such notice shall have been withdrawn or such provision amended
in accordance herewith.
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
AND THE LETTERS OF CREDIT
Section 2.01. The Advances.
(a) Revolving Credit Facility. Each Revolving Credit Lender
severally agrees, on the terms and conditions hereinafter set forth, to make
advances ("Revolving Credit Advances") to the Company from time to time on any
Business Day during the period from the Closing Date until the Revolving Credit
Commitment Termination Date in an aggregate amount at any one time outstanding
not to exceed the amount of such Lender's Revolving Credit Commitment, and, as
to all Lenders, in an aggregate amount at any one time outstanding not to exceed
$800,000,000. All Revolving Credit Advances shall be made by the Lenders ratably
according to their respective Revolving Credit Commitments.
Within the limits of each Lender's Revolving Credit Commitment
in effect from time to time, the Company may borrow under this Section 2.01(a)
and/or obtain the issuance of Letters of Credit under Section 2.13, prepay
Revolving Credit Advances pursuant to Section 2.05(a) and reborrow under this
Section 2.01(a); provided that the aggregate outstanding principal amount of
Revolving Credit Advances when added to the aggregate Letter of Credit Liability
may not at any time exceed the aggregate amount of the Revolving Credit
Commitments at such time.
(b) Term Facility. Each Term Lender severally agrees, on the
terms and conditions hereinafter set forth, to make an advance (collectively,
the "Term Advances") to the Company on the Closing Date in an aggregate amount
not to exceed such Lender's Term Commitment, and, as to all Term Lenders, in an
aggregate amount not to exceed $300,000,000. All Term Advances shall be made by
the Lenders ratably according to their respective Term Commitments. Term
Advances once repaid may not be reborrowed.
(c) Minimum Amounts. Each Borrowing shall be in an aggregate
amount at least equal to $5,000,000 or an integral multiple of $1,000,000 in
excess thereof.
(d) Use of Proceeds. The proceeds of the Advances shall be
used solely (1) to repay the "Loans" under and as defined in the Existing Credit
Agreement and (2) for general corporate purposes of the Company and its
Subsidiaries (including, without limitation, to finance the operations of the
Company and the Subsidiary Guarantors, to finance Permitted Acquisitions and
Capital Expenditures, to pay fees and expenses reasonably incurred with respect
to any of the foregoing and for working capital).
(e) No Responsibility to Third Parties. Neither the
Administrative Agent nor any Lender nor any Issuing Bank shall have any
responsibility as to the application or use of any of the proceeds of any
Advance or the use of any Letter of Credit.
Section 2.02. Making the Advances.
(a) Except as otherwise provided in Section 2.13, each
Borrowing shall be made on notice, given not later than 11:00 A.M. (New York
City time) on the Business Day of (or, with respect to a Borrowing of Eurodollar
Rate Advances, 10:00 A.M. (New York City time) on the third Business Day prior
to the date of) the proposed Borrowing, by the Company to the Administrative
Agent. Each such notice of a Borrowing (a "Notice of Borrowing") shall be by
telex, telecopier or cable, confirmed immediately in writing, in substantially
the form of Exhibit C, specifying therein (1) the requested date of such
Borrowing, (2) the Facility under which such Borrowing is to be made, (3) the
requested Type of Advances comprising such Borrowing, (4) the requested
aggregate amount of such Borrowing and (5) in the case of a Borrowing consisting
of Eurodollar Rate Advances, the requested initial Interest Period therefor.
The Administrative Agent shall give to each Lender prompt
notice of each Notice of Borrowing received from the Company and, in the case of
a proposed Borrowing comprised of Eurodollar Rate Advances, the applicable
interest rate under Section 2.06(a)(ii).
Each Lender shall, before 1:00 P.M. (New York City time) on
the date of each Borrowing after the Closing Date, make available for the
account of its Applicable Lending Office to the Administrative Agent at the
Administrative Agent's Account, in same day funds, such Lender's ratable portion
of such Borrowing. After the Administrative Agent's receipt of such funds and
upon fulfillment of the applicable conditions set forth in Article III, the
Administrative Agent will transfer same day funds to the Company's Account;
provided that in the case of any Revolving Credit Borrowing, the Administrative
Agent shall first make a portion of such funds equal to any unreimbursed
drawings under any Letters of Credit available to the relevant Issuing Banks for
reimbursement of such drawing.
(b) Anything in paragraph (a) above to the contrary
notwithstanding, (i) the Company may not select Eurodollar Rate Advances (1) for
any Borrowing if the aggregate amount of such Borrowing is less than $5,000,000
or (2) if the obligation of the relevant Lenders to make Eurodollar Rate
Advances shall then be suspended pursuant to Section 2.08 or 2.09, and (ii)
Eurodollar Rate Advances may not be outstanding under more than 20 separate
Interest Periods at any one time.
(c) Each Notice of Borrowing shall be irrevocable and binding
on the Company. In the case of any Borrowing that the related Notice of
Borrowing specifies is to be comprised of Eurodollar Rate Advances, the Company
shall indemnify each relevant Lender against any loss, cost or expense incurred
by such Lender as a result of any failure to fulfill on or before the date
specified in such Notice of Borrowing the applicable conditions set forth in
Article III, including, without limitation, any loss (excluding loss of
anticipated profits), cost or expense incurred by reason of the liquidation or
reemployment of deposits or other funds acquired by such Lender to fund the
Advance to be made by such Lender as part of such Borrowing when such Advance,
as a result of such failure, is not made on such date.
(d) Unless the Administrative Agent shall have received notice
from a relevant Lender prior to 12:00 Noon (New York City time) on the date of
any Borrowing that such Lender will not make available to the Administrative
Agent such Lender's ratable 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 Section
2.02(a) and the Administrative Agent may, in reliance upon such assumption, make
available to the Company on such date a corresponding amount. If and to the
extent that such Lender shall not have so made such ratable portion available to
the Administrative Agent and the Administrative Agent shall have made available
such corresponding amount to the Company, such Lender and the Company 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 Company until the date such amount is
repaid to the Administrative Agent, at (i) in the case of the Company, the
interest rate applicable at such time under Section 2.06 to Advances comprising
such Borrowing and (ii) in the case of such Lender, the Federal Funds Rate (it
being understood that repayments by the Company pursuant to this sentence shall
not be subject to Sections 2.05(a) and 10.04(c)). If such Lender shall repay to
the Administrative Agent such corresponding amount, such amount so repaid shall
constitute such Lender's Advance as part of such Borrowing for purposes of this
Agreement.
(e) The failure of any Lender to make the Advance to be made
by it as part of any Borrowing shall not relieve any other Lender of its
obligation, if any, hereunder to make its Advance on the date of such Borrowing,
but no Lender shall be responsible for the failure of any other Lender to make
the Advance to be made by such other Lender on the date of any Borrowing.
Section 2.03. Repayment.
(a) Revolving Credit Advances. The Company hereby promises to
pay to the Administrative Agent for the account of each Revolving Credit Lender
the entire outstanding principal amount of such Lender's Revolving Credit
Advances, and each Revolving Credit Advance shall mature, on the Revolving
Credit Commitment Termination Date.
(b) Term Advances. The Company hereby promises to pay to the
Administrative Agent for the account of each Term Lender the aggregate principal
amount of such Lender's Term Advances in three consecutive annual installments,
one such installment to be payable on each Principal Payment Date, as follows:
Principal Payment Date
on or nearest to Amount of Installment
June 30, 2001 $75,000,000.00
June 30, 2002 $105,000,000.00
June 18, 2003 $120,000,000.00
If the Company does not borrow the full amount of the Term Commitments on the
Closing Date, or if the Term Commitments are reduced prior to the Closing Date,
the shortfall or reduction shall be applied to reduce the foregoing installments
ratably.
(c) All Advances. All repayments of principal under this
Section 2.03 shall be made together with interest accrued to the date of such
repayment on the principal amount repaid.
Section 2.04. Termination or Reduction of the Commitments.
(a) Optional. The Company may at any time or from time to
time, upon not less than three Business Days' notice to the Administrative
Agent, terminate in whole or reduce in part the Commitments under either
Facility, provided that (i) each partial reduction of the Commitments under such
Facility shall be in an aggregate amount of $5,000,000 or an integral multiple
of $1,000,000 in excess thereof and (ii) the aggregate amount of the Revolving
Credit Commitments shall not be reduced below the aggregate Letter of Credit
Liabilities (less any portion thereof for which the Company has provided an
alternate letter of credit or cash collateral acceptable to the relevant Issuing
Banks and the Administrative Agent).
(b) Mandatory. The Revolving Credit Commitments shall be
automatically and permanently reduced to zero on the Revolving Credit Commitment
Termination Date. The unused Term Commitments shall be automatically and
permanently reduced to zero at the close of business on the Closing Date.
(c) Reductions Pro Rata; No Reinstatements. Each reduction of
the Commitments under a Facility shall be applied to the respective Commitments
of the Lenders according to their respective Pro Rata Shares of such Facility.
Commitments once terminated or reduced may not be reinstated.
Section 2.05. Prepayments, Etc.
(a) Optional Prepayments. The Company may, upon at least three
Business Days' notice (in the case of prepayment of Eurodollar Rate Advances) or
upon notice given on the date of prepayment (in the case of prepayments of Base
Rate Advances) to the Administrative Agent (which notice shall state the
Facility to be prepaid and the proposed date and aggregate principal amount of
the prepayment), and if such notice is given the Company shall, prepay the
outstanding principal amount of the Advances under the specified Facility in the
aggregate amount and on the date specified in such notice, together with accrued
interest to the date of such prepayment on the principal amount prepaid;
provided that (x) each partial prepayment shall be in an aggregate principal
amount of $5,000,000 or an integral multiple of $1,000,000 in excess thereof,
(y) any such prepayment of a Eurodollar Rate Advance other than on the last day
of the Interest Period therefor shall be accompanied by, and subject to, the
payment of any amount payable under Section 10.04(c) in respect of such
prepayment and (z) each such notice shall be made on the relevant day not later
than, in the case of prepayments of Eurodollar Rate Advances, 10:00 A.M. (New
York City time) and, in the case of prepayments of Base Rate Advances, 12:00
noon (New York City time).
(b) Mandatory Prepayments; Commitment Reductions.
(i) Asset Sales. Without limiting the obligation of the
Company to obtain the consent of the Required Lenders pursuant to
Section 6.06 to an Asset Sale not otherwise permitted hereunder, not
later than the third Business Day following the occurrence of each
Asset Sale the Company shall prepay the Advances (and/or cash
collateralize Letter of Credit Liabilities in the manner specified in
Section 2.05(d)), and the Revolving Credit Commitments shall be subject
to automatic reduction, in an aggregate amount equal to the Relevant
Percentage of the Net Available Proceeds of such Asset Sale; provided
that no prepayment shall be required pursuant to this clause (i) with
respect to:
(1) any sale, lease, assignment, transfer or other
disposition of any property to Allied, the Company or any
wholly owned Subsidiary of Allied;
(2) any sale, lease, assignment, transfer or other
disposition of inventory, obsolete or worn out assets, scrap,
Permitted Investments and cash and cash equivalents, in each
case if disposed of in the ordinary course of business for
fair value;
(3) the sale of Specialized Waste;
(4) any sale of an asset in connection with a sale
and leaseback of such asset; and
(5) any other Asset Sale of assets constituting, as
at the date of such Asset Sale, less than 2% of Total Assets
to the extent the Net Available Proceeds thereof are
reinvested in the business of members of the Allied Group
within one year of the date of such Asset Sale.
(ii) Casualty Events. Upon the date 30 days following the
receipt by any member of the Allied Group of the proceeds of insurance,
condemnation award or other compensation in respect of any Casualty
Event affecting any property of any member of the Allied Group, the
Company shall prepay the Advances (and/or cash collateralize Letter of
Credit Liabilities in the manner specified in Section 2.05(d)), and the
Revolving Credit Commitments shall be subject to automatic reduction,
in an aggregate amount, if any, equal to the Relevant Percentage of the
Net Available Proceeds of such Casualty Event; provided that no
prepayment shall be required pursuant to this clause (ii) with respect
to any Casualty Event with respect to assets constituting, as at the
date of receipt of the Net Available Proceeds thereof, less than 2% of
Total Assets to the extent such Net Available Proceeds are reinvested
in the business of members of the Allied Group within one year of the
date of such receipt. Nothing in the immediately preceding sentence
shall be deemed to limit any obligation of Allied or any of its
Subsidiaries pursuant to any of the Security Documents to remit to a
collateral or similar account (including, without limitation, a
"Collateral Account" under and as defined in the Security Documents)
maintained by the Administrative Agent pursuant to any of the Security
Documents the proceeds of insurance, condemnation award or other
compensation received in respect of any Casualty Event.
(iii) Specified Issuance. Upon the occurrence of each
Specified Issuance, the Company shall prepay the Advances in an amount
equal to the Relevant Percentage of the Net Available Proceeds thereof.
(iv) Change in Control. Upon the occurrence of a Change in
Control (unless otherwise consented to by the Required Lenders), the
Company shall prepay all Advances in full, the Commitments shall be
automatically and permanently reduced to zero and the Company shall
cash collateralize Letter of Credit Liabilities (less any portion
thereof for which the Company has provided an alternate letter of
credit acceptable to the relevant Issuing Banks and the Administrative
Agent) in the manner specified in Section 2.05(d).
(c) Application.
(i) Prepayments pursuant to Sections 2.05(b)(i) and (ii) shall
be applied first to the prepayment in full of the Term Advances, then
to the prepayment in full of outstanding Revolving Credit Advances
(with pro tanto reductions of the Revolving Credit Commitments) and
finally to cash collateralize Letter of Credit Liabilities in the
manner specified in paragraph (d) below.
(ii) Prepayments pursuant to Section 2.05(b)(iii) shall be
applied first to prepay outstanding Advances (pro rata to outstanding
Revolving Credit Advances and outstanding Term Advances), until the
Revolving Credit Advances have been prepaid in full, then to the
prepayment in full of outstanding Term Advances and finally to cash
collateralize Letter of Credit Liabilities in the manner specified in
paragraph (d) below.
(d) Cash Collateral for Letter of Credit Liabilities. In the
event that the Company shall be required pursuant to Section 2.05(b) to cash
collateralize Letter of Credit Liabilities, the Company shall effect the same by
paying to the Administrative Agent same day funds in an amount equal to the
required amount, which funds shall be deposited in the L/C Cash Collateral
Account until such time as the Letters of Credit shall have been terminated and
all of the Letter of Credit Liabilities paid in full. Deposits of funds in the
L/C Cash Collateral Account, releases of such funds for application to Letter of
Credit Liabilities, releases of such funds to the members of the Allied Group
and investments of funds on deposit therein shall be subject to, and effected in
accordance with, the terms of the Security Agreement.
(e) Terms Applicable to All Prepayments. All prepayments under
this Section 2.05 shall be made together with accrued interest to the date of
such prepayment on the principal amount prepaid. Each prepayment of Advances
under this Section 2.05 shall be made for the account of the relevant Lenders
according to their respective Pro Rata Shares of the principal amount of the
Advances then outstanding under the relevant Facility. All prepayments applied
to the Term Advances shall be applied to the remaining installments thereof in
inverse order of maturities.
Section 2.06. Interest.
(a) Ordinary Interest. The Company shall pay interest on the
unpaid principal amount of each Advance owing to each Lender from the date of
such Advance until such principal amount shall be paid in full, at the following
rates per annum:
(i) Base Rate Advances. While such Advance is a Base Rate
Advance, a rate per annum equal at all times to the sum of (1) the Base
Rate in effect from time to time plus (2) the Applicable Margin in
effect from time to time, payable in arrears quarterly on each
Quarterly Date and on the date such Base Rate Advance shall be
Converted (but only on the amount Converted) or paid in full.
(ii) Eurodollar Rate Advances. While such Advance is a
Eurodollar Rate Advance, a rate per annum equal at all times during
each Interest Period for such Advance to the sum of (1) the Eurodollar
Rate for such Interest Period for such Advance plus (2) the Applicable
Margin in effect from time to time, payable in arrears on the last day
of such Interest Period and, if such Interest Period has a duration of
more than three months, on each three-month anniversary of the first
day of such Interest Period occurring during such Interest Period.
(b) Post-Default Interest. If an Event of Default shall have
occurred and be continuing during any period, the Company shall, notwithstanding
anything else in this Agreement to the contrary, pay to the Administrative Agent
for the account of each Lender interest, during such period, at the applicable
Post-Default Rate on any principal of any Advance made by such Lender to the
Company, and on any other amount whatsoever then due and payable by the Company
hereunder or under the Notes held by such Lender to or for the account of such
Lender, such interest to be payable from time to time on demand.
Section 2.07. Fees.
(a) Commitment Fee. The Company hereby promises to pay to the
Administrative Agent for the account of each Revolving Credit Lender a
commitment fee, on the average daily Unused Revolving Credit Commitment of such
Lender (such daily average to be calculated for the period for which the
commitment fee is then payable) for the period from the Closing Date (or from
the effective date specified in the Assignment and Acceptance pursuant to which
it became a Lender in the case of each other Lender other than the Initial
Lenders) until the Revolving Credit Commitment Termination Date at the
Applicable Commitment Fee Rate, payable in arrears (x) quarterly after the date
of this Agreement on each Quarterly Date and (y) on the Revolving Credit
Commitment Termination Date.
(b) Letter of Credit Commission, Etc. The Company hereby
promises to pay to the Administrative Agent (A) for the account of each Issuing
Bank a non-refundable fronting fee of 1/4% per annum of the face amount of each
Letter of Credit issued by such Issuing Bank for the period from the date of
issuance thereof until such Letter of Credit has been drawn in full, expires or
is terminated and (B) for the account of each Lender a non-refundable commission
on such Lender's Pro Rata Share of the average daily aggregate Available Amount
of all Letters of Credit then outstanding at the Applicable Letter of Credit Fee
Rate, such fees to be payable in arrears on each Quarterly Date and on the
Revolving Credit Commitment Termination Date and calculated, for any day, after
giving effect to any payments made under such Letter of Credit on such day.
(c) Letter of Credit Expenses. The Company shall pay to each
Issuing Bank, for its own account, such commission, issuance fees, transfer fees
and other fees and charges in connection with the issuance or administration of
the Letters of Credit issued by it as the Company and such Issuing Bank shall
agree.
Section 2.08. Conversion and Continuation of Advances.
(a) Optional Conversion. The Company may on any Business Day,
upon notice given to the Administrative Agent not later than 10:00 A.M. (New
York City time) on the third Business Day prior to the date of the proposed
Conversion and subject to the provisions of Section 2.09, Convert all or any
portion of the Advances of one Type outstanding under a Facility (and, in the
case of Eurodollar Rate Advances, having the same Interest Period) into Advances
of the other Type under such Facility; provided that any Conversion of
Eurodollar Rate Advances into Base Rate Advances shall be made only on the last
day of an Interest Period for such Eurodollar Rate Advances, any Conversion of
Base Rate Advances into Eurodollar Rate Advances shall be in an amount not less
than $5,000,000 or integral multiples of $1,000,000 in excess thereof and no
Conversion of any Advances shall result in a more than 20 separate Interest
Periods being outstanding. Each such notice of Conversion shall, within the
restrictions specified above, specify (i) the date of such Conversion, (ii) the
aggregate amount, Type and Facility of the Advances (and, in the case of
Eurodollar Rate Advances, the Interest Period therefor) to be Converted and
(iii) if such Conversion is into Eurodollar Rate Advances, the duration of the
initial Interest Period for such Advances. Each notice of Conversion shall be
irrevocable and binding on the Company.
(b) Certain Mandatory Conversions.
(i) On the date on which the aggregate unpaid principal amount
of Eurodollar Rate Advances comprising any Borrowing shall be reduced,
by payment or prepayment or otherwise, to less than $5,000,000 such
Advances shall automatically Convert into Base Rate Advances.
(ii) If the Company shall fail to select the duration of any
Interest Period for any outstanding Eurodollar Rate Advances in
accordance with the provisions contained in the definition of "Interest
Period" in Section 1.01 and in clause (a) or (c) of this Section 2.08,
the Administrative Agent will forthwith so notify the Company and the
relevant Lenders, whereupon each such Eurodollar Rate Advance will
automatically, on the last day of the then existing Interest Period
therefor, Convert into a Base Rate Advance.
(iii) Upon the occurrence and during the continuance of any
Event of Default and upon notice from the Administrative Agent to the
Company at the request of the Required Lenders, (x) each Eurodollar
Rate Advance will automatically, on the last day of the then existing
Interest Period therefor, Convert into a Base Rate Advance and (y) the
obligation of the Lenders to make, or to Convert Advances into, or to
Continue, Eurodollar Rate Advances shall be suspended.
(c) Continuations. The Company may, on any Business Day, upon
notice given to the Administrative Agent not later than 10:00 A.M. (New York
City time) on the third Business Day prior to the date of the proposed
Continuation and subject to the provisions of Sections 2.09, Continue all or any
portion of the Eurodollar Rate Advances outstanding under a Facility having the
same Interest Period as such Eurodollar Rate Advances; provided that any such
Continuation shall be made only on the last day of an Interest Period for such
Eurodollar Rate Advances, any Continuation of Eurodollar Rate Advances shall be
in an amount not less than $5,000,000 and no Continuation of any Eurodollar Rate
Advances shall result in more than 20 separate Interest Periods being
outstanding. Each such notice of Continuation shall, within the restrictions
specified above, specify (i) the date of such Continuation, (ii) the aggregate
amount and Facility of, and the Interest Period for, the Advances being
Continued and (iii) the duration of the initial Interest Period for the
Eurodollar Rate Advances subject to such Continuation. Each notice of
Continuation shall be irrevocable and binding on the Company.
Section 2.09. Increased Costs, Illegality, Etc.
(a) If, due to either (i) the introduction of or any change in
or in the interpretation of (to the extent any such introduction or change
occurs after the date hereof) any law or regulation or (ii) the compliance with
any guideline or request from any central bank or other governmental authority
adopted or made after the date hereof (whether or not having the force of law),
there shall be any increase in the cost to any Lender of agreeing to make or
making, funding or maintaining Eurodollar Rate Advances under any Facility, then
the Company shall from time to time, upon demand by such Lender (with a copy of
such demand to the Administrative Agent), pay to the Administrative Agent for
the account of such Lender additional amounts sufficient to compensate such
Lender for such increased cost; provided that, before making any such demand,
each Lender agrees to use reasonable efforts (consistent with its internal
policy and legal and regulatory restrictions) to designate a different
Applicable Lending Office if the making of such a designation would avoid the
need for, or reduce the amount of, such increased cost and would not, in the
reasonable judgment of such Lender, be otherwise disadvantageous to such Lender.
A certificate as to the amount of such increased cost, submitted to the Company
by such Lender, shall be conclusive and binding for all purposes, absent
manifest error.
(b) If any Lender determines in good faith that compliance
with any law or regulation enacted or introduced after the date hereof or any
guideline or request from any central bank or other governmental authority
adopted or made after the date hereof (whether or not having the force of law)
affects or would affect the amount of capital required or expected to be
maintained by such Lender or any corporation controlling such Lender and that
the amount of such capital is increased by or based upon the existence of such
Lender's commitment to lend hereunder and other commitments of this type or the
issuance of the Letters of Credit (or similar contingent obligations), then,
upon demand by such Lender (with a copy of such demand to the Administrative
Agent), the Company shall pay to the Administrative Agent for the account of
such Lender, from time to time as specified by such Lender, additional amounts
sufficient to compensate such Lender in the light of such circumstances, to the
extent that such Lender reasonably determines such increase in capital to be
allocable to the existence of such Lender's commitment to lend hereunder or to
the issuance or maintenance of any Letters of Credit. A certificate as to such
amounts submitted to the Company by such Lender, shall be conclusive and binding
for all purposes, absent manifest error.
(c) If, with respect to any Eurodollar Rate Advances, (i) the
Required Lenders reasonably determine and notify the Administrative Agent that
the Eurodollar Rate for any Interest Period for such Advances will not
adequately reflect the cost to such Required Lenders of making, funding or
maintaining their respective Eurodollar Rate Advances for such Interest Period,
or (ii) if fewer than two Reference Banks furnish timely information to the
Administrative Agent for determining the Eurodollar Rate for any Eurodollar Rate
Advances, the Administrative Agent shall forthwith so notify the Company and the
Lenders, whereupon (x) each Eurodollar Rate Advance will automatically, on the
last day of any then existing Interest Period therefor, Convert to a Base Rate
Advance, and (y) the obligation of the Lenders to make, or to Convert Advances
into, or to Continue, Eurodollar Rate Advances shall be suspended until the
Administrative Agent shall notify the Company and such Lenders that the
circumstances causing such suspension no longer exist.
(d) Notwithstanding any other provision of this Agreement, if
the introduction of or any change in or in the interpretation of (to the extent
any such introduction or change occurs after the date hereof) any law or
regulation shall make it unlawful, or any central bank or other governmental
authority having appropriate jurisdiction shall assert in writing after the date
hereof that it is unlawful, for any Lender or its Eurodollar Lending Office to
perform its obligations hereunder to make Eurodollar Rate Advances or to
continue to fund or maintain Eurodollar Rate Advances hereunder, then, on notice
thereof and demand therefor by such Lender to the Company through the
Administrative Agent, (i) each Eurodollar Rate Advance of such Lender will
automatically, upon such demand, Convert to a Base Rate Advance and (ii) the
obligation of such Lender to make, or to Convert Advances into, or to Continue,
Eurodollar Rate Advances shall be suspended until the Administrative Agent shall
notify the Company that such Lender has determined that the circumstances
causing such suspension no longer exist; provided that, before making any such
demand, such Lender agrees to use reasonable efforts (consistent with its
internal policy and legal and regulatory restrictions) to designate a different
Eurodollar Lending Office if the making of such a designation would allow such
Lender or its Eurodollar Lending Office to continue to perform its obligations
to make Eurodollar Rate Advances or to continue to fund or maintain Eurodollar
Rate Advances and would not, in the reasonable judgment of such Lender, be
otherwise disadvantageous to such Lender.
(e) The Company shall not be obligated to pay any additional
amounts arising pursuant to clauses (a) and (b) of this Section 2.09 that are
attributable to the Excluded Period with respect to such additional amount;
provided that if an applicable law, rule, regulation, guideline or request shall
be adopted or made on any date and shall be applicable to the period (a
"ss.2.09(e) Retroactive Period") prior to the date on which such law, rule,
regulation, guideline or request is adopted or made, the limitation on the
Company's obligation to pay such additional amounts hereunder shall not apply to
the additional amounts payable in respect of such ss.2.09(e) Retroactive Period
so long as the Company receives written notice of such law, rule, regulation,
guideline or request from the Administrative Agent or any Lender within 180 days
after its adoption.
Section 2.10. Payments and Computations.
(a) The Company shall make each payment hereunder and under
the Notes not later than 12:00 Noon (New York City time) on the day when due in
U.S. Dollars to the Administrative Agent at the Administrative Agent's Account
in same day funds and without deduction, set-off or counterclaim. The
Administrative Agent will promptly thereafter cause to be distributed like funds
relating to the payment of principal or interest or commitment fees under or in
respect of a particular Facility ratably (other than amounts payable pursuant to
Section 2.09(a), 2.09(b), 2.11, 2.13(d) or 10.04(c), or amounts payable to the
Issuing Banks in respect of Letters of Credit) to the relevant Lenders for the
account of their Applicable Lending Offices, and like funds relating to the
payment of any other amount payable to any Lender to such Lender for the account
of its Applicable Lending Office, in each case to be applied in accordance with
the terms of this Agreement. Upon its acceptance of an Assignment and Acceptance
and recording of the information contained therein in the Register pursuant to
Section 10.07(d), from and after the effective date of such Assignment and
Acceptance, the Administrative Agent shall make all payments hereunder and under
the Notes in respect of the interest assigned thereby to the Lender assignee
thereunder, and the parties to such Assignment and Acceptance shall make all
appropriate adjustments in such payments for periods prior to such effective
date directly between themselves.
(b) If the Administrative Agent receives funds for application
to the Obligations under the Loan Documents under circumstances for which the
Loan Documents do not specify the Advances or the Facility to which, or the
manner in which, such funds are to be applied, and the Company has not otherwise
directed how such funds are to be applied (which direction is consistent with
the terms of the Loan Documents), the Administrative Agent may, but shall not be
obligated to, elect to distribute such funds to each Lender ratably in
accordance with such Lender's proportionate share of the principal amount of all
outstanding Revolving Credit Advances, then to such Lenders proportionate share
of the principal amount of all outstanding Term Advances and then to the
Available Amount of all Letters of Credit then outstanding, in repayment or
prepayment of such of the outstanding Advances or other Obligations owed to such
Lender, and for application to such principal installments, as the
Administrative Agent shall direct.
(c) The Company hereby authorizes each Lender, if and to the
extent payment owed to such Lender is not made by the Company when due hereunder
or under any Note held by such Lender, to charge from time to time against any
or all of the Company's accounts with such Lender any amount so due (with notice
to the Administrative Agent and the Company promptly following such charge).
(d) Each Reference Bank agrees to furnish to the
Administrative Agent timely information for the purpose of determining each
Eurodollar Rate. If any one or more of the Reference Banks shall not furnish
such timely information to the Administrative Agent for the purpose of
determining any such interest rate, the Administrative Agent shall determine
such interest rate on the basis of timely information furnished by the remaining
Reference Banks.
(e) All computations of interest, fees and Letter of Credit
commissions shall be made by the Administrative Agent on the basis of a year of
360 days (or, in the case of Base Rate Advances bearing interest based upon
clause (a) in the definition of "Base Rate" in Section 1.01, 365 or 366 days, as
the case may be), in each case for the actual number of days (including the
first day but excluding the last day) occurring in the period for which such
interest, fees or commissions are payable. Each determination by the
Administrative Agent of an interest rate, fee or commission hereunder made in
accordance with the provisions of this Agreement shall be conclusive and binding
for all purposes, absent manifest error.
(f) Whenever any payment hereunder or under the Notes shall be
stated to be due on a day other than a Business Day, such payment shall be made
on the next succeeding Business Day, and such extension of time shall in such
case be included in the computation of payment of interest or commitment fee, as
the case may be; provided that, if such extension would cause payment of
interest on or principal of Eurodollar Rate Advances to be made in the next
following calendar month, such payment shall be made on the immediately
preceding Business Day.
(g) Unless the Administrative Agent shall have received notice
from the Company prior to the date on which any payment is due to any Lender
hereunder that the Company will not make such payment in full, the
Administrative Agent may assume that the Company has made such payment in full
to the Administrative Agent on such date and the Administrative Agent may, in
reliance upon such assumption, cause to be distributed to each such Lender on
such due date an amount equal to the amount then due such Lender. If and to the
extent the Company shall not have so made such payment in full to the
Administrative Agent, each such Lender shall repay to the Administrative Agent
forthwith on demand such amount distributed to such Lender together with
interest thereon, for each day from the date such amount is distributed to such
Lender until the date such Lender repays such amount to the Administrative
Agent, at the Federal Funds Rate.
Section 2.11. Taxes.
(a) Any and all payments by each Obligor hereunder or under
the Notes shall be made, in accordance with Section 2.10, free and clear of and
without deduction for any and all present or future taxes, levies, imposts,
deductions, charges or withholdings, and all liabilities with respect thereto,
excluding, in the case of each Tax Indemnitee, income and franchise taxes and
general taxes on capital imposed on such Tax Indemnitee by a jurisdiction as a
result of such Tax Indemnitee being organized under the laws of such
jurisdiction (or a political subdivision thereof) or of its principal office or
Applicable Lending Office being located in such jurisdiction (or a political
subdivision thereof) (all such non-excluded taxes, levies, imposts, deductions,
charges, withholdings and liabilities being hereinafter referred to as "Taxes").
If an Obligor shall be required by law to deduct any Taxes from or in respect of
any sum payable hereunder or under any Note to any Tax Indemnitee, (i) the sum
payable shall be increased as may be necessary so that after making all required
deductions (including deductions applicable to additional sums payable under
this Section 2.11) such Tax Indemnitee receives an amount equal to the sum it
would have received had no such deductions been made, (ii) such Obligor shall
make such deductions and (iii) such Obligor shall pay the full amount deducted
to the relevant taxation authority or other authority in accordance with
applicable law.
(b) In addition, each Obligor agrees to pay any present or
future stamp or documentary taxes or any other excise or property taxes, charges
or similar levies that arise from any payment made by it hereunder or under the
Notes or from the execution, delivery or registration of this Agreement or the
Notes (hereinafter referred to as "Other Taxes").
(c) Each Obligor will indemnify each Tax Indemnitee for the
full amount of Taxes or Other Taxes (including, without limitation, any Taxes or
Other Taxes imposed by any jurisdiction on amounts payable under this Section
2.11) paid by such Tax Indemnitee and any liability (including penalties,
additions to tax, interest and expenses) arising therefrom or with respect
thereto; provided that the Obligors shall not be liable for any such Taxes,
Other Taxes or liability that is found in a final, non-appealable judgment to
have resulted from (1) the gross negligence or willful misconduct of such Tax
Indemnitee or (2) the failure by the Administrative Agent to perform any of its
obligations under this Agreement (but only to the extent such failure is found
in a final, non-appealable judgment to have resulted from the gross negligence
or willful misconduct of the Administrative Agent). This indemnification shall
be made within 30 days from such date such Tax Indemnitee makes written demand
therefor.
(d) Within 30 days after the date of any payment of Taxes,
each Obligor will furnish to the Administrative Agent, at its address referred
to in Section 10.02, appropriate evidence of payment thereof. If such Obligor
shall make a payment hereunder or under the Notes through an account or branch
outside the United States, or a payment is made on behalf of such Obligor by a
payor that is not a United States Person, such Obligor will, if no taxes are
payable in respect of such payment, furnish, or will cause such payor to
furnish, to the Administrative Agent, at such address, a certificate from the
appropriate taxing authority or authorities, or an opinion of counsel acceptable
to the Administrative Agent, in either case stating that such payment is exempt
from or not subject to Taxes. For purposes of this subsection (d) and subsection
(e), the terms "United States" and "United States Person" has the meanings
specified in Section 7701 of the Code.
(e) Each Lender organized under the laws of a jurisdiction
outside the United States shall, on or prior to the date of its execution and
delivery of this Agreement (in the case of each Initial Lender) and on the date
of the Assignment and Acceptance pursuant to which it became a Lender (in the
case of each other Lender), and from time to time thereafter if requested in
writing by the Company or the Administrative Agent or promptly upon the
occurrence of any event requiring a change in the last form delivered by such
Lender (but, in each case, only so long as such Lender remains lawfully able to
do so after the date such Lender becomes a Lender hereunder), provide the
Administrative Agent and the Company with either (i) Internal Revenue Service
form 1001 or 4224, as appropriate, or any successor form prescribed by the
Internal Revenue Service, certifying that such Lender is entitled to benefits
under an income tax treaty to which the United States is a party that reduces
the rate of withholding tax on payments under this Agreement and the Notes or
certifying that the income receivable pursuant to this Agreement and the Notes
is effectively connected with the conduct of a trade or business in the United
States or (ii) Internal Revenue Service form W-8, upon which the Company is
entitled to rely, from a Lender that has not at the time such Lender becomes a
Lender hereunder been named in any notice issued by the Secretary of the
Treasury (or such Secretary's authorized delegate) pursuant to Sections
881(c)(2)(B) or 871(h)(5) of the Code, or any successor form or statement
prescribed by the Internal Revenue Service in order to establish that such
Lender is entitled to treat the interest payments under this Agreement and the
Notes as portfolio interest that is exempt from withholding tax under the Code,
together with a certificate stating that such Lender is not described in Section
881(c)(3) of the Code. If the form provided by a Lender at the time such Lender
first becomes a party to this Agreement indicates a United States interest
withholding tax rate in excess of zero (or if the Lender cannot provide at such
time such form because it is not entitled to reduced withholding under a treaty,
the payments are not effectively connected income and the payments do not
qualify as portfolio interest), withholding tax at such rate (or at the then
existing U.S. statutory rate if the Lender cannot provide the form) shall be
excluded from Taxes unless and until such Lender provides the appropriate form
certifying that a lesser rate applies, whereupon withholding tax at such lesser
rate only shall be excluded from Taxes for periods governed by such form;
provided that, if at the date of the Assignment and Acceptance pursuant to which
a Lender assignee becomes a party to this Agreement, the Lender assignor was
entitled to payments under subsection (a) in respect of United States
withholding tax with respect to interest paid at such date, then, to the extent
such tax results in liability for such payments, the term Taxes shall include
(in addition to withholding taxes that may be imposed in the future or other
amounts otherwise includable in Taxes) United States interest withholding tax,
if any, applicable with respect to the Lender assignee on such date.
(f) For any period with respect to which a Lender has failed
to provide the Company and the Administrative Agent with the appropriate form
described in Section 2.11(e) (other than if such failure is due to a change in
law occurring after the date on which a form originally was required to be
provided or if such form otherwise is not required under paragraph (e) above),
such Lender shall not be entitled to indemnification under paragraph (a) or (c)
above with respect to Taxes imposed by the United States.
(g) Any Lender claiming any additional amounts payable
pursuant to this Section 2.11 shall use reasonable efforts (consistent with its
internal policy and legal and regulatory restrictions) to change the
jurisdiction of its Applicable Lending Office(s) if the making of such a change
would avoid the need for, or reduce the amount of, any such additional amounts
that may thereafter accrue and would not, in the reasonable judgment of such
Lender, be otherwise disadvantageous to such Lender.
(h) Without prejudice to the survival of any other agreement
of the Obligors hereunder, the agreements and obligations of the Obligors
contained in this Section 2.11 shall survive the payment in full of principal
and interest hereunder and under the Notes.
Section 2.12. Sharing of Payments, Etc.
If any Lender shall obtain any payment (whether voluntary, involuntary,
through the exercise of any right of set-off, or otherwise) on account of the
Advances owing to it under either Facility (other than pursuant to Section
2.09(a), 2.09(b), 2.11, 2.13(d) or 10.04(c), or payments to the Issuing Banks in
respect of Letters of Credit) in excess of its ratable share of payments on
account of the Advances under such Facility obtained by all the relevant
Lenders, such Lender shall forthwith purchase from the other relevant Lenders
such participations in the Advances under such Facility owing to them as shall
be necessary to cause such purchasing Lender to share the excess payment ratably
with each of them; provided that if all or any portion of such excess payment is
thereafter recovered from such purchasing Lender, such purchase from each
relevant Lender shall be rescinded and such Lender shall repay to the purchasing
Lender the purchase price to the extent of such recovery together with an amount
equal to such Lender's ratable share (according to the proportion of (i) the
amount of such Lender's required repayment to (ii) the total amount so recovered
from the purchasing Lender) of any interest or other amount paid or payable by
the purchasing Lender in respect of the total amount so recovered. The Company
agrees that any Lender so purchasing a participation from another Lender
pursuant to this Section 2.12 may, to the fullest extent permitted by law,
exercise all its rights of payment (including the right of set-off) with respect
to such participation as fully as if such Lender were the direct creditor of the
Company in the amount of such participation.
Section 2.13. Letters of Credit.
(a) Issuance of Letters of Credit, Etc. On the Closing Date,
all Existing Letters of Credit shall automatically, without any action on the
part of any Person, be deemed to be Letters of Credit hereunder for all purposes
of this Agreement and the other Loan Documents. In addition, on and after the
Closing Date the Company may request the Issuing Banks to issue or have
outstanding, on the terms and conditions hereinafter set forth, letters of
credit for the account of the members of the Allied Group (collectively with the
Existing Letters of Credit, the "Letters of Credit") from time to time on any
Business Day during the period from the Closing Date until the date 90 days
prior to the Revolving Credit Commitment Termination Date; provided that:
(i) the aggregate Available Amount of all Letters of Credit
shall not exceed at any time the Letter of Credit Sublimit and the
aggregate outstanding principal amount of all Revolving Credit Advances
when added to the aggregate amount of Letter of Credit Liabilities
shall not exceed the aggregate Revolving Credit Commitments on such
Business Day;
(ii) no Letter of Credit shall have an expiration date later
than, or shall permit the account party or the beneficiary to require
the renewal thereof to a date beyond, the date 30 days prior to the
Revolving Credit Commitment Termination Date.
On each day during the period commencing with the issuance by an
Issuing Bank of any Letter of Credit and until such Letter of Credit shall have
been drawn in full or expired or been terminated, the Revolving Credit
Commitment of each Lender shall be deemed to be utilized for all purposes of
this Agreement in an amount equal to such Lender's Pro Rata Share of the then
undrawn amount of such Letter of Credit. Each Letter of Credit shall be
denominated and payable in U.S. Dollars.
(b) Request for Issuance.
(i) Each Letter of Credit shall be issued upon notice, given
not later than 1:00 P.M. (New York City time) three Business Days prior
to the date of the proposed issuance of such Letter of Credit, by the
Company to the relevant Issuing Bank and the Administrative Agent,
which shall give to each Lender prompt notice thereof by telex or
telecopier. Each such notice of issuance of a Letter of Credit (a
"Notice of Issuance") shall be by telex or telecopier, confirmed
promptly in writing, specifying therein (A) the requested date of such
issuance (which shall be a Business Day), (B) the Available Amount
requested for such Letter of Credit, (C) the identity of the relevant
Issuing Bank with respect to such Letter of Credit, (D) the expiration
date of such Letter of Credit, (E) the account party or parties for
such Letter of Credit, (F) the name and address of the beneficiary of
such Letter of Credit and (G) the form of such Letter of Credit,
together with a description of the nature of the transactions or
obligations proposed to be supported thereby. If the requested form of
such Letter of Credit is acceptable to the relevant Issuing Bank in its
sole discretion, such Issuing Bank will, upon fulfillment of the
applicable conditions set forth in Article III, make such Letter of
Credit available to the Company at its office referred to in Section
10.02 or as otherwise agreed with the Company in connection with such
issuance.
(ii) Each Issuing Bank shall furnish (A) to the Administrative
Agent on the first Business Day of each week a written report
summarizing the issuance and expiration dates of Letters of Credit
issued by it during the previous week and drawings during such week
under all Letters of Credit issued by it, (B) to each Lender and to the
Company on the first Business Day of each month, a written report
summarizing the issuance and expiration dates of the Letters of Credit
issued by it during the preceding month and drawings during such month
under all Letters of Credit issued by it and (C) to the Administrative
Agent and each Lender on the first Business Day of each calendar
quarter, a written report setting forth the average daily aggregate
Available Amount during the preceding calendar quarter of all Letters
of Credit issued by it.
(c) Drawing and Reimbursement.
(i) The payment by an Issuing Bank of a draft drawn under any
Letter of Credit shall constitute for all purposes of this Agreement
the making by such Issuing Bank of an advance to the Company in the
amount of such payment, which the Company agrees to repay on demand
and, if not paid on demand, shall bear interest, from the date demanded
to the date paid in full (and which interest shall be payable on
demand), (x) from and including the date of demand to but not including
the second Business Day thereafter at the Base Rate in effect for each
such day plus the Applicable Margin in effect for each such day, and
(y) from and including said second Business Day thereafter at the
Post-Default Rate. Without limiting the obligations of the Company
hereunder, upon demand by such Issuing Bank through the Administrative
Agent, each Lender having a Revolving Credit Commitment shall make
Revolving Credit Advances in an aggregate amount equal to the amount of
such Lender's Pro Rata Share of such advance by making available for
the account of its Applicable Lending Office to the Administrative
Agent for the account of such Issuing Bank, by deposit to the
Administrative Agent's Account, in same day funds, an amount equal to
the sum of (A) its Pro Rata Share of the outstanding principal amount
of such advance plus (B) interest accrued and unpaid to and as of such
date on the outstanding principal amount of such advance.
(ii) Each Lender agrees to make such Revolving Credit Advances
on the Business Day on which demand therefor is made by such Issuing
Bank through the Administrative Agent (provided that notice of such
demand is given not later than 12:00 Noon (New York City time) on such
Business Day) or (if notice of such demand is given after such time)
the first Business Day next succeeding such demand.
(iii) If and to the extent that any Revolving Credit Lender
shall not have so made the amount of such Revolving Credit Advance
available to the Administrative Agent for the account of such Issuing
Bank, such Lender agrees to pay to the Administrative Agent forthwith
on demand such amount together with interest thereon, for each day from
the date of demand by such Issuing Bank until the date such amount is
paid to the Administrative Agent, at the Federal Funds Rate.
(iv) The Revolving Credit Advances provided for in this
Section 2.13 shall be made by the Lenders irrespective of whether there
has occurred and is continuing any Default or Event of Default or of
whether any other condition precedent specified in Article III has not
been satisfied, and the obligation of each Lender under the Revolving
Credit Facility to make such Revolving Credit Advances is absolute and
unconditional.
(d) Increased Costs.
(i) If any change in any law or regulation or in the
interpretation thereof (to the extent any such change occurs after the date
hereof) by any court or administrative or governmental authority charged with
the administration thereof shall either (x) impose, modify or deem applicable
any reserve, special deposit or similar requirement against letters of credit or
guarantees issued by, or assets held by, or deposits in or for the account of,
any Issuing Bank or any Lender or (y) impose on any Issuing Bank or any Lender
any other condition regarding this Agreement, such Issuing Bank or such Lender
or any Letter of Credit, and the result of any event referred to in the
preceding clause (x) or (y) shall be to increase the cost to such Issuing Bank
or such Lender of issuing or maintaining any Letter of Credit or any commitment
hereunder in respect of Letters of Credit, then, upon demand by such Issuing
Bank or such Lender, the Company shall immediately pay to such Issuing Bank or
such Lender, from time to time as specified by such Issuing Bank or such Lender,
additional amounts that shall be sufficient to compensate such Issuing Bank or
such Lender for such increased cost. A certificate as to the amount of such
increased cost, submitted to the Company by such Issuing Bank or such Lender
shall be conclusive and binding for all purposes, absent manifest error.
(ii) The Company shall not be obligated to pay any additional
amounts arising pursuant to this Section 2.13(d) that are attributable to the
Excluded Period with respect to such additional amounts; provided that if an
applicable law, rule, regulation, guideline or request shall be adopted or made
on any date and shall be applicable to the period (a "ss.2.13(d) Retroactive
Period") prior to the date on which such law, rule, regulation, guideline or
request is adopted or made, the limitation on the Company's obligation to pay
such additional amounts hereunder shall not apply to the additional amounts
payable in respect of such ss.2.13(d) Retroactive Period so long as the Company
receives written notice of such law, rule, regulation, guideline or request from
the Administrative Agent or any Lender within 180 days after its adoption.
(e) Obligations Absolute. The Obligations of the Company under
this Agreement and any other L/C Related Document shall, to the extent permitted
by law, be unconditional and irrevocable, and shall be paid strictly in
accordance with the terms of such L/C Related Document under all circumstances,
including, without limitation, any of the following circumstances:
(i) any lack of validity or enforceability of any one or more
of such other documents and agreements, including, but not limited to,
the L/C Related Documents;
(ii) any change in the time, manner or place of payment of, or
in any other term of, all or any of the Obligations of the Company in
respect of any L/C Related Document or any other amendment or waiver of
or any consent to departure from all or any of the L/C Related
Documents;
(iii) the existence of any claim, set-off, defense or other
right that the Company may have at any time against any beneficiary or
any transferee of a Letter of Credit (or any Persons for whom any such
beneficiary or any such transferee may be acting), the relevant Issuing
Bank or any other Person, whether in connection with the transactions
contemplated by the L/C Related Documents or any unrelated transaction;
(iv) any statement or any 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 relevant Issuing Bank under a Letter of
Credit against presentation of a draft or certificate that does not
comply with the terms of such Letter of Credit, except to the extent
that such payment resulted from such Issuing Bank's willful misconduct
or gross negligence, as found in a final, non-appealable judgment by a
court of competent jurisdiction, in determining whether such draft or
certificate complies on its face with the terms of such Letter of
Credit;
(vi) any exchange, release or nonperfection of any Collateral
or other collateral, or any release or amendment or waiver of or
consent to departure from any guarantee, for all or any of the
Obligations of the Company in respect of the L/C Related Documents; or
(vii) any other circumstance or happening whatsoever, whether
or not similar to any of the foregoing, including, without limitation,
any other circumstance that might otherwise constitute a defense
available to, or a discharge of, the Company or a guarantor.
(f) Additional Issuers of Letters of Credit. At the reasonable
request of the Company, the Administrative Agent shall appoint a Lender or an
Affiliate of a Lender (in each case, an "LC Issuer") to issue one or have
outstanding one or more specific Letters of Credit hereunder in accordance with
the terms hereof, provided that:
(1) such appointment shall in no way be deemed to be a
resignation or removal of any other Issuing Bank hereunder;
(2) such appointment shall be subject to the consent of such
LC Issuer and an acknowledgment from such LC Issuer that it shall
perform its obligations as an Issuing Bank hereunder in accordance with
the terms hereof (and, if such LC Issuer is not a Lender, the Affiliate
of such LC Issuer that is a Lender shall have acknowledged that such
Lender shall ensure the performance of such LC Issuer's obligations
hereunder);
(3) each Initial Lender shall be deemed to be an "LC Issuer"
with respect to the Existing Letters of Credit (if any) issued by it;
and
(4) unless the context otherwise requires, each reference
herein and in the other Loan Documents to the "Issuing Bank" shall be
deemed to include reference to such LC Issuers.
Section 2.14. Replacement of Lender.
(a) Subject to clause (b) below, if any Lender requests
compensation pursuant to Section 2.09(a), 2.09(b), 2.11 or 2.13(d), or the
obligation of any Lender to make, or to Convert Base Rate Advances into, or to
Continue, Eurodollar Rate Advances shall be suspended pursuant to Section
2.09(c) or 2.09(d) (such Lender being herein called an "Affected Lender"), then,
so long as such condition exists, the Company may, after the date 30 days after
the date of such request or suspension, (x) designate an Eligible Assignee
acceptable to the Administrative Agent and each Issuing Bank (which acceptance
will not be unreasonably withheld) that is not an Affiliate of the Company (such
Eligible Assignee being herein called a "Replacement Lender") to assume the
Affected Lender's Commitments and other obligations hereunder and to purchase
the Affected Lender's Advances and other rights under the Loan Documents (all
without recourse to or representation or warranty by, or expense to, the
Affected Lender) for a purchase price equal to the aggregate principal amount of
the outstanding Advances held by the Affected Lender plus all accrued but unpaid
interest on such Advances and accrued but unpaid fees owing to the Affected
Lender (and upon such assumption, purchase and substitution, and subject to the
execution and delivery to the Administrative Agent by the Replacement Lender of
documentation satisfactory to the Administrative Agent and compliance with the
requirements of Section 10.07(c), the Replacement Lender shall succeed to the
rights and obligations of the Affected Lender hereunder and the other Loan
Documents); (y) pay to the Affected Lender all amounts payable to such Affected
Lender under Section 10.04(c), calculated as if the purchase by the Replacement
Lender constituted a mandatory prepayment of Advances by the Company, and (z)
pay to the Administrative Agent the processing and recordation fee specified in
Section 10.07(a)(vi) with respect to such assignment. If the Company exercises
its rights under the preceding sentence, the Affected Lender shall no longer be
a party hereto or have any rights or obligations hereunder or under the other
Loan Documents; provided that the obligations of the Company to the Affected
Lender under Sections 2.09, 2.11 and 10.04 with respect to events occurring or
obligations arising before or as a result of such replacement shall survive such
exercise.
(b) The Company may not exercise its rights under this Section
2.14 (i) with respect to any Affected Lender unless the Company simultaneously
exercises such rights with respect to all Affected Lenders or (ii) if a Default
or an Event of Default has occurred and is then continuing.
ARTICLE III
CONDITIONS OF LENDING
Section 3.01. Initial Extensions of Credit.
The obligation of any Lender or Issuing Bank to make its initial extension of
credit hereunder (whether by making an Advance or issuing a Letter of Credit) is
subject to the condition precedent that (1) such extension of credit shall be
made on or before June 30, 1998 and (2) the Administrative Agent shall have
received the following in form and substance satisfactory to it:
(a) The Notes, duly executed by the Company.
(b) The following documents, each dated the Closing Date
(unless otherwise specified):
(i) for each Obligor, a copy of the organizational
documents, as amended and in effect, of such Obligor certified
(as of a date reasonably close to the Closing Date) by the
Secretary of State of the jurisdiction of organization of such
Obligor; a certificate from such Secretary of State dated as
of a date reasonably close to the Closing Date as to the good
standing of and organizational documents filed by such
Obligor; and evidence from each Obligor that it is qualified
to do business in each jurisdiction where such qualification
is required;
(ii) for each Obligor, a certificate of the Secretary
or an Assistant Secretary of such Obligor, dated the Closing
Date and certifying (A) that attached thereto is a true and
complete copy of the by-laws (or operating or partnership
agreement, where applicable) of such Obligor as amended and in
effect at all times from the date on which the resolutions
referred to in clause (B) were adopted to and including the
date of such certificate, (B) that attached thereto is a true
and complete copy of resolutions (or consent by members or
partners, where applicable, to the extent required) duly
adopted by the board of directors (or members or partners,
where applicable) of such Obligor authorizing the execution,
delivery and performance of such of the Loan Documents to
which such Obligor is or is intended to be a party and the
extensions of credit hereunder, and that such resolutions (or
consent by members or partners, where applicable, to the
extent required) have not been modified, rescinded or amended
and are in full force and effect, (C) that the organizational
documents of such Obligor have not been amended since the date
of the certification thereto furnished pursuant to clause (i)
above, and (D) as to the incumbency and specimen signature of
each officer (or member or partner, where applicable) of such
Obligor executing such of the Loan Documents to which such
Obligor is intended to be a party and each other document to
be delivered by such Obligor from time to time in connection
therewith (and the Administrative Agent and each Lender may
conclusively rely on such certificate until it receives notice
in writing from such Obligor);
(iii) for each Obligor, a certificate of another
officer (or member or partner, where applicable) of such
Obligor, dated the Closing Date, as to the incumbency and
specimen signature of the Secretary or Assistant Secretary, as
the case may be, of such Obligor;
(c) The Pledge Agreement and the Security Agreement, in
substantially the forms of Exhibits B-1 and B-2, respectively, duly
executed by each of the intended parties thereto, together with:
(i) such appropriately completed and duly executed
copies of Uniform Commercial Code financing statements as the
Administrative Agent or any Lender shall have requested in
order to perfect the Liens created by the Security Documents
and covering the Collateral described therein;
(ii) executed documents for recordation and filing of
or with respect to such Security Documents that the
Administrative Agent or any Lender may deem necessary or
desirable in order to perfect the Liens created thereby; and
(iii) the stock certificates required to be delivered
pursuant to such Security Documents, each accompanied by
undated stock powers executed in blank.
(d) (i) A favorable opinion of Latham & Watkins, special
counsel for the Obligors, in substantially the form of Exhibit D-1 and
otherwise satisfactory to the Administrative Agent and the Lenders; and
(ii) a favorable opinion of Steven M. Helm, Esq., general counsel of
the Company, in substantially the form of Exhibit D-2 and otherwise
satisfactory to the Administrative Agent and the Lenders.
(e) A favorable opinion of Milbank, Tweed, Hadley & McCloy,
special New York counsel for CUSA, in substantially the form of Exhibit
E.
(f) A certificate of a Financial Officer of the Company to the
effect that:
(x) the representations and warranties contained in
each Loan Document are correct on and as of the Closing Date,
before and after giving effect to the transactions
contemplated hereby, as though made on and as of such date
(or, if any such representation or warranty is expressly
stated to have been made as of a specific date, as of such
specific date); and
(y) no event has occurred and is continuing that
constitutes a Default or an Event of Default.
(g) Evidence of the existence of all insurance required to be
maintained by Allied and its Subsidiaries hereunder, together with
evidence that the Administrative Agent on behalf of the Secured Parties
is an additional insured or loss payee (to the extent required under
Section 5.02).
(h) Evidence of receipt of all governmental and third party
consents and approvals necessary in connection with this Agreement and
that the same remain in effect.
(i) The results of a recent lien search in each of the
jurisdictions requested by the Administrative Agent, and such searches
shall reveal no liens on any of the assets of any Obligor except for
Liens permitted by Section 6.02 or Liens to be discharged on or prior
to the Closing Date pursuant to documentation satisfactory in form and
substance to the Administrative Agent.
(j) Evidence that the Company shall have paid all fees
required to be paid, and all expenses for which invoices have been
presented, on or before the Closing Date (including, without
limitation, the reasonable fees and expenses of Milbank, Tweed, Hadley
& McCloy, special New York counsel to CUSA).
(k) Evidence that the Company shall have repaid (or is
simultaneously repaying) all amounts owing under the Existing Credit
Agreement, that all letters of credit issued under the Existing Credit
Agreement shall have expired or been terminated, that all commitments
to lend thereunder shall have been (or shall simultaneously be)
terminated and that all Liens securing such obligations have been
released in a manner satisfactory to the Administrative Agent.
(l) Such environmental assessments as the Administrative Agent
may reasonably request.
(m) Such other approvals, opinions and documents relating to
this Agreement and the transactions contemplated hereby as any Lender
or any Issuing Bank may, through the Administrative Agent, reasonably
request.
Section 3.02. Conditions Precedent to Each Borrowing and Issuance.
The obligation of each Lender to make an Advance on the occasion of each
Borrowing (excluding, however, the making of any Advance pursuant to Section
2.13), and the right of the Company to request the issuance of Letters of
Credit, shall be subject to the further conditions precedent that on the date of
such Borrowing or issuance the following statements shall be true (and each of
the giving of the applicable Notice of Borrowing or Notice of Issuance and the
acceptance by the Company of the proceeds of such Borrowing or of such Letter of
Credit shall constitute a representation and warranty by the Company that on the
date of such Borrowing or issuance such statements are true):
(a) the representations and warranties contained in each Loan
Document are correct in all material respects on and as of the date of
such Borrowing or issuance, before and after giving effect to such
Borrowing or issuance and to the application of the proceeds therefrom,
as though made on and as of such date (or, if any such representation
or warranty is expressly stated to have been made as of a specific
date, as of such specific date);
(b) no event has occurred and is continuing, or would result
from such Borrowing or issuance or from the application of the proceeds
therefrom, that constitutes a Default or an Event of Default; and
(c) such Borrowing or issuance is permitted under the terms of
the Allied Senior Notes Indenture (including, without limitation, under
Sections 1008 and 1009 thereof) and under the terms of the Allied Waste
Senior Subordinated Notes Indenture (including, without limitation,
under Section 1008 thereof).
Section 3.03. Determinations Under Section 3.01.
For purposes of determining compliance with the conditions specified in
Section 3.01, each Lender shall be deemed to have consented to, approved or
accepted or to be satisfied with each document or other matter required
thereunder to be consented to or approved by or acceptable or satisfactory to
the Lenders unless an officer of the Administrative Agent responsible for the
transactions contemplated by the Loan Documents shall have received notice from
such Lender prior to the Closing Date specifying its objection thereto and such
Lender shall not have made available to the Administrative Agent such Lender's
ratable portion of the Borrowings made on the Closing Date.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Each Obligor represents and warrants to the Administrative
Agent, each Issuing Bank and each of the Lenders that:
Section 4.01. Organization; Powers. It (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, (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 have 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
Company, to borrow hereunder.
Section 4.02. Authorization.
The execution, delivery and performance by each Obligor of each of the Loan
Documents to which such Obligor is a party and the other Credit Agreement
Transactions:
(a) have been duly authorized by all requisite corporate and,
if required, stockholder action;
(b) in the case of Allied and the Company, 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, (B) any order of any Governmental Authority or
(C) any provision of any indenture, agreement or other instrument to
which Allied or the Company is a party or by which either 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 or the Company (other than any Lien created hereunder or under
the Security Documents); and
(c) in the case of members of the Allied Group (other than
Allied and the Company), 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, (B) any order
of any Governmental Authority or (C) any provision of any indenture,
agreement or other instrument to which any of them 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 any of them (other than any Lien created
hereunder or under the Security Documents and Liens permitted under
Section 6.02), in each case other than violations, conflicts and
breaches referred to in clauses (i) and (ii) above that could not,
either individually or in the aggregate, reasonably be expected to have
a Material Adverse Effect or result in any liability of the
Administrative Agent or any Lender.
Section 4.03. Enforceability.
This Agreement has been duly executed and delivered by Allied and the Company
and constitutes, and each other Loan Document when executed and delivered by
each Obligor party thereto will constitute, a legal, valid and binding
obligation of such Obligor enforceable against such Obligor in accordance with
its terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally.
Section 4.04. 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 Credit Agreement 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,
(c) such as may be required in the ordinary course of business in connection
with the performance of the obligations of Allied and the Company hereunder and
(d) such as may be required in connection with sales of capital stock or other
ownership interests of the Company or any of its Subsidiaries as part of
foreclosure proceedings with respect to such capital stock or other ownership
interests under the Security Documents.
Section 4.05. Financial Statements.
(a) Allied has heretofore furnished to the Lenders the
Consolidated balance sheet and statements of income, stockholders' equity and
cash flows of Allied and its Subsidiaries on a Consolidated basis (1) as of and
for the fiscal year ended December 31, 1997, reported on by Arthur Anderson LLP,
independent public accountants, and (2) as of and for the fiscal quarter and the
portion of the fiscal year ended March 31, 1998, certified by the chief
financial officer of Allied. Such financial statements present fairly, in all
material respects, the financial position and results of operations and cash
flows of Allied and its Subsidiaries as of such dates and for such periods in
accordance with U.S. generally accepted accounting principles consistently
applied, subject to year-end audit adjustments and the absence of footnotes in
the case of the statements referred to in clause (2) of the first sentence of
this paragraph.
(b) Allied has hereto furnished to the Lenders projected
Consolidated balance sheets and statements of income, stockholders' equity and
cash flows of Allied and its Subsidiaries (covering the period ending on
December 31, 2003). Such projected financial statements have been based on
estimates believed by Allied to be reasonable at the time such projections were
furnished to the Lenders.
Section 4.06. No Material Adverse Change.
Since December 31, 1997, there has been no material adverse change in the
business, condition (financial or otherwise), operations, performance,
properties or prospects of Allied and its Subsidiaries, taken as a whole.
Section 4.07. Title to Properties; Possession Under Leases.
(a) Each member of the Allied Group has good title to, or
valid leasehold interests in, all properties and assets which are material to
the Allied Group, taken as a whole, 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 the Loan Documents.
(b) Each member of the Allied Group has complied with all
obligations under all leases which are material to the Allied Group, taken as a
whole, to which it is a party and all such leases are in full force and effect,
except where failure to do so or failure of such leases to be in full force and
effect could not reasonably be expected to have a Material Adverse Effect. Each
member of the Allied Group 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 4.08. Subsidiaries; Other Equity Investments.
(a) Part A of Schedule 4.08 sets forth as of June 1, 1998 a
list of all Subsidiaries of Allied. Each such Subsidiary is a wholly owned
Subsidiary except as otherwise indicated on Schedule 4.08. The shares of capital
stock or other ownership interests issued by the Company and the other
Subsidiaries of Allied and owned by members of the Allied Group are fully paid
and non-assessable and are owned by Allied or the Company, directly or
indirectly, free and clear of all Liens (other than Liens permitted by the Loan
Documents).
(b) Part B of Schedule 4.08 sets forth as of June 1, 1998 a
list of all equity investments (other than equity investments in Subsidiaries
referred to in Part A of said Schedule 4.08) held by Allied or any of its
Subsidiaries in any Person, and, for each such investment (i) the identity of
the Person or Persons holding such investment and (ii) the nature of such
investment.
(c) Part C of Schedule 4.08 sets forth as of the date hereof a
list of each Subsidiary of the Company that is inactive and that has total
assets of less than $10,000 (each, an "Inactive Subsidiary").
Section 4.09. Litigation; Compliance with Laws.
(a) Except as set forth on Schedule 4.09, there are no
actions, suits or proceedings at law or in equity or by or before any
Governmental Authority now pending or, to the knowledge of any Obligor,
threatened against or affecting any member of the Allied Group or any business,
property or rights of any such Person (i) that involve any Loan Document or the
Credit Agreement Transactions or (ii) as to which there is a reasonable
likelihood of an adverse determination and that, if adversely determined, could
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect.
(b) No member of the Allied Group 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 have a Material Adverse Effect.
Section 4.10. Agreements.
No member of the Allied Group 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 have a Material Adverse Effect.
Section 4.11. Federal Reserve Regulations.
(a) No member of the Allied Group 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 Advance or any Letter of
Credit will be used by any member of the Allied Group, 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 of Governors of the Federal Reserve System, including
Regulation U or X.
Section 4.12. Investment Company Act; Public Utility Holding Company Act. No
member of the Allied Group 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 4.13. Tax Returns.
Each member of the Allied Group has filed or caused to be filed all material
Federal, state and other tax returns, extensions 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 and assessments that are
being contested in good faith by appropriate proceedings and for which such
member shall have set aside on its books adequate reserves.
Section 4.14. 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 Company to the Administrative 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, as of the date of such statements and
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 schedule was based upon or constitutes a
forecast, projection or expressions of opinion, each of Allied and the Company
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 4.15. Employee Benefit Plans.
Each of the Company 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 Company 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 aggregate 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 the aggregate
fair market value of the assets of all such underfunded Plans.
Section 4.16. Environmental Matters.
Except as set forth in Schedule 4.16:
(a) the facilities and properties owned, leased or operated by
Allied, the Company and Allied's other Subsidiaries (the "Properties") do not
contain, and have not previously contained, to the Company'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 have a Material Adverse Effect;
(b) the Properties and all operations of the Company and
Allied's other 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 have 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 Company or Allied's other Subsidiaries, which Releases or
threatened Releases, in the aggregate, could reasonably be expected to have a
Material Adverse Effect;
(d) no member of the Allied Group has received any notice of
an Environmental Claim in connection with the Properties or the operations of
the Company or any of Allied's Subsidiaries or with regard to any Person whose
liabilities for environmental matters any member of the Allied Group 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 have a
Material Adverse Effect; 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 manner that could give
rise to liability under any Environmental Law, nor have the Company or any of
Allied's other 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 have a Material Adverse Effect.
Section 4.17. Insurance.
Schedule 4.17 sets forth a true, complete and correct description of all
material insurance maintained by Allied and the Company (including insurance
maintained by Allied or the Company for Allied's Subsidiaries) as of the Closing
Date. As of the Closing Date, such insurance is in full force and effect and all
premiums which have become due and payable have been duly paid. Each member of
the Allied Group maintains insurance in such amounts and covering such risks and
liabilities as are in accordance with normal industry practice.
Section 4.18. Labor Matters.
As of the Closing Date, there are no strikes, lockouts or slowdowns against
any member of the Allied Group pending or, to the knowledge of Allied or the
Company, threatened, which could reasonably be expected to have a Material
Adverse Effect. The hours worked by and payments made to employees of the Allied
Group do not violate the Fair Labor Standards Act or any other applicable
Federal, state, local or foreign law dealing with such matters, in a manner
which could reasonably be expected to have a Material Adverse Effect. All
payments due from members of the Allied Group, or for which any claim may be
made against any member of the Allied Group, 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 such member, except where the failure to do so could
not reasonably be expected to have a Material Adverse Effect. The consummation
of the Credit Agreement 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 any member of the Allied Group is
bound, except where such event could not reasonably be expected to have a
Material Adverse Effect.
Section 4.19. Solvency.
Immediately after the consummation of the Credit Agreement Transactions to
occur on the Closing Date and immediately following the making of each Advance
and after giving effect to the application of the proceeds thereof, and taking
into account all rights of indemnity, subrogation and contribution of the
Obligors under applicable law and under Section 9.08, each Obligor is Solvent.
Section 4.20. Intellectual Property.
Each member of the Allied Group owns, or is licensed to use, all Intellectual
Property necessary for the conduct of its business as currently conducted,
except for any failure to so own or license Intellectual Property which,
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect. No claim has been asserted and is pending against any
member of the Allied Group challenging or questioning the use of any
Intellectual Property by them or the validity or effectiveness of any
Intellectual Property used by them, except for any claims, which, individually
or in the aggregate, could not reasonably be expected to have a Material Adverse
Effect. The use of Intellectual Property by the members of the Allied Group does
not infringe on the rights of any Person in any material respect and in any
manner which could reasonably be expected to have a Material Adverse Effect.
Section 4.21. Year 2000. Any reprogramming required to permit
the proper functioning, in and following the year 2000, of (i) the computer
systems of Allied and its Subsidiaries and (ii) equipment containing embedded
microchips (including systems and equipment supplied by others or with which the
systems of Allied and its Subsidiaries interface) and the testing of all such
systems and equipment, as so reprogrammed, will be completed in all material
respects by June 30, 1999. The aggregate cost to Allied and its Subsidiaries of
such reprogramming and testing, and of the reasonably foreseeable consequences
of year 2000 to Allied and its Subsidiaries resulting from reprogramming errors
and the failure of others' systems or equipment, cannot reasonably be expected
to have a Material Adverse Effect. Except for such of the reprogramming referred
to in the preceding sentence as may be necessary, the computer and management
information systems of Allied and its Subsidiaries are and, with ordinary course
upgrading and maintenance, will continue for the term of this Agreement to be,
sufficient to permit Allied and its Subsidiaries to conduct its business without
the occurrence of a Material Adverse Effect.
ARTICLE V
AFFIRMATIVE COVENANTS
Each Obligor covenants and agrees with each Lender that so
long as this Agreement shall remain in effect, until the Revolving Credit
Commitments have been terminated and the principal of and interest on each
Advance, all fees and all other expenses or amounts payable under the Loan
Documents shall have been paid in full, all Letters of Credit have been canceled
or have expired (or fully collateralized with cash or one or more letters of
credit acceptable to the relevant Issuing Banks and the Administrative Agent)
and all amounts drawn thereunder have been reimbursed in full, unless the
Required Lenders shall otherwise consent in writing:
Section 5.01. Existence; Businesses and Properties. Each of the Obligors
will, and will cause each of its Subsidiaries to:
(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 of Allied (other than the Company) 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 with all applicable
laws, rules, regulations and decrees and orders of any Governmental
Authority, whether now in effect or hereafter enacted, except for
failures to comply which could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect; 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, except for failures
to maintain and preserve property that could not reasonably be expected
to have a Material Adverse Effect.
Section 5.02. Insurance.
Each of the Obligors will, and will cause each of its Subsidiaries to:
(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, which endorsement shall provide that, from and after the Closing
Date, if the insurance carrier shall have received written notice from
the Administrative Agent of the occurrence of an Event of Default, the
insurance carrier shall pay all proceeds otherwise payable to the
Company or the other Obligors under such policies directly to the
Administrative Agent; and deliver original or certified copies of all
such policies to the Administrative Agent.
(c) If any separate or additional property, casualty or
"umbrella" insurance policy is known by a Responsible Officer to have
been obtained by the Company or any other member of the Allied Group,
notify the Administrative Agent thereof promptly, and promptly deliver
to the Administrative Agent a duplicate original copy of such policy.
Section 5.03. Obligations and Taxes.
Each of the Obligors will, and will cause each of its Subsidiaries
to, 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 that (x) such payment of Indebtedness shall not be
required pursuant to this Section 5.03 to the extent failure to so pay could not
reasonably be expected to have a Material Adverse Effect; and (y) 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 Allied 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.
Allied shall furnish to the Administrative Agent:
(a) within seven days after the filing of Allied's Annual
Report on Form 10-K with respect to each fiscal year (and in any event
within 105 days after the end of such fiscal year), (x) its
Consolidated balance sheet and related statements of operations,
stockholders' equity and cash flows showing the financial condition of
Allied and its 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 Subsidiaries on a Consolidated basis in accordance with GAAP; (y) a
calculation of the Leverage Ratio as at the last day of such fiscal
year; and (z) annual consolidating income statements for Allied and
each of its operating regions;
(b) within seven days after the filing of Allied's Quarterly
Report on Form 10-Q with respect to each of the first three fiscal
quarters of each fiscal year (and in any event within 55 days after the
end of each such fiscal quarter), (x) its Consolidated balance sheet
and related statements of operations, stockholders' equity and cash
flows showing the financial condition of Allied and its 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 Subsidiaries on a Consolidated
basis in accordance with GAAP, subject to normal year-end audit
adjustments and lack of footnote disclosures; (y) a calculation of the
Leverage Ratio as at the last day of such fiscal quarter; and (z)
quarterly consolidating income statements for Allied;
(c) concurrently with any delivery of financial statements
under 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 and (ii) setting
forth computations in reasonable detail satisfactory to the
Administrative Agent demonstrating compliance with the covenants
contained in Section 6.02, 6.04, 6.05, 6.06, 6.07, 6.11 and 6.12;
(d) promptly after the same become publicly available, copies
of all periodic and other reports, proxy statements and other materials
filed by any member of the Allied Group 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) within 55 days after the end of each fiscal quarter, (x) a
report in form and substance satisfactory to the Administrative Agent
of all Permitted Acquisitions consummated during such quarter, which
report shall identify, inter alia, each Permitted Acquisition having
total Acquisition Consideration of $5,000,000 or more (a "Large
Acquisition") and, for each Large Acquisition, a description of the
total Acquisition Consideration therefor; and (y) a list of all of the
Company's Domestic Subsidiaries;
(f) promptly, from time to time, such other information
regarding the operations, business affairs and financial condition of
members of the Allied Group, or compliance with the terms of any Loan
Document, as the Administrative Agent or any Lender may reasonably
request; and
(g) within 60 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 reasonably
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.
Section 5.05. Litigation and Other Notices.
Each of the Obligors will, and will cause each of its Subsidiaries to furnish
to the Administrative Agent, each Issuing Bank and each Lender:
(a) as soon as possible and in any event within five Business
Days after any Responsible Officer knows or has reason to believe that
a Default or Event of Default has occurred, written notice specifying
the nature and extent thereof and the corrective action (if any) taken
or proposed to be taken with respect thereto;
(b) as soon as possible and in any event within five Business
Days after any Responsible Officer has knowledge thereof, written
notice of the filing or commencement of, or of 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 any member of the Allied Group that
could reasonably be expected to have a Material Adverse Effect;
(c) prompt written notice of any development known to any
Responsible Officer that has had, or could reasonably be expected to
have, a Material Adverse Effect; and
(d) as soon as possible and in any event within five Business
Days after any Responsible Officer knows or has reason to believe that
a Change in Control has occurred or is reasonably likely to occur,
written notice of such Change in Control.
Section 5.06. Employee Benefits. Each of the Obligors will, and will cause
each of its Subsidiaries to:
(a) comply in all material respects with the applicable
provisions of ERISA and the Code, except where non-compliance could not
reasonably be expected to have a Material Adverse Effect; and
(b) furnish to the Administrative Agent (i) as soon as
possible after, and in any event within 10 days after any Responsible
Officer 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 any member of the Allied Group in an
aggregate amount exceeding $5,000,000 or (ii) requiring payments by any
member of the Allied Group exceeding $2,500,000 in any year, a
statement of a Financial Officer of the Company setting forth details
as to such ERISA Event and the action, if any, that the Company
proposes to take with respect thereto.
Section 5.07. Maintaining Records; Access to Properties and Inspections.
Each of the Obligors will, and will cause each of its Subsidiaries to, keep
proper books of record and account in conformity with GAAP. Each Obligor 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 members of the Allied Group 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 members of the Allied Group with the officers thereof and
independent accountants therefor.
Section 5.08. Environmental Laws.
Each of the Obligors will, and will cause each of its Subsidiaries to:
(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 have a Material Adverse Effect;
provided that no member of the Allied Group shall 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; and
(b) with respect to any Permitted Acquisition having
Acquisition Consideration in excess of $10,000,000, 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 the total consideration of
which is in excess of $10,000,000:
(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 Company
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.
Section 5.09. Preparation of Environmental Reports.
The Company and each other member of the Allied Group hereby agrees that, if a
Default or Event of Default caused by reason of a breach of Section 4.16 or 5.08
shall have occurred and be continuing, the Administrative Agent is authorized to
engage an environmental consulting firm selected by the Administrative Agent to
prepare, on behalf of the Administrative Agent, the Lenders and the Issuing
Banks but at the sole cost and expense of the Company, an environmental site
assessment report for the Properties which are the subject of such default,
which environmental site assessment report shall indicate the presence or
absence of Hazardous Materials and, to the extent feasible under the
circumstances, the estimated cost of any compliance or Remedial Action (if such
costs are reasonably ascertainable at such time) in connection with such
Properties. Each Obligor will, and will cause each of its Subsidiaries to,
cooperate fully with the Administrative Agent and such environmental consulting
firms in their preparation of such environmental assessment reports, including
(without limitation), permitting any representatives designated by the
Administrative Agent or such environmental consulting firms to visit and inspect
the related Properties at reasonable times and as often as reasonably requested
and to make extracts from and copies of environmental records of the members of
the Allied Group. If requested by the Company, the Company shall be entitled to
have access to the data relating to such environmental assessment reports.
Section 5.10. Further Assurances.
Each of the Obligors will, and will cause each of its Subsidiaries (other than
Inactive Subsidiaries) to:
(a) Execute any and all further documents, financing
statements, agreements and instruments, and take all further action
(including, without limitation, filing Uniform Commercial Code and
other financing statements) that the Required Lenders or the
Administrative 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 (subject to Liens permitted under the Loan Documents).
(b) Take such action from time to time as shall be necessary
to ensure that all Specified Subsidiaries (including Specified
Subsidiaries formed or acquired pursuant to Permitted Acquisitions) are
"Subsidiary Guarantors" hereunder, that all of the capital stock or
other ownership interests of Specified Subsidiaries owned by the
Company and the Specified Subsidiaries is pledged to the Administrative
Agent pursuant to the Security Agreement and that substantially all of
the personal property (in any event excluding landfills) of the Company
and the Specified Subsidiaries (including assets acquired pursuant to
Permitted Acquisitions) is pledged to the Administrative Agent pursuant
to the Security Agreement. Without limiting the generality of the
foregoing, in the event that the Company or any of the Specified
Subsidiaries shall form or acquire any new Subsidiary after June 1,
1998 that shall constitute a Specified Subsidiary, and in connection
with each Permitted Acquisition, the Company and the Specified
Subsidiaries will, within the Required Period therefor:
(i) cause each new Specified Subsidiary to become a
"Subsidiary Guarantor" hereunder and a "Grantor" under the
Security Agreement pursuant to an Assumption Agreement;
(ii) take and cause each new Specified Subsidiary to
take such action (including, without limitation, delivering
such shares of stock or other certificated ownership interests
and executing and delivering such Uniform Commercial Code
financing statements) as shall be necessary to create and
perfect valid and enforceable first priority Liens (subject
only to Liens permitted under the Loan Documents) on
substantially all of the personal property (in any event
excluding landfills) of such new Specified Subsidiary and on
substantially all of the personal property (in any event
excluding landfills) acquired pursuant to each Permitted
Acquisition, as collateral security for the Obligations
hereunder and under the other Loan Documents;
(iii) deliver all certificates evidencing capital
stock or other ownership interests in such new Specified
Subsidiary owned by members of the Allied Group, each
accompanied by undated stock powers executed in blank; and
(iv) deliver such proof of corporate or other company
action, incumbency of officers, opinions of counsel and other
documents as is consistent with those delivered by each
Obligor pursuant to Section 3.01 on the Closing Date or as the
Administrative Agent shall have reasonably requested.
(c) At its 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 but excluding landfills)
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 the Obligors (including real and other properties
acquired subsequent to the Closing Date, but in any event excluding
landfills)). Such security interests and Liens will be created under
Security Documents in form and substance satisfactory to the
Administrative Agent, and shall be accompanied by all such instruments
and documents (including legal opinions, title insurance policies and
lien searches) as the Administrative Agent shall reasonably request.
Notwithstanding the foregoing provisions of this Section 5.10, no member of the
Allied Group shall be required to pledge to, or create or perfect a security
interest in favor of, the Administrative Agent any property that is then subject
to a negative pledge clause permitted under Section 6.03, provided that (1) to
the extent reasonably requested by the Administrative Agent or the Required
Lenders, the Company shall use reasonable efforts to limit the property subject
to any negative pledge clause contained in documentation providing for
Indebtedness secured by Liens in accordance with Section 6.02(k); and (2) the
Company shall from time to time deliver to the Administrative Agent such
documents and other information as the Administrative Agent or any Lender may
reasonably request relating to such negative pledge clauses and the property
subject thereto.
Section 5.11. Compliance with Terms of Leaseholds.
Each of the Obligors will, and will cause each of its Subsidiaries to make all
payments and otherwise perform all obligations in respect of all leases of real
property to which a member of the Allied Group 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 Allied's Subsidiaries to do so, except, in any case, where the
failure to do any of the foregoing, either individually or in the aggregate,
could not be reasonably expected to have a Material Adverse Effect.
Section 5.12. Performance of Material Agreements.
Each of the Obligors will, and will cause each of its Subsidiaries to perform
and observe all of the terms and provisions of each Material Agreement, maintain
each such Material Agreement in full force and effect, enforce such Material
Agreement in accordance with its terms, and cause each of Allied's Subsidiaries
to do so, except, in any case, where the failure to do any of the foregoing,
either individually or in the aggregate, could not be reasonably expected to
have a Material Adverse Effect; and take all action as may be from time to time
reasonably requested by the Administrative Agent or the Required Lenders
(through the Administrative Agent) to request and obtain information and reports
required to be provided by each other party to each such Material Agreement.
Section 5.13. Junior Indebtedness.
For so long as any Junior Indebtedness is outstanding, Allied shall deliver to
the Administrative Agent, on or prior to the last day of each fiscal year,
evidence reasonably satisfactory to the Administrative Agent that the members of
the Allied Group will be in compliance with the financial covenants (if any) set
forth therein (including compliance as a result of a waiver or amendment of the
terms thereof).
Section 5.14. Inactive Subsidiaries.
The Company shall cause each Inactive Subsidiary to be dissolved within 90
days of the date hereof; provided that if after such period the Company has not
caused any Inactive Subsidiary to be so dissolved, then each such Inactive
Subsidiary shall deemed to be (as of such 90th day) a newly formed Specified
Subsidiary for purposes of Section 5.10(b).
Section 5.15. Year 2000.
The Company will use its reasonable best efforts to ensure that any computer
systems and/or software used in the operation of Allied's or any of its
Subsidiaries' businesses is modified or replaced to the extent necessary to
prevent or avoid any the occurrence of any Material Adverse Effect as a result
of the commencement of the year 2000.
ARTICLE VI
NEGATIVE COVENANTS
Each Obligor covenants and agrees with each Lender that so
long as this Agreement shall remain in effect, until the Revolving Credit
Commitments have been terminated and the principal of and interest on each
Advance, all fees and all other expenses or amounts payable under the Loan
Documents shall have been paid in full, all Letters of Credit have been canceled
or have expired (or fully collateralized with cash or one or more letters of
credit acceptable to the relevant Issuing Banks and the Administrative Agent)
and all amounts drawn thereunder have been reimbursed in full, unless the
Required Lenders shall otherwise consent in writing:
Section 6.01. Indebtedness.
None of the Obligors will, nor will they cause or permit any of its
Subsidiaries to, create, incur, assume or permit to exist any Indebtedness
secured by a Lien except Liens permitted by Section 6.02.
Section 6.02. Liens.
None of the Obligors will, nor will they cause or permit any of its
Subsidiaries to 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 of Allied) now owned or hereafter acquired by it or on any income
or revenues or rights in respect of any thereof, except:
(a) Liens on properties or assets of members of the Allied
Group existing on the date hereof and set forth in Schedule 6.02
(excluding, however, following the making of the initial extensions of
credit hereunder, the Indebtedness to be repaid with the proceeds of
such Advances, as indicated on Schedule 6.02); provided that such Liens
shall secure only those obligations (and extensions, renewals and
refinancings thereof) which they secure on the date hereof;
(b) Liens created under the Loan Documents;
(c) Liens for taxes not yet due or which are being contested
in compliance with Section 5.03;
(d) 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;
(e) pledges and deposits made in the ordinary course of
business in compliance with worker's compensation, unemployment
insurance and other social security laws or regulations;
(f) 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;
(g) 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 members of the Allied Group;
(h) Liens arising out of Capital Lease Obligations, so long
as such Liens (i) attach only to the property subject to the related
capitalized lease, (ii) the aggregate principal component of Capital
Lease Obligations incurred in any fiscal year shall not exceed
$50,000,000 and (iii) the aggregate principal component of Capital
Lease Obligations incurred after the Closing Date shall not exceed
$200,000,000;
(i) 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 Allied
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
Allied shall have set aside on its books adequate reserves, in
accordance with GAAP, with respect to such judgment or award;
(j) Liens arising from Uniform Commercial Code financing
statements and similar documents filed on a precautionary basis in
respect of operating leases intended by the parties to be true leases
(other than any such leases entered into in violation of this
Agreement); and
(k) additional Liens on property (but not on the capital stock
or other ownership interests of any Domestic Subsidiary of the Company
or on any landfill) to secure Indebtedness (including, without
limitation, Capital Lease Obligations in addition to those permitted
under paragraph (h) of this Section 6.02) so long as the aggregate
principal amount of such Indebtedness does not at any time exceed 7.5%
of Total Assets.
Section 6.03. No Other Negative Pledge.
None of the Obligors will, nor will they cause or permit any of its
Subsidiaries to, 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 Administrative Agent, the Lenders and the
Issuing Banks;
(ii) in favor of the holders of the Allied Waste Senior
Subordinated Notes, 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), (h), (j) or (k), provided that
such prohibition or condition does not apply to any property or assets
not subject to such Lien;
(iv) in connection with any lease permitted under Section 6.04
solely to the extent that such lease prohibits a Lien on the lease or
the property subject to such lease; or
(v) pursuant to any agreement entered into by any member of
the Allied Group in connection with an Asset Sale for the period
beginning with the date such agreement is entered into through the date
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.
None of the Obligors will, nor will they cause or permit any of its
Subsidiaries to, 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 (1) the Company may enter into any such transaction
with respect to any lease that is (A) required to be capitalized in accordance
with GAAP, and in compliance with Section 6.02(h) or (k) or (B) is of the type
permitted by Section 6.02(j); and (2) the aggregate fair market value of
property that is the subject of such a sale-leaseback transaction after the
Closing Date shall not exceed 3.5% of Total Assets.
Section 6.05. Investments, Loans and Advances.
None of the Obligors will, nor will they cause or permit any of its
Subsidiaries to, purchase, hold or acquire any capital stock or other ownership
interests, 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 Company (i) existing on the
date hereof and (ii) made after the date hereof in the capital stock or
other ownership interests of the Company and the Subsidiary Guarantors;
loans or advances by the Company or any wholly owned Subsidiary of
Allied to the Company or any wholly owned Subsidiary of Allied; and
loans or advances by the Company or any wholly owned Subsidiary of
Allied to Allied or by Allied to the Company or any wholly owned
Subsidiary of Allied; provided that in any event no Obligor shall make
any investments in, or loans or advances to, Reliant Insurance or any
of its Subsidiaries after the date hereof (other than in accordance
with clause (j) below);
(b) Permitted Investments;
(c) loans and advances to employees of members of the Allied
Group for travel, entertainment and relocation expenses in the ordinary
course of their business;
(d) loans by members of the Allied Group to their employees in
connection with management incentive plans not to exceed $10,000,000 at
any time outstanding; provided that such limitation shall not apply to
loans the proceeds of which are used to purchase common stock of
Allied;
(e) investments constituting Capital Expenditures permitted
under Section 6.11;
(f) investments in the capital stock or other ownership
interests of any Specified Subsidiary formed after the date hereof,
provided that (i) such capital stock or interest is pledged to the
Administrative Agent (for the benefit of the Secured Parties) pursuant
to the Security Agreement and (ii) the Company and such Subsidiary
comply with the applicable provisions of Section 5.10 with respect to
such newly formed Subsidiary;
(g) Interest Rate Protection Agreements;
(h) Permitted Call/Option Agreements;
(i) investments made after the Closing Date in joint ventures
and other business entities (in each case that are not Subsidiaries of
the Company) that are engaged in the same line or lines of business as
the Company and its Subsidiaries, or other business activities
incidental thereto, in an aggregate amount not to exceed $50,000,000;
(j) loans and advances (x) to Persons that are not
Subsidiaries or other Affiliates of Allied and (y) to Reliant
Insurance, in each case made after the Closing Date and in an aggregate
amount not exceeding $10,000,000;
(k) extensions of trade credit in the ordinary course of
business in an aggregate amount not at any time exceeding $1,000,000;
(l) receivables owing to members of the Allied Group that
arise in the ordinary course of business and are payable or
dischargeable in accordance with customary trade terms; and
(m) one or more non-hostile acquisitions by the Company or any
of its Subsidiaries of a business unit (with any associated assets)
located in the United States or capital stock or other ownership
interests (other than Margin Stock) of any other Person organized under
the laws of the United States, any state thereof or the District of
Columbia; provided that:
(1) 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 ownership interests, the Person so
acquired is engaged in, the same line of business as the
Company and its Subsidiaries and other business activities
incidental thereto;
(2) the business acquired conducts its business
exclusively in the United States;
(3) in connection with any such acquisition involving
a merger of the Company or any of its Subsidiaries, either (x)
the Company or such Subsidiary shall be the survivor (and if
any such acquisition involves a merger of the Company and one
of its Subsidiaries, the Company shall be the survivor); or
(y) (I) the successor shall be a corporation organized and
existing under the laws of the United States of America, any
state thereof or the District of Columbia (the "Successor
Corporation") and shall expressly assume, by amendment to this
Agreement executed by the Obligors and such Successor
Corporation and in form and substance satisfactory to the
Required Lenders and the Administrative Agent, all of the
obligations of the Company or such Subsidiary, as the case may
be, hereunder and under the other the Loan Documents and (II)
in the case of a merger involving the Company, the Company
shall have delivered to the Administrative Agent a certificate
signed by an executive officer of the Company and a written
opinion of counsel satisfactory to the Administrative Agent
(who may be counsel to the Company), each stating that such
transaction and such amendment to this Agreement comply with
this Section 6.05(m) and that all conditions precedent herein
provided for relating to such transaction have been satisfied;
(4) immediately prior to and after giving effect to
such acquisition, no Default or Event of Default shall have
occurred and be continuing;
(5) during the Required Period with respect to such
acquisition, the Obligors shall comply with their obligations
under Section 5.10 with respect to the related Acquired
Business;
(6) in the case of an acquisition of capital stock or
other ownership interests of a Person, the Company or one of
its Subsidiaries acquires a majority of the capital stock or
other ownership interests of such Person; and
(7) the prior written consent of the Administrative
Agent and the Required Lenders shall be required with respect
to any acquisition (whether in one transaction or a series of
related transactions) where the Acquisition Consideration
therefor exceeds 40% of Consolidated EBITDA for the Rolling
Period ending on the last day of the most recent fiscal
quarter with respect to which financial statements have been
delivered pursuant to Section 5.04.
Any acquisition satisfying each of the criteria set forth in this
clause (m) is referred to herein as a "Permitted Acquisition".
Section 6.06. Mergers, Consolidations, Sales of Assets and Acquisitions.
None of the Obligors will, nor will they cause or permit any of its
Subsidiaries to, 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
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 of Allied may merge into the
Company in a transaction in which the Company is the surviving
corporation; (ii) any Subsidiary of Allied may merge into or
consolidate with any other Subsidiary of Allied in a transaction in
which the surviving entity is a wholly owned Subsidiary of Allied and
no Person other than the Company or a wholly owned Subsidiary of Allied
receives any consideration; and (iii) in connection with one or more
Permitted Acquisitions, the Company or any of its Subsidiaries may
merge with or into another Person to the extent permitted under Section
6.05(m)(3)(y) (provided that, for all purposes of this paragraph (a),
Reliant Insurance shall not merge into Allied, the Company or any other
Subsidiary of Allied);
(b) any Subsidiary of Allied (other than the Company) may
change the jurisdiction in which it is incorporated so long as the new
jurisdiction is in the United States;
(c) the Company or any of its Subsidiaries (other than Reliant
Insurance) may make Permitted Acquisitions; and
(d) the Company or any of its Subsidiaries may conduct an
Asset Sale of a type not described in this Section 6.06, provided that
(1) the Net Available Proceeds thereof are applied in the manner and to
the extent required under Section 2.05(b) and (2) any Asset Sale of
assets or stock having a fair market value in excess of 2% of Total
Assets shall not be permitted without the prior consent of the Required
Lenders.
Section 6.07. Dividends and Distributions; Restrictions on Ability of
Subsidiaries to Pay Dividends; Preferred Stock.
None of the Obligors will, nor will they cause or permit any of its
Subsidiaries to:
(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 other ownership interests
or directly or indirectly redeem, purchase, retire or otherwise acquire
for value (or permit any Subsidiary of Allied to purchase or acquire)
any shares of any class of its capital stock or other ownership
interests or set aside any amount for any such purpose; provided that:
(1) Any Subsidiary of the Company may declare and pay
dividends or make other distributions to the Company.
(2) Each member of the Allied Group may declare and
pay dividends in shares of its common stock.
(3) So long as no Default or Event of Default shall
have occurred and be continuing, Allied may:
(A) declare and pay cash dividends on its
common stock, provided that the aggregate amount of
cash dividends so payable in any fiscal year of
Allied shall not exceed 50% of Allied's net income
(determined in accordance with GAAP) for the
immediately preceding fiscal year; and
(B) declare and pay cash dividends in
respect of its Cash-Pay Preferred Stock (provided
that if the initial issuance of such Cash-Pay
Preferred Stock required the approval of all or some
of the Lenders or the Administrative Agent hereunder,
then the cash dividends in respect of such Cash-Pay
Preferred Stock shall be allowed under this clause
(B) only to the extent such payments would be
required to be made under the terms of such Cash-Pay
Preferred Stock as so approved by such Lenders or the
Administrative Agent, as the case may be, without
giving effect to any subsequent amendment or
modification thereof not agreed to in writing by the
Required Lenders).
(4) The Company may declare and make dividend
payments to Allied solely to the extent necessary for Allied
to pay for administrative expenses to conduct its business in
accordance with Sections 5.01(b) and 6.09.
(5) In addition to the dividend payments referred to
in clause (4) above, the Company may declare and make dividend
payments to Allied to enable Allied to make:
(A) payments of cash interest then required
in respect of the Allied Senior Notes (but only to
the extent such payments would be required to be made
under the indenture for the Allied Senior Notes as in
effect on the Closing Date, without giving effect to
any amendment or modification thereof after the
Closing Date not agreed to in writing by the Required
Lenders);
(B) payments of cash interest then required
in respect of other Indebtedness of Allied (so long
as such Indebtedness is incurred in compliance with
the terms of this Agreement); and
(C) the dividend payments referred to in
clause (3) above,
provided that all dividend payments in accordance with this
paragraph (5) are subject to the satisfaction of the following
conditions on the date of such dividend payment and after
giving effect thereto:
(i) no Default or Event of Default shall
have occurred and be continuing; and
(ii) such dividend payment shall be made
within five days of the dates on which such interest
in respect of the Allied Senior Notes, such interest
in respect of such other Indebtedness or such cash
dividends shall be payable by Allied, as the case may
be.
(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 (1)
pay any dividends or make any other distributions on its capital stock
or any other ownership interest or (2) make or repay any loans or
advances to the Company or the parent of such Subsidiary, except for:
(x) restrictions under the Allied Waste Senior
Subordinated Notes and the Allied Senior Notes (or any
restrictions under any refinancings thereof permitted by the
terms of this Agreement, so long as such restrictions are no
less favorable to the Lenders (as reasonably determined by the
Administrative Agent) than restrictions under the Allied Waste
Senior Subordinated Notes or Allied Senior Notes, as the case
may be), but only to the extent such restriction restricts
dividend payments to Allied by the Company or any Subsidiary
of the Company; and
(y) pursuant to any agreement entered into by any
member of the Allied Group 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 of Allied 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.
(c) Issue any Cash-Pay Preferred Stock unless (1) the Net
Available Proceeds thereof are applied in the manner and to the extent
required under Section 2.05(b)(iii); (2) no Default or Event of Default
under Section 6.12 (determined on a pro forma basis after giving effect
to such issuance) would occur; and (3) after giving effect to such
issuance no other Default or Event of Default shall have occurred and
be continuing.
Section 6.08. Transactions with Affiliates.
None of the Obligors will, nor will they cause or permit any of its
Subsidiaries to, 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 Company or any wholly owned Subsidiary
of Allied; or
(b) that any member of the Allied Group may 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 members of the
Allied Group than could be obtained on an arm's-length basis from
unrelated third parties.
Section 6.09. Business of Allied, Company and Subsidiaries.
None of the Obligors will, nor will they cause or permit any of its
Subsidiaries to:
(a) Engage at any time, (i) in the case of the Company and
each of its Subsidiaries (other than Reliant Insurance), in any
business or business activity other than the business currently
conducted by them and business activities reasonably incidental thereto
and (ii) in the case of Allied, in any business or business activity
other than the ownership of all the outstanding stock of the Company
and all activities reasonably incidental thereto and other than being
an obligor under the Allied Senior Notes or other Indebtedness of
Allied permitted to be incurred hereunder.
(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.
In addition, none of the Obligors will permit Reliant Insurance to engage to any
substantial extent in any line or lines of business or business activity other
than the business currently conducted by Reliant Insurance and business
activities reasonably incidental thereto.
Section 6.10. Other Indebtedness and Agreements.
None of the Obligors will, nor will they cause or permit any of its
Subsidiaries to:
(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 any member of the Allied Group is outstanding in
an aggregate outstanding principal amount in excess of $25,000,000, or
modify its charter or by-laws, in each case to the extent that any such
waiver, supplement, modification, amendment, termination or release
could reasonably be expected to have a Material Adverse Effect.
(b) Make any distribution, whether in cash, property,
securities or a combination thereof, other than scheduled 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 Junior Indebtedness, except for refinancings
(including subsequent refinancings) of Junior Indebtedness so long as
the terms of the Indebtedness issued as part of such refinancing are no
less favorable to the Lenders (as reasonably determined by the
Administrative Agent) than the Junior Indebtedness so refinanced.
(c) Make any payment or prepayment of any 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.
Section 6.11. Capital Expenditures.
None of the Obligors will, nor will they cause or permit any of its
Subsidiaries to, permit the aggregate amount of Capital Expenditures by members
of the Allied Group, taken as a whole, during any fiscal year to exceed the
amount of Permitted Capital Expenditures for such fiscal year.
Section 6.12. Financial Covenants.
None of the Obligors will, nor will they cause or permit any of its
Subsidiaries to:
(a) Fixed Charge Coverage Ratio. Permit the Fixed Charge
Coverage Ratio at any time to be less than 1.25 to 1.00.
(b) Leverage Ratio. Permit the Leverage Ratio at any time
during any period set forth below to exceed the ratio set forth below
opposite such period:
Period Maximum Ratio
From and including the Closing Date
through and including December 30, 1998 5.00 to 1.00
From and including December 31, 1998
to and including December 30, 1999 4.50 to 1.00
From and including December 31, 1999
to and including December 30, 2000 4.00 to 1.00
From and including December 31, 2000
to and including December 30, 2001 3.50 to 1.00
From and after December 31, 2001 3.00 to 1.00
(c) Interest Expense Coverage Ratio. Permit the Interest
Expense Coverage Ratio at any time during any period set forth below to
be less than the ratio set forth below opposite such period:
Period Minimum Ratio
From and including the Closing Date
through and including December 30, 1999 2.50 to 1.00
From December 31, 1999
through and including December 30, 2000 3.00 to 1.00
From and after December 31, 2000 3.50 to 1.00
ARTICLE VII
EVENTS OF DEFAULT
Section 7.01. Events of Default.
If any of the following events ("Events of Default") shall occur and be
continuing:
(a) any representation or warranty of any member of the Allied
Group 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; or
(b) the Company shall default in the payment of any principal
of any Advance or any reimbursement obligation with respect to any
Letter of Credit 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; or
(c) the Company shall default in the payment of any interest
on any Advance or any fee or any other amount (other than an amount
referred to in paragraph (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; or
(d) any Obligor shall default in the due observance or
performance of any covenant, condition or agreement contained in
Section 5.01(a), 5.05 or 5.08 or in Article VI; or
(e) any Obligor shall default in the due observance or
performance of any covenant, condition or agreement contained in any
Loan Document (other than those specified in clauses (b), (c) and (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 Company; or
(f) any member of the Allied Group 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 $10,000,000 (after
giving effect to any grace period provided in the underlying
documentation providing for such Indebtedness, but in any event not in
excess of five Business Days), 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; or
(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 any Obligor, or of a
substantial part of the property or assets of any Obligor, under the
Bankruptcy Code 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 any Obligor or for a substantial part of the property or
assets of any Obligor or (iii) the winding-up or liquidation of any
Obligor; 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; or
(h) any Obligor shall (i) voluntarily commence any proceeding
or file any petition seeking relief under the Bankruptcy Code 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 clause (g) above, (iii) apply for or consent to
the appointment of a receiver, trustee, custodian, sequestrator,
conservator or similar official for any Obligor or for a substantial
part of the property or assets of any Obligor, (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 Indebtedness as it become due or (vii) take any
action for the purpose of effecting any of the foregoing; or
(i) one or more judgments for the payment of money in an
aggregate amount in excess of $10,000,000 shall be rendered against any
Obligor (or any combination of Obligors) 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 any member
of the Allied Group to enforce any such judgment; or
(j) any security interest purported to be created by any
Security Document and required hereunder or thereunder to be perfected
shall cease to be a valid, perfected, first priority (except as
otherwise expressly permitted in this Agreement or the other Loan
Documents) security interest in the securities, assets or properties
covered thereby, except to the extent that any such loss of perfection
or priority results (x) from the failure of the Administrative Agent to
maintain possession of certificates representing securities pledged
under the Security Documents (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) or (y) from any other
action or inaction of the Administrative Agent that is found in a
final, non-appealable judgment to constitute the gross negligence or
willful misconduct of the Administrative Agent; or the Company or any
other Obligor shall assert that any security interest purported to be
created by any Security Document and required hereunder or thereunder
to be perfected is not a valid, perfected, first priority (except as
otherwise expressly permitted in this Agreement or the other Loan
Documents) security interest in the securities, assets or properties
purported to be covered thereby; or
(k) any Loan Document shall not be for any reason, or shall be
asserted by any Obligor not to be, in full force and effect and
enforceable in accordance with its terms; or
(l) any ERISA Event that could reasonably be expected to have
a Material Adverse Effect shall have occurred and be continuing; or
(m) an Environmental Claim shall have been asserted against
any member of the Allied Group or any of their respective Affiliates,
that, in the reasonable judgment of the Required Lenders, is reasonably
likely to be determined adversely to any member of the Allied Group,
and the amount thereof (either individually or in the aggregate) is
reasonably likely to have a Material Adverse Effect (insofar as such
but after deducting any portion thereof that is reasonably expected to
be paid by other creditworthy Persons jointly and severally liable
therefor);
then, and in any such event, the Administrative Agent (i) shall at the request,
or may with the consent, of the Required Lenders, by notice to the Company,
declare the obligation of each Lender to make Advances and of the Issuing Banks
to issue Letters of Credit to be terminated, whereupon the same shall forthwith
terminate, and (ii) shall at the request, or may with the consent, of the
Required Lenders, by notice to the Company, declare the Advances and the Notes,
all interest thereon and all other amounts payable under this Agreement and the
other Loan Documents to be forthwith due and payable, whereupon the Advances and
the Notes, all such interest and all such amounts shall become and be forthwith
due and payable, without presentment, demand, protest or further notice of any
kind, all of which are hereby expressly waived by the Company; provided that in
the event of an actual or deemed entry of an order for relief with respect to
any Obligor or any of its Subsidiaries under the Bankruptcy Code, (x) the
obligation of each Lender to make Advances and of the Issuing Banks to issue
Letters of Credit shall automatically be terminated and (y) the Advances and the
Notes, all such interest and all such amounts shall automatically become and be
due and payable, without presentment, demand, protest or any notice of any kind,
all of which are hereby expressly waived by the Company.
Section 7.02. Actions in Respect of the Letters of Credit Upon Default.
If any Event of Default shall have occurred and be continuing, the
Administrative Agent may, irrespective of whether it is taking any of the
actions described in Section 7.01 or otherwise, make demand upon the Company to,
and forthwith upon such demand the Company will, pay to the Administrative Agent
on behalf of the Lenders in same day funds at the Administrative Agent's
Account, for deposit in the L/C Cash Collateral Account, an amount equal to the
aggregate Available Amount of all Letters of Credit then outstanding, which
funds shall be retained by the Administrative Agent in the L/C Collateral
Account as collateral security for the Letter of Credit Liabilities until such
time as the Letters of Credit shall have been terminated and all of such Letter
of Credit Liabilities paid in full.
If at any time the Administrative Agent determines that any
funds held in the L/C Cash Collateral Account are subject to any right or claim
of any Person other than the Administrative Agent and the Lenders or that the
total amount of such funds is less than the aggregate Available Amount of all
Letters of Credit, the Company will, forthwith upon demand by the Administrative
Agent, pay to the Administrative Agent, as additional funds to be deposited and
held in the L/C Cash Collateral Account, an amount equal to the excess of (a)
such aggregate Available Amount over (b) the total amount of funds, if any, then
held in the L/C Cash Collateral Account that the Administrative Agent determines
to be free and clear of any such right and claim.
ARTICLE VIII
THE ADMINISTRATIVE AGENT
Section 8.01. Authorization and Action.
Each Lender and Issuing Bank hereby appoints and authorizes the Administrative
Agent to take such action as agent on its behalf and to exercise such powers and
discretion under this Agreement and the other Loan Documents, to which it is a
party, as are delegated to the Administrative Agent by the terms hereof and
thereof, together with such powers and discretion as are reasonably incidental
thereto. As to any matters not expressly provided for by the Loan Documents
(including, without limitation, enforcement or collection of the Notes), the
Administrative Agent shall not be required to exercise any discretion or take
any action, and shall not be required to act or to refrain from acting (and
shall be fully protected in so acting or refraining from acting) except upon the
instructions of the Required Lenders, and such instructions shall be binding
upon all Lenders and all holders of the Notes; provided that the Administrative
Agent shall not be required to take any action that exposes it to personal
liability or that is contrary to any of the Loan Documents or applicable law.
The Administrative Agent agrees to give to the Issuing Banks and Lenders prompt
notice of each notice given to it by any Obligor pursuant to the terms of this
Agreement.
Each Lender and Issuing Bank hereby authorizes the
Administrative Agent to execute and deliver each of the Security Documents.
Section 8.02. Administrative Agent's Reliance, Etc.
Neither the Administrative Agent nor any of its directors, officers, agents or
employees shall be liable for any action taken or omitted to be taken by it or
them under or in connection with the Loan Documents, except for its or their own
gross negligence or willful misconduct. Without limitation of the generality of
the foregoing, the Administrative Agent (i) may treat the payee of any Note as
the holder thereof until the Administrative Agent receives and accepts an
Assignment and Acceptance entered into by the Lender that is the payee of such
Note, as assignor, and an Eligible Assignee, as assignee, as provided in Section
10.07; (ii) may consult with legal counsel (including counsel for any Obligor),
independent public accountants and other experts selected by it and shall not be
liable for any action taken or omitted to be taken in good faith by them in
accordance with the advice of such counsel, accountants or experts; (iii) makes
no warranty or representation to any Issuing Bank or Lender and shall not be
responsible to any of them for any statements, warranties or representations
made in or in connection with the Loan Documents; (iv) shall not have any duty
to ascertain or to inquire as to the performance or observance of any of the
terms, covenants or conditions of any Loan Document on the part of any Obligor
or to inspect the property (including the books and records) of any Obligor; (v)
shall not be responsible to any Issuing Bank or Lender for the due execution,
legality, validity, enforceability, genuineness, sufficiency or value of any
Loan Document or any other instrument or document furnished pursuant hereto; and
(vi) shall incur no liability under or in respect of any Loan Document by acting
upon any notice, consent, certificate or other instrument or writing (which may
be by telegram, telecopy, cable or telex) believed by it to be genuine and
signed or sent by the proper party or parties.
Section 8.03. CUSA and Affiliates.
With respect to its Commitments, the Advances made by it and the Notes issued
to it, CUSA shall have the same rights and powers under the Loan Documents as
any other Lender and may exercise the same as though it were not the
Administrative Agent; and the term "Lender" or "Lenders" shall, unless otherwise
expressly indicated, include CUSA in its individual capacity. CUSA and its
Affiliates may accept deposits from, lend money to, act as trustee under
indentures for, accept investment banking engagements from and generally engage
in any kind of business with, any Obligor, any of its Subsidiaries, any of its
Affiliates and any Person who may do business with or own securities of any
Obligor or any such Subsidiary or Affiliate, all as if CUSA were not the
Administrative Agent and without any duty to account therefor to the Lenders or
Issuing Banks.
Section 8.04. Lender Credit Decision.
Each Lender and Issuing Bank acknowledges that it has, independently and
without reliance upon the Administrative Agent, any other Issuing Bank or any
other Lender and based on the financial statements referred to in Section 4.05
and such other documents and information as it has deemed appropriate, made its
own credit analysis and decision to enter into this Agreement. Each Lender and
Issuing Bank also acknowledges that it will, independently and without reliance
upon the Administrative Agent, any other Issuing Bank 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.
Section 8.05. Indemnification.
The Lenders agree to indemnify the Administrative Agent (to the extent not
promptly reimbursed by the Company), ratably according to the principal amounts
of the Notes then held by them, from and against any and all liabilities,
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 any of them in any way relating to or
arising out of the Loan Documents or any action taken or omitted by any of them
under the Loan Documents; provided that no Lender shall be liable for any
portion of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting from the gross
negligence or willful misconduct of the Administrative Agent. Without limitation
of the foregoing, each Lender agrees to reimburse (x) the Administrative Agent
promptly upon demand for its ratable share of any costs and expenses payable by
the Company under Section 10.04 of this Agreement and (y) the Administrative
Agent under the Security Documents, in each case to the extent that the
Administrative Agent is not promptly reimbursed for such costs and expenses by
the Company.
Section 8.06. Collateral Duties.
(a) Except for action expressly required of the Administrative
Agent hereunder and under the other Loan Documents, the Administrative Agent
shall in all cases be fully justified in refusing to act hereunder and
thereunder unless it shall be further indemnified to its satisfaction by the
Lenders proportionately in accordance with the Obligations then due and payable
to each of them against any and all liability and expense that may be incurred
by it by reason of taking or continuing to take any such action.
(b) Except as expressly provided herein, the Administrative
Agent shall have no duty to take any affirmative steps with respect to the
collection of amounts payable in respect of the Collateral. The Administrative
Agent shall incur no liability as a result of any private sale of the
Collateral.
(c) The Lenders and Issuing Banks hereby consent, and agree
upon written request by the Administrative Agent to execute and deliver such
instruments and other documents as the Administrative Agent may deem desirable
to confirm such consent, to the release of the Liens on any of the Collateral,
including any release in connection with any Asset Sale of Collateral or any
part thereof consummated in accordance with the Loan Documents.
(d) The parties hereto acknowledge that the Administrative
Agent shall be deemed to have exercised reasonable care in the custody and
preservation of the Collateral in its possession if the Collateral is accorded
treatment substantially equal to that which the Administrative Agent accords its
own property, it being understood that neither the Administrative Agent nor any
Lender or Issuing Bank shall have responsibility for (1) ascertaining or taking
action with respect to calls, conversions, exchanges, maturities, tenders or
other matters relative to any Collateral, whether or not the Administrative
Agent, any Lender or any Issuing Bank has or is deemed to have knowledge of such
matters, or (2) taking any necessary steps to preserve rights against any
parties with respect to any Collateral.
Section 8.07. Successor Administrative Agent. The Administrative Agent may
resign at any time by giving written notice thereof to the Issuing Banks, the
Lenders and the Company and may be removed at any time with or without cause by
the Required Lenders. Upon any such resignation or removal, the Required Lenders
shall have the right to appoint a successor Administrative Agent. If no
successor Administrative Agent shall have been so appointed by the Required
Lenders, and shall have accepted such appointment, within 30 days after the
retiring Administrative Agent's giving of notice of resignation or the Required
Lenders' removal of the Administrative Agent, then the retiring Administrative
Agent may, on behalf of the Issuing Banks and the Lenders, appoint a successor
Administrative Agent, which shall be an Initial Lender or a commercial bank
organized under the laws of the United States or of any State thereof and having
a combined capital and surplus of at least $500,000,000. Upon the acceptance of
any appointment as Administrative Agent hereunder by a successor Administrative
Agent such successor Administrative Agent shall succeed to and become vested
with all the rights, powers, discretion, privileges and duties of the retiring
Administrative Agent and such retiring Administrative Agent shall be discharged
from its duties and obligations under the Loan Documents. After any retiring
Administrative Agent's resignation or removal hereunder as Administrative Agent,
the provisions of this Article VIII shall inure to the benefit of the
Administrative Agent as to any actions taken or omitted to be taken by it while
it was Administrative Agent under this Agreement and under the Security
Documents.
Section 8.08. Co-Syndication Agents and other Titles.
The Co-Syndication Agents named on the cover page of this Agreement, and the
Senior Managing Agents, Managing Agents and Co-Agents identified on the
signature pages hereof, shall have no duties or liabilities to any Person
hereunder or under the other Loan Documents except in their respective separate
capacities as Lenders or Issuing Banks hereunder.
ARTICLE IX
THE GUARANTEE
Section 9.01. The Guarantee.
Each of the Guarantors hereby, jointly and severally, guarantees to each
Lender, each Issuing Bank and the Administrative Agent and their respective
successors and assigns the prompt payment in full when due (whether at stated
maturity, by acceleration or otherwise) of:
(a) the principal of and interest on the Advances made by the
Lenders to, and the Notes held by each Lender of, the Company and all
other amounts from time to time owing to the Lenders, the Issuing Banks
and the Administrative Agent by the Company under this Agreement and
under the Notes; and
(b) all amounts from time to time owing to the Lenders, the
Issuing Banks and the Administrative Agent by any Obligor under any of
the other Loan Documents (provided that, in the case of this clause
(b), no Guarantor shall guarantee or otherwise be liable for any
obligation or liability under the Loan Documents of any other Guarantor
that is not both (x) a "Wholly Owned Restricted Subsidiary" of the
Company as defined in the Allied Waste Senior Subordinated Notes
Indenture and (y) either Allied or a "Restricted Subsidiary" as defined
in the Allied Senior Notes Indenture),
in each case strictly in accordance with the terms thereof (such obligations
being herein collectively called the "Guaranteed Obligations"). The Guarantors
hereby further jointly and severally agree that if the Company shall fail to pay
in full when due (whether at stated maturity, by acceleration or otherwise) any
of the Guaranteed Obligations, the Guarantors will promptly pay the same,
without any demand or notice whatsoever, and that in the case of any extension
of time of payment or renewal of any of the Guaranteed Obligations, the same
will be promptly paid in full when due (whether at extended maturity, by
acceleration or otherwise) in accordance with the terms of such extension or
renewal.
Section 9.02. Obligations Unconditional.
(a) The obligations of the Guarantors under Section 9.01 are
absolute and unconditional, joint and several, irrespective of the value,
genuineness, validity, regularity or enforceability of the obligations of the
Company under this Agreement, the Notes or any other agreement or instrument
referred to herein or therein, or any substitution, release or exchange of any
other guarantee of or security for any of the Guaranteed Obligations, and, to
the fullest extent permitted by applicable law, irrespective of any other
circumstance whatsoever that might otherwise constitute a legal or equitable
discharge or defense of a surety or guarantor, it being the intent of this
Section 9.02 that the obligations of the Guarantors hereunder shall be absolute
and unconditional, joint and several, under any and all circumstances.
(b) Without limiting the generality of the foregoing clause
(a), it is agreed that the occurrence of any one or more of the following shall
not alter or impair the liability of the Guarantors hereunder which shall remain
absolute, unconditional and joint and several, as described above:
(i) any modification or amendment (including without
limitation by way of amendment, extension, renewal or waiver), or any
acceleration or other change in the time for payment or performance of
the terms of all or any part of the Guaranteed Obligations or any Loan
Document, or any other agreement or instrument whatsoever relating
thereto, or any modification of the Commitments;
(ii) any release, termination, waiver, abandonment, lapse or
expiration, subordination or enforcement of the liability of any
Guarantor under this Article IX or of any other guarantee of all or any
part of the Guaranteed Obligations;
(iii) any application of the proceeds of any other guarantee
(including without limitation any letter of credit or the obligations
of any other guarantor of all or any part of the Guaranteed
Obligations) to all or any part of the Guaranteed Obligations in any
such manner and to such extent as the Administrative Agent may
determine;
(iv) any release of any other Person (including without
limitation any other guarantor with respect to all or any part of the
Guaranteed Obligations) from any personal liability with respect to all
or any part of the Guaranteed Obligations;
(v) any settlement, compromise, release, liquidation or
enforcement, upon such terms and in such manner as the Administrative
Agent may determine or as applicable law may dictate, of all or any
part of the Guaranteed Obligations or any other guarantee of (including
without limitation any letter of credit issued with respect to) all or
any part of the Guaranteed Obligations;
(vi) the giving of any consent to the merger or consolidation
of, the sale of substantial assets by, or other restructuring or
termination of the corporate existence of the Company or any other
Person or any disposition of any shares of any Guarantor;
(vii) any proceeding against the Company or any other
guarantor of (including without limitation any issuer of any letter of
credit issued with respect to) all or any part of the Guaranteed
Obligations or any collateral provided by any other Person or the
exercise of any rights, remedies, powers and privileges of the
Administrative Agent, the Issuing Banks and the Lenders under the Loan
Documents or otherwise in such order and such manner as the
Administrative Agent may determine, regardless of whether the Lender
shall have proceeded against or exhausted any collateral, right,
remedy, power or privilege before proceeding to call upon or otherwise
enforce this Article IX;
(viii) the entering into such other transactions or business
dealings with the Company, Allied, any Subsidiary or Affiliate of the
Company or any other guarantor of all or any part of the Guaranteed
Obligations as the Administrative Agent, any Issuing Bank or any Lender
may desire; or
(ix) all or any combination of any of the actions set forth in
this Section 9.02(b).
(c) The enforceability and effectiveness of this Article IX
and the liability of the Guarantors, and the rights, remedies, powers and
privileges of the Administrative Agent, the Issuing Banks and the Lenders under
this Article IX shall not be affected, limited, reduced, discharged or
terminated, and each Guarantor hereby expressly waives to the fullest extent
permitted by law any defense now or in the future arising, by reason of:
(i) the illegality, invalidity or unenforceability of all or
any part of the Guaranteed Obligations, any Loan Document or any other
agreement or instrument whatsoever relating to all or any part of the
Guaranteed Obligations;
(ii) any disability or other defense with respect to all or
any part of the Guaranteed Obligations, including the effect of any
statute of limitations that may bar the enforcement of all or any part
of the Guaranteed Obligations or the obligations of any such other
guarantor;
(iii) the illegality, invalidity or unenforceability of any
security for or other guarantee (including without limitation any
letter of credit) of all or any part of the Guaranteed Obligations or
the lack of perfection or continuing perfection or failure of the
priority of any Lien on any collateral for all or any part of the
Guaranteed Obligations;
(iv) the cessation, for any cause whatsoever, of the liability
of the Company or any other guarantor with respect to all or any part
of the Guaranteed Obligations (other than, subject to Section 9.03
hereof, by reason of the full payment of all Guaranteed Obligations);
(v) any failure of the Administrative Agent, any Issuing Bank
or any Lender to marshal assets in favor of the Company or any other
Person (including any other guarantor of all or any part of the
Guaranteed Obligations), to exhaust any collateral for all or any part
of the Guaranteed Obligations, to pursue or exhaust any right, remedy,
power or privilege it may have against the Company or any other
guarantor of all or any part of the Guaranteed Obligations (including
any issuer of any letter of credit) or any other Person or to take any
action whatsoever to mitigate or reduce such or any other Person's
liability under this Article IX, the Administrative Agent, the Issuing
Banks and the Lenders being under no obligation to take any such action
notwithstanding the fact that all or any part of the Guaranteed
Obligations may be due and payable and that the Company may be in
default of its obligations under any Loan Document;
(vi) any counterclaim, set-off or other claim which the
Company or any other guarantor of all or any part of the Guaranteed
Obligations has or claims with respect to all or any part of the
Guaranteed Obligations;
(vii) any failure of the Administrative Agent, any Issuing
Bank or any Lender or any other Person to file or enforce a claim in
any bankruptcy or other proceeding with respect to any Person;
(viii)
shapeType1fFlipH0fFlipV0lineColor16777215fPreferRelativeResize0any
bankruptcy, insolvency, reorganization, winding-up or adjustment of
debts, or appointment of a custodian, liquidator or the like of it, or
similar proceedings commenced by or against any Person, including any
discharge of, or bar or stay against collecting, all or any part of the
Guaranteed Obligations (or any interest on all or any part of the
Guaranteed Obligations) in or as a result of any such proceeding;
(ix) any action taken by the Administrative Agent, any Issuing
Bank or any Lender that is authorized by this Section 9.02 or otherwise
in this Article IX or by any other provision of any Loan Document or
any omission to take any such action;
(x) any of the acts mentioned in any of the provisions of this
Agreement or the Notes or any other agreement or instrument referred to
herein or therein shall be done or omitted; or
(xi) any other circumstance whatsoever (other than payment in
full of the Guaranteed Obligations) that might otherwise constitute a
legal or equitable discharge or defense of a surety or guarantor.
(d) To the fullest extent permitted by law, each Guarantor
expressly waives, for the benefit of the Administrative Agent, the Issuing Banks
and the Lenders, all set-offs and counterclaims and all diligence, presentment,
demand for payment or performance, notices of nonpayment or nonperformance,
protest, notices of protest, notices of dishonor and all other notices or
demands of any kind or nature whatsoever, and any requirement that the
Administrative Agent, any Issuing Bank or any Lender exhaust any right, power or
remedy or proceed against the Company under this Agreement, any Note or any
other Loan Document or other agreement or instrument referred to herein or
therein, or against any other Person under any other guarantee of, or security
for, any of the Guaranteed Obligations, and all notices of acceptance of this
Article IX or of the existence, creation, incurring or assumption of new or
additional Guaranteed Obligations. Each Guarantor further expressly waives the
benefit of any and all statutes of limitation, to the fullest extent permitted
by applicable law.
(e) Each Guarantor further waives any right to which it may be
entitled:
(i) that the assets of the Company first be used or depleted
in satisfaction of the Company's obligations under this Agreement; and
(ii) to require that the Company be sued and all claims
against the Company be completed prior to an action or proceeding being
initiated against such Guarantor.
Section 9.03. Reinstatement.
The obligations of the Guarantors under this Article IX shall be automatically
reinstated if and to the extent that for any reason any payment by or on behalf
of the Company in respect of the relevant Guaranteed Obligations is rescinded or
must be otherwise restored by any holder of any of the relevant Guaranteed
Obligations, whether as a result of any proceedings in bankruptcy or
reorganization or otherwise, and the Guarantors jointly and severally agree that
they will indemnify the Administrative Agent, each Issuing Bank and each Lender
on demand for all reasonable costs and expenses (including, without limitation,
fees of counsel) incurred by the Administrative Agent, such Issuing Bank or such
Lender in connection with such rescission or restoration, including any such
costs and expenses incurred in defending against any claim alleging that such
payment constituted a preference, fraudulent transfer or similar payment under
any bankruptcy, insolvency or similar law.
Section 9.04. Subrogation.
To the extent that, as a result of this Article IX, any Lender or Issuing Bank
would be subject to an extended preference period under Section 547 of the
Bankruptcy Code, each Guarantor hereby waives all rights of subrogation, whether
arising by contract or operation of law (including, without limitation, any such
right arising under the Bankruptcy Code) or otherwise, by reason of any payment
by it pursuant to the provisions of this Article IX and agrees with the Company
for the benefit of each of its creditors (including, without limitation, each
Lender, each Issuing Bank and the Administrative Agent) that any such payment by
it shall constitute a contribution of capital by such Guarantor to the Company
(or an investment in the equity capital of the Company by such Guarantor).
Section 9.05. Remedies.
The Guarantors jointly and severally agree that, as between the Guarantors and
the Lenders and Issuing Banks, the obligations of the Company under this
Agreement and the Notes may be declared to be forthwith due and payable as
provided in Article VII (and shall be deemed to have become automatically due
and payable in the circumstances provided in said Article VII) for purposes of
Section 9.01 notwithstanding any stay, injunction or other prohibition
preventing such declaration (or such obligations from becoming automatically due
and payable) as against the Company and that, in the event of such declaration
(or such obligations being deemed to have become automatically due and payable),
such obligations (whether or not due and payable by the Company) shall forthwith
become due and payable by the Guarantors for purposes of said Section 9.01.
Section 9.06. Instrument for the Payment of Money.
Each Guarantor hereby acknowledges that the guarantee in this Article IX
constitutes an instrument for the payment of money, and consents and agrees that
any Lender, any Issuing Bank or the Administrative Agent, at its sole option, in
the event of a dispute by such Guarantor in the payment of any moneys due
hereunder, shall have the right to bring motion-action under New York CPLR
Section 3213.
Section 9.07. Continuing Guarantee.
The guarantee in this Article IX is a continuing guarantee, and shall apply to
all Guaranteed Obligations whenever arising.
Section 9.08. Rights of Contribution.
The Subsidiary Guarantors hereby agree, as among themselves, that if any
Subsidiary Guarantor shall become an Excess Funding Guarantor (as defined below)
by reason of the payment by such Subsidiary Guarantor of any Guaranteed
Obligations, each other Subsidiary Guarantor shall, on demand of such Excess
Funding Guarantor (but subject to the next sentence), pay to such Excess Funding
Guarantor an amount equal to such Subsidiary Guarantor's Pro Rata Portion (as
defined below and determined, for this purpose, without reference to the
properties, Indebtedness and liabilities of such Excess Funding Guarantor) of
the Excess Payment (as defined below) in respect of such Guaranteed Obligations.
The payment obligation of a Subsidiary Guarantor to any Excess Funding Guarantor
under this Section 9.08 shall be subordinate and subject in right of payment to
the prior payment in full of the obligations of such Subsidiary Guarantor under
the other provisions of this Article IX and such Excess Funding Guarantor shall
not exercise any right or remedy with respect to such excess until payment and
satisfaction in full of all of such obligations.
For purposes of this Section 9.08, (i) "Excess Funding
Guarantor" means, in respect of any Guaranteed Obligations, a Subsidiary
Guarantor that has paid an amount in excess of its Pro Rata Portion of such
Guaranteed Obligations, (ii) "Excess Payment" means, in respect of any
Guaranteed Obligations, the amount paid by an Excess Funding Guarantor in excess
of its Pro Rata Portion of such Guaranteed Obligations and (iii) "Pro Rata
Portion" means, for any Subsidiary Guarantor, the ratio (expressed as a
percentage) of (x) the amount by which the aggregate present fair saleable value
of all properties of such Subsidiary Guarantor (excluding any shares of stock of
any other Subsidiary Guarantor) exceeds the amount of all the Indebtedness and
liabilities of such Subsidiary Guarantor (including contingent, subordinated,
unmatured and unliquidated liabilities, but excluding the obligations of such
Subsidiary Guarantor hereunder and any obligations of any other Subsidiary
Guarantor that have been Guaranteed by such Subsidiary Guarantor) to (y) the
amount by which the aggregate fair saleable value of all properties of the
Company and all of the Subsidiary Guarantors exceeds the amount of all the
Indebtedness and liabilities (including contingent, subordinated, unmatured and
unliquidated liabilities, but excluding the obligations of the Company and the
Subsidiary Guarantors hereunder) of the Company and all of the Subsidiary
Guarantors, all as of the Closing Date. If any Subsidiary becomes a Subsidiary
Guarantor hereunder subsequent to the Closing Date, then for purposes of this
Section 9.08 such subsequent Subsidiary Guarantor shall be deemed to have been a
Subsidiary Guarantor as of the Closing Date and the aggregate present fair
saleable value of the properties, and the amount of the Indebtedness and
liabilities, of such Subsidiary Guarantor as of the Closing Date shall be deemed
to be equal to such value and amount on the date such Subsidiary Guarantor
becomes a Subsidiary Guarantor hereunder.
Section 9.09. General Limitation on Guarantee Obligations.
In any action or proceeding involving any state corporate law, or any state or
Federal bankruptcy, insolvency, reorganization or other law affecting the rights
of creditors generally, if the obligations of any Guarantor under Section 9.01
would otherwise, taking into account the provisions of Section 9.08, be held or
determined to be void, invalid or unenforceable, or subordinated to the claims
of any other creditors, on account of the amount of its liability under said
Section 9.01, then, notwithstanding any other provision hereof to the contrary,
the amount of such liability shall, without any further action by such
Guarantor, any Lender, any Issuing Bank, the Administrative Agent or any other
Person, be automatically limited and reduced to the highest amount that is valid
and enforceable and not subordinated to the claims of other creditors as
determined in such action or proceeding.
ARTICLE X
MISCELLANEOUS
Section 10.01. Amendments, Consents, Etc.
(a) No amendment or waiver of any provision of this Agreement,
the Notes or the other Loan Documents, nor any consent to any departure by any
Obligor from any provision of this Agreement, the Notes or the other Loan
Documents, shall in any event be effective unless the same shall be in writing
and signed by the Company and the Required Lenders, and then such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given; provided that:
(i) no amendment, waiver or consent shall, unless in writing
and signed by the Required Lenders and each Lender that would be
adversely affected by such amendment, waiver or consent:
(1) waive any of the conditions specified in
Section 3.01;
(2) change the percentage of the Commitments or of
the aggregate unpaid principal amount of the Advances, or the
number or percentage of Lenders, that shall be required for
the Lenders or any of them to take any action hereunder;
(3) amend this Section 10.01;
(4) reduce the principal of, or interest on, the
Notes or any fees or other amounts payable hereunder;
(5) postpone any date fixed for any payment of
principal of, or interest on, the Notes or any fees or other
amounts payable hereunder or amend Section 2.03 or 2.05; or
(6) release all or substantially all of the
Guarantors from their respective obligations under Article IX
or release all or substantially all of the Collateral (unless
in each case such release is permitted under Section 8.06(c)
or 10.01(b) or otherwise permitted pursuant to the terms of
the Loan Documents);
(7) increase the Commitment of such Lender or
subject such Lender to any additional obligations; or
(8) change the order of application of any prepayment
set forth in Section 2.05 in any manner that materially
affects such Lender; and
(ii) no amendment, waiver or consent shall, unless in writing
and (x) signed by the Administrative Agent in addition to the Lenders
required above to take such action, affect the rights or duties of the
Administrative Agent under this Agreement, any Note or any other Loan
Document, and (y) signed by each Issuing Bank in addition to the
Lenders required to take such action, amend Section 2.07, 2.13 or 3.02,
increase the Letter of Credit Sublimit or otherwise affect the rights
or obligations of such Issuing Bank under this Agreement.
(b) Except as otherwise provided herein in the Security
Documents, the Administrative Agent shall not consent to release any Collateral
or terminate any Lien under any Security Document unless such release or
termination shall be consented to in writing by the Required Lenders; provided
that:
(1) the consent of all Lenders shall be required to release
all or substantially all of the Collateral, except upon the termination
of the Liens created by each of the Security Documents in accordance
with the terms thereof; and
(2) no such consent shall be required to release any Lien
covering property that is the subject of an Asset Sale permitted
hereunder and, upon such a permitted Asset Sale, such property shall be
deemed to be transferred free and clear of the Lien of the Security
Documents without any action on the part of any party (and the
Administrative Agent is hereby authorized to execute such releases and
other documents, and to take such other action, as the Company may
reasonably request to give effect thereto).
Section 10.02. Notices, Etc.
All notices and other communications provided for hereunder shall be in
writing (including telecopy communication) and mailed, telecopied or delivered:
(a) if to any of the Obligors, care of Allied Industries,
Inc., 15880 N. Greenway-Hayden Loop, Suite 100, Scottsdale, AZ 85260,
Attention: G. Thomas Rochford, Jr., telephone number (602) 627-2729;
telecopier number (602) 627-2707;
(b) if to any Initial Lender, at the Domestic Lending Office
specified in its Administrative Questionnaire;
(c) if to any other Lender, at its Domestic Lending Office
specified in the Assignment and Acceptance pursuant to which it became
a Lender;
(d) if to Citibank, as Issuing Bank, at its address at 2 Penns
Way, Suite 200, New Castle, Delaware, 19720, Attention: John Williams
(or his successor), telephone number (302) 894-6013, telecopier number
(302) 894-6120;
(e) if to any other Issuing Bank, to its address referred to
in paragraph (b) or (c) above;
(f) if to the Administrative Agent, at its address at 2 Penns
Way, Suite 200, New Castle, Delaware, 19720, Attention: John Williams
(or his successor), telephone number (302) 894-6013, telecopier number
(302) 894-6120;
or, as to each party, at such other address as shall be designated by such party
in a written notice to the other parties. All such notices and communications
shall, when mailed or telecopied, be effective when deposited in the mails or
transmitted by telecopier, respectively, except that notices and communications
to the Administrative Agent pursuant to Article II, III, VII or VIII shall not
be effective until received by the Administrative Agent.
Section 10.03. No Waiver; Remedies.
No failure on the part of any Lender, any Issuing Bank or the Administrative
Agent to exercise, and no delay in exercising, any right hereunder or under any
Note shall operate as a waiver thereof; nor shall any single or partial exercise
of any such right preclude any other or further exercise thereof or the exercise
of any other right. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.
Each Obligor irrevocably waives, to the fullest extent
permitted by applicable law, any claim that any action or proceeding commenced
by the Administrative Agent, any Issuing Bank or any Lender relating in any way
to this Agreement should be dismissed or stayed by reason, or pending the
resolution, of any action or proceeding commenced by any Obligor relating in any
way to this Agreement whether or not commenced earlier. To the fullest extent
permitted by applicable law, the Obligors shall take all measures necessary for
any such action or proceeding commenced by the Administrative Agent, any Issuing
Bank or any Lender to proceed to judgment prior to the entry of judgment in any
such action or proceeding commenced by any Obligor.
Section 10.04. Costs, Expenses and Indemnification.
(a) The Company agrees to pay on demand (i) all costs and
expenses of the Administrative Agent, the Issuing Banks and the Lenders in
connection with the preparation, execution, delivery, administration,
modification and amendment of the Loan Documents including, without limitation,
(A) all due diligence, syndication (including printing, distribution and bank
meetings), transportation, computer, duplication, appraisal, insurance,
consultant, search, filing and recording fees and expenses, ongoing audit
expenses and all other reasonable out-of-pocket expenses incurred by the
Administrative Agent (including the reasonable fees and expenses of Milbank,
Tweed, Hadley & McCloy, special counsel to CUSA) whether or not any of the
transactions contemplated by this Agreement are consummated, (B) the reasonable
fees and expenses of counsel for the Administrative Agent with respect thereto,
with respect to advising the Administrative Agent as to its rights and
responsibilities, or the perfection, protection or preservation of rights or
interests, under the Loan Documents, and (C) with respect to negotiations with
any Obligor or with other creditors of any Obligor or any of its Subsidiaries
arising out of any Default or Event of Default or any events or circumstances
that may reasonably be expected to give rise to a Default or Event of Default
and with respect to presenting claims in or otherwise participating in or
monitoring any bankruptcy, insolvency or other similar proceeding involving
creditors' rights generally and any proceeding ancillary thereto) and (ii) all
costs and expenses of the Administrative Agent, the Issuing Banks and the
Lenders in connection with the enforcement of the Loan Documents, whether in any
action, suit or litigation, any bankruptcy, insolvency or other similar
proceeding affecting creditors' rights generally or otherwise (including,
without limitation, the fees and expenses of counsel for the Administrative
Agent, each Issuing Bank and each Lender with respect thereto).
(b) The Company agrees to indemnify and hold harmless each
Indemnified Party from and against any and all claims, damages, losses,
liabilities and expenses (including, without limitation, fees and expenses of
counsel) that may be incurred by or asserted or awarded against any Indemnified
Party, in each case arising out of or in connection with or by reason of, or in
connection with the preparation for a defense of, any investigation, litigation
or proceeding arising out of, related to or in connection with the Credit
Agreement Transactions or the actual or alleged presence of Hazardous Materials
on any property owned by an Obligor or any Environmental Claim relating in any
way to any Obligor or any of its Subsidiaries, in each case whether or not such
investigation, litigation or proceeding is brought by any Obligor, its
directors, shareholders or creditors or an Indemnified Party or any Indemnified
Party is otherwise a party thereto and whether or not the Credit Agreement
Transactions or the other transactions contemplated hereby are consummated,
except to the extent such claim, damage, loss, liability or expense is found in
a final, non-appealable judgment by a court of competent jurisdiction to have
resulted from such Indemnified Party's gross negligence or willful misconduct.
(c) If any payment of principal of, or Conversion of, any
Eurodollar Rate Advance is made by the Company to or for the account of a
relevant Lender other than on the last day of the Interest Period for such
Advance, as a result of a payment or Conversion pursuant to Section 2.03, 2.05,
2.08(b)(i) or 2.09(d) or as the result of acceleration of the maturity of the
Notes pursuant to Section 7.01 or for any other reason, the Company shall, upon
demand by such Lender (with a copy of such demand to the Administrative Agent),
pay to the Administrative Agent for the account of such Lender any amounts
required to compensate such Lender for any additional losses, costs or expenses
that it may reasonably incur as a result of such payment, including, without
limitation, any loss (excluding loss of anticipated profits), cost or expense
incurred by reason of the liquidation or reemployment of deposits or other funds
acquired by any Lender to fund or maintain such Advance.
(d) If any Obligor fails to pay when due any costs, expenses
or other amounts payable by it under any Loan Document, including, without
limitation, reasonable fees and expenses of counsel and indemnities, such amount
may be paid on behalf of such Obligor by the Administrative Agent or any Lender,
in its sole discretion.
Section 10.05. Right of Setoff.
Upon (a) the occurrence and during the continuance of any Event of Default and
(b) the making of the request or the granting of the consent specified by
Section 7.01 to authorize the Administrative Agent to declare the Notes due and
payable pursuant to the provisions of Section 7.01, each Lender is hereby
authorized at any time and from time to time, to the fullest extent permitted by
law, to set off and otherwise 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 Company
against any and all of the Obligations of the Company now or hereafter existing
under this Agreement and the Note held by such Lender, irrespective of whether
such Lender shall have made any demand under this Agreement or such Note and
although such obligations may be unmatured. Each Lender agrees promptly to
notify the Company after any such setoff and application; provided that the
failure to give such notice shall not affect the validity of such setoff and
application. The rights of each Lender under this Section are in addition to
other rights and remedies (including, without limitation, other rights of
setoff) that such Lender may have.
Section 10.06. Governing Law; Submission to Jurisdiction.
This Agreement and the Notes shall be governed by, and construed in accordance
with, the law of the State of New York. Each Obligor hereby submits to the
nonexclusive jurisdiction of the United States District Court for the Southern
District of New York and of any New York state court sitting in New York City
for the purposes of all legal proceedings arising out of or relating to this
Agreement or the transactions contemplated hereby. Each Obligor irrevocably
waives, to the fullest extent permitted by applicable law, any objection that it
may now or hereafter have to the laying of the venue of any such proceeding
brought in such a court and any claim that any such proceeding brought in such a
court has been brought in an inconvenient forum.
Section 10.07. Assignments and Participations.
(a) Each Lender may assign to one or more banks or other
entities all or a portion of its rights and obligations under this Agreement
(including, without limitation, all or a portion of its Commitments, the
Advances owing to it and the Note or Notes held by it); provided that:
(i) except in the case of an assignment to a Person that,
immediately prior to such assignment, was a Lender or an affiliate of a
Lender or an assignment of all of a Lender's rights and obligations
under this Agreement, the amount of the Commitments of the assigning
Lender being assigned pursuant to each such assignment (determined as
of the date of the Assignment and Acceptance with respect to such
assignment) shall in no event be less than the lesser of (x) such
Lender's Commitments hereunder and (y) $10,000,000 or an integral
multiple of $1,000,000 in excess thereof (except as otherwise agreed by
the Company and the Administrative Agent);
(ii) except in the case of an assignment to a Person that,
immediately prior to such assignment, was a Lender or an Affiliate of a
Lender, each such assignment (so long as no Event of Default shall have
occurred and be continuing) shall be made only upon the prior written
approval of the Company, the Administrative Agent and, with respect to
Revolving Credit Commitments only, the Issuing Banks, such approval not
to be unreasonably withheld;
(iii) each such assignment shall be to an Eligible Assignee;
(iv) each such assignment by a Lender of its Advances,
Commitment or Note under either Facility shall be made in such manner
so that the same portion of its Advances, Commitment and Note under
such Facility is assigned to the respective assignee; and
(v) to the extent the consent of the Company and the
Administrative Agent was not required pursuant to Section 10.07(a)(ii),
the Company and the Administrative Agent shall have received notice of
such assignment, and
(vi) the parties to each such assignment shall execute and
deliver to the Administrative Agent, for its acceptance and recording
in the Register, an Assignment and Acceptance, together with any Note
or Notes subject to such assignment and a processing and recordation
fee of $3,000.
Upon such execution, delivery, acceptance and recording, from and after the
effective date specified in such Assignment and Acceptance, (x) the assignee
thereunder shall be a party hereto and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such Assignment and
Acceptance, have the rights and obligations of a Lender hereunder and (y) the
Lender assignor thereunder shall, to the extent that rights and obligations
hereunder have been assigned by it pursuant to such Assignment and Acceptance,
relinquish its rights and be released from its obligations under this Agreement
(and, 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).
(b) By executing and delivering an Assignment and Acceptance,
the Lender assignor thereunder and the assignee thereunder confirm to and agree
with each other and the other parties hereto as follows: (i) other than as
provided in such Assignment and Acceptance, 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 or any other instrument or document
furnished pursuant hereto; (ii) such assigning Lender makes no representation or
warranty and assumes no responsibility with respect to the financial condition
of any Obligor or the performance or observance by the Obligors of any of their
respective obligations under this Agreement or any other instrument or document
furnished pursuant hereto; (iii) such assignee confirms that it has received a
copy of this Agreement, together with copies of the financial statements
referred to in Section 4.05 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; (iv) such assignee will, independently and
without reliance upon the Administrative Agent, any Issuing Bank, 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; (v) such assignee confirms
that it is an Eligible Assignee; (vi) such assignee appoints and authorizes the
Administrative Agent to take such action as agent on its behalf and to exercise
such powers and discretion under this Agreement as are delegated to the
Administrative Agent by the terms hereof, together with such powers and
discretion as are reasonably incidental thereto; (vii) such assignee agrees that
it will perform in accordance with their terms all of the obligations that by
the terms of this Agreement are required to be performed by it as a Lender; and
(viii) such assignee has provided the Company and the Administrative Agent with
the forms and documents with respect to such assignee referred to in Section
2.11(e).
(c) The Administrative Agent, acting for this purpose as an
agent of the Company, shall maintain at its address referred to in Section 10.02
a copy of each Assignment and Acceptance delivered to and accepted by it and a
register for the recordation of the names and addresses of the Lenders and the
Commitments of, and principal amount of the Advances owing under each Facility
to, each Lender from time to time (the "Register"). The entries in the Register
shall be conclusive and binding for all purposes, absent manifest error, and the
Company, the Administrative Agent and the Lenders shall treat each Person whose
name is recorded in the Register as a Lender hereunder for all purposes of this
Agreement. No assignment shall be effective until it is recorded in the Register
pursuant to this Section 10.07(c). The Register shall be available for
inspection by the Company or any Lender at any reasonable time and from time to
time upon reasonable prior notice.
(d) Upon its receipt of an Assignment and Acceptance executed
by an assigning Lender and an assignee, together with any Note or Notes subject
to such assignment, the Administrative Agent shall, if such Assignment and
Acceptance has been completed and is in substantially the form of Exhibit F
hereto, (i) accept such Assignment and Acceptance, (ii) record the information
contained therein in the Register and (iii) give prompt notice thereof to the
Company. Within five Business Days after its receipt of such notice, the
Company, at its own expense, shall execute and deliver to the Administrative
Agent in exchange for the surrendered Note or Notes a new Note or Notes to the
order of such assignee in an amount equal to the portion of the Facilities
assumed by it pursuant to such Assignment and Acceptance and, if the assigning
Lender has retained a portion of such Facilities, a new Note or Notes to the
order of the assigning Lender in an amount equal to the portion so retained by
it hereunder. Such new Note or Notes shall be in an aggregate principal amount
equal to the aggregate principal amount of such surrendered Note or Notes, shall
be dated the effective date of such Assignment and Acceptance and shall
otherwise be in substantially the form of Exhibit A-1 and A-2, as the case may
be.
(e) Each Lender may sell participations in or to all or a
portion of its rights and/or obligations under this Agreement (including,
without limitation, all or a portion of its Commitments or the Advances owing to
it and the Note or Notes held by it); provided that (i) such Lender's
obligations under this Agreement (including, without limitation, its
Commitments) shall remain unchanged, (ii) such Lender shall remain solely
responsible to the other parties hereto for the performance of such obligations,
(iii) such Lender shall remain the holder of any such Note for all purposes of
this Agreement, (iv) the Obligors, the Administrative Agent, the Issuing Banks
and the other Lenders shall continue to deal solely and directly with such
Lender in connection with such Lender's rights and obligations under this
Agreement and (v) no participant under any such participation shall have any
right to approve any amendment or waiver of any provision of any Loan Document,
or any consent to any departure by any Obligor therefrom, except to the extent
that such amendment, waiver or consent would reduce the principal of, or
interest on, the Notes or any fees or other amounts payable hereunder, in each
case to the extent subject to such participation, postpone any date fixed for
any payment of principal of, or interest on, the Notes or any fees or other
amounts payable hereunder, in each case to the extent subject to such
participation, or release all or substantially all of the Guarantors from their
respective obligations under Article IX or release all or substantially all of
the Collateral (unless in each case such release is permitted pursuant to the
terms of the Loan Documents).
(f) Citibank, as Issuing Bank, may (subject to the prior
written consent of the Company, such consent not to be unreasonably withheld)
assign all or any portion of its rights and obligations under this Agreement to
one or more successor Issuing Banks that is a commercial bank organized under
the laws of the United States, or any state thereof, and having total assets in
excess of $1,000,000,000 and, upon the acceptance of such assignment, the
successor Issuing Bank shall succeed to such portion of such rights and
obligations and such assigning Issuing Bank shall be discharged from its duties
and obligations under this Agreement to such extent.
(g) Each Issuing Bank and any Lender may, in connection with
any assignment or participation or proposed assignment or participation pursuant
to this Section 10.07, disclose to the assignee or participant or proposed
assignee or participant, any information relating to the Company furnished to
such Lender by or on behalf of the Company; provided that, prior to any such
disclosure, the assignee or participant or proposed assignee or participant
shall agree in writing to preserve the confidentiality of any Confidential
Information received by it from the Issuing Banks or the Lenders.
(h) Notwithstanding any other provision set forth in this
Agreement, any Lender may at any time create a security interest in all or any
portion of its rights under this Agreement (including, without limitation, the
Advances owing to it and the Note or Notes held by it) in favor of any Federal
Reserve Bank in accordance with Regulation A of the Board of Governors of the
Federal Reserve System.
(i) Anything in this Section 10.07 to the contrary
notwithstanding, each Lender shall be permitted to pledge all or any part of its
right, title and interest in, to and under the Advances and Notes held by it to
any trustee for the benefit of the holders of such Lender's securities.
(j) Anything in this Section 10.07 to the contrary
notwithstanding, neither Allied nor any of its Subsidiaries or Affiliates may
acquire (whether by assignment, participation or otherwise), and neither any
Lender nor any Issuing Bank shall assign or participate to Allied or any of its
Subsidiaries or Affiliates, any interest in any Commitment, Advance or other
amount owing hereunder without the prior consent of each Lender.
Section 10.08. Execution in Counterparts.
This Agreement may be executed in any number of counterparts and by different
parties hereto in separate counterparts, each of which when so executed shall be
deemed to be an original and all of which taken together shall constitute one
and the same agreement. Delivery of an executed counterpart of a signature page
to this Agreement by telecopier shall be effective as delivery of a manually
executed counterpart of this Agreement.
Section 10.09. No Liability of the Issuing Banks.
The Company assumes all risks of the acts or omissions of any beneficiary or
transferee of any Letter of Credit with respect to its use of such Letter of
Credit. No Issuing Bank nor any of its officers or directors shall be liable or
responsible for: (a) the use that may be made of any Letter of Credit issued by
such Issuing Bank or any acts or omissions of any beneficiary or transferee in
connection therewith; (b) the validity, sufficiency or genuineness of documents,
or of any endorsement thereon, even if such documents should prove to be in any
or all respects invalid, insufficient, fraudulent or forged; (c) payment by such
Issuing Bank against presentation of documents that do not comply with the terms
of a Letter of Credit issued by it, including failure of any documents to bear
any reference or adequate reference to such Letter of Credit; or (d) any other
circumstances whatsoever in making or failing to make payment under any Letter
of Credit issued by such Issuing Bank, except that the Company shall have a
claim against such Issuing Bank, and such Issuing Bank shall be liable to the
Company, to the extent of any direct, but not consequential, damages suffered by
the Company that the Company proves were caused by (i) such Issuing Bank's
willful misconduct or gross negligence in determining whether documents
presented under any Letter of Credit issued by it comply with the terms of such
Letter of Credit or (ii) such Issuing Bank's willful failure to make lawful
payment under a Letter of Credit issued by it after the presentation to it of a
draft and certificates strictly complying with the terms and conditions of such
Letter of Credit. In furtherance and not in limitation of the foregoing, each
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.
Section 10.10. Confidentiality.
Neither the Administrative Agent, any Issuing Bank nor any Lender shall
disclose any Confidential Information to any Person without the prior consent of
the Company, other than (a) to the Administrative Agent's, such Issuing Bank's
or such Lender's Affiliates and their officers, partners, directors, employees,
agents and advisors (including independent auditors and counsel) and to actual
or prospective assignees and participants, and then only on a confidential
basis, (b) as required by any law, rule or regulation or judicial process and
(c) as requested or required by any state, Federal or foreign authority or
examiner regulating or having authority over Lenders or the Lenders' respective
activities.
Section 10.11. WAIVER OF JURY TRIAL.
EACH OF THE OBLIGORS, THE ADMINISTRATIVE AGENT, THE LENDERS AND THE ISSUING
BANKS HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE)
ARISING OUT OF OR RELATING TO ANY OF THE LOAN DOCUMENTS, THE ADVANCES, THE
LETTERS OF CREDIT OR THE ACTIONS OF THE ADMINISTRATIVE AGENT, ANY LENDER OR ANY
ISSUING BANK IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT
THEREOF.
Section 10.12. Survival.
The obligations of the Company under Sections 2.09, 2.11, 2.13(d) and 10.04,
the obligations of each Guarantor under Section 9.03, the obligations of the
Lenders under Section 8.05 and the obligations of the Lenders, the Issuing Banks
and the Administrative Agent under Section 10.10, shall survive the repayment of
the Advances and the termination of the Commitments. In addition, each
representation and warranty made, or deemed to be made by a notice of any
extension of credit (whether by means of an Advance or a Letter of Credit),
herein or pursuant hereto shall survive the making of such representation and
warranty, and no Lender or Issuing Bank shall be deemed to have waived, by
reason of making any extension of credit hereunder (whether by means of an
Advance or a Letter of Credit), any Default or Event of Default that may arise
by reason of such representation or warranty proving to have been false or
misleading, notwithstanding that such Lender, Issuing Bank or the Administrative
Agent may have had notice or knowledge or reason to believe that such
representation or warranty was false or misleading at the time such extension of
credit was made.
Section 10.13. Captions.
The table of contents and captions and section headings appearing herein are
included solely for convenience of reference and are not intended to affect the
interpretation of any provision of this Agreement.
Section 10.14. Successors and Assigns.
This Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns, provided that no
Obligor may assign any of its rights or obligations hereunder or under the other
Loan Documents without the prior consent of all of the Lenders, the Issuing
Banks and the Administrative Agent.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto duly authorized,
as of the date first above written.
ALLIED WASTE NORTH AMERICA, INC.
By /s/ G. Thomas Rochford, Jr.
-------------------------------
G. Thomas Rochford, Jr.
Title: Treasurer
ALLIED WASTE INDUSTRIES, INC.
By /s/ G. Thomas Rochford, Jr.
-------------------------------
G. Thomas Rochford, Jr.
Title: Treasurer
EACH PERSON LISTED ON
SCHEDULE I, as Subsidiary Guarantors
By /s/ G. Thomas Rochford, Jr.
-------------------------------
G. Thomas Rochford, Jr.
Title: Treasurer
THE ADMINISTRATIVE AGENT
CITICORP USA, INC.
By /s/ Judith Fishlow Minter
-------------------------------
Judith Fishlow Minter
Title: Attorney-In-Fact
ISSUING BANK
CITIBANK, N.A.
By /s/ Judith Fishlow Minter
--------------------------
Judith Fishlow Minter
Title: Attorney-In-Fact
THE
LENDERS
CITICORP USA INC., as a Lender and an
Administrative Agent
By /s/ Judith Fishlow Minter
----------------------------
Judith Fishlow Minter
Title: Attorney-In-Fact
CREDIT SUISSE FIRST BOSTON, as a Lender
and a Co-Syndication Agent
By /s/ Kristin Lepri
------------------------
Kristin Lepri
Title: Associate
By /s/ Joel Glodowski
-------------------------
Joel Glodowski
Title: Managing Director
GOLDMAN SACHS CREDIT PARTNERS, L.P., as a
Lender and a Co-Syndication Agent
By /s/ Stephen B. King
--------------------------
Stephen B. King
Title: Authorized Signatory
<PAGE>
BANK OF AMERICA, as a Lender and a Senior
Managing Agent
By /s/ Robert P. Rospierski
----------------------------
Robert P. Rospierski
Title: Managing Director
BANK ONE, ARIZONA, N.A., as a Lender and a
Senior Managing Agent
By /s/ Gene L. Coffman
--------------------------
Gene L. Coffman
Title: Vice President
BANKBOSTON, N.A., as a Lender and a Senior
Managing Agent
By /s/ Arthur J. Oberheim
-----------------------------
Arthur J. Oberheim
Title: Vice President
<PAGE>
BANKERS TRUST COMPANY, as a Lender and a
Senior Managing Agent
By /s/ G. Andrew Keith
------------------------------
G. Andrew Keith
Title: Vice President
THE BANK OF NOVA SCOTIA, as a Lender and a
Senior Managing Agent
By /s/ John A. Quick
------------------------------
John A. Quick
Title: Senior Relationship
Manager
WACHOVIA BANK, N.A., as a Lender and a
Senior Managing Agent
By /s/ Michael Sims
---------------------------
Michael Sims
Title: Vice President
<PAGE>
FLEET BANK, N.A., as a Lender and a
Managing Agent
By /s/ Christopher J. Mayrose
-----------------------------
Christopher J. Mayrose
Title: Vice President
THE INDUSTRIAL BANK OF JAPAN, LIMITED, LOS
ANGELES AGENCY, as a Lender and a Managing
Agent
By /s/ Vicente L. Timiraos
-----------------------------
Vicente L. Timiraos
Title: SVP & SDGM
LONG-TERM
CREDIT
BANK OF
JAPAN,
LTD., LOS
ANGELES
AGENCY,
as a
Lender
and a
Managing
Agent
By /s/ Koh Takemoto
----------------------------
Koh Takemoto
Title: General Manager
<PAGE>
PARIBAS, as a Lender and a Managing Agent
By /s/ Chuck Irwin
--------------------------
Chuck Irwin
Title: Vice President
By /s/ Larry Robinson
---------------------------
Larry Robinson
Title: Vice President
TORONTO DOMINION (TEXAS), INC., as a
Lender and a Managing Agent
By /s/ Warren Finlay
---------------------------
Warren Finlay
Title: President
WELLS FARGO BANK, N.A., as a Lender and a
Managing Agent
By /s/ Michael Real
---------------------------------
Michael Real
Title: Assistant Vice President
By /s/ Margot N. Solding
---------------------------------
Margot N. Solding
Title: Senior Vice President
<PAGE>
ABN-AMRO, as a Lender and a Managing Agent
By /s/ Eric R. Hollinsworth
---------------------------------
Eric R. Hollinsworth
Title: Assistant Vice President
By /s/ Michael A. Tribolet
--------------------------------
Michael A. Tribolet
Title: Senior Vice President
CIBC INC., as a Lender and a Co- Agent
By /s/ Cyd Petre
----------------------------
Cyd Petre
Title: Executive Director
DRESDNER BANK AG, NEW YORK AND GRAND
CAYMAN BRANCHES, as a Lender and a Co-
Agent
By /s/ Christopher E. Sarisky
---------------------------------
Christopher E. Sarisky
Title: Assistant Vice President
By /s/ Beverly F. Cason
----------------------------
Beverly F. Cason
Title: Vice President
<PAGE>
THE FUJI BANK, LIMITED,
LOS ANGELES AGENCY, as a Lender and a
Co-Agent
By /s/ Masahito Fukuda
-------------------------------
Masahito Fukuda
Title: Joint General Manager
UNION BANK OF CALIFORNIA, N.A., as a
Lender and a Co-Agent
By /s/ A. Pasha Moghaddam
-----------------------------
A. Pasha Moghaddam
Title: Vice President
THE SUMITOMO TRUST & BANKING CO., LTD., as
a Lender
By /s/ Akifumi Shiozaki
--------------------------------
Akifumi Shiozaki
Title: Deputy General Manager
<PAGE>
CREDIT LYONNAIS LOS ANGELES BRANCH, as a
Lender
By /s/ Dianne M. Scott
-----------------------------
Dianne M. Scott
Title: Vice President and
Manager
COMPAGNIE FINANCIERE DE CIC ET DE L'UNION
EUROPEENNE, as a Lender
By /s/ Brian O'Leary
--------------------------
Brian O'Leary
Title: Vice Presdent
By /s/ Sean Mounier
-------------------------------
Sean Mounier
Title: First Vice President
CHASE BANK OF TEXAS, NATIONAL ASSOCIATION,
as a Lender
By /s/ B.B. Wuthrich
------------------------
B.B. Wuthrich
Title: Vice President
<PAGE>
BANQUE NATIONALE DE PARIS, as a Lender
By /s/ David W. Low
---------------------------------
David W. Low
Title: Vice President & Manager
By /s/ Jeffrey S. Kajisa
---------------------------------
Jeffrey S. Kajisa
Title: Assistant Vice President
COMERICA WEST
INCORPORATED, as a Lender
By /s/ Eoin P. Collins
-----------------------------
Eoin P. Collins
Title: Account Officer
CORESTATES/FIRST UNION, as a Lender
By /s/ Thomas Harper
-----------------------------
Thomas Harper
Title: Vice President
<PAGE>
GENERAL ELECTRIC CAPITAL CORPORATION, as a
Lender
By /s/ Janet K. Williams
--------------------------------
Janet K. Williams
Title: Duly Authorized
Signatory
HIBERNIA NATIONAL BANK, as a Lender
By /s/ Stephanie M. Freeman
----------------------------
Stephanie M. Freeman
Title: Banking Officer
KBC BANK N.V., as a Lender
By /s/ Tod R. Angus
-------------------------
Tod R. Angus
Title: Vice President
By /s/ Robert Shauffer
---------------------------
Robert Shauffer
Title: Vice President
<PAGE>
MERITA BANK PLC, as a Lender
By /s/ Frank Maffei
---------------------------
Frank Maffei
Title: Vice President
By /s/ Paul Brooks
--------------------------
Paul Brooks
Title: Vice President
THE MITSUBISHI TRUST AND
BANKING CORPORATION,
LOS ANGELES AGENCY, as a Lender
By /s/ Yasushi Satomi
------------------------------
Yasushi Satomi
Title: Senior Vice President
THE SANWA BANK, LIMITED, as a Lender
By /s/ Steven Yamada
----------------------------
Steven Yamada
Title: Vice President
<PAGE>
THE SUMITOMO BANK,
LIMITED, as a Lender
By /s/ Goro Hirai
-----------------------------
Goro Hirai
Title: Joint General Manager
THE TOYO TRUST & BANKING CO., LTD., LOS
ANGELES AGENCY, as a Lender
By /s/ Reijiro Hemmi
--------------------------
Reijiro Hemmi
Title: General Manager
EXHIBIT 12
ALLIED WASTE INDUSTRIES, INC.
RATIO OF EARNINGS TO FIXED CHARGES
(in thousands except for ratios)
Six Months
Ended June 30,
---------------------------
1997 1998
--------- -----------
(unaudited)
Fixed Charges:
Interest expensed.......................... $ 47,458 $ 39,607
Interest capitalized....................... 15,223 30,933
------------ -----------
Total interest expense................. 62,681 70,540
Interest component of rent expense............ 2,015 1,990
Amortization of debt issuance costs........... 2,104 1,844
------------ -----------
Total Fixed Charges.................... $ 66,800 $ 74,374
============ ===========
Earnings:
Income from continuing operations
before income taxes.................... $ 43,261 $ 45,489
Plus fixed charges......................... 66,800 74,374
Less interest capitalized.................. (15,223) (30,933)
------------ -----------
Total Earnings......................... $ 94,838 $ 88,930
============ ===========
Ratio of earnings to fixed charges............ 1.4x 1.2x
============ ===========
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the inclusion of
our report dated June 25, 1998 in this Quarterly Report on Form 10-Q and the
incorporation by reference of our report dated June 25, 1998 into Allied Waste
Industries, Inc.'s previously filed Registration Statements on Form S-3 (File
No. 33-73618, No. 333-30559 and No. 333-57507), Form S-4 (File No. 333-22575,
No. 333-31231, No. 333-35639, 333-52501 and No. 333-60727) and Form S-8 (File
No. 33-42354, No. 33-63510, No. 33-79654, No. 33-79756, No. 33-79664 and No.
333-48357). It should be noted that we have not audited any financial statements
of the Rabanco Companies subsequent to December 31, 1997 or performed any audit
procedures subsequent to the date of our report.
ARTHUR ANDERSEN LLP
Phoenix, Arizona,
August 10, 1998.
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
EXHIBIT 27.1
ALLIED WASTE INDUSTRIES, INC.
Financial Data Schedule
June 30, 1998
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 14,494
<SECURITIES> 0
<RECEIVABLES> 204,313
<ALLOWANCES> 7,080
<INVENTORY> 7,473
<CURRENT-ASSETS> 252,882
<PP&E> 1,776,935
<DEPRECIATION> 351,949
<TOTAL-ASSETS> 2,675,045
<CURRENT-LIABILITIES> 272,753
<BONDS> 1,474,851
0
0
<COMMON> 1,244
<OTHER-SE> 654,939
<TOTAL-LIABILITY-AND-EQUITY> 2,675,045
<SALES> 576,350
<TOTAL-REVENUES> 576,350
<CGS> 320,370
<TOTAL-COSTS> 320,370
<OTHER-EXPENSES> 170,207
<LOSS-PROVISION> 827
<INTEREST-EXPENSE> 41,451
<INCOME-PRETAX> 45,489
<INCOME-TAX> 26,611
<INCOME-CONTINUING> 18,878
<DISCONTINUED> 0
<EXTRAORDINARY> 3,093
<CHANGES> 0
<NET-INCOME> 15,785
<EPS-PRIMARY> 0.13
<EPS-DILUTED> 0.12
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
EXHIBIT 27.2
ALLIED WASTE INDUSTRIES, INC.
Restated Financial Data Schedule
June 30, 1997
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 28,486
<SECURITIES> 0
<RECEIVABLES> 159,970
<ALLOWANCES> 6,353
<INVENTORY> 7,733
<CURRENT-ASSETS> 219,781
<PP&E> 1,233,607
<DEPRECIATION> 244,799
<TOTAL-ASSETS> 2,167,319
<CURRENT-LIABILITIES> 223,964
<BONDS> 1,475,636
0
1
<COMMON> 1,015
<OTHER-SE> 253,854
<TOTAL-LIABILITY-AND-EQUITY> 2,167,319
<SALES> 523,218
<TOTAL-REVENUES> 523,218
<CGS> 308,559
<TOTAL-COSTS> 308,559
<OTHER-EXPENSES> 123,300
<LOSS-PROVISION> 1,629
<INTEREST-EXPENSE> 49,562
<INCOME-PRETAX> 43,261
<INCOME-TAX> 14,749
<INCOME-CONTINUING> 28,512
<DISCONTINUED> 0
<EXTRAORDINARY> 52,412
<CHANGES> 0
<NET-INCOME> (23,900)
<EPS-PRIMARY> (0.24)
<EPS-DILUTED> (0.23)
</TABLE>
