<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 28, 1998
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
ALLIED WASTE INDUSTRIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 4953 88-0228636
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (IRS EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION IDENTIFICATION NO.)
CODE NUMBER)
</TABLE>
------------------------
ALLIED WASTE INDUSTRIES, INC.
15880 NORTH GREENWAY-HAYDEN LOOP
SUITE 100
SCOTTSDALE, ARIZONA 85260
(602) 423-2946
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
STEVEN M. HELM
VICE PRESIDENT, LEGAL
ALLIED WASTE INDUSTRIES, INC.
15880 NORTH GREENWAY-HAYDEN LOOP
SUITE 100
SCOTTSDALE, ARIZONA 85260
(602) 423-2946
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE
NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
COPIES TO:
<TABLE>
<S> <C> <C>
JEFFREY BAGNER, ESQ. ANN L. STRAW, ESQ. STEPHEN W. RUBIN, ESQ.
FRIED, FRANK HARRIS, SHRIVER & AMERICAN DISPOSAL SERVICES, INC. PROSKAUER ROSE LLP
JACOBSON 745 MCCLINTOCK DRIVE 1585 BROADWAY
ONE NEW YORK PLAZA SUITE 230 NEW YORK, NEW YORK 10036
NEW YORK, NEW YORK 10004 BURR RIDGE, ILLINOIS 60521 (212) 969-3000
(212) 859-8000 (630) 655-1105
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as
practicable after the effective date of this registration statement and the
satisfaction or waiver of all other conditions to the merger (the "Merger") of
AWIN II Acquisition Corporation ("Acquisition") with and into American Disposal
Services, Inc. ("American") pursuant to the Agreement and Plan of Merger dated
as of August 10, 1998, among Allied Waste Industries, Inc., Acquisition and
American, described in the enclosed Joint Proxy Statement and Prospectus.
If the securities being registered on the Form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
TO BE REGISTERED REGISTERED PER SHARE OFFERING PRICE REGISTRATION FEE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
47,963,682
Common Stock, par value $.01 par................. shares(1) Not Applicable(2) Not Applicable(3) $284,594
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Based upon the registrant's estimate of the maximum number of shares of
Allied Waste Common Stock that will be issued in connection with the Merger.
(Assumes all outstanding options to purchase Common Stock of American will
be exercised prior to consummation of the Merger.)
(2) Estimated solely for purposes of determining the registration fee in
accordance with Rule 457(f). Calculated pursuant to Rule 457(f) based upon
the average of the high and low sale prices for shares of American Common
Stock on the Nasdaq Stock Market on August 26, 1998.
(3) Calculated pursuant to Rule 457(f) based upon the average of the high and
low sale prices for shares of American Common Stock on the Nasdaq Stock
Market on August 26, 1998 ($33.1875) multiplied by the 29,068,898 shares of
American Common Stock and common stock equivalents to be exchanged in
connection with the Merger.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
SUBJECT TO COMPLETION, AUGUST 28, 1998
ALLIED WASTE INDUSTRIES, INC.
15880 NORTH GREENWAY-HAYDEN LOOP
SUITE 100
SCOTTSDALE, ARIZONA 85260
, 1998
Dear Stockholder of Allied Waste Industries, Inc.:
You are invited to attend the Special Meeting of Stockholders of Allied
Waste Industries, Inc. ("Allied Waste") to be held on , 1998 at
p.m., Time. The Special Meeting will be held at
.
At the Special Meeting you will be asked to consider and vote upon two
proposals: first, a proposal to approve and adopt the Agreement and Plan of
Merger dated as of August 10, 1998 (the "Merger Agreement"), by and among Allied
Waste, AWIN II Acquisition Corporation ("Acquisition"), a wholly owned
subsidiary of Allied Waste, and American Disposal Services, Inc. ("American"),
and second, a proposal to approve an amendment to Allied Waste's Restated
Certificate of Incorporation to increase the number of authorized shares of the
common stock of Allied Waste from 200,000,000 to 300,000,000.
The Merger Agreement provides, among other things, for the merger of
Acquisition with and into American (the "Merger"), pursuant to which American
would become a wholly owned subsidiary of Allied Waste and each outstanding
share of common stock of American would be converted into 1.65 shares of common
stock of Allied Waste (the "Exchange Ratio"). Upon consummation of the Merger,
Allied Waste would issue approximately [ ] million shares of its common
stock to the stockholders and option holders of American, representing
approximately [ ]% of the total shares of Allied Waste's common stock to be
outstanding immediately after the Merger, based upon the number of shares of
common stock of Allied Waste and American outstanding as of , 1998.
The Merger is subject to a number of conditions, including obtaining the
approval of the stockholders of Allied Waste and American and obtaining federal
antitrust regulatory clearance. A summary of the terms and conditions of the
Merger, certain financial and other information relating to Allied Waste and
American and a copy of the Merger Agreement are set forth in the accompanying
Joint Proxy Statement and Prospectus. Please review and consider the enclosed
materials carefully.
Your Board of Directors has unanimously approved the Merger Agreement. In
addition, the Board of Directors has received a written opinion, dated August
10, 1998, of Credit Suisse First Boston Corporation (a copy of which opinion is
included in the accompanying Joint Proxy Statement and Prospectus) to the effect
that, as of such date and based upon and subject to certain matters stated in
such opinion, the Exchange Ratio was fair to Allied Waste from a financial point
of view. THE BOARD OF DIRECTORS OF ALLIED WASTE BELIEVES THAT THE PROPOSED
MERGER AND THE PROPOSED AMENDMENT TO THE RESTATED CERTIFICATE OF INCORPORATION
OF ALLIED WASTE ARE IN THE BEST INTERESTS OF ALLIED WASTE AND ITS STOCKHOLDERS
AND UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THESE PROPOSALS.
Regardless of the number of shares you hold or whether you plan to attend
the Special Meeting, we urge you to complete, sign, date, and return the
enclosed proxy card immediately. If you attend the Special Meeting, you may vote
in person if you wish, even if you have previously returned your proxy card.
Sincerely,
/s/ ROGER A. RAMSEY
--------------------------------------
Roger A. Ramsey
Chairman of the Board
<PAGE> 3
ALLIED WASTE INDUSTRIES, INC.
15880 NORTH GREENWAY-HAYDEN LOOP
SUITE 100
SCOTTSDALE, ARIZONA 85260
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON , 1998
To the Stockholders of Allied Waste Industries, Inc.:
Notice is hereby given that the Special Meeting of Stockholders of Allied
Waste Industries, Inc. ("Allied Waste") will be held at , on
, 1998, at p.m. Time, to consider and act upon
the following proposals:
1. To approve and adopt the Agreement and Plan of Merger, dated as of
August 10, 1998, by and among Allied Waste, AWIN II Acquisition Corporation
("Acquisition"), a wholly owned subsidiary of Allied Waste, and American
Disposal Services, Inc. ("American") providing for, among other things, the
merger of Acquisition with and into American and the issuance by Allied
Waste of 1.65 shares of Allied Waste common stock, par value $.01 per
share, for each outstanding share of American common stock, par value $.01
per share.
2. To approve an amendment to the Restated Certificate of
Incorporation of Allied Waste to increase the number of authorized shares
of Allied Waste Common Stock from 200,000,000 to 300,000,000.
The Special Meeting may be postponed or adjourned from time to time, and at
any reconvened meeting actions with respect to the matters specified in this
notice may be taken without further notice to stockholders unless required by
the Bylaws of Allied Waste.
Only stockholders of record at the close of business on September 4, 1998,
are entitled to notice of and to vote on all matters at the Special Meeting and
any postponements or adjournments thereof. A list of all stockholders will be
available at the Special Meeting and, during the 10-day period prior to the
Special Meeting, at the offices of Allied Waste, 15880 North Greenway-Hayden
Loop, Suite 100, Scottsdale, Arizona 85260, during ordinary business hours.
By Order of the Board of Directors,
/s/ STEVEN M. HELM
--------------------------------------
Steven M. Helm
Corporate Secretary
Scottsdale, Arizona
, 1998
WHETHER OR NOT YOU INTEND TO BE PRESENT AT THE SPECIAL MEETING, PLEASE SIGN AND
DATE THE ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED PREPAID ENVELOPE. IF YOU
ATTEND THE SPECIAL MEETING, YOU MAY VOTE EITHER IN PERSON OR BY YOUR PROXY.
<PAGE> 4
AMERICAN DISPOSAL SERVICES, INC.
745 MCCLINTOCK DRIVE
SUITE 230
BURR RIDGE, ILLINOIS 60521
, 1998
Dear Stockholder of American Disposal Services, Inc.:
You are invited to attend a Special Meeting of Stockholders of American
Disposal Services, Inc. ("American") to be held on , 1998 at
. The Special Meeting will be held at .
At the Special Meeting you will be asked to consider and vote upon a
proposal to approve and adopt the Agreement and Plan of Merger, dated as of
August 10, 1998 (the "Merger Agreement"), by and among Allied Waste Industries,
Inc. ("Allied Waste"), AWIN II Acquisition Corporation ("Acquisition"), a wholly
owned subsidiary of Allied Waste, and American.
The Merger Agreement provides, among other things, for the merger of
Acquisition with and into American (the "Merger"), pursuant to which American
would become a wholly owned subsidiary of Allied Waste and each outstanding
share of common stock of American, par value $.01 per share (the "American
Common Stock"), would be converted into 1.65 shares of common stock of Allied
Waste, par value $.01 per share (the "Exchange Ratio"). Upon consummation of the
Merger, Allied Waste would issue approximately [ ] million shares of its
common stock to the stockholders and option holders of American, representing
approximately [ ]% of the total shares of Allied Waste's common stock to be
outstanding immediately after the Merger, based upon the number of shares of
common stock of Allied Waste and American outstanding as of , 1998.
The Merger is subject to a number of conditions, including obtaining the
approval of the stockholders of Allied Waste and American and obtaining federal
antitrust regulatory clearance. A summary of the terms and conditions of the
Merger, certain financial and other information relating to Allied Waste and
American and a copy of the Merger Agreement are set forth in the accompanying
Joint Proxy Statement and Prospectus. Please review and consider the enclosed
materials carefully.
Your Board of Directors has unanimously approved the Merger Agreement. In
addition, the Board of Directors has received an opinion dated August 8, 1998
from CIBC Oppenheimer Corp. that, as of such date, the Exchange Ratio pursuant
to the Merger Agreement was fair, from a financial point of view, to the holders
of American Common Stock (a copy of which opinion is included in the
accompanying Joint Proxy Statement and Prospectus). THE BOARD OF DIRECTORS OF
AMERICAN BELIEVES THAT THE PROPOSED MERGER IS IN THE BEST INTERESTS OF AMERICAN
AND ITS STOCKHOLDERS AND UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR APPROVAL AND
ADOPTION OF THE MERGER AGREEMENT.
Regardless of the number of shares you hold or whether you plan to attend
the Special Meeting, we urge you to complete, sign, date, and return the
enclosed proxy card immediately. If you attend the Special Meeting, you may vote
in person if you wish, even if you have previously returned your proxy card.
Sincerely,
/s/ RICHARD DE YOUNG
--------------------------------------
Richard De Young
Chairman, President and Chief
Executive Officer
<PAGE> 5
AMERICAN DISPOSAL SERVICES, INC.
745 MCCLINTOCK DRIVE
SUITE 230
BURR RIDGE, ILLINOIS 60521
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON , 1998
To the Stockholders of American Disposal Services, Inc.:
Notice is hereby given that a Special Meeting of Stockholders of American
Disposal Services, Inc. ("American") will be held at , on
, 1998, at , to consider and act upon the following
proposal (the "Merger Proposal"):
To approve and adopt the Agreement and Plan of Merger dated as of August
10, 1998 (the "Merger Agreement"), by and among American, Allied Waste
Industries, Inc. ("Allied Waste") and AWIN II Acquisition Corporation
("Acquisition"), a wholly owned subsidiary of Allied Waste, providing for, among
other things, the merger of Acquisition with and into American (the "Merger")
and the conversion of each outstanding share of American common stock, par value
$.01 per share, into 1.65 shares of Allied Waste common stock, par value $.01
per share.
The meeting may be postponed or adjourned from time to time, and at any
reconvened meeting actions with respect to the matters specified in this notice
may be taken without further notice to stockholders unless required by the
Bylaws of American.
Only stockholders of record at the close of business on September 4, 1998,
are entitled to notice of and to vote on the Merger Proposal at the Special
Meeting and any postponements or adjournments thereof. The approval and adoption
of the Merger Agreement requires the affirmative vote of a majority of the
shares of American Common Stock outstanding on the record date. The Merger and
other related matters are more fully described in the accompanying Joint Proxy
Statement and Prospectus and the Appendices thereto, which form a part of this
notice and should be read carefully by all stockholders.
By Order of the Board of Directors,
/s/ ANN L. STRAW
--------------------------------------
Ann L. Straw
Corporate Secretary
Burr Ridge, Illinois
, 1998
WHETHER OR NOT YOU INTEND TO BE PRESENT AT THE MEETING, PLEASE SIGN AND DATE THE
ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED PREPAID ENVELOPE. IF YOU ATTEND THE
SPECIAL MEETING, YOU MAY VOTE EITHER IN PERSON OR BY YOUR PROXY.
<PAGE> 6
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
Subject to Completion, August 28, 1998
ALLIED WASTE INDUSTRIES, INC.
AMERICAN DISPOSAL SERVICES, INC.
JOINT PROXY STATEMENT AND PROSPECTUS
This Joint Proxy Statement and Prospectus is being furnished to the
stockholders of Allied Waste Industries, Inc., a Delaware corporation ("Allied
Waste"), in connection with the solicitation of proxies by its Board of
Directors to be voted at the Special Meeting of Stockholders of Allied Waste
(the "Allied Waste Special Meeting") scheduled to be held on , 1998,
at p.m., , at , and at any adjournment or
postponement thereof, and to the stockholders of American Disposal Services,
Inc., a Delaware corporation ("American"), in connection with the solicitation
of proxies by its Board of Directors to be voted at the Special Meeting of
Stockholders of American (the "American Special Meeting") scheduled to be held
on , 1998, at a.m., Time, at ,
and at any adjournment or postponement thereof.
At the Allied Waste Special Meeting and the American Special Meeting, the
holders of common stock, par value $.01 per share, of Allied Waste ("Allied
Waste Common Stock"), and the holders of common stock, par value $.01 per share,
of American ("American Common Stock"), will be asked to consider and vote upon a
proposal to approve and adopt the Agreement and Plan of Merger, dated as of
August 10, 1998 (the "Merger Agreement"), by and among Allied Waste, AWIN II
Acquisition Corporation, a wholly owned subsidiary of Allied Waste
("Acquisition"), and American providing for the merger of Acquisition with and
into American (the "Merger"), and the issuance of shares of Allied Waste Common
Stock pursuant thereto. Such approvals are a condition to consummating the
Merger. Upon consummation of the Merger, American will become a wholly owned
subsidiary of Allied Waste and the holders of the issued and outstanding shares
of American Common Stock will receive, at the effective time of the Merger, 1.65
shares of Allied Waste Common Stock for each share of American Common Stock held
by them (the "Exchange Ratio"), with cash being paid in lieu of fractional
shares. In connection with the Merger, it is anticipated that substantially all
outstanding options to purchase American Common Stock will be exercised,
contingent on the consummation of the Merger, and the shares of American Common
Stock issued upon such exercise will be converted into shares of Allied Waste
Common Stock in the Merger in accordance with the Exchange Ratio. See "The Plan
of Merger and Terms of the Merger." A copy of the Merger Agreement is attached
hereto as Appendix A and incorporated herein by reference.
In addition, at the Allied Waste Special Meeting, holders of shares of
Allied Waste Common Stock will be asked to consider and vote upon a proposal to
approve an amendment to the Restated Certificate of Incorporation of Allied
Waste to increase the number of authorized shares of Allied Waste Common Stock
from 200,000,000 to 300,000,000 (the "Charter Amendment").
On , 1998, the closing sale price of Allied Waste Common Stock
as reported on the Nasdaq National Market tier of Nasdaq (the "Nasdaq Stock
Market") was $[ ] per share. Based on such closing price, the consideration
to be received by stockholders of American pursuant to the Merger would be
approximately $[ ] per share of American Common Stock. Based upon the number
of shares of Allied Waste Common Stock outstanding as of , 1998, and
assuming that approximately [ ] million shares of Allied Waste Common Stock
are issued in exchange for the exercise of outstanding options to purchase
American Common Stock, approximately [ ] million shares of Allied Waste
Common Stock will be outstanding after the Merger is consummated, of which
approximately [ ]% will be owned by former stockholders and option holders
of American and approximately [ ]% will be owned by current stockholders of
Allied Waste.
SEE "RISK FACTORS" BEGINNING ON PAGE 17 FOR CERTAIN CONSIDERATIONS RELEVANT
TO AN INVESTMENT IN ALLIED WASTE COMMON STOCK.
This Joint Proxy Statement and Prospectus also constitutes the prospectus
of Allied Waste that is a part of the Registration Statement of Allied Waste
filed with the Securities and Exchange Commission with respect to the shares of
Allied Waste Common Stock to be issued in connection with the Merger (which
includes shares to be issued in exchange for the exercise of outstanding options
to purchase American Common Stock). This Joint Proxy Statement and Prospectus is
first being mailed to the stockholders of Allied Waste and American on or about
, 1998.
THE SECURITIES TO BE ISSUED IN CONNECTION WITH THE MERGER HAVE NOT BEEN APPROVED
OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS JOINT PROXY
STATEMENT AND PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
The date of this Joint Proxy Statement and Prospectus is , 1998.
<PAGE> 7
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS JOINT PROXY STATEMENT AND PROSPECTUS, AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY ALLIED WASTE OR AMERICAN. THIS JOINT PROXY STATEMENT
AND PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN
OFFER TO BUY, ALLIED WASTE COMMON STOCK, OR A SOLICITATION OF A PROXY, IN ANY
JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH AN
OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS JOINT PROXY STATEMENT AND
PROSPECTUS NOR ANY DISTRIBUTION OF SECURITIES MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF ALLIED WASTE OR AMERICAN SINCE THE DATE HEREOF OR THAT THE
INFORMATION IN THIS JOINT PROXY STATEMENT AND PROSPECTUS IS CORRECT AS OF ANY
TIME SUBSEQUENT TO THE DATE HEREOF. ALL INFORMATION HEREIN WITH RESPECT TO
ALLIED WASTE AND ACQUISITION HAS BEEN FURNISHED BY ALLIED WASTE, AND ALL
INFORMATION HEREIN WITH RESPECT TO AMERICAN HAS BEEN FURNISHED BY AMERICAN.
i
<PAGE> 8
TABLE OF CONTENTS
<TABLE>
<S> <C>
AVAILABLE INFORMATION....................................... viii
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE........... ix
FORWARD-LOOKING STATEMENTS.................................. ix
SUMMARY..................................................... 1
THE COMPANIES............................................. 1
Allied Waste and Acquisition........................... 1
American Disposal Services, Inc........................ 1
THE MEETINGS.............................................. 1
THE MERGER................................................ 2
Recommendations of the Boards of Directors............. 2
Interests of Certain Persons in the Merger -- Possible
Conflicts of Interest................................. 3
Opinions of Financial Advisors......................... 3
Certain Terms of The Merger............................ 4
Conditions to the Merger............................... 5
No Solicitation........................................ 6
Termination or Amendment of Merger Agreement........... 7
Dissenters' Rights..................................... 8
Stockholders' Comparative Rights....................... 8
Market Price Data...................................... 8
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA........... 10
SUMMARY COMBINED UNAUDITED PRO FORMA CONDENSED FINANCIAL
INFORMATION............................................ 13
COMPARATIVE UNAUDITED PER SHARE DATA...................... 15
THE CHARTER AMENDMENT..................................... 16
RISK FACTORS.............................................. 17
Expected Benefits of Combined Business May Not Be
Achieved.............................................. 17
Stock Prices May Vary in Response to Changes in
Business and Economic Conditions...................... 17
Integration of Acquired Businesses..................... 17
Interests of Certain Persons in the Merger............. 17
Risks Associated With Allied Waste's Acquisition
Activities............................................ 18
Competition From Other Companies and Municipalities;
Landfill Alternatives................................. 18
Capital and Working Capital Requirements; Leverage..... 19
Cost Of Compliance With Environmental Regulations...... 20
Impact Of Adverse Weather Conditions................... 21
Reliance on Management................................. 21
No Dividends........................................... 21
Potential Effect of Certain Allied Waste Anti-Takeover
Provisions and Delaware Law........................... 21
THE MEETINGS................................................ 21
Date, Time and Place of the Meetings...................... 21
Purpose of the Meetings................................... 22
Record Date and Outstanding Shares........................ 22
Voting and Revocation of Proxies.......................... 22
Vote Required for Approval................................ 23
Solicitation of Proxies................................... 23
THE MERGER AND RELATED TRANSACTIONS......................... 24
General Description of the Merger......................... 24
Background of the Merger.................................. 24
</TABLE>
ii
<PAGE> 9
<TABLE>
<S> <C>
Joint Reasons for the Merger.............................. 26
Additional Factors Considered by the Allied Waste Board... 27
Recommendation of the Board of Directors of Allied
Waste.................................................. 28
Additional Factors Considered by the American Board....... 28
Recommendation of the Board of Directors of American...... 29
Opinion of Financial Advisor to Allied Waste.............. 30
Opinion of Financial Advisor to American.................. 33
Possible Conflicts of Interest............................ 39
Material Federal Income Tax Consequences.................. 41
Accounting Treatment...................................... 43
Government and Regulatory Approvals....................... 43
Restrictions on Resales by Affiliates..................... 43
AMENDMENT TO THE RESTATED CERTIFICATE OF INCORPORATION OF
ALLIED WASTE.............................................. 44
THE PLAN OF MERGER AND TERMS OF THE MERGER.................. 45
Effective Time of the Merger.............................. 45
Manner and Basis for Converting Shares.................... 45
American Options.......................................... 46
American Warrant.......................................... 46
Conditions to the Merger.................................. 46
Cooperation............................................... 48
Representations and Warranties of Allied Waste and
American............................................... 48
Conduct of the Business of Allied Waste and American Prior
to the Merger.......................................... 48
No Solicitation of Acquisition Transactions............... 51
Conduct of the Business of the Combined Companies
Following the Merger................................... 51
Termination or Amendment.................................. 51
Termination Fees.......................................... 52
Expenses.................................................. 53
Indemnification........................................... 53
STOCK OPTION AGREEMENT...................................... 54
Exercise; Termination..................................... 55
Repurchase of Option or Option Shares..................... 55
Profit Limitation......................................... 55
Other..................................................... 56
OTHER AGREEMENTS............................................ 56
COMPARATIVE RIGHTS OF STOCKHOLDERS OF ALLIED WASTE AND
AMERICAN.................................................. 56
General................................................... 56
Board of Directors........................................ 57
Number of Directors....................................... 57
Special Meetings of Stockholders.......................... 57
Stockholder Nominations and Proposals..................... 57
Amendment of Certain Charter Provisions................... 58
Amendment of Bylaws....................................... 58
Authorized Capital Stock.................................. 58
Delaware Anti-Takeover Law................................ 58
ALLIED WASTE AND AMERICAN COMBINED UNAUDITED PRO FORMA
CONDENSED FINANCIAL STATEMENTS............................ 60
ALLIED WASTE AND AMERICAN NOTES TO COMBINED UNAUDITED PRO
FORMA CONDENSED FINANCIAL STATEMENTS...................... 66
</TABLE>
iii
<PAGE> 10
<TABLE>
<S> <C>
Basis of Presentation..................................... 66
Pro Forma Adjustments..................................... 66
Net Income (Loss) Per Common Share........................ 67
MARKET PRICE DATA........................................... 68
Market Information........................................ 68
Dividend Information...................................... 69
DESCRIPTION OF ALLIED WASTE CAPITAL STOCK................... 69
Common Stock.............................................. 69
Preferred Stock........................................... 69
Authorized But Unissued Shares............................ 69
Transfer Agent and Registrar.............................. 70
LEGAL MATTERS............................................... 70
EXPERTS..................................................... 70
OTHER MATTERS............................................... 70
STOCKHOLDER PROPOSALS FOR 1999 ANNUAL MEETINGS.............. 70
MANAGEMENT AND ADDITIONAL INFORMATION....................... 71
APPENDIX A: Agreement and Plan of Merger
APPENDIX B: Stock Option Agreement
APPENDIX C: Opinion of Credit Suisse First Boston
Corporation
APPENDIX D: Opinion of CIBC Oppenheimer Corp.
</TABLE>
iv
<PAGE> 11
QUESTIONS AND ANSWERS ABOUT
THE ALLIED WASTE/AMERICAN MERGER
Q: WHAT WILL HAPPEN IF THE PROPOSED MERGER IS COMPLETED?
A: A subsidiary of Allied Waste will merge into American. As a result of this
merger:
American will become a wholly owned subsidiary of Allied Waste;
American stockholders will become stockholders of Allied Waste; and
Allied Waste stockholders will continue to be stockholders of Allied
Waste.
Q: WHY ARE THE TWO COMPANIES PROPOSING TO MERGE? HOW WILL I BENEFIT?
A: We believe that the merger of Allied Waste and American will create a
company with greater financial strength and flexibility, operational
efficiencies, earning power and longer-term growth potential than either
Allied Waste or American would have as separate companies. We believe that
the combined company will be able to compete more effectively, and will
exercise greater purchasing leverage in the consolidation of the solid waste
industry. As a result, the combined company should have more consistent,
predictable and sustainable cash flows and earnings growth. See "The Merger
and the Related Transactions -- Joint Reasons for the Merger" beginning on
page 26.
Q: WHAT WILL AMERICAN STOCKHOLDERS RECEIVE FOR THEIR AMERICAN SHARES?
A: American stockholders will receive 1.65 shares of Allied Waste common stock
in exchange for each of their shares of American common stock. This exchange
ratio will not change, even if the market price of Allied Waste's common
stock or American's common stock increases or decreases between now and the
date that the merger is completed. You will receive only whole shares of
Allied Waste common stock. Any fractional shares you would otherwise receive
in the exchange will be paid in cash.
Q: WILL ALLIED WASTE STOCKHOLDERS RECEIVE ANY SHARES AS A RESULT OF THE MERGER?
A: No. The merger will not have any effect on the number of shares of Allied
Waste common stock that Allied Waste stockholders own.
Q: WHAT DO I NEED TO DO NOW?
A: After reading this document carefully, just mail your signed proxy card in
the enclosed return envelope as soon as possible so that your shares can be
voted at the , 1998 Allied Waste special meeting (if you are an
Allied Waste stockholder) or at the , 1998 American special
meeting (if you are an American stockholder).
Q: IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER VOTE MY
SHARES FOR ME?
A: Your broker will not be able to vote your shares without instructions from
you. You should instruct your broker to vote your shares, following the
directions provided by your broker.
Q: CAN I CHANGE MY VOTE AFTER I HAVE MAILED MY SIGNED PROXY CARD?
A: Yes. You can change your vote at any time before your proxy card is voted at
the applicable stockholder meeting. You can do this in one of three ways.
First, you can send a written notice stating that you would like to revoke
your proxy. Second, you can complete and submit a new proxy card. Third, you
can attend the appropriate meeting and vote in person. Your attendance alone
will not, however, revoke your proxy. If you have instructed a broker to
vote your shares, you must follow the procedure provided by your broker to
change those instructions.
v
<PAGE> 12
Q: SHOULD I SEND IN MY STOCK CERTIFICATES NOW?
A: No. If you are an American stockholder, after the merger is completed you
will receive written instructions for exchanging your shares of American
common stock for shares of Allied Waste common stock. If you are an Allied
Waste stockholder, you will keep your certificates.
Q: WHAT ARE THE TAX CONSEQUENCES OF THE MERGER TO STOCKHOLDERS?
A: The exchange of shares of American common stock for shares of Allied Waste
common stock in the merger will be tax-free to American stockholders for
federal income tax purposes. Your tax basis in the shares of Allied Waste
common stock that you will receive in the merger will equal your current tax
basis in your American common stock. The merger will not have any effect on
Allied Waste stockholders for federal income tax purposes.
Q: ARE THERE ANY RISKS ASSOCIATED WITH THE MERGER?
A: The merger does involve risks. For a discussion of certain risk factors that
should be considered in evaluating the merger, see "Risk Factors" beginning
on page 17.
Q: ARE ANY REGULATORY APPROVALS NEEDED TO COMPLETE THE MERGER?
A: Yes. The only significant approval required relates to federal antitrust
law. Allied Waste and American filed premerger notifications with the United
States antitrust authorities pursuant to the Hart-Scott-Rodino Antitrust
Improvements Act of 1976. We believe that complying with the requirements of
this law will not delay the merger.
Q: WHEN DO YOU EXPECT THE MERGER TO BE COMPLETED?
A: We hope to complete the merger in the fourth quarter of 1998. We are working
toward completing the merger as quickly as possible and expect that it will
be completed soon after our special meetings of stockholders.
Q: WHAT OTHER MATTERS WILL BE VOTED ON AT THE SPECIAL MEETINGS?
A: American does not expect to ask its stockholders to vote on any other
matters at the American special meeting.
Allied Waste is also seeking approval of an amendment to its certificate of
incorporation which would increase the authorized number of shares of Allied
Waste common stock from 200 million to 300 million.
Q: WHERE CAN I FIND MORE INFORMATION ABOUT THE COMPANIES?
A: Both of our companies file periodic reports and other information with the
Securities and Exchange Commission. You may read and copy this information
at the Commission's public reference facilities. Please call the Commission
at 1-800-SEC-0330 for information about these facilities. This information
is also available at the Internet site maintained by the Commission at
http://www.sec.gov and at the offices of the NASD. For a more detailed
description of the information available, please see pages
and .
Q: WHO CAN HELP ANSWER MY QUESTIONS?
A: If you are an Allied Waste stockholder and you have more questions about the
merger, you should contact:
ALLIED WASTE INDUSTRIES, INC.
15880 North Greenway -- Hayden Loop
Suite 100
Scottsdale, Arizona 85260
Telephone: (602) 423-2946
or
, Allied Waste's proxy solicitor, who may be called
toll-free at 1-800- - .
vi
<PAGE> 13
If you are an American stockholder and you have more questions about the
merger, you should contact:
AMERICAN DISPOSAL SERVICES, INC.
745 McClintock Drive
Suite 230
Burr Ridge, Illinois 60521
Telephone: (630) 655-1105
or
, American's proxy solicitor, who may be called toll-free at
vii
<PAGE> 14
AVAILABLE INFORMATION
Allied Waste and American each are subject to the informational
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and, in accordance therewith, file reports, proxy statements, and other
information with the Securities and Exchange Commission (the "Commission"). Such
reports, proxy statements, and other information may be inspected and copied at
the offices of the Commission, Public Reference Room, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, and the Regional Offices of the Commission
in Chicago, Illinois at Citicorp Center, 500 W. Madison, Suite 1400, Chicago,
Illinois 60661-2511 and in New York, New York at 7 World Trade Center, Suite
1300, New York, New York 10048. The public may obtain information on the
operation of the Public Reference Room by calling the Commission at
1-800-SEC-0330. Copies of such materials may be obtained from the Public
Reference Section of the Commission at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates. The Commission maintains an Internet
web site that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the Commission
(http://www.sec.gov). Allied Waste Common Stock and American Common Stock are
listed on the Nasdaq Stock Market and the reports, proxy statements and other
information of Allied Waste and American described above may also be inspected
at the offices of Nasdaq at 1735 K Street, N.W., Washington, D.C. 20006. Upon
consummation of the Merger, listing of the American Common Stock on The Nasdaq
Stock Market will be terminated.
Allied Waste has filed with the Commission a registration statement (the
"Registration Statement") on Form S-4 under the Securities Act of 1933, as
amended (the "Securities Act"), with respect to the securities to be issued
pursuant to the Merger and offered hereby. This Joint Proxy Statement and
Prospectus also constitutes the Prospectus of Allied Waste filed as part of the
Registration Statement and does not contain all of the information set forth in
the Registration Statement and the exhibits thereto, certain parts of which are
omitted in accordance with the rules of the Commission. Statements made in this
Joint Proxy Statement and Prospectus as to the contents of any contract,
agreement, or other document referred to are not necessarily complete; with
respect to each such contract, agreement, or other document filed as an exhibit
to the Registration Statement, reference is made to the exhibit for a more
complete description of the matter involved, and each such statement shall be
qualified in its entirety by such reference. The Registration Statement and any
amendments thereto, including exhibits filed as part thereof, are available for
inspection and copying at the Commission's offices as described above. After the
Merger, registration of the American Common Stock under the Exchange Act will be
terminated.
viii
<PAGE> 15
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
Allied Waste incorporates herein by reference the following documents filed
by it with the Commission: (i) its Annual Report on Form 10-K for the year ended
December 31, 1997; (ii) its Quarterly Reports on Form 10-Q for the quarters
ended March 31, 1998 and June 30, 1998; (iii) its Current Reports on Form 8-K
dated May 18, 1998, August 20, 1998 and August 28, 1998; (iv) its Current Report
on Form 8-K/A dated August 28, 1998; (v) the description of Allied Waste Common
Stock contained in its Registration Statement on Form S-1 (No. 33-99886),
including any amendments or reports filed for the purpose of updating such
description; and (vi) its Proxy Statement related to the annual meeting held on
May 28, 1998.
American incorporates herein by reference the following documents filed by
it with the Commission pursuant to the Exchange Act: (i) its Annual Report on
Form 10-K/A for the year ended December 31, 1997; (ii) its Quarterly Reports on
Form 10-Q for the quarters ended March 31, 1998 and June 30, 1998; (iii) its
Current Report on Form 8-K dated January 23, 1998; and (iv) its Proxy Statement
related to its annual meeting held on June 23, 1998.
All documents filed by Allied Waste and American pursuant to Section 13(a),
13(c), 14, or 15(d) of the Exchange Act subsequent to the date of this Joint
Proxy Statement and Prospectus and prior to the date the Merger is consummated
shall be deemed to be incorporated by reference in this Joint Proxy Statement
and Prospectus and to be part hereof from the date of filing of such documents.
All information appearing in this Joint Proxy Statement and Prospectus is
qualified in its entirety by the information and financial statements (including
notes thereto) appearing in the documents incorporated by reference herein.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be modified or superseded, for purposes
of this Joint Proxy Statement and Prospectus, to the extent that a statement
contained herein or in any subsequently filed document that is deemed to be
incorporated herein modifies or supersedes any such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Joint Proxy Statement and Prospectus.
THIS JOINT PROXY STATEMENT AND PROSPECTUS INCORPORATES DOCUMENTS BY
REFERENCE THAT ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. ALLIED WASTE AND
AMERICAN HEREBY UNDERTAKE TO PROVIDE, BY FIRST CLASS MAIL OR OTHER EQUALLY
PROMPT MEANS WITHIN ONE BUSINESS DAY OF RECEIPT OF A REQUEST, WITHOUT CHARGE TO
EACH PERSON, INCLUDING ANY BENEFICIAL OWNER, TO WHOM A COPY OF THIS JOINT PROXY
STATEMENT AND PROSPECTUS HAS BEEN DELIVERED, ON WRITTEN OR ORAL REQUEST OF ANY
SUCH PERSON, A COPY OF ANY AND ALL OF THE DOCUMENTS REFERRED TO ABOVE THAT HAVE
BEEN OR MAY BE INCORPORATED INTO THIS JOINT PROXY STATEMENT AND PROSPECTUS BY
REFERENCE, OTHER THAN EXHIBITS TO SUCH DOCUMENTS (UNLESS SUCH EXHIBITS ARE
SPECIFICALLY INCORPORATED BY REFERENCE INTO SUCH DOCUMENTS). DOCUMENTS RELATING
TO ALLIED WASTE ARE AVAILABLE UPON REQUEST FROM ALLIED WASTE INDUSTRIES, INC.,
15880 NORTH GREENWAY-HAYDEN LOOP, SUITE 100, SCOTTSDALE, ARIZONA 85260,
ATTENTION: CORPORATE SECRETARY, TELEPHONE NUMBER (602) 423-2946. DOCUMENTS
RELATING TO AMERICAN ARE AVAILABLE UPON REQUEST FROM AMERICAN DISPOSAL SERVICES,
INC., 745 MCCLINTOCK DRIVE, SUITE 230, BURR RIDGE, ILLINOIS 60521, ATTENTION:
CORPORATE SECRETARY, TELEPHONE NUMBER (630) 655-1105. IN ORDER TO ENSURE TIMELY
DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY , 1998.
------------------------
FORWARD-LOOKING STATEMENTS
Certain statements in the Summary and under the captions "Risk Factors,"
"The Merger and Related Transactions -- Joint Reasons for the Merger,"
"-- Additional Factors Considered by the Allied Waste Board," "-- Recommendation
of the Board of Directors of Allied Waste," "-- Additional Factors Considered
ix
<PAGE> 16
by the American Board," "-- Recommendation of the Board of Directors of
American," "Allied Waste and American Combined Unaudited Pro Forma Condensed
Financial Statements" and "Allied Waste and American Notes to Combined Unaudited
Pro Forma Condensed Financial Statements" and elsewhere in this Joint Proxy
Statement and Prospectus, constitute "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors which may cause the actual results, performance, or achievements
of the combined company to be materially different from any future results,
performance or achievements expressed or implied by such forward-looking
statements. These forward-looking statements were based on various factors and
were derived utilizing numerous important assumptions and other important
factors that could cause actual results to differ materially from those in the
forward-looking statements. Important assumptions and other important factors
that could cause actual results to differ materially from those in the
forward-looking statements include, but are not limited to: uncertainty as to
the combined company's future profitability; the combined company's ability to
develop and implement operational and financial systems to manage rapidly
growing operations; competition in Allied Waste's and American's existing and
potential future lines of business; the combined company's ability to integrate
and successfully operate acquired businesses and the risks associated with such
businesses; the combined company's ability to obtain financing on acceptable
terms to finance the combined company's growth strategy and for the combined
company to operate within the limitations imposed by financing arrangements;
uncertainty as to the future profitability of acquired businesses; trends in the
solid waste management industry; competitive pressures; changes in relationships
with customers; changes in the regulatory environment; outcome of pending
litigation and regulatory inquiries; and the impact of accounting policies
required to be adopted in the near future. In addition, Allied Waste and
American stockholders should consider carefully the information set forth herein
under "Risk Factors", under the captions "Business -- Regulation," " -- Factors
Influencing Future Results and Accuracy of Forward-Looking Statements" and
"Legal Proceedings" in Parts I and II of Allied Waste's Annual Report on Form
10-K for the fiscal year ended December 31, 1997 and under the caption
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" in Item 5 of Allied Waste's Current Report on Form 8-K/A dated
August 28, 1998, and the information set forth under the captions "Business"
(including "Business -- Factors that May Influence Future Results and Accuracy
of Forward-Looking Statements" and "Business -- Environmental Regulations"),
"Legal Proceedings" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" in Parts I and II of American's Annual
Report on Form 10-K/A for the fiscal year ended December 31, 1997, both of which
are incorporated by reference herein. Other factors and assumptions not
identified above were also involved in the derivation of these forward-looking
statements, and the failure of such other assumptions to be realized as well as
other factors may also cause actual results to differ materially from those
projected. Neither Allied Waste nor American assume any obligation to update
these forward-looking statements to reflect actual results, changes in
assumptions or changes in other factors affecting such forward-looking
statements.
x
<PAGE> 17
SUMMARY
The following is a summary of certain information contained elsewhere or
incorporated by reference in this Joint Proxy Statement and Prospectus. The
information contained in this summary is qualified in its entirety by, and
should be read in conjunction with, the more detailed information appearing
elsewhere in this Joint Proxy Statement and Prospectus and the documents
incorporated herein by reference.
THE COMPANIES
ALLIED WASTE AND ACQUISITION
Allied Waste serves approximately 1.8 million residential, municipal and
commercial customers through operations in 23 states located primarily in the
Midwest, Northeast, Southeast, Southwest and Northwest United States. As of June
30, 1998, Allied Waste provided its services through a network of 96 collection
companies, 50 transfer stations, 26 recycling facilities, and 59 landfills.
Acquisition is a wholly owned subsidiary of Allied Waste organized for the
purpose of effecting the Merger. Acquisition has no material assets and has not
engaged in any activities except in connection with the Merger. The principal
executive offices of Allied Waste and Acquisition are located at 15880 North
Greenway -- Hayden Loop, Suite 100, Scottsdale, Arizona 85260, and the telephone
number is (602) 423-2946.
Additional information concerning Allied Waste is included in Allied
Waste's reports filed under the Exchange Act that are incorporated by reference
in this Joint Proxy Statement and Prospectus. See "Available Information" and
"Incorporation of Certain Information by Reference."
AMERICAN DISPOSAL SERVICES, INC.
American is a regional, integrated, non-hazardous solid waste services
company that provides solid waste collection, transfer and disposal services
primarily in the Midwest and in the Northeast. American conducts operations in
the following 12 states: Arkansas, Connecticut, Illinois, Indiana, Kansas,
Kentucky, Massachusetts, Missouri, Ohio, Oklahoma, Pennsylvania and Rhode
Island. American owns ten solid waste landfills and owns, operates or has
exclusive contracts to receive waste from 21 transfer stations. As of June 30,
1998, American's operations covered six primary operating regions and its 10
landfills and 21 transfer stations are supported by 21 collection divisions,
which currently serve over 400,000 residential, commercial and industrial
customers. The principal executive offices of American are located at 745
McClintock Drive, Suite 230, Burr Ridge, Illinois 60521, and the telephone
number is (630) 655-1105.
Additional information concerning American is included in American's
reports filed under the Exchange Act that are incorporated by reference in this
Joint Proxy Statement and Prospectus. See "Available Information" and
"Incorporation of Certain Information by Reference."
THE MEETINGS
The Allied Waste Special Meeting will be held at p.m., Time on
, 1998, at , for the purpose of considering and
acting upon proposals to (i) approve and adopt the Merger Agreement, including
the issuance of shares of Allied Waste Common Stock pursuant thereto, and (ii)
approve an amendment to Allied Waste's Restated Certificate of Incorporation to
increase the number of authorized shares of Allied Waste Common Stock from
200,000,000 to 300,000,000. The American Special Meeting will be held at
a.m., Time on , 1998, at for the purpose of
considering and acting upon a proposal to approve and adopt the Merger
Agreement. The Allied Waste Special Meeting and the American Special Meeting,
together, are sometimes referred to hereinafter as the "Meetings."
Only those stockholders of Allied Waste of record at the close of business
on September 4, 1998 (the "Allied Waste Record Date"), are entitled to notice
of, and to vote at, the Allied Waste Special Meeting.
1
<PAGE> 18
Only those stockholders of American of record at the close of business on
September 4, 1998 (the "American Record Date"), are entitled to notice of, and
to vote at, the American Special Meeting.
Pursuant to the rules of the Nasdaq Stock Market, approval and adoption of
the Merger Agreement (which also will constitute approval of the issuance of
shares of Allied Waste Common Stock in accordance with the terms of the Merger
Agreement (the "Share Issuance")) requires the affirmative vote of the holders
of a majority of the shares of Allied Waste Common Stock voted, in person or by
proxy, at the Allied Waste Special Meeting, provided that the total votes cast
on the proposal represent over 50% in interest of the shares entitled to vote
thereon. Pursuant to Delaware law, approval and adoption of the Charter
Amendment requires the affirmative vote of the holders of a majority of the
shares of Allied Waste Common Stock outstanding on the Allied Waste Record Date.
At the close of business on the Allied Waste Record Date, there were
approximately [ ] million shares of Allied Waste Common Stock outstanding
and entitled to vote at the Allied Waste Special Meeting. All executive officers
and directors of Allied Waste who, as of the Allied Waste Record Date,
collectively had the right to vote approximately [ ] million shares of
Allied Waste Common Stock, representing approximately [ ]% of the shares
outstanding as of such date, have indicated to Allied Waste that they intend to
vote the shares of Allied Waste Common Stock over which they have voting control
in favor of the Merger Agreement and the Charter Amendment. In addition, certain
directors and their affiliates have agreed with American to vote the shares of
Allied Waste Common Stock over which they have voting control (of which
shares are included in the shares owned by directors of Allied Waste described
in the previous sentence) in favor of the Merger and the Charter Amendment. As
of the Allied Waste Record Date, these persons and their affiliates owned
shares of Allied Waste Common Stock, representing approximately
% of the then outstanding shares. See "The Meetings -- Vote Required for
Approval."
Pursuant to Delaware law, approval and adoption of the Merger Agreement
requires the affirmative vote of the holders of a majority of the shares of
American Common Stock outstanding on the American Record Date. At the close of
business on the American Record Date, there were approximately [ ] million
shares of American Common Stock outstanding and entitled to vote at the American
Special Meeting. All executive officers and directors of American who, as of the
American Record Date, were stockholders of American have indicated to American
that they intend to vote their shares of American Common Stock in favor of the
Merger Agreement. As of the American Record Date, such individuals collectively
had the right to vote approximately shares of American Common
Stock, representing less than % of the shares outstanding as of such date.
See "The Meetings -- Vote Required for Approval."
THE MERGER
RECOMMENDATIONS OF THE BOARDS OF DIRECTORS
The Board of Directors of Allied Waste has unanimously approved the Merger
Agreement and the Charter Amendment and has directed that such matters be
submitted to the stockholders of Allied Waste. The Board of Directors of Allied
Waste recommends that the stockholders of Allied Waste approve and adopt the
Merger Agreement, including the issuance of shares of Allied Waste Common Stock
pursuant thereto, and the Charter Amendment. See "The Merger and Related
Transactions -- Background of the Merger," "-- Joint Reasons for the Merger,"
"Additional Factors Considered by the Allied Waste Board" and "-- Recommendation
of the Board of Directors of Allied Waste."
The Board of Directors of American has unanimously approved the Merger
Agreement and has directed that it be submitted to the stockholders of American.
The Board of Directors of American recommends that the stockholders of American
approve and adopt the Merger Agreement. See "The Merger and Related
Transactions -- Background of the Merger," "-- Joint Reasons for the Merger,"
"-- Additional Factors Considered by the American Board" and "-- Recommendation
of the Board of Directors of American." In considering the recommendation of
American's Board of Directors with respect to the Merger, American stockholders
should be aware that certain officers and directors of American have direct or
indirect interests in recommending the Merger, apart from their interests as
stockholders of American, which are separate from those of unaffiliated
stockholders of American. See "The Merger and Related Transactions -- Possible
Conflicts of Interest."
2
<PAGE> 19
INTERESTS OF CERTAIN PERSONS IN THE MERGER -- POSSIBLE CONFLICTS OF INTEREST
Certain officers and directors of American have direct or indirect
interests in recommending the Merger apart from their interests as stockholders
of American, which are separate from those of unaffiliated stockholders of
American. Such interests include: (i) on , 1998 Allied Waste entered
into non-competition agreements with certain executive officers of American,
such agreements to be effective at the Effective Time (as hereinafter defined);
(ii) on , 1998, an affiliated entity of Richard De Young, Chairman,
President and Chief Executive Officer of American, entered into a market
development consulting agreement with Allied Waste, such agreement to be
effective at the Effective Time, and it is anticipated that Messrs. De Young and
Lavey and Ms. Straw will become principals in this entity, (iii) all officers
and directors of American hold vested and unvested options to acquire American
Common Stock ("American Options"), substantially all of which options are
anticipated to be exercised prior to the Merger, contingent on consummation of
the Merger, and the shares of American Common Stock issued in connection with
such exercise will be converted into shares of Allied Waste Common Stock in the
Merger in accordance with the Exchange Ratio; (iv) pursuant to the terms of
their respective employment agreements with American, all officers of American
are entitled to receive severance payments upon consummation of the Merger; (v)
pursuant to the terms of their respective employment agreements with American,
in the event the executive officers of American are required to pay an excise
tax on excess parachute payments received from American upon a Change of Control
(as defined in such employment agreements), American is required to pay to the
officers an amount necessary to place the officers in the same after-tax
financial position as the officers would have been in had the officers not
incurred such tax; (vi) on , 1998, Allied Waste entered into
employment agreements with certain executive officers of American, such
agreements to be effective as of the Effective Time; (vii) on , 1998,
Allied Waste entered into agreements with certain executive officers of American
providing for their assistance in integrating American's operations into Allied
Waste following the Merger, and (viii) pursuant to the Merger Agreement,
officers, directors and employees of American will be indemnified by Allied
Waste and American against certain liabilities and Allied Waste will maintain in
effect directors' and officers' liability insurance on behalf of such directors
and officers. For more information on such conflicts of interest, see "The
Merger and Related Transactions -- Possible Conflicts of Interest."
OPINIONS OF FINANCIAL ADVISORS
Allied Waste. On August 10, 1998, the Board of Directors of Allied Waste
received a written opinion of Credit Suisse First Boston Corporation ("CSFB") to
the effect that, as of such date and based upon and subject to the matters
stated in such opinion, the Exchange Ratio was fair to Allied Waste from a
financial point of view. This opinion is attached as Appendix C to this Joint
Proxy Statement and Prospectus and is incorporated herein by reference. You
should read the opinion carefully to understand the procedures followed,
assumptions made, matters considered and limitations on the review undertaken by
CSFB in rendering its opinion. The opinion of CSFB is directed to the Board of
Directors of Allied Waste and does not constitute a recommendation to any
stockholder as to how such stockholder should vote at the Allied Waste Special
Meeting. See "The Merger and Related Transactions -- Opinion of Financial
Advisor to Allied Waste."
American. On August 8, 1998, the Board of Directors of American received a
written opinion of CIBC Oppenheimer Corp. ("CIBC Oppenheimer") to the effect
that as of the date of such opinion and based upon and subject to the matters
stated in such opinion, the Exchange Ratio pursuant to the Merger Agreement was
fair, from a financial point of view, to the holders of shares of American
Common Stock. The full text of the written opinion of CIBC Oppenheimer, which
sets forth the assumptions made, matters considered and limitations on the
review undertaken in connection with the opinion, is attached hereto as Appendix
D to this Joint Proxy Statement and Prospectus and is incorporated herein by
reference. HOLDERS OF AMERICAN COMMON STOCK ARE URGED TO, AND SHOULD, READ SUCH
OPINION IN ITS ENTIRETY. The opinion of CIBC Oppenheimer is directed to the
Board of Directors of American and does not constitute a recommendation to any
stockholder as to how such stockholder should vote at the American Special
Meeting. See "The Merger and Related Transactions -- Opinion of Financial
Advisor to American."
3
<PAGE> 20
CERTAIN TERMS OF THE MERGER
EXCHANGE RATIO. At the Effective Time, Acquisition will merge with and
into American, and American will become a wholly owned subsidiary of Allied
Waste. In the Merger, each outstanding share of American Common Stock will be
converted into the right to receive, without interest, 1.65 shares of Allied
Waste Common Stock. In addition, at the Effective Time, each issued and
outstanding share of common stock, par value $.01 per share, of Acquisition
("Acquisition Common Stock") will be converted into one share of common stock,
par value $.01 per share of the corporation surviving the Merger (the "Surviving
Corporation").
Based upon the number of shares of common stock of Allied Waste and
American outstanding as of , 1998, and assuming the exercise of all
outstanding American options in connection with the Merger, approximately
[ ] million shares of Allied Waste Common Stock will be outstanding
immediately after the Effective Time, of which approximately [ ] million
shares, representing [ ]% of the total number of outstanding shares, will be
held by former holders of American Common Stock and American Options. See "The
Plan of Merger and Terms of the Merger -- Manner and Basis for Converting
Shares" and "-- American Options."
FRACTIONAL SHARES. No fractional shares of Allied Waste Common Stock will
be issued pursuant to the Merger. In lieu of such fractional shares, each holder
of shares of American Common Stock who would otherwise have been entitled to
receive a fraction of a share of Allied Waste Common Stock will be entitled to
receive from the Exchange Agent (as hereinafter defined) a cash payment equal to
such fraction multiplied by the average closing price per share of Allied Waste
Common Stock on the Nasdaq Stock Market, as reported by the Wall Street Journal,
during the 20 trading days immediately preceding the Effective Time (as defined
below).
EFFECTIVE TIME OF THE MERGER. The Merger will become effective at such
time (the "Effective Time") as shall be stated in a certificate of merger to be
filed with the Secretary of State of the State of Delaware (the "Certificate of
Merger") in accordance with the Delaware General Corporation Law (the "DGCL").
Assuming the requisite stockholder approval of the Merger Agreement is obtained,
it is anticipated that the Effective Time will occur as soon as practicable
following the Meetings. If all other conditions to the Merger have not been
satisfied or waived prior to the Meetings, however, it is expected that the
Merger will occur as soon as practicable after such conditions have been
satisfied or waived.
EXCHANGE OF AMERICAN COMMON STOCK CERTIFICATES. Promptly after
consummation of the Merger, (the "Exchange Agent") will mail a
letter of transmittal with instructions to each holder of record of American
Common Stock for use in exchanging certificates representing shares of American
Common Stock for certificates representing shares of Allied Waste Common Stock
and cash in lieu of any fractional shares. Certificates should not be
surrendered by the holders of American Common Stock until they have received the
letter of transmittal from the Exchange Agent. See "The Plan of Merger and Terms
of the Merger -- Manner and Basis for Converting Shares."
AMERICAN OPTIONS; CONVERSION OF AMERICAN WARRANTS. Under American's
Amended and Restated 1996 Option Plan (the "American Option Plan"), in the event
of certain transactions, including any transaction that results in the
acquisition of all or substantially all of the outstanding shares of American
Common Stock by a single person or entity, all outstanding options issued under
the American Option Plan shall terminate effective as of the consummation of the
transaction and, during a period of at least 30 days prior to the consummation
of the transaction, each holder of any such options shall have the right to
exercise in full all of his or her stock options (whether vested or not vested)
but contingent on the consummation of the transaction. If the transaction is not
consummated, then the exercise of the options shall be null and void. The Merger
is a transaction which will cause this provision of the American Option Plan to
become operative. Therefore, all holders of the options of American, including
the directors and executive officers of American, will have the opportunity to
exercise their options (whether vested or not vested) for a period of at least
30 days prior to the consummation of the Merger and any shares of American
Common Stock issued upon exercise of the options will be converted into shares
of Allied Waste Common Stock in the Merger in accordance with the terms of the
Merger Agreement. See "The Plan of Merger and Terms of the
4
<PAGE> 21
Merger -- American Options." It is anticipated that a warrant to purchase 48,788
shares of American Common Stock will be exercised for shares of American Common
Stock immediately prior to the Effective Time. See "The Plan of Merger and Terms
of the Merger -- American Warrant." As of , 1998, the outstanding
American Options included options held by officers and directors of American to
acquire approximately 1.5 million shares of American Common Stock pursuant to
the terms of certain stock option agreements, at exercise prices ranging from
$7.17 to $43.13 per share. Of these, options to acquire shares of
American Common Stock are not currently vested. See "The Merger and Related
Transactions -- Possible Conflicts of Interest."
INDEMNIFICATION. The Merger Agreement provides that the officers,
directors, employees and agents of American or any of its subsidiaries will be
indemnified by Allied Waste and the surviving corporation in the Merger against
certain liabilities and costs, including those arising out of, relating to or in
connection with any action or omission occurring prior to the Effective Time or
arising out of or pertaining to the transactions contemplated by the Merger
Agreement. The Merger Agreement further provides that (i) the indemnification
provisions of the Certificate of Incorporation and Bylaws of the Surviving
Corporation as in effect at the Effective Time will not be amended, repealed or
otherwise modified for a period of six years from the Effective Time in any
manner that would adversely affect the rights thereunder of individuals who, at
the Effective Time, were directors, officers, employees or agents of American,
(ii) Allied Waste will assume, be jointly and severally liable for, and honor,
and will cause the Surviving Corporation to honor, in accordance with their
respective terms, certain indemnification agreements of American without limit
as to time; and (iii) for a period of six years after the Effective Time, Allied
Waste will cause to be maintained in effect the current policies of directors'
and officers' liability insurance maintained by American and its subsidiaries
(or policies with the same coverages and amounts and containing terms and
conditions that are no less advantageous to the indemnified parties) with
respect to matters arising on or before the Effective Time. See "The Plan of
Merger and Terms of the Merger -- Indemnification."
CONDITIONS TO THE MERGER
MATERIAL FEDERAL INCOME TAX CONSEQUENCES. It is a condition to Allied
Waste's obligation to consummate the Merger (the "Allied Waste Tax Condition")
that Allied Waste shall have received an opinion of its counsel to the effect
that (i) the Merger will constitute a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code") and
(ii) no gain or loss will be recognized by Allied Waste or Acquisition for
federal income tax purposes as a result of consummation of the Merger. It is a
condition to American's obligation to consummate the Merger (the "American Tax
Condition") that American shall have received an opinion of its counsel to the
effect that (i) the Merger will constitute a reorganization within the meaning
of Section 368(a) of the Code, (ii) no gain or loss will be recognized by Allied
Waste, American or Acquisition as a result of the Merger, and (iii) no gain or
loss will be recognized by the holders of American Common Stock upon the
exchange of their American Common Stock solely for shares of Allied Waste Common
Stock, except for gain or loss attributable to cash received in lieu of
fractional shares. Both the Allied Waste Tax Condition and the American Tax
Condition are waivable at the option of the party entitled to receive such
opinion as a condition of its obligation to consummate the Merger. American does
not currently intend to waive such condition. In the event that such condition
is waived by American, Allied Waste and American will recirculate a revised
Joint Proxy Statement and Prospectus that discloses the waiver of this condition
and contains all related material disclosure, including risks to investors. In
such event, American will resolicit proxies from its stockholders. See "The
Merger and Related Transactions -- Material Federal Income Tax Consequences."
ACCOUNTING TREATMENT. It is a condition to each party's obligation to
consummate the Merger that Allied Waste shall have received a letter from Arthur
Andersen LLP, dated as of the date on which the transactions contemplated by the
Merger Agreement are consummated (the "Closing Date"), to the effect that the
Merger will qualify for pooling-of-interests accounting treatment under
Accounting Principles Board Opinion No. 16 if closed and consummated in
accordance with the Merger Agreement. Furthermore, it is a condition to each
party's obligation to consummate the Merger that each of the parties to the
Merger Agreement shall have received a letter dated the Closing Date, addressed
to American, from Ernst & Young LLP regarding such firm's concurrence with
American's management's conclusions that no conditions
5
<PAGE> 22
exist related to American that would preclude Allied Waste's accounting for the
Merger with American as a pooling-of-interests under Accounting Principles Board
Opinion No. 16 if closed and consummated in accordance with the Merger
Agreement. See "The Merger and Related Transactions -- Accounting Treatment."
GOVERNMENTAL AND REGULATORY APPROVALS. Consummation of the Merger is
conditioned upon the expiration or termination of the applicable waiting period
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act"). Under the provisions of the HSR Act applicable to the Merger, the
Merger may not be consummated until the expiration of a 30 day waiting period
following the filing of notification reports with the Federal Trade Commission
(the "FTC") and the Antitrust Division of the Department of Justice (the
"Antitrust Division") by Allied Waste and American unless a request for
additional information or documentary material is received from the FTC or the
Antitrust Division or unless early termination of the waiting period is granted.
If within the initial 30 day waiting period, either the Antitrust Division or
the FTC requests additional information or material concerning the Merger, the
waiting period will be extended and would expire on the twentieth calendar day
after the date of substantial compliance with such request. Only one extension
of the waiting period pursuant to a request for additional information is
authorized by the HSR Act. Thereafter, such waiting period may be extended only
by court order or with the consent of the parties. On August 19, 1998, Allied
Waste and American filed notification reports under the HSR Act with the FTC and
the Antitrust Division. Accordingly, the waiting period will expire on September
18, 1998, unless a request is made for additional information or material. At
any time before or after the Merger, the Antitrust Division or the FTC could
take such action under the antitrust laws as it deems necessary or desirable in
the public interest, including seeking to enjoin the Merger or seeking
divestiture of substantial assets of Allied Waste or American or their
subsidiaries. Private parties and state attorneys general may also bring an
action under the antitrust laws under certain circumstances. There can be no
assurance that a challenge to the Merger on antitrust grounds will not be made
or, if such a challenge is made, of the result. Consummation of the Merger is
conditioned upon expiration or termination of the waiting period under the HSR
Act. See "The Merger and Related Transactions -- Government and Regulatory
Approvals."
NO STATUTE OR INJUNCTION PREVENTING MERGER. Consummation of the Merger is
subject to the condition that no statute, rule or regulation shall have been
enacted by any state or federal government or governmental agency in the United
States which would prevent the consummation of the Merger or make the Merger
illegal, and no injunction, preliminary or permanent, or other order or decree
by any federal or state court which prevents the consummation of the Merger
shall have been issued and remain in effect.
OTHER CONDITIONS TO THE MERGER. In addition to the approval and adoption
of the Merger Agreement by the requisite votes of Allied Waste, Acquisition and
American stockholders and the satisfaction of the conditions described above,
the respective obligations of Allied Waste and American to effect the Merger are
subject to the satisfaction or waiver, where permissible, of certain other
conditions, including, without limitation, (i) conditions relating to the
accuracy of each party's representations and warranties and compliance with each
party's covenants, and (ii) a condition to the effect that the shares of Allied
Waste Common Stock issuable in the Merger and those to be reserved for issuance
upon the exercise of stock options or warrants shall have been authorized for
listing on the Nasdaq Stock Market, upon official notice of issuance. See "The
Plan of Merger and Terms of the Merger -- Conditions to the Merger."
NO SOLICITATION
The Merger Agreement provides that, after the date of the Merger Agreement
and prior to the Effective Time or earlier termination of the Merger Agreement,
American will not, and will not permit its subsidiaries to, initiate, solicit,
negotiate, encourage, or provide confidential information to facilitate, and
American will use its reasonable efforts to cause any officer, director, or
employee of American, or any attorney, accountant, investment banker, financial
advisor or other agent retained by American or any of its subsidiaries not to
initiate, solicit, negotiate, encourage, or provide non-public or confidential
information to facilitate, any proposal or offer to acquire all or any
substantial part of the business or properties or any capital stock of American
whether by merger, purchase of assets, tender offer or otherwise, whether for
cash, securities or any
6
<PAGE> 23
other consideration or any combination thereof (an "Acquisition Transaction").
Notwithstanding the foregoing, American may, in response to an unsolicited
written offer or proposal with respect to a potential or proposed Acquisition
Transaction ("Acquisition Proposal") that American's Board of Directors
determines, in good faith and after consultation with its independent financial
advisor, would result (if consummated pursuant to its terms) in an Acquisition
Transaction more favorable to American's stockholders than the Merger (any such
offer or proposal being referred to as a "Superior Proposal"), furnish (subject
to the execution of a confidentiality agreement substantially similar to the
confidentiality provisions of the Merger Agreement), confidential or non-public
information to a financially capable corporation, partnership, person or other
entity or group (a "Potential Acquirer") and negotiate with such Potential
Acquirer if the Board of Directors of American, after consulting with its
outside legal counsel, determines in good faith that consideration of the
Superior Proposal is reasonably necessary for the American Board of Directors to
act in a manner consistent with its fiduciary duties or that the failure to
provide such confidential or non-public information to or negotiate with such
Potential Acquirer would be reasonably likely to constitute a breach of its
fiduciary duty to American's stockholders. See "The Plan of Merger and Terms of
the Merger -- No Solicitation of Acquisition Transactions."
TERMINATION OR AMENDMENT OF MERGER AGREEMENT
TERMINATION. The Merger Agreement may be terminated under certain
circumstances, including (a) by the mutual written consent of Allied Waste and
American or (b) either by Allied Waste or American at any time prior to the
Closing Date (i) upon a material breach of a representation or warranty by the
other party (the "Non-Terminating Party") which is not cured in all material
respects and which causes certain conditions set forth in the Merger Agreement
to be incapable of being satisfied; (ii) if the Merger is not completed by
January 31, 1999 (unless due to a delay or default on the part of the party
requesting termination (the "Terminating Party")); (iii) if the Merger is
enjoined by a final, unappealable court order not entered at the request or with
the support of the Terminating Party and if the Terminating Party shall have
used reasonable efforts to prevent entry of such order; (iv) if the
Non-Terminating Party (x) fails to perform in any material respect any of its
material covenants in the Merger Agreement and (y) does not cure such default in
all material respects within 30 days after written notice of such default
specifying such default in reasonable detail is given to the Non-Terminating
Party by the Terminating Party; and (v) if the stockholders of the
Non-Terminating Party fail to approve the Merger at a duly held meeting of
stockholders called for such purpose or any adjournment thereof. Additionally,
American may terminate the Merger Agreement if (A) it receives a Superior
Proposal, resolves to accept such Superior Proposal and if it shall have given
Allied Waste two days' prior written notice of its intention to terminate
(provided that such termination shall not be effective until such time as
certain termination fees shall have been received by Allied Waste); or (B) a
tender or exchange offer is commenced by a Potential Acquirer (excluding any
affiliate of American or any group of which any affiliate of American is a
member) for all outstanding shares of American Common Stock, American's Board of
Directors determines, in good faith and after consultation with an independent
financial advisor, that such offer constitutes a Superior Proposal and resolves
to accept such Superior Proposal or recommend to the stockholders that they
tender their shares in such tender or exchange offer, and American shall have
given Allied Waste two days' prior written notice of its intention to terminate
(provided that such termination shall not be effective until such time as
certain termination fees shall have been received by Allied Waste). Allied Waste
may terminate the Merger Agreement if the Board of Directors of American shall
have resolved to accept a Superior Proposal or shall have recommended to the
stockholders of American that they tender their shares in a tender or exchange
offer commenced by a third party (excluding any affiliate of American or any
group of which any affiliate of American is a member); provided that Allied
Waste may not so terminate the Merger Agreement until three days after receipt
of a notice from American of such Superior Proposal.
AMENDMENT. The Merger Agreement may be amended or supplemented by an
instrument in writing signed on behalf of each party and in compliance with
applicable law. Such amendment may occur at any time prior to the Closing Date,
and, subject to applicable law, whether before or after approval by the
stockholders of American and Allied Waste. See "The Plan of Merger and Terms of
the Merger -- Termination or Amendment."
7
<PAGE> 24
TERMINATION FEES; EXPENSES. Allied Waste or American may be required to
pay the other a fee of $32 million upon termination of the Merger Agreement
depending upon the circumstances surrounding such termination. Certain expenses
incurred in connection with this Joint Proxy Statement and Prospectus and the
reasonable expenses of American in connection with any HSR review or proceedings
will be shared equally by Allied Waste and American. All other costs and
expenses incurred in connection with the Merger Agreement and the transactions
contemplated thereby shall be paid by the party incurring such expenses. See
"The Plan of Merger and Terms of the Merger -- Termination Fees" and
"-- Expenses."
STOCK OPTION. American granted Allied Waste an option to purchase
4,000,000 shares of American Common Stock at a price of $40 per share. The
shares subject to the option represent approximately % of the shares of
American Common Stock outstanding as of the American Record Date (and
approximately % of the shares of American Common Stock outstanding after
exercise of the option in full). The option is only exercisable upon the
occurrence of certain of the events described under the caption "Termination"
above. The shares issuable upon exercise of the option will not be eligible to
vote on the Merger Agreement at the American Special Meeting. The option holder
has the right under certain circumstances to require the grantor to repurchase
all or any portion of the option and any shares purchased upon exercise of the
options at prices set forth in the option. The total profit under the option is
limited to $40 million less any termination fee paid to Allied Waste under the
Merger Agreement. See "Stock Option Agreement."
DISSENTERS' RIGHTS
Delaware law does not require that holders of Allied Waste Common Stock or
American Common Stock who object to the Merger and who vote against or abstain
from voting in favor of the Merger be afforded any appraisal or dissenters'
rights or the right to receive cash for their shares. Neither Allied Waste nor
American intend to make available any such rights to their respective
stockholders.
STOCKHOLDERS' COMPARATIVE RIGHTS
The rights of stockholders of American are currently governed by Delaware
law, the Amended Restated Certificate of Incorporation and Bylaws of American.
The rights of stockholders of Allied Waste are governed by Delaware law and the
Restated Certificate of Incorporation and Bylaws of Allied Waste. See
"Comparative Rights of Stockholders of Allied Waste and American."
MARKET PRICE DATA
Allied Waste Common Stock is traded on the Nasdaq Stock Market under the
symbol "AWIN." American Common Stock is traded on the Nasdaq Stock Market under
the symbol "ADSI." The following table sets forth the range of high and low per
share sale prices for the Allied Waste Common Stock and the American Common
Stock as reported on the Nasdaq Stock Market for the period from January 1, 1996
through , 1998.
<TABLE>
<CAPTION>
ALLIED WASTE AMERICAN
COMMON STOCK COMMON STOCK
---------------------- ---------------------
HIGH LOW HIGH LOW
------ ------------ ----------- ------
<S> <C> <C> <C> <C>
1996
First Quarter............................................. $ 9 1/4 $ 6 1/2 $ * $ *
Second Quarter............................................ 10 3/8 8 * *
Third Quarter............................................. 10 1/8 6 7/16 18 1/4 9
Fourth Quarter............................................ 9 5/8 8 18 1/2 15 1/2
1997
First Quarter............................................. $ 9 7/8 $ 7 1/4 $ 18 $ 16 1/2
Second Quarter............................................ 18 1/8 8 25 1/16 16 3/8
Third Quarter............................................. 20 1/8 14 1/4 33 3/4 21
Fourth Quarter............................................ 24 3/8 18 3/8 37 1/2 29
</TABLE>
8
<PAGE> 25
<TABLE>
<CAPTION>
ALLIED WASTE AMERICAN
COMMON STOCK COMMON STOCK
---------------------- ---------------------
HIGH LOW HIGH LOW
------ ------------ ----------- ------
<S> <C> <C> <C> <C>
1998
First Quarter............................................. $ 25 3/8 $ 19 5/8 $ 38 1/4 $ 32 1/4
Second Quarter............................................ 28 7/16 23 9/16 46 7/8 37 5/16
Third Quarter (through ).........................
</TABLE>
- ---------------
* American completed an initial public offering of shares of American Common
Stock at a sales price of $9.00 per share on July 30, 1996. Prior to that
date, shares of American Common Stock were not publicly traded.
On August 10, 1998, the last trading day completed prior to announcement by
Allied Waste and American that they had reached an agreement concerning the
Merger, the closing sale price of Allied Waste Common Stock as reported on the
Nasdaq Stock Market was $26.50 per share, and the closing sale price of American
Common Stock as reported on the Nasdaq Stock Market was $38.50 per share.
Assuming the Merger had occurred on such date, the equivalent market value per
share of American Common Stock, calculated by multiplying the closing sale price
of Allied Waste Common Stock by the Exchange Ratio, would have been $43.73.
On , 1998, the last trading prior to the date of this Joint Proxy
Statement and Prospectus, the closing sale price of Allied Waste Common Stock as
reported on the Nasdaq Stock Market was $[ ] per share, the closing sale
price of American Common as reported on the Nasdaq Stock Market was $[ ] per
share and the "implied per share price" (as defined below) of American Common
Stock was $ . The "implied per share price" of American Common Stock on such
date equals the closing price per share of Allied Waste on such date multiplied
by the Exchange Ratio. The market prices of shares of Allied Waste Common Stock
and American Common Stock are subject to fluctuation. The market price of Allied
Waste Common Stock on the Closing Date, the date shares of Allied Waste Common
Stock are received by holders of American Common Stock, or the date on which
such shares of Allied Waste Common Stock are eventually sold, may be more or
less than the price of Allied Waste Common Stock as of the date of this Joint
Proxy Statement and Prospectus. In addition, past stock market price performance
is not necessarily indicative of future price performance. As a result,
stockholders are urged to obtain current market quotations. Neither Allied Waste
nor American has ever declared or paid cash dividends on its common stock. See
"Market Price Data -- Dividend Information."
Following the Merger, Allied Waste Common Stock will continue to be traded
on the Nasdaq Stock Market under the symbol "AWIN", and the listing of American
Common Stock on the Nasdaq Stock Market will be terminated.
9
<PAGE> 26
SUMMARY FINANCIAL INFORMATION
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
The selected historical consolidated financial data of Allied Waste for
each of the five years in the period ended December 31, 1997, have been derived
from the historical audited consolidated financial statements of Allied Waste.
The selected historical consolidated financial data of Allied Waste for the six
months ended June 30, 1997 and 1998, have been derived from the historical
unaudited condensed consolidated financial statements of Allied Waste and
reflect all adjustments which Allied Waste's management considers necessary for
a fair presentation of the financial position and results of operations for
these periods. The Allied Waste 1997, 1996 and 1995 statements of operations,
balance sheet and other data have been restated to give effect to transactions
through June 30, 1998 that were accounted for using the pooling-of-interests
method for business combinations. The selected historical consolidated financial
data of American for each of the five years in the period ended December 31,
1997 have been derived from the historical audited consolidated financial
statements of American. The selected historical consolidated financial data of
American for the six months ended June 30, 1997 and 1998 have been derived from
the historical unaudited condensed consolidated financial statements of American
and reflect all adjustments which American's management considers necessary for
a fair presentation of the financial position and results of operations for
these periods. The historical financial data is not necessarily indicative of
results to be expected after the Merger is consummated. The financial data
should be read in conjunction with the separate audited consolidated financial
statements and the notes thereto incorporated by reference herein. See
"Available Information."
10
<PAGE> 27
ALLIED WASTE INDUSTRIES, INC.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
-------------------------------------------------------- -----------------------
1993 1994 1995 1996 1997 1997 1998
-------- -------- -------- ---------- ---------- ---------- ----------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Operating revenues......................... $108,948 $200,184 $461,841 $ 489,019 $1,098,529 $ 523,218 $ 576,350
-------- -------- -------- ---------- ---------- ---------- ----------
Cost of Operations....................... 68,374 128,271 293,324 310,790 630,932 308,559 320,370
Selling, general and administrative...... 18,278 39,077 67,203 73,573 129,841 61,947 56,296
Depreciation and amortization............ 10,637 19,829 44,219 50,110 130,086 61,353 68,768
Acquisition related and non-recurring
costs.................................. -- -- 1,531 90,764 5,010 -- 45,143
Unusual items............................ -- 2,100 -- 5,744 -- -- --
-------- -------- -------- ---------- ---------- ---------- ----------
Operating income (loss).................... 11,659 10,907 55,564 (41,962) 202,660 91,359 85,773
Interest income.......................... (310) (1,107) (735) (2,219) (1,969) (1,464) (1,167)
Interest expense......................... 7,633 13,958 16,486 14,264 98,005 49,562 41,451
Other income, net........................ -- -- -- -- (1,076) -- --
-------- -------- -------- ---------- ---------- ---------- ----------
Income (loss) before income taxes.......... 4,336 (1,944) 39,813 (54,007) 107,700 43,261 45,489
Income tax expense (benefit)............... 1,694 (663) 10,571 109 36,605 14,749 26,611
-------- -------- -------- ---------- ---------- ---------- ----------
Net income (loss) before extraordinary
items.................................... 2,642 (1,281) 29,242 (54,116) 71,095 28,512 18,878
Extraordinary items, net of income tax
benefit.................................. -- (3,029) -- (13,411) (53,205) (52,412) (3,093)
-------- -------- -------- ---------- ---------- ---------- ----------
Net income (loss).......................... 2,642 (4,310) 29,242 (67,527) 17,890 (23,900) 15,785
Preferred dividends........................ (927) (3,773) (4,070) (1,073) (381) (337) --
Conversion fee on equity securities
converted................................ -- -- (2,151) -- -- -- --
-------- -------- -------- ---------- ---------- ---------- ----------
Income (loss) available to common
shareholders............................. $ 1,715 $ (8,083) $ 23,021 $ (68,600) $ 17,509 $ (24,237) $ 15,785
======== ======== ======== ========== ========== ========== ==========
Basic EPS:
Net income (loss) before extraordinary
items.................................. $ 0.08 $ (0.18) $ 0.38 $ (0.68) $ 0.66 $ 0.28 $ 0.15
Extraordinary items...................... -- (0.11) -- (0.16) (0.50) (0.52) (0.02)
-------- -------- -------- ---------- ---------- ---------- ----------
Net income (loss)........................ $ 0.08 $ (0.29) $ 0.38 $ (0.84) $ 0.16 $ (0.24) $ 0.13
======== ======== ======== ========== ========== ========== ==========
Weighted average common shares............. 21,490 27,907 60,636 81,442 107,123 99,981 124,293
======== ======== ======== ========== ========== ========== ==========
Diluted EPS:
Net income (loss) before extraordinary
items.................................. $ 0.08 $ (0.15) $ 0.35 $ (0.68) $ 0.62 $ 0.26 $ 0.15
Extraordinary items...................... -- (0.09) -- (0.16) (0.46) (0.49) (0.03)
-------- -------- -------- ---------- ---------- ---------- ----------
Net income (loss)........................ $ 0.08 $ (0.24) $ 0.35 $ (0.84) $ 0.16 $ (0.23) $ 0.12
======== ======== ======== ========== ========== ========== ==========
Weighted average common shares............. 22,702 33,828 67,762 81,442 114,937 107,328 128,380
======== ======== ======== ========== ========== ========== ==========
BALANCE SHEET DATA (AT END OF PERIOD):
Cash and cash equivalents.................. $ 3,812 $ 6,269 $ 11,887 $ 61,615 $ 23,836 $ 28,486 $ 14,494
Working capital (deficit).................. 3,892 (10,087) (41,022) 24,244 (40,811) (4,183) (19,871)
Property and equipment, net................ 94,208 222,386 394,700 816,922 1,372,260 988,808 1,424,986
Goodwill, net.............................. 34,880 78,633 89,498 857,411 899,158 857,319 915,479
Total assets............................... 159,926 379,324 598,643 2,468,032 2,591,539 2,167,319 2,675,045
Total long-term debt, net of current
portion.................................. 61,019 177,126 245,645 1,203,168 1,400,896 1,475,636 1,474,851
Stockholders' equity....................... 70,277 93,174 173,910 317,098 644,691 254,869 656,183
Long-term debt to total capitalization..... 46% 66% 59% 79% 68% 85% 69%
</TABLE>
11
<PAGE> 28
AMERICAN DISPOSAL SERVICES, INC.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
--------------------------------------------------- -------------------
1993 1994 1995 1996 1997 1997 1998
------- -------- -------- -------- -------- -------- --------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Operating revenues........................ $ 7,730 $ 18,517 $ 30,004 $ 56,804 $121,363 $ 46,274 $ 97,655
Cost of operations...................... 5,750 12,647 17,286 30,376 65,947 25,080 54,159
Selling, general and administrative..... 1,646 4,910 5,882 8,328 16,821 6,357 11,111
Depreciation and amortization........... 1,166 3,226 6,308 12,334 21,975 9,056 14,484
------- -------- -------- -------- -------- -------- --------
Operating income (loss)................... (832) (2,266) 528 5,766 16,620 5,781 17,901
Interest income......................... (35) (2) (189) (260) (201) -- --
Interest expense........................ 417 1,497 3,030 5,745 6,223 3,458 743
Other income, net....................... -- -- -- (179) (274) (109) (227)
------- -------- -------- -------- -------- -------- --------
Income (loss) before income taxes......... (1,214) (3,761) (2,313) 460 10,872 2,432 17,385
Income tax expense (benefit).............. (391) (1,372) 332 245 3,531 750 6,780
------- -------- -------- -------- -------- -------- --------
Income (loss) before extraordinary
items................................... (823) (2,389) (2,645) 215 7,341 1,682 10,605
Extraordinary items, net of income tax
benefit................................. 74 -- (908) (476) -- -- --
------- -------- -------- -------- -------- -------- --------
Net income (loss)......................... (749) (2,389) (3,553) (261) 7,341 1,682 10,605
Preferred dividends....................... -- -- (190) (109) -- -- --
------- -------- -------- -------- -------- -------- --------
Income (loss) available to common
shareholders............................ $ (749) $ (2,389) $ (3,743) $ (370) $ 7,341 $ 1,682 $ 10,605
======= ======== ======== ======== ======== ======== ========
Basic EPS:
Net income (loss) before extraordinary
items................................. $ (0.67) $ (1.07) $ (0.85) $ 0.02 $ 0.56 $ 0.16 $ 0.49
Extraordinary items..................... 0.06 -- (0.27) (0.07) -- -- --
------- -------- -------- -------- -------- -------- --------
Net income (loss)....................... $ (0.61) $ (1.07) $ (1.12) $ (0.05) $ 0.56 $ 0.16 $ 0.49
======= ======== ======== ======== ======== ======== ========
Weighted average common shares............ 1,219 2,224 3,341 7,064 13,177 10,209 21,709
======= ======== ======== ======== ======== ======== ========
Diluted EPS:
Net income (loss) before extraordinary
items................................. $ (0.67) $ (1.07) $ (0.85) $ 0.01 $ 0.53 $ 0.16 $ 0.47
Extraordinary items..................... 0.06 -- (0.27) (0.06) -- -- --
------- -------- -------- -------- -------- -------- --------
Net income (loss)....................... $ (0.61) $ (1.07) $ (1.12) $ (0.05) $ 0.53 $ 0.16 $ 0.47
======= ======== ======== ======== ======== ======== ========
Weighted average common shares............ 1,219 2,224 3,341 7,465 13,822 10,719 22,597
======= ======== ======== ======== ======== ======== ========
BALANCE SHEET DATA (AT END OF PERIOD):
Cash and cash equivalents................. $ 2,134 $ 548 $ 6,383 $ 2,301 $ 2,426 $ 2,166 $ 21,268
Working capital (deficit)................. 788 (2,237) (8,819) 1,219 721 5,344 17,002
Property and equipment, net............... 15,156 17,062 81,250 93,692 174,340 128,035 195,994
Goodwill, net............................. 11,877 13,569 15,739 31,237 157,304 64,484 296,351
Total assets.............................. 35,651 37,557 114,693 144,986 373,024 224,573 559,909
Total long-term debt, net of current
portion................................. 16,073 18,487 48,789 65,445 20,788 63,817 1,281
Redeemable preferred stock................ -- -- 1,908 -- -- -- --
Stockholders' equity...................... 12,531 12,132 33,855 58,097 297,375 129,872 488,308
Long-term debt to total capitalization.... 56% 60% 59% 53% 7% 33% 0%
</TABLE>
12
<PAGE> 29
SUMMARY COMBINED UNAUDITED PRO FORMA
CONDENSED FINANCIAL INFORMATION
The following summary combined unaudited pro forma condensed balance sheet
as of June 30, 1998 of Allied Waste and American gives effect to the Merger
under the pooling-of-interests method of accounting for business combinations as
if the Merger had been consummated on June 30, 1998. The following summary
combined unaudited pro forma condensed statements of operations for the six
months ended June 30, 1998 and for the years ended December 31, 1995, 1996 and
1997 give effect to the Merger as if the Merger had been consummated on January
1, 1995. The pro forma information for the years ended December 31, 1995, 1996
and 1997 was prepared based on the respective audited historical financial
information of Allied Waste (as restated) and American. The pro forma
information for the six months ended June 30, 1998 was prepared based on the
respective unaudited historical financial information of Allied Waste and
American. These statements do not purport to be indicative of the combined
financial position or combined results of operations of Allied Waste and
American that might have occurred, nor are they indicative of future combined
financial position or combined results of operations. These statements have not
been restated for the Illinois Recycling Services, Inc. ("IRS") acquisition by
Allied Waste in August 1998 nor other acquisitions completed subsequent to June
30, 1998 accounted for using the pooling-of-interests method for business
combinations. Additionally, these statements are not adjusted to exclude
historical acquisition related and non-recurring costs and historical unusual
charges nor have they been adjusted to take into account cost savings and
operating efficiencies associated with the Merger. The summary combined
unaudited pro forma condensed financial information should be read in
conjunction with the Combined Unaudited Pro Forma Condensed Financial Statements
and notes thereto, included elsewhere herein, and Allied Waste's and American's
Consolidated Financial Statements and notes thereto, included in Allied Waste's
and American's filings under the Exchange Act and incorporated herein by
reference. See "Available Information."
13
<PAGE> 30
ALLIED WASTE AND AMERICAN COMBINED
<TABLE>
<CAPTION>
SUMMARY COMBINED UNAUDITED PRO FORMA
CONDENSED FINANCIAL INFORMATION(I)
------------------------------------------------------
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED
---------------------------------- JUNE 30,
1995 1996 1997 1998
-------- -------- ---------- ----------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS:
Revenues................................. $491,845 $545,823 $1,239,418 $674,005
Cost and expenses:
Cost of operations..................... 310,610 341,166 707,445 374,529
Selling, general and administrative.... 73,085 81,901 148,647 67,407
Depreciation and amortization.......... 50,527 62,444 154,597 83,252
Acquisition related and non-recurring
costs............................... 1,531 96,508 5,010 45,143
-------- -------- ---------- --------
Operating income (loss).................. 56,092 (36,196) 223,719 103,674
Interest expense....................... 15,317 15,413 80,834 40,582
Interest income........................ (924) (2,479) (2,170) (1,167)
Other income, net...................... -- (179) (1,350) (227)
-------- -------- ---------- --------
Income (loss) before income taxes........ 41,699 (48,951) 146,405 64,486
Income tax expense....................... 12,583 2,192 51,079 34,036
-------- -------- ---------- --------
Net income (loss) available to common
shareholders before extraordinary
items.................................. 29,116 (51,143) 95,326 30,450
Preferred dividends...................... (4,260) (1,182) (381) --
Conversion fee on equity securities
converted.............................. (2,151) -- -- --
-------- -------- ---------- --------
Income (loss) available to common
shareholders before extraordinary
items.................................. $ 22,705 $(52,325) $ 94,945 $ 30,450
======== ======== ========== ========
Earnings per common share before
extraordinary items.................... $ 0.20 $ (0.40) $ 0.54 $ 0.17
======== ======== ========== ========
Weighted average number of common and
common equivalent shares outstanding... 115,726 129,406 176,784 176,344
======== ======== ========== ========
</TABLE>
<TABLE>
<CAPTION>
SUMMARY
COMBINED UNAUDITED
PRO FORMA CONDENSED
FINANCIAL INFORMATION AS OF
JUNE 30, 1998
---------------------------
(IN THOUSANDS,
EXCEPT RATIOS)
<S> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 35,762
Working capital (deficit)................................... (26,845)
Property and equipment, net................................. 1,620,980
Goodwill, net............................................... 1,211,830
Total assets................................................ 3,234,954
Long-term debt, net of current portion...................... 1,430,735
Stockholders' equity........................................ 1,165,912
Long-term debt to total capitalization...................... 55%
</TABLE>
- ---------------
(i) These statements have not been restated to include the financial statements
relating to Allied Waste's acquisition of IRS in August, 1998. Additionally,
the financial statements have not been adjusted to exclude historical
acquisition related and non-recurring costs and unusual charges, nor have
they been adjusted to take into account cost savings and operating
efficiencies of the Merger.
14
<PAGE> 31
COMPARATIVE UNAUDITED PER SHARE DATA
The following table sets forth for the periods and as of the dates
indicated (a) the net income (loss) before extraordinary items available to
common shareholders per common and common equivalent shares of Allied Waste (as
restated) and the book value per share of Allied Waste (as restated), (b) the
net income (loss) before extraordinary items available to common shareholders
per common and common equivalent shares of American and the book value per share
of American, (c) the combined unaudited pro forma net income (loss) before
extraordinary items available to common shareholders per common and common
equivalent shares of Allied Waste and the book value per share of Allied Waste,
after giving effect to the Merger on a pooling-of-interests basis; and (d) the
American equivalent combined net income (loss) before extraordinary items
available to common shareholders per common and common equivalent shares of
Allied Waste and the book value per share of Allied Waste, in each case as
attributable to the 1.65 shares of Allied Waste that will be received by
American stockholders for each share of American Common Stock. The information
presented in the table is not adjusted to exclude historical acquisition related
and non-recurring costs and unusual charges. In addition, these per share data
should be read in conjunction with the combined unaudited pro forma condensed
financial statements and the separate historical consolidated financial
statements of Allied Waste (as restated) and American and the notes thereto
appearing elsewhere herein or incorporated by reference herein. See "Allied
Waste and American Combined Unaudited Pro Forma Condensed Financial Statements."
<TABLE>
<CAPTION>
AMERICAN
ALLIED COMBINED EQUIVALENT
WASTE AMERICAN PRO FORMA COMBINED
------ -------- --------- ----------
<S> <C> <C> <C> <C>
Net income (loss) before extraordinary items
available to common shareholders per common and
common equivalent shares:
Year ended December 31, 1995..................... $ 0.35 $(0.85) $0.20 $ 0.33
Year ended December 31, 1996..................... (0.68) 0.01 (0.40) (0.66)
Year ended December 31, 1997..................... 0.62 0.53 0.54 0.89
Six months ended June 30, 1998................... 0.15 0.47 0.17 0.28
Book value per share:
December 31, 1997................................ 5.21 15.39 5.61 9.26
June 30, 1998.................................... 5.27 20.05 6.76 11.15
</TABLE>
- ---------------
Neither Allied Waste nor American has ever declared or paid cash dividends on
its common stock. See "Market Price Data -- Dividend Information."
15
<PAGE> 32
THE CHARTER AMENDMENT
At the Allied Waste Special Meeting, stockholders of Allied Waste will also
be asked to consider and act upon a proposal to approve an amendment to the
Restated Certificate of Incorporation of Allied Waste to increase the number of
authorized shares of Allied Waste Common Stock from 200,000,000 to 300,000,000.
As of the date hereof, approval of this amendment is not necessary for
consummation of the Merger. However, following the Merger, Allied Waste would
have approximately seven million shares of Allied Waste Common Stock available
for general corporate purposes and this number will be reduced by any
acquisitions for stock committed to by Allied Waste and American prior to the
Effective Time. The Board of Directors of Allied Waste believes that the Charter
Amendment is necessary in order to assure that after the Merger, Allied Waste
will have sufficient shares available for issuance at the Board of Directors'
discretion for future acquisitions, stock splits, stock dividends, equity
financings, employee benefit plans and other corporate purposes. The
availability of additional shares of Allied Waste Common Stock may have certain
"anti-takeover" effects. See "Amendment to the Restated Certificate of
Incorporation of Allied Waste." THE BOARD OF DIRECTORS OF ALLIED WASTE
RECOMMENDS THAT THE STOCKHOLDERS OF ALLIED WASTE VOTE FOR THE AMENDMENT TO THE
RESTATED CERTIFICATE OF INCORPORATION OF ALLIED WASTE.
16
<PAGE> 33
RISK FACTORS
In addition to the other information set forth in this Joint Proxy
Statement and Prospectus, the following factors should be considered by the
Allied Waste stockholders and the American stockholders before voting on the
proposals contained herein.
EXPECTED BENEFITS OF COMBINED BUSINESS MAY NOT BE ACHIEVED
There can be no assurance that the expected benefits of the Merger relative
to the combined business as described under "The Merger and Related
Transactions -- Joint Reasons for the Merger," "-- Additional Factors Considered
by the Allied Waste Board" and "-- Additional Factors Considered by the American
Board" will be achieved. Whether the anticipated benefits of the Merger are
ultimately achieved will depend on a number of factors, including the ability of
the combined company to achieve operating efficiencies, administrative cost
savings, geographic and other cost savings resulting from access to more
landfills, insurance and bonding cost reductions, lower cost of capital and
general economies of scale and the ability of the combined company to capitalize
on its combined asset base and strategic position.
STOCK PRICES MAY VARY IN RESPONSE TO CHANGES IN BUSINESS AND ECONOMIC CONDITIONS
The relative stock prices of the Allied Waste Common Stock and the American
Common Stock at the Effective Time may vary significantly from the prices as of
the date of execution of the Merger Agreement, the date hereof, the date on
which stockholders vote on the Merger, the date that shares of Allied Waste
Common Stock are received by holders of American Common Stock or the date on
which such shares of Allied Waste Common Stock are eventually sold due to, among
other factors, changes in the business, operations and prospects of Allied Waste
or American, as the case may be, market assessments of the likelihood that the
Merger will be consummated and the timing thereof and general market and
economic conditions. The Exchange Ratio is fixed and will not be adjusted based
on changes in the relative stock prices of the Allied Waste Common Stock and the
American Common Stock.
INTEGRATION OF ACQUIRED BUSINESSES
During 1997, Allied Waste acquired 65 companies (and sold 37 operations).
The acquired net revenue accounted for approximately 27.6% of Allied Waste's
revenues in 1997. Subsequent to December 31, 1997, Allied Waste acquired 32
companies, which collectively comprised approximately $355 million in annual
revenues. During 1997, American acquired 28 companies (and sold one operation),
which collectively comprised approximately $88 million in annual revenues.
Subsequent to December 31, 1997, American acquired 26 companies, which
collectively comprised approximately $70 million in annual revenues. Allied
Waste expects to continue to acquire appropriate landfills, collection
operations and transfer stations in the future. The financial position and
results of operations of Allied Waste will depend to a large extent on Allied
Waste's ability to integrate acquired operations effectively (including the
acquisition of American) and to realize expected cost savings and operational
efficiencies. There can be no assurance that Allied Waste's efforts to integrate
acquired operations will be effective, or that expected cost savings and
operational efficiencies will be realized. Failure to integrate effectively
acquired operations could have an adverse effect on Allied Waste's future
results of operations. As Allied Waste continues to pursue its acquisitions
strategy in the future, its financial position and results of operations may
fluctuate significantly from period to period.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the Merger by the Board of Directors
of American, American stockholders should be aware that the directors and
executive officers of American have certain interests in the Merger that are
different from, or in addition to, the interests of American stockholders
generally. These interests, together with other relevant factors, were
considered by the Board of Directors of American in making its recommendation
and approving the Merger Agreement. See "The Merger and Related
Transactions -- Possible Conflicts of Interest."
17
<PAGE> 34
RISKS ASSOCIATED WITH ALLIED WASTE'S ACQUISITION ACTIVITY
The solid waste industry is currently undergoing significant consolidation,
and Allied Waste encounters competition through pricing in its efforts to
acquire landfills, transfer stations and collection operations. Allied Waste's
vertical integration strategy depends on its ability to identify and acquire or
develop appropriate landfills, collection operations and transfer stations.
There can be no assurance that Allied Waste will be able to locate appropriate
acquisition candidates, that any identified candidates will be acquired or that
acquired operations will be integrated effectively or prove profitable.
Completion of an acquisition requires the expenditure of sizable amounts of
capital and the competition among companies pursuing acquisitions may increase
capital requirements. Allied Waste could be forced to alter its acquisition
activity in the future if such candidates become unavailable or too costly. In
connection with any transaction which has been or may be made by Allied Waste,
there may be liabilities imposed upon Allied Waste, including, without
limitation, liabilities arising from non-compliance with environmental laws by
prior owners or tax liabilities. If the Charter Amendment is not approved,
Allied Waste will, after the Merger, have a limited number of shares available
for general corporate purposes, including acquisitions. In such event, Allied
Waste's ability to effect acquisitions using its Common Stock may be limited
until additional shares of Allied Waste Common Stock are authorized.
COMPETITION FROM OTHER COMPANIES AND MUNICIPALITIES; LANDFILL ALTERNATIVES
The non-hazardous waste collection and disposal industry is led by four
large national waste management companies, Waste Management, Inc.,
Browning-Ferris Industries, Inc., Republic Services, Inc., and Allied Waste, and
includes numerous regional and local companies such as American, Casella Waste
Systems, Inc., Eastern Environmental Services, Inc., Superior Services, Inc. and
Waste Industries, Inc., all of which contribute to the high level of competition
that characterizes the industry. Some of the large national waste management
companies have considerably greater financial and operational resources than
Allied Waste. In addition, counties and municipalities that operate their own
waste collection and disposal facilities often enjoy the benefits of tax-exempt
financing and may control the disposal of waste collected within their
jurisdictions. Alternatives to landfill disposal, such as recycling and
composting, are increasingly being used, and incineration continues to be
utilized in some markets in which Allied Waste operates. There has also been an
increasing trend at the state and local levels to mandate waste reduction at the
source and to prohibit the disposal of certain types of wastes, such as yard
wastes, at landfills. This trend may result in a reduction in the volume of
waste going to landfills in certain areas, which may affect Allied Waste's
ability to operate its landfills at their full capacity and/or affect the prices
that can be charged for landfill disposal services. In addition, most of the
states in which Allied Waste operates landfills have adopted plans or
requirements that will require counties to adopt comprehensive plans to reduce,
through waste planning, composting and recycling or other programs, the volume
of solid waste deposited in landfills within the next few years. Obtaining
permits to operate non-hazardous solid waste landfills may be difficult and
expensive, often taking a number of years to obtain, requiring numerous hearings
and compliance with zoning, environmental and other regulatory measures, and
often being subject to resistance from citizen or other groups. There can be no
assurance that Allied Waste will be successful in obtaining or retaining permits
it requires, and an inability to receive such permits could have a material
adverse effect on Allied Waste's future results of operations. In connection
with Allied Waste's development of existing landfills, it is often necessary to
expend considerable time, effort and money to obtain permits required to
increase the capacity of these landfills. Allied Waste cannot predict whether or
not it will be able to obtain the governmental approvals necessary to establish
new or expand existing landfills and, if it does, whether or not it will be
economically beneficial to do so. In some areas, suitable land may be
unavailable for new landfill sites. There can be no assurance that Allied Waste
will be successful in obtaining new landfill sites or expanding the permitted
capacity of its current landfills once its landfill capacity has been consumed.
In such event, Allied Waste could be forced to dispose of collected waste at
landfills operated by its competitors or long-haul the waste at a higher cost to
Allied Waste's landfills, which could have a material adverse effect on Allied
Waste's landfill revenues and collection expenses.
18
<PAGE> 35
CAPITAL AND WORKING CAPITAL REQUIREMENTS; LEVERAGE
Allied Waste intends to fund its cash needs through cash flow from
operations and borrowings under an existing senior credit facility in the
principal amount of $1.1 billion (that matures in 2003) (of which approximately
$494.5 million was outstanding as of June 30, 1998), and its equipment lease
facilities. Because of the capital intensive nature of the solid waste industry,
Allied Waste may require additional equity and/or debt financing in order to
provide for cash in excess of the cash generated from operations for future
operations, capital expenditures, acquisitions, debt repayment obligations
and/or financial assurance obligations. A substantial portion of Allied Waste's
available cash will be required to be applied to service indebtedness, which is
expected to include approximately $146.8 million in annual principal and
interest payments. During 1998, Allied Waste also expects to spend approximately
$224 million for capital, closure and post-closure, and remediation expenditures
related to its landfill operations. Amounts expended on capital, closure and
post-closure and remediation expenditures will increase as a result of any
acquisitions or expansions of Allied Waste's operations. As a result of these
expenditures, Allied Waste may periodically have low levels of working capital
or be required to finance working capital deficits. Further regulatory action by
federal, state and local governments could accelerate expenditures for closure
and post-closure monitoring and obligate Allied Waste to spend sums in addition
to those presently reserved for such purposes. These factors, together with the
other factors discussed above, could substantially increase Allied Waste's
operating costs and impair Allied Waste's ability to invest in its facilities.
Allied Waste has substantial indebtedness with significant debt service
requirements and is leveraged. At June 30, 1998, Allied Waste's consolidated
debt was approximately $1.5 billion. The degree to which Allied Waste is
leveraged has important consequences, including the following: (i) the ability
of Allied Waste to obtain additional financing in the future, whether for
working capital, capital, closure, post-closure and remediation expenditures,
acquisitions, development or other purposes, may be impaired, (ii) a substantial
portion of Allied Waste's cash flow from operations is required to be dedicated
to the payment of principal and interest on its debt, thereby reducing funds
available to Allied Waste for other purposes, (iii) Allied Waste's flexibility
in planning for or reacting to changes in market conditions may be limited, (iv)
Allied Waste may be more vulnerable in the event of a downturn in its business
and (v) to the extent of Allied Waste's outstanding debt under its senior credit
facility at variable rates that have not been hedged, Allied Waste will be
vulnerable to increases in interest rates. The ability of Allied Waste to meet
its debt service obligations will depend on the future operating performance and
financial results of Allied Waste, which will be subject in part to factors
beyond the control of Allied Waste. Although Allied Waste believes that its cash
flow will be adequate to meet its interest payments, there can be no assurance
that Allied Waste will continue to generate earnings in the future sufficient to
cover its fixed charges. If Allied Waste is unable to generate earnings in the
future sufficient to cover its fixed charges and is unable to borrow sufficient
funds under either the senior credit facility or from other sources, it may be
required to refinance all or a portion of its existing debt or to sell all or a
portion of its assets. There can be no assurance that a refinancing would be
possible, nor can there be any assurance as to the timing of any asset sales or
the proceeds which Allied Waste could realize therefrom. In addition, the terms
of certain of its debt restrict Allied Waste's ability to sell assets and Allied
Waste's use of the proceeds therefrom. The senior credit facility and the
indentures relating to Allied Waste's other debt contain a number of significant
covenants that, among other things, will restrict the ability of Allied Waste
and its subsidiaries to incur additional indebtedness, incur liens on property
or assets, repay other indebtedness, pay dividends, enter into certain
investments or transactions, repurchase or redeem capital stock, engage in
mergers or consolidations, or engage in certain transactions with subsidiaries
and affiliates and otherwise restrict corporate activities. In addition, the
senior credit facility also requires Allied Waste to maintain certain net worth,
debt to equity, and cash flow to debt ratios. There can be no assurance that
such restrictions will not adversely affect Allied Waste's ability to finance
its future operations or capital needs or engage in other business activities
that may be in the interest of Allied Waste. If for any reason, including a
shortfall in anticipated operating results or proceeds from assets sales, Allied
Waste were unable to meet its debt service obligations or comply with such
covenants, it would be in default under the terms of certain of its debt
agreements. In the event of such a default, the holders of such debt could elect
to declare all of such debt immediately due and payable, including accrued and
unpaid interest, and to terminate their commitments with respect to funding
obligations under such debt. In addition, such holders could proceed against any
19
<PAGE> 36
collateral which, in the case of certain debt, consists of the capital stock of
Allied Waste's subsidiaries and substantially all of the assets of Allied Waste.
Any default with respect to any of Allied Waste's debt could result in a default
under other debt or result in the bankruptcy of Allied Waste.
COST OF COMPLIANCE WITH ENVIRONMENTAL REGULATIONS
The scope and stringency of laws and regulations designed to protect the
environment have increased dramatically. Compliance with the evolving and
expanding regulatory requirements, including the adoption in October 1991 of
Subtitle D regulations pursuant to the U.S. Resource Conservation and Recovery
Act of 1976, as amended, has been and will continue to be costly. Rigorous
regulatory standards require waste management companies to enhance or replace
equipment and to modify landfill operations or, in some cases, to close
landfills. There can be no assurance that Allied Waste will be able to implement
price increases sufficient to offset the cost of complying with these standards.
In addition, environmental regulatory changes could accelerate expenditures for
closure and post-closure monitoring at solid waste facilities and obligate
Allied Waste to spend sums in addition to those presently accrued for such
purposes. These factors could increase substantially Allied Waste's operating
costs as well as the possibility of the impairment of Allied Waste's investment
in its facilities. In addition to the costs of complying with environmental
regulations, Allied Waste will continue to be involved in legal proceedings in
the ordinary course of business. Government agencies may seek to impose fines on
Allied Waste for alleged failure to comply with laws and regulations or to
revoke or to deny the renewal of, Allied Waste's permits and licenses. In
addition, governmental agencies, as well as surrounding landowners, may assert
claims against Allied Waste alleging environmental damage or violations of
permits and licenses pursuant to which Allied Waste operates. Citizens' groups
have become increasingly active in challenging the grant or renewal of permits
and licenses, and responding to such challenges has further increased the costs
associated with permitting new facilities or expanding current facilities. A
significant judgment against Allied Waste, the loss of a significant permit or
license or the imposition of a significant fine could have a material adverse
affect on Allied Waste's financial condition. Certain of Allied Waste's waste
disposal operations traverse state and county boundaries. In the future, Allied
Waste's collection, transfer and landfill operations may also be affected by
legislation that may be proposed in the United States Congress that would
authorize the states to enact legislation governing interstate shipments of
waste. Such proposed federal legislation may allow individual states to prohibit
the disposal of out-of-state waste or to limit the amount of out-of-state waste
that could be imported for disposal and would require states, under certain
circumstances, to reduce the amounts of waste exported to other states. If this
or similar legislation is enacted, states in which Allied Waste will operate
landfills could act to limit or prohibit the importation of out-of-state waste
or exportation of waste. Such state actions could adversely affect landfills
within these states that receive a significant portion of waste originating from
out-of-state. Management believes that several states have proposed or have
considered adopting legislation that would regulate the interstate
transportation and disposal of waste in their landfills. Many states have also
adopted legislative and regulatory measures to mandate or encourage waste
reduction at the source and waste recycling.
The Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended ("CERCLA"), has been interpreted to impose joint and several
liability on current and former owners or operators of facilities at which there
has been a release or a threatened release of a "hazardous substance" and on
persons who generate, transport or arrange for the disposal of such substances
at the facility. Hundreds of substances are defined as "hazardous" under CERCLA
and their presence, even in minute amounts, can result in substantial liability.
The statute provides for the remediation of contaminated facilities and imposes
costs on the responsible parties. The expense of conducting such a cleanup can
be significant. Notwithstanding its efforts to comply with applicable
regulations and to avoid transporting and receiving hazardous substances, such
substances may be present in waste collected by Allied Waste or disposed of in
its landfills, or in waste collected, transported or disposed of in the past by
acquired companies. Cleanup liability may also arise under various state laws
similar to CERCLA. As used in this Prospectus, "non-hazardous waste" means
substances, including asbestos, that are not defined as hazardous waste under
federal regulations.
In the solid waste industry, only very limited environmental impairment
insurance regarding landfills is available. Allied Waste carries environmental
impairment liability insurance for all of its operating landfills
20
<PAGE> 37
except one owned and four operated sites. The environmental impairment liability
insurance is in the amount of up to $5 million for the policy term in excess of
a $1 million deductible per claim. An uninsured or underinsured claim of
sufficient magnitude would require Allied Waste to fund such claim from cash
flow generated by operations or borrowings under its senior credit facility or
other sources of liquidity. There can be no assurance that Allied Waste would be
able to fund any such claim from operations, its senior credit facility or
elsewhere.
IMPACT OF ADVERSE WEATHER CONDITIONS
The collection and landfill operations of Allied Waste could be adversely
affected by protracted periods of inclement weather which interfere with
collection and landfill operations, delay the development of landfill capacity
and/or reduce the volume of waste generated by Allied Waste's customers. In
addition, particularly harsh weather conditions may result in the temporary
suspension of certain of Allied Waste's operations. There can be no assurance
that protracted periods of inclement weather will not have a material adverse
effect on Allied Waste's future results of operations.
RELIANCE ON MANAGEMENT
Allied Waste is highly dependent upon its senior management team. In
addition, as Allied Waste continues to grow, its requirements for operations
management with waste industry experience will also increase. The availability
of such experienced management at compensation levels that are within industry
norms is not known. 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 Allied Waste.
NO DIVIDENDS
Allied Waste has never declared or paid cash dividends on Allied Waste
Common Stock. Allied Waste currently expects to retain its earnings for its
business and does not anticipate paying dividends on Allied Waste Common Stock
at any time in the foreseeable future. Subject to the restrictions and
prohibitions on dividend payments in Allied Waste's debt instruments, the
decision whether to apply legally available funds to the payment of dividends on
Allied Waste Common Stock will be made by the Allied Waste Board of Directors
from time to time in the exercise of its business judgment. See "Market Price
Data."
POTENTIAL EFFECT OF CERTAIN ALLIED WASTE ANTI-TAKEOVER PROVISIONS AND DELAWARE
LAW
Certain provisions of the Allied Waste Amended Certificate of Incorporation
(the "Allied Waste Certificate"), the Allied Waste By-laws, and the DGCL may
have the effect of making more difficult an acquisition of Allied Waste in a
transaction that is not approved by the Allied Waste Board of Directors. For
example, the Allied Waste Board of Directors is given the power to issue up to
10,000,000 shares of Preferred Stock of Allied Waste in one or more series, and
to fix the rights and preferences as to any such series, without further
authorization of the holders of Allied Waste Common Stock. Certain provisions of
the Allied Waste By-laws regulate or limit the right of stockholders to call
meetings of stockholders, nominate persons for election as directors, and to
submit proposals at meetings of shareholders. In addition, Section 203 limits
the right of certain persons who acquire large amounts of Allied Waste Common
Stock without the prior approval of the Board of Directors of Allied Waste to
pursue business combination and certain other transactions involving Allied
Waste. These provisions may have the effect of discouraging a third party from
making a tender offer or otherwise attempting to gain control of Allied Waste
even though such an attempt might be economically beneficial to Allied Waste and
its stockholders. See "Comparative Rights of Stockholders of Allied Waste and
American," and "-- Description of Allied Waste Capital Stock -- Preferred
Stock."
THE MEETINGS
DATE, TIME AND PLACE OF THE MEETINGS
The Allied Waste Special Meeting will be held at p.m., Time,
on , 1998, at . The American Special Meeting will be held
at a.m., Time, on , 1998, at .
21
<PAGE> 38
PURPOSE OF THE MEETINGS
The purpose of the Allied Waste Special Meeting is to consider and act upon
the following proposals: (i) to approve and adopt the Merger Agreement,
including the issuance of shares of Allied Waste Common Stock pursuant thereto,
and (ii) to approve an amendment to the Allied Waste Restated Certificate of
Incorporation to increase the number of authorized shares of Allied Waste Common
Stock from 200,000,000 to 300,000,000 (the "Charter Amendment"). Allied Waste
stockholder approval of the Merger is required in accordance with the rules of
the Nasdaq Stock Market since the Allied Waste Common Stock to be issued in
connection with the Merger will be in excess of 20% of the number of shares of
Allied Waste Common Stock outstanding before such issuance and, it is
anticipated that adoption of the Charter Amendment will be required in order to
ensure that there will be sufficient shares of Allied Waste Common Stock
available for issuance in connection with the Merger.
The purpose of the American Special Meeting is to consider and act upon a
proposal to approve and adopt the Merger Agreement.
RECORD DATE AND OUTSTANDING SHARES
Only holders of record of Allied Waste Common Stock at the close of
business on the Allied Waste Record Date are entitled to notice of, and to vote
at, the Allied Waste Special Meeting, and only holders of record of American
Common Stock at the close of business on the American Record Date are entitled
to notice of, and to vote at, the American Special Meeting.
On the Allied Waste Record Date, there were holders of record
of Allied Waste Common Stock and shares of Allied Waste Common Stock
issued and outstanding. Each share of Allied Waste Common Stock entitles the
holder thereof to one vote on each matter submitted for stockholder approval.
On the American Record Date, there were holders of record of
American Common Stock and shares of American Common Stock issued
and outstanding. Each share of American Common Stock entitles the holder thereof
to one vote on each matter submitted for stockholder approval.
An automated system administered by the transfer agent of Allied Waste and
American, respectively, will be used to tabulate the votes at the Meetings.
Abstentions and broker non-votes are counted as shares present in the
determination of whether the shares of stock represented at the meeting
constitutes a quorum. In the case of proposals requiring the affirmative vote of
the holders of a majority of shares present or represented by proxy and entitled
to vote thereon (i.e., the vote of holders of Allied Waste Common Stock to
approve the Merger Agreement), abstentions will be counted as part of the total
number of votes cast on such proposals in determining whether the proposals have
received the requisite number of favorable votes, whereas broker non-votes will
not be counted as part of the total number of votes cast on such proposals.
Thus, abstentions will have the same effect as votes against any such proposal,
whereas broker non-votes will have no effect in determining whether any such
proposal has been approved by the stockholders.
In the case of proposals requiring the affirmative vote of the holders of a
specified percentage of outstanding shares (i.e., the vote of holders of
American Common Stock regarding the approval and adoption of the Merger
Agreement and the vote of holders of Allied Waste Common Stock regarding the
approval of the amendment of Allied Waste's Amended Certificate of
Incorporation) both abstentions and broker non-votes will be counted as part of
the total number of votes cast on such proposals in determining whether the
proposals have been approved by the stockholders. Thus, both abstentions and
broker non-votes will have the same effect as a vote against such proposals.
VOTING AND REVOCATION OF PROXIES
All properly executed proxies that are not revoked will be voted at the
Allied Waste Special Meeting and the American Special Meeting, as applicable, in
accordance with the instructions contained therein. If a holder of Allied Waste
Common Stock executes and returns a proxy and does not specify otherwise, the
shares represented by such proxy will be voted FOR (i) approval and adoption of
the Merger Agreement (including
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the issuance of shares of Allied Waste Common Stock in connection therewith) and
(ii) approval of the amendment to the Allied Waste Restated Certificate of
Incorporation to increase the number of authorized shares of Allied Waste Common
Stock from 200,000,000 to 300,000,000. If a holder of American Common Stock
executes and returns a proxy and does not specify otherwise, the shares
represented by such proxy will be voted FOR approval and adoption of the Merger
Agreement. A stockholder of Allied Waste or American who has executed and
returned a proxy may revoke it at any time before it is voted at the respective
meeting by (a) executing and returning a proxy bearing a later date, (b) filing
a written notice of such revocation with the Secretary of Allied Waste or
American, as appropriate, stating that the proxy is revoked or (c) attending the
meeting and voting in person.
Delaware law does not require that holders of Allied Waste Common Stock or
American Common Stock who object to the Merger and who vote against or abstain
from voting in favor of the Merger be afforded any appraisal rights or the right
to receive cash for their shares. Neither Allied Waste nor American intends to
make any such rights available to its stockholders.
VOTE REQUIRED FOR APPROVAL
ALLIED WASTE. The presence at the Allied Waste Special Meeting, in person
or by proxy, of holders of a majority of the outstanding shares of Allied Waste
Common Stock entitled to vote at the meeting will constitute a quorum for the
transaction of business. Under the rules of the Nasdaq Stock Market, approval of
the Merger (including the issuance of shares of Allied Waste Common Stock in
connection therewith) requires the affirmative vote of the holders of a majority
of the shares of Allied Waste Common Stock voted, in person or by proxy, at the
Allied Waste Special Meeting provided that the total vote cast on the proposal
represents over 50% in interest of all shares entitled to vote on the proposal.
On the Allied Waste Record Date, the directors and officers of Allied Waste and
their affiliates held approximately [ ] million shares of Allied Waste
Common Stock, representing approximately [ ]% of the outstanding shares, and
such persons have indicated to Allied Waste that they intend to vote their
shares in favor of the Merger and the Charter Amendment. In addition, certain
directors (Roger A. Ramsey, Thomas Van Weelden and those directors of Allied
Waste affiliated with Apollo Advisors II, L.P. or Blackstone Management
Associates II, L.L.C.) and their affiliates have agreed with American to vote
the shares of Allied Waste over which they have voting control (of which
shares are included in the shares beneficially owned by directors of Allied
Waste described in the previous sentence) in favor of the Merger and the Charter
Amendment. As of the Allied Waste Record Date, these directors and their
affiliates owned shares of Allied Waste Common Stock entitled to
vote at the Allied Waste Special Meeting, representing approximately % of
the then outstanding shares.
Adoption and approval of the Charter Amendment requires the affirmative
vote of the holders of a majority of the outstanding shares of Allied Waste
Common Stock entitled to vote on such proposal.
AMERICAN. The presence at the American Special Meeting, in person or by
proxy, of holders of a majority of the issued and outstanding shares of American
Common Stock entitled to vote at the meeting will constitute a quorum for the
transaction of business. Pursuant to Delaware law, approval and adoption of the
Merger Agreement requires the affirmative vote of the holders of a majority of
the shares of American Common Stock entitled to vote thereon. All officers and
directors of American who, as of the American Record Date, were stockholders of
American have indicated to American that they intend to vote their shares of
American Common Stock in favor of the Merger Agreement. As of the American
Record Date, such individuals collectively had the right to vote approximately
[ ] shares of American Common Stock, representing less than % of the
outstanding shares of American Common Stock on such date.
SOLICITATION OF PROXIES
In addition to solicitation by mail, the directors, officers, and employees
of each of Allied Waste and American may solicit proxies from their respective
stockholders by personal interview, telephone, telegram, facsimile, or
otherwise. Allied Waste and American will each bear the costs of the
solicitation of proxies from
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their respective stockholders, except that Allied Waste and American will share
equally the cost of printing and filing this Joint Proxy Statement and
Prospectus. Allied Waste has engaged , a proxy solicitation firm,
to assist in the solicitation of proxies from Allied Waste stockholders. Allied
Waste will pay the fees in connection with the solicitation by such firm which
are anticipated to be $ plus such firm's out-of-pocket expenses.
American has engaged , a proxy solicitation firm, to assist
in the solicitation of proxies from American stockholders. American will pay the
fees in connection with the solicitation by such firm which are anticipated to
be $ , plus such firm's out-of-pocket expenses. Arrangements will be made
with brokerage firms and other custodians, nominees, and fiduciaries who hold
Allied Waste Common Stock and American Common Stock of record for the forwarding
of solicitation materials to the beneficial owners thereof. Allied Waste and
American will reimburse brokers, custodians, nominees and fiduciaries for the
reasonable out-of-pocket expenses incurred by them in connection therewith.
THE MERGER AND RELATED TRANSACTIONS
The detailed terms and conditions of the Merger, including conditions to
consummation of the Merger, are contained in the Merger Agreement, which is
attached hereto as Appendix A and incorporated herein by reference. The
following discussion sets forth a description of material terms and conditions
of the Merger Agreement. The description in this Joint Proxy Statement and
Prospectus of the terms and conditions of the Merger is qualified in its
entirety by reference to the Merger Agreement.
GENERAL DESCRIPTION OF THE MERGER
The Merger Agreement provides that, at the Effective Time, Acquisition will
merge with and into American, whereupon American will become a wholly owned
subsidiary of Allied Waste and each outstanding share of American Common Stock
will be converted into 1.65 shares of Allied Waste Common Stock, with cash being
paid in lieu of fractional shares. In addition, at the Effective Time, each
issued and outstanding share of Acquisition Common Stock shall be converted into
one share of common stock, par value $.01 per share, of the Surviving
Corporation.
Based upon the number of shares of Allied Waste Common Stock and American
Common Stock outstanding as of , 1998, and assuming all outstanding
American Options are exercised prior to the consummation of the Merger,
approximately million shares of Allied Waste Common Stock will be
outstanding immediately following the Effective Time, of which approximately
million shares, representing % of the total, will be held by
former holders of American Common Stock and American Options.
BACKGROUND OF THE MERGER
Thomas Van Weelden, President and Chief Executive Officer of Allied Waste,
and Richard De Young, Chairman, President and Chief Executive Officer of
American, have known each other for a number of years.
On June 15, 1998, Mr. Van Weelden contacted Mr. De Young and advised him
that Allied Waste was actively pursuing a number of potential business
combination transactions and that Allied Waste considered American to be the
most attractive strategic partner for Allied Waste. The two executives discussed
the potential operational benefits of a combination of Allied Waste and American
and decided to further explore the possibility of a mutually acceptable
transaction. Over the next two weeks, Messrs. Van Weelden and De Young had a
number of conversations relating to the strategic and operational benefits of a
combination transaction and the process by which they could continue to explore
this possibility.
In late June 1998, Allied Waste and its legal counsel provided American and
its legal counsel with a form of merger agreement in order to outline the
possible structure of a transaction. Representatives of each of Allied Waste and
American met on June 30, 1998 to discuss issues raised by the proposed form of
merger agreement. In late July 1998, pursuant to confidentiality arrangements,
representatives of Allied Waste and American began reviewing business and
financial information provided by the other company.
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Early in the week of August 3, 1998, in a number of conversations, Messrs.
Van Weelden and De Young concluded that there was reasonable basis for actively
pursuing a transaction and arranged a meeting for August 6 at which the
financial terms and principal contractual terms of a possible transaction would
be addressed for the first time. Prior to the August 6 meeting, representatives
of the two companies' financial advisors reviewed certain business and financial
information relating to Allied Waste, American and the possible strategic
benefits of a combination of the two companies and met with members of the
management of both companies.
On August 6, 1998, Mr. Van Weelden and members of Allied Waste management
met with Mr. De Young and certain members of American's management and outside
legal counsel. At this meeting, Mr. Van Weelden advised the representatives of
American that Allied Waste would pursue a transaction only if American
demonstrated its full commitment to the proposed strategic combination by
granting Allied Waste the option contemplated by the Stock Option Agreement and
representatives of American indicated that the financial terms of the
transaction would impact American's willingness to grant an option. At this
meeting, Mr. Van Weelden and Mr. De Young discussed for the first time possible
exchange ratios for a merger transaction. Negotiations over the terms of a
merger agreement and stock option agreement also occurred at this meeting and
continued through execution of the agreements.
On August 7, 1998, Mr. Van Weelden, other members of Allied Waste
management, and Allied Waste's legal and financial advisors reviewed the
possible transaction involving American with the Executive Committee of the
Board of Directors of Allied Waste. The members of the Executive Committee of
the Board of Directors of Allied Waste unanimously agreed that Allied Waste
should communicate to American a proposal involving an exchange ratio of 1.65
shares of Allied Waste Common Stock for each share of American Common Stock
conditioned upon American agreeing to enter into the Stock Option Agreement.
Following the meeting of the Allied Waste Executive Committee, Mr. Van
Weelden advised Mr. De Young of the terms of Allied Waste's proposal and that
this proposal was Allied Waste's final proposal. Mr. De Young indicated that he
would present the Allied Waste proposal to the Board of Directors of American.
On August 8, 1998, the American Board held a special meeting at which (i)
the Board reviewed with American's management and legal and financial advisors
the proposed terms of the Merger and Merger Agreement and the anticipated
effects of the Merger on American and the combined companies, (ii) members of
American's senior management and American's financial and legal advisors made
presentations concerning the Merger, and (iii) CIBC Oppenheimer rendered its
written opinion that, as of such date, and based upon and subject to the
assumptions made, matters considered and limitations on the review undertaken
set forth therein, the Exchange Ratio pursuant to the Merger Agreement was fair,
from a financial point of view, to the holders of American Common Stock. On
August 10, 1998, the American Board unanimously approved the Merger Agreement
and recommended that the stockholders of American vote in favor of the Merger.
At that meeting, the American Board took into consideration certain
non-financial changes in the final terms of the proposed Merger Agreement from
the draft reviewed at the August 8 special meeting.
On August 10, 1998, the Board of Directors of Allied Waste held a special
meeting at which the Board members discussed the proposed Merger. At this
meeting, (i) the Board reviewed with Allied Waste's management and legal and
financial advisors the proposed terms of the Merger and Merger Agreement and the
probable effects of the Merger on Allied Waste and the combined company, (ii)
members of Allied Waste's senior management and Allied Waste's legal advisor
made presentations concerning the Merger, and (iii) CSFB reviewed with the
Allied Waste Board the financial analyses prepared by CSFB in connection with
its evaluation of the Exchange Ratio and rendered its written opinion to the
effect that, as of such date and based upon and subject to certain matters
stated in such opinion, the Exchange Ratio was fair to Allied Waste from a
financial point of view. At such meeting, the Allied Waste Board unanimously
approved the Merger Agreement and recommended that the stockholders of Allied
Waste vote in favor of the Merger.
The Merger Agreement was executed early in the evening of August 10, 1998.
A joint public announcement was made by the parties on the morning of August 11,
1998.
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JOINT REASONS FOR THE MERGER
The Boards of Directors of Allied Waste and American believe that the
Merger represents an important strategic opportunity for two companies with
similar business strategies and corporate cultures and complementary operations
and geographical presence. The Allied Waste and American Boards believe that the
company resulting from the Merger will have an experienced and talented
operating management team operating some of the highest quality assets in the
solid waste management industry in the United States. Both Boards of Directors
believe that Allied Waste and American, as a combined company, will have greater
financial strength and increased operational efficiencies, earning power and
longer term growth potential than either Allied Waste or American would have on
its own. The Allied Waste Board and the American Board identified a number of
potential benefits of the Merger which they believe will contribute to the
success of the combined company and thus inure to the benefit of stockholders of
both companies, including the following:
ENHANCED FUTURE GROWTH OPPORTUNITIES. The strategy of both Allied Waste
and American has been to expand their solid waste management services
aggressively by acquiring and developing additional solid waste collection
operations, landfills and transfer stations. Both companies anticipate that
significant attractive consolidation opportunities currently exist as a result
of added service requirements, increased environmental regulation and public
concern over the environment, all of which have contributed to higher costs
associated with providing waste management services generally. The Boards of
Directors of Allied Waste and American believe that the combined company will be
better positioned to identify and pursue consolidation opportunities by being
able to draw upon the resources, experience and development efforts of both
Allied Waste and American.
GEOGRAPHICALLY COMPLEMENTARY OPERATIONS. Both Allied Waste and American
are engaged in the non-hazardous solid waste management business throughout the
United States and provide solid waste management services, consisting of solid
waste collection, transfer, disposal and recycling services to municipal,
commercial, industrial and residential customers. Together, Allied Waste and
American have collection operations, transfer facilities, and landfills that are
highly complementary. As a result, the combined company will be able to more
effectively compete in a variety of highly competitive markets. Both Boards of
Directors also considered the strategic and operational opportunities between
the markets served by Allied Waste and those served by American and believe that
a combination of Allied Waste and American will result in the potential for
further growth and operational efficiencies by allowing the combined company to
expand, complete and link existing service areas.
STRENGTHENED OPERATIONS AND MARKET DEVELOPMENT MANAGEMENT. Both Allied
Waste and American have historically experienced external growth through various
acquisitions and business combinations. The Boards of Directors of Allied Waste
and American believe that the combined company will be able to take advantage of
the best personnel in the operations and market development areas and,
therefore, will be better positioned to sustain the growth of the combined
company and achieve operational efficiencies.
SYNERGIES OF THE COMBINED COMPANY. On a pro forma combined basis, Allied
Waste and American had 1997 revenues of approximately $1.24 billion and, as of
June 30, 1998, total assets in excess of $3.2 billion. The combined company
expects to serve more than 2.2 million customers through the operation of
approximately 69 landfills, 117 collection companies and 71 transfer stations.
Each Board of Directors believes that the Merger should result in a number of
important cost savings and operational efficiencies, including the opportunity
to leverage certain financial and administrative functions over a larger
operational and revenue base, reduce capital expenditures and lower costs of
capital, insurance and bonding. In evaluating the Merger, each Board of
Directors also considered the desirability of other potential savings from the
synergies between Allied Waste and American and the integration of the
companies' operations, including administrative cost savings through elimination
of duplicative positions, the realization of geographic and other efficiencies
resulting from access to more landfills, decreased travel time to such landfills
and increased internalization of collected waste and the ability to reduce the
capital expenditures of the combined company relative to the capital expenditure
budgets for the two companies operating separately. The managements of Allied
Waste and American estimate the potential cost savings from the Merger to be
approximately $24.5
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million pre-tax per annum, approximately 90% of which are expected to be
achieved within the first 90 days of operations subsequent to the Merger,
although there can be no assurance as to the timing or amount of such potential
cost savings.
INCREASED FINANCIAL FLEXIBILITY. Both Boards concluded that the Merger
will result in a combined company having enhanced cash flow and net income than
either company would have operating separately. In addition, following the
Merger, Allied Waste will have less financial leverage and, as a result, the
combined company should have a lower cost of capital and increased financial
capacity to support its operations, pursue acquisition opportunities, and to
sustain future growth.
ADDITIONAL FACTORS CONSIDERED BY THE ALLIED WASTE BOARD
The Board of Directors of Allied Waste has determined that the terms of the
Merger Agreement and the transactions contemplated thereby, which were
established through arms'-length negotiation with American, are fair to, and in
the best interests of, Allied Waste and its stockholders. In reaching this
determination, the Allied Waste Board consulted with management of Allied Waste,
as well as its accounting, financial and legal advisors, and considered the
factors described above under "-- Joint Reasons for the Merger" and a number of
additional factors, including the following:
- -- the effectiveness of the Merger in pursuing and implementing Allied Waste's
long-term growth strategy -- in that regard, the combination with American is
expected to
- permit Allied Waste to benefit from the growth from the existing
operations of both Allied Waste and American as enhanced by the cost
savings and operational efficiencies resulting from the Merger and
- provide Allied Waste with greater ability to identify and pursue the
acquisition of additional solid waste collection, transfer and recycling
operations, and landfills. This will enable Allied Waste to further one
of its strategic objectives of more effectively participating in the
ongoing consolidation of the solid waste services industry. This greater
ability is expected to result from the combined company's enhanced
financial strength and flexibility, broadened geographic base of
operations, and an expanded operations and market development team
(including the services of a consulting group affiliated with Richard De
Young, American's Chairman, Chief Executive Officer and President);
- -- the financial condition, results of operations, businesses and prospects of
Allied Waste and American, including, but not limited to, information with
respect to their respective recent and historic stock prices and earnings
performance, and the expected accretive nature of the Merger to the earnings
per share of Allied Waste stockholders;
- -- the judgment of management of Allied Waste that the Merger is in the best
interests of Allied Waste and its stockholders and will result in a company
with an enhanced strategic, operational and financial position;
- -- the terms and conditions of the Merger Agreement, the Stock Option Agreement
and related agreements, all of which were negotiated at arms'-length, which
were viewed as evidencing a strong commitment by both companies to completing
the Merger and providing an equitable basis, financial and otherwise, for the
Merger from the standpoint of Allied Waste;
- -- the financial analyses presented by CSFB and the written opinion of CSFB to
the effect that, as of August 10, 1998 and based upon and subject to certain
matters stated in such opinion, the Exchange Ratio was fair to Allied Waste
from a financial point of view (which analyses and opinion were considered in
their entirety, without reliance or emphasis on any specific analysis); see
"-- Opinion of Financial Advisor to Allied Waste";
- -- the expected ability to quickly and effectively combine and integrate the
operations and support functions of Allied Waste and American;
- -- current industry, economic and market conditions, including trends which
encourage consolidation in the solid waste services industry;
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- -- the likelihood of the Merger being approved by the appropriate regulatory
authorities; see "-- Government and Regulatory Approvals";
- -- the advice of Allied Waste's independent accountants with respect to the
ability to account for the Merger as a pooling of interests; see
"-- Accounting Treatment";
- -- the advice of Allied Waste's counsel that the Merger should be treated as a
tax-free reorganization; see "-- Material Federal Income Tax Consequences";
- -- the effect of the Merger on Allied Waste's other constituencies, including
its senior management and other employees, customers and the communities
served by Allied Waste;
- -- the risk that the Merger would not be consummated;
- -- the termination fee to be paid by Allied Waste to American in the event of
certain terminations of the Merger Agreement; and
- -- the charges expected to be incurred by Allied Waste in connection with the
Merger.
The Allied Waste Board of Directors also evaluated the risks inherent in
any business combination that currently unanticipated difficulties could arise
in the process of integrating the operations of combining companies and that the
cost savings and operational efficiencies expected to result from the
combination may not be realized or, if realized, may not be realized within the
period expected. In reviewing these risks, the Allied Waste Board considered the
experience of Allied Waste management in effectively integrating and managing
past acquisitions and combinations and the arrangements with the executive
officers of American to obtain their assistance in a transition period following
the Merger. Having assessed these risks, the Board of Directors of Allied Waste
concluded that the management of the combined company would be likely to manage
these risks successfully. The Allied Waste Board also considered the
acquisition-related and non-recurring charges expected to be incurred in
connection with the Merger and the dilution to 1997 and 1998 restated historical
results of operations for the combined companies.
The foregoing discussion of the information and factors considered by the
Allied Waste Board is not intended to be exhaustive. In view of the variety of
factors considered in connection with its evaluation of the Merger, the Allied
Waste Board did not find it practicable to and did not quantify or otherwise
assign relative weights to the specific factors considered in reaching its
determination. The determination was made after consideration of all of the
factors as a whole. In addition, individual members of the Allied Waste Board
may have given different weights to the different factors.
RECOMMENDATION OF THE BOARD OF DIRECTORS OF ALLIED WASTE
For the reasons set forth under "-- Joint Reasons for the Merger" and
"-- Additional Factors Considered by the Allied Waste Board," the Board of
Directors of Allied Waste believes that the terms of the Merger Agreement and
the Merger are fair to, and in the best interests of, Allied Waste and the
holders of Allied Waste Common Stock. All members of the Board of Directors of
Allied Waste approved the Merger Agreement. THE ALLIED WASTE BOARD UNANIMOUSLY
RECOMMENDS THAT THE HOLDERS OF ALLIED WASTE COMMON STOCK VOTE "FOR" APPROVAL AND
ADOPTION OF THE MERGER AGREEMENT AND THE ISSUANCE OF SHARES OF ALLIED WASTE
COMMON STOCK PURSUANT THERETO.
ADDITIONAL FACTORS CONSIDERED BY THE AMERICAN BOARD
In reaching its conclusion to approve the Merger Agreement, the Board of
Directors of American consulted with the management of American, as well as with
its financial, accounting and legal advisors, and considered the factors
described above under "-- Joint Reasons for the Merger" and a number of
additional factors, including the following:
- -- the effectiveness of the Merger in implementing and accelerating American's
basic long-term growth strategy, and the compatibility of the respective
business strategies of American and Allied Waste;
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- -- the financial performance and condition, business and prospects of Allied
Waste and American, including, but not limited to, information with respect
to their respective recent and historic stock prices and earnings
performance, and the accretive nature of the Merger to the earnings per
shares of American's stockholders;
- -- the effect on American's stockholders of American continuing as a stand-alone
entity compared to the effect of American combining with Allied Waste, in
light of the factors summarized above with respect to the financial condition
and prospects of the two companies on a stand-alone basis and of the combined
company, and the current economic, financial and business environment;
- -- the detailed financial analysis, pro forma and other information with respect
to Allied Waste and American presented by CIBC Oppenheimer, as well as the
American Board's own knowledge of Allied Waste, American and their respective
businesses;
- -- the written opinion of CIBC Oppenheimer that, as of August 8, 1998, and based
upon and subject to the assumptions made, matters considered and limitations
on the review undertaken set forth therein, the Exchange Ratio was fair from
a financial point of view to the holders of American Common Stock; see
"-- Opinions of Financial Advisors -- American";
- -- the terms of the Merger Agreement, which are generally reciprocal in nature,
and certain other information regarding the Merger, including the terms and
structure of the Merger;
- -- that American stockholders will own approximately % of Allied Waste
immediately following the Merger;
- -- the likelihood of the Merger being approved by the appropriate regulatory
authorities; see "Government and Regulatory Approvals";
- -- the advice of American's independent auditors with respect to the ability to
account for the Merger as a pooling-of-interests; see "-- Accounting
Treatment";
- -- the advice of American's counsel that the Merger should be treated as a
tax-free reorganization; see "Material Federal Income Tax Consequences";
- -- the possible difficulty and management distraction inherent in integrating
two large and geographically dispersed operations and the risk that the
synergies and benefits sought in the Merger would not be fully achieved;
- -- the risk that the Merger would not be consummated;
- -- the termination fee to be paid by American to Allied Waste and the maximum
cost to American of the option granted to Allied Waste in the event of
certain terminations of the Merger Agreement of $40 million; and
- -- the charges expected to be incurred by Allied Waste in connection with the
Merger.
The foregoing discussion of the information and factors considered by the
American Board is not intended to be exhaustive. In view of the variety of
factors considered in connection with its evaluation of the Merger, the American
Board did not find it practicable to and did not quantify or otherwise assign
relative weights to the specific factors considered in reaching its
determination. The determination was made after consideration of all of the
factors as a whole. In addition, individual members of the American Board may
have given different weights to the different factors.
RECOMMENDATION OF THE BOARD OF DIRECTORS OF AMERICAN
For the reasons set forth under "-- Joint Reasons for the Merger" and
"Additional Factors Considered by the American Board," the Board of Directors of
American believes that the Merger Agreement is fair to, and in the best
interests of, American and the holders of American Common Stock. All members of
the American Board approved the Merger Agreement. THE AMERICAN BOARD UNANIMOUSLY
RECOMMENDS THAT THE HOLDERS OF AMERICAN COMMON STOCK VOTE "FOR" APPROVAL AND
ADOPTION OF THE MERGER AGREEMENT. In considering the recommendation of
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the American Board of Directors with respect to the Merger, American
stockholders should be aware that certain officers and directors of American
have direct and indirect interests in the consummation of the Merger, apart from
their interests as stockholders of American, which are separate from those of
unaffiliated stockholders of American. See "-- Possible Conflicts of Interest."
OPINION OF FINANCIAL ADVISOR TO ALLIED WASTE
CSFB is acting as financial advisor to Allied Waste in connection with the
Merger. CSFB was selected by Allied Waste based on CSFB's experience, expertise
and familiarity with Allied Waste and its business. CSFB is an internationally
recognized investment banking firm and is regularly engaged in the valuation of
businesses and securities in connection with mergers and acquisitions, leveraged
buyouts, negotiated underwritings, competitive biddings, secondary distributions
of listed and unlisted securities, private placements and valuations for
corporate and other purposes.
In connection with CSFB's engagement, Allied Waste requested that CSFB
evaluate the fairness of the Exchange Ratio from a financial point of view to
Allied Waste. On August 10, 1998, the date on which the Merger Agreement was
executed, CSFB rendered to the Board of Directors of Allied Waste a written
opinion dated August 10, 1998 to the effect that, as of such date and based upon
and subject to certain matters stated in such opinion, the Exchange Ratio was
fair to Allied Waste from a financial point of view.
THE FULL TEXT OF CSFB'S WRITTEN OPINION DATED AUGUST 10, 1998 TO THE BOARD
OF DIRECTORS OF ALLIED WASTE, WHICH SETS FORTH THE PROCEDURES FOLLOWED,
ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS ON THE REVIEW UNDERTAKEN,
IS ATTACHED AS APPENDIX C TO THIS JOINT PROXY STATEMENT AND PROSPECTUS AND IS
INCORPORATED HEREIN BY REFERENCE. HOLDERS OF ALLIED WASTE COMMON STOCK ARE URGED
TO READ THIS OPINION CAREFULLY IN ITS ENTIRETY. CSFB'S OPINION IS ADDRESSED TO
THE BOARD OF DIRECTORS OF ALLIED WASTE AND RELATES ONLY TO THE FAIRNESS OF THE
EXCHANGE RATIO FROM A FINANCIAL POINT OF VIEW TO ALLIED WASTE, DOES NOT ADDRESS
ANY OTHER ASPECT OF THE PROPOSED MERGER OR ANY RELATED TRANSACTION AND DOES NOT
CONSTITUTE A RECOMMENDATION TO ANY STOCKHOLDER AS TO HOW SUCH STOCKHOLDER SHOULD
VOTE AT THE ALLIED WASTE SPECIAL MEETING. THE SUMMARY OF THE OPINION OF CSFB SET
FORTH IN THIS JOINT PROXY STATEMENT AND PROSPECTUS IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO THE FULL TEXT OF SUCH OPINION.
In arriving at its opinion, CSFB reviewed the Merger Agreement and certain
publicly available business and financial information relating to Allied Waste
and American. CSFB also reviewed certain other information relating to Allied
Waste and American, including financial forecasts, provided to or discussed with
CSFB by Allied Waste and American, and met with managements of Allied Waste and
American to discuss the businesses and prospects of Allied Waste and American.
CSFB also considered certain financial and stock market data of Allied Waste and
American and compared those data with similar data for other publicly held
companies in businesses similar to Allied Waste and American and considered, to
the extent publicly available, the financial terms of certain other business
combinations and other transactions recently effected. CSFB also considered such
other information, financial studies, analyses and investigations and financial,
economic and market criteria which CSFB deemed relevant.
In connection with its review, CSFB did not assume any responsibility for
independent verification of any of the information provided to or otherwise
reviewed by CSFB and relied on such information being complete and accurate in
all material respects. With respect to financial forecasts, CSFB assumed that
such forecasts were reasonably prepared on bases reflecting the best currently
available estimates and judgments of the managements of Allied Waste and
American as to the future financial performance of Allied Waste and American and
the cost savings and other potential synergies (including the amount, timing and
achievability thereof) anticipated to result from the Merger. CSFB was not
requested to make and did not make an independent evaluation or appraisal of the
assets or liabilities (contingent or otherwise) of Allied Waste or American, nor
was CSFB furnished with any such evaluations or appraisals. CSFB's opinion was
necessarily based upon information available to, and financial, economic, market
and other conditions as they existed and could be evaluated by, CSFB on the date
of its opinion. CSFB did not express any opinion as to the actual value of the
Allied Waste Common Stock when issued pursuant to the Merger or the prices at
which the Allied Waste Common Stock will trade subsequent to the Merger.
Although CSFB evaluated the Exchange
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Ratio from a financial point of view, CSFB was not requested to, and did not,
recommend the specific consideration payable in the Merger, which consideration
was determined between Allied Waste and American. No other limitations were
imposed on CSFB with respect to the investigations made or procedures followed
by CSFB in rendering its opinion.
In preparing its opinion to the Board of Directors of Allied Waste, CSFB
performed a variety of financial and comparative analyses, including those
described below. The summary of CSFB's analyses set forth below does not purport
to be a complete description of the analyses underlying CSFB's opinion. The
preparation of a fairness opinion is a complex analytic process involving
various determinations as to the most appropriate and relevant methods of
financial analyses and the application of those methods to the particular
circumstances and, therefore, such an opinion is not readily susceptible to
summary description. In arriving at its opinion, CSFB made qualitative judgments
as to the significance and relevance of each analysis and factor considered by
it. Accordingly, CSFB believes that its analyses must be considered as a whole
and that selecting portions of its analyses and factors, without considering all
analyses and factors, could create a misleading or incomplete view of the
processes underlying such analyses and its opinion. In its analyses, CSFB made
numerous assumptions with respect to Allied Waste, American, industry
performance, regulatory, general business, economic, market and financial
conditions and other matters, many of which are beyond the control of Allied
Waste and American. No company, transaction or business used in such analyses as
a comparison is identical to Allied Waste or American or the proposed Merger,
nor is an evaluation of the results of such analyses entirely mathematical;
rather such analyses involve complex considerations and judgments concerning
financial and operating characteristics and other factors that could affect the
acquisition, public trading or other values of the companies, business segments
or transactions being analyzed. The estimates contained in such analyses and the
ranges of valuations resulting from any particular analysis are not necessarily
indicative of actual values or predictive of future results or values, which may
be significantly more or less favorable than those suggested by such analyses.
In addition, analyses relating to the value of businesses or securities do not
purport to be appraisals or to reflect the prices at which businesses or
securities actually may be sold. Accordingly, such analyses and estimates are
inherently subject to substantial uncertainty. CSFB's opinion and financial
analyses were only one of many factors considered by the Board of Directors of
Allied Waste in its evaluation of the proposed Merger and should not be viewed
as determinative of the views of the Board of Directors or management of Allied
Waste with respect to the Merger or the Exchange Ratio.
The following is a summary of the material analyses performed by CSFB in
connection with its opinion dated August 10, 1998:
Selected Companies Analysis. CSFB compared certain publicly available
financial, operating and stock market data of American to corresponding data of
Allied Waste and the following publicly traded companies: Browning-Ferris
Industries, Inc., New Waste Management, Republic Services, Inc., Casella Waste
Systems, Inc., Eastern Environmental Services, Inc., Superior Services, Inc. and
Waste Industries, Inc. (collectively, the "Selected Companies"). CSFB analyzed
equity values as a multiple of estimated calendar 1998 and 1999 earnings per
share ("EPS") and enterprise values (equity value plus total debt plus the
liquidation value of preferred stock, if any, plus the value of minority
interests, if any, minus cash and short-term investments) as a multiple of
estimated calendar 1998 and 1999 revenues, earnings before interest, taxes,
depreciation and amortization ("EBITDA") and earnings before interest and taxes
("EBIT"). All multiples were based on closing stock prices on August 7, 1998.
Estimated financial data for American and the Selected Companies were based on
estimates of selected investment banking firms as compiled by First Call.
Applying a range of selected multiples for the Selected Companies of estimated
calendar 1998 EPS, revenues, EBITDA and EBIT of 30.0x to 40.0x, 3.0x to 4.0x,
11.0x to 13.0x and 18.0x to 21.0x, respectively, and estimated calendar 1999
EPS, revenues, EBITDA and EBIT of 25.0x to 33.0x, 2.0x to 3.0x, 7.5x to 8.5x and
11.5x to 13.5x, respectively, to corresponding financial data of American
indicated an implied enterprise reference range and implied equity reference
range for American of approximately $870.0 million to $1,140.0 million and
$35.10 to $45.40 per share, respectively.
Because of inherent differences between the businesses, operations and
prospects of American and the Selected Companies, CSFB believes that a purely
quantitative analysis of the Selected Companies without considering qualitative
judgments concerning differences between the financial and operating
characteristics of
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American and the Selected Companies that could affect the public trading values
of American and the Selected Companies, would not be particularly meaningful in
the context of the Merger.
Selected Transactions Analysis. CSFB analyzed, among other things, the
implied transaction multiples paid or proposed to be paid in the following
selected merger and acquisition transactions in the solid waste industry
(acquiror/target): Allied Waste/Rabanco Companies, USA Waste Services, Inc.
("USA Waste")/Waste Management, Inc., USA Waste/Transamerican Waste Industries,
Inc., USA Waste/City Management Holdings Trust, SITA, S.A./Browning-Ferris
Industries, Inc. (European operations), Republic Waste Industries, Inc.
("Republic Waste")/Silver State Disposal Service, Inc., USA Waste/Waste
Management, Inc. (Canadian assets), USA Waste/United Waste Systems, Inc., USA
Waste/Allied Waste (Canadian assets), USA Waste/Mid American Waste Systems,
Inc., Allied Waste/Solid Waste Assets of Laidlaw Inc., USA Waste/Sanifill, Inc.,
Republic Waste/Addington Resources, Inc., Republic Waste/Continental Waste
Industries, Inc., USA Waste/Western Waste Industries Inc. and Republic
Waste/Southland Environmental Services, Inc. (collectively, the "Selected
Transactions"). CSFB compared enterprise values in the Selected Transactions as
multiples of latest 12 months revenues, EBITDA and EBIT. Multiples for the
Selected Transactions were based on financial information available at the time
of the transaction. Applying a range of selected multiples for the Selected
Transactions of latest 12 months revenues, EBITDA and EBIT of 3.0x to 5.0x,
13.0x to 15.0x and 22.0x to 24.0x, respectively, to current annualized revenues,
EBITDA and EBIT of American indicated an implied enterprise reference range and
implied equity reference range for American of approximately $1,040.0 million to
$1,200.0 million and $41.55 to $47.65 per share, respectively.
Because the market conditions, rationale and circumstances surrounding the
Selected Transactions were specific to each transaction and vary between
transactions and because of inherent differences between the businesses,
operations and prospects of American and the companies involved in the Selected
Transactions, CSFB believes that a purely quantitative analysis of the Selected
Transactions, without considering qualitative judgments concerning differences
between the characteristics of the Selected Transactions and the Merger that
could affect the acquisition values of American and the acquired companies
involved in the Selected Transactions, would not be particularly meaningful in
the context of the Merger.
Discounted Cash Flow Analysis. CSFB estimated the present value of the
future streams of the stand-alone free cash flows that could be produced by
American from the fourth quarter of 1998 through fiscal year 2003, based on
internal estimates of the management of American. Ranges of estimated terminal
values were calculated using terminal multiples of normalized estimated calendar
year 2003 EBITDA of 7.0x and 8.0x. The free cash flow streams and estimated
terminal values were then discounted to present value using discount rates
ranging from 11.0% to 12.0%. This analysis indicated an implied enterprise
reference range and implied equity reference range for American of approximately
$950.0 million to $1,275.0 million and $38.10 to $50.50 per share, respectively.
Aggregate Reference Ranges. On the basis of the valuation methodologies
employed in the analyses described above, CSFB derived an aggregate implied
enterprise reference range for American of approximately $1,000 million to
$1,200 million, and an aggregate implied equity reference range for American of
approximately $40.00 to $47.60 per share (before giving effect to certain cost
savings and other potential synergies anticipated by the managements of Allied
Waste and American to result from the Merger) and approximately $45.25 to $54.35
per share (after giving effect to such cost savings and other potential
synergies). Based on the closing stock price of Allied Waste Common Stock on
August 7, 1998, the Exchange Ratio equated to an implied equity value for
American of $44.76 per share.
Pro Forma Merger Analysis. CSFB analyzed the potential pro forma effect of
the Merger on Allied Waste's projected EPS for fiscal years 1998 through 2000,
based both on internal estimates of the management of Allied Waste (including
estimates with respect to planned acquisitions) and estimates of selected
investment banking firms as compiled by First Call. This analysis indicated that
the Merger would be accretive to Allied Waste's EPS commencing in fiscal year
1999 (the first full year after the closing of the Merger is expected to occur)
through fiscal year 2000, assuming certain cost savings and other potential
synergies anticipated by the managements of Allied Waste and American to result
from the Merger are
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achieved. The actual results achieved by the combined company may vary from
projected results and the variations may be material.
Contribution Analysis. CSFB analyzed the relative contributions of Allied
Waste and American to the estimated revenue, EBITDA and EBIT of the pro forma
combined company for calendar years 1998 through 2000. Based on the Exchange
Ratio and the closing stock price of Allied Waste Common Stock on August 7,
1998, current holders of Allied Waste Common Stock and American Common Stock
would own approximately 77.5% and 22.5%, respectively, of the pro forma combined
company upon consummation of the Merger. CSFB compared Allied Waste
stockholders' equity ownership of 77.5% with the relative contributions of
Allied Waste to the estimated calendar 1998, 1999 and 2000 revenues, EBITDA and
EBIT of the pro forma combined company. This analysis indicated that Allied
Waste would contribute approximately (i) 83.5%, 78.3% and 75.7% of the pro forma
combined company's revenues for estimated calendar 1998, 1999 and 2000,
respectively, (ii) 84.0%, 79.9% and 77.2% of the pro forma combined company's
EBITDA for estimated calendar 1998, 1999 and 2000, respectively, and (iii)
86.2%, 81.3% and 78.2% of the pro forma combined company's EBIT for estimated
calendar 1998, 1999 and 2000, respectively. CSFB also performed an exchange
ratio analysis comparing the relative contributions of Allied Waste and American
to the estimated revenues, EBITDA and EBIT of the combined company over fiscal
years 1998 through 2000. This analysis yielded implied exchange ratios ranging
from 0.91 to 1.83, as compared to the Exchange Ratio of 1.65.
Other Factors and Analyses. In the course of preparing its opinion, CSFB
performed certain other analyses and considered certain other information and
data, including, among other things, (i) the history of trading prices for
Allied Waste Common Stock and American Common Stock and the relationship between
movements of such Common Stock and the S&P 500 Index and (ii) stockholder
profiles of Allied Waste and American.
Miscellaneous. Pursuant to the terms of Credit Suisse First Boston's
engagement, Allied Waste has agreed to pay Credit Suisse First Boston for its
financial advisory services in connection with the Merger (i) a financial
advisory fee of $100,000, (ii) a fee of $1.0 million payable upon delivery of
CSFB's opinion on August 10, 1998, and (iii) a fee of $2.4 million payable upon
consummation of the Merger. Allied Waste also has agreed to reimburse Credit
Suisse First Boston for out-of-pocket expenses incurred by Credit Suisse First
Boston in performing its services, including fees and expenses for legal counsel
and any other advisor retained by Credit Suisse First Boston, and to indemnify
Credit Suisse First Boston and certain related persons and entities against
certain liabilities, including liabilities under the federal securities laws,
arising out of Credit Suisse First Boston's engagement. Credit Suisse First
Boston and its affiliates have in the past provided financial services to Allied
Waste and American unrelated to the proposed Merger, for which services Credit
Suisse First Boston and its affiliates have received compensation. In the
ordinary course of its business, Credit Suisse First Boston and its affiliates
may actively trade the debt and equity securities of both Allied Waste and
American for their own accounts and for the accounts of customers and,
accordingly, may at any time hold long or short positions in such securities.
OPINION OF FINANCIAL ADVISOR TO AMERICAN
American retained CIBC Oppenheimer to act as its financial advisor and to
render its opinion to American's Board of Directors as to the fairness, from a
financial point of view, to American's holders of American Common Stock, of the
Exchange Ratio provided in the Merger Agreement. The American Board of Directors
selected CIBC Oppenheimer as its financial advisor because CIBC Oppenheimer is
an internationally recognized investment banking firm that has substantial
experience in the solid waste industry and is familiar with American and its
businesses. As part of its investment banking business, CIBC Oppenheimer is
regularly engaged in the valuation of businesses and securities in connection
with mergers, acquisitions, underwritings, sales and distributions of listed and
unlisted securities, private placements and valuations for estate, corporate and
other purposes.
On August 8, 1998, CIBC Oppenheimer delivered its written opinion to
American's Board of Directors that, as of such date, the Exchange Ratio provided
in the Merger Agreement was fair, from a financial point of view, to the holders
of American Common Stock (the "CIBC Oppenheimer Fairness Opinion").
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The full text of the CIBC Oppenheimer Fairness Opinion, which sets forth
certain assumptions made, certain procedures followed and certain matters
considered by CIBC Oppenheimer, is attached as Appendix D to this Joint Proxy
Statement and Prospectus. American and Allied Waste each provided CIBC
Oppenheimer with its respective financial forecasts. With respect to the
financial forecasts and other data concerning American reviewed by CIBC
Oppenheimer, the management of American advised CIBC Oppenheimer that such
forecasts and other data had been reasonably prepared on bases reflecting such
management's best currently available estimates and judgment as to the future
financial performance of American. With respect to the financial forecasts and
other data concerning Allied Waste reviewed by CIBC Oppenheimer, the management
of Allied Waste advised CIBC Oppenheimer that such forecasts and other data had
been reasonably prepared on bases reflecting such management's best currently
available estimates and judgment as to the future financial performance of
Allied Waste. CIBC Oppenheimer relied upon the estimates of the managements of
American and Allied Waste of the operating synergies achievable as a result of
the Merger and its discussion of such synergies with the respective managements
of American and Allied Waste.
In connection with CIBC Oppenheimer's review, CIBC Oppenheimer did not
assume responsibility for independent verification of any of the information
considered for its review and has relied upon such information being complete
and accurate in all respects. In arriving at its opinion, CIBC Oppenheimer
neither made nor obtained any independent evaluation or appraisal of the assets
or liabilities (contingent or otherwise) of American or Allied Waste, nor was it
furnished with any such evaluations or appraisals. CIBC Oppenheimer also
assumed, without independent verification, the accuracy of the advice and
conclusions of the parties' legal counsel and accountants with respect to tax
and accounting matters, including, without limitation, the treatment of the
Merger as a tax-free reorganization for federal income tax purposes and the
accounting of the Merger as a pooling of interests business combination. The
CIBC Oppenheimer Fairness Opinion was necessarily based on information available
to CIBC Oppenheimer and on the general economic, financial and stock market
conditions and circumstances as they existed and could be evaluated by CIBC
Oppenheimer on the date of the CIBC Oppenheimer Fairness Opinion. No limitations
were imposed by American or Allied Waste on CIBC Oppenheimer with respect to the
investigations made or procedures followed by CIBC Oppenheimer.
The summary of the written CIBC Oppenheimer Fairness Opinion set forth in
this Proxy Statement is qualified in its entirety by reference to the full text
of the opinion which is attached as Appendix D hereto. AMERICAN STOCKHOLDERS ARE
URGED TO, AND SHOULD, READ THIS OPINION CAREFULLY IN ITS ENTIRETY IN CONJUNCTION
WITH THIS PROXY STATEMENT FOR THE ASSUMPTIONS MADE, MATTERS CONSIDERED AND
LIMITS OF THE REVIEW BY CIBC OPPENHEIMER. The CIBC Oppenheimer Fairness Opinion
is directed only to the fairness, from a financial point of view, of the
Exchange Ratio provided in the Merger Agreement and does not address any other
aspect of the Merger. The CIBC Oppenheimer Fairness Opinion does not constitute
an opinion as to the price at which the American Common Stock or the Allied
Waste Common Stock will actually trade at any time. The CIBC Oppenheimer
Fairness Opinion does not constitute a recommendation to American stockholders
as to how such stockholders should vote with respect to the approval of the
Merger.
In rendering its opinion, CIBC Oppenheimer (i) reviewed a draft of the
Merger Agreement; (ii) reviewed the terms of the Stock Option Agreement; (iii)
reviewed the historical financial statements and financial forecasts and other
information prepared by representatives of American and Allied Waste; (iv)
reviewed certain publicly available information for American and Allied Waste,
including periodic and other reports filed with the Commission; (v) reviewed the
reported market prices and trading volumes for American and Allied Waste shares;
(vi) held discussions with the senior management and representatives of American
and Allied Waste concerning each company's historical and current operations,
financial condition and prospects; and (vii) reviewed such other documents and
financial, economic and market criteria and made such other investigations as it
deemed appropriate for the purposes of such opinion.
The following is a summary of certain of the financial analyses used by
CIBC Oppenheimer in connection with providing its opinion to the Board of
Directors of American on August 8, 1998.
In establishing the range of values resulting from the application of each
of the analyses, CIBC Oppenheimer made qualitative judgments as to the
meaningfulness of the valuation measurements. The
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judgments were based upon the number and similarity of comparable companies and
transactions, as well as the predictability and volatility of future earnings
when assessing the relative significance of the Discounted Cash Flow Analysis
described below. The relative appropriateness of certain other valuation
measurements, such as operating cash flow or price/earnings multiples, as used
generally for comparative purposes, were also taken into account in making such
judgments.
Based on the closing price of Allied Waste Common Stock of $27.13 on August
7, 1998 (the last trading day prior to preparation of materials for CIBC
Oppenheimer's presentation to the American Board), the Exchange Ratio results in
an implied price per share of American Common Stock of $44.76. This implied
value is based upon the relative market valuations of the American Common Stock
and the Allied Waste Common Stock as of such date, which may change prior to
consummation of the Merger.
Comparable Companies Analysis. CIBC Oppenheimer compared American to the
following solid waste management services companies which are publicly traded
and are deemed by CIBC Oppenheimer to be similar to American: Allied Waste
Industries, Inc.; Casella Waste Systems, Inc.; Eastern Environmental Services,
Inc.; Republic Services, Inc.; Superior Services, Inc.; Waste Connections, Inc.;
and Waste Industries, Inc. (collectively, the "Comparable Companies"). Using
publicly available information, CIBC Oppenheimer analyzed, among other things,
the market values and certain financial criteria for the Comparable Companies
including their (i) revenue, (ii) earnings before interest, taxes, depreciation
and amortization ("EBITDA"), (iii) earnings before interest and taxes ("EBIT")
and (iv) net income, in each case for the most recent twelve month period
(adjusted, in each case described herein, to estimate the effect of acquisitions
effected during such twelve month periods) for which financial data were
available and, on an estimated basis, for the calendar years ending 1998 and
1999. CIBC Oppenheimer excluded certain statistics that it deemed were not
representative for the Comparable Companies as a group. For each of the
multiples of revenue, EBITDA, EBIT and net income, CIBC Oppenheimer took the
High, Low and Average (each as defined below) for the Comparable Companies and
applied these multiples to American's results for the most recent twelve months
and to the estimated results of American for the fiscal years ending December
31, 1998 and 1999. For these purposes (and as used hereinafter) the "High" was
calculated as the average of the high multiples, the "Low" was calculated as the
average of the low multiples, and the "Average" was calculated as the average of
the average multiples, each of the above calculations excluding those multiples
that CIBC Oppenheimer deemed to be not meaningful. Although CIBC Oppenheimer
calculated implied equity values using revenue multiples, it did not deem the
results of these calculations to be relevant. The Comparable Company Analysis
resulted in implied equity values (excluding implied equity values based on
revenue multiples) for American which ranged from a Low of $711.9 million to a
High of $972.8 million, with an Average of $842.9 million. The range of implied
equity values for American was then divided by American's common shares
outstanding on a fully diluted basis to arrive at an implied price which ranged
from a Low of $28.18 to a High of $38.51, with an Average of $33.36 per fully
diluted share.
Comparable Merger and Acquisition Transactions Analysis. Using publicly
available information, CIBC Oppenheimer analyzed the consideration paid (or
proposed to be paid in the case of pending acquisitions) in ten selected merger
and acquisition transactions involving selected solid waste management
companies. The ten transactions reviewed were: (i) Superior Services,
Inc./GeoWaste Incorporated; (ii) USA Waste Services, Inc./Waste Management,
Inc.; (iii) USA Waste Services, Inc./United Waste Systems, Inc.; (iv) Allied
Waste Industries, Inc./Solid Waste Operations of Laidlaw Inc.; (v) USA Waste
Services, Inc./Sanifill, Inc.; (vi) Republic Industries, Inc./Addington
Resources, Inc.; (vii) Republic Industries, Inc./Continental Waste Industries,
Inc.; (viii) USA Waste Services, Inc./Western Waste Industries; (ix) USA Waste
Services, Inc./Chambers Development Company, Inc.; and (x) Browning-Ferris
Industries, Inc./Attwoods plc (collectively, the "Comparable Transactions").
CIBC Oppenheimer calculated the multiples of the consideration paid (or
proposed to be paid in the case of pending acquisitions) in relation to the
acquired companies' (i) revenue, (ii) EBITDA, (iii) EBIT and (iv) net income, in
each case for the most recent reported twelve month period ending prior to the
date of the announcement of the acquisition for which financial data were
available. CIBC Oppenheimer developed multiples for 1998 and 1999 by discounting
the most recent twelve month multiples in order to estimate the future value of
such multiples. Similar to the Comparable Companies Analysis, CIBC Oppenheimer
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calculated the Low, Average and High multiples. CIBC Oppenheimer excluded
certain statistics that it deemed were not representative for the Comparable
Transactions as a group. For each of the multiples of revenue, EBITDA, EBIT and
net income, CIBC Oppenheimer took the High, Low and Average for the Comparable
Transactions and applied these multiples to American's results for the most
recent twelve months and to the estimated results of American for the fiscal
years ending December 31, 1998 and 1999. Although CIBC Oppenheimer calculated
implied equity values using revenue multiples, it did not deem the results of
these calculations to be relevant. The Comparable Merger and Acquisition
Transactions Analysis resulted in implied equity values (excluding implied
equity values based on revenue multiples) for American which ranged from a Low
of $730.8 million to a High of $1,395.0 million, with an Average of $1,020.7
million. The range of implied equity values for American was then divided by
American's common shares outstanding on a fully diluted basis to arrive at an
implied price which ranged from a Low of $28.93 to a High of $55.21, with an
Average of $40.40 per fully diluted share.
Discounted Cash Flow Analysis. CIBC Oppenheimer performed a Discounted
Cash Flow Analysis to evaluate the Exchange Ratio. In conducting its analysis,
CIBC Oppenheimer relied on certain assumptions, financial projections and other
information provided by American management. Using the information set forth in
the American projections, CIBC Oppenheimer performed Discounted Cash Flow
Analyses of the projected after-tax cash flows of American on a stand-alone
basis for the fiscal years ending December 31, 1998 through December 31, 2003.
This analysis consisted of adding the discounted present value of the projected
future cash flows from American on a stand-alone basis and the discounted
present value of the terminal value of American on a stand-alone basis at the
end of the reference period. For purposes of such analysis, CIBC Oppenheimer
used discount rates ranging from 11% to 14%. CIBC Oppenheimer then calculated
the terminal value for American by applying EBITDA multiples ranging from 8.0x
to 10.0x to the projected EBITDA for American for the fiscal year ending
December 31, 2003. The Discounted Cash Flow Analyses resulted in implied equity
values for American which ranged from a Low of $732.6 million to a High of
$1,382.6 million, with an Average of $1,039.6 million. The range of implied
equity values of American on a stand-alone basis was then divided by the
American common shares outstanding on a fully diluted basis to determine a range
of equity values per fully diluted share for American. The implied price for
American ranged from a Low of $29.00 to a High of $54.73, with an Average of
$41.15 per fully diluted share.
Common Stock Trading Analysis. To provide contextual data and comparative
market data, CIBC Oppenheimer examined the history of the trading prices and
their relative relationships for American Common Stock during the 12 month
period from August 8, 1997 to August 7, 1998, the six month period from February
8, 1998 to August 7, 1998 and the three month period from May 8, 1998 to August
7, 1998. This information was presented solely to provide the Board of Directors
of American with background information regarding the stock prices of American
over the periods indicated. CIBC Oppenheimer noted that during such periods,
American's Common Stock traded between a high of $48.00 and a low of $26.00 per
share, a high of $48.00 and a low of $34.22 per share and a high of $48.00 and a
low of $37.88 per share, respectively. In addition, an analysis of the daily
closing price ratio, calculated as American's closing price divided by Allied
Waste's closing price, indicated that the average daily closing price ratio
during the periods August 8, 1997 to August 7, 1998, February 8, 1998 to August
7, 1998, and May 8, 1998 to August 7, 1998, equaled 1.61, 1.59 and 1.60,
respectively.
Pro Forma Merger Analysis. CIBC Oppenheimer prepared pro forma analyses of
the financial impact of the Merger. Using earnings estimates prepared by
American management for American and earnings estimates prepared by Allied Waste
management for Allied Waste, in each case for the calendar years ending 1998 and
1999, CIBC Oppenheimer compared the earnings per share ("EPS") of Allied Waste's
common stock, on a stand-alone basis, to the EPS of the common stock of the
combined company. For purposes of the analysis, CIBC Oppenheimer assumed $24.3
million in pre-tax savings for the combined company for 1998 and 1999. Based on
such analyses, the Merger would be accretive to Allied Waste stockholders in
1998 and 1999.
Contribution Analysis. CIBC Oppenheimer analyzed American's and Allied
Waste's relative contribution to the combined company with respect to total
revenues, EBITDA, EBIT, total assets, net income and book value. Its analysis
was made for the fiscal year ending December 31, 1998 based on projected results
for
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both American and Allied Waste. As a result of the Merger, American stockholders
will own approximately 16.2% of the implied enterprise value of the combined
company (equity value plus associated debt less cash of American). This compares
with American's contribution to the combined company's pro forma results of
approximately 16.4% of total revenues, 15.9% of EBITDA, 14.3% of EBIT and 17.5%
of total assets. In addition, American stockholders will own approximately 24.5%
of the common stock on a fully diluted basis of the combined company. This
compares with American's contribution to the combined company's pro forma
results of approximately 17.6% of net income and 42.4% of book value for the
period ending December 31, 1998 (prior to taking into account any operating
synergies which may result from the Merger).
Premiums Paid Analysis. CIBC Oppenheimer analyzed the average premiums
paid in all domestic non-hostile mergers and acquisitions of public companies
with transaction values between $750 million and $1.5 billion since January 1,
1995 (241 transactions). Such average premiums were approximately 23.2%, 27.1%
and 33.6% relative to the one day, one week and one month closing prices prior
to the transaction announcement date, respectively. CIBC Oppenheimer also
analyzed the average premiums paid in domestic non-hostile stock-for-stock
mergers and acquisitions of public companies with transaction values between
$750 million and $1.5 billion since January 1, 1995 (47 transactions). Such
average premiums were approximately 26.6%, 31.3% and 38.3% relative to the one
day, one week and one month closing prices prior to the transaction announcement
date, respectively. CIBC Oppenheimer also analyzed the average premiums paid in
two solid waste stock-for-stock mergers which it deemed to be comparable to the
Merger: (i) USA Waste Services, Inc./Sanifill, Inc.; and (ii) USA Waste
Services, Inc./United Waste Systems, Inc. (the "Selected Solid Waste
Transactions"). The average premiums of the Selected Solid Waste Transactions
were approximately (0.2)%, 2.5% and 0.2% relative to the one day, one week and
one month closing prices prior to the transaction announcement date,
respectively. In analyzing the Merger, CIBC Oppenheimer noted that the implied
price per share for American of $44.76 represents an implied premium of 14.4%,
12.6% and (4.0)% for the closing price of American's Common Stock one day, one
week and one month prior to August 7, 1998 (the last trading day prior to
preparation of materials for CIBC Oppenheimer's presentation to the American
Board).
In consideration of the fact that the Merger involves the receipt by
American's stockholders of Allied Waste Common Stock, CIBC Oppenheimer performed
certain financial analyses with respect to Allied Waste, including as described
below: (i) Comparable Companies Analysis; (ii) Comparable Merger and Acquisition
Transactions Analysis; (iii) Discounted Cash Flow Analysis; and (iv) Common
Stock Trading Analysis.
Comparable Companies Analysis. CIBC Oppenheimer compared Allied Waste to
the following solid waste management services companies which are publicly
traded and are deemed by CIBC Oppenheimer to be similar to Allied Waste:
American Disposal Services, Inc.; Casella Waste Systems, Inc.; Eastern
Environmental Services, Inc.; Republic Services, Inc.; Superior Services, Inc.;
Waste Connections, Inc.; and Waste Industries, Inc. (collectively, the
"Comparable Companies"). Using publicly available information, CIBC Oppenheimer
analyzed, among other things, the market values and certain financial criteria
for the Comparable Companies including their (i) revenue, (ii) EBITDA, (iii)
EBIT and (iv) net income, in each case for the most recent twelve month periods
for which financial data were available and, on an estimated basis, for the
calendar years ending 1998 and 1999. CIBC Oppenheimer excluded certain
statistics that it deemed were not representative for the Comparable Companies
as a group. For each of the multiples of revenue, EBITDA, EBIT and net income,
CIBC Oppenheimer took the High, Low and Average for the Comparable Companies and
applied these multiples to Allied Waste's results for the most recent twelve
months and to the estimated results of Allied Waste for the fiscal years ending
December 31, 1998 and 1999. Although CIBC Oppenheimer calculated implied equity
values using revenue multiples, it did not deem the results of these
calculations to be relevant. The Comparable Company Analysis resulted in implied
equity values (excluding implied equity values based on revenue multiples) for
Allied Waste which ranged from a Low of $2,515.3 million to a High of $4,023.7
million, with an Average of $3,249.7 million. The range of implied equity values
for Allied Waste was then divided by Allied Waste's common shares outstanding on
a fully diluted basis to arrive at an implied price which ranged from a Low of
$19.29 to a High of $30.86, with an Average of $24.93 per fully diluted share.
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Comparable Merger and Acquisition Transactions Analysis. Using publicly
available information, CIBC Oppenheimer analyzed the consideration paid (or
proposed to be paid in the case of pending acquisitions) in ten selected merger
and acquisition transactions involving selected solid waste management
companies. The ten transactions reviewed were: (i) Superior Services,
Inc./GeoWaste Incorporated; (ii) USA Waste Services, Inc./Waste Management,
Inc.; (iii) USA Waste Services, Inc./United Waste Systems, Inc.; (iv) Allied
Waste Industries, Inc./Solid Waste Operations of Laidlaw Inc.; (v) USA Waste
Services, Inc./Sanifill, Inc.; (vi) Republic Industries, Inc./Addington
Resources, Inc.; (vii) Republic Industries, Inc./Continental Waste Industries,
Inc.; (viii) USA Waste Services, Inc./Western Waste Industries; (ix) USA Waste
Services, Inc./Chambers Development Company, Inc.; and (x) Browning-Ferris
Industries, Inc./Attwoods plc (collectively, the "Comparable Transactions").
CIBC Oppenheimer calculated the multiples of the consideration paid (or
proposed to be paid in the case of pending acquisitions) in relation to the
acquired companies' (i) revenue, (ii) EBITDA, (iii) EBIT and (iv) net income, in
each case for the most recent reported twelve month period ending prior to the
date of the announcement of the acquisition for which financial data were
available. CIBC Oppenheimer developed multiples for 1998 and 1999 by discounting
the most recent twelve month multiples in order to estimate the future value of
such multiples. Similar to the Comparable Companies Analysis, CIBC Oppenheimer
calculated the Low, Average and High multiples. CIBC Oppenheimer excluded
certain statistics that it deemed were not representative for the Comparable
Transactions as a group. For each of the multiples of revenue, EBITDA, EBIT and
net income, CIBC Oppenheimer took the High, Low and Average for the Comparable
Transactions and applied these multiples to Allied Waste's results for the most
recent twelve months and to the estimated results of Allied Waste for the fiscal
years ending December 31, 1998 and 1999. Although CIBC Oppenheimer calculated
implied equity values using revenue multiples, it did not deem the results of
these calculations to be relevant. The Comparable Merger and Acquisition
Transactions Analysis resulted in implied equity values (excluding implied
equity values based on revenue multiples) for Allied Waste which ranged from a
Low of $2,604.4 million to a High of $5,259.0 million, with an Average of
$3,831.1 million. The range of implied equity values for Allied Waste was then
divided by Allied Waste's common shares outstanding on a fully diluted basis to
arrive at an implied price which ranged from a Low of $19.98 to a High of
$40.34, with an Average of $29.39 per fully diluted share.
Discounted Cash Flow Analysis. CIBC Oppenheimer performed a Discounted
Cash Flow Analysis to evaluate the Exchange Ratio. In conducting its analysis,
CIBC Oppenheimer relied on certain assumptions, financial projections and other
information provided by Allied Waste management. Using the information set forth
in the Allied Waste projections, CIBC Oppenheimer performed Discounted Cash Flow
Analyses of the projected after-tax cash flows of Allied Waste on a stand-alone
basis for the fiscal years ending December 31, 1998 through December 31, 2003.
This analysis consisted of adding the discounted present value of the projected
future cash flows from Allied Waste on a stand-alone basis and the discounted
present value of the terminal value of Allied Waste on a stand-alone basis at
the end of the reference period. For purposes of such analysis, CIBC Oppenheimer
used discount rates ranging from 11% to 14%. CIBC Oppenheimer then calculated
the terminal value for Allied Waste by applying EBITDA multiples ranging from
8.0x to 10.0x to the projected EBITDA for Allied Waste for the fiscal year
ending December 31, 2003. The Discounted Cash Flow Analyses resulted in implied
equity values for Allied Waste which ranged from a Low of $2,268.8 million to a
High of $4,134.2 million, with an Average of $3,152.4 million. The range of
implied equity values of Allied Waste on a stand-alone basis was then divided by
the Allied Waste common shares outstanding on a fully diluted basis to determine
a range of equity values per fully diluted share for Allied Waste. The implied
price for Allied Waste ranged from a Low of $17.40 to a High of $31.71, with an
Average of $24.18 per fully diluted share.
Common Stock Trading Analysis. To provide contextual data and comparative
market data, CIBC Oppenheimer examined the history of the trading prices and
their relative relationships for Allied Waste Common Stock during the 12 month
period from August 8, 1997 to August 7, 1998, the six month period from February
8, 1998 to August 7, 1998 and the three month period from May 8, 1998 to August
7, 1998. This information was presented solely to provide the Board of Directors
of American with background information regarding the stock prices of Allied
Waste over the periods indicated. CIBC Oppenheimer noted
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that during such periods, Allied Waste's common stock traded between a high of
$31.13 and a low of $14.50 per share, a high of $31.13 and a low of $19.63 per
share and a high of $31.13 and a low of $23.94 per share, respectively.
The summary set forth above does not purport to be a complete description
of the analyses performed by CIBC Oppenheimer. The preparation of a CIBC
Oppenheimer fairness opinion involves various determinations as to the most
appropriate and relevant methods of financial analysis and the application of
these methods to the particular circumstances and, therefore, such an opinion is
not readily susceptible to summary description. Accordingly, notwithstanding the
separate factors summarized above, CIBC Oppenheimer believes that its analyses
must be considered as a whole and that selecting portions of its analyses and
the factors considered by it, without considering all analyses and factors,
could create an incomplete or misleading view of the evaluation process
underlying its opinions. In performing its analyses for the purposes of the CIBC
Oppenheimer Fairness Opinion, CIBC Oppenheimer made numerous assumptions with
respect to industry performance, business and economic conditions and other
matters. The analyses performed by CIBC Oppenheimer are not necessarily
indicative of actual values or future results, which may be significantly more
or less favorable than suggested by such analyses.
Pursuant to the terms of an engagement letter dated July 31, 1998, American
has agreed to pay CIBC Oppenheimer: (i) a retainer of $100,000; (ii) a fee of
$750,000 upon delivery of the CIBC Oppenheimer Fairness Opinion; and (iii) an
additional fee equal to $3.25 million to be paid upon consummation of the
Merger; provided, that if a merger, consolidation or other business combination
is consummated with respect to American and an entity other than Allied Waste as
a result of a Superior Proposal (as such term is defined in the Merger
Agreement), then the amount of the additional fee payable to CIBC Oppenheimer
upon such consummation would increase to $5.25 million. American has also agreed
to reimburse CIBC Oppenheimer for its reasonable out-of-pocket expenses and to
indemnify CIBC Oppenheimer and certain related persons against certain potential
liabilities arising out of the engagement of CIBC Oppenheimer, including
liabilities under the federal securities laws.
In the ordinary course of business, CIBC Oppenheimer may actively trade the
securities of both American and Allied Waste for its own account and for the
accounts of its customers and, accordingly, may at any time hold a long or short
position in such securities. CIBC Oppenheimer has provided financial advisory
and investment banking services to American in the past, including (i) acting as
the managing underwriter in an initial public offering of American Common Stock
completed in July, 1996, (ii) acting as the managing underwriter in a public
offering of American Common Stock completed in May, 1997, (iii) acting as a
managing underwriter in a public offering of American Common Stock completed in
October, 1997 and (iv) acting as a managing underwriter in a public offering of
American Common Stock completed in April, 1998, and has in each case received
usual and customary fees for rendering such services.
POSSIBLE CONFLICTS OF INTEREST
In considering the recommendation of the Boards of Directors of American
with respect to the Merger, holders of American Common Stock should be aware
that certain members of the Boards of Directors and management have certain
interests separate from their interests as stockholders, including those
referred to below.
CERTAIN AGREEMENTS. The executive officers of American have employment
agreements with American that provide for payments to be made to them upon
termination of their employment with American in the event of a Change of
Control (as defined in the employment agreements). The Merger will constitute a
Change of Control, and pursuant to these employment agreements Messrs. De Young,
Kogler, Lavey, Conrath and McDonnell and Mses. Straw and Ryan will receive
payments of approximately $2.2 million, $1.6 million, $1.1 million, $0.9
million, $0.9 million, $1.0 million, and $0.9 million, respectively. In the
event the executive officers are required to pay an excise tax on excess
parachute payments received from American upon a Change of Control, the
employment agreements require American to pay to the officers an amount
necessary to place the officers in the same after-tax financial position as the
officers would have been in had the officers not incurred such tax.
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Proskauer Rose LLP, American's counsel, will receive legal fees for
services rendered to American in connection with the Merger. Stephen W. Rubin, a
director of American, is a partner in Proskauer Rose LLP.
NON-COMPETITION AGREEMENTS. On , 1998, Messrs. De Young and
Lavey and Ms. Straw entered into non-competition agreements with Allied Waste
pursuant to which they have agreed, for a period of seven years from the
Effective Time for Mr. De Young and for a period of five years from the
Effective Time for Mr. Lavey and Ms. Straw, to refrain from competing with
Allied Waste in the non-hazardous solid waste industry in those geographical
areas in which Allied Waste or American operates. As consideration for the
non-competition agreements, Messrs. De Young and Lavey and Ms. Straw will
receive at the Effective Time payments in the amounts of $2.0 million, $500,000
and $500,000, respectively.
MARKET DEVELOPMENT CONSULTING AGREEMENT. On , 1998, Allied
Waste entered into a market development consulting agreement effective as of the
Effective Time with Environmental Growth, LLC, a Delaware limited liability
company ("Growth"), the members of which are anticipated to be Messrs. De Young
and Lavey and Ms. Straw. The consulting agreement provides, among other things,
that Growth shall be retained for a term of four years on an exclusive basis to
identify and negotiate acquisitions on behalf of Allied Waste in Arkansas,
Illinois, Indiana, Iowa, Kansas, Kentucky, Michigan, Missouri, Nebraska, Ohio,
Oklahoma, western Pennsylvania, Nevada and Wisconsin. Growth will receive an
annual market development consulting fee of approximately $1.0 million and, for
each acquisition made by Allied Waste for which Growth provides acquisition
services pursuant to the terms of the agreement, a market development payment of
2 1/2% of the pro forma annual revenues of any such acquired company (the
"Acquisition Payment"). Either party may terminate the consulting agreement at
any time with 60 days' prior notice to the other party, provided that if Allied
Waste is the terminating party, Allied Waste will pay to Growth an amount equal
to the annual fee otherwise payable during the remainder of the term of the
consulting agreement, as well as the Acquisition Payment for any acquisition
identified by Growth and consummated by Allied Waste within 12 months following
the termination of the consulting agreement.
EMPLOYMENT AGREEMENTS. On , 1998, Richard Kogler, Vice
President and Chief Operating Officer of American, entered into an employment
agreement with Allied Waste, effective as of the Effective Time for a term of
three years at an annual base salary of $225,000. In addition, Mr. Kogler is
entitled to employment inducement compensation of $160,000. On ,
1998, John McDonnell, Vice President -- Engineering of American entered into an
employment agreement with Allied Waste to be effective as of the Effective Time
for a term of two and one half years at an annual base salary of $145,000. In
addition, Mr. McDonnell is entitled to receive employment inducement
compensation of $30,000 at the Effective Time as well as an integration
completion bonus in the amount of $160,000 payable at the six month anniversary
of the Effective Time.
TRANSITION AGREEMENTS. On , 1998, certain of the executive
officers of American entered into agreements with Allied Waste which provide
that such individuals will, for a period of six months following the Effective
Time, make himself or herself available to assist Allied Waste in the
integration of American's operations (the "Transition Agreements"). As
consideration for the Transition Agreements, amounts will be paid to Messrs. De
Young, Lavey and Conrath and to Mses. Straw and Ryan in the amounts of $800,000,
$350,000, $320,000, $350,000 and $175,000, respectively. In addition, on the six
month anniversary of the Effective Time, Mr. Conrath shall receive an
integration completion bonus in the amount of $150,000.
INDEMNIFICATION. The Merger Agreement provides that the officers,
directors, employees and agents of American or any of its subsidiaries will be
indemnified by Allied Waste and the Surviving Corporation against certain
liabilities and costs, including those arising out of, relating to or in
connection with any action or omission occurring prior to the Effective Time or
arising out of or pertaining to the transactions contemplated by the Merger
Agreement. The Merger Agreement further provides that (i) the indemnification
provisions of the Certificate of Incorporation and Bylaws of the Surviving
Corporation as in effect at the Effective Time will not be amended, repealed or
otherwise modified for a period of six years from the Effective Time in any
manner that would adversely affect the rights thereunder of individuals who, at
the Effective Time, were
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directors, officers, employees or agents of American, (ii) Allied Waste will
assume, be jointly and severally liable for, and honor, and will cause the
Surviving Corporation to honor, in accordance with their respective terms,
certain indemnification agreements of American without limit as to time; and
(iii) for a period of six years after the Effective Time, Allied Waste will
cause to be maintained in effect the current policies of directors' and
officers' liability insurance maintained by American and its subsidiaries (or
policies with the same coverages and amounts and containing terms and conditions
that are no less advantageous to the indemnified parties) with respect to
matters arising on or before the Effective Time. Pursuant to the Merger
Agreement, Allied Waste will guarantee the obligations of the Surviving
Corporation to indemnify each present and former director and officer of
American against liabilities or expenses incurred in connection with claims
relating to matters prior to the closing of the Merger, and to maintain in
effect directors' and officers' liability insurance for their benefit. In
addition, Allied Waste will guarantee the obligations of the Surviving
Corporation under indemnification agreements entered into by American with each
of its present and former directors and executive officers. See "The Plan of
Merger and Terms of the Merger -- Indemnification".
STOCK OWNERSHIP. As of the American Record Date, current directors and
executive officers of American are owners of an aggregate of shares of
American Common Stock, representing an aggregate of less than % of the shares
of American Common Stock outstanding as of the American Record Date. Each of
such directors and executive officers of American has advised American that he
or she intends to vote or direct the vote of all the outstanding shares of
American Common Stock over which he or she has or shares voting control in favor
of the approval and adoption of the Merger Agreement.
As of the American Record Date, 108 individuals, including all officers and
directors of American, held options to acquire an aggregate of approximately 1.9
million shares of American Common Stock pursuant to the terms of certain stock
option agreements, at exercise prices ranging from $7.17 to $43.13 per share.
Pursuant to the terms of the American Option Plan, all American Options, whether
or not such options have vested or become exercisable, will become exercisable
prior to the Effective Time. It is anticipated that substantially all American
Options will be exercised, contingent upon the consummation of the Merger, and
all shares of American Common Stock issued upon exercise of these options will
be converted into Allied Waste Common Stock in the Merger. Assuming a market
value of Allied Waste Common Stock of $ per share, the value of the shares
of Allied Waste Common Stock issuable in exchange for shares of American Common
Stock purchased upon exercise of vested and unvested American Options held by
executive officers and directors of American less the exercise price of such
options is expected to be approximately as follows for Messrs. De Young, Kogler,
Conrath and Lavey and for Mses. Straw and Ryan: $ , $ ,
$ , $ , $ , $ and $ , respectively.
See "The Plan of Merger and Terms of the Merger -- American Options."
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
The following discussion summarizes the material Federal income tax
consequences of the Merger to holders of American Common Stock under the Code,
but does not deal with all tax consequences of the Merger that may be relevant
to American stockholders in light of their particular circumstances, such as the
tax consequences to American stockholders who do not hold their American Common
Stock as a capital asset, foreign persons, insurance companies, tax-exempt
organizations, financial institutions, securities dealers, broker-dealers,
persons who acquired their shares in compensatory transactions or stockholders
who hold American Common Stock as part of a "straddle," "hedge," or "conversion"
transaction. Furthermore, no foreign, state or local tax considerations are
addressed herein.
THIS SUMMARY SHOULD NOT BE REGARDED AS A SUBSTITUTE FOR AN INDIVIDUAL
ANALYSIS OF THE TAX CONSEQUENCES OF THE MERGER TO AN AMERICAN STOCKHOLDER. EACH
AMERICAN STOCKHOLDER SHOULD CONSULT A TAX ADVISOR REGARDING THE PARTICULAR
FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX CONSEQUENCES OF THE MERGER TO SUCH
STOCKHOLDER'S OWN PARTICULAR SITUATION.
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It is a condition precedent to American's obligation to consummate the
Merger that American shall have received from its special counsel, Proskauer
Rose LLP, an opinion substantially to the effect that (i) the Merger will
constitute a reorganization within the meaning of Section 368(a) of the Code,
(ii) no gain or loss will be recognized by Allied Waste, American, or
Acquisition as a result of the Merger and (iii) no gain or loss will be
recognized by the holders of American Common Stock upon the exchange of their
American Common Stock solely for shares of USA Common Stock (except with respect
to cash received in lieu of fractional shares of Allied Waste Common Stock). It
is a condition precedent to Allied Waste's obligation to consummate the Merger
that Allied Waste shall have received from its counsel, Fried, Frank, Harris,
Shriver & Jacobson, an opinion substantially to the effect that (i) the Merger
will constitute a reorganization within the meaning of Section 368(a) of the
Code, and (ii) no gain or loss will be recognized by Allied Waste or Acquisition
for Federal income tax purposes as a result of the consummation of the Merger.
The opinions of Proskauer Rose LLP and Fried, Frank, Harris, Shriver & Jacobson
are hereinafter referred to as the "Opinions." The Opinions will be subject to
certain assumptions as noted therein and will be based on certain
representations of Allied Waste and American. The Opinions will be based upon
the Code, applicable Treasury regulations, judicial authority and administrative
rulings and practice, all as of the date of the Opinions. There can be no
assurance that future legislative, judicial or administrative changes or
interpretations will not adversely affect the accuracy of the statements and
conclusions set forth therein. Any such changes or interpretations could be
applied retroactively and could affect the tax consequences of the Merger. The
Opinions will not be binding upon the Internal Revenue Service (the "Service")
or a court, and the Service or a court will not be precluded from adopting a
contrary position. Both the Allied Waste Tax Condition and the American Tax
Condition are waivable at the option of the party entitled to receive such
opinion as a condition of its obligation to consummate the Merger. American does
not currently intend to waive such condition. In the event that such condition
is waived by American, Allied Waste and American will recirculate a revised
Joint Proxy Statement and Prospectus that discloses the waiver of this condition
and contains all related material disclosure, including risks to investors. In
such event, American will resolicit proxies from its stockholders.
Assuming the Merger qualifies as a reorganization under Section 368(a) of
the Code, it is the opinion of Fried, Frank, Harris, Shriver and Jacobson and
Proskauer Rose LLP that, the following Federal income tax consequences will
occur:
(a) no gain or loss will be recognized by Allied Waste, Acquisition or
American as a result of the Merger;
(b) no gain or loss will be recognized by holders of American Common
Stock upon the exchange of their American Common Stock solely for shares of
Allied Waste Common Stock (except with respect to cash received in lieu of
fractional shares of Allied Waste Common Stock).
(c) the tax basis of the shares of Allied Waste Common Stock received
by a American stockholder in the Merger (including any fractional share
deemed received) will be the same as the tax basis of American Common Stock
surrendered in exchange therefor;
(d) the holding period of the shares of Allied Waste Common Stock
received by a American stockholder in the Merger (including any fractional
share deemed received) will include the holding period of the shares of
American Common Stock surrendered in exchange therefor, provided that such
shares of American Common Stock are held as capital assets at the Effective
Time; and
(e) a cash payment in lieu of a fractional share will be treated as if
a fractional share of Allied Waste Common Stock had been received in the
Merger and then redeemed by Allied Waste. Such redemption should qualify as
a distribution in full payment in exchange for the fractional share rather
than as a distribution of a dividend. Accordingly, an American stockholder
receiving cash in lieu of a fractional share will recognize gain or loss
upon such payment in an amount equal to the difference, if any, between
such stockholder's basis in the fractional share (as described in paragraph
(c) above) and the amount of cash received. Such gain or loss will be a
capital gain or loss if such stockholder's American Common Stock is held as
a capital asset at the Effective Time.
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EACH AMERICAN STOCKHOLDER SHOULD CONSULT A TAX ADVISOR AS TO THE PARTICULAR
CONSEQUENCES OF THE MERGER THAT MAY APPLY TO SUCH STOCKHOLDER, INCLUDING THE
APPLICATION OF STATE, LOCAL, FOREIGN AND OTHER FEDERAL TAX LAWS.
For more information on the tax opinions to be delivered by counsel to
Allied Waste and American as conditions to the obligations of the parties to
consummate the Merger, see "The Plan of Merger and Terms of the Merger --
Conditions to the Merger."
ACCOUNTING TREATMENT
It is anticipated that the Merger will be accounted for using the "pooling
of interests" method of accounting pursuant to Opinion No. 16 of the Accounting
Principles Board. The pooling of interests method of accounting assumes that the
combining companies have been merged from inception, and the historical
financial statements for periods prior to consummation of the Merger are
restated as though the companies had been combined from inception.
Two of the conditions to the closing of the Merger are as follows: (i)
Arthur Andersen LLP, independent accountants for Allied Waste, shall have
delivered a letter, dated the Closing Date, addressed to Allied Waste, in form
and substance reasonably satisfactory to Allied Waste, to the effect that the
Merger will qualify for "pooling of interests" accounting treatment if
consummated in accordance with the Merger Agreement, and (ii) Ernst & Young LLP,
independent auditors for American, shall have delivered a letter, dated the
Closing Date addressed to American and Allied Waste, regarding such firm's
concurrence with the conclusions of American's management that no conditions
exist related to American that would preclude Allied Waste's accounting for the
Merger with American as a "pooling of interests" under Accounting Principles
Board Opinion No. 16 if closed and consummated in accordance with the Merger
Agreement.
GOVERNMENT AND REGULATORY APPROVALS
Transactions such as the Merger are reviewed by the Antitrust Division and
the FTC to determine whether they comply with applicable antitrust laws. Under
the provisions of the HSR Act applicable to the Merger, the Merger may not be
consummated until the expiration of a 30 day waiting period following the filing
of notification reports with the FTC and the Antitrust Division by Allied Waste
and American unless a request for additional information or documentary material
is received from the FTC or the Antitrust Division or unless early termination
of the waiting period is granted. If within the initial 30 day waiting period,
either the Antitrust Division or the FTC requests additional information or
material concerning the Merger, the waiting period will be extended and would
expire on the twentieth calendar day after the date of substantial compliance
with such request. Only one extension of the waiting period pursuant to a
request for additional information is authorized by the HSR Act. Thereafter,
such waiting period may be extended only by court order or with the consent of
the parties. Allied Waste and American filed notification reports with the
Department of Justice and FTC under the HSR Act on August 19, 1998 and,
accordingly, the waiting period will expire on September 18, 1998, unless a
request is made for additional information or material.
The FTC and the Antitrust Division frequently scrutinize the legality under
the antitrust laws of transactions such as the Merger. At any time before or
after the Merger, the Antitrust Division or the FTC could take such action under
the antitrust laws as it deems necessary or desirable in the public interest,
including seeking to enjoin the Merger or seeking divestiture of substantial
assets of Allied Waste or American or their subsidiaries. Private parties and
state attorneys general may also bring an action under the antitrust laws under
certain circumstances. There can be no assurance that a challenge to the Merger
on antitrust grounds will not be made or, if such a challenge is made, of the
result.
RESTRICTIONS ON RESALES BY AFFILIATES
The shares of Allied Waste Common Stock to be received by American
stockholders in connection with the Merger have been registered under the
Securities Act and, except as set forth below, may be traded
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without restriction. The shares of Allied Waste Common Stock issued in the
Merger and received by persons who are deemed to be "affiliates" (as that term
is defined in Rule 144 under the Securities Act) of American prior to the Merger
may be resold by them only in transactions permitted by the resale provisions of
Rule 145 under the Securities Act (or, in the case of persons who become
affiliates of Allied Waste, Rule 144 under the Securities Act) or as otherwise
permitted under the Securities Act. The Merger Agreement provides that American
and Allied Waste will use their reasonable efforts to cause each of their
officers, directors and each other person who is an "affiliate" of American or
Allied Waste, as the case may be, to deliver to Allied Waste and/or American on
or prior to the Effective Time a written agreement to the effect that such
persons will not offer to sell, sell or otherwise dispose of any shares of
Allied Waste Common Stock issued in the Merger except, in each case, pursuant to
an effective registration statement or in compliance with Rule 145 or in a
transaction which, in the opinion of legal counsel satisfactory to Allied Waste,
is exempt from the registration requirements of the Securities Act and, in any
case, until after the results covering 30 days of post-Merger combined
operations of Allied Waste and American have been filed with the Commission,
sent to stockholders of Allied Waste or otherwise publicly issued.
Under Commission guidelines interpreting generally accepted accounting
principles, with certain limited exceptions, the sale of Allied Waste Common
Stock or American Common Stock by an affiliate of either Allied Waste or
American generally within 30 days prior to the Effective Time or thereafter
prior to the publication of results that include a minimum of at least 30 days
of combined operations of Allied Waste and American after the Effective Time
could preclude "pooling of interests" accounting treatment for the Merger.
AMENDMENT TO THE RESTATED CERTIFICATE OF INCORPORATION OF ALLIED WASTE
The authorized capital stock of Allied Waste currently consists of
200,000,000 shares of Common Stock, par value $.01 per share, and 10,000,000
shares of Preferred Stock, par value $.10 per share. On the Allied Waste Record
Date, shares of Allied Waste Common Stock were issued and
outstanding, and shares were reserved for issuance upon exercise
of outstanding options and warrants.
As of the date hereof, approval of the Charter Amendment is not necessary
for consummation of the Merger. However, following the Merger, Allied Waste
would have approximately seven million shares of Allied Waste Common Stock
available for general corporate purposes and this number will be reduced by any
acquisitions for stock committed to by Allied Waste and American prior to the
Effective Time. The Board of Directors of Allied Waste believes that the Charter
Amendment is necessary in order to assure that after the Merger, Allied Waste
will have sufficient shares available for issuance at the Board of Directors'
discretion for future acquisitions, stock splits, stock dividends, equity
financings, employee benefit plans and other corporate purposes. Accordingly,
the Allied Waste Board of Directors has proposed the Charter Amendment to
increase the number of shares of Allied Waste Common Stock available for
issuance from 200,000,000 to 300,000,000.
If the Charter Amendment is approved by the stockholders of Allied Waste,
the additional shares of Allied Waste Common Stock may be issued from time to
time upon authorization of the Board of Directors, without further approval by
the stockholders unless required by applicable law or the rules of the Nasdaq
Stock Market, and for such consideration as the Allied Waste Board of Directors
may determine and as may be permitted by applicable law. The rules of the Nasdaq
Stock Market generally require the approval of a majority of the shares voting
(assuming the presence of a quorum) for the issuance of shares of Allied Waste
Common Stock under certain circumstances, including if the issuance of shares
(i) will result in a change of control of Allied Waste, (ii) is in connection
with the acquisition of the stock or assets of another company, would result in
the issuance of shares having 20% or more of the voting power outstanding before
such issuance, or (iii) is in connection with a transaction other than a public
offering and involves the sale of shares representing 20% or more of the voting
power outstanding before the issuance and the sale is for less than the greater
of book or market value of the stock. The availability of additional shares of
Allied Waste Common Stock for issuance will afford Allied Waste greater
flexibility in acting upon proposed transactions.
The increase in authorized shares is not being proposed as a means of
preventing or dissuading a change in control or takeover of Allied Waste.
However, use of these shares for such a purpose is possible. Shares of
authorized but unissued or unreserved Allied Waste Common Stock and Preferred
Stock, for example, could
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be issued in an effort to dilute the stock ownership and voting power of persons
seeking to obtain control of Allied Waste or could be issued to purchasers who
would support the Board of Directors in opposing a takeover proposal. In
addition, the increase in authorized shares, if approved, may have the effect of
discouraging a challenge for control or make it less likely that such a
challenge, if attempted, would be successful. The Board of Directors and
executive officers of Allied Waste have no knowledge of any current effort to
obtain control of Allied Waste or to accumulate large amounts of Allied Waste
Common Stock.
The proposed Charter Amendment does not change the terms of the Allied
Waste Common Stock, which does not have preemptive rights. The additional shares
of Allied Waste Common Stock for which authorization is sought will have the
same voting rights, the same rights to dividends and distributions and will be
identical in all other respects to the shares of Allied Waste Common Stock now
authorized.
RECOMMENDATION OF THE BOARD OF DIRECTORS. The Board of Directors of Allied
Waste recommends that the stockholders of Allied Waste vote FOR the Charter
Amendment. This amendment is being proposed by the Board of Directors in order
to assure that, after the Merger, Allied Waste will have sufficient shares
available for issuance at the Board of Directors' discretion for future
acquisitions, stock splits, stock dividends, equity financings, employee benefit
plans and other corporate purposes.
VOTE REQUIRED FOR APPROVAL. Approval of the Charter Amendment requires the
affirmative vote of a majority of the outstanding shares of Allied Waste Common
Stock.
If approved by the stockholders of Allied Waste, it is anticipated that the
Charter Amendment will become effective as soon as practicable after the Allied
Waste Special Meeting.
THE PLAN OF MERGER AND TERMS OF THE MERGER
The following summary of the terms of the Merger Agreement is qualified in
its entirety by reference to the Merger Agreement, a copy of which is attached
hereto as Appendix A. Certain capitalized terms used herein without definition
have the respective meanings set forth in the Merger Agreement.
EFFECTIVE TIME OF THE MERGER
The Merger will become effective at such time as shall be stated in the
Certificate of Merger, which shall be in a form mutually acceptable to Allied
Waste and American, and shall be filed with the Secretary of State of the State
of Delaware in accordance with the DGCL (the "Merger Filing"). The Merger Filing
shall be made simultaneously with, or as soon as practicable after, the closing
of the transactions contemplated by the Merger Agreement in accordance with the
Merger Agreement. See "-- Conditions to the Merger."
MANNER AND BASIS FOR CONVERTING SHARES
At the Effective Time, each outstanding share of American Common Stock
(other than shares owned by Allied Waste) will be converted into the right to
receive, without interest, 1.65 shares of Allied Waste Common Stock, with cash
being paid in lieu of fractional shares. In addition, at the Effective Time,
each issued and outstanding share of Acquisition Common Stock will be converted
into one share of common stock, par value $.01 per share, of the Surviving
Corporation.
After the Effective Time, the stock transfer books of American will be
closed. SHARE CERTIFICATES SHOULD NOT BE SURRENDERED FOR EXCHANGE BY
STOCKHOLDERS OF AMERICAN PRIOR TO APPROVAL OF THE MERGER AND THE RECEIPT OF A
LETTER OF TRANSMITTAL.
No certificates or scrip for fractional shares of Allied Waste Common Stock
will be issued in the Merger, and such fractional interests will not entitle the
owner thereof to vote or to any other rights of a security holder. In lieu of
any such fractional shares, each holder of shares of American Common Stock who
would otherwise have been entitled to receive a fraction of a share of Allied
Waste Common Stock upon surrender of American certificates for exchange pursuant
to the Merger Agreement will be entitled to receive from the Exchange Agent a
cash payment equal to such fraction multiplied by the average closing price per
share of Allied Waste
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Common Stock on the Nasdaq Stock Market, as reported by the Wall Street Journal,
during the 20 trading days immediately preceding the Effective Time.
From and after the Effective Time, each holder of an outstanding
certificate which immediately prior to the Effective Time represented shares of
American Common Stock will be entitled to receive in exchange therefor, upon
surrender thereof to the Exchange Agent, a certificate or certificates
representing the number of whole shares of Allied Waste Common Stock (together
with any cash payable in respect of fractional shares) to which such holder is
entitled pursuant to the Merger Agreement. Until holders or transferees of
certificates theretofore representing shares of American Common Stock have
surrendered them for exchange as provided herein, no dividends or other
distributions will be paid with respect to any shares represented by such
certificates and no payment for fractional shares will be made and, without
regard to when such certificates representing shares of American Common Stock
are surrendered for exchange as provided herein, no interest will be paid on any
dividends or other distributions or any payment for fractional shares. Upon
surrender of a certificate which, immediately prior to the Effective Time
represented shares of American Common Stock, there will be paid to the holder of
such certificate the amount of any dividends or other distributions which
theretofore became payable, but which were not paid by reason of the foregoing,
with respect to the number of whole shares of Allied Waste Common Stock
represented by the certificate or certificates issued upon such surrender.
AMERICAN OPTIONS
Under the terms of the American Option Plan, in the event of certain
transactions, including any transaction that results in the acquisition of all
or substantially all of the outstanding shares of American Common Stock by a
single person or entity, each holder of any such options shall, during a period
of at least 30 days prior to the consummation of the transaction, have the right
to exercise in full all of his or her stock options (whether vested or not
vested) but contingent on the consummation of the transaction. If the
transaction is not consummated, then the exercise of the options shall be null
and void. Any American options outstanding as of the consummation of the
transaction will terminate pursuant to the terms of the American Option Plan.
The Merger is a transaction which will cause this provision of the American
Option Plan to become operative. Therefore, all holders of the options,
including the directors and executive officers of American, shall have the
opportunity to exercise their options (whether vested or not vested) for a
period of at least 30 days prior to the consummation of the Merger and any
shares of American Common Stock issued upon exercise of the options will be
converted into shares of Allied Waste Common Stock in the Merger in accordance
with the terms of the Merger Agreement.
AMERICAN WARRANT
It is anticipated that a warrant to purchase 48,788 shares of American
Common Stock will be exercised for shares of American Common Stock immediately
prior to the Effective Time.
CONDITIONS TO THE MERGER
The respective obligations of Allied Waste and American to effect the
Merger are subject to the fulfillment at or prior to the Closing Date of the
following conditions: (a) the Merger Agreement and the transactions contemplated
thereby shall have been approved and adopted by the requisite vote of the
stockholders of Allied Waste and American under applicable law and applicable
listing requirements; (b) the shares of Allied Waste Common Stock issuable in
the Merger and those to be reserved for issuance upon exercise of stock options
or warrants or the conversion of convertible securities shall have been
authorized for listing on the Nasdaq Stock Market upon official notice of
issuance; (c) the waiting period applicable to consummation of the Merger under
the HSR Act shall have expired or been terminated; (d) the Registration
Statement shall have become effective in accordance with the provisions of the
Securities Act, no stop order suspending such effectiveness shall have been
issued and remain in effect and no proceeding for that purpose shall have been
instituted by the Commission or any state regulatory authorities; (e) no
preliminary or permanent injunction or other order or decree by any federal or
state court which prevents the consummation of the Merger shall have been issued
and remain in effect (each party agreeing to use its reasonable efforts to
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have any such injunction, order or decree lifted); (f) no statute, rule or
regulation shall have been enacted by any state or federal government or
governmental agency in the United States which would prevent the consummation of
the Merger or make the Merger illegal; (g) Arthur Andersen LLP, independent
accountants for Allied Waste, shall have delivered a letter, dated the Closing
Date, addressed to Allied Waste, in form and substance reasonably satisfactory
to Allied Waste, to the effect that the Merger will qualify for "pooling of
interests" accounting treatment if consummated in accordance with the Merger
Agreement; and (h) each of the parties to the Merger Agreement shall have
received a letter dated the Closing Date from Ernst & Young LLP regarding such
firm's concurrence with American's management's conclusions that no conditions
exist related to American that would preclude Allied Waste's accounting for the
Merger as a "pooling-of-interests" under Accounting Principles Board Opinion No.
16 if closed and consummated in accordance with the Merger Agreement.
The obligation of American to effect the Merger is further subject to the
fulfillment at or prior to the Closing Date of the following additional
conditions, unless waived by American: (a) Allied Waste and Acquisition shall
have performed their agreements in the Merger Agreement required to be performed
on or prior to Closing Date, and the representations and warranties of Allied
Waste and Acquisition contained in the Merger Agreement shall be true and
correct on and as of the date made and (except to the extent that such
representations and warranties speak as of an earlier date) on and as of the
Closing Date as if made at and as of such date, except for such failures to
perform or to be true and correct that would not reasonably be expected to have
a material adverse effect on the business operations, properties, assets,
condition (financial or other) or results of operations of Allied Waste and its
subsidiaries considered as a whole, and American shall have received a
certificate of the Chairman of the Board and Chief Executive Officer, the
President or a Vice President of Allied Waste and of the President and Chief
Executive Officer or a Vice President of Acquisition to that effect; and (b)
American shall have received an opinion of Proskauer Rose LLP, in form and
substance reasonably satisfactory to American, dated the Closing Date,
substantially to the effect that on the basis of facts, representations and
assumptions set forth in such opinion which are consistent with the state of
facts existing at the Effective Time, the Merger will constitute a
reorganization within the meaning of Section 368(a) of the Code and neither
Allied Waste, Acquisition, American, nor the holders of American Common Stock
(except to the extent any such holders receive cash in lieu of fractional
shares) will recognize any gain or loss for federal income tax purposes.
The obligation of Allied Waste and Acquisition to effect the Merger is
further subject to the fulfillment at or prior to the Closing Date of the
following additional conditions, unless waived by Allied Waste and Acquisition:
(a) American shall have performed its agreements in the Merger Agreement
required to be performed on or prior to the Closing Date, and the
representations and warranties of American contained in the Merger Agreement
shall be true and correct on and as of the date made and (except to the extent
that such representations and warranties speak as of an earlier date) on and as
of the Closing Date as if made at and as of such date, except for such failures
to perform or to be true and correct that would not reasonably be expected to
have a material adverse effect on the business operations, properties, assets,
condition (financial or other) or results of operations of Allied Waste and its
subsidiaries considered as a whole, and Allied Waste shall have received a
certificate of the President and Chief Executive Officer or of a Vice President
of American to that effect; and
(b) Allied Waste shall have received an opinion of Fried, Frank, Harris,
Shriver & Jacobson, in form and substance reasonably satisfactory to Allied
Waste, dated the Closing Date, substantially to the effect that on the basis of
facts, representations and assumptions set forth in such opinion which are
consistent with the state of facts existing at the Effective Time, the Merger
will constitute a reorganization under Section 368(a) of the Code and neither
Allied Waste nor Acquisition will recognize any gain or loss for federal income
tax purposes as a result of consummation of the Merger.
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COOPERATION
Pursuant to the Merger Agreement, each of the parties has agreed to take,
or to cause to be taken, all action and to do or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by the Merger
Agreement. In this regard, the Merger Agreement provides, among other things,
that Allied Waste shall take all reasonable steps necessary to avoid or
eliminate impediments under any antitrust, competition or trade regulation law
that may be asserted by the FTC, the Antitrust Division, any state Attorney
General or any governmental entity with respect to the Merger so as to enable
consummation of the Merger to occur as soon as reasonably possible. The Merger
Agreement further provides that, notwithstanding the foregoing, Allied Waste
will propose, negotiate, commit to and effect, by consent decree, hold separate
order, or otherwise, the sale, divestiture, or disposition of such assets or
businesses of Allied Waste or, effective as of the Effective Time, the Surviving
Corporation, as may be required in order to avoid the entry of, or to effect the
dissolution of, any injunction, temporary restraining order or other order in
any suit or proceeding, which would otherwise have the effect of preventing or
delaying consummation of the Merger.
REPRESENTATIONS AND WARRANTIES OF ALLIED WASTE AND AMERICAN
In the Merger Agreement, Allied Waste and American have made various
representations and warranties relating to, among other things, their respective
businesses and financial condition, the accuracy of their various filings with
the Commission, the satisfaction of certain legal requirements for the Merger
and the absence of undisclosed liabilities or material litigation matters. The
representations and warranties of each of the parties to the Merger Agreement
will expire upon consummation of the Merger.
CONDUCT OF THE BUSINESS OF ALLIED WASTE AND AMERICAN PRIOR TO THE MERGER
Pursuant to the Merger Agreement, American has agreed that, after the date
of the Merger Agreement and prior to the Closing Date or earlier termination of
the Merger Agreement, and except as otherwise agreed to in writing by Allied
Waste and except as otherwise contemplated by or disclosed in the Merger
Agreement, it shall, and shall cause each of its subsidiaries to: (a) conduct
their respective businesses in the ordinary and usual course of business and
consistent with past practice; (b) not (i) amend or propose to amend their
respective charters or Bylaws (except that American may amend its charter to
increase the number of authorized shares of American Common Stock), (ii) split,
combine or reclassify their outstanding capital stock or (iii) declare, set
aside or pay any dividend or distribution payable in cash, stock, property or
otherwise, except for the payment of dividends or distributions to American by a
wholly owned subsidiary of American; (c) not issue, sell, pledge or dispose of,
or agree to issue, sell, pledge or dispose of, any additional shares of, or any
options, warrants or rights of any kind to acquire any shares of their capital
stock of any class or any debt or equity securities convertible into or
exchangeable for such capital stock, except that (i) American may issue shares
upon conversion of convertible securities and exercise of options and warrants,
(ii) American may issue shares of American Common Stock (or warrants or options
to acquire American Common Stock) in connection with acquisitions of assets or
businesses pursuant to the proviso set forth in (d)(vii) below, and (iii)
American may issue shares of American Common Stock pursuant to earnouts from
previously completed transactions in accordance with the existing terms of the
agreements relating thereto; (d) not (i) incur or become contingently liable
with respect to any indebtedness for borrowed money other than (A) borrowings in
the ordinary course of business (other than pursuant to credit facilities) or
borrowings under the existing credit facilities of American or any of its
subsidiaries as such facilities may be amended in a manner that does not have a
material adverse effect on American up to the borrowing limit in effect on the
date of the Merger Agreement, (B) borrowings to refinance existing indebtedness
on terms which are reasonably acceptable to Allied Waste or (C) borrowings in
connection with acquisitions as set forth in the proviso to (d)(vii) below, (ii)
redeem, purchase, acquire or offer to purchase or acquire any shares of its
capital stock, or any options, warrants or rights to acquire any of its capital
stock, or any security convertible into or exchangeable for its capital stock,
(iii) take any action that would jeopardize the treatment of the Merger as a
pooling of interests under Accounting Principles Board Opinion No. 16, (iv) take
or fail to take any action which action or failure to take action would cause
American or its stockholders (except to the
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extent that any stockholders receive cash in lieu of fractional shares and
except to the extent of stockholders in special circumstances) to recognize gain
or loss for federal income tax purposes as a result of the consummation of the
Merger or would otherwise cause the Merger not to qualify as a reorganization
under Section 368(a) of the Code, (v) make any acquisition of any assets or
businesses other than expenditures for current assets in the ordinary course of
business and other than as set forth in the proviso in (d)(vii) below, (vi)
sell, pledge, dispose of or encumber any material assets or businesses other
than (a) sales of businesses or assets in the ordinary course of business, (b)
sales of businesses or assets otherwise disclosed pursuant to the Merger
Agreement, (c) sales of businesses or assets with aggregate 1997 revenues less
than $5 million, and (d) pledges or encumbrances pursuant to existing credit
facilities or other permitted borrowings, or (vii) except as set forth in the
following proviso, enter into any binding contract, agreement, commitment or
arrangement with respect to any of the foregoing; provided that, notwithstanding
the foregoing (other than subsections (iii) and (iv) of this clause (d)),
American shall not be prohibited from acquiring any assets or businesses or
incurring or assuming indebtedness in connection with acquisitions of assets or
businesses so long as (A) such acquisitions are otherwise disclosed in the
Merger Agreement, (B) the aggregate value of consideration paid or payable in
connection with any such acquisition (other than those acquisitions disclosed in
the Merger Agreement) including any funded indebtedness assumed and any American
Common Stock issued in connection with such acquisition (valued for purposes of
this limitation at a price per share equal to the price of American Common Stock
on the date the agreement in respect of any such acquisition is entered into)
does not exceed $10 million and such acquisition is accretive to the earnings
per share of American. (For purposes of the foregoing, any contingent, royalty
and similar payments made in connection with acquisitions of businesses or
assets will be included as acquisition consideration and will be deemed to have
a value equal to their present value assuming an 8% per annum discount rate and
assuming that all amounts payable for the first five years following
consummation of the acquisitions (but not thereafter) are paid); (e) use all
reasonable efforts to preserve intact their respective business organizations
and goodwill, keep available the services of their respective present officers
and key employees, preserve the goodwill and business relationships with
customers and others having business relationships with them and not engage in
any action, directly or indirectly, with the intent to adversely impact the
transaction contemplated by the Merger Agreement; (f) subject to restrictions
imposed by applicable law, confer with one or more representatives of Allied
Waste to report operational matters of materiality and the general status of
ongoing operations; (g) not enter into or amend any employment, severance,
special pay arrangement with respect to termination of employment or other
similar arrangements or agreements with any directors, officers or key
employees, except in the ordinary course and consistent with past practice;
provided, however, that American and its subsidiaries shall in no event enter
into or amend any written employment agreement providing for annual base salary
in excess of $100,000 per annum; (h) not adopt, enter into or amend any pension
or retirement plan, trust or fund, except as required to comply with changes in
applicable law and not adopt, enter into or amend in any material respect any
bonus, profit sharing, compensation, stock option, deferred compensation, health
care, employment or other employee benefit plan, agreement, trust, fund or
arrangement for the benefit or welfare of any employees or retirees generally,
other than in the ordinary course of business, except (i) as contemplated by
(c), above, (ii) as required to comply with changes in applicable law, (iii) any
of the foregoing involving any such then existing plans, agreements, trusts,
funds or arrangements of any company acquired after the date hereof or (iv) as
required pursuant to an existing contractual arrangement or agreement; (i) use
commercially reasonable efforts to maintain with financially responsible
insurance companies insurance on its tangible assets and its businesses in such
amounts and against such risks and losses as are consistent with past practice;
and (j) not make, change or revoke any material tax election or make any
material agreement or settlement regarding taxes with any taxing authority.
Notwithstanding the foregoing, American will not (A) acquire or agree to acquire
any assets or business if such acquisition or agreement may reasonably be
expected to delay the consummation of the Merger, (B) acquire or agree to
acquire any assets or businesses if such assets or businesses are not in
industries in which American currently operates, unless such assets or
businesses are acquired incidental to an acquisition of businesses or assets
that are in industries in which American currently operates and it is reasonable
to acquire such incidental businesses or assets, or (C) acquire or agree to
acquire all or substantially all of the business, assets or properties or
capital stock of any entity with securities registered under the Securities Act
or the Exchange Act.
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Pursuant to the Merger Agreement, Allied Waste has agreed that, after the
date of the Merger Agreement and prior to the Closing Date or earlier
termination of the Merger Agreement, and except as otherwise agreed to in
writing by American, it shall, and shall cause each of its subsidiaries to: (a)
conduct their respective businesses in the ordinary and usual course of business
and consistent with past practice; (b) not (i) amend or propose to amend their
respective charters (except for any amendments by Allied Waste of its
Certificate of Incorporation to increase the number of authorized shares of
Allied Waste Common Stock to not more than 400 million) or bylaws, (ii) split,
combine or reclassify (whether by stock dividend or otherwise) their outstanding
capital stock, or (iii) declare, set aside or pay any dividend or distribution
payable in cash, stock, property or otherwise, except for the payment of
dividends or distributions to Allied Waste by a wholly-owned subsidiary of
Allied Waste; (c) not issue, sell, pledge, or dispose of, or agree to issue,
sell, pledge or dispose of, any additional shares of, or any options, warrants
or rights of any kind to acquire any shares of their capital stock of any class
or any debt or equity securities convertible into or exchangeable for such
capital stock, except that (i) Allied Waste may issue shares upon conversion of
convertible securities and exercise of options, (ii) Allied Waste may issue
options with an exercise price per share of Allied Waste Common Stock no less
than the fair market value of a share of Allied Waste Common Stock on the date
of the grant thereof (and shares upon exercise of such options) pursuant to its
employee stock option plans in effect on the date of the Merger Agreement and
(iii) Allied Waste may issue shares of capital stock (or warrants or options to
acquire capital stock) in connection with acquisitions of assets or businesses
pursuant to the proviso set forth in (d)(vii) below; (d) not (i) incur or become
contingently liable with respect to any indebtedness for borrowed money other
than (A) borrowings in the ordinary course of business or borrowings under the
existing credit facilities of Allied Waste or any of its subsidiaries, (B)
borrowings to refinance existing indebtedness on terms which are reasonably
acceptable to American or (C) as set forth in the proviso in (d)(vii) below,
(ii) redeem, purchase, acquire or offer to purchase or acquire any shares of its
capital stock or any options, warrants or rights to acquire any of its capital
stock, or any security convertible into or exchangeable for its capital stock,
(iii) take any action which would jeopardize the treatment of the Merger as a
pooling of interests under Accounting Principles Board Opinion No. 16, (iv) take
or fail to take any action which action or failure to take action would cause
Allied Waste or its stockholders to recognize gain or loss for federal income
tax purposes as a result of the consummation of the Merger or would otherwise
cause the merger not to qualify as a reorganization under Section 368(a) of the
Code, (v) pledge or encumber any material assets or businesses other than
pledges or encumbrances pursuant to existing credit facilities, (vi) make any
acquisition of any assets or businesses other than expenditures for current
assets in the ordinary course of business and expenditures for fixed or capital
assets in the ordinary course of business and other than as set forth in the
proviso in (d)(vii) below, or (vii) enter into any binding contract, agreement,
commitment or arrangement with respect to any of the foregoing; provided that,
notwithstanding the foregoing (other than subsections (iii) and (iv) of this
clause (d)), Allied Waste shall not be prohibited from acquiring any assets or
businesses or incurring or assuming indebtedness in connection with acquisitions
of assets or businesses; (e) use all reasonable efforts to preserve intact their
respective business organizations and goodwill, keep available the services of
their respective present officers and key employees, and preserve the goodwill
and business relationships with customers and others having business
relationships with them and not engage in any action, directly or indirectly,
with the intent to adversely impact the transactions contemplated by the Merger
Agreement; (f) subject to restrictions imposed by applicable law, confer with
one or more representatives of American to report operational matters of
materiality and the general status of ongoing operations; and (g) use
commercially reasonable efforts to maintain with financially responsible
insurance companies insurance on its tangible assets and its businesses in such
amounts and against such risks and losses as are consistent with past practice.
Notwithstanding anything in the Merger Agreement to the contrary, Allied Waste
will not (A) acquire or agree to acquire any assets or businesses if such
acquisition or agreement may reasonably be expected to delay the consummation of
the Merger; and (B) acquire or agree to acquire any assets or businesses if such
assets or businesses are not in industries in which Allied Waste currently
operates, unless such assets or businesses are acquired incidental to an
acquisition of businesses or assets that are in industries in which Allied Waste
currently operates and it is reasonable to acquire such incidental businesses or
assets in connection with such acquisition.
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NO SOLICITATION OF ACQUISITION TRANSACTIONS
The Merger Agreement provides that after the date of the Merger Agreement
and prior to the Effective Time or earlier termination of the Merger Agreement,
American shall not, and shall not permit any of its subsidiaries to, initiate,
solicit, negotiate, encourage or provide confidential information to facilitate,
and American shall, and shall use its reasonable efforts to cause any officer,
director or employee of American, or any attorney, accountant, investment
banker, financial advisor or any other agent retained by it or any of its
subsidiaries, not to initiate, solicit, negotiate, encourage or provide
non-public or confidential information to facilitate, any Acquisition
Transaction; provided, however, that (i) American may, in response to a Superior
Proposal, furnish (subject to the execution of a confidentiality agreement
substantially similar to the confidentiality provisions of the Merger
Agreement), confidential or non-public information to a Potential Acquirer and
negotiate with such Potential Acquirer if the Board of Directors of American,
after consulting with its outside legal counsel, determines in good faith that
consideration of the Superior Proposal is reasonably necessary for the Board of
Directors to act in a manner consistent with its fiduciary duties or that the
failure to provide such confidential or non-public information to or to
negotiate with such Potential Acquirer would be reasonably likely to constitute
a breach of its fiduciary duty to its stockholders and (ii) American's Board of
Directors may take and disclose to American's stockholders a position
contemplated by Rule 14e-2 under the Exchange Act. The Merger Agreement requires
that American immediately notify Allied Waste after receipt of any Acquisition
Proposal, indication of interest or request for non-public information relating
to American or its subsidiaries in connection with an Acquisition Proposal or
for access to the properties, books or records of American or any subsidiary by
any person or entity that informs the Board of Directors of American or such
subsidiary that it is considering making, or has made, an Acquisition Proposal.
Such notice to Allied Waste shall be made orally and in writing and shall
indicate in reasonable detail the identity of the offeror and the terms and
conditions of such proposal, inquiry or contact.
The Merger Agreement also provides that after the date of the Merger
Agreement and prior to the Effective Time or the earlier termination of the
Merger Agreement, Allied Waste shall promptly notify American after receipt of
any proposal or offer to acquire all or any substantial part of the businesses,
properties or capital stock of Allied Waste, whether by merger, purchase of
assets, tender offer or otherwise, whether for cash, securities or any other
consideration or combination thereof (an "Allied Waste Acquisition
Transaction"), and shall indicate in reasonable detail the identity of the
offeror and the terms and conditions of such proposal or offer.
CONDUCT OF THE BUSINESS OF THE COMBINED COMPANIES FOLLOWING THE MERGER
Following the Merger, American will be a wholly owned subsidiary of Allied
Waste. Pursuant to the Merger Agreement, the Certificate of Incorporation and
the Bylaws of American, as in effect immediately prior to the Effective Time,
will be the Certificate of Incorporation and Bylaws of the Surviving Corporation
after the Effective Time, and (subject to certain provisions of the Merger
Agreement) thereafter may be amended in accordance with their terms as provided
in the DGCL, except that no amendment shall be made to, nor shall any provision
be included which is inconsistent with, the provisions of the Amended Restated
Certificate of Incorporation of American relating to indemnification of
directors and officers and elimination of personal liability of directors for
breach of fiduciary duty to the fullest extent permitted by the DGCL.
TERMINATION OR AMENDMENT
The Merger Agreement may be terminated at any time prior to the Closing
Date, whether before or after approval by the stockholders of Allied Waste or
American, by the mutual written consent of American and Allied Waste or as
follows: (a) by either Allied Waste or American (i) upon a material breach of a
representation or warranty of the Non-Terminating Party contained in the Merger
Agreement which has not been cured in all material respects and which has caused
certain conditions to the obligation of the Terminating Party to effect the
Merger to be incapable of being satisfied by the Termination Date, (ii) if the
Merger is not completed by January 31, 1999 (unless due to a delay or default on
the part of the Terminating Party), (iii) if the Merger is enjoined by a final,
unappealable court order not entered at the request or with the support of the
Terminating Party and if the Terminating Party shall have used reasonable
efforts to prevent
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the entry of such order, (iv) if the Non-Terminating Party (A) fails to perform
in any material respect any of its material covenants in the Merger Agreement
and (B) does not cure such default in all material respects within 30 days after
written notice of such default specifying such default in reasonable detail is
given to the Non-Terminating Party by the Terminating Party, or (v) if the
stockholders of the Non- Terminating Party fail to approve the Merger at a duly
held meeting of such stockholders called for such purpose or any adjournment or
postponement thereof, (b) by American (i) if American receives a Superior
Proposal, resolves to accept such Superior Proposal, and has given Allied Waste
two days' prior written notice of its intention to terminate pursuant to such
provision (provided that such termination shall not be effective until such time
as any termination fees required to be paid by American pursuant to the Merger
Agreement have been received by Allied Waste) or (ii) if (A) a tender or
exchange offer is commenced by a Potential Acquirer (excluding any affiliate of
American or any group of which any affiliate of American is a member) for all
outstanding shares of American Common Stock, (B) the Board of Directors of
American determines, in good faith and after consultation with an independent
financial advisor, that such offer constitutes a Superior Proposal and resolves
to accept such Superior Proposal or recommend to the stockholders that they
tender their shares in such tender or exchange offer and (C) American shall have
given Allied Waste two days' prior written notice of its intention to terminate
pursuant to this provision (provided that such termination shall not be
effective until such time as any termination fees required to be paid by
American pursuant to the Merger Agreement have been received by Allied Waste),
and (c) by Allied Waste if the Board of Directors of American shall have
resolved to accept a Superior Proposal or shall have recommended to the
stockholders of American that they tender their shares in a tender or exchange
offer commenced by a third party (excluding any affiliate of Allied Waste or any
group of which any affiliate of Allied Waste is a member); provided that Allied
Waste may not so terminate until three days after receipt of the notice of
American of such Superior Proposal. In the event of termination of the Merger
Agreement pursuant to its terms by either Allied Waste or American, the Merger
Agreement shall forthwith become void and there shall be no liability or further
obligation on the part of American, Allied Waste, Acquisition or their
respective officers or directors (except for certain obligations of the parties
regarding confidential information, return of non-public information following
termination, expenses and fees payable in connection with the Merger Agreement
and/or the termination thereof, assignment of the Agreement and the governing
law applicable to the Agreement, all of which shall survive the termination).
Termination of the Merger Agreement will not relieve any party from liability
for any willful and intentional breach of any covenant or agreement of such
party contained in the Merger Agreement.
The Merger Agreement may not be amended except by action taken by the
parties' respective Boards of Directors or duly authorized committees thereof
and then only by an instrument in writing signed on behalf of each party and in
compliance with applicable law. Such amendment may take place at any time prior
to the Closing Date, and, subject to applicable law, whether before or after
approval by the stockholders of American, Allied Waste or Acquisition.
TERMINATION FEES
American and Allied Waste have each agreed to pay a termination fee to the
other party should certain of the termination rights described in
"-- Termination or Amendment" above be exercised under certain circumstances.
American has agreed to pay Allied Waste a fee equal to $32 million if (i)
American terminates the Merger Agreement pursuant to clause (b)(i) or (b)(ii) of
"-- Termination or Amendment" above, (ii) Allied Waste terminates the Merger
Agreement as described in clause (c) of "-- Termination or Amendment" above, or
(iii) (x) the Merger Agreement is terminated for any reason at a time at which
Allied Waste was not in material breach of its covenants contained in the Merger
Agreement and was entitled to terminate pursuant to clause (a)(v) of
"-- Termination or Amendment" above, (y) prior to the time of such termination a
proposal relating to an Acquisition Transaction has been made, and (z) on or
prior to the nine month anniversary of the termination of the Merger Agreement
(xx) American or any of its subsidiaries or affiliated enters into an agreement
or letter of intent (or resolves or announces an intention to do) with respect
to an Acquisition Transaction involving a person, entity or group if such
person, entity or group (or any member of such group, or any affiliate of the
foregoing) made a proposal with respect to an Acquisition Transaction on or
after the date of, and prior to the termination of, the Merger Agreement and
such
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Acquisition Transaction is consummated or (yy) an Acquisition Transaction shall
otherwise occur with any person who shall have made a proposal with respect to
an Acquisition Transaction within 90 days after termination of the Merger
Agreement. Such fee shall be payable upon the first occurrence of any such
event. Allied Waste has agreed to pay American a fee equal to $32 million if (i)
the Merger Agreement is terminated for any reason at a time at which American
was not in material breach of its covenants contained in the Merger Agreement
and was entitled to terminate pursuant to clause (a)(v) of "-- Termination or
Amendment" above, (ii) prior to the time of such termination a proposal relating
to an Allied Waste Acquisition Transaction has been made, and (iii) on or prior
to the nine month anniversary of the termination of the Merger Agreement (x)
Allied Waste or any of its subsidiaries or affiliates enters into an agreement
or letter of intent (or resolves or announces an intention to do) with respect
to an Allied Waste Acquisition Transaction or a merger, acquisition or other
business combination involving a person, entity or group if such person, entity
or group (or any member of such group, or any affiliate of the foregoing) made a
proposal with respect to an Allied Waste Acquisition Transaction on or after the
date of, and prior to the termination of, the Merger Agreement and such Allied
Waste Acquisition Transaction is consummated or (y) an Allied Waste Acquisition
Transaction shall otherwise occur. Such fee shall be payable upon the first
occurrence of any such event.
EXPENSES
The Merger Agreement provides that all costs and expenses incurred in
connection with the Merger Agreement and the transactions contemplated thereby
shall be paid by the party incurring such expenses, except that those expenses
incurred in connection with printing and filing this Joint Proxy Statement and
Prospectus, and the reasonable expenses of American in connection with any HSR
Act review or proceedings, shall be shared equally by Allied Waste and American.
INDEMNIFICATION
The Merger Agreement provides that the indemnification provisions of the
Certificate of Incorporation and Bylaws of the Surviving Corporation as in
effect at the Effective Time shall not be amended, repealed or otherwise
modified for a period of six years from the Effective Time in any manner that
would adversely affect the rights thereunder of individuals who at the Effective
Time were directors, officers, employees or agents of American. The Merger
Agreement further provides that Allied Waste shall assume, be jointly and
severally liable for, and honor, and shall cause the Surviving Corporation to
honor, in accordance with their respective terms each of the indemnification
agreements listed in the Merger Agreement.
The Merger Agreement also provides that, without limiting the foregoing,
after the Effective Time, each of Allied Waste and the Surviving Corporation
shall, to the fullest extent permitted under applicable law, indemnify and hold
harmless, each present and former director, officer, employee and agent of
American or any of its subsidiaries (each, together with such person's heirs,
executors or administrators, an "indemnified party" and collectively, the
"indemnified parties") against any costs or expenses (including attorneys'
fees), judgments, fines, losses, claims, damages, liabilities and amounts paid
in settlement in connection with any actual or threatened claim, action, suit,
proceeding or investigation, whether civil, criminal, administrative or
investigative, arising out of, relating to or in connection with any action or
omission occurring or alleged to occur prior to the Effective Time (including,
without limitation, acts or omissions in connection with such persons serving as
an officer, director or other fiduciary in any entity if such service was at the
request or for the benefit of American) or arising out of or pertaining to the
transactions contemplated by the Merger Agreement. In the event of any such
actual or threatened claim, action, suit, proceeding or investigation (whether
arising before or after the Effective Time), (i) American or Allied Waste and
the Surviving Corporation, as the case may be, shall pay the reasonable fees and
expenses of counsel selected by the indemnified parties, which counsel shall be
reasonably satisfactory to Allied Waste and the Surviving Corporation, promptly
after statements therefor are received and shall pay all other reasonable
expenses in advance of the final disposition of such action, (ii) Allied Waste
and the Surviving Corporation will cooperate and use all reasonable efforts to
assist in the vigorous defense of any such matter, and (iii) to the extent any
determination is required to be made with respect to whether an indemnified
party's conduct complies with
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the standards set forth under the DGCL and Allied Waste's or the Surviving
Corporation's respective charters or Bylaws, such determination shall be made by
independent legal counsel acceptable to Allied Waste or the Surviving
Corporation, as the case may be, and the indemnified party; provided, however,
that neither Allied Waste nor the Surviving Corporation shall be liable for any
settlement effected without its written consent (which consent shall not be
unreasonably withheld) and, provided further, that if Allied Waste or the
Surviving Corporation advances or pays any amount to any person under this
paragraph and if it shall thereafter be finally determined by a court of
competent jurisdiction that such person was not entitled to be indemnified under
the Merger Agreement for all or any portion of such amount, to the extent
required by law, such person shall repay such amount or such portion thereof, as
the case may be, to Allied Waste or the Surviving Corporation, as the case may
be. The indemnified parties as a group may not retain more than one law firm to
represent them with respect to each matter unless there is, under applicable
standards of professional conduct, a conflict on any significant issue between
the positions of any two or more indemnified parties.
In the event the Surviving Corporation or Allied Waste or any of their
successors or assigns (i) consolidates with or merges into any other person and
shall not be the continuing or surviving corporation or entity of such
consolidation or merger or (ii) transfers all or substantially all of its
properties and assets to any person, then and in each such case, proper
provisions shall be made so that the successors and assigns of the Surviving
Corporation or Allied Waste shall assume the indemnification obligations of the
Surviving Corporation or Allied Waste, as the case may be, set forth in the
Merger Agreement.
The Merger Agreement requires that for a period of six years after the
Effective Time, Allied Waste shall cause to be maintained in effect the current
policies of directors' and officers' liability insurance maintained by American
and its subsidiaries (provided that Allied Waste may substitute therefor
policies of at least the same coverage and amounts containing terms and
conditions that are no less advantageous to the indemnified parties and which
coverages and amounts shall be no less than the coverages and amounts provided
at that time for Allied Waste's directors and officers) with respect to matters
arising on or before the Effective Time. Allied Waste shall pay all reasonable
expenses, including reasonable attorneys' fees, that may be incurred by any
indemnified party in enforcing the indemnity and other obligations provided in
the indemnification provisions of the Merger Agreement.
The rights of each indemnified party under the Merger Agreement are in
addition to, and not in limitation of, any other rights such indemnified party
may have under the charter or Bylaws of American, any indemnification agreement,
under the DGCL or otherwise. The indemnification provisions of the Merger
Agreement shall survive the consummation of the Merger and expressly are
intended to benefit each of the indemnified parties.
STOCK OPTION AGREEMENT
The following description does not purport to be complete and is qualified
in its entirety by reference to the Stock Option Agreement dated as of August
10, 1998 between American and Allied Waste (the "Stock Option Agreement"), a
copy of which is attached as Appendix B to this Joint Proxy Statement and
Prospectus and is incorporated herein by reference.
American granted Allied Waste an option to purchase up to 4,000,000 shares
of American Common Stock (the "Option") in connection with the execution and
delivery of the Merger Agreement by Allied Waste. The per share exercise price
of the Option is $40 in cash (the "Option Price"). Based on the number of shares
of American Common Stock outstanding on the American Record Date, the Option,
upon the occurrence of certain events described below, would give Allied Waste
the right to purchase approximately % of the outstanding shares of American
Common Stock (representing approximately % of the shares of American Common
Stock which would be outstanding after exercise in full of the Option). If any
additional shares of American Common Stock are issued or become outstanding
after August 10, 1998, then the number of shares subject to the Option shall
automatically be increased to a number of shares representing % of the
shares of American Common Stock then outstanding without any change to the
Option Price.
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The Option is not currently exercisable and any shares of American Common
Stock issuable upon exercise of the Option will not be eligible to vote on the
Merger at the American Special Meeting.
EXERCISE; TERMINATION
The Option may be exercised, in whole or in part, after the occurrence of a
Triggering Event (as defined below) and for a period of 180 days thereafter. The
Option shall terminate upon either (i) the occurrence of the Effective Time or
(ii) (A) if the Option has not been exercised, on the earlier of 180 days after
Allied Waste becomes entitled to receive a termination fee of $32 million under
the Merger Agreement and the date Allied Waste is no longer potentially entitled
to receive such termination fee and (B) if the Option has been exercised, one
year after the date of exercise.
A Triggering Event shall have occurred if the Merger Agreement is
terminated and Allied Waste then or thereafter becomes entitled to receive a
termination fee of $32 million from American. The events which would entitle
Allied Waste to receive this termination fee are described in "The Plan of
Merger and Terms of the Merger -- Termination Fees."
REPURCHASE OF OPTION OR OPTION SHARES
Upon the occurrence of a Triggering Event and before the Option terminates,
at the request of Allied Waste (or any other person to whom all or a portion of
the Option has been transferred) made, in most cases, within 180 days of the
occurrence of the Triggering Event, American shall repurchase (i) the Option at
a price equal to the number of shares of American Common Stock then purchasable
upon exercise of the Option multiplied by the amount by which the Market Price
(as defined below) exceeds the Option Price and (ii) all or a portion of the
shares of American Common Stock issued upon exercise of the Option at a price
equal to the number of shares to be repurchased multiplied by the Market Price.
Market Price means the highest of (i) the Option Price plus $2.00, (ii) the
price per share of American Common Stock at which a tender or exchange offer has
been made after August 10, 1998 if such offer has either been consummated or not
withdrawn or terminated, (iii) the price per share of American Common Stock to
be paid by a third party pursuant to any agreement with American for a merger or
similar transaction entered into after August 10, 1998, and (iv) the average
closing price for shares of American Common Stock on the Nasdaq Stock Market for
the 20 trading days immediately preceding the request for repurchase.
PROFIT LIMITATION
Notwithstanding any other provision in the Stock Option Agreement, Allied
Waste's Total Profit (as defined below) plus, if paid, the $32 million
termination fee paid to Allied Waste under the Merger Agreement shall not exceed
$40 million and, if it otherwise would exceed such amount, Allied Waste, at its
sole election, shall either (i) deliver to American for cancellation shares
previously purchased by Allied Waste pursuant to the Option, (ii) pay cash or
other consideration to American or (iii) undertake any combination thereof, so
that Allied Waste's Total Profit when aggregated with the termination fee, if
paid, shall not exceed $40 million. Further, the Option may not be exercised for
a number of shares that would, as of the date of exercise, result in a Notional
Total Profit (as defined below), together with the termination fee paid to
Allied Waste, of more than $40 million.
"Total Profit" means the aggregate (before income taxes) of the following:
(a) all amounts received by Allied Waste (and any other holder of all or a
portion of the Option) as the result of the repurchase of all or part of the
unexercised portion of the Option, (b)(i) the net cash amounts received by
Allied Waste (and any other such holder) pursuant to the sale of shares acquired
pursuant to the Option (or any other securities into which such shares are
converted or exchanged) to any unaffiliated party, less (ii) the purchase price
for such shares and (c) the net cash amounts received by Allied Waste (and any
other such holder) on the transfer of the Option to any unaffiliated party.
"Notional Total Profit" means, with respect to any number of shares as to
which Allied Waste may propose to exercise the Option, the Total Profit
determined as of the date of the exercise assuming that the Option was exercised
on such date for such number of shares and assuming such shares, together with
all
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other shares purchased pursuant to the Option and held by Allied Waste, any
other such holders, and their affiliates as of such date, were sold for cash at
the closing market price for the American Common Stock as of the close of
business on the preceding trading day (less customary brokerage commissions).
OTHER
The Stock Option Agreement contains provisions governing the procedure for
exercise of the Option and payment for the shares purchased upon such exercise
and other provisions that adjust the number of shares and the Option Price
therefor upon the occurrence of certain events, such as stock dividends,
divisions, combinations and recapitalizations, exchange of shares or other
similar transactions.
The Stock Option Agreement also contains restrictions on the ability of
Allied Waste (or any other holder of the Option) to propose business
combinations or other extraordinary transactions with American, seek control of
American, transfer shares acquired upon exercise of the Option, and to take
certain other specified actions if the exercise of the Option results in such
party owning in excess of 9.9% of the then outstanding shares of American Common
Stock. The restrictions expire upon the earlier of August 10, 2003 and the date
such person owns less than 5% of the outstanding shares of American Common
Stock.
Finally, the Stock Option Agreement contains provisions obligating American
to register, under the circumstances therein specified, the offering, sale and
delivery by Allied Waste of shares of American Common Stock acquired pursuant to
the exercise of the Option under the Securities Act.
OTHER AGREEMENTS
In connection with the execution of the Merger Agreement, Allied Waste
agreed to enter into certain agreements with the executive officers of American
or their affiliates. These agreements are described in "The Merger and Related
Transactions -- Possible Conflicts of Interest."
In addition, Allied Waste has agreed to provide severance payments for
corporate office employees (other than to Messrs. De Young, Kogler, Lavey,
McDonnell, and Conrath and Mses. Straw and Ryan) and exempt field employees who
are terminated other than for cause during the period commencing on August 10,
1998 and ending on the date which is six months following the Effective Time in
an amount (payable upon termination) equal to six months base salary for each
such employee as of the date hereof. If any such employee is terminated other
than for cause during the period commencing on the date which is three months
following the Effective Time, Allied Waste will provide such employee with an
additional severance payment equal to three months base salary for such employee
as of August 10, 1998.
Allied Waste also has agreed to provide severance payments for non-exempt
field employees who are terminated other than for cause during the period
commencing on August 10, 1998 and ending on the date which is six months
following the Effective Time, in an amount (payable upon termination) equal to
the product of the number of years of service credit of such employee,
multiplied by two weeks base salary for such employee as of August 10, 1998.
COMPARATIVE RIGHTS OF STOCKHOLDERS OF ALLIED WASTE AND AMERICAN
GENERAL
As a result of the Merger, holders of American Common Stock will become
stockholders of Allied Waste, and the rights of such former American
stockholders will thereafter be governed by the Allied Waste Certificate, the
Allied Waste By-laws and the DGCL. The rights of holders of American Common
Stock are currently governed by the American Amended Restated Certificate of
Incorporation (the "American Certificate"), the American Bylaws and the DGCL.
The following summary, which does not purport to be a complete description of
the differences between the rights of the stockholders of Allied Waste and the
rights of the stockholders of American, sets forth certain differences between
the Allied Waste Certificate and the Allied Waste By-laws, on the one hand, and
the American Certificate and the American Bylaws, on the other.
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This summary is qualified in its entirety by reference to the full text of each
of these documents and the DGCL. For more information on how such documents may
be obtained, see "Available Information."
BOARD OF DIRECTORS
The DGCL permits, but does not require, a classified board of directors.
Neither the Allied Waste Board of Directors nor the American Board of Directors
is classified. All of the directors of Allied Waste and American serve one-year
terms and are subject to election at each annual meeting of stockholders.
NUMBER OF DIRECTORS
The Allied Waste By-laws currently provide that the number of directors
which shall constitute the whole Allied Waste Board of Directors shall be
eleven. The Board of Directors of Allied Waste currently consists of ten
members. The American Bylaws provide that the number of directors will be fixed
by the American Board of Directors. The Board of Directors of American currently
consists of six members.
SPECIAL MEETINGS OF STOCKHOLDERS
The American Bylaws provide that special meetings of the stockholders of
American, for any purpose or purposes, may be called by the Chairman, or by
resolution of the Board of Directors, or at the request in writing of a majority
of the directors then in office or of the holders of a majority of the
outstanding shares of American Common Stock. The Allied Waste By-laws provide
that special meetings of the stockholders of Allied Waste, for any purpose or
purposes, may be called by the Allied Waste Board of Directors or a committee of
the Board of Directors empowered by the entire Board of Directors to call such
meetings, but such special meetings may not be called by a stockholder or any
other person or persons.
STOCKHOLDER NOMINATIONS AND PROPOSALS
The Allied Waste By-laws establish advance notice procedures with regard to
the nomination (other than by or at the direction of the Board of Directors of
Allied Waste) of candidates for election as directors and with regard to certain
matters to be brought before an annual meeting of the stockholders of Allied
Waste. These procedures provide that the notice of proposed stockholder
nominations for the election of directors must be timely given in writing to the
Secretary of Allied Waste prior to the meeting at which directors are to be
elected. The procedures also provide that at any annual meeting of the
stockholders, and subject to any other applicable requirements, only such
business may be conducted as has been brought before the meeting by, or at the
direction of the Board of Directors or by a stockholder who has timely given
prior written notice to the Secretary of Allied Waste of such stockholder's
intention to bring such business before the meeting. To be timely, a notice
given with respect to the nomination of directors or any other matter to be
considered at an annual meeting of the stockholders generally must be received
at the principal executive offices of Allied Waste not less than 75 days nor
more than 120 days in advance of the anniversary date of the previous year's
annual meeting of the stockholders; provided, however, that if the date of the
annual meeting has been changed to more than 30 days before the anniversary date
or more than 60 days after such date, such notice must be received by Allied
Waste on the later of the 75th day prior to the scheduled date of the annual
meeting or the 15th day following the date on which the first public
announcement of the meeting date is made by Allied Waste. To be in proper form,
the notice must contain certain information specified in the Allied Waste
By-laws. No person shall be eligible for election as a director unless nominated
by or at the direction of the Board of Directors of Allied Waste or in
accordance with the foregoing procedures. Similarly, no stockholder proposal may
be presented at any meeting of the stockholders of Allied Waste unless these
procedures have been complied with.
The American Bylaws do not provide for any special advance notice
provisions with regard to the nomination of candidates for election as directors
or with regard to matters to be brought before an annual or special meeting of
the stockholders of American.
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AMENDMENT OF CERTAIN CHARTER PROVISIONS
Neither the Allied Waste Restated Certificate of Incorporation nor the
American Amended Restated Certificate of Incorporation provides for any special
charter amendment procedures, other than as provided in the DGCL.
AMENDMENT OF BYLAWS
The American Bylaws may be amended or repealed, or new or additional Bylaws
adopted by the Board of Directors of American or by the vote of the stockholders
of American entitled to vote in the election of directors. The Allied Waste
Certificate and the Allied Waste By-laws provide that the Board of Directors is
expressly and solely authorized to make, alter or repeal the Allied Waste
By-laws, or adopt new bylaws, without any action on the part of the stockholders
of Allied Waste; provided, however, that no such adoption, amendment or repeal
shall be valid with respect to bylaw provisions which have been adopted, amended
or repealed by the stockholders of Allied Waste; and further provided, that
bylaws adopted or amended by the directors of Allied Waste and any powers
thereby conferred may be amended, altered or repealed by the stockholders of
Allied Waste.
AUTHORIZED CAPITAL STOCK
The Allied Waste Restated Certificate of Incorporation currently provides
that Allied Waste has the authority to issue 200,000,000 shares of Allied Waste
Common Stock and 10,000,000 shares of its preferred stock, par value $.10 per
share (the "Allied Waste Preferred Stock"). At the Allied Waste Special Meeting,
the stockholders of Allied Waste are being asked to approve an amendment to the
Allied Waste Restated Certificate of Incorporation to increase the number of
authorized shares of Allied Waste Common Stock to 300,000,000. No shares of
Allied Waste Preferred Stock are outstanding. The American Amended Restated
Certificate of Incorporation provides that American has the authority to issue
60,000,000 shares of American Common Stock, and 5,000,000 shares of its
preferred stock, par value $.01 per share (the "American Preferred Stock"). No
shares of American Preferred Stock are outstanding.
DELAWARE ANTI-TAKEOVER LAW
Both Allied Waste and American are Delaware corporations and consequently
are subject to certain anti-takeover provisions of the DGCL and, following
consummation of the Merger, Allied Waste will continue to be subject to these
provisions. The business combination provision contained in Section 203 of the
DGCL ("Section 203") defines an interested stockholder of a corporation as any
person that (i) owns, directly or indirectly, or has the right to acquire, 15%
or more of the outstanding voting stock of the corporation or (ii) is an
affiliate or associate of the corporation and was the owner of 15% or more of
the outstanding voting stock of the corporation at any time within the
three-year period immediately prior to the date on which it is sought to be
determined whether such person is an interested stockholder, and the affiliates
and the associates of such person. Under Section 203, a Delaware corporation may
not engage in any business combination with any interested stockholder for a
period of three years following the date such stockholder became an interested
stockholder, unless (i) prior to such date the board of directors of the
corporation approved either the business combination or the transaction which
resulted in the stockholder becoming an interested stockholder, or (ii) upon
consummation of the transaction which resulted in the stockholder becoming an
interested stockholder, the interested stockholder owned at least 85% of the
voting stock of the corporation outstanding at the time the transaction
commenced (excluding, for determining the number of shares outstanding, (a)
shares owned by persons who are directors and officers and (b) employee stock
plans, in certain instances), or (iii) on or subsequent to such date the
business combination is approved by the board of directors and authorized at an
annual or special meeting of the stockholders by at least 66 2/3% of the
outstanding voting stock that is not owned by the interested stockholder. The
restrictions imposed by Section 203 will not apply to a corporation if (i) the
corporation's original certificate of incorporation contains a provision
expressly electing not to be governed by this section or (ii) the corporation,
by the action of its stockholders holding a majority of outstanding stock,
adopts an amendment to its certificate of incorporation or bylaws expressly
electing not to be governed by Section 203 (such amendment will not be effective
until
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12 months after adoption and shall not apply to any business combination between
such corporation and any person who became an interested stockholder of such
corporation on or prior to such adoption).
Since neither Allied Waste nor American has elected out of Section 203,
such section currently applies to Allied Waste and American and will continue to
apply to Allied Waste following the Merger. Section 203 could, under certain
circumstances, make it more difficult for a third party to gain control of
American or Allied Waste (including Allied Waste following the Merger).
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ALLIED WASTE AND AMERICAN
COMBINED UNAUDITED PRO FORMA
CONDENSED FINANCIAL STATEMENTS
The following combined unaudited pro forma condensed financial statements
at June 30, 1998 and for the six months ended June 30, 1998 and the years ended
December 31, 1997, 1996 and 1995 are based upon the historical consolidated
financial statements of Allied Waste, as restated for the acquisitions through
June 30, 1998 accounted for using the pooling-of-interests method for business
combinations, and of American and should be read in conjunction with those
consolidated financial statements and related notes. Such financial statements,
as previously filed with the Commission under the Exchange Act are incorporated
by reference in this Joint Proxy Statement and Prospectus. These combined
unaudited pro forma condensed financial statements give effect to the Merger by
combining the results of operations of Allied Waste and American using the
pooling-of-interests method of accounting as if the companies had been combined
since their inception. These combined unaudited pro forma condensed financial
statements are not necessarily indicative of the operating results that would
have been achieved had the Merger been consummated as of the beginning of the
periods presented and should not be construed as representative of future
operating results.
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ALLIED WASTE AND AMERICAN
COMBINED UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
JUNE 30, 1998
The following combined unaudited pro forma condensed balance sheet presents
the combined financial position of Allied Waste and American as of June 30,
1998. Such unaudited pro forma combined information is based on the historical
unaudited condensed consolidated balance sheets of Allied Waste (as restated)
and American as of June 30, 1998, after giving effect to the Merger using the
"pooling of interests" method of accounting and to the pro forma adjustments as
described in the notes to combined unaudited pro forma condensed financial
statements.
<TABLE>
<CAPTION>
PRO FORMA COMBINED
ALLIED WASTE AMERICAN ADJUSTMENTS PRO FORMA
------------ -------- ----------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Assets:
Current assets:
Cash and cash equivalents.................. $ 14,494 $ 21,268 $ 45,397(a) $ 35,762
(45,397)(d)
Other current assets....................... 238,388 34,755 -- 273,143
---------- -------- -------- ----------
Total current assets.................... 252,882 56,023 -- 308,905
Property and equipment, net............. 1,424,986 195,994 -- 1,620,980
Goodwill, net........................... 915,479 296,351 -- 1,211,830
Other assets............................ 81,698 11,541 93,239
---------- -------- -------- ----------
Total assets............................ $2,675,045 $559,909 $ -- $3,234,954
========== ======== ======== ==========
Liabilities and Stockholders' Equity:
Current liabilities........................ $ 229,152 $ 35,766 $(12,024)(c) $ 288,894
36,000(b)
Current portion of long-term debt.......... 43,601 3,255 -- 46,856
---------- -------- -------- ----------
Total current liabilities............... 272,753 39,021 23,976 335,750
Long-term debt, net of current portion..... 1,474,851 1,281 (45,397)(d) 1,430,735
Other long-term liabilities................ 271,258 31,299 -- 302,557
Stockholders' equity....................... 656,183 488,308 45,397(a) 1,165,912
(36,000)(b)
12,024(c)
---------- -------- -------- ----------
Total liabilities and stockholders' equity... $2,675,045 $559,909 $ -- $3,234,954
========== ======== ======== ==========
</TABLE>
See notes to combined unaudited pro forma condensed financial statements.
61
<PAGE> 78
ALLIED WASTE AND AMERICAN
COMBINED UNAUDITED PRO FORMA CONDENSED
STATEMENT OF OPERATIONS
The following combined unaudited pro forma condensed statement of
operations for the six months ended June 30, 1998 was prepared based on the
historical statement of operations of Allied Waste (as restated) and American
for such period after giving effect to the Merger using the pooling-of-interests
method of accounting and to the pro forma adjustments described in the notes to
combined unaudited pro forma condensed financial statements.
<TABLE>
<CAPTION>
ALLIED WASTE AMERICAN
SIX MONTHS SIX MONTHS
ENDED ENDED
JUNE 30, JUNE 30, PRO FORMA COMBINED
1998 1998 ADJUSTMENTS PRO FORMA
------------ ---------- ----------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Revenues..................................... $576,350 $97,655 $ -- $674,005
Costs and expenses:
Cost of operations......................... 320,370 54,159 -- 374,529
Selling, general and administrative........ 56,296 11,111 -- 67,407
Depreciation and amortization.............. 68,768 14,484 -- 83,252
Acquisition related and non-recurring
costs................................... 45,143 -- -- 45,143
-------- ------- ------- --------
Operating income............................. 85,773 17,901 -- 103,674
Interest expense........................... 41,451 743 (1,612)(a) 40,582
Interest income............................ (1,167) -- -- (1,167)
Other income, net.......................... -- (227) -- (227)
-------- ------- ------- --------
Income before income taxes................... 45,489 17,385 1,612 64,486
Income tax expense........................... 26,611 6,780 645 34,036
-------- ------- ------- --------
Net income available to common shareholders
before extraordinary items................. $ 18,878 $10,605 $ 967 $ 30,450
======== ======= ======= ========
Earnings per common share before
extraordinary items........................ $ 0.15 $ 0.17
======== ========
Weighted average number of common and common
equivalent shares outstanding.............. 128,380 176,344
======== ========
</TABLE>
See notes to combined unaudited pro forma condensed financial statements.
62
<PAGE> 79
ALLIED WASTE AND AMERICAN
COMBINED UNAUDITED PRO FORMA CONDENSED
STATEMENT OF OPERATIONS
The following combined unaudited pro forma condensed statement of
operations for the year ended December 31, 1997 was prepared based on the
historical statement of operations of Allied Waste (as restated) and American
for such year after giving effect to the Merger using the pooling-of-interests
method of accounting and to the pro forma adjustments described in the notes to
combined unaudited pro forma condensed financial statements.
<TABLE>
<CAPTION>
ALLIED WASTE AMERICAN
SUPPLEMENTAL SUPPLEMENTAL
PRO FORMA PRO FORMA
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, PRO FORMA COMBINED
1997(I) 1997(II) ADJUSTMENTS PRO FORMA
------------ ------------ ----------- ----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Revenues................................. $1,098,529 $140,889 $ -- $1,239,418
Costs and expenses:
Cost of operations..................... 630,932 76,513 -- 707,445
Selling, general and administrative.... 129,841 18,806 -- 148,647
Depreciation and amortization.......... 130,086 24,511 -- 154,597
Acquisition related and non-recurring
costs............................... 5,010 -- -- 5,010
---------- -------- -------- ----------
Operating income......................... 202,660 21,059 -- 223,719
Interest expense....................... 82,558 1,681 (3,405)(a) 80,834
Interest income........................ (1,969) (201) -- (2,170)
Other income, net...................... (1,076) (274) -- (1,350)
---------- -------- -------- ----------
Income before income taxes............... 123,147 19,853 3,405 146,405
Income tax expense....................... 42,784 6,933 1,362 51,079
---------- -------- -------- ----------
Net income before extraordinary items.... 80,363 12,920 2,043 95,326
Preferred dividends...................... (381) -- -- (381)
---------- -------- -------- ----------
Income available to common shareholders
before extraordinary items............. $ 79,982 $ 12,920 $ 2,043 $ 94,945
========== ======== ======== ==========
Earnings per common share before
extraordinary items.................... $ 0.62 $ 0.54
========== ==========
Weighted average number of common and
common equivalent shares outstanding... 128,820 176,784
========== ==========
</TABLE>
- ---------------
(i) The unaudited Allied Waste supplemental pro forma condensed statement of
operations for the year ended December 31, 1997 is based upon the
historical consolidated financial statements of Allied Waste (as restated)
and should be read in connection with those consolidated financial
statements and related notes, which are included elsewhere herein. The
Allied Waste unaudited supplemental pro forma condensed statement of
operations gives effect to the Allied Waste issuance of 16.3 million common
shares in September 1998 and the repayment of $271 million debt at 7.6%
interest therefrom as if it had occurred on January 1, 1997.
(ii) The unaudited American supplemental pro forma condensed statement of
operations for the year ended December 31, 1997 is based upon the
historical consolidated financial statements of American and should be read
in connection with those consolidated financial statements and related
notes, which are included elsewhere herein. The American unaudited
supplemental pro forma condensed statement of operations gives effect to:
(i) the acquisition of Fred B. Barbara Companies, Liberty Disposal, Inc.
and Evansville, Indiana Operations of Waste Management, Inc. (collectively
the "American Significant Acquisitions") and (ii) the American issuances in
May 1997 and October 1997 of common stock (collectively the "American
Financings") and the repayment of $25.2 million of debt at 8.25% interest
on May 13, 1997 and $55.8 million of debt at 8.25% interest on October 23,
1997 from the proceeds therefrom as if the American Significant
Acquisitions and American Financings had occurred on January 1, 1997.
See notes to combined unaudited pro forma condensed financial statements.
63
<PAGE> 80
ALLIED WASTE AND AMERICAN
COMBINED UNAUDITED PRO FORMA CONDENSED
STATEMENT OF OPERATIONS
The following combined unaudited pro forma condensed statement of
operations for the year ended December 31, 1996 was prepared based on the
historical statement of operations of Allied Waste (as restated) and American
for such year after giving effect to the Merger using the pooling-of-interests
method of accounting and to the pro forma adjustments described in the notes to
combined unaudited pro forma condensed financial statements.
<TABLE>
<CAPTION>
ALLIED WASTE AMERICAN
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, PRO FORMA COMBINED
1996 1996 ADJUSTMENTS PRO FORMA
------------ ------------ ----------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Revenues................................... $489,019 $56,804 $ -- $545,823
Costs and expenses:
Cost of operations....................... 310,790 30,376 -- 341,166
Selling, general and administrative...... 73,573 8,328 -- 81,901
Depreciation and amortization............ 50,110 12,334 -- 62,444
Acquisition related and non-recurring
costs................................. 96,508 -- -- 96,508
-------- ------- ------- --------
Operating income (loss).................... (41,962) 5,766 -- (36,196)
Interest expense......................... 14,264 5,745 (4,596)(a) 15,413
Interest income.......................... (2,219) (260) -- (2,479)
Other income, net........................ -- (179) -- (179)
-------- ------- ------- --------
Loss before income taxes................... (54,007) 460 4,596 (48,951)
Income tax expense......................... 109 245 1,838 2,192
-------- ------- ------- --------
Net loss before extraordinary items........ (54,116) 215 2,758 (51,143)
Preferred dividends........................ (1,073) (109) -- (1,182)
-------- ------- ------- --------
Loss available to common shareholders
before extraordinary items............... $(55,189) $ 106 $ 2,758 $(52,325)
======== ======= ======= ========
Loss per common share before extraordinary
items.................................... $ (0.68) $ (0.40)
======== ========
Weighted average number of common and
common equivalent shares outstanding..... 81,442 129,406
======== ========
</TABLE>
See notes to combined unaudited pro forma condensed financial statements.
64
<PAGE> 81
ALLIED WASTE AND AMERICAN
COMBINED UNAUDITED PRO FORMA CONDENSED
STATEMENT OF OPERATIONS
The following combined unaudited pro forma condensed statement of
operations for the year ended December 31, 1995 was prepared based on the
historical statement of operations of Allied Waste (as restated) and American
for such year after giving effect to the Merger using the pooling-of-interests
method of accounting and to the pro forma adjustments described in the notes to
combined historical unaudited pro forma condensed financial statements.
<TABLE>
<CAPTION>
ALLIED WASTE AMERICAN
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, PRO FORMA COMBINED
1995 1995 ADJUSTMENTS PRO FORMA
------------ ------------ ----------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Revenues................................... $461,841 $30,004 $ -- $491,845
Cost and expenses:
Cost of operations....................... 293,324 17,286 -- 310,610
Selling, general and administrative...... 67,203 5,882 -- 73,085
Depreciation and amortization............ 44,219 6,308 -- 50,527
Acquisition related and non-recurring
costs................................. 1,531 -- -- 1,531
-------- ------- ------- --------
Operating income........................... 55,564 528 -- 56,092
Interest expense......................... 16,486 3,030 (4,199)(a) 15,317
Interest income.......................... (735) (189) -- (924)
-------- ------- ------- --------
Income before income taxes................. 39,813 (2,313) 4,199 41,699
Income tax expense......................... 10,571 332 1,680 12,583
-------- ------- ------- --------
Net income before extraordinary items...... 29,242 (2,645) 2,519 29,116
Preferred dividends........................ (4,070) (190) -- (4,260)
Conversion fee on equity securities
converted................................ (2,151) -- -- (2,151)
-------- ------- ------- --------
Income (loss) available to common
shareholders before extraordinary
items.................................... $ 23,021 $(2,835) $ 2,519 $ 22,705
======== ======= ======= ========
Earnings per common share before
extraordinary items...................... $ 0.35 $ 0.20
======== ========
Weighted average number of common and
common equivalent shares outstanding..... 67,762 115,726
======== ========
</TABLE>
See notes to combined unaudited pro forma condensed financial statements.
65
<PAGE> 82
ALLIED WASTE AND AMERICAN
NOTES TO COMBINED UNAUDITED PRO FORMA CONDENSED
FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The combined unaudited pro forma condensed financial statements assume the
issuance of Allied Waste Common Stock in exchange for all outstanding American
Common Stock. Such financial statements also assume that the Merger will be
accounted for using the pooling-of-interests method of accounting pursuant to
Opinion No. 16 of the Accounting Principles Board. The pooling-of-interests
method of accounting assumes that the combining companies have been merged from
their inception, and the historical financial statements for periods prior to
consummation of the Merger are restated as though the companies had been
combined from their inception. Additionally, supplemental pro forma statements
of operations for the year ended December 31, 1997 have been presented for each
of Allied Waste and American to reflect acquisitions and financing transactions
deemed to be significant to Allied Waste or American, respectively, during 1998
and 1997.
Pursuant to the rules and regulations of the Commission, the combined
unaudited pro forma condensed statements of operations exclude the results of
operations associated with discontinued businesses, extraordinary items and
cumulative effects of accounting changes. In addition, the combined unaudited
pro forma condensed balance sheet includes an adjustment for estimated
non-recurring costs directly related to the Merger which are expected to be
included in operations of Allied Waste within the twelve months succeeding the
consummation of the Merger. Such costs are currently estimated to be
approximately $36 million, net of income taxes.
Certain reclassifications have been made to the historical financial
statements of Allied Waste and American to conform to the pro forma
presentation. Such reclassifications are not material to the combined unaudited
pro forma condensed financial statements.
2. PRO FORMA ADJUSTMENTS
The pro forma adjustments reflected in the pro forma combined financial
statements give effect to the following:
PRO FORMA COMBINED BALANCE SHEET
(a) In connection with the Merger, it is anticipated that all outstanding
options to purchase American Common Stock will be exercised in exchange for a
number of shares of American Common Stock. The American Common Stock will then
be exchanged for Allied Waste Common Stock in accordance with the Exchange
Ratio. This adjustment reflects the cash received for the exercise price of the
options.
(b) Reflects the resulting reduction to stockholders' equity and increase
in accrued liabilities for the estimated non-recurring costs of $36 million, net
of income taxes, related to the Merger. Actual non-recurring merger costs may
vary from such estimates.
(c) To reflect the tax deduction for the compensation expense associated
with the exercise of the stock options. The estimated resulting benefit of $12.0
million (40% of the estimated compensation expense of $30.1 million) is
reflected as a reduction in accrued liabilities and as an increase in additional
paid-in capital net of the par value of the stock issued.
(d) To reflect the repayment of debt with the proceeds from the exercise of
the options.
PRO FORMA COMBINED AND SUPPLEMENTAL STATEMENT OF OPERATIONS
(a) To reflect the reduction of interest expense resulting from the
repayment of approximately $45.4 million of indebtedness, with the proceeds from
the exercise of the options discussed above, at interest rates of
66
<PAGE> 83
9.25%, 10.125%, 7.5%, and 7.1% for the periods ended December 31, 1995, 1996,
1997 and June 30, 1998, respectively.
3. NET INCOME (LOSS) PER COMMON SHARE
Pro forma net income (loss) per common share is calculated by dividing pro
forma net income to common shareholders less dividend requirements on the Series
C preferred stock, Series D preferred stock and 7% preferred stock by the pro
forma weighted average common and common equivalent shares outstanding during
the period. Pro forma weighted average common and common equivalent shares have
been computed as follows (in thousands):
<TABLE>
<CAPTION>
SIX MONTHS YEAR ENDED DECEMBER 31,
ENDED ---------------------------
JUNE 30, 1998 1997 1996 1995
------------- ------- ------- -------
<S> <C> <C> <C> <C>
Historical weighted average common shares... 124,293 107,123 81,442 60,636
Common stock equivalents --
Stock options and warrants................ 3,208 6,126 -- 1,771
Effect of Series C preferred stock, assumed
converted................................. -- -- -- 234
Effect of Series D preferred stock, assumed
converted................................. -- -- -- 764
Effect of 7% preferred stock, assumed
converted................................. -- 762 -- --
Effect of convertible notes, assumed
converted................................. -- 173 -- 2,655
Effect of shares assumed issued pursuant to
earn out agreements....................... 879 753 -- 1,702
Pro forma effect of issuing common shares
related to the Allied Waste equity
offering.................................. -- 13,883 -- --
------- ------- ------- -------
128,380 128,820 81,442 67,762
Pro forma effect of issuing common shares
related to the Merger..................... 47,964 47,964 47,964 47,964
------- ------- ------- -------
Pro forma weighted average number of common
and common equivalent shares
outstanding............................... 176,344 176,784 129,406 115,726
======= ======= ======= =======
</TABLE>
67
<PAGE> 84
MARKET PRICE DATA
MARKET INFORMATION
Allied Waste Common Stock is traded on the Nasdaq Stock Market under the
symbol "AWIN." American Common Stock is traded on the Nasdaq Stock Market under
the symbol "ADSI." The following table sets forth the range of high and low per
share sale prices for the Allied Waste Common Stock and the American Common
Stock as reported on the Nasdaq Stock Market, for the period from January 1,
1996 through , 1998.
<TABLE>
<CAPTION>
ALLIED WASTE AMERICAN
COMMON COMMON
STOCK STOCK
---------------- ----------------
HIGH LOW HIGH LOW
------ ------ ------ ------
<S> <C> <C> <C> <C>
1996
First Quarter............................................. $ 9 1/4 $ 6 1/2 $ * $ *
Second Quarter............................................ 10 3/8 8 * *
Third Quarter............................................. 10 1/8 6 7/16 18 1/4 9
Fourth Quarter............................................ 9 5/8 8 18 1/2 15 1/2
1997
First Quarter............................................. $ 9 7/8 $ 7 1/4 $18 $16 1/2
Second Quarter............................................ 18 1/8 8 25 1/16 16 3/8
Third Quarter............................................. 20 1/8 14 1/4 33 3/4 21
Fourth Quarter............................................ 24 3/8 18 3/8 37 1/2 29
1998
First Quarter............................................. $25 3/8 $19 5/8 $38 1/4 $32 1/4
Second Quarter............................................ 28 7/16 23 9/16 46 7/8 37 5/16
Third Quarter (through )
</TABLE>
- ---------------
* American completed an initial public offering of shares of American Common
Stock at a sales price of $9.00 per share on July 30, 1996. Prior to that
date, shares of American Common Stock were not publicly traded.
On August 10, 1998, the last trading day completed prior to announcement by
Allied Waste and American that they had reached an agreement concerning the
Merger, the closing sale price of Allied Waste Common Stock as reported on the
Nasdaq Stock Market was $ per share, and the closing sale price of American
Common Stock as reported on the Nasdaq Stock Market was $ per share.
Assuming the Merger had occurred on such date, the equivalent market value per
share of American Common Stock, calculated by multiplying the closing sale price
of Allied Waste Common Stock by the Exchange Ratio, would have been $ .
On , 1998, the last trading day prior to the date of this Joint
Proxy Statement and Prospectus, the closing sale price of Allied Waste Common
Stock as reported on the Nasdaq Stock Market was $ per share, the closing
sale price of American Common Stock as reported on the Nasdaq Stock Market was
$
per share, and the "implied per share price" (as defined below) of American
Common Stock was $ . The "implied per share price" of American Common
Stock on such date equals the closing price per share of Allied Waste on such
date multiplied by the Exchange Ratio. The market prices of shares of Allied
Waste Common Stock and American Common Stock are subject to fluctuation. The
market price of Allied Waste Common Stock on the Closing Date, the date shares
of Allied Waste Common Stock are received by holders of American Common Stock,
or the date on which such shares of Allied Waste Common Stock are eventually
sold, may be more or less than the price of Allied Waste Common Stock as of the
date of this Joint Proxy Statement and Prospectus. As a result, stockholders are
urged to obtain current market quotations.
68
<PAGE> 85
Following the Merger, Allied Waste Common Stock will continue to be traded
on the Nasdaq Stock Market under the symbol "AWIN", and the listing of American
Common Stock on the Nasdaq Stock Market will be terminated.
DIVIDEND INFORMATION
Allied Waste has never declared or paid cash dividends on its Common Stock.
Allied Waste currently expects to retain its earnings for its business and does
not anticipate paying dividends on its Common Stock at any time in the
foreseeable future. In addition, Allied Waste is prohibited from paying cash
dividends on Allied Waste Common Stock by the terms of certain credit and debt
agreements. The decision whether to apply legally available funds to the payment
of dividends on Allied Waste Common Stock will be made by the Allied Waste Board
of Directors from time to time in the exercise of its business judgment.
American has never paid cash dividends on its Common Stock. In addition,
payment of dividends on the American Common Stock is restricted by the terms of
American's bank credit agreement.
DESCRIPTION OF ALLIED WASTE CAPITAL STOCK
Allied Waste is currently authorized to issue 200,000,000 shares of Allied
Waste Common Stock, par value $.01 per share, of which shares
were outstanding on the Allied Waste Record Date, and 10,000,000 shares of
Preferred Stock, none of which are outstanding. If the Charter Amendment is
approved at the Allied Waste Special Meeting, the number of authorized shares of
Allied Waste Common Stock will increase to 300,000,000.
COMMON STOCK
Each holder of Allied Waste Common Stock is entitled to one vote per share
held of record on each matter submitted to stockholders. Cumulative voting for
the election of directors is not permitted, and the holders of a plurality of
shares voting for the election of directors can elect all members of the Allied
Waste Board of Directors.
Subject to the rights of any holders of Preferred Stock, holders of record
of shares of Allied Waste Common Stock are entitled to receive ratably dividends
when and if declared by the Allied Waste Board of Directors out of funds of
Allied Waste legally available therefor. In the event of a voluntary or
involuntary winding up or dissolution, liquidation or partial liquidation of
Allied Waste, holders of Allied Waste Common Stock are entitled to participate
ratably in any distribution of the assets of Allied Waste, subject to any prior
rights of holders of any outstanding Preferred Stock.
Holders of Allied Waste Common Stock have no conversion, redemption or
preemptive rights. All outstanding shares of Allied Waste Common Stock are
validly issued, fully paid and nonassessable.
PREFERRED STOCK
The Allied Waste Board of Directors is authorized, without further approval
of the stockholders, to issue the Preferred Stock in series and with respect to
each series, to fix its designations, relative rights (including voting,
dividend, conversion, sinking fund and redemption rights), preferences
(including with respect to dividends and upon liquidation), privileges and
limitations. The Board of Directors of Allied Waste, without stockholder
approval, may issue Preferred Stock with voting and conversion rights, both of
which could adversely affect the voting power of the holders of Allied Waste
Common Stock, and dividend or liquidation preferences that would restrict Common
Stock dividends or adversely affect the assets available for distribution to
holders of shares of Common Stock upon Allied Waste's dissolution.
AUTHORIZED BUT UNISSUED SHARES
Authorized but unissued shares of Allied Waste Common Stock or Preferred
Stock can be reserved for issuance by the Board of Directors of Allied Waste
from time to time without further shareholder action for
69
<PAGE> 86
proper corporate purposes, including stock dividends or stock splits, raising
equity capital and structuring future corporate transactions, including
acquisitions.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Allied Waste Common Stock is
American Stock Transfer and Trust Company.
LEGAL MATTERS
The validity of the Allied Waste Common Stock to be issued in connection
with the Merger will be passed upon by Steven Helm, Vice President, Legal, of
Allied Waste. As of , 1998, Steven Helm beneficially owned
shares of Allied Waste Common Stock. Certain tax consequences of the Merger will
be passed upon for Allied Waste by Fried, Frank, Harris, Shriver & Jacobson, a
partnership which includes professional corporations, and for American by
Proskauer Rose LLP, New York, New York. Stephen W. Rubin, a member of Proskauer
Rose LLP, is a director of American.
EXPERTS
The audited consolidated financial statements of Allied Waste incorporated
by reference in this prospectus and elsewhere in the registration statement have
been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their report with respect thereto, and are incorporated by
reference in reliance upon the authority of said firm as experts in giving said
reports.
The consolidated balance sheets of American as of December 31, 1997 and
1996 and the consolidated statements of operations, stockholders' equity and
cash flows for each of the three years in the period ended December 31, 1997 of
American incorporated by reference in this Joint Proxy Statement and Prospectus
have been incorporated herein in reliance on the report of Ernst & Young LLP,
independent auditors, given on the authority of such firm as experts in
accounting and auditing.
OTHER MATTERS
The respective Boards of Directors of Allied Waste and American do not know
of any other matters to be presented for action at the Allied Waste Special
Meeting or the American Special Meeting other than those listed in their
respective Notices of Meeting and referred to herein. If any other matter should
properly come before the Allied Waste Special Meeting or the American Special
Meeting, respectively, or any adjournment thereof, it is intended that the
proxies solicited hereby be voted with respect to such matters in accordance
with the judgment of the persons voting such proxies.
STOCKHOLDER PROPOSALS FOR 1999 ANNUAL MEETINGS
As described in Allied Waste's proxy statement on Schedule 14A relating to
its 1998 Annual Meeting of Stockholders, any proposals of stockholders of Allied
Waste to be considered for inclusion in the Proxy Statement for Allied Waste's
1999 annual meeting of stockholders must be received by Allied Waste at its
principal executive offices no later than for inclusion in Allied
Waste's proxy materials. To be eligible to be considered at an annual meeting of
stockholders of Allied Waste, a stockholder proposal must be made in a timely
manner. Under Allied Waste's Bylaws, in order for a stockholder proposal to be
timely a notice must be given to Allied Waste no more than 120 days and no less
than 75 days before the anniversary date of the immediately preceding annual
meeting of stockholders except in certain circumstances. Any stockholder
proposals included in Allied Waste proxy solicitation materials for its 1999
annual meeting or otherwise to be considered at such meeting shall be subject to
the requirements of Allied Waste's Bylaws and the proxy rules adopted under the
Exchange Act. See "Comparative Rights of Stockholders of Allied Waste and
American -- Stockholder Nominations and Proposals."
70
<PAGE> 87
As described in American's proxy statement on Schedule 14A relating to its
1998 Annual Meeting of Stockholders, any proposals of stockholders of American
to be considered for inclusion in the Proxy Statement for American's 1999 annual
meeting of stockholders (if the Merger is not consummated) must be received by
American at its principal executive offices no later than for
inclusion in American's proxy materials. To be eligible to be considered at an
annual meeting of stockholders of American, a stockholder proposal must be made
in a timely manner. Any stockholder proposals included in American proxy
solicitation materials for its 1999 annual meeting (if the Merger is not
consummated) or otherwise to be considered at such meeting shall be subject to
the requirements of American's Bylaws and the proxy rules adopted under the
Exchange Act. See "Comparative Rights of Stockholders of Allied Waste and
American -- Stockholder Nominations and Proposals."
MANAGEMENT AND ADDITIONAL INFORMATION
Certain information relating to the management, executive compensation,
various benefit plans (including stock plans), voting securities and the
principal holders thereof, certain relationships and related transactions and
other related matters as to Allied Waste and American is set forth in or
incorporated by reference in the Annual Reports on Form 10-K and 10-K/A for the
year ended December 31, 1997 of Allied Waste and American, respectively, which
are incorporated by reference in this Joint Proxy Statement Prospectus. See
"INCORPORATION OF CERTAIN INFORMATION BY REFERENCE." Stockholders who wish to
obtain copies thereof may contact Allied Waste and American at their respective
addresses and telephone numbers set forth under "INCORPORATION OF CERTAIN
INFORMATION BY REFERENCE."
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<PAGE> 88
APPENDIX A
AGREEMENT AND PLAN OF MERGER
DATED AS OF AUGUST 10, 1998
BY AND AMONG
ALLIED WASTE INDUSTRIES, INC.,
AWIN II ACQUISITION CORPORATION
AND
AMERICAN DISPOSAL SERVICES, INC.
A-1
<PAGE> 89
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE I THE MERGER........................................................ A-5
SECTION 1.1 The Merger.................................................. A-5
SECTION 1.2 Effective Time of the Merger................................ A-5
ARTICLE II THE SURVIVING AND PARENT CORPORATIONS............................ A-5
SECTION 2.1 Certificate of Incorporation................................ A-5
SECTION 2.2 Bylaws...................................................... A-5
SECTION 2.3 Directors................................................... A-5
SECTION 2.4 Officers.................................................... A-5
ARTICLE III CONVERSION OF SHARES............................................ A-6
SECTION 3.1 Conversion of Company Shares in the Merger.................. A-6
SECTION 3.2 Conversion of Subsidiary Shares............................. A-6
SECTION 3.3 Exchange of Certificates.................................... A-6
SECTION 3.4 No Fractional Securities.................................... A-7
SECTION 3.5 Closing..................................................... A-8
SECTION 3.6 Closing of the Company's Transfer Books..................... A-8
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND SUBSIDIARY..........
A-8
SECTION 4.1 Organization and Qualification.............................. A-8
SECTION 4.2 Capitalization.............................................. A-8
SECTION 4.3 Subsidiaries................................................ A-9
SECTION 4.4 Authority; Non-Contravention; Approvals..................... A-9
SECTION 4.5 Reports and Financial Statements............................ A-10
SECTION 4.6 Absence of Undisclosed Liabilities.......................... A-11
SECTION 4.7 Absence of Certain Changes or Events........................ A-11
SECTION 4.8 Litigation.................................................. A-11
SECTION 4.9 Registration Statement and Proxy Statement.................. A-11
SECTION 4.10 No Violation of Law......................................... A-12
SECTION 4.11 Compliance with Agreements.................................. A-12
SECTION 4.12 Taxes....................................................... A-12
SECTION 4.13 Employee Benefit Plans; ERISA............................... A-13
SECTION 4.14 Labor Controversies......................................... A-14
SECTION 4.15 Environmental Matters....................................... A-14
SECTION 4.16 Non-competition Agreements.................................. A-15
SECTION 4.17 Title to Assets............................................. A-15
SECTION 4.18 Reorganization and Pooling of Interests..................... A-15
SECTION 4.19 Parent Stockholders' Approval............................... A-16
SECTION 4.20 Brokers and Finders......................................... A-16
SECTION 4.21 Opinion of Financial Advisor................................ A-16
SECTION 4.22 Ownership of Company Common Stock........................... A-16
</TABLE>
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ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE COMPANY..................... A-16
SECTION 5.1 Organization and Qualification.............................. A-16
SECTION 5.2 Capitalization.............................................. A-16
SECTION 5.3 Subsidiaries................................................ A-17
SECTION 5.4 Authority; Non-Contravention; Approvals..................... A-17
SECTION 5.5 Reports and Financial Statements............................ A-18
SECTION 5.6 Absence of Undisclosed Liabilities.......................... A-19
SECTION 5.7 Absence of Certain Changes or Events........................ A-19
SECTION 5.8 Litigation.................................................. A-19
SECTION 5.9 Registration Statement and Proxy Statement.................. A-19
SECTION 5.10 No Violation of Law......................................... A-19
SECTION 5.11 Compliance with Agreements.................................. A-20
SECTION 5.12 Taxes....................................................... A-20
SECTION 5.13 Employee Benefit Plans; ERISA............................... A-20
SECTION 5.14 Labor Controversies......................................... A-22
SECTION 5.15 Environmental Matters....................................... A-22
SECTION 5.16 Non-competition Agreements.................................. A-22
SECTION 5.17 Title to Assets............................................. A-22
SECTION 5.18 Reorganization and Pooling of Interests..................... A-23
SECTION 5.19 Company Stockholders' Approval.............................. A-23
SECTION 5.20 Brokers and Finders......................................... A-23
SECTION 5.21 Opinion of Financial Advisor................................ A-23
ARTICLE VI CONDUCT OF BUSINESS PENDING THE MERGER........................... A-23
SECTION 6.1 Conduct of Business by the Company Pending the Merger....... A-23
Conduct of Business by Parent and Subsidiary Pending the
SECTION 6.2 Merger...................................................... A-25
SECTION 6.3 Control of the Company's Operations......................... A-26
SECTION 6.4 Control of Parent's Operations.............................. A-26
SECTION 6.5 Acquisition Transactions.................................... A-26
ARTICLE VII ADDITIONAL AGREEMENTS........................................... A-27
SECTION 7.1 Access to Information....................................... A-27
SECTION 7.2 Registration Statement and Proxy Statement.................. A-28
SECTION 7.3 Stockholders' Approvals..................................... A-28
SECTION 7.4 Compliance with the Securities Act.......................... A-29
SECTION 7.5 Exchange Listing............................................ A-29
SECTION 7.6 Expenses and Fees........................................... A-29
SECTION 7.7 Agreement to Cooperate...................................... A-30
SECTION 7.8 Public Statements........................................... A-30
SECTION 7.9 Notification of Certain Matters............................. A-30
SECTION 7.10 Directors' and Officers' Indemnification.................... A-31
SECTION 7.11 Corrections to the Joint Proxy Statement/Prospectus and
Registration Statement...................................... A-32
SECTION 7.12 Employment and Consulting Agreements........................ A-32
ARTICLE VIII CONDITIONS..................................................... A-33
Conditions to Each Party's Obligation to Effect the
SECTION 8.1 Merger...................................................... A-33
Conditions to Obligation of the Company to Effect the
SECTION 8.2 Merger...................................................... A-33
Conditions to Obligations of Parent and Subsidiary to Effect
SECTION 8.3 the Merger.................................................. A-34
</TABLE>
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ARTICLE IX TERMINATION, AMENDMENT AND WAIVER................................ A-34
SECTION 9.1 Termination................................................. A-34
SECTION 9.2 Effect of Termination....................................... A-35
SECTION 9.3 Amendment................................................... A-36
SECTION 9.4 Waiver...................................................... A-36
ARTICLE X GENERAL PROVISIONS................................................ A-36
SECTION 10.1 Non-Survival of Representations and Warranties.............. A-36
SECTION 10.2 Notices..................................................... A-36
SECTION 10.3 Interpretation.............................................. A-37
SECTION 10.4 Miscellaneous............................................... A-37
SECTION 10.5 Counterparts................................................ A-37
SECTION 10.6 Parties in Interest......................................... A-37
</TABLE>
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of August 10, 1998 (this
"Agreement"), is made and entered into by and among Allied Waste Industries,
Inc., a Delaware corporation ("Parent"), AWIN II Acquisition Corporation, a
Delaware corporation and a wholly-owned subsidiary of Parent ("Subsidiary"), and
American Disposal Services, Inc., a Delaware corporation (the "Company").
WHEREAS, the Boards of Directors of Parent, Subsidiary and the Company have
approved the merger of Subsidiary with and into the Company on the terms set
forth in this Agreement (the "Merger"); and
WHEREAS, Parent, Subsidiary and the Company intend the Merger to qualify as
a tax-free reorganization under the provisions of Section 368 of the Internal
Revenue Code of 1986, as amended (the "Code"), and the regulations thereunder.
NOW, THEREFORE, in consideration of the premises and the representations,
warranties, covenants and agreements contained herein, the parties hereto,
intending to be legally bound, agree as follows:
ARTICLE I
THE MERGER
SECTION 1.1 The Merger. Upon the terms and subject to the conditions of
this Agreement, at the Effective Time (as defined in Section 1.2) in accordance
with the General Corporation Law of the State of Delaware (the "DGCL"),
Subsidiary shall be merged with and into the Company and the separate existence
of Subsidiary shall thereupon cease. The Company shall be the surviving
corporation in the Merger and is hereinafter sometimes referred to as the
"Surviving Corporation."
SECTION 1.2 Effective Time of the Merger. The Merger shall become
effective at such time (the "Effective Time") as shall be stated in a
certificate of merger, in a form mutually acceptable to Parent and the Company,
to be filed with the Secretary of State of the State of Delaware in accordance
with the DGCL (the "Merger Filing"). The Merger Filing shall be made
simultaneously with or as soon as practicable after the closing of the
transactions contemplated by this Agreement in accordance with Section 3.5. The
parties acknowledge that it is their mutual desire and intent to consummate the
Merger as soon as practicable after the date hereof. Accordingly, the parties
shall, subject to the provisions hereof and to the fiduciary duties of their
respective boards of directors, use all reasonable efforts to consummate, as
soon as practicable, the transactions contemplated by this Agreement in
accordance with Section 3.5.
ARTICLE II
THE SURVIVING AND PARENT CORPORATIONS
SECTION 2.1 Certificate of Incorporation. The Certificate of
Incorporation of the Company as in effect immediately prior to the Effective
Time shall be the Certificate of Incorporation of the Surviving Corporation
after the Effective Time, and (subject to Section 7.10 hereof) thereafter may be
amended in accordance with its terms and as provided in the DGCL.
SECTION 2.2 Bylaws. The Bylaws of the Company as in effect immediately
prior to the Effective Time shall be the Bylaws of the Surviving Corporation
after the Effective Time and (subject to Section 7.10 hereof) thereafter may be
amended in accordance with their terms and as provided by the Certificate of
Incorporation of the Surviving Corporation and the DGCL.
SECTION 2.3 Directors. The directors of the Surviving Corporation shall
be as designated in Section 2.3 of the Parent Disclosure Schedule (as defined in
Article IV), and such directors shall serve in accordance with the Bylaws of the
Surviving Corporation until their respective successors are duly elected or
appointed and qualified.
SECTION 2.4 Officers. The officers of Subsidiary in office immediately
prior to the Effective Time shall be the officers of the Surviving Corporation
after the Effective Time, and such officers shall serve in
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accordance with the Bylaws of the Surviving Corporation until their respective
successors are duly elected or appointed and qualified.
ARTICLE III
CONVERSION OF SHARES
SECTION 3.1 Conversion of Company Shares in the Merger. At the Effective
Time, by virtue of the Merger and without any action on the part of any holder
of any capital stock of Parent or the Company:
(a) each share of the common stock, par value $.01 per share, of the
Company (the "Company Common Stock") shall, subject to Sections 3.3 and
3.4, be converted into the right to receive, without interest, 1.65 shares
of the common stock, par value $.01 per share, of Parent ("Parent Common
Stock") (the "Exchange Ratio");
(b) each share of capital stock of the Company, if any, owned by
Parent or any subsidiary of Parent or held in treasury by the Company or
any subsidiary of the Company immediately prior to the Effective Time shall
be canceled and no consideration shall be paid in exchange therefor and
shall cease to exist from and after the Effective Time; and
(c) each unexpired warrant to purchase Company Common Stock that is
outstanding at the Effective Time, whether or not exercisable, shall
automatically and without any action on the part of the holder thereof be
converted into a warrant to purchase a number of shares of Parent Common
Stock equal to the number of shares of Company Common Stock that could be
purchased under such warrant multiplied by the Exchange Ratio, at a price
per share of Parent Common Stock equal to the per share exercise price of
such warrant divided by the Exchange Ratio.
SECTION 3.2 Conversion of Subsidiary Shares. At the Effective Time, by
virtue of the Merger and without any action on the part of Parent as the sole
stockholder of Subsidiary, each issued and outstanding share of common stock,
par value $.01 per share, of Subsidiary ("Subsidiary Common Stock") shall be
converted into one share of common stock, par value $.01 per share, of the
Surviving Corporation.
SECTION 3.3 Exchange of Certificates.
(a) From and after the Effective Time, each holder of an outstanding
certificate which immediately prior to the Effective Time represented shares of
Company Common Stock shall be entitled to receive in exchange therefor, upon
surrender thereof to an exchange agent reasonably satisfactory to Parent and the
Company (the "Exchange Agent"), a certificate or certificates representing the
number of whole shares of Parent Common Stock to which such holder is entitled
pursuant to Section 3.1(a). Notwithstanding any other provision of this
Agreement, (i) until holders or transferees of certificates theretofore
representing shares of Company Common Stock have surrendered them for exchange
as provided herein, no dividends or other distributions shall be paid with
respect to any shares represented by such certificates and no payment for
fractional shares shall be made, and (ii) without regard to when such
certificates representing shares of Company Common Stock are surrendered for
exchange as provided herein, no interest shall be paid on any dividends or other
distributions or any payment for fractional shares. Upon surrender of a
certificate which immediately prior to the Effective Time represented shares of
Company Common Stock, there shall be paid to the holder of such certificate the
amount of any dividends or other distributions which theretofore became payable,
but which were not paid by reason of the foregoing, with respect to the number
of whole shares of Parent Common Stock represented by the certificate or
certificates issued upon such surrender.
(b) If any certificate for shares of Parent Common Stock is to be issued in
a name other than that in which the certificate for shares of Company Common
Stock surrendered in exchange therefor is registered, it shall be a condition of
such exchange that the person requesting such exchange shall pay any applicable
transfer or other taxes required by reason of such issuance.
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(c) Within five days after the Effective Time, Parent shall make available
to the Exchange Agent the certificates representing shares of Parent Common
Stock required to effect the exchanges referred to in paragraph (a) above and
cash for payment of any fractional shares referred to in Section 3.4.
(d) Within five days after the Effective Time, Parent shall cause the
Exchange Agent to mail to each holder of record of a certificate or certificates
that immediately prior to the Effective Time represented outstanding shares of
Company Common Stock (the "Company Certificates") (i) a letter of transmittal
satisfactory to the Company (which shall specify that delivery shall be
effected, and risk of loss and title to the Company Certificates shall pass,
only upon actual delivery of the Company Certificates to the Exchange Agent),
and (ii) instructions for use in effecting the surrender of the Company
Certificates in exchange for certificates representing shares of Parent Common
Stock. Upon surrender of Company Certificates for cancellation to the Exchange
Agent, together with a duly executed letter of transmittal and such other
documents as the Exchange Agent shall reasonably require, the holder of such
Company Certificates shall be entitled to receive in exchange therefor a
certificate representing that number of whole shares of Parent Common Stock into
which the shares of Company Common Stock theretofore represented by the Company
Certificates so surrendered shall have been converted pursuant to the provisions
of Section 3.1(a), and the Company Certificates so surrendered shall be
canceled. Notwithstanding the foregoing, neither the Exchange Agent nor any
party hereto shall be liable to a holder of shares of Company Common Stock for
any shares of Parent Common Stock or dividends or distributions thereon
delivered to a public official pursuant to applicable abandoned property,
escheat or similar laws.
(e) Promptly following the date which is twelve months after the Effective
Time, the Exchange Agent shall deliver to Parent all cash, certificates
(including any Parent Common Stock) and other documents in its possession
relating to the transactions described in this Agreement, and the Exchange
Agent's duties shall terminate. Thereafter, each holder of a Company Certificate
may surrender such Company Certificate to the Surviving Corporation or Parent
and (subject to applicable abandoned property, escheat and similar laws) receive
in exchange therefor the Parent Common Stock, together with cash for the payment
of any fractional shares referred to in Section 3.4, without any interest
thereon. Notwithstanding the foregoing, none of the Exchange Agent, Parent,
Subsidiary, the Company or the Surviving Corporation shall be liable to a holder
of shares of Company Common Stock for any shares of Parent Common Stock,
together with cash for the payment of any fractional shares referred to in
Section 3.4, delivered to a public official pursuant to applicable abandoned
property, escheat or similar laws.
(f) In the event any Company Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Company Certificate to be lost, stolen or destroyed, the Surviving
Corporation shall issue in exchange for such lost, stolen or destroyed Company
Certificate the Parent Common Stock deliverable in respect thereof determined in
accordance with this Article III, together with cash for the payment of any
fractional shares referred to in Section 3.4. When authorizing such issuance in
exchange therefor, the Board of Directors of the Surviving Corporation may, in
its discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed Company Certificate to give the
Surviving Corporation such indemnity as it may reasonably direct as protection
against any claim that may be made against the Surviving Corporation with
respect to the Company Certificate alleged to have been lost, stolen or
destroyed.
SECTION 3.4 No Fractional Securities. Notwithstanding any other provision
of this Agreement, no certificates or scrip for fractional shares of Parent
Common Stock shall be issued in the Merger and no Parent Common Stock dividend,
stock split or interest shall relate to any fractional security, and such
fractional interests shall not entitle the owner thereof to vote or to any other
rights of a security holder. In lieu of any such fractional shares, each holder
of shares of Company Common Stock who would otherwise have been entitled to
receive a fraction of a share of Parent Common Stock upon surrender of Company
Certificates for exchange pursuant to this Article III shall be entitled to
receive from the Exchange Agent a cash payment equal to such fraction multiplied
by the average closing price of Parent Common Stock on the Nasdaq National
Market, as reported by the Wall Street Journal, during the 20 trading days
immediately preceding the Effective Time (the "Parent Average Trading Price").
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SECTION 3.5 Closing. The closing (the "Closing") of the transactions
contemplated by this Agreement shall take place at a location mutually agreeable
to Parent and the Company as promptly as practicable (but in any event within
five business days) following the date on which the last of the conditions set
forth in Article VIII is fulfilled or waived, or at such other time and place as
Parent and the Company shall agree. The date on which the Closing occurs is
referred to in this Agreement as the "Closing Date."
SECTION 3.6 Closing of the Company's Transfer Books. At and after the
Effective Time, holders of Company Certificates shall cease to have any rights
as stockholders of the Company, except for the right to receive shares of Parent
Common Stock pursuant to Section 3.1 and the right to receive cash for payment
of fractional shares pursuant to Section 3.4. At the Effective Time, the stock
transfer books of the Company shall be closed and no transfer of shares of
Company Common Stock which were outstanding immediately prior to the Effective
Time shall thereafter be made. If, after the Effective Time, subject to the
terms and conditions of this Agreement, Company Certificates formerly
representing shares of Company Common Stock are presented to the Surviving
Corporation, they shall be canceled and exchanged for shares of Parent Common
Stock in accordance with this Article III, together with cash for the payment of
any fractional shares referred to in Section 3.4.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUBSIDIARY
Parent and Subsidiary jointly and severally represent and warrant to the
Company that, except as set forth in the Disclosure Schedule dated as of the
date hereof and signed by an authorized officer of Parent (the "Parent
Disclosure Schedule"), it being agreed that disclosure of any item on the Parent
Disclosure Schedule shall be deemed disclosure with respect to all Sections of
this Agreement if the relevance of such item is reasonably apparent from the
face of the Parent Disclosure Schedule:
SECTION 4.1 Organization and Qualification. Each of Parent and Subsidiary
is a corporation duly organized, validly existing and in good standing under the
laws of the state of its incorporation and has the requisite corporate power and
authority to own, lease and operate its assets and properties and to carry on
its business as it is now being conducted. Each of Parent and Subsidiary is
qualified to transact business and is in good standing in each jurisdiction in
which the properties owned, leased or operated by it or the nature of the
business conducted by it makes such qualification necessary, except where the
failure to be so qualified and in good standing would not reasonably be expected
to have a material adverse effect on the business, operations, properties,
assets, condition (financial or other) or results of operations of Parent and
its subsidiaries, taken as a whole (a "Parent Material Adverse Effect"). True,
accurate and complete copies of each of Parent's and Subsidiary's certificates
of incorporation and bylaws, in each case as in effect on the date hereof,
including all amendments thereto, have heretofore been delivered to the Company.
SECTION 4.2 Capitalization.
(a) As of July 31, 1998, the authorized capital stock of Parent consisted
of 200 million shares of Parent Common Stock and 10 million shares of preferred
stock ("Parent Preferred Stock"). As of July 31, 1998, (i) 124,869,130 shares of
Parent Common Stock were issued and outstanding, all of which were validly
issued and are fully paid, nonassessable and free of preemptive rights, (ii) no
shares of Parent Preferred Stock were issued and outstanding, (iii) 570,048
shares of Parent Common Stock and no shares of Parent Preferred Stock were held
in the treasury of Parent, (iv) 7,138,728 shares of Parent Common Stock were
reserved for issuance upon exercise of options issued and outstanding pursuant
to the stock option plans of the Parent, (v) 0 shares of Parent Common Stock
were reserved for issuance upon conversion of outstanding convertible debentures
or notes of the Parent, and (vi) 647,827 shares of Parent Common Stock were
reserved for issuance upon exercise of outstanding warrants. Assuming conversion
of all outstanding convertible debentures and outstanding convertible notes of
the Parent and the exercise of all outstanding options, warrants or rights to
purchase Parent Common Stock, as of July 31, 1998, there would be 132,655,685
shares of Parent Common Stock issued and outstanding. In addition, as of July
31, 1998, no more than 14,181,286 shares of Parent Common Stock were reserved
for issuance in connection with pending acquisitions. Since July 31, 1998,
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except as permitted by the Agreement, (i) no shares of capital stock of Parent
have been issued except in connection with the exercise or conversion of the
instruments referred to in the second sentence of this Section 4.2(a) and (ii)
no options, warrants, securities convertible into, or commitments with respect
to the issuance of shares of capital stock of Parent have been issued, granted
or made.
(b) The authorized capital stock of Subsidiary consists of 1,000 shares of
Subsidiary Common Stock, of which 100 shares are issued and outstanding, which
shares are owned beneficially and of record by Parent.
(c) Except as disclosed in the Parent SEC Reports (as defined in Section
4.5) or in Section 4.2(a) or as otherwise contemplated by this Agreement, as of
the date hereof, there are no outstanding subscriptions, options, calls,
contracts, commitments, understandings, restrictions, arrangements, rights or
warrants, including any right of conversion or exchange under any outstanding
security, instrument or other agreement and also including any rights plan or
other anti-takeover agreement, obligating Parent or any subsidiary of Parent to
issue, deliver or sell, or cause to be issued, delivered or sold, additional
shares of the capital stock of Parent or obligating Parent or any subsidiary of
Parent to grant, extend or enter into any such agreement or commitment. Except
as disclosed in the Parent SEC Reports or as otherwise contemplated by this
Agreement, there are no voting trusts, proxies or other agreements or
understandings to which Parent or any subsidiary of Parent is a party or is
bound with respect to the voting of any shares of capital stock of Parent. The
shares of Parent Common Stock issued to stockholders of the Company in the
Merger will be at the Effective Time duly authorized, validly issued, fully paid
and nonassessable, free of preemptive rights and will be issued in compliance
with all applicable securities and other laws.
SECTION 4.3 Subsidiaries. Each direct and indirect corporate subsidiary
of Parent is duly organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation and has the requisite corporate power
and authority to own, lease and operate its assets and properties and to carry
on its business as it is now being conducted and each subsidiary of Parent is
qualified to transact business, and is in good standing, in each jurisdiction in
which the properties owned, leased or operated by it or the nature of the
business conducted by it makes such qualification necessary; except in all cases
where the failure to be so qualified and in good standing would not reasonably
be expected to have a Parent Material Adverse Effect. All of the outstanding
shares of capital stock of each corporate subsidiary of Parent are validly
issued, fully paid, nonassessable and free of preemptive rights, and are owned
directly or indirectly by Parent, free and clear of any liens, claims,
encumbrances, security interests, equities and options of any nature whatsoever
except that such shares are pledged to secure Parent's credit facilities. There
are no subscriptions, options, warrants, rights, calls, contracts, voting
trusts, proxies or other commitments, understandings, restrictions or
arrangements relating to the issuance, sale, voting, transfer, ownership or
other rights with respect to any shares of capital stock of any corporate
subsidiary of Parent, including any right of conversion or exchange under any
outstanding security, instrument or agreement. As used in this Agreement, the
term "subsidiary" shall mean, when used with reference to any person or entity,
any corporation, partnership, joint venture or other entity of which such person
or entity (either acting alone or together with its other subsidiaries) owns,
directly or indirectly, 50% or more of the stock or other voting interests, the
holders of which are entitled to vote for the election of a majority of the
board of directors or any similar governing body of such corporation,
partnership, joint venture or other entity.
SECTION 4.4 Authority; Non-Contravention; Approvals.
(a) Parent and Subsidiary each have full corporate power and authority to
enter into this Agreement and, subject to the Parent Stockholders' Approval (as
defined in Section 7.3(b)) and the Parent Required Statutory Approvals (as
defined in Section 4.4(c)), to consummate the transactions contemplated hereby.
This Agreement has been approved by the Boards of Directors of Parent and
Subsidiary and the sole stockholder of Subsidiary, and no other corporate
proceedings on the part of Parent or Subsidiary are necessary to authorize the
execution and delivery of this Agreement or, except for the Parent Stockholders'
Approval, the consummation by Parent and Subsidiary of the transactions
contemplated hereby. This Agreement has been duly executed and delivered by each
of Parent and Subsidiary, and, assuming the due authorization, execution and
delivery hereof by the Company, constitutes a valid and legally binding
agreement of each of Parent and Subsidiary enforceable against each of them in
accordance with its terms,
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except that such enforcement may be subject to (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting or relating to
enforcement of creditors' rights generally and (ii) general equitable
principles.
(b) The execution, delivery and performance of this Agreement by each of
Parent and Subsidiary and the consummation of the Merger and the transactions
contemplated hereby do not and will not violate, conflict with or result in a
breach of any provision of, or constitute a default (or an event which, with
notice or lapse of time or both, would constitute a default) under, or result in
the termination of, or accelerate the performance required by, or result in a
right of termination or acceleration under, or result in the creation of any
lien, security interest or encumbrance upon any of the properties or assets of
Parent or any of its subsidiaries under any of the terms, conditions or
provisions of (i) the respective certificates of incorporation or bylaws of
Parent or any of its subsidiaries, (ii) any statute, law, ordinance, rule,
regulation, judgment, decree, order, injunction, writ, permit or license of any
court or governmental authority applicable to Parent or any of its subsidiaries
or any of their respective properties or assets, or (iii) any note, bond,
mortgage, indenture, deed of trust, license, franchise, permit, concession,
contract, lease or other instrument, obligation or agreement of any kind to
which Parent or any of its subsidiaries is now a party or by which Parent or any
of its subsidiaries or any of their respective properties or assets may be bound
or affected. The consummation by Parent and Subsidiary of the transactions
contemplated hereby will not result in any violation, conflict, breach,
termination, acceleration or creation of liens under any of the terms,
conditions or provisions described in clauses (i) through (iii) of the preceding
sentence, subject (x) in the case of the terms, conditions or provisions
described in clause (ii) above, to obtaining (prior to the Effective Time) the
Parent Required Statutory Approvals and the Parent Stockholder's Approval, and
(y) in the case of the terms, conditions or provisions described in clause (iii)
above, to obtaining (prior to the Effective Time) consents required from
commercial lenders, lessors or other third parties as specified in Section
4.4(b) of the Parent Disclosure Schedule. Excluded from the foregoing sentences
of this paragraph (b), insofar as they apply to the terms, conditions or
provisions described in clauses (ii) and (iii) of the first sentence of this
paragraph (b) (and whether resulting from such execution and delivery or
consummation), are such violations, conflicts, breaches, defaults, terminations,
accelerations or creations of liens, security interests or encumbrances that
would not reasonably be expected to have a Parent Material Adverse Effect.
(c) Except for (i) the filings by Parent required by the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), (ii) the filing
of the Registration Statement and Joint Proxy Statement/ Prospectus (as such
terms are defined in Section 4.9) with the Securities and Exchange Commission
(the "SEC") pursuant to the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the Securities Act of 1933, as amended (the "Securities
Act"), and the declaration of the effectiveness thereof by the SEC and filings
with various state blue sky authorities, (iii) the making of the Merger Filing
with the Secretary of State of the State of Delaware in connection with the
Merger, and (iv) any required filings with or approvals from the Nasdaq National
Market, applicable state environmental authorities, public service commissions
and public utility commissions (the filings and approvals referred to in clauses
(i) through (iv) are collectively referred to as the "Parent Required Statutory
Approvals"), no declaration, filing or registration with, or notice to, or
authorization, consent or approval of, any governmental or regulatory body or
authority is necessary for the execution and delivery of this Agreement by
Parent or Subsidiary or the consummation by Parent or Subsidiary of the
transactions contemplated hereby, other than such declarations, filings,
registrations, notices, authorizations, consents or approvals which, if not made
or obtained, as the case may be, would not reasonably be expected to have a
Parent Material Adverse Effect.
SECTION 4.5 Reports and Financial Statements. Since January 1, 1996,
Parent has filed with the SEC all forms, statements, reports and documents
(including all exhibits, post-effective amendments and supplements thereto)
required to be filed by it under each of the Securities Act, the Exchange Act
and the respective rules and regulations thereunder, all of which, as amended if
applicable, complied when filed in all material respects with all applicable
requirements of the appropriate act and the rules and regulations thereunder.
Parent has previously delivered or made available to the Company copies
(including all exhibits, post-effective amendments and supplements thereto) of
its (a) Annual Reports on Form 10-K for the fiscal year ended December 31, 1997
and for the immediately preceding fiscal year, as filed with the SEC, (b) proxy
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and information statements relating to (i) all meetings of its stockholders
(whether annual or special) and (ii) actions by written consent in lieu of a
stockholders' meeting from January 1, 1996, until the date hereof, and (c) all
other reports, including quarterly reports, and registration statements filed by
Parent with the SEC since January 1, 1996 (other than registration statements
filed on Form S-8) (the documents referred to in clauses (a), (b) and (c) filed
prior to the date hereof are collectively referred to as the "Parent SEC
Reports"). As of their respective dates, the Parent SEC Reports did not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading. The
audited consolidated financial statements of Parent included in the Parent's
Annual Report on Form 10-K for the year ended December 31, 1997 (collectively,
the "Parent Financial Statements") have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis (except
as may be indicated therein or in the notes thereto) and fairly present the
financial position of Parent and its subsidiaries as of the dates thereof and
the results of their operations and changes in financial position for the
periods then ended.
SECTION 4.6 Absence of Undisclosed Liabilities. Except as disclosed in
the Parent SEC Reports or as heretofore disclosed to the Company in writing with
respect to acquisitions or potential transactions or commitments, neither Parent
nor any of its subsidiaries had at December 31, 1997, or has incurred since that
date and as of the date hereof, any liabilities or obligations (whether
absolute, accrued, contingent or otherwise) of any nature, except: (a)
liabilities, obligations or contingencies (i) which are accrued or reserved
against in the Parent Financial Statements or reflected in the notes thereto, or
(ii) which were incurred after December 31, 1997, and were incurred in the
ordinary course of business and consistent with past practices; (b) liabilities,
obligations or contingencies which (i) would not reasonably be expected to have
a Parent Material Adverse Effect, or (ii) have been discharged or paid in full
prior to the date hereof; and (c) liabilities and obligations which are of a
nature not required to be reflected in the consolidated financial statements of
Parent and its subsidiaries prepared in accordance with generally accepted
accounting principles consistently applied and which were incurred in the
ordinary course of business.
SECTION 4.7 Absence of Certain Changes or Events. Since the date of the
most recent Parent SEC Report that contains consolidated financial statements of
Parent, there has not been any Parent Material Adverse Effect, except for
changes that affect the industries in which Parent and its subsidiaries operate
generally.
SECTION 4.8 Litigation. Except as disclosed in the Parent SEC Reports,
there are no claims, suits, actions or proceedings pending or, to the knowledge
of Parent, threatened against, relating to or affecting Parent or any of its
subsidiaries, before any court, governmental department, commission, agency,
instrumentality or authority, or any arbitrator that seek to restrain or enjoin
the consummation of the Merger or which if adversely determined would reasonably
be expected to have a Parent Material Adverse Effect. Except as set forth in the
Parent SEC Reports, neither Parent nor any of its subsidiaries is subject to any
judgment, decree, injunction, rule or order of any court, governmental
department, commission, agency, instrumentality or authority or any arbitrator
which prohibits or restricts the consummation of the transactions contemplated
hereby or would reasonably be expected to have a Parent Material Adverse Effect.
SECTION 4.9 Registration Statement and Proxy Statement. None of the
information to be supplied by Parent or its subsidiaries for inclusion in (a)
the Registration Statement on Form S-4 to be filed under the Securities Act with
the SEC by Parent in connection with the Merger for the purpose of registering
the shares of Parent Common Stock to be issued in the Merger (such registration
statement, together with any amendments thereof, being the "Registration
Statement"), or (b) the proxy statement to be distributed in connection with the
Company's and Parent's meetings of their respective stockholders to vote upon
this Agreement and the transactions contemplated hereby (the "Proxy Statement"
and, together with the prospectus included in the Registration Statement, the
"Joint Proxy Statement/Prospectus") will, in the case of the Proxy Statement or
any amendments thereof or supplements thereto, at the time of the mailing of the
Proxy Statement and any amendments or supplements thereto, and at the time of
the meetings of stockholders of the Company and Parent to be held in connection
with the transactions contemplated by this Agreement, or, in the case of the
Registration Statement, as amended or supplemented, at the time it becomes
effective
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and at the time of such meetings of the stockholders of the Company and Parent,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they are made, not
misleading. The Joint Proxy Statement/ Prospectus will, as of its mailing date,
comply as to form in all material respects with all applicable laws, including
the provisions of the Securities Act and the Exchange Act and the rules and
regulations promulgated thereunder, except that no representation is made by
Parent or Subsidiary with respect to information supplied by the Company or the
stockholders of the Company for inclusion therein.
SECTION 4.10 No Violation of Law. Except as disclosed in the Parent SEC
Reports, neither Parent nor any of its subsidiaries is in violation of, or has
been given written notice or been charged with any violation of, any law,
statute, order, rule, regulation, ordinance, or judgment (including, without
limitation, any applicable environmental law, ordinance or regulation) of any
governmental or regulatory body or authority, except for violations which would
not reasonably be expected to have a Parent Material Adverse Effect. Except as
disclosed in the Parent SEC Reports, as of the date of this Agreement, to the
knowledge of Parent, no investigation or review by any governmental or
regulatory body or authority is pending or threatened, nor has any governmental
or regulatory body or authority indicated an intention to conduct the same,
other than, in each case, those the outcome of which, as far as reasonably can
be foreseen, would not reasonably be expected to have a Parent Material Adverse
Effect. Parent and its subsidiaries have all permits, licenses, franchises,
variances, exemptions, orders and other governmental authorizations, consents
and approvals necessary to conduct their businesses as presently conducted
(collectively, the "Parent Permits"), except for permits, licenses, franchises,
variances, exemptions, orders, authorizations, consents and approvals the
absence of which would not reasonably be expected to have a Parent Material
Adverse Effect. Parent and its subsidiaries are not in violation of the terms of
any Parent Permit, except for delays in filing reports or violations which would
not reasonably be expected to have a Parent Material Adverse Effect.
SECTION 4.11 Compliance with Agreements. Except as disclosed in the
Parent SEC Reports, Parent and each of its subsidiaries are not in breach or
violation of or in default in the performance or observance of any term or
provision of, and no event has occurred which, with lapse of time or action by a
third party, would result in a default under (a) the respective certificate of
incorporation, bylaws or other similar organizational instruments of Parent or
any of its subsidiaries, or (b) any contract, commitment, agreement, indenture,
mortgage, loan agreement, note, lease, bond, license, approval or other
instrument to which Parent or any of its subsidiaries is a party or by which any
of them is bound or to which any of their property is subject, other than, in
the case of clause (b) of this Section 4.11, breaches, violations and defaults
which would not reasonably be expected to have a Parent Material Adverse Effect.
SECTION 4.12 Taxes.
(a) Parent and its subsidiaries have (i) duly filed with the appropriate
governmental authorities all Tax Returns (as defined in Section 4.12(c))
required to be filed by them for all periods ending on or prior to the Effective
Time, other than those Tax Returns the failure of which to file would not
reasonably be expected to have a Parent Material Adverse Effect, and such Tax
Returns are true, correct and complete in all material respects and (ii) duly
paid in full or made adequate provision in accordance with generally accepted
accounting principles for the payment of all Taxes (as defined in Section
4.12(b)) for all past and current periods which are due prior to the date
hereof. The liabilities and reserves for Taxes reflected in the Parent balance
sheet included in the latest Parent SEC Report to cover all Taxes for all
periods ending at or prior to the date of such balance sheet have been
determined in accordance with generally accepted accounting principles and there
is no material liability for Taxes for any period beginning after such date
other than Taxes arising in the ordinary course of business. There are no
material liens for Taxes upon any property or assets of Parent or any subsidiary
thereof, except for liens for Taxes not yet due or Taxes contested in good faith
and adequately reserved against in accordance with generally accepted accounting
principles. There are no unresolved issues of law or fact arising out of a
notice of deficiency, proposed deficiency or assessment from the Internal
Revenue Service (the "IRS") or any other governmental taxing authority with
respect to Taxes of the Parent or any of its subsidiaries which would reasonably
be expected to have a Parent Material Adverse Effect. Neither Parent nor its
subsidiaries has waived any statute of limitations in respect of a material
amount
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of Taxes or agreed to any extension of time with respect to a material Tax
assessment or deficiency other than waivers and extensions which are no longer
in effect. Neither Parent nor any of its subsidiaries is a party to any
agreement providing for the allocation or sharing of Taxes with any entity that
is not, directly or indirectly, a wholly-owned corporate subsidiary of Parent
other than agreements the consequences of which are fully and adequately
reserved for in the Parent Financial Statements. Neither Parent nor any of its
corporate subsidiaries has, with regard to any assets or property held, acquired
or to be acquired by any of them, filed a consent to the application of Section
341(f) of the Code.
(b) For purposes of this Agreement, the term "Taxes" shall mean all taxes,
including, without limitation, income, gross receipts, excise, property, sales,
withholding, social security, occupation, use, service, license, payroll,
franchise, transfer and recording taxes, fees and charges, windfall profits,
severance, customs, import, export, employment or similar taxes, charges, fees,
levies or other assessments imposed by the United States, or any state, local or
foreign government or subdivision or agency thereof, whether computed on a
separate, consolidated, unitary, combined, or any other basis, and such term
shall include any interest, fines, penalties or additional amounts of any
interest in respect of any additions, fines or penalties attributable or imposed
or with respect to any such taxes, charges, fees, levies or other assessments.
(c) For purposes of this Agreement, the term "Tax Return" shall mean any
return, report or other document required to be supplied to a taxing authority
in connection with Taxes.
SECTION 4.13 Employee Benefit Plans; ERISA.
(a) Except as disclosed in the Parent SEC Reports, at the date hereof,
Parent and its subsidiaries do not maintain or contribute to or have any
obligation or liability to or with respect to any material employee benefit
plans, programs, arrangements or practices, including employee benefit plans
within the meaning set forth in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), or other similar material
arrangements for the provision of benefits (excluding any "Multi-employer Plan"
within the meaning of Section 3(37) of ERISA or a "Multiple Employer Plan"
within the meaning of Section 413(c) of the Code) (such plans, programs,
arrangements or practices of Parent and its subsidiaries being referred to as
the "Parent Plans"). The Parent Disclosure Schedule lists all Multi-employer
Plans to which any of them makes contributions or has any obligation or
liability to make material contributions. Neither Parent nor any of its
subsidiaries maintains or has any material liability with respect to any
Multiple Employer Plan. Neither Parent nor any of its subsidiaries has any
obligation to create or contribute to any additional such plan, program,
arrangement or practice or to amend any such plan, program, arrangement or
practice so as to increase benefits or contributions thereunder, except as
required under the terms of the Parent Plans, under existing collective
bargaining agreements or to comply with applicable law.
(b) Except as disclosed in the Parent SEC Reports, (i) there have been no
prohibited transactions within the meaning of Section 406 or 407 of ERISA or
Section 4975 of the Code with respect to any of the Parent Plans that could
result in penalties, taxes or liabilities which would reasonably be expected to
have a Parent Material Adverse Effect, (ii) except for premiums due, there is no
outstanding material liability, whether measured alone or in the aggregate,
under Title IV of ERISA with respect to any of the Parent Plans, (iii) neither
the Pension Benefit Guaranty Corporation nor any plan administrator has
instituted proceedings to terminate any of the Parent Plans subject to Title IV
of ERISA other than in a "standard termination" described in Section 4041(b) of
ERISA, (iv) none of the Parent Plans has incurred any "accumulated funding
deficiency" (as defined in Section 302 of ERISA and Section 412 of the Code),
whether or not waived, as of the last day of the most recent fiscal year of each
of the Parent Plans ended prior to the date of this Agreement, (v) the current
present value of all projected benefit obligations under each of the Parent
Plans which is subject to Title IV of ERISA did not, as of its latest valuation
date, exceed the then current value of the assets of such plan allocable to such
benefit liabilities by more than the amount, if any, disclosed in the Parent SEC
Reports as of December 31, 1997, based upon reasonable actuarial assumptions
currently utilized for such Parent Plan, (vi) each of the Parent Plans has been
operated and administered in accordance with applicable laws during the period
of time covered by the applicable statute of limitations, except for failures to
comply which would not reasonably be expected to have a Parent Material Adverse
Effect, (vii) each of the Parent Plans which is intended to be "qualified"
within the meaning of Section 401(a) of the
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Code has been determined by the Internal Revenue Service to be so qualified and
such determination has not been modified, revoked or limited by failure to
satisfy any condition thereof or by a subsequent amendment thereto or a failure
to amend, except that it may be necessary to make additional amendments
retroactively to maintain the "qualified" status of such Parent Plans, and the
period for making any such necessary retroactive amendments has not expired,
(viii) with respect to Multi-employer Plans, neither Parent nor any of its
subsidiaries has made or suffered a "complete withdrawal" or a "partial
withdrawal," as such terms are respectively defined in Sections 4203, 4204 and
4205 of ERISA and, to the knowledge of Parent and its subsidiaries, no event has
occurred or is expected to occur which presents a material risk of a complete or
partial withdrawal under such Sections 4203, 4204 and 4205, (ix) to the
knowledge of Parent and its subsidiaries, there are no material pending,
threatened or anticipated claims involving any of the Parent Plans other than
claims for benefits in the ordinary course, (x) Parent and its subsidiaries have
no current material liability under Title IV of ERISA, and Parent and its
subsidiaries do not reasonably anticipate that any such liability will be
asserted against Parent or any of its subsidiaries, and (xi) no act, omission or
transaction (individually or in the aggregate) has occurred with respect to any
Parent Plan that has resulted or could result in any material liability (direct
or indirect) of Parent or any subsidiary under Sections 409 or 502(c)(i) or (l)
of ERISA or Chapter 43 of Subtitle (A) of the Code. None of the Parent
Controlled Group Plans has an "accumulated funding deficiency" (as defined in
Section 302 of ERISA and Section 412 of the Code) or is required to provide
security to a Parent Plan pursuant to Section 401(a)(29) of the Code.
(c) The Parent SEC Reports contain a true and complete summary or list of
or otherwise describe all material employment contracts and other employee
benefit arrangements with "change of control" or similar provisions and all
severance agreements with executive officers.
SECTION 4.14 Labor Controversies. Except as disclosed in the Parent SEC
Reports, (a) there are no significant controversies pending or, to the knowledge
of Parent, threatened between Parent or its subsidiaries and any representatives
of any of their employees, and (b) to the knowledge of Parent, there are no
material organizational efforts presently being made involving any of the
presently unorganized employees of Parent and its subsidiaries except for such
controversies and organizational efforts which would not reasonably be expected
to have a Parent Material Adverse Effect.
SECTION 4.15 Environmental Matters. (a) Except as disclosed in the Parent
SEC Reports, (i) Parent and its subsidiaries have conducted their respective
businesses in compliance with all applicable Environmental Laws (defined in
Section 4.15(b)), including, without limitation, having all permits, licenses
and other approvals and authorizations necessary for the operation of their
respective businesses as presently conducted, (ii) none of the properties owned
by Parent or any of its subsidiaries contain any Hazardous Substance (defined in
Section 4.15(c)) as a result of any activity of Parent or any of its
subsidiaries in amounts exceeding the levels permitted by applicable
Environmental Laws, (iii) since January 1, 1996, neither Parent nor any of its
subsidiaries has received any notices, demand letters or requests for
information from any Federal, state, local or foreign governmental entity
indicating that Parent or any of its subsidiaries may be in violation of, or
liable under, any Environmental Law in connection with the ownership or
operation of their businesses, (iv) there are no civil, criminal or
administrative actions, suits, demands, claims, hearings, investigations or
proceedings pending or threatened, against Parent or any of its subsidiaries
relating to any violation, or alleged violation, of any Environmental Law, (v)
no Hazardous Substance has been disposed of, released or transported in
violation of any applicable Environmental Law from any properties owned by
Parent or any of its subsidiaries as a result of any activity of Parent or any
of its subsidiaries during the time such properties were owned, leased or
operated by Parent or any of its subsidiaries, and (vi) neither Parent, its
subsidiaries nor any of their respective properties are subject to any
liabilities or expenditures (fixed or contingent) relating to any suit,
settlement, court order, administrative order, regulatory requirement, judgment
or claim asserted or arising under any Environmental Law, except for violations
of the foregoing clauses (i) through (vi) that would not reasonably be expected
to have a Parent Material Adverse Effect.
(b) As used herein, "Environmental Law" means any Federal, state, local or
foreign law, statute, ordinance, rule, regulation, code, license, permit,
authorization, approval, consent, legal doctrine, order, judgment, decree,
injunction, requirement or agreement with any governmental entity relating to
(x) the protection, preservation or restoration of the environment (including,
without limitation, air, water vapor,
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surface water, groundwater, drinking water supply, surface land, subsurface
land, plant and animal life or any other natural resource) or to human health or
safety, or (y) the exposure to, or the use, storage, recycling, treatment,
generation, transportation, processing, handling, labeling, production, release
or disposal of Hazardous Substances, in each case as amended and as in effect on
the Closing Date. The term "Environmental Law" includes, without limitation, (i)
the Federal Comprehensive Environmental Response Compensation and Liability Act
of 1980, the Superfund Amendments and Reauthorization Act, the Federal Water
Pollution Control Act of 1972, the Federal Clean Air Act, the Federal Clean
Water Act, the Federal Resource Conservation and Recovery Act of 1976 (including
the Hazardous and Solid Waste Amendments thereto), the Federal Solid Waste
Disposal Act and the Federal Toxic Substances Control Act, the Federal
Insecticide, Fungicide and Rodenticide Act, and the Federal Occupational Safety
and Health Act of 1970, each as amended and as in effect on the Closing Date,
and (ii) any common law or equitable doctrine (including, without limitation,
injunctive relief and tort doctrines such as negligence, nuisance, trespass and
strict liability) that may impose liability or obligations for injuries or
damages due to, or threatened as a result of, the presence of, effects of or
exposure to any Hazardous Substance.
(c) As used herein, "Hazardous Substance" means any substance presently or
hereafter listed, defined, designated or classified as hazardous, toxic,
radioactive, or dangerous, or otherwise regulated, under any Environmental Law.
Hazardous Substance includes any substance to which exposure is regulated by any
government authority or any Environmental Law including, without limitation, any
toxic waste, pollutant, contaminant, hazardous substance, toxic substance,
hazardous waste, special waste, industrial substance or petroleum or any
derivative or by-product thereof, radon, radioactive material, asbestos, or
asbestos containing material, urea formaldehyde foam insulation, lead or
polychlorinated biphenyls.
SECTION 4.16 Non-competition Agreements. Neither Parent nor any
subsidiary of Parent is a party to any agreement which (i) purports to restrict
or prohibit in any material respect any of them from, directly or indirectly,
engaging in any business involving the collection, interim storage, transfer,
recovery, processing, recycling, marketing or disposal of rubbish, garbage,
paper, textile wastes, chemical or hazardous wastes, liquid and other wastes or
any other material business currently engaged in by Parent or the Company, or
any corporations affiliated with either of them, and (ii) would restrict or
prohibit the Company or any subsidiary of the Company (other than the Company
and its subsidiaries that are currently so restricted or prohibited) from
engaging in any such business. None of Parent's officers, directors or key
employees is a party to any agreement which, by virtue of such person's
relationship with Parent, restricts in any material respect Parent or any
subsidiary of Parent from, directly or indirectly, engaging in any of the
businesses described above.
SECTION 4.17 Title to Assets. Parent and each of its subsidiaries has
good and marketable title in fee simple to all its real property and good title
to all its leasehold interests and other properties as reflected in the most
recent balance sheet included in the Parent Financial Statements, except for
such properties and assets that have been disposed of in the ordinary course of
business since the date of such balance sheet, free and clear of all mortgages,
liens, pledges, charges or encumbrances of any nature whatsoever, except (i) the
lien for current taxes, payments of which are not yet delinquent, (ii) such
imperfections in title and easements and encumbrances, if any, as are not
substantial in character, amount or extent and do not materially detract from
the value or interfere with the present use of the property subject thereto or
affected thereby, or otherwise materially impair the Parent's business
operations (in the manner presently carried on by the Parent), or (iii) as
disclosed in the Parent SEC Reports, and except for such matters which would not
reasonably be expected to have a Parent Material Adverse Effect. All leases
under which Parent leases any real or personal property are in good standing,
valid and effective in accordance with their respective terms, and there is not,
under any of such leases, any existing default or event which with notice or
lapse of time or both would become a default other than failures to be in good
standing, valid and effective and defaults under such leases which would not
reasonably be expected to have a Parent Material Adverse Effect.
SECTION 4.18 Reorganization and Pooling of Interests. None of the Parent,
Subsidiary or, to their knowledge, any of their affiliates has taken or agreed
or intends to take any action or has any knowledge of any fact or circumstance
that would prevent the Merger from (a) constituting a reorganization within the
meaning of Section 368(a) of the Code or (b) being treated for financial
accounting purposes as a "pooling of interests" in accordance with generally
accepted accounting principles and the rules, regulations and
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interpretations of the SEC (a "Pooling Transaction"). As of the date hereof,
other than directors and officers of Parent and certain of their affiliates, to
the knowledge of Parent, there are no "affiliates" of Parent, as that term is
used in paragraphs (c) and (d) of Rule 145 under the Securities Act.
SECTION 4.19 Parent Stockholders' Approval. The affirmative vote of
stockholders of Parent required for approval and adoption of this Agreement and
the Merger is a majority of the shares of Parent Common Stock outstanding and
entitled to vote at a meeting of stockholders (in order to approve an amendment
to the Articles of Incorporation of Parent to increase its authorized shares of
Parent Common Stock in addition to the issuance of shares pursuant to the
Merger).
SECTION 4.20 Brokers and Finders. Parent has not entered into any
contract, arrangement or understanding with any person or firm which may result
in the obligation of Parent to pay any finder's fees, brokerage or agent
commissions or other like payments in connection with the transactions
contemplated hereby. There is no claim for payment by Parent of any investment
banking fees, finder's fees, brokerage or agent commissions or other like
payments in connection with the negotiations leading to this Agreement or the
consummation of the transactions contemplated hereby, except for fees payable to
Credit Suisse First Boston Corporation.
SECTION 4.21 Opinion of Financial Advisor. The financial advisor of
Parent, Credit Suisse First Boston Corporation, has rendered an opinion to the
Board of Directors of Parent to the effect that as of the date of this Agreement
the Exchange Ratio is fair to Parent from a financial point of view; it being
understood and acknowledged by the Company that such opinion has been rendered
for the benefit of the Board of Directors of Parent and is not intended to, and
may not, be relied upon by the Company, its affiliates or their respective
subsidiaries.
SECTION 4.22 Ownership of Company Common Stock. Neither Parent nor any of
its subsidiaries beneficially owns any shares of Company Common Stock as of the
date hereof.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Subsidiary that, except
as set forth in the disclosure schedule dated as of the date hereof and signed
by an authorized officer of the Company (the "Company Disclosure Schedule"), it
being agreed that disclosure of any item on the Company Disclosure Schedule
shall be deemed disclosure with respect to all Sections of this Agreement if the
relevance of such item is reasonably apparent from the face of the Company
Disclosure Schedule:
SECTION 5.1 Organization and Qualification. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has the requisite corporate power and authority to own,
lease and operate its assets and properties and to carry on its business as it
is now being conducted. The Company is qualified to transact business and is in
good standing in each jurisdiction in which the properties owned, leased or
operated by it or the nature of the business conducted by it makes such
qualification necessary, except where the failure to be so qualified and in good
standing would not reasonably be expected to have a material adverse effect on
the business, operations, properties, assets, condition (financial or other) or
results of operations of the Company and its subsidiaries, taken as a whole (a
"Company Material Adverse Effect"). True, accurate and complete copies of the
Company's certificate of incorporation and bylaws, in each case as in effect on
the date hereof, including all amendments thereto, have heretofore been
delivered to Parent.
SECTION 5.2 Capitalization.
(a) The authorized capital stock of the Company consists of 60,000,000
shares of Company Common Stock and 5,000,000 shares of preferred stock ("Company
Preferred Stock"). As of June 30, 1998, (i) 24,638,895 shares of Company Common
Stock were issued and outstanding, all of which were validly issued and are
fully paid, nonassessable and free of preemptive rights, and no shares of
Company Preferred Stock were issued and outstanding, (ii) no shares of Company
Common Stock and no shares of Company
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Preferred Stock were held in the treasury of the Company, (iii) 1,908,759 shares
of Company Common Stock were reserved for issuance upon exercise of options
issued and outstanding, and (iv) 48,788 shares of Company Common Stock were
reserved for issuance upon exercise of outstanding warrants. Assuming the
exercise of all outstanding options, warrants and rights to purchase Company
Common Stock, as of June 30, 1998, there would be 26,596,442 shares of Company
Common Stock issued and outstanding. In addition, as of June 30, 1998, no more
than 2,542,896 shares of Company Common Stock were reserved for issuance in
connection with pending acquisitions. Since June 30, 1998, except as permitted
by the Agreement, (i) no shares of capital stock of the Company have been issued
except in connection with the exercise of the instruments referred to in the
second sentence of this Section 5.2(a) and (ii) no options, warrants, securities
convertible into, or commitments with respect to the issuance of shares of
capital stock of the Company have been issued, granted or made.
(b) Except as disclosed in the Company SEC Reports (as defined in Section
5.5) or as set forth in Section 5.2(b) of the Company Disclosure Schedule or in
Section 5.2(a), as of the date hereof there were no outstanding subscriptions,
options, calls, contracts, commitments, understandings, restrictions,
arrangements, rights or warrants, including any right of conversion or exchange
under any outstanding security, instrument or other agreement and also including
any rights plan or other anti-takeover agreement, obligating the Company or any
subsidiary of the Company to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of the capital stock of the Company or
obligating the Company or any subsidiary of the Company to grant, extend or
enter into any such agreement or commitment. Except as disclosed in the Company
SEC Reports or as otherwise contemplated by this Agreement, there are no voting
trusts, proxies or other agreements or understandings to which the Company or
any subsidiary of the Company is a party or is bound with respect to the voting
of any shares of capital stock of the Company.
SECTION 5.3 Subsidiaries. Each direct and indirect corporate subsidiary
of the Company is duly organized, validly existing and in good standing under
the laws of its jurisdiction of incorporation and has the requisite power and
authority to own, lease and operate its assets and properties and to carry on
its business as it is now being conducted and each subsidiary of the Company is
qualified to transact business, and is in good standing, in each jurisdiction in
which the properties owned, leased or operated by it or the nature of the
business conducted by it makes such qualification necessary; except in all cases
where the failure to be so qualified and in good standing would not reasonably
be expected to have a Company Material Adverse Effect. All of the outstanding
shares of capital stock of each corporate subsidiary of the Company are validly
issued, fully paid, nonassessable and free of preemptive rights and are owned
directly or indirectly by the Company free and clear of any liens, claims,
encumbrances, security interests, equities and options of any nature whatsoever,
except that such shares are pledged to secure the Company's credit facilities.
There are no subscriptions, options, warrants, rights, calls, contracts, voting
trusts, proxies or other commitments, understandings, restrictions or
arrangements relating to the issuance, sale, voting, transfer, ownership or
other rights with respect to any shares of capital stock of any corporate
subsidiary of the Company, including any right of conversion or exchange under
any outstanding security, instrument or agreement.
SECTION 5.4 Authority; Non-Contravention; Approvals.
(a) The Company has full corporate power and authority to enter into this
Agreement and, subject to the Company Stockholders' Approval (as defined in
Section 7.3(a)) and the Company Required Statutory Approvals (as defined in
Section 5.4(c)), to consummate the transactions contemplated hereby. This
Agreement has been approved by the Board of Directors of the Company, and no
other corporate proceedings on the part of the Company are necessary to
authorize the execution and delivery of this Agreement or, except for the
Company Stockholders' Approval, the consummation by the Company of the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by the Company, and, assuming the due authorization, execution and
delivery hereof by Parent and Subsidiary, constitutes a valid and legally
binding agreement of the Company, enforceable against the Company in accordance
with its terms, except that such enforcement may be subject to (a) bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting or
relating to enforcement of creditors' rights generally and (b) general equitable
principles.
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(b) The execution, delivery and performance of this Agreement by the
Company and the consummation of the Merger and the transactions contemplated
hereby do not and will not violate, conflict with or result in a breach of any
provision of, or constitute a default (or an event which, with notice or lapse
of time or both, would constitute a default) under, or result in the termination
of, or accelerate the performance required by, or result in a right of
termination or acceleration under, or result in the creation of any lien,
security interest or encumbrance upon any of the properties or assets of the
Company or any of its subsidiaries under any of the terms, conditions or
provisions of (i) the respective certificates of incorporation or bylaws of the
Company or any of its subsidiaries, (ii) any statute, law, ordinance, rule,
regulation, judgment, decree, order, injunction, writ, permit or license of any
court or governmental authority applicable to the Company or any of its
subsidiaries or any of their respective properties or assets, or (iii) any note,
bond, mortgage, indenture, deed of trust, license, franchise, permit,
concession, contract, lease or other instrument, obligation or agreement of any
kind to which the Company or any of its subsidiaries is now a party or by which
the Company or any of its subsidiaries or any of their respective properties or
assets may be bound or affected. The consummation by the Company of the
transactions contemplated hereby will not result in any violation, conflict,
breach, termination, acceleration or creation of liens under any of the terms,
conditions or provisions described in clauses (i) through (iii) of the preceding
sentence, subject (x) in the case of the terms, conditions or provisions
described in clause (ii) above, to obtaining (prior to the Effective Time) the
Company Required Statutory Approvals and the Company Stockholders' Approval, and
(y) in the case of the terms, conditions or provisions described in clause (iii)
above, to obtaining (prior to the Effective Time) consents required from
commercial lenders, lessors or other third parties as specified in Section
5.4(b) of the Company Disclosure Schedule. Excluded from the foregoing sentences
of this paragraph (b), insofar as they apply to the terms, conditions or
provisions described in clauses (ii) and (iii) of the first sentence of this
paragraph (b) (and whether resulting from such execution and delivery or
consummation), are such violations, conflicts, breaches, defaults, terminations,
accelerations or creations of liens, security interests or encumbrances that
would not reasonably be expected to have a Company Material Adverse Effect.
(c) Except for (i) the filings by the Company required by the HSR Act, (ii)
the filing of the Joint Proxy Statement/Prospectus with the SEC pursuant to the
Exchange Act and the Securities Act, (iii) the making of the Merger Filing with
the Secretary of State of the State of Delaware in connection with the Merger,
and (iv) any required filings with or approvals from applicable state
environmental authorities, public service commissions and public utility
commissions (the filings and approvals referred to in clauses (i) through (iv)
are collectively referred to as the "Company Required Statutory Approvals"), no
declaration, filing or registration with, or notice to, or authorization,
consent or approval of, any governmental or regulatory body or authority is
necessary for the execution and delivery of this Agreement by the Company or the
consummation by the Company of the transactions contemplated hereby, other than
such declarations, filings, registrations, notices, authorizations, consents or
approvals which, if not made or obtained, as the case may be, would not
reasonably be expected to have a Company Material Adverse Effect.
SECTION 5.5 Reports and Financial Statements. Since January 1, 1996, the
Company has filed with the SEC all material forms, statements, reports and
documents (including all exhibits, post-effective amendments and supplements
thereto) required to be filed by it under each of the Securities Act, the
Exchange Act and the respective rules and regulations thereunder, all of which,
as amended if applicable, complied when filed in all material respects with all
applicable requirements of the appropriate act and the rules and regulations
thereunder. The Company has previously delivered or made available to Parent
copies (including all exhibits, post-effective amendments and supplements
thereto) of its (a) Annual Reports on Form 10-K for the year ended December 31,
1997, and for the immediately preceding fiscal year, as filed with the SEC, (b)
proxy and information statements relating to (i) all meetings of its
stockholders (whether annual or special) and (ii) actions by written consent in
lieu of a stockholders' meeting from January 1, 1996, until the date hereof, and
(c) all other reports, including quarterly reports, and registration statements
filed by the Company with the SEC since January 1, 1996 (other than registration
statements filed on Form S-8) (the documents referred to in clauses (a), (b),
and (c) filed prior to the date hereof are collectively referred to as the
"Company SEC Reports"). As of their respective dates, the Company SEC Reports
did not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
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The audited consolidated financial statements of the Company included in the
Company's Annual Report on Form 10-K for the twelve months ended December 31,
1997 (collectively, the "Company Financial Statements") have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis (except as may be indicated therein or in the notes thereto) and fairly
present the financial position of the Company and its subsidiaries as of the
dates thereof and the results of their operations and changes in financial
position for the periods then ended.
SECTION 5.6 Absence of Undisclosed Liabilities. Except as disclosed in
the Company SEC Reports or as heretofore disclosed to Parent in writing with
respect to acquisitions or potential transactions or commitments, neither the
Company nor any of its subsidiaries had at December 31, 1997, or has incurred
since that date and as of the date hereof, any liabilities or obligations
(whether absolute, accrued, contingent or otherwise) of any nature, except (a)
liabilities, obligations or contingencies (i) which are accrued or reserved
against in the Company Financial Statements or reflected in the notes thereto or
(ii) which were incurred after December 31, 1997, and were incurred in the
ordinary course of business and consistent with past practices, (b) liabilities,
obligations or contingencies which (i) would not reasonably be expected to have
a Company Material Adverse Effect, or (ii) have been discharged or paid in full
prior to the date hereof, and (c) liabilities and obligations which are of a
nature not required to be reflected in the consolidated financial statements of
the Company and its subsidiaries prepared in accordance with generally accepted
accounting principles consistently applied and which were incurred in the
ordinary course of business.
SECTION 5.7 Absence of Certain Changes or Events. Since the date of the
most recent Company SEC Report that contains consolidated financial statements
of the Company, there has not been any Company Material Adverse Effect, except
for changes that affect the industries in which the Company and its subsidiaries
operate generally.
SECTION 5.8 Litigation. Except as referred to in the Company SEC Reports,
there are no claims, suits, actions or proceedings pending or, to the knowledge
of the Company, threatened against, relating to or affecting the Company or any
of its subsidiaries, before any court, governmental department, commission,
agency, instrumentality or authority, or any arbitrator that seek to restrain
the consummation of the Merger or which if adversely determined would reasonably
be expected to have a Company Material Adverse Effect. Except as referred to in
the Company SEC Reports, neither the Company nor any of its subsidiaries is
subject to any judgment, decree, injunction, rule or order of any court,
governmental department, commission, agency, instrumentality or authority, or
any arbitrator which prohibits or restricts the consummation of the transactions
contemplated hereby or would reasonably be expected to have a Company Material
Adverse Effect.
SECTION 5.9 Registration Statement and Proxy Statement. None of the
information to be supplied by the Company or its subsidiaries for inclusion in
(a) the Registration Statement or (b) the Proxy Statement will, in the case of
the Proxy Statement or any amendments thereof or supplements thereto, at the
time of the mailing of the Proxy Statement and any amendments or supplements
thereto, and at the time of the meetings of stockholders of the Company and
Parent to be held in connection with the transactions contemplated by this
Agreement or, in the case of the Registration Statement, as amended or
supplemented, at the time it becomes effective and at the time of such meetings
of the stockholders of the Company and Parent, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the
circumstances under which they are made, not misleading. The Joint Proxy
Statement/Prospectus will comply, as of its mailing date, as to form in all
material respects with all applicable laws, including the provisions of the
Securities Act and the Exchange Act and the rules and regulations promulgated
thereunder, except that no representation is made by the Company with respect to
information supplied by Parent, Subsidiary or any stockholder of Parent for
inclusion therein.
SECTION 5.10 No Violation of Law. Except as disclosed in the Company SEC
Reports, neither the Company nor any of its subsidiaries is in violation of or
has been given written notice or been charged with any violation of, any law,
statute, order, rule, regulation, ordinance or judgment (including, without
limitation, any applicable environmental law, ordinance or regulation) of any
governmental or regulatory body or authority,
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except for violations which would not reasonably be expected to have a Company
Material Adverse Effect. Except as disclosed in the Company SEC Reports, as of
the date of this Agreement, to the knowledge of the Company, no investigation or
review by any governmental or regulatory body or authority is pending or
threatened, nor has any governmental or regulatory body or authority indicated
an intention to conduct the same, other than, in each case, those the outcome of
which, as far as reasonably can be foreseen, would not reasonably be expected to
have a Company Material Adverse Effect. The Company and its subsidiaries have
all permits, licenses, franchises, variances, exemptions, orders and other
governmental authorizations, consents and approvals necessary to conduct their
businesses as presently conducted (collectively, the "Company Permits"), except
for permits, licenses, franchises, variances, exemptions, orders,
authorizations, consents and approvals the absence of which would not reasonably
be expected to have a Company Material Adverse Effect. The Company and its
subsidiaries are not in violation of the terms of any Company Permit, except for
delays in filing reports or violations which would not reasonably be expected to
have a Company Material Adverse Effect.
SECTION 5.11 Compliance with Agreements. Except as disclosed in the
Company SEC Reports, the Company and each of its subsidiaries are not in breach
or violation of or in default in the performance or observance of any term or
provision of, and no event has occurred which, with lapse of time or action by a
third party, would result in a default under, (a) the respective certificates of
incorporation, bylaws or similar organizational instruments of the Company or
any of its subsidiaries, or (b) any contract, commitment, agreement, indenture,
mortgage, loan agreement, note, lease, bond, license, approval or other
instrument to which the Company or any of its subsidiaries is a party or by
which any of them is bound or to which any of their property is subject, other
than, in the case of clause (b) of this Section 5.11, breaches, violations and
defaults which would not reasonably be expected to have a Company Material
Adverse Effect.
SECTION 5.12 Taxes. The Company and its subsidiaries have (i) duly filed
with the appropriate governmental authorities all Tax Returns required to be
filed by them for all periods ending on or prior to the Effective Time, other
than those Tax Returns the failure of which to file would not reasonably be
expected to have a Company Material Adverse Effect, and such Tax Returns are
true, correct and complete in all material respects, and (ii) duly paid in full
or made adequate provision in accordance with generally accepted accounting
principles for the payment of all Taxes for all past and current periods which
are due prior to the date hereof. The liabilities and reserves for Taxes
reflected in the Company balance sheet included in the latest Company SEC Report
to cover all Taxes for all periods ending at or prior to the date of such
balance sheet have been determined in accordance with generally accepted
accounting principles, and there is no material liability for Taxes for any
period beginning after such date other than Taxes arising in the ordinary course
of business. There are no material liens for Taxes upon any property or asset of
the Company or any subsidiary thereof, except for liens for Taxes not yet due or
Taxes contested in good faith and adequately reserved against in accordance with
generally accepted accounting principles. There are no unresolved issues of law
or fact arising out of a notice of deficiency, proposed deficiency or assessment
from the IRS or any other governmental taxing authority with respect to Taxes of
the Company or any of its subsidiaries which would reasonably be expected to
have a Company Material Adverse Effect. Neither the Company nor its subsidiaries
has waived any statute of limitations in respect of a material amount of Taxes
or agreed to any extension of time with respect to a material Tax assessment or
deficiency other than waivers and extensions which are no longer in effect.
Neither the Company nor any of its subsidiaries is a party to any agreement
providing for the allocation or sharing of Taxes with any entity that is not,
directly or indirectly, a wholly-owned corporate subsidiary of Company other
than agreements the consequences of which are fully and adequately reserved for
in the Company Financial Statements. Neither the Company nor any of its
corporate subsidiaries has, with regard to any assets or property held, acquired
or to be acquired by any of them, filed a consent to the application of Section
341(f) of the Code.
SECTION 5.13 Employee Benefit Plans; ERISA.
(a) Except as disclosed in the Company SEC Reports, at the date hereof, the
Company and its subsidiaries do not maintain or contribute to or have any
obligation or liability to or with respect to any material employee benefit
plans, programs, arrangements or practices, including employee benefit plans
within the meaning set forth in Section 3(3) of ERISA, or other similar material
arrangements for the provision of
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benefits (excluding any "Multi-employer Plan" within the meaning of Section
3(37) of ERISA or a "Multiple Employer Plan" within the meaning of Section
413(c) of the Code) (such plans, programs, arrangements or practices of the
Company and its subsidiaries being referred to as the "Company Plans"). The
Company Disclosure Schedule lists all Multi-employer Plans to which any of them
makes contributions or has any obligation or liability to make material
contributions. Neither the Company nor any of its subsidiaries maintains or has
any material liability with respect to any Multiple Employer Plan. Neither the
Company nor any of its subsidiaries has any obligation to create or contribute
to any additional such plan, program, arrangement or practice or to amend any
such plan, program, arrangement or practice so as to increase benefits or
contributions thereunder, except as required under the terms of the Company
Plans, under existing collective bargaining agreements or to comply with
applicable law.
(b) Except as disclosed in the Company SEC Reports, (i) there have been no
prohibited transactions within the meaning of Section 406 or 407 of ERISA or
Section 4975 of the Code with respect to any of the Company Plans that could
result in penalties, taxes or liabilities which would reasonably be expected to
have a Company Material Adverse Effect, (ii) except for premiums due, there is
no outstanding material liability, whether measured alone or in the aggregate,
under Title IV of ERISA with respect to any of the Company Plans, (iii) neither
the Pension Benefit Guaranty Corporation nor any plan administrator has
instituted proceedings to terminate any of the Company Plans subject to Title IV
of ERISA other than in a "standard termination" described in Section 4041(b) of
ERISA, (iv) none of the Company Plans has incurred any "accumulated funding
deficiency" (as defined in Section 302 of ERISA and Section 412 of the Code),
whether or not waived, as of the last day of the most recent fiscal year of each
of the Company Plans ended prior to the date of this Agreement, (v) the current
present value of all projected benefit obligations under each of the Company
Plans which is subject to Title IV of ERISA did not, as of its latest valuation
date, exceed the then current value of the assets of such plan allocable to such
benefit liabilities by more than the amount, if any, disclosed in the Company
SEC Reports as of December 31, 1997, based upon reasonable actuarial assumptions
currently utilized for such Company Plan, (vi) each of the Company Plans has
been operated and administered in accordance with applicable laws during the
period of time covered by the applicable statute of limitations, except for
failures to comply which would not reasonably be expected to have a Company
Material Adverse Effect, (vii) each of the Company Plans which is intended to be
"qualified" within the meaning of Section 401(a) of the Code has been determined
by the Internal Revenue Service to be so qualified and such determination has
not been modified, revoked or limited by failure to satisfy any condition
thereof or by a subsequent amendment thereto or a failure to amend, except that
it may be necessary to make additional amendments retroactively to maintain the
"qualified" status of such Company Plans, and the period for making any such
necessary retroactive amendments has not expired, (viii) with respect to
Multi-employer Plans, neither the Company nor any of its subsidiaries has made
or suffered a "complete withdrawal" or a "partial withdrawal," as such terms are
respectively defined in Sections 4203, 4204 and 4205 of ERISA and, to the best
knowledge of the Company and its subsidiaries, no event has occurred or is
expected to occur which presents a material risk of a complete or partial
withdrawal under such Sections 4203, 4204 and 4205, (ix) to the knowledge of the
Company and its subsidiaries, there are no material pending, threatened or
anticipated claims involving any of the Company Plans other than claims for
benefits in the ordinary course, (x) the Company and its subsidiaries have no
current material liability under Title IV of ERISA, and the Company and its
subsidiaries do not reasonably anticipate that any such liability will be
asserted against the Company or any of its subsidiaries, and (xi) no act,
omission or transaction (individually or in the aggregate) has occurred with
respect to any Company Plan that has resulted or could result in any material
liability (direct or indirect) of the Company or any subsidiary under Sections
409 or 502(c)(1) or (l) of ERISA or Chapter 43 of Subtitle (A) of the Code. None
of the Company Controlled Group Plans has an "accumulated funding deficiency"
(as defined in Section 302 of ERISA and Section 412 of the Code) or is required
to provide security to a Company Plan pursuant to Section 401(a)(29) of the
Code.
(c) The Company SEC Reports contain a true and complete summary or list of
or otherwise describe all material employment contracts and other employee
benefit arrangements with "change of control" or similar provisions and all
severance agreements with executive officers.
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(d) Except as disclosed in Section 7.12(b) of the Company Disclosure
Schedule, there are no agreements which will or may provide payments to any
officer, employee, stockholder, or highly compensated individual which will be
"parachute payments" under Code Section 280G that are nondeductible to the
Company or subject to tax under Code Section 4999 for which the Company or any
ERISA Affiliate would have withholding liability.
SECTION 5.14 Labor Controversies. Except as disclosed in the Company SEC
Reports, (a) there are no significant controversies pending or, to the knowledge
of the Company, threatened between the Company or its subsidiaries and any
representatives of any of their employees, and (b) to the knowledge of the
Company, there are no material organizational efforts presently being made
involving any of the presently unorganized employees of the Company or its
subsidiaries, except for such controversies and organizational efforts, which
would not reasonably be expected to have a Company Material Adverse Effect.
SECTION 5.15 Environmental Matters. Except as disclosed in the Company
SEC Reports, (i) the Company and its subsidiaries have conducted their
respective businesses in compliance with all applicable Environmental Laws,
including, without limitation, having all permits, licenses and other approvals
and authorizations necessary for the operation of their respective businesses as
presently conducted, (ii) none of the properties owned by the Company or any of
its subsidiaries contain any Hazardous Substance as a result of any activity of
the Company or any of its subsidiaries in amounts exceeding the levels permitted
by applicable Environmental Laws, (iii) since January 1, 1996, neither the
Company nor any of its subsidiaries has received any notices, demand letters or
requests for information from any Federal, state, local or foreign governmental
entity indicating that the Company or any of its subsidiaries may be in
violation of, or liable under, any Environmental Law in connection with the
ownership or operation of their businesses, (iv) there are no civil, criminal or
administrative actions, suits, demands, claims, hearings, investigations or
proceedings pending or threatened, against the Company or any of its
subsidiaries relating to any violation, or alleged violation, of any
Environmental Law, (v) no Hazardous Substance has been disposed of, released or
transported in violation of any applicable Environmental Law from any properties
owned by the Company or any of its subsidiaries as a result of any activity of
the Company or any of its subsidiaries during the time such properties were
owned, leased or operated by the Company or any of its subsidiaries, and (vi)
neither the Company, its subsidiaries nor any of their respective properties are
subject to any material liabilities or expenditures (fixed or contingent)
relating to any suit, settlement, court order, administrative order, regulatory
requirement, judgment or claim asserted or arising under any Environmental Law,
except for violations of the foregoing clauses (i) through (vi) that would not
reasonably be expected to have a Company Material Adverse Effect.
SECTION 5.16 Non-competition Agreements. Except as disclosed in the
Company SEC Reports, neither the Company nor any subsidiary of the Company is a
party to any agreement which (i) purports to restrict or prohibit in any
material respect any of them or any corporation affiliated with any of them
from, directly or indirectly, engaging in any business involving the collection,
interim storage, transfer, recovery, processing, recycling, marketing or
disposal of rubbish, garbage, paper, textile wastes, chemical or hazardous
wastes, liquid and other wastes or any other material business currently engaged
in by Parent or the Company, or any corporations affiliated with either of them,
and (ii) would restrict or prohibit Parent or any subsidiary of the Parent
(other than the Company and its subsidiaries that are currently so restricted or
prohibited) from engaging in such business. None of the Company's officers,
directors or key employees is a party to any agreement which, by virtue of such
person's relationship with the Company, restricts in any material respect the
Company or any subsidiary or affiliate of the Company from, directly or
indirectly, engaging in any of the businesses described above.
SECTION 5.17 Title to Assets. The Company and each of its subsidiaries
has good and marketable title in fee simple to all its real property and good
title to all its leasehold interests and other properties, as reflected in the
most recent balance sheet included in the Company Financial Statements, except
for properties and assets that have been disposed of in the ordinary course of
business since the date of such balance sheet, free and clear of all mortgages,
liens, pledges, charges or encumbrances of any nature whatsoever, except (i) the
lien for current taxes, payments of which are not yet delinquent, (ii) such
imperfections in title and easements and encumbrances, if any, as are not
substantial in character, amount or extent and do not materially detract from
the value, or interfere with the present use of the property subject
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thereto or affected thereby, or otherwise materially impair the Company's
business operations (in the manner presently carried on by the Company), or
(iii) as disclosed in the Company SEC Reports, and except for such matters which
would not reasonably be expected to have a Company Material Adverse Effect. All
leases under which the Company leases any real or personal property are in good
standing, valid and effective in accordance with their respective terms, and
there is not, under any of such leases, any existing default or event which with
notice or lapse of time or both would become a default other than failures to be
in good standing, valid and effective and defaults under such leases which would
not reasonably be expected to have a Company Material Adverse Effect.
SECTION 5.18 Reorganization and Pooling of Interests. Neither the Company
nor, to the knowledge of the Company, any of its affiliates has taken or agreed
or intends to take any action or has any knowledge of any fact or circumstance
that would prevent the Merger from (a) constituting a reorganization within the
meaning of Section 368(a) of the Code or (b) being treated for financial
accounting purposes as a Pooling Transaction. As of the date hereof, other than
directors and officers of the Company, to the knowledge of the Company, there
are no "affiliates" of the Company, as that term is used in paragraphs (c) and
(d) of Rule 145 under the Securities Act.
SECTION 5.19 Company Stockholders' Approval. The affirmative vote of
stockholders of the Company required for approval and adoption of this Agreement
and the Merger is a majority of the outstanding shares of Company Common Stock
entitled to vote thereon.
SECTION 5.20 Brokers and Finders. The Company has not entered into any
contract, arrangement or understanding with any person or firm which may result
in the obligation of the Company to pay any finder's fees, brokerage or agent
commissions or other like payments in connection with the transactions
contemplated hereby. There is no claim for payment by the Company of any
investment banking fees, finder's fees, brokerage or agent commissions or other
like payments in connection with the negotiations leading to this Agreement or
the consummation of the transactions contemplated hereby other than fees payable
to CIBC Oppenheimer & Co., as disclosed in the Company Disclosure Schedule.
SECTION 5.21 Opinion of Financial Advisor. The financial advisor of the
Company, CIBC Oppenheimer & Co., has rendered an opinion to the Board of
Directors of the Company to the effect that, as of the date thereof, the
Exchange Ratio is fair from a financial point of view to the holders of Company
Common Stock; it being understood and acknowledged by Parent and Subsidiary that
such opinion has been rendered for the benefit of the Board of Directors of the
Company and is not intended to, and may not, be relied upon by Parent, its
affiliates or their respective subsidiaries.
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 6.1 Conduct of Business by the Company Pending the Merger. Except
as otherwise contemplated by this Agreement or disclosed in Section 6.1 of the
Company Disclosure Schedule, after the date hereof and prior to the Closing Date
or earlier termination of this Agreement, unless Parent shall otherwise agree in
writing, the Company shall, and shall cause its subsidiaries to:
(a) conduct their respective businesses in the ordinary and usual
course of business and consistent with past practice;
(b) not (i) amend or propose to amend their respective certificates of
incorporation or bylaws, (ii) split, combine or reclassify their
outstanding capital stock or (iii) declare, set aside or pay any dividend
or distribution payable in cash, stock, property or otherwise, except for
the payment of dividends or distributions to the Company by a wholly-owned
subsidiary of the Company;
(c) not issue, sell, pledge or dispose of, or agree to issue, sell,
pledge or dispose of, any additional shares of, or any options, warrants or
rights of any kind to acquire any shares of their capital stock of any
class or any debt or equity securities convertible into or exchangeable for
such capital stock, except that (i) the Company may issue shares upon
conversion of convertible securities and exercise of options and
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warrants outstanding on the date hereof, (ii) the Company may issue shares
of Company Common Stock (or warrants or options to acquire Company Common
Stock) in connection with acquisitions of assets or businesses pursuant to
the proviso of Section 6.1(d) and (iii) the Company may issue shares of
Company Common Stock pursuant to earnouts from previously completed
transactions in accordance with the existing terms of the agreements
relating thereto;
(d) not (i) incur or become contingently liable with respect to any
indebtedness for borrowed money other than (A) borrowings in the ordinary
course of business (other than pursuant to credit facilities) or borrowings
under the existing credit facilities of the Company or any of its
subsidiaries as such facilities may be amended in a manner that does not
have a material adverse effect on the Company (the "Existing Credit
Facilities") up to the existing borrowing limit on the date hereof, (B)
borrowings to refinance existing indebtedness on terms which are reasonably
acceptable to Parent, or (C) borrowings in connection with acquisitions as
set forth in the proviso in this Section 6.1(d), (ii) redeem, purchase,
acquire or offer to purchase or acquire any shares of its capital stock or
any options, warrants or rights to acquire any of its capital stock or any
security convertible into or exchangeable for its capital stock, (iii) take
any action that would jeopardize the treatment of the Merger as a pooling
of interests under Opinion No. 16 of the Accounting Principles Board ("APB
No. 16"), (iv) take or fail to take any action which action or failure to
take action would cause the Company or its stockholders (except to the
extent that any stockholders receive cash in lieu of fractional shares and
except to the extent of stockholders in special circumstances) to recognize
gain or loss for federal income tax purposes as a result of the
consummation of the Merger or would otherwise cause the Merger not to
qualify as a reorganization under Section 368(a) of the Code, (v) make any
acquisition of any assets or businesses other than expenditures for current
assets in the ordinary course of business and expenditures for fixed or
capital assets in the ordinary course of business and other than as set
forth in the proviso in this Section 6.1(d), (vi) sell, pledge, dispose of
or encumber any material assets or businesses other than (A) sales of
businesses or assets in the ordinary course of business, (B) sales of
businesses or assets disclosed in Section 6.1 of the Company Disclosure
Schedule, (C) sales of businesses or assets with aggregate 1997 revenues of
less than $5 million, and (D) pledges or encumbrances pursuant to Existing
Credit Facilities or other permitted borrowings, or (vii) except as
contemplated by the following proviso, enter into any binding contract,
agreement, commitment or arrangement with respect to any of the foregoing;
provided, however, that notwithstanding the foregoing (other than
subsections (iii) and (iv) of this Section 6.1(d)), the Company shall not
be prohibited from acquiring any assets or businesses or incurring or
assuming indebtedness in connection with acquisitions of assets or
businesses so long as (A) such acquisitions are disclosed in Section 6.1 of
the Company Disclosure Schedule, or (B) the aggregate value of
consideration paid or payable in connection with any such acquisition
(other than those acquisitions disclosed in Schedule 6.1 of the Company
Disclosure Schedule) including any funded indebtedness assumed and any
Company Common Stock issued in connection with such acquisitions (valued
for purposes of this limitation at a price per share equal to the price of
the Company Common Stock on the date the agreement in respect of any such
acquisition is entered into) does not exceed $10 million and such
acquisition is accretive to the earnings per share of the Company. For
purposes of the foregoing, any contingent, royalty and similar payments
made in connection with acquisitions of businesses or assets shall be
included as acquisition consideration and shall be deemed to have a value
equal to their present value assuming a 8% per annum discount rate and
assuming that all amounts payable for the first five years following
consummation of the acquisitions (but not thereafter) are paid.
Notwithstanding anything herein to the contrary: (A) the Company will not
acquire or agree to acquire any assets or businesses if such acquisition or
agreement may reasonably be expected to delay the consummation of the
Merger; (B) the Company will not acquire or agree to acquire any assets or
businesses if such assets or businesses are not in industries in which the
Company currently operates, unless such assets or businesses are acquired
incidental to an acquisition of businesses or assets that are in industries
in which the Company currently operates and it is reasonable to acquire
such incidental businesses or assets in connection with such acquisition;
and (C) the Company will not acquire or agree to acquire all or
substantially all of the business, assets, properties or capital stock of
any entity with securities registered under the Securities Act or the
Exchange Act;
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(e) use all reasonable efforts to preserve intact their respective
business organizations and goodwill, keep available the services of their
respective present officers and key employees, and preserve the goodwill
and business relationships with customers and others having business
relationships with them and not engage in any action, directly or
indirectly, with the intent to adversely impact the transactions
contemplated by this Agreement;
(f) subject to restrictions imposed by applicable law, confer with one
or more representatives of Parent to report operational matters of
materiality and the general status of ongoing operations;
(g) not enter into or amend any employment, severance, special pay
arrangement with respect to termination of employment or other similar
arrangements or agreements with any directors, officers or key employees,
except in the ordinary course and consistent with past practice; provided,
however, that the Company and its subsidiaries shall in no event enter into
or amend any written employment agreements providing for annual base salary
in excess of $100,000 per annum;
(h) not adopt, enter into or amend any pension or retirement plan,
trust or fund, except as required to comply with changes in applicable law
and not adopt, enter into or amend in any material respect any bonus,
profit sharing, compensation, stock option, deferred compensation, health
care, employment or other employee benefit plan, agreement, trust, fund or
arrangement for the benefit or welfare of any employees or retirees
generally, other than in the ordinary course of business, except (i) as
contemplated by Section 6.1(c), (ii) as required to comply with changes in
applicable law, (iii) any of the foregoing involving any such then existing
plans, agreements, trusts, funds or arrangements of any company acquired
after the date hereof, or (iv) as required pursuant to an existing
contractual arrangement or agreement;
(i) use commercially reasonable efforts to maintain with financially
responsible insurance companies insurance on its tangible assets and its
businesses in such amounts and against such risks and losses as are
consistent with past practice; and
(j) not make, change or revoke any material Tax election or make any
material agreement or settlement regarding Taxes with any taxing authority.
SECTION 6.2 Conduct of Business by Parent and Subsidiary Pending the
Merger. Except as otherwise contemplated by this Agreement, after the date
hereof and prior to the Closing Date or earlier termination of this Agreement,
unless the Company shall otherwise agree in writing, Parent shall, and shall
cause its subsidiaries to:
(a) conduct their respective businesses in the ordinary and usual
course of business and consistent with past practice;
(b) not (i) amend or propose to amend their respective certificates of
incorporation (except for any amendments by Parent of its Certificate of
Incorporation to increase the number of authorized shares of Parent Common
Stock to not more than 400 million) or bylaws, (ii) split, combine or
reclassify (whether by stock dividend or otherwise) their outstanding
capital stock, or (iii) declare, set aside or pay any dividend or
distribution payable in cash, stock, property or otherwise, except for the
payment of dividends or distributions to Parent by a wholly-owned
subsidiary of Parent;
(c) not issue, sell, pledge or dispose of, or agree to issue, sell,
pledge or dispose of, any additional shares of, or any options, warrants or
rights of any kind to acquire any shares of their capital stock of any
class or any debt or equity securities convertible into or exchangeable for
such capital stock, except that (i) Parent may issue shares upon conversion
of convertible securities and exercise of options and warrants outstanding
on the date hereof, (ii) Parent may issue options with an exercise price
per share of Parent Common Stock no less than the fair market value of a
share of Parent Common Stock on the date of grant thereof (and shares upon
exercise of such options) pursuant to its employee stock option plans in
effect on the date hereof, and (iii) Parent may issue shares of capital
stock (or warrants or options to acquire capital stock) in connection with
acquisitions of assets or businesses;
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(d) not (i) incur or become contingently liable with respect to any
indebtedness for borrowed money other than (A) borrowings in the ordinary
course of business or borrowings under the existing credit facilities of
Parent or any of its subsidiaries, (B) borrowings to refinance existing
indebtedness on terms which are reasonably acceptable to the Company, (C)
as set forth in the proviso in this Section 6.2(d), (ii) redeem, purchase,
acquire or offer to purchase or acquire any shares of its capital stock or
any options, warrants or rights to acquire any of its capital stock or any
security convertible into or exchangeable for its capital stock, (iii) take
any action that would jeopardize the treatment of the Merger as a pooling
of interests under APB No. 16, (iv) take or fail to take any action which
action or failure to take action would cause Parent or its stockholders to
recognize gain or loss for federal income tax purposes as a result of the
consummation of the Merger or would otherwise cause the Merger not to
qualify as a reorganization under Section 368(a) of the Code, (v) pledge or
encumber any material assets or businesses other than pledges or
encumbrances pursuant to existing or future credit facilities, or (vi)
enter into any binding contract, agreement, commitment or arrangement with
respect to any of the foregoing; provided, however, that notwithstanding
the foregoing (other than subsections (iii) and (iv) of this Section
6.2(d)), Parent shall not be prohibited from acquiring any assets or
businesses or incurring or assuming indebtedness in connection with
acquisitions of assets or businesses. Notwithstanding anything herein to
the contrary: (A) Parent will not acquire or agree to acquire any assets or
businesses if such acquisition or agreement may reasonably be expected to
delay the consummation of the Merger; and (B) Parent will not acquire or
agree to acquire any assets or businesses if such assets or businesses are
not in industries in which Parent currently operates, unless such assets or
businesses are acquired incidental to an acquisition of businesses or
assets that are in industries in which Parent currently operates and it is
reasonable to acquire such incidental businesses or assets in connection
with such acquisition;
(e) use all reasonable efforts to preserve intact their respective
business organizations and goodwill, keep available the services of their
respective present officers and key employees, and preserve the goodwill
and business relationships with customers and others having business
relationships with them and not engage in any action, directly or
indirectly, with the intent to adversely impact the transactions
contemplated by this Agreement;
(f) subject to restrictions imposed by applicable law, confer with one
or more representatives of the Company to report operational matters of
materiality and the general status of ongoing operations; and
(g) use commercially reasonable efforts to maintain with financially
responsible insurance companies insurance on its tangible assets and its
businesses in such amounts and against such risks and losses as are
consistent with past practice.
SECTION 6.3 Control of the Company's Operations. Nothing contained in
this Agreement shall give to Parent, directly or indirectly, rights to control
or direct the Company's operations prior to the Effective Time. Prior to the
Effective Time, the Company shall exercise, consistent with the terms and
conditions of this Agreement, complete control and supervision of its
operations.
SECTION 6.4 Control of Parent's Operations. Nothing contained in this
Agreement shall give to the Company, directly or indirectly, rights to control
or direct Parent's operations prior to the Effective Time. Prior to the
Effective Time, Parent shall exercise, consistent with the terms and conditions
of this Agreement, complete control and supervision of its operations.
SECTION 6.5 Acquisition Transactions.
(a) After the date hereof and prior to the Effective Time or earlier
termination of this Agreement, the Company shall not, and shall not permit any
of its subsidiaries to, initiate, solicit, negotiate, encourage or provide
confidential information to facilitate, and the Company shall, and shall use its
reasonable efforts to cause any officer, director or employee of the Company, or
any attorney, accountant, investment banker, financial advisor or other agent
retained by it or any of its subsidiaries, not to initiate, solicit, negotiate,
encourage or provide non-public or confidential information to facilitate, any
proposal or offer to acquire all or any substantial part of the business,
properties or capital stock of the Company, whether by merger, purchase
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of assets, tender offer or otherwise, whether for cash, securities or any other
consideration or combination thereof (any such transactions being referred to
herein as an "Acquisition Transaction").
(b) Notwithstanding the provisions of paragraph (a) above, (i) the Company
may, in response to an unsolicited written offer or proposal with respect to a
potential or proposed Acquisition Transaction ("Acquisition Proposal") which the
Company's Board of Directors determines, in good faith and after consultation
with its independent financial advisor, would result (if consummated pursuant to
its terms) in an Acquisition Transaction more favorable to the Company's
stockholders than the Merger (any such offer or proposal being referred to as a
"Superior Proposal"), furnish (subject to the execution of a confidentiality
agreement substantially similar to the confidentiality provisions of this
agreement), confidential or non-public information to a financially capable
corporation, partnership, person or other entity or group (a "Potential
Acquirer") and negotiate and, upon termination of this Agreement in accordance
with Section 9.1(a)(iv) and after payment to Parent of the fee pursuant to
Section 7.6(b), enter agreements with such Potential Acquirer if the Board of
Directors of the Company, after consulting with its outside legal counsel,
determines in good faith that consideration of the Superior Proposal is
reasonably necessary for the Board of Directors to act in a manner consistent
with its fiduciary duties or that the failure to provide such confidential or
non-public information to or negotiate with such Potential Acquirer would be
reasonably likely to constitute a breach of its fiduciary duty to the Company's
stockholders, and (ii) the Company's Board of Directors may take and disclose to
the Company's stockholders a position contemplated by Rule 14e-2 under the
Exchange Act. It is understood and agreed that negotiations and other activities
conducted in accordance with this paragraph (b) shall not constitute a violation
of paragraph (a) of this Section 6.5.
(c) The Company shall immediately notify Parent after receipt of any
Acquisition Proposal, indication of interest or request for non-public
information relating to the Company or its subsidiaries in connection with an
Acquisition Proposal or for access to the properties, books or records of the
Company or any subsidiary by any person or entity that informs the Board of
Directors of the Company or such subsidiary that it is considering making, or
has made, an Acquisition Proposal. Such notice to Parent shall be made orally
and in writing and shall indicate in reasonable detail the identity of the
offeror and the terms and conditions of such proposal, inquiry or contact.
(d) After the date hereof and prior to the Effective Time or earlier
termination of this Agreement, the Parent shall promptly notify the Company
after receipt of any proposal or offer to acquire all or any substantial part of
the business, properties or capital stock of Parent, whether by merger, purchase
of assets, tender offer or otherwise, whether for cash, securities or any other
consideration or combination thereof (any such transactions being referred to
herein as a "Parent Acquisition Transaction"), and shall indicate in reasonable
detail the identity of the offeror or Person and the terms and conditions of
such proposal or offer.
ARTICLE VII
ADDITIONAL AGREEMENTS
SECTION 7.1 Access to Information.
(a) Subject to applicable law, the Company and its subsidiaries shall
afford to Parent and Subsidiary and their respective accountants, counsel,
financial advisors and other representatives (the "Parent Representatives") and
Parent and its subsidiaries shall afford to the Company and its accountants,
counsel, financial advisors and other representatives (the "Company
Representatives") reasonable access during normal business hours with reasonable
notice throughout the period prior to the Effective Time to all of their
respective properties, books, contracts, commitments and records (including, but
not limited to, Tax Returns) and, during such period, shall furnish promptly to
one another (i) a copy of each report, schedule and other document filed or
received by any of them pursuant to the requirements of federal or state
securities laws or filed by any of them with the SEC in connection with the
transactions contemplated by this Agreement, and (ii) such other information
concerning their respective businesses, properties and personnel as Parent or
Subsidiary or the Company, as the case may be, shall reasonably request;
provided, however, that no investigation pursuant to this Section 7.1 shall
amend or modify any representations or warranties made herein
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or the conditions to the obligations of the respective parties to consummate the
Merger. Parent and its subsidiaries shall hold and shall use their reasonable
best efforts to cause the Parent Representatives to hold, and the Company and
its subsidiaries shall hold and shall use their reasonable best efforts to cause
the Company Representatives to hold, in strict confidence all nonpublic
documents and information furnished to Parent and Subsidiary or to the Company,
as the case may be, in connection with the transactions contemplated by this
Agreement, except that (i) Parent, Subsidiary and the Company may disclose such
information as may be necessary in connection with seeking the Parent Required
Statutory Approvals and Parent Stockholders' Approval, the Company Required
Statutory Approvals and the Company Stockholders' Approval, and (ii) each of
Parent, Subsidiary and the Company may disclose any information that it is
required by law or judicial or administrative order to disclose.
(b) In the event that this Agreement is terminated in accordance with its
terms, each party shall promptly redeliver to the other all nonpublic written
material provided pursuant to this Section 7.1 and shall not retain any copies,
extracts or other reproductions in whole or in part of such written material. In
such event, all documents, memoranda, notes and other writings prepared by
Parent or the Company based on the information in such material shall be
destroyed (and Parent and the Company shall use their respective reasonable best
efforts to cause their advisors and representatives to similarly destroy their
documents, memoranda and notes), and such destruction (and reasonable best
efforts) shall be certified in writing by an authorized officer supervising such
destruction.
(c) At least 60 days prior to the Closing, the Company shall deliver to the
Parent a complete copy of each agreement which requires the Company to register
any shares of Company Common Stock under the Securities Act and which would
require the Parent to register any shares of Parent Common Stock under the
Securities Act upon or after the Closing.
SECTION 7.2 Registration Statement and Proxy Statement. Parent and the
Company shall file with the SEC as soon as is reasonably practicable after the
date hereof the Registration Statement and shall use all reasonable efforts to
have the Registration Statement declared effective by the SEC as promptly as
practicable. Parent also shall take any action required to be taken under
applicable state blue sky or securities laws in connection with the issuance of
Parent Common Stock pursuant hereto. Parent and the Company shall promptly
furnish to each other all information, and take such other actions, as may
reasonably be requested in connection with any action by any of them in
connection with the preceding sentence. The information provided and to be
provided by Parent and the Company, respectively, for use in the Joint Proxy
Statement/ Prospectus shall not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading.
SECTION 7.3 Stockholders' Approvals.
(a) The Company shall, as promptly as practicable, submit this Agreement
and the transactions contemplated hereby for the approval of its stockholders at
a meeting of stockholders and, subject to the fiduciary duties of its Board of
Directors, shall use its reasonable best efforts to obtain stockholder approval
and adoption (the "Company Stockholders' Approval") of this Agreement and the
transactions contemplated hereby. Such meeting of stockholders shall be held as
soon as practicable following the date upon which the Registration Statement
becomes effective. The Company shall, through its Board of Directors, recommend
to its stockholders approval of the transactions contemplated by this Agreement.
(b) Parent shall, as promptly as practicable, submit this Agreement and the
transactions contemplated hereby for the approval of its stockholders at a
meeting of stockholders and, subject to the fiduciary duties of its Board of
Directors, shall use its reasonable best efforts to obtain stockholder approval
and adoption (the "Parent Stockholders' Approval") of this Agreement and the
transactions contemplated hereby. Such meeting of stockholders shall be held as
soon as practicable following the date on which the Registration Statement
becomes effective. Parent shall, through its Board of Directors, (i) recommend
to its stockholders approval of the transactions contemplated by this Agreement,
and (ii) authorize and cause an officer of Parent to vote Parent's shares of
Subsidiary Common Stock for adoption and approval of this Agreement and the
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transactions contemplated hereby, and shall take all additional actions as the
sole stockholder of Subsidiary necessary to adopt and approve this Agreement and
the transactions contemplated hereby.
SECTION 7.4 Compliance with the Securities Act. Parent and the Company
shall each use its commercially reasonable efforts to cause each officer, each
director and each other person who is an "affiliate," as that term is used in
paragraphs (c) and (d) of Rule 145 under the Securities Act, of Parent or the
Company, as the case may be, to deliver to Parent and the Company on or prior to
the Effective Time a written agreement (an "Affiliate Agreement") to the effect
that such person will not offer to sell, sell or otherwise dispose of any shares
of Parent Common Stock issued in the Merger, except, in each case, pursuant to
an effective registration statement or in compliance with Rule 145, as amended
from time to time, or in a transaction which, in the opinion of legal counsel
reasonably satisfactory to Parent, is exempt from the registration requirements
of the Securities Act and, in any case, until after the results covering 30 days
of post-Merger combined operations of Parent and the Company have been filed
with the SEC, sent to stockholders of Parent or otherwise publicly issued. The
Company shall use its commercially reasonable efforts to cause each of its
officers, directors and "affiliates" to vote all shares of Company Common Stock
held by them in favor of the Merger.
SECTION 7.5 Exchange Listing. Parent shall use its reasonable best
efforts to effect, at or before the Effective Time, authorization for listing on
the Nasdaq National Market of the shares of Parent Common Stock to be issued
pursuant to the Merger or to be reserved for issuance upon exercise of stock
options or warrants or the conversion of convertible securities.
SECTION 7.6 Expenses and Fees.
(a) All costs and expenses incurred in connection with this Agreement and
the transactions contemplated hereby shall be paid by the party incurring such
expenses, except that those expenses incurred in connection with printing and
filing the Joint Proxy Statement/Prospectus and the reasonable expenses of the
Company in connection with any HSR Act review or proceedings shall be shared
equally by Parent and the Company.
(b) The Company agrees to pay to Parent a fee equal to $32 million if:
(i) the Company terminates this Agreement pursuant to clause (iv) or
(v) of Section 9.1(a);
(ii) Parent terminates this Agreement pursuant to clause (iv) of
Section 9.1(b); or
(iii) this Agreement is terminated for any reason at a time at which
Parent was not in material breach of its covenants contained in this
Agreement and was entitled to terminate this Agreement pursuant to clause
(vi) of Section 9.1(b), and (i) prior to the time of such termination a
proposal relating to an Acquisition Transaction had been made, and (ii) on
or prior to the nine month anniversary of the termination of this Agreement
(x) the Company or any of its subsidiaries or affiliates enters into an
agreement or letter of intent (or resolves or announces an intention to do)
with respect to an Acquisition Transaction involving a person, entity or
group if such person, entity, group (or any member of such group, or any
affiliate of any of the foregoing) made a proposal with respect to an
Acquisition Transaction on or after the date hereof and prior to the
termination of this Agreement and such Acquisition Transaction is
consummated or (y) an Acquisition Transaction shall otherwise occur with
any person who shall have made a proposal with respect to an Acquisition
Transaction within 90 days after termination of this Agreement. Such fee
shall be payable upon the first occurrence of any such event.
(c) Parent agrees to pay to the Company a fee equal to $32 million if (i)
this Agreement is terminated for any reason at a time at which the Company was
not in material breach of its covenants contained in this Agreement and was
entitled to terminate this Agreement pursuant to clause (vii) of Section 9.1(a),
(ii) prior to the time of such termination a proposal relating to a Parent
Acquisition Transaction had been made, and (iii) on or prior to the nine month
anniversary of the termination of this Agreement (x) Parent or any of its
subsidiaries or affiliates enters into an agreement or letter of intent (or
resolves or announces an intention to do) with respect to a Parent Acquisition
Transaction or a merger, acquisition or other business combination involving a
person, entity or group if such person, entity, group (or any member of such
group, or any affiliate
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of any of the foregoing) made a proposal with respect to a Parent Acquisition
Transaction on or after the date hereof and prior to the termination of this
Agreement and such Parent Acquisition Transaction is consummated or (y) a Parent
Acquisition Transaction shall otherwise occur. Such fee shall be payable upon
the first occurrence of any such event.
SECTION 7.7 Agreement to Cooperate.
(a) Subject to the terms and conditions herein provided and subject to the
fiduciary duties of the respective boards of directors of the Company and
Parent, each of the parties hereto shall use all reasonable efforts to take, or
cause to be taken, all action and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement,
including using its reasonable efforts to obtain all necessary or appropriate
waivers, consents or approvals of third parties required in order to preserve
material contractual relationships of Parent and the Company and their
respective subsidiaries, all necessary or appropriate waivers, consents and
approvals and SEC "no-action" letters to effect all necessary registrations,
filings and submissions and to lift any injunction or other legal bar to the
Merger (and, in such case, to proceed with the Merger as expeditiously as
possible).
(b) Without limitation of the foregoing, each of Parent and the Company
undertakes and agrees to file as soon as practicable, and in any event prior to
15 days after the date hereof, a Notification and Report Form under the HSR Act
with the FTC and the Antitrust Division. Each of Parent and the Company shall
(i) respond as promptly as practicable to any inquiries received from the FTC or
the Antitrust Division for additional information or documentation and to all
inquiries and requests received from any State Attorney General or other
governmental authority in connection with antitrust matters, and (ii) not extend
any waiting period under the HSR Act or enter into any agreement with the FTC or
the Antitrust Division not to consummate the transactions contemplated by this
Agreement, except with the prior written consent of the other parties hereto.
Parent shall take all reasonable steps necessary to avoid or eliminate
impediments under any antitrust, competition, or trade regulation law that may
be asserted by the FTC, the Antitrust Division, any State Attorney General or
any other governmental entity with respect to the Merger so as to enable the
Closing to occur as soon as reasonably possible. Without limiting the foregoing,
Parent shall propose, negotiate, commit to and effect, by consent decree, hold
separate order, or otherwise, the sale, divestiture or disposition of such
assets or businesses of Parent or, effective as of the Effective Time, the
Surviving Corporation as may be required in order to avoid the entry of, or to
effect the dissolution of, any injunction, temporary restraining order or other
order in any suit or proceeding, which would otherwise have the effect of
preventing or delaying the Closing. Each party shall promptly notify the other
party of any written communication to that party from the FTC, the Antitrust
Division, any State Attorney General or any other governmental entity and permit
the other party to review in advance any proposed written communication to any
of the foregoing.
(c) In the event any litigation is commenced by any person or entity
relating to the transactions contemplated by this Agreement, including any
Acquisition Transaction, Parent shall have the right, at its own expense, to
participate therein, and the Company will not settle any such litigation without
the consent of Parent, which consent will not be unreasonably withheld.
SECTION 7.8 Public Statements. The parties shall consult with each other
prior to issuing any press release or any public statement with respect to this
Agreement or the transactions contemplated hereby and shall not issue any such
press release or public statement prior to such consultation.
SECTION 7.9 Notification of Certain Matters. Each of the Company, Parent
and Subsidiary agrees to give prompt notice to each other of, and to use
commercially reasonable efforts to remedy, (i) the occurrence or failure to
occur of any event which occurrence or failure to occur would be likely to cause
any of its representations or warranties in this Agreement to be untrue or
inaccurate in any material respect at the Effective Time, and (ii) any material
failure on its part to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it hereunder; provided, however,
that the delivery of any notice pursuant to this Section 7.9 shall not limit or
otherwise affect the remedies available hereunder to the party receiving such
notice.
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SECTION 7.10 Directors' and Officers' Indemnification.
(a) The indemnification provisions of the certificate of incorporation and
bylaws of the Surviving Corporation as in effect at the Effective Time shall not
be amended, repealed or otherwise modified for a period of six years from the
Effective Time in any manner that would adversely affect the rights thereunder
of individuals who at the Effective Time were directors, officers, employees or
agents of the Company. Parent shall assume, be jointly and severally liable for,
and honor, guaranty and stand surety for, and shall cause the Surviving
Corporation to honor, in accordance with their respective terms each of the
covenants contained in this Section 7.10 and each of the indemnification
agreements listed on Section 7.10 of the Company Disclosure Schedule without
limit as to time.
(b) Without limiting Section 7.10(a), after the Effective Time, each of
Parent and the Surviving Corporation shall, to the fullest extent permitted
under applicable law, indemnify and hold harmless, each present and former
director, officer, employee and agent of the Company or any of its subsidiaries
(each, together with such person's heirs, executors or administrators, an
"Indemnified Party" and collectively, the "Indemnified Parties") against any
costs or expenses (including attorneys fees), judgments, fines, losses, claims,
damages, liabilities and amounts paid in settlement in connection with any
actual or threatened claim, action, suit, proceeding or investigation, whether
civil, criminal, administrative or investigative, arising out of, relating to or
in connection with any action or omission occurring or alleged to occur prior to
the Effective Time (including, without limitation, acts or omissions in
connection with such persons serving as an officer, director or other fiduciary
in any entity if such service was at the request or for the benefit of the
Company) and the Merger and the other transactions contemplated by this
Agreement or arising out of or pertaining to the transactions contemplated by
this Agreement. In the event of any such actual or threatened claim, action,
suit, proceeding or investigation (whether arising before or after the Effective
Time), (i) the Company or Parent and the Surviving Corporation, as the case may
be, shall pay the reasonable fees and expenses of counsel selected by the
Indemnified Parties, which counsel shall be reasonably satisfactory to the
Parent and the Surviving Corporation, promptly after statements therefor are
received and shall pay all other reasonable expenses in advance of the final
disposition of such action, (ii) the Parent and the Surviving Corporation will
cooperate and use all reasonable efforts to assist in the vigorous defense of
any such matter, and (iii) to the extent any determination is required to be
made with respect to whether an Indemnified Party's conduct complies with the
standards set forth under the DGCL and the Parent's or the Surviving
Corporation's respective certificate of incorporation or bylaws, such
determination shall be made by independent legal counsel acceptable to the
Parent or the Surviving Corporation, as the case may be, and the Indemnified
Party; provided, however, that neither Parent nor the Surviving Corporation
shall be liable for any settlement effected without its written consent (which
consent shall not be unreasonably withheld) and, provided further, that if
Parent or the Surviving Corporation advances or pays any amount to any person
under this paragraph (b) and if it shall thereafter be finally determined by a
court of competent jurisdiction that such person was not entitled to be
indemnified hereunder for all or any portion of such amount, to the extent
required by law, such person shall repay such amount or such portion thereof, as
the case may be, to Parent or the Surviving Corporation, as the case may be. The
Indemnified Parties as a group may not retain more than one law firm to
represent them with respect to each matter unless there is, under applicable
standards of professional conduct, a conflict on any significant issue between
the positions of any two or more Indemnified Parties.
(c) In the event the Surviving Corporation or Parent or any of their
successors or assigns (i) consolidates with or merges into any other person and
shall not be the continuing or surviving corporation or entity of such
consolidation or merger, or (ii) transfers all or substantially all of its
properties and assets to any person, then and in each such case, proper
provisions shall be made so that the successors and assigns of the Surviving
Corporation or Parent shall assume the obligations of the Surviving Corporation
or the Parent, as the case may be, set forth in this Section 7.10.
(d) For a period of six years after the Effective Time, Parent shall cause
to be maintained in effect the current policies of directors' and officers'
liability insurance maintained by the Company and its subsidiaries (provided
that Parent may substitute therefor policies of at least the same coverage and
amounts containing terms and conditions that are no less advantageous to the
Indemnified Parties, and which coverages and
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amounts shall be no less than the coverages and amounts provided at that time
for Parent's directors and officers) with respect to matters arising on or
before the Effective Time.
(e) Parent shall pay all reasonable expenses, including reasonable
attorneys' fees, that may be incurred by any Indemnified Party in enforcing the
indemnity and other obligations provided in this Section 7.10.
(f) The rights of each Indemnified Party hereunder shall be in addition to,
and not in limitation of, any other rights such Indemnified Party may have under
the charter or bylaws of the Company, any indemnification agreement, under the
DGCL or otherwise. The provisions of this Section 7.10 shall survive the
consummation of the Merger and expressly are intended to benefit each of the
Indemnified Parties.
SECTION 7.11 Corrections to the Joint Proxy Statement/Prospectus and
Registration Statement. Prior to the date of approval of the Merger by their
respective stockholders, each of the Company, Parent and Subsidiary shall
correct promptly any information provided by it to be used specifically in the
Joint Proxy Statement/Prospectus and Registration Statement that shall have
become false or misleading in any material respect and shall take all steps
necessary to file with the SEC and have declared effective or cleared by the SEC
any amendment or supplement to the Joint Proxy Statement/Prospectus or the
Registration Statement so as to correct the same and to cause the Joint Proxy
Statement/Prospectus as so corrected to be disseminated to the stockholders of
the Company and Parent, in each case to the extent required by applicable law.
SECTION 7.12 Employment and Consulting Agreements. (a) Parent and
Subsidiary agree that the Surviving Corporation will recognize existing
seniority with full credit for prior service and will provide benefits to the
Company's employees that are in the aggregate comparable to the benefits
provided to Parent employees with comparable prior service as if such employees
had been employed by Parent for the period for which they were employed by the
Company; provided, however, that nothing contained herein shall be considered as
requiring Parent or the Surviving Corporation to continue any specific plan or
benefit or as precluding amendments to any specific plan or benefit other than
as provided in Section 7.12(b) below; and provided further that nothing
expressed or implied in this Agreement shall confer upon any employee or any
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 continued employment for any specified period, at any specified location or
under any specified job category.
(b) From and after the Effective Time, Parent shall, and shall cause the
Surviving Corporation and its subsidiaries to, honor in accordance with their
terms, the employment, severance, and other compensation contracts listed in
Section 7.12 of the Company Disclosure Schedule between the Company or one of
its subsidiaries and certain current or former directors, officers or employees
thereof (true and correct copies of which have been delivered by the Company to
the Parent). Parent, Subsidiary and the Company each hereby acknowledge and
agree that: (i) upon the consummation of the Merger, each of the executives
listed in Section 7.12 of the Company Disclosure Schedule will be deemed to have
terminated his employment with the Company; (ii) each such executive will be
entitled to receive the severance pay and benefits required by the contracts
listed in Section 7.12 of the Company Disclosure Schedule (the amounts payable
in connection therewith have previously been accurately provided to Parent), and
(iii) any cash payments to which such executives are entitled shall be made at
Closing and simultaneously therewith.
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ARTICLE VIII
CONDITIONS
SECTION 8.1 Conditions to Each Party's Obligation to Effect the
Merger. The respective obligations of each party to effect the Merger shall be
subject to the fulfillment at or prior to the Closing Date of the following
conditions:
(a) this Agreement and the transactions contemplated hereby shall have
been approved and adopted by the requisite vote of the stockholders of the
Company and Parent under applicable law and applicable listing
requirements;
(b) the shares of Parent Common Stock issuable in the Merger and those
to be reserved for issuance upon exercise of stock options or warrants or
the conversion of convertible securities shall have been authorized for
listing on the Nasdaq National Market;
(c) the waiting period applicable to the consummation of the Merger
under the HSR Act shall have expired or been terminated;
(d) the Registration Statement shall have become effective in
accordance with the provisions of the Securities Act, and no stop order
suspending such effectiveness shall have been issued and remain in effect
and no proceeding for that purpose shall have been instituted by the SEC or
any state regulatory authorities;
(e) no preliminary or permanent injunction or other order or decree by
any federal or state court which prevents the consummation of the Merger
shall have been issued and remain in effect (each party agreeing to use its
reasonable efforts to have any such injunction, order or decree lifted);
(f) no statute, rule or regulation shall have been enacted by any
state or federal government or governmental agency in the United States
which would prevent the consummation of the Merger or make the Merger
illegal;
(g) Arthur Andersen L.L.P., certified public accountants for Parent,
shall have delivered a letter, dated the Closing Date, addressed to Parent,
in form and substance reasonably satisfactory to Parent, to the effect that
the Merger will qualify for a pooling of interests accounting treatment if
consummated in accordance with this Agreement; and
(h) each of the parties to the Agreement shall have received a letter
dated the Closing Date, addressed to the Company, from Ernst & Young, LLP
regarding such firm's concurrence with the Company's management's
conclusions that no conditions exist related to the Company that would
preclude the Parent's accounting for the Merger with the Company as a
pooling of interests under Accounting Principles Board Opinion No. 16 if
closed and consummated in accordance with this Agreement.
SECTION 8.2 Conditions to Obligation of the Company to Effect the
Merger. Unless waived by the Company, the obligation of the Company to effect
the Merger shall be subject to the fulfillment at or prior to the Closing Date
of the following additional conditions:
(a) Parent and Subsidiary shall have performed their agreements
contained in this Agreement required to be performed on or prior to the
Closing Date and the representations and warranties of Parent and
Subsidiary contained in this Agreement shall be true and correct on and as
of the date made and (except to the extent that such representations and
warranties speak as of an earlier date) on and as of the Closing Date as if
made at and as of such date, except for such failures to perform or to be
true and correct that would not reasonably be expected to have a Parent
Material Adverse Effect, and the Company shall have received a certificate
of the Chief Executive Officer, the President or a Vice President of Parent
and of the Chief Executive Officer, the President or a Vice President of
Subsidiary to that effect; and
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(b) the Company shall have received an opinion of Proskauer Rose LLP,
in form and substance reasonably satisfactory to the Company, dated the
Closing Date, substantially to the effect that, on the basis of facts,
representations and assumptions set forth in such opinion, which are
consistent with the state of facts existing at the Effective Time: (i) the
Merger will constitute a reorganization within the meaning of Section
368(a) of the Code; (ii) no gain or loss will be recognized by Parent, the
Company or Subsidiary as a result of the Merger; and (iii) no gain or loss
will be recognized by the holders of Company Common Stock upon the exchange
of their Company Common Stock solely for shares of Parent Common Stock
(except with respect to cash received in lieu of fractional shares of
Parent Common Stock). In rendering such opinion, such counsel may rely upon
representations contained in certificates of officers and certain
stockholders of Parent, the Company and Subsidiary.
SECTION 8.3 Conditions to Obligations of Parent and Subsidiary to Effect
the Merger. Unless waived by Parent and Subsidiary, the obligations of Parent
and Subsidiary to effect the Merger shall be subject to the fulfillment at or
prior to the Effective Time of the additional following conditions:
(a) the Company shall have performed its agreements contained in this
Agreement required to be performed on or prior to the Closing Date and the
representations and warranties of the Company contained in this Agreement
shall be true and correct on and as of the date made and (except to the
extent that such representations and warranties speak as of an earlier
date) on and as of the Closing Date as if made at and as of such date,
except for such failures to perform and to be true and correct that would
not reasonably be expected to have a Company Material Adverse Effect, and
Parent shall have received a Certificate of the Chief Executive Officer,
the President or a Vice President of the Company to that effect; and
(b) Parent shall have received an opinion of Fried, Frank, Harris,
Shriver & Jacobson (or such other counsel selected by Parent), in form and
substance reasonably satisfactory to Parent, dated the Closing Date,
substantially to the effect that, on the basis of facts, representations
and assumptions set forth in such opinion, which are consistent with the
state of facts, existing at the Effective Time: (i) the Merger will
constitute a reorganization within the meaning of Section 368(a) of the
Code; and (ii) Parent and Subsidiary will recognize no gain or loss for
federal income tax purposes as a result of consummation of the Merger. In
rendering such opinion, such counsel may rely upon representations
contained in certificates of officers and certain stockholders of Parent,
the Company and Subsidiary.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
SECTION 9.1 Termination. This Agreement may be terminated at any time
prior to the Closing Date, whether before or after approval by the stockholders
of the Company or Parent, by the mutual written consent of the Company and
Parent or as follows:
(a) The Company shall have the right to terminate this Agreement:
(i) upon a material breach of a representation or warranty of
Parent contained in this Agreement which has not been cured in all
material respects and which has caused any of the conditions set forth
in section 8.2(a) to be incapable of being satisfied by the Termination
Date;
(ii) if the Merger is not completed by January 31, 1999 (the
"Termination Date") (unless due to a delay or default on the part of the
Company);
(iii) if the Merger is enjoined by a final, unappealable court
order not entered at the request or with the support of the Company and
if the Company shall have used reasonable efforts to prevent the entry
of such order;
(iv) if the Company receives a Superior Proposal, resolves to
accept such Superior Proposal, and the Company shall have given Parent
two days' prior written notice of its intention to terminate
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pursuant to this provision; provided, however, that such termination
shall not be effective until such time as the payment required by
Section 7.6(b) shall have been received by Parent;
(v) if (A) a tender or exchange offer is commenced by a Potential
Acquirer (excluding any affiliate of the Company or any group of which
any affiliate of the Company is a member) for all outstanding shares of
Company Common Stock, (B) the Company's Board of Directors determines,
in good faith and after consultation with an independent financial
advisor, that such offer constitutes a Superior Proposal and resolves to
accept such Superior Proposal or recommend to the stockholders that they
tender their shares in such tender or exchange offer, and (C) the
Company shall have given Parent two days' prior written notice of its
intention to terminate pursuant to this provision; provided, however,
that such termination shall not be effective until such time as the
payment required by Section 7.6(b) shall have been received by Parent;
(vi) if Parent or Subsidiary (A) fails to perform in any material
respect any of its material covenants in this Agreement, and (B) does
not cure such default in all material respects within 30 days after
written notice of such default specifying such default in reasonable
detail is given to Parent and Subsidiary by the Company; or
(vii) if the stockholders of Parent fail to approve the Merger at a
duly held meeting of stockholders called for such purpose or any
adjournment or postponement thereof.
(b) Parent shall have the right to terminate this Agreement:
(i) upon a material breach of a representation or warranty of the
Company contained in this Agreement which has not been cured in all
material respects and which has caused any of the conditions set forth
in Section 8.3(a) to be incapable of being satisfied by the Termination
Date;
(ii) if the Merger is not completed by January 31, 1999 (unless due
to a delay or default on the part of Parent);
(iii) if the Merger is enjoined by a final, unappealable court
order not entered at the request or with the support of Parent and if
Parent shall have used reasonable efforts to prevent the entry of such
order;
(iv) if the Board of Directors of the Company shall have resolved
to accept a Superior Proposal or shall have recommended to the
stockholders of the Company that they tender their shares in a tender or
an exchange offer commenced by a third party (excluding any affiliate of
Parent or any group of which any affiliate of Parent is a member);
provided that the Parent may not so terminate until three days after
receipt of the notice of the Company of such Superior Proposal;
(v) if the Company (A) fails to perform in any material respect any
of its material covenants in this Agreement, and (B) does not cure such
default in all material respects within 30 days after written notice of
such default specifying such default in reasonable detail is given to
the Company by Parent; or
(vi) if the stockholders of the Company fail to approve the Merger
at a duly held meeting of stockholders called for such purpose or any
adjournment or postponement thereof.
(c) As used in this Section 9.1, (i) "affiliate" has the meaning
assigned to it in Section 7.4, and (ii) "group" has the meaning set forth
in Section 13(d) of the Exchange Act and the rules and regulations
thereunder.
SECTION 9.2 Effect of Termination. In the event of termination of this
Agreement by either Parent or the Company pursuant to the provisions of Section
9.1, this Agreement shall forthwith become void and there shall be no liability
or further obligation on the part of the Company, Parent, Subsidiary or their
respective officers or directors (except in this Section 9.2, in the second
sentence of Section 7.1(a) and in Sections 7.1(b), 7.6 and 10.4, all of which
shall survive the termination). Nothing in this Section 9.2 shall relieve any
party from liability for any willful and intentional breach of any covenant or
agreement of such party contained in this Agreement.
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SECTION 9.3 Amendment. This Agreement may not be amended except by action
taken by the parties' respective Boards of Directors or duly authorized
committees thereof and then only by an instrument in writing signed on behalf of
each of the parties hereto and in compliance with applicable law. Such amendment
may take place at any time prior to the Closing Date, and, subject to applicable
law, whether before or after approval by the stockholders of the Company, Parent
or Subsidiary.
SECTION 9.4 Waiver. At any time prior to the Effective Time, the parties
hereto may (a) extend the time for the performance of any of the obligations or
other acts of the other parties hereto, (b) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant thereto, or (c) waive compliance with any of the agreements or
conditions 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 X
GENERAL PROVISIONS
SECTION 10.1 Non-Survival of Representations and Warranties. No
representations, warranties or agreements in this Agreement or in any instrument
delivered pursuant to this Agreement shall survive the Merger, and after
effectiveness of the Merger neither the Company, Parent, Subsidiary or their
respective officers or directors shall have any further obligation with respect
thereto except for the agreements contained in Articles II, III and X, Section
7.10, Section 7.12 and Section 9.2.
SECTION 10.2 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally, mailed by
registered or certified mail (return receipt requested) or sent via facsimile to
the parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
If to Parent or Subsidiary, to:
Allied Waste Industries, Inc.
15880 N. Greenway-Hayden Loop
Suite 100
Scottsdale, AZ 85260
Attention: Steven Helm, Esq.
Vice President, Legal
with a copies to:
Fennemore Craig
3003 North Central Avenue
Phoenix, AZ 85012-2913
Attention: Karen C. McConnell, Esq.
and
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, New York 10004
Attention: Peter Golden, Esq.
If to the Company, to:
American Disposal Services, Inc.
745 McClintock Drive
Suite 305
Burr Ridge, IL 60521
Attention: Ann Straw, Esq.
Vice President, General Counsel and Secretary
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with a copy to:
Proskauer Rose LLP
1585 Broadway
New York, New York 10036
Attention: Steven Rubin, Esq.
SECTION 10.3 Interpretation. The headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. In this Agreement, unless a contrary intention
appears, (i) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Agreement as a whole and not to any particular
Article, Section or other subdivision, and (ii) reference to any Article or
Section means such Article or Section hereof. No provision of this Agreement
shall be interpreted or construed against any party hereto solely because such
party or its legal representative drafted such provision. For purposes of
determining whether any fact or circumstance involves a material adverse effect
on the results of operations of a party, the following shall not be considered:
(i) any special transaction charges incurred by such party as a result of the
consummation of acquisitions accounted for under the pooling of interests method
of accounting, and (ii) any non-cash, non-recurring charges resulting from (A)
the write-down of non-material assets, the value of which are impaired as the
result of an order of a governmental or regulatory body or authority, or (B) the
sale of non-material assets.
SECTION 10.4 Miscellaneous. This Agreement (including the documents and
instruments referred to herein): (a) constitutes the entire agreement and
supersedes all other prior agreements and understandings, both written and oral,
among the parties, or any of them, with respect to the subject matter hereof;
and (b) shall not be assigned by operation of law or otherwise, except that
Subsidiary may assign this Agreement to any other wholly-owned subsidiary of
Parent. THIS AGREEMENT SHALL BE GOVERNED IN ALL RESPECTS, INCLUDING VALIDITY,
INTERPRETATION AND EFFECT, BY THE LAWS OF THE STATE OF DELAWARE APPLICABLE TO
CONTRACTS EXECUTED AND TO BE PERFORMED WHOLLY WITHIN SUCH STATE. THE EXCLUSIVE
VENUE FOR THE ADJUDICATION OF ANY DISPUTE OR PROCEEDING ARISING OUT OF THIS
AGREEMENT OR THE PERFORMANCE THEREOF SHALL BE THE COURTS LOCATED IN THE STATE OF
DELAWARE AND THE PARTIES HERETO AND THEIR AFFILIATES EACH CONSENT TO AND HEREBY
SUBMIT TO THE JURISDICTION OF ANY COURT LOCATED IN THE STATE OF DELAWARE.
SECTION 10.5 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
SECTION 10.6 Parties in Interest. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto, and except as set forth in
Sections 2.1, 2.2, 3.3, 7.9, 7.10 and 7.12 (which are intended to and shall
create third party beneficiary rights if the Merger is consummated), nothing in
this Agreement, express or implied, is intended to confer upon any other person
any rights or remedies of any nature whatsoever under or by reason of this
Agreement. The rights of any third party beneficiary hereunder are not subject
to any defense, offset or counterclaim.
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IN WITNESS WHEREOF, Parent, Subsidiary and the Company have caused this
Agreement to be signed by their respective officers as of the date first written
above.
ALLIED WASTE INDUSTRIES, INC.
By: /s/ THOMAS H. VAN WEELDEN
--------------------------------------
Name: Thomas H. Van Weelden
--------------------------------------
Title: President and Chief Executive
Officer
--------------------------------------
AWIN II ACQUISITION CORPORATION
By: /s/ THOMAS H. VAN WEELDEN
--------------------------------------
Name: Thomas H. Van Weelden
--------------------------------------
Title: President and Chief Executive
Officer
--------------------------------------
AMERICAN DISPOSAL SERVICES, INC.
By: /s/ RICHARD DE YOUNG
--------------------------------------
Name: Richard De Young
--------------------------------------
Title: President and Chief Executive
Officer
--------------------------------------
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APPENDIX B
STOCK OPTION AGREEMENT
DATED AS OF AUGUST 10, 1998
BY AND AMONG
ALLIED WASTE INDUSTRIES, INC.,
AND
AMERICAN DISPOSAL SERVICES, INC.
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STOCK OPTION AGREEMENT, dated as of the 10th day of August, 1998 (this
"Agreement"), between American Disposal Services, Inc., a Delaware corporation
("Issuer"), and Allied Waste Industries, Inc., a Delaware corporation
("Grantee").
WHEREAS, contemporaneously with the execution of this Agreement, the
Grantee, a wholly-owned subsidiary of Grantee ("Merger Sub"), and Issuer are
entering into an Agreement and Plan of Merger, dated as of the date hereof (the
"Merger Agreement"), pursuant to which Grantee and Issuer intend to effect a
merger of Merger Sub with and into Issuer (the "Merger"); and
WHEREAS, as an inducement and condition to Grantee's willingness to enter
into the Merger Agreement, and in consideration thereof, the Board of Directors
of Issuer has approved the grant to Grantee of the option pursuant to this
Agreement; provided, that such grant was expressly conditioned upon, and made of
no effect until after, execution and delivery of the Merger Agreement by Issuer,
Grantee and Merger Sub.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements set forth in this Agreement and in the Merger Agreement, the
parties agree as follows:
1. The Option. (a) Issuer hereby grants to Grantee an unconditional,
irrevocable option (the "Option") to purchase, subject to the terms hereof, up
to 4,000,000 fully paid and nonassessable shares of common stock, having a par
value of .01 per share ("Common Stock"), of Issuer at a price per share in cash
equal to $40.00 (the "Option Price"); provided, however, that in no event shall
the number of shares for which the Option is exercisable exceed 19.9% of the
shares of Common Stock issued and outstanding at the time of exercise (without
giving effect to the shares of Common Stock issued or issuable under the Option)
(the "Maximum Applicable Percentage"). The number of shares of Common Stock
purchasable upon exercise of the Option and the Option Price are subject to
adjustment as set forth in this Agreement.
(b) In the event that any additional shares of Common Stock are issued or
otherwise become outstanding after the date of this Agreement (other than
pursuant to this Agreement), the aggregate number of shares of Common Stock
purchasable upon exercise of the Option (inclusive of shares, if any, previously
purchased upon exercise of the Option) shall automatically be increased (without
any further action on the part of Issuer or Grantee being necessary) so that,
after such issuance, it equals the Maximum Applicable Percentage. Any such
increase shall not affect the Option Price.
2. Exercise; Closing.
(a) Conditions to Exercise; Termination. Grantee or any other person that
shall become a holder of all or a part of the Option in accordance with the
terms of this Agreement (each such person, including Grantee, being referred to
as the "Holder") may exercise the Option, in whole or in part, after the
occurrence of a Triggering Event by delivering a written notice as provided in
Section 2(d) within 180 days of the occurrence of a Triggering Event (as defined
in Section 2(b)). The Option shall terminate upon either (i) the occurrence of
the Effective Time (as defined in the Merger Agreement) or (ii) (A) if the
Notice Date (as hereinafter defined) has not previously occurred, the close of
business on the earlier of (x) the day 180 days after the date that Grantee
becomes entitled to receive the Termination Fee (as defined in the Merger
Agreement) and (y) the date that Grantee is no longer potentially entitled to
receive the Termination Fee, in each case under Section 7.6(b) of the Merger
Agreement, and (B) if the Notice Date has previously occurred, one year after
the Notice Date (the events in (i) or (ii) being referred to as "Exercise
Termination Events".)
(b) Triggering Event. A "Triggering Event" shall have occurred if the
Merger Agreement is terminated and Grantee then or thereafter becomes entitled
to receive the Termination Fee pursuant to Section 7.6(b) of the Merger
Agreement.
(c) Notice of Trigger Event by Issuer. Issuer shall notify Grantee
promptly in writing of the occurrence of any Triggering Event, it being
understood that the giving of the notice by Issuer shall not be a condition to
the right of the Holder to exercise the Option.
(d) Notice of Exercise by Grantee. If a Holder shall be entitled to and
wishes to exercise the Option, it shall send to Issuer a written notice (the
date on which it is given, as defined in Section 16, is referred to as the
"Notice Date") specifying (i) the total number of shares that the Holder will
purchase pursuant to the
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exercise and (ii) a place and date (a "Closing Date") not earlier than three
business days nor later than 60 business days from the Notice Date for the
closing of the purchase (a "Closing"); provided, that if a filing is required
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act") or prior notification to or approval of any other authority is
required in connection with this purchase, the Holder or Issuer, as required,
promptly after the giving of the notice shall file the notice or application for
approval and shall expeditiously process the same and the period of time
referred to in clause (ii) shall commence on the date on which the Holder
furnishes to Issuer a supplemental written notice setting forth the Closing
Date, which notice shall be furnished as promptly as practicable after all
required notification periods shall have expired or been terminated and all
required approvals shall have been obtained and all requisite waiting periods
shall have passed. Each of the Holder and the Issuer agrees to use all
reasonable efforts to cooperate with and provide information to Issuer or
Holder, as the case may be, for the purpose of any required notice or
application for approval.
(e) Payment of Purchase Price. At each Closing, the Holder shall pay to
Issuer the aggregate purchase price for the shares of Common Stock purchased
pursuant to the exercise of the Option in immediately available funds by a wire
transfer to a bank account designated by Issuer; provided, that failure or
refusal of Issuer to designate a bank account shall not preclude the Holder from
exercising the option, in whole or in part.
(f) Delivery of Common Stock. At such Closing, simultaneously with the
payment of the purchase price by the Holder, Issuer shall deliver to the Holder
a certificate or certificates representing the number of shares of Common Stock
purchased by the Holder and, if the Option shall be exercised in part only, a
new option evidencing the rights of the Holder to purchase the balance (as
adjusted pursuant to Section l(b)) of the shares then purchasable hereunder.
(g) Restrictive Legend. Certificates for Common Stock delivered at a
Closing may be endorsed with a restrictive legend that shall read substantially
as follows:
"The transfer of the shares represented by this certificate is subject
to certain provisions of an agreement between the registered holder and
Issuer, a copy of which agreement is on file at the principal office of
Issuer, and to resale restrictions arising under the Securities Act of
1933, as amended. A copy of the aforementioned agreement will be mailed to
the holder without charge promptly after receipt by Issuer of a written
request."
It is understood and agreed that: (i) the reference to the resale restrictions
of the Securities Act of 1933, as amended (the "Securities Act"), in the above
legend shall be removed by delivery of substitute certificate(s) without this
reference if the Holder shall have delivered to Issuer a copy of a letter from
the staff of the Securities and Exchange Commission, or a written opinion of
counsel, in form and substance reasonably satisfactory to Issuer, to the effect
that this legend is not required for purposes of the Securities Act; (ii) the
reference to the provisions of this Agreement in the above legend shall be
removed by delivery of substitute certificate(s) without this reference if the
shares have been sold or transferred in compliance with the provisions of this
Agreement and under circumstances that do not require the retention of such
reference; and (iii) the legend shall be removed in its entirety if the
conditions in the preceding clauses (i) and (ii) both are satisfied. In
addition, the certificates shall bear any other legend as may be required by
applicable law.
(h) Ownership of Record; Tender of Purchase Price; Expenses. Upon the
giving by the Holder to Issuer of a written notice of exercise referred to in
Section 2(e) and the tender of the applicable purchase price in immediately
available funds, the Holder shall be deemed to be the holder of record of the
shares of Common Stock issuable upon such exercise, notwithstanding that the
stock transfer books of Issuer shall then be closed or that certificates
representing such shares of Common Stock shall not have been delivered to the
Holder. Issuer shall pay all expenses, and any and all United States federal,
state and local taxes (other than income taxes payable by Holder) and other
charges that may be payable in connection with the preparation, issue and
delivery of stock certificates under this Section 2 in the name of the Holder or
its assignee, transferee or designee.
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3. Covenants of Issuer. In addition to its other agreements and covenants
herein, Issuer agrees:
(a) Shares Reserved for Issuance. To maintain, free from preemptive
rights, sufficient authorized but unissued or treasury shares of Common
Stock so that the Option may be fully exercised without additional
authorization of Common Stock after giving effect to all other options,
warrants, convertible securities and other rights of third parties to
purchase shares of Common Stock from Issuer, or to issue the appropriate
number of shares of Common Stock pursuant to the terms of this Agreement;
(b) No Avoidance. Not to avoid or seek to avoid (whether by charter
amendment or through reorganization, consolidation, merger, issuance of
rights, dissolution or sale of assets, or by any other voluntary act) the
observance or performance of any of the covenants, agreements or conditions
to be observed or performed hereunder by Issuer and not to take any action
which would cause any of its representations or warranties not to be true;
and
(c) Further Assurances. Promptly after the date hereof to take all
actions as may from time to time be required (including (i) complying with
all applicable premerger notification, reporting and waiting period
requirements under the HSR Act and (ii) in the event that prior approval of
or notice to any other regulatory authority is necessary under any
applicable federal, state or local law before the Option may be exercised,
cooperating fully with the Holder in preparing and processing the required
applications or notices) in order to permit each Holder to exercise the
Option and purchase shares of Common Stock pursuant to such exercise and to
take all action necessary to protect the rights of the Holder against
dilution.
4. Representations and Warranties of Issuer. Issuer hereby represents and
warrants to Grantee that Issuer has all requisite corporate power and authority
and has taken all corporate action necessary to authorize, execute, deliver and
perform its obligations under this Agreement and to consummate the transactions
contemplated hereby; this Agreement has been duly and validly authorized,
executed and delivered by Issuer and constitutes a valid and binding agreement
of Issuer enforceable against Issuer in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors' rights
and to general equity principles. Issuer hereby further represents and warrants
to Grantee that it has taken all necessary corporate action to authorize and
reserve for issuance upon exercise of the Option the shares of Common Stock
issuable upon exercise of the Option and that all shares of Common Stock, upon
issuance pursuant to the Option, will be delivered free and clear of all claims,
liens, encumbrances, and security interests (other than those created by this
Agreement) and not subject to any preemptive rights. There are no agreements,
instruments, securities, arrangements, or plans which would create any
additional cost or burden on any exercise of the Option. Issuer has taken all
action necessary to make inapplicable to Grantee any state takeover, business
combination, control share or other similar statute and any charter provisions
which would otherwise be applicable to Grantee or any transaction involving
Issuer and Grantee by reason of the grant of the Option, the acquisition of
beneficial ownership of shares of Common Stock as a result of the grant of the
Option, or the acquisition of shares of Common Stock upon exercise of the
Option, except for statutes or provisions which by their terms cannot be waived
or rendered inapplicable by any action of the Board of Directors of the Issuer.
5. Representations and Warranties of Grantee. Grantee hereby represents
and warrants to Issuer that Grantee has all requisite corporate power and
authority and has taken all corporate action necessary in order to authorize,
execute, deliver and perform its obligations under this Agreement and to
consummate the transactions contemplated hereby; this Agreement has been duly
and validly authorized, executed and delivered by Grantee and constitutes a
valid and binding agreement of Grantee enforceable against Grantee in accordance
with its terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability relating to
or affecting creditors' rights and to general equity principles.
6. Exchange; Replacement. This Agreement and the Option granted hereby
are exchangeable, without expense, at the option of the Holder, upon
presentation and surrender of this Agreement at the principal office of Issuer,
for other Agreements providing for Options of different denominations entitling
the holder thereof to purchase in the aggregate the same number of shares of
Common Stock purchasable at such time hereunder,
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subject to corresponding adjustments in the number of shares of Common Stock
purchasable upon exercise so that the aggregate number of such shares under all
Stock Option Agreements issued in respect of this Agreement shall not exceed the
Maximum Applicable Percentage. Unless the context shall require otherwise, the
terms "Agreement" and "Option" as used in this Agreement include any Stock
Option Agreements and related options for which this Agreement (and the option
granted hereby) may be exchanged. Upon (i) receipt by Issuer of evidence
reasonably satisfactory to it of the loss, theft, destruction, or mutilation of
this Agreement, (ii) receipt by Issuer of reasonably satisfactory
indemnification in the case of loss, theft or destruction and (iii) surrender
and cancellation of this Agreement in the case of mutilation, Issuer will
execute and deliver a new Agreement of like tenor and date. Any new Agreement
executed and delivered shall constitute an additional contractual obligation on
the part of Issuer, whether or not the Agreement so lost, stolen, destroyed or
mutilated shall at any time be enforceable by any person other than the holder
of the new Agreement.
7. Adjustments. In addition to the adjustment to the total number of
shares of Common Stock purchasable upon exercise of the Option pursuant to
Section l(b), the total number of shares of Common Stock purchasable upon the
exercise and the Option Price shall be subject to adjustment from time to time
as follows:
(a) In the event of any change in the outstanding shares of Common
Stock by reason of stock dividends, split-ups, mergers, recapitalizations,
combinations, subdivisions, conversions, exchanges of shares or the like,
the type and number of shares of Common Stock purchasable upon exercise of
the Option shall be appropriately adjusted, and proper provision shall be
made in the agreements governing any such transaction, so that (i) any
Holder shall receive upon exercise of the Option the number and class of
shares, other securities, property or cash that such Holder would have
received in respect of the shares of Common Stock purchasable upon exercise
of the option if the Option had been exercised and such shares of Common
Stock had been issued to such Holder immediately prior to such event or the
record date therefor, as applicable; and (ii) in the event any additional
shares of Common Stock are to be issued or otherwise become outstanding as
a result of any such change (other than pursuant to an exercise of the
Option), the number of shares of Common Stock purchasable upon exercise of
the Option shall be increased so that, after such issuance and together
with shares of Common Stock previously issued pursuant to the exercise of
the Option (as adjusted on account of any of the foregoing changes in the
Common Stock), the number of shares so purchasable equals the Maximum
Applicable Percentage of the number of shares of Common Stock issued and
outstanding immediately after the consummation of such change; and
(b) Whenever the number of shares of Common Stock purchasable upon
exercise hereof is adjusted as provided in this Section 7, the Option Price
shall be adjusted by multiplying the Option Price by a fraction, the
numerator of which is equal to the number of shares of Common Stock
purchasable prior to the adjustment and the denominator of which is equal
to the number of shares of Common Stock purchasable after the adjustment.
8. Registration. (a) At any time after the occurrence of a Triggering
Event prior to an Exercise Termination Event, Issuer shall, at the request of
Grantee delivered in the written notice of exercise of the option provided for
in Section 2(e), as promptly as practicable prepare, file and keep current a
shelf registration statement under the Securities Act covering any or all shares
issued and issuable pursuant to the Option and shall use its best efforts to
cause such registration statement to become effective and remain current in
order to permit the sale or other disposition of any shares of Common Stock
issued upon total or partial exercise of the Option ("Option Shares") in
accordance with any plan of disposition requested by Grantee; provided, however,
that Issuer may postpone filing a registration statement relating to a
registration request by Grantee under this Section 8 for a period of time (not
in excess of 90 days) if in its judgment such filing would require the
disclosure of material information that Issuer has a bona fide business purpose
for preserving as confidential. Issuer will use its best efforts to cause such
registration statement first to become effective and then to remain effective
for 365 days after the later of the (i) day the registration statement first
becomes effective or until such earlier date as all shares registered shall have
been sold by Grantee or the Holders and (ii) the Closing Date. In connection
with any such registration, Issuer and Grantee shall provide
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each other with representations, warranties, indemnities and other agreements
customarily given in connection with such registrations. If requested by Grantee
in connection with such registration, Issuer shall become a party to any
underwriting agreement relating to the sale of such shares, but only to the
extent of obligating Issuer in respect of representations, warranties,
indemnities, contribution and other agreements customarily made by issuers in
such underwriting agreements.
(b) In the event that Grantee so requests, the closing of the sale or other
disposition of the Common Stock or other securities pursuant to a registration
statement filed pursuant to Section 8(a) shall occur substantially
simultaneously with the exercise of the Option.
9. Repurchase of Option and/or Shares.
(a) Repurchase; Repurchase Price. Upon the occurrence of a Triggering
Event prior to an Exercise Termination Event, (i) at the request of a Holder,
delivered in writing within 180 days of this occurrence (or such later period as
provided in Section 2(d) with respect to any required notice or application or
in Section 10), Issuer shall repurchase the Option from the Holder, in whole or
in part, at a price (the "Option Repurchase Price") equal to the number of
shares of Common Stock then purchasable upon exercise of the Option (or such
lesser number of shares as may be designated in the Repurchase Notice (as
defined below)) multiplied by the amount by which the market/offer price (as
defined below) exceeds the Option Price and (ii) at the request of a Holder or
any person who has been a Holder (for purposes of this Section 9 only, each such
person being referred to as a "Holder"), delivered in writing within 180 days of
this occurrence (or such later period as provided in Section 2(d) with respect
to any required notice or application or in Section 10), Issuer shall repurchase
such number of Option Shares from such Holder as the Holder shall designate in
the Repurchase Notice at a price (the "Option Share Repurchase Price") equal to
the number of shares designated multiplied by the market/offer price. The term
"market/offer price" shall mean the highest of (w) the Option Price plus $2.00,
(x) the price per share of Common Stock at which a tender or exchange offer for
Common Stock has been made after the date of this Agreement and prior to the
delivery of the Repurchase Notice and which offer has either been consummated or
has not been withdrawn or terminated as of the date payment of the Repurchase
Price is made, (y) the price per share of Common Stock to be paid by any third
party pursuant to an agreement with Issuer for a merger, share exchange,
consolidation or reorganization entered into after the date hereof and on or
prior to the delivery of the Repurchase Notice and (z) the average closing price
for shares of Common Stock on the NYSE (or, if the Common Stock is not then
listed on the NYSE, any other national securities exchange or automated
quotation system on which the Common Stock is then listed or quoted) for the
twenty consecutive trading days immediately preceding the delivery of the
Repurchase Notice. In the event that a tender or exchange offer is made for the
Common Stock or an agreement is entered into for a merger, share exchange,
consolidation or reorganization involving consideration other than cash, the
value of the securities or other property issuable or deliverable in exchange
for the Common Stock shall be determined in good faith by a nationally
recognized investment banking firm selected by Issuer and reasonably acceptable
to Grantee.
(b) Method of Repurchase. A Holder may exercise its right to require
Issuer to repurchase the Option, in whole or in part, and/or any Option Shares
then owned by such Holder pursuant to this Section 9 by surrendering for this
purpose to Issuer, at its principal office, this Agreement or certificates for
Option Shares, as applicable, accompanied by a written notice or notices stating
that the Holder elects to require Issuer to repurchase the Option and/or such
Option Shares in accordance with the provisions of this Section 9 (each such
notice, a "Repurchase Notice"). Within two business days after the surrender of
the Option and/or certificates representing Option Shares and the receipt of the
Repurchase Notice, Issuer shall deliver or cause to be delivered to the Holder
the applicable Option Repurchase Price and/or the Option Share Repurchase Price
or, in either case, the portion that Issuer is not then prohibited under
applicable law and regulation from so delivering. In the event that the
Repurchase Notice shall request the repurchase of the Option in part, Issuer
shall deliver with the Option Repurchase Price a new Stock Option Agreement
evidencing the right of the Holder to purchase that number of shares of Common
Stock purchasable pursuant to the Option at the time of delivery of the
Repurchase Notice minus the number of shares of Common Stock represented by that
portion of the Option then being repurchased.
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(c) Effect of Statutory or Regulatory Restraints on Repurchase. To the
extent that, upon or following the delivery of a Repurchase Notice, Issuer is
prohibited under applicable law or regulation from repurchasing the Option (or a
portion) and/or any Option Shares subject to such Repurchase Notice (and Issuer
hereby undertakes to use its reasonable best efforts to obtain all required
regulatory and legal approvals and to file any required notices as promptly as
practicable in order to accomplish this repurchase), Issuer shall immediately so
notify the Holder in writing and thereafter deliver or cause to be delivered,
from time to time, to the Holder the portion of the option Repurchase Price and
the Option Share Repurchase Price that Issuer is no longer prohibited from
delivering, within 2 business days after the date on which it is no longer so
prohibited; provided, however, that upon notification by Issuer in writing of
this prohibition, the Holder may, within 5 days of receipt of this notification
from Issuer, revoke in writing its Repurchase Notice, whether in whole or to the
extent of the prohibition, whereupon, in the latter case, Issuer shall promptly
(i) deliver to the Holder that portion of the option Repurchase Price and/or the
Option Share Repurchase Price that Issuer is not prohibited from delivering; and
(ii) deliver to the Holder, as appropriate, (a) with respect to the Option, a
new Stock Option Agreement evidencing the right of the Holder to purchase that
number of shares of Common Stock for which the surrendered Stock Option
Agreement was exercisable at the time of delivery of the Repurchase Notice less
the number of shares as to which the Option Repurchase Price has theretofore
been delivered to the Holder, and/or (b) with respect to Option Shares, a
certificate for the option Shares as to which the Option Share Repurchase Price
has not theretofore been delivered to the Holder. Notwithstanding anything to
the contrary in this Agreement, including, without limitation, the time
limitations on the exercise of the Option, the Holder may exercise the Option
for 180 days after a notice of revocation has been issued pursuant to this
Section 9(c).
(d) Acquisition Transactions. In addition to any other restrictions
covenants, Issuer hereby agrees that, in the event that a Holder delivers a
Repurchase Notice, it shall not enter or agree to enter into any Acquisition
Transaction unless the other party or parties thereto agree to assume in writing
Issuer's obligations under Section 9(a) and, notwithstanding any notice of
revocation delivered pursuant to the proviso to Section 9(c), a Holder may
require such other party or parties to perform Issuer's obligations under
Section 9(a) unless such party or parties are prohibited by law or regulation
from such performance, in which case such party or parties shall be subject to
the obligations of the Issuer under Section 9(c).
10. Extension of Exercise Periods. The 180-day periods for exercise of
certain rights under Sections 2 and 9 shall be extended in each such case at the
request of the Holder to the extent necessary to avoid liability by the Holder
under Section 16(b) of the Exchange Act by reason of this exercise.
11. Standstill. Upon an exercise of the Option which results in Grantee
or any Holder owning in excess of 9.9% of the then outstanding shares of Common
Stock, the person who would own in excess of 9.9% of such shares shall be
subject to the following restrictions:
(a) it and its affiliates will not (and will not assist, provide or
arrange financing to or for others or encourage other to), directly or
indirectly, acting alone or as part of a group, (i) propose to Issuer or to
any of Issuer's security holders or any other person any merger,
consolidation or similar transaction, acquisition of a substantial portion
of Issuer's business or assets, an acquisition of any of Issuer's
securities or any other transaction involving any of Issuer's securities,
in any such case involving it and the Issuer or the Issuer and any third
party, (ii) acquire by purchase or otherwise, or agree, propose or offer to
acquire any of the securities of Issuer or any interest therein (other than
pursuant to exercises of the Option, stock dividends or other distributions
by the Issuer or offerings by Issuer made available to holder of shares of
Common Stock generally), (iii) otherwise seek to influence or control, in
any manner whatsoever, (including proxy solicitation, becoming a
"participant" in any "election contest," or otherwise), the management or
policies of the Issuer or (iv) enter into discussions, negotiations,
arrangements or understandings with, or solicit or encourage, any third
party with respect to any of the foregoing or make public disclosure in
respect of any of the foregoing or request permission to do any of the
foregoing. (As used in this Agreement, the term "affiliate" shall have the
meaning set forth in Rule 12b-2 of the Securities Exchange Act of 1934.)
(Notwithstanding the foregoing, any employee benefit, pension or similar
plan of such person or the Company, as the case may be, may own, acquire or
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transfer up to 1% of any class of securities of an Issuer in the ordinary
course of business, solely for investment.); and
(b) it shall not sell, transfer or dispose of the Option Shares (a
"Transfer") except:
(i) to affiliated or associated persons who agree to become subject
to this Agreement on the same terms as such person;
(ii) in connection with a bona fide pledge, after default in the
obligation secured by the pledge;
(iii) an offering or distribution of the Shares in compliance with
the Securities Act in which reasonable efforts are made not to knowingly
sell 5% or more of the then outstanding shares of Common Stock to any
one person (including its affiliates and other members of a "group"
within the meaning of Rule 13(d)(3) of the Securities Exchange Act of
1934);
(iv) in compliance with the requirements of Rule 144 under the
Securities Act;
(v) in privately negotiated transactions which would not, to the
reasonable knowledge of such person after reasonable inquiry, after
giving effect to the Transfer result in the acquiror's ownership of 5%
or more of the outstanding shares of Common Stock;
(vi) pursuant to a tender or exchange offer (as such terms are used
in the Securities Exchange Act of 1934 and the rules and regulations
promulgated thereunder) made by a party not affiliated or associated
with such person for all outstanding Shares as to which offer a majority
of the directors of the Issuer then in office have not recommended that
stockholders not tender or exchange their Shares; or
(vii) pursuant to a tender or exchange offer by the Issuer or in a
merger or other transaction pursuant to an agreement with the Issuer.
These restrictions shall expire upon the earlier of (i) five years from the
date of this Agreement and (ii) the date upon which such person owns less than
5% of the outstanding shares of Common Stock so long as this person continues to
own less than 5% of the outstanding shares of Common Stock for the next twelve
consecutive months and, if its ownership is 5% or more of the outstanding shares
during this twelve month period, then these restrictions shall once again apply
to that person.
12. Assignment. Neither party hereto may assign any of its rights or
obligations under this Agreement or the Option to any other person without the
express written consent of the other party except that Grantee may assign its
rights in whole or in part to any of its affiliates and, in the event that a
Triggering Event shall have occurred, Grantee may assign the Option, in whole or
in part to one or more third parties, provided that the affiliate and any third
party shall execute this Agreement and become subject to its terms. Any
attempted assignment in contravention of the preceding sentence shall be null
and void.
13. Filings; Other Actions. Each of Grantee and Issuer will use its best
efforts to make all filings with, and to obtain consents of, all third parties
and govern mental authorities necessary for the consummation of the transactions
contemplated by this Agreement.
14. Specific Performance. The parties acknowledge that damages would be
an inadequate remedy for a breach of this Agreement by either party and that the
obligations of the parties shall be specifically enforceable through injunctive
or other equitable relief.
15. Severability; Etc. If any term, provision, covenant, or restriction
contained in this Agreement is held by a court or a federal or state regulatory
agency of competent jurisdiction to be invalid, void, or unenforceable, the
remainder of the terms, provisions, covenants, and restrictions contained in
this Agreement shall remain in full force and effect, and shall in no way be
affected, impaired, or invalidated. If for any reason a court or regulatory
agency determines that the Holder is not permitted to acquire, or Issuer is not
permitted to repurchase pursuant to Section 9, the full number of shares of
Common Stock provided in Section 1(a) hereof (as adjusted pursuant (b) and 7
hereof), it is the express intention of Issuer to allow Holder to acquire
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or to require Issuer to repurchase such lesser number of shares as may be
permissible, without any amendment or modification of this Agreement.
16. Notices. All notices, requests, instructions, or other documents to
be given hereunder shall be in writing and shall be deemed given (i) three
business days following sending by registered or certified mail, return receipt
requested, postage prepaid, (ii) when sent if sent by facsimile, provided that
the fax is promptly confirmed by telephone confirmation, (iii) when delivered,
if delivered personally to the intended recipient, and (iv) one business day
later, if sent by overnight delivery via a national courier service, in each
case at the respective addresses of the parties set forth in the Merger
Agreement.
17. Governing Law. This Agreement shall be deemed to be made in and in
all respects shall be interpreted, construed and governed by and in accordance
with the law of the State of Delaware, without regard to the conflict of law
principles thereof.
18. Expenses. Except as otherwise expressly provided in this Agreement or
in the Merger Agreement, all costs and expenses incurred in connection with this
Agreement and the transactions contemplated by this Agreement shall be paid by
the party incurring the expense, including fees and expenses of its own
financial consultants, investment bankers, accountants, and counsel.
19. Entire Agreement, Etc. This Agreement and the Merger Agreement
constitute the entire agreement, and supersede all other prior agreements,
understandings, representations and warranties, both written and oral, between
the parties, with respect to the subject matter of this Agreement. The terms and
conditions of this Agreement shall inure to the benefit of and be binding upon
the parties hereto and their respective successors and permitted assigns.
Nothing in this Agreement, expressed or implied, is intended to confer upon any
party, other than the parties, and their respective successors and permitted
assigns, any rights, remedies, obligations or liabilities under or by reason of
this Agreement, except as expressly provided in this Agreement.
20. Limitation on Profit. (a) Notwithstanding any other provision of this
Agreement, in no event shall the Grantee's Total Profit (as hereinafter defined)
plus any Termination Fee paid to Grantee pursuant to Section 7.6(b) of the
Merger Agreement exceed in the aggregate $40 million and, if it otherwise would
exceed this amount, the Grantee, at its sole election, shall either (i) reduce
the number of shares of Common Stock subject to this Option, (ii) deliver to the
Issuer for cancellation Option Shares previously purchased by Grantee, (iii) pay
cash to the Issuer, or (iv) any combination thereof, so that Grantee's realized
Total Profit, when aggregated with the Termination Fee so paid to Grantee shall
not exceed $40 million after taking into account the foregoing actions.
(b) Notwithstanding any other provision of this Agreement, this Option may
not be exercised for a number of shares as would, as of the date of exercise,
result in a Notional Total Profit (as defined below) which, together with any
Termination Fee theretofore paid to Grantee would exceed $40 million; provided,
that nothing in this sentence shall restrict any exercise of the Option
permitted hereby on any subsequent date.
(c) As used in this Agreement, the term "Total Profit" shall mean the
aggregate amount (before taxes) of the following: (i) (x) the amount received by
Grantee and any other Holder pursuant to Issuer's repurchase of the Option (or
any portion thereof) or any Option Shares pursuant to Section 9, less, in the
case of any repurchase of Option Shares, (y) the Grantee's and any other
Holder's purchase price for such Option Shares, as the case may be, (ii) (x) the
net cash amounts (and the fair market value of any other consideration) received
by Grantee and any other Holder pursuant to the sale of Option Shares (or any
other securities into which such Option Shares are converted or exchanged) to
any unaffiliated party, less (y) the Grantee's (or any other Holder's) purchase
price of the Option Shares, and (iii) the net cash amounts (and the fair market
value of any other consideration) received by Grantee (or any other Holder) on
the transfer of the Option (or any portion thereof) to any unaffiliated party.
In the case of clauses (ii) (x) and (iii) above, the Grantee and any Holder
agrees to furnish as promptly as reasonably practicable after any disposition of
all or a portion of the Option or Option Shares a complete and correct
statement, certified by a responsible executive officer or partner of the
Grantee or Holder, of the net cash amounts (and the fair market value of any
other consideration) received in connection with any sale or transfer of the
Option or Option Shares.
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(d) As used in this Agreement, the term "Notional Total Profit" with
respect to any number of shares as to which Grantee and any other Holder may
propose to exercise this Option shall be the Total Profit determined as of the
date of this proposal assuming that this Option were exercised on such date for
this number of shares and assuming that such shares, together with all other
Option Shares held by Grantee and any other Holders and their respective
affiliates as of such date, were sold for cash at the closing market price for
the Common Stock as of the close of business on the preceding trading day (less
customary brokerage commissions).
21. Captions. The Article, Section and paragraph captions in this
Agreement are for convenience of reference only, do not constitute part of this
Agreement and shall not be deemed to limit or otherwise affect any of the
provisions of this Agreement.
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
the duly authorized officers of the parties hereto as of the date first written
above.
AMERICAN DISPOSAL SERVICES, INC.
By: /s/ RICHARD DE YOUNG
------------------------------------
Name: Richard De Young
Title: President and Chief Executive
Officer
ALLIED WASTE INDUSTRIES, INC.
By: /s/ THOMAS H. VAN WEELDEN
------------------------------------
Name: Thomas H. Van Weelden
Title: President and Chief Executive
Officer
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APPENDIX C
OPINION OF
CREDIT SUISSE FIRST BOSTON CORPORATION
DATED AUGUST 10, 1998
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[LETTERHEAD OF CREDIT SUISSE FIRST BOSTON CORPORATION]
August 10, 1998
Board of Directors
Allied Waste Industries, Inc.
15880 North Greenway -- Hayden Loop
Scottsdale, Arizona 85260
Members of the Board:
You have asked us to advise you with respect to the fairness to Allied Waste
Industries, Inc. ("Allied") from a financial point of view of the Exchange Ratio
(as herein defined) set forth in the Agreement and Plan of Merger, dated as of
August 10, 1998 (the "Merger Agreement"), among Allied, AWIN II Acquisition
Corp., a wholly owned subsidiary of Allied ("Sub"), and American Disposal
Services, Inc. ("ADS"). The Merger Agreement provides for, among other things,
the merger of Sub with and into ADS (the "Merger") pursuant to which each
outstanding share of the common stock, par value $0.01 per share, of ADS (the
"ADS Common Stock") will be converted into the right to receive 1.65 shares (the
"Exchange Ratio") of the common stock, par value $0.01 per share, of Allied (the
"Allied Common Stock").
In arriving at our opinion, we have reviewed the Merger Agreement and certain
publicly available business and financial information relating to Allied and
ADS. We have also reviewed certain other information relating to Allied and ADS,
including financial forecasts, provided to or discussed with us by Allied and
ADS, and have met with the management of Allied and ADS to discuss the
businesses and prospects of Allied and ADS. We have also considered certain
financial and stock market data of Allied and ADS, and we have compared those
data with similar data for other publicly held companies in businesses similar
to Allied and ADS, and we have considered, to the extent publicly available, the
financial terms of certain other business combinations and other transactions
which have recently been effected. We also considered such other information,
financial studies, analyses and investigations and financial, economic and
market criteria which we deemed relevant.
In connection with our review, we have not assumed any responsibility for
independent verification of any of the foregoing information and have relied on
its being complete and accurate in all material respects. With respect to the
financial forecasts, you have informed us, and we have assumed, that such
forecasts have been reasonably prepared on bases reflecting the best currently
available estimates and judgments of the managements of Allied and ADS as to the
future financial performance of Allied and ADS and the cost savings and other
potential synergies (including the amount, timing and achievability thereof)
anticipated to result from the Merger. We have not been requested to make, and
have not made, an independent evaluation or appraisal of the assets or
liabilities (contingent or otherwise) of Allied or ADS, nor have we been
furnished with any such evaluations or appraisals. Our opinion is necessarily
based upon information available to us, and financial, economic, market and
other conditions as they exist and can be evaluated, on the date hereof. We are
not expressing any opinion as to what the value of the Allied Common Stock
actually will be when issued pursuant to the Merger or the prices at which the
Allied Common Stock will trade subsequent to the Merger.
We have acted as financial advisor to Allied in connection with the Merger and
will receive a fee for our services, a significant portion of which is
contingent upon the consummation of the Merger. We will also receive a fee upon
delivery of this opinion. We have in the past provided financial services to
Allied and ADS unrelated to the proposed Merger, for which services we have
received compensation. In the ordinary course of business, Credit Suisse First
Boston and its affiliates may actively trade the debt and equity securities of
Allied and ADS for their own accounts and for the accounts of customers and,
accordingly, may at any time hold long or short positions in such securities.
It is understood that this letter is for the information of the Board of
Directors of Allied in connection with its evaluation of the Merger, does not
constitute a recommendation to any stockholder as to how such stockholder should
vote on any matter relating to the proposed Merger, and is not to be quoted or
referred to, in whole or in part, in any registration statement, prospectus or
proxy statement, or in any other document used in
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Allied Waste Industries, Inc.
August 10, 1998
Page 2
connection with the offering or sale of securities, nor shall this letter be
used for any other purposes, without our prior written consent.
Based upon and subject to the foregoing, it is our opinion that, as of the date
hereof, the Exchange Ratio is fair to Allied from a financial point of view.
Very truly yours,
CREDIT SUISSE FIRST BOSTON CORPORATION
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APPENDIX D
OPINION OF
CIBC OPPENHEIMER CORP.
DATED AUGUST 8, 1998
D-1
<PAGE> 140
APPENDIX D
August 8, 1998
The Board of Directors
American Disposal Services, Inc.
745 McClintock Drive, Suite 230
Burr Ridge, IL 60521
Dear Sirs:
You have requested our opinion as to the fairness from a financial point of
view to the stockholders of American Disposal Services, Inc. ("American
Disposal" or the "Company") of the Exchange Ratio (as defined below) provided
for in the Agreement and Plan of Merger (the "Merger Agreement") to be entered
into by and among the Company and Allied Waste Industries, Inc. ("Allied")
pursuant to which American Disposal will be merged with and into Allied.
Pursuant to the Merger Agreement, each share of common stock of Allied will
be converted into the right to receive 1.65 shares of common stock, $.01 par
value per share of the Company (the "Exchange Ratio").
In rendering its opinion, CIBC Oppenheimer: (i) reviewed a draft of the
Merger Agreement; (ii) reviewed the terms of the Stock Option Agreement; (iii)
reviewed the historical financial statements and financial forecasts and other
information prepared by representatives of American Disposal and Allied; (iv)
reviewed certain publicly available information for American Disposal and
Allied, including periodic and other reports filed with the Securities and
Exchange Commission; (v) reviewed the reported market prices and trading volumes
for American Disposal and Allied shares; (vi) held discussions with the senior
management and representatives of American Disposal and Allied concerning each
company's historical and current operations, financial condition and prospects;
and (vii) reviewed such other documents and financial, economic and market
criteria and made such other investigations as it deemed appropriate for the
purposes of such opinion.
We also considered certain stock market data of American Disposal and
Allied and compared that data with similar data for other publicly held
companies in businesses similar to those of American Disposal and Allied. We
considered, to the extent publicly available, the financial terms of certain
other business combinations which have recently been effected, including the
premiums paid in similar mergers and acquisitions. We performed discounted cash
flow analyses on the projections furnished to us by American Disposal and
Allied.
In connection with our review, we have not assumed responsibility for
independent verification of any of the foregoing information and have relied
upon its being complete and accurate in all respects. With respect to the
financial forecasts and other data concerning American Disposal reviewed by us,
the management of American Disposal advised us that such forecasts and other
data had been reasonably prepared on bases reflecting their best currently
available estimates and judgment as to the future financial performance of
American Disposal. With respect to the financial forecasts and other data
concerning Allied reviewed by us, the management of Allied advised us that such
forecasts and other data had been reasonably prepared on bases reflecting their
best currently available estimates and judgment as to the future financial
performance of Allied. We relied upon the estimates of the managements of
American Disposal and Allied of the operating synergies achievable as a result
of the Merger. In addition, we have not made an independent evaluation or
appraisal of the assets or liabilities (contingent or otherwise) of American
Disposal and Allied, nor have we been furnished with any such evaluations or
appraisals. We have assumed, without independent verification, the accuracy of
the advice and conclusions of the parties' legal counsel and accountants with
respect to accounting and tax matters. Our opinion is necessarily based on
information available to us and general economic, financial and stock market
conditions and circumstances as they exist and can be evaluated by us on the
date hereof.
D-2
<PAGE> 141
As part of our investment banking business, we are regularly engaged in
valuations of businesses and securities in connection with acquisitions and
mergers, underwritings, secondary distributions of securities, private
placements and valuations for other purposes.
We acted as financial advisor to the Board of Directors of American
Disposal in rendering this opinion and will receive a fee for our services. We
have also acted as managing underwriter to American Disposal in prior financing
transactions for which we have received fees for our services. In the ordinary
course of its business, CIBC Oppenheimer Corp. and its affiliates may actively
trade securities of American Disposal for their own accounts and for the
accounts of customers and, accordingly, may at any time hold a long or short
position in such securities.
Based on the foregoing, it is our opinion that the Exchange Ratio is fair,
from a financial point of view, to the stockholders of American Disposal.
Very truly yours,
CIBC Oppenheimer Corp.
By: /s/ MARSHALL A. HEINBERG
------------------------------------
Marshall A. Heinberg
Managing Director
D-3
<PAGE> 142
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law permits a corporation
to indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of the fact
that he is or was a director, officer, employee or agent of the corporation or
is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against expenses, judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action. In an action brought to obtain a judgment in the corporation's favor,
whether by the corporation itself or derivatively by a stockholder, the
corporation may only indemnify for expenses, including attorney's fees, actually
and reasonably incurred in connection with the defense or settlement of such
action, and the corporation may not indemnify for amounts paid in satisfaction
of a judgment or in settlement of the claim. In any such action, no such person
shall have been adjudged liable to the corporation except as claim was brought.
In any other type of proceeding, the indemnification may extend to judgments,
fines and amounts paid in settlement, actually and reasonably incurred in
connection with such other proceeding, as well as to expenses.
The statute does not permit indemnification unless the person seeking
indemnification has acted in good faith and in a manner be reasonably believed
to be in, or not opposed to, the best interests of the corporation and , in the
case of criminal actions or proceedings, the person had no reasonable cause to
believe his conduct was unlawful. The statute contains additional limitations
applicable to criminal actions and to actions brought by or in the name of the
corporation. The determination as to whether a person seeking indemnification
has met the required standard of conduct is to be made (1) by a majority vote of
a quorum of disinterested members of the board of directors, (2) by independent
legal counsel in a written opinion, if such a quorum does not exist or if the
disinterested directors so direct, or (3) by the stockholders.
Allied Waste's Certificate of Incorporation and Bylaws require Allied Waste
to indemnify its directors to the fullest extent permitted under Delaware law.
Pursuant to employment agreements entered into by Allied Waste with its
executive officers and certain other key employees, Allied Waste must indemnify
such officers and employees in the same manner and to the same extent that,
Allied Waste is required to indemnify its directors under the Allied Waste's
Bylaws. Allied Waste's Certificate limits the personal liability of a director
to the corporation or its stockholders to damages for breach of the director's
fiduciary duty.
Allied Waste has purchased insurance on behalf of its directors and
officers against certain liabilities that may be asserted against, or incurred
by, such persons in their capacities as directors or officers of the registrant,
or that may arise out of their status as directors or officers of the
registrant, including liabilities under the federal and state securities laws.
Allied Waste has entered into indemnification agreements to indemnify its
directors to the extent permitted under Delaware law.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
The following is a list of all the exhibits and financial statement
schedules filed as part of the Registration Statement.
(a) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBITS
- ----------- -----------------------
<C> <S>
2.1 Agreement and Plan of Merger dated as of August 10, 1998 by
and among Allied Waste Industries, Inc., AWIN II Acquisition
Corporation, and American Disposal Services, Inc. (included
as Appendix A to the Joint Proxy Statement/Prospectus).
</TABLE>
II-1
<PAGE> 143
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBITS
- ----------- -----------------------
<C> <S>
2.2 Stock Option Agreement dated as of August 10, 1998 between
Allied Waste Industries, Inc. and American Disposal
Services, Inc. (included as Appendix B to the Joint Proxy
Statement/Prospectus).
4.1 Restated Certificate of Incorporation of Allied Waste
Industries, Inc. (incorporated by reference to Exhibit 3.1
to Allied Waste's Report on 10-K/A-2 for the fiscal year
ended December 31, 1996).
4.2 Allied Waste Industries, Inc.'s Amended and Restated
By-Laws, (Incorporated by reference to Exhibit 3.2 to Allied
Waste's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1997).
4.3 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.
4.4 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 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.
4.10 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.
4.11 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.
4.12 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.
4.13 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.
*5.1 Opinion of Steven Helm, Vice President, Legal, of Allied
Waste regarding the legality of the securities.
*8.1 Opinion of Fried, Frank, Harris, Shriver & Jacobson
regarding tax matters.
</TABLE>
II-2
<PAGE> 144
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBITS
- ----------- -----------------------
<C> <S>
*8.2 Opinion of Proskauer Rose LLP regarding tax matters.
10.1 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.
10.2 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.
*23.1 Consent of Fried, Frank, Harris, Shriver & Jacobson (set
forth in Exhibit 8.1).
*23.2 Consent of Proskauer Rose LLP (set forth in Exhibit 8.2).
*23.3 Consent of Vice President, Legal, of Allied Waste (set forth
in Exhibit 5.1).
23.4 Consent of Arthur Andersen LLP.
23.5 Consent of Ernst & Young LLP.
23.6 Consent of Sweeney Conrad, P.C.
24.1 Powers of Attorney (included on the signature page to the
filed Registration Statement).
99.1 Form of Allied Waste Proxy.
99.2 Form of American Disposal Proxy.
99.3 Consent of Credit Suisse First Boston Corporation.
99.4 Consent of CIBC Oppenheimer Corp.
</TABLE>
- ---------------
* To be filed by amendment.
(b) FINANCIAL STATEMENT SCHEDULES
Schedules are omitted since the information required to be submitted has
been included in the financial statements or the notes thereto included in the
Joint Proxy Statement/Prospectus or incorporated by reference to Allied Waste's
Annual Report on Form 10-K for the fiscal year ended December 31, 1997, or the
required information is not applicable.
(c) The opinions of Credit Suisse First Boston Corporation and CIBC
Oppenheimer Corp. are included as Appendices C and D, respectively, to the Joint
Proxy Statement/Prospectus and information with respect thereto is included in
the Joint Proxy Statement/Prospectus, which is part of this Registration
Statement.
ITEM 22. UNDERTAKINGS
The undersigned registrant hereby undertakes: (1) to file, during any
period in which offers or sales are being made, a post-effective amendment to
this registration statement: (i) to include any prospectus required by Section
10(a)(3) of the Securities Act of 1933; (ii) to reflect in the Prospectus an
facts or events arising after the effective date of the registration statement
(or the most recent post-effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the information set forth in
the registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any deviation
from the low or high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the Commission pursuant to Rule
reflected in the form of prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and price represent no more
than a 20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration statement;
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information
II-3
<PAGE> 145
in the registration statement; (2) that, for the purpose of determining any
liability under the Securities Act of 1993, each such post-effective amendment
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof; (3) to remove from
registration by means of a post-effective amendment any of the securities being
registered which remain unsold at the termination of the offering.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
The undersigned registrant hereby undertakes as follows: that prior to any
public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriter, in addition to the information called for
by the other Items of the applicable form.
The registrant undertakes that every prospectus (i) that is filed pursuant
to paragraph (1) immediately preceding, or (ii) that purports to meet the
requirements of Section 10(a)(3) of the Act and is used in connection with an
offering of securities subject to Rule 415 (sec. 230.415 of this chapter), will
be filed as a part of an amendment to the registration statement and will not be
used until such amendment is effective, and that, for purposes of determining
any liability under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11 or 13 of this Form, within one business day of receipt of such
request, and to send the incorporated documents by first class mail or other
equally prompt means. This includes information contained in documents filed
subsequent to the effective date of the registration statement through the date
of responding to the request.
The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-4
<PAGE> 146
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Scottsdale, State of
Arizona, on August , 1998.
ALLIED WASTE INDUSTRIES, INC.
By: /s/ HENRY L. HIRVELA
------------------------------------
Henry L. Hirvela
Vice President -- Chief Financial
Officer
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons and in the
capacities indicated on August , 1998 and each of the undersigned do hereby
constitute and appoint Thomas H. Van Weelden, Henry L. Hirvela, James S. Eng,
and each of them, with full power to act alone, as attorney and agents for the
undersigned, with full power of substitution, for and in the name place and
stead of the undersigned, to sign and file with the Securities and Exchange
Commission under the Securities Act of 1933 any and all amendments and exhibits
to this Registration Statement and any and all applications, instruments and
other documents to be filed with the Securities and Exchange Commission
pertaining to the registration of the securities covered hereby, with full power
and authority to do and perform any and all acts and things whatsoever requisite
or desirable.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ ROGER A. RAMSEY Chairman of the Board of Directors
- -----------------------------------------------------
Roger A. Ramsey
/s/ THOMAS H. VAN WEELDEN Director, President and Chief Executive
- ----------------------------------------------------- Officer (Principal Executive Officer)
Thomas H. Van Weelden
/s/ HENRY L. HIRVELA Vice President -- Chief Financial Officer
- ----------------------------------------------------- (Principal Financial Officer)
Henry L. Hirvela
/s/ JAMES S. ENG Corporate Controller (Principal Accounting
- ----------------------------------------------------- Officer)
James S. Eng
/s/ NOLAN LEHMANN Director
- -----------------------------------------------------
Nolan Lehmann
/s/ DAVID B. KAPLAN Director
- -----------------------------------------------------
David B. Kaplan
/s/ MICHAEL GROSS Director
- -----------------------------------------------------
Michael Gross
/s/ ANTONY P. RESSLER Director
- -----------------------------------------------------
Antony P. Ressler
/s/ HOWARD A. LIPSON Director
- -----------------------------------------------------
Howard A. Lipson
/s/ DENNIS HENDRIX Director
- -----------------------------------------------------
Dennis Hendrix
</TABLE>
II-5
<PAGE> 147
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ WARREN B. RUDMAN Director
- -----------------------------------------------------
Warren B. Rudman
Director
- -----------------------------------------------------
Vincent Tese
</TABLE>
II-6
<PAGE> 148
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
EXHIBIT NO. DESCRIPTION OF EXHIBITS PAGE
- ----------- ----------------------- ------------
<C> <S> <C>
2.1 Agreement and Plan of Merger dated as of August 10, 1998 by
and among Allied Waste Industries, Inc., AWIN II Acquisition
Corporation, and American Disposal Services, Inc. (included
as Appendix A to the Joint Proxy Statement/ Prospectus).....
2.2 Stock Option Agreement dated as of August 10, 1998 between
Allied Waste Industries, Inc. and American Disposal
Services, Inc. (included as Appendix B to the Joint Proxy
Statement/Prospectus).......................................
4.1 Restated Certificate of Incorporation of Allied Waste
Industries, Inc. (incorporated by reference to Exhibit 3.1
to Allied Waste's Report on 10-K/A-2 for the fiscal year
ended December 31, 1996)....................................
4.2 Allied Waste Industries, Inc.'s Amended and Restated
By-Laws, (Incorporated by reference to Exhibit 3.2 to Allied
Waste's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1997)..............................................
4.3 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............................
4.4 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 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..............
4.10 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..............
</TABLE>
II-7
<PAGE> 149
<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
EXHIBIT NO. DESCRIPTION OF EXHIBITS PAGE
- ----------- ----------------------- ------------
<C> <S> <C>
4.11 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................................................
4.12 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................................................
4.13 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............................
*5.1 Opinion of Steven Helm, Vice President, Legal, of Allied
Waste regarding the legality of the securities..............
*8.1 Opinion of Fried, Frank, Harris, Shriver & Jacobson
regarding tax matters.......................................
*8.2 Opinion of Proskauer Rose LLP regarding tax matters.........
10.1 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............................
10.2 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................................................
*23.1 Consent of Fried, Frank, Harris, Shriver & Jacobson (set
forth in Exhibit 8.1).......................................
*23.2 Consent of Proskauer Rose LLP (set forth in Exhibit 8.2)....
*23.3 Consent of Vice President, Legal, of Allied Waste (set forth
in Exhibit 5.1).............................................
23.4 Consent of Arthur Andersen LLP..............................
23.5 Consent of Ernst & Young LLP................................
23.6 Consent of Sweeney Conrad, P.C. ............................
24.1 Powers of Attorney (included on the signature page to the
filed Registration Statement)...............................
99.1 Form of Allied Waste Proxy..................................
99.2 Form of American Disposal Proxy.............................
99.3 Consent of Credit Suisse First Boston Corporation...........
99.4 Consent of CIBC Oppenheimer Corp. ..........................
</TABLE>
- ---------------
* To be filed by amendment.
II-8
<PAGE> 1
EXHIBIT 23.4
[ARTHUR ANDERSEN LLP LETTERHEAD]
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference in this joint proxy statement and prospectus of our report dated
June 30, 1998 on the Allied Waste Industries, Inc. 1997 financial statements
included in Allied Waste Industries, Inc.'s Current Report on Form 8-K/A-1 filed
August 27, 1998 and to all references to our firm included in this joint proxy
statement and prospectus.
ARTHUR ANDERSEN LLP
Phoenix, Arizona,
August 26, 1998.
<PAGE> 1
EXHIBIT 23.5
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Joint Proxy Statement that is made a part of the Registration Statement (Form
S-4) and related Prospectus of Allied Waste Industries, Inc. for the
registration of 47,963,682 shares of its common stock and to the incorporation
by reference therein of our report dated February 24, 1998, with respect to the
consolidated financial statements of American Disposal Services, Inc. included
in its Annual Report (Form 10-K/A) for the year ended December 31, 1997, filed
with the Securities and Exchange Commission.
Ernst & Young LLP
Chicago, Illinois
August 27, 1998
<PAGE> 1
EXHIBIT 23.6
[SWEENEY CONRAD, P.C. LETTERHEAD]
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference in this joint proxy statement and prospectus of our reports dated
March 21, 1997 on the Rabanco Companies and Regional Disposal Company 1996
financial statements included in Allied Waste Industries, Inc.'s Current Report
on Form 8-K filed August 27, 1998.
SWEENEY CONRAD, P.C.
Bellevue, Washington
August 26, 1998.
<PAGE> 1
EXHIBIT 99.1
ALLIED WASTE INDUSTRIES, INC.
PROXY FOR SPECIAL MEETING OF STOCKHOLDERS , 1998
The undersigned hereby appoints Roger A. Ramsey and Thomas H. Van Weelden
as Proxies, each with the power to appoint his substitute, and hereby authorizes
them to represent and vote, as designated on the reverse side of this proxy
card, all shares of Common Stock of Allied Waste Industries, Inc. (the
"Company") held of record by the undersigned on , 1998, at the
Special Meeting of Stockholders to be held on , 1998, or any
adjournment thereof.
(CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE)
PLEASE DATE, SIGN AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE!
SPECIAL MEETING OF STOCKHOLDERS
ALLIED WASTE INDUSTRIES, INC.
, 1998
-Please Detach and Mail in the Envelope Provided -
-------------------------------------------------------------------------------
<TABLE>
<S> <C>
[X] PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE
</TABLE>
To vote in accordance with the recommendations of the Board of Directors
just sign below, no boxes need be checked.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
PROPOSALS 1 AND 2
1. Proposal to approve and adopt the Agreement and Plan of Merger among the
Company, a wholly-owned subsidiary of the Company, and American Disposal
Services, Inc. and to approve the issuance of shares of Common Stock of the
Company pursuant to this agreement.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. Proposal to amend the Amended Certificate of Incorporation of the Company to
increase the number of authorized shares of Common Stock of the Company from
200,000,000 to 300,000,000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY. THIS
PROXY WILL BE VOTED AS DIRECTED. IN THE ABSENCE OF DIRECTION, THIS PROXY WILL BE
VOTED FOR PROPOSALS 1 AND 2.
STOCKHOLDERS ARE URGED TO DATE, MARK, SIGN AND RETURN THIS PROXY PROMPTLY IN THE
ENVELOPE PROVIDED, WHICH REQUIRED NO POSTAGE IF MAILED WITHIN THE UNITED STATES.
<TABLE>
<S> <C>
SIGNATURE(S) DATE
- -------------------------------------------------------- ------------------------------------
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NOTE: Please sign exactly as name or names hereon. Joint owners should each
sign. When signing as attorney, executor, administrator, trustee or
guardian, please give full title as such.
<PAGE> 1
EXHIBIT 99.2
AMERICAN DISPOSAL SERVICES, INC.
745 McCLINTOCK DRIVE
BURR RIDGE, ILLINOIS 60521
SOLICITED BY THE BOARD OF DIRECTORS FOR THE SPECIAL MEETING OF
STOCKHOLDERS TO BE HELD ON , 1998
The undersigned hereby appoints RICHARD De YOUNG, STEPHEN P. LAVEY and ANN
L. STRAW, or any of them, with the power of substitution, as proxies and hereby
authorizes them to represent and vote, as designated below, all shares of Common
Stock of American Disposal Services, Inc. (the "Corporation") held of record by
the undersigned at the close of business on September 4, 1998 at the Special
Meeting of Stockholders to be held on , 1998.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE FOLLOWING PROPOSAL
Proposal to approve and adopt the Agreement and Plan of Merger, dated as of
August 10, 1998, among Allied Waste Industries, Inc., AWIN II Acquisition
Corporation, and the Corporation.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED AS DIRECTED. IF NO DIRECTION IS
GIVEN, THIS PROXY WILL BE VOTED FOR THE FOREGOING PROPOSAL.
PLEASE SIGN EXACTLY AS NAME APPEARS BELOW.
Dated: , 1998
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Signature
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Signature, if held jointly
PLEASE SIGN EXACTLY AS YOUR NAME
APPEARS ON THIS PROXY. IF SHARES ARE
REGISTERED IN MORE THAN ONE NAME, THE
SIGNATURES OF ALL SUCH PERSONS ARE
REQUIRED. A CORPORATION SHOULD SIGN IN
ITS FULL CORPORATE NAME BY A DULY
AUTHORIZED OFFICER, STATING SUCH
OFFICER'S TITLE. TRUSTEES, GUARDIANS,
EXECUTORS AND ADMINISTRATORS SHOULD
SIGN IN THEIR OFFICIAL CAPACITY GIVING
THEIR FULL TITLE AS SUCH. A
PARTNERSHIP SHOULD SIGN IN THE
PARTNERSHIP NAME BY AN AUTHORIZED
PERSON, STATING SUCH PERSON'S TITLE
AND RELATIONSHIP TO THE PARTNERSHIP.
PLEASE COMPLETE, DATE, SIGN AND RETURN THIS PROXY PROMPTLY, USING THE ENCLOSED
ENVELOPE.
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EXHIBIT 99.3
[LETTERHEAD OF CREDIT SUISSE FIRST BOSTON CORPORATION]
Board of Directors
Allied Waste Industries, Inc.
15880 North Greenway -- Hayden Loop
Scottsdale, Arizona 85260
Members of the Board:
We hereby consent to the inclusion of our opinion letter to the Board of
Directors of Allied Waste Industries, Inc. ("Allied Waste") as Appendix C to the
Joint Proxy Statement and Prospectus of Allied Waste and American Disposal
Services, Inc. ("American Disposal") relating to the proposed merger transaction
involving Allied Waste and American Disposal. In giving such consent, we do not
admit that we come within the category of persons whose consent is required
under, and we do not admit that we are "experts" for purposes of, the Securities
Act of 1933, as amended, and the rules and regulations promulgated thereunder.
By:
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CREDIT SUISSE FIRST BOSTON CORPORATION
New York, New York
August 28, 1998
<PAGE> 1
CONSENT OF CIBC OPPENHEIMER CORP.
We hereby consent to the inclusion of our opinion letter dated August 8,
1998 to the Board of Directors of American Disposal Services, Inc. ("American")
as Appendix D to American's proxy statement for its special meeting of
stockholders (the "Proxy Statement") being called to vote upon the proposed
Agreement and Plan of Merger by and among American, Allied Waste Industries,
Inc. and AWIN II Acquisition Corporation and the transactions contemplated
thereby. We also consent to the references to our firm and such opinion in such
Proxy Statement. In giving such consent, we do not admit that we come within the
category of persons whose consent is required under Section 7 of the Securities
Act of 1933, as amended (the "Act"), or the rules and regulations of the
Securities and Exchange Commission thereunder (the "Regulations"), nor do we
admit that we are experts with respect to any part of such Proxy Statement
within the meaning of the term "experts" as used in the Act or the Regulations.
CIBC OPPENHEIMER CORP.
By:
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Name: Marshall Heinberg
Title: Managing Director
August 28, 1998
