<PAGE> 1
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the quarterly period ended: March 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ___________
Commission File Number: 0-19285
ALLIED WASTE INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 88-0228636
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization.) Identification No.)
15880 North Greenway-Hayden Loop, Suite 100, Scottsdale, Arizona 85260
(Address of principal executive offices and zip code)
Registrant's telephone number, including area code: (602) 423-2946
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No ___
Indicate the number of shares outstanding of the issuer's class of
common stock, as of the latest practicable date.
Class Outstanding as of May 12, 1999
Common Stock 187,710,144
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<PAGE> 2
ALLIED WASTE INDUSTRIES, INC.
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1999
INDEX
<TABLE>
<S> <C>
PART I FINANCIAL INFORMATION
Item 1 - Financial Statements
Condensed Consolidated Balance Sheets .............................. 3
Condensed Consolidated Statements of Operations .................... 4
Condensed Consolidated Statements of Cash Flows .................... 5
Notes to Condensed Consolidated Financial Statements ............... 6
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations .............................................. 18
PART II OTHER INFORMATION
Item 1 - Legal Proceedings .................................................... 33
Item 2 - Changes in Securities ................................................ 33
Item 3 - Defaults Upon Senior Securities ...................................... 33
Item 4 - Submission of Matters to a Vote of Security Holders .................. 33
Item 5 - Other Information .................................................... 33
Item 6 - Exhibits and Reports on Form 8-K ..................................... 34
Signature ..................................................................... 40
</TABLE>
2
<PAGE> 3
ALLIED WASTE INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
December 31, March 31,
1998 1999
---- ----
(unaudited)
<S> <C> <C>
ASSETS
Current Assets --
Cash and cash equivalents $ 39,742 $ 37,043
Accounts receivable, net of allowance of $ 13,907
and $13,291 225,087 226,335
Prepaid and other current assets 47,184 63,887
Deferred income taxes, net 44,141 31,993
Assets held for sale 143,750 132,530
---------- ----------
Total current assets 499,904 491,788
Property and equipment, net 1,776,025 1,799,733
Goodwill, net 1,327,470 1,451,412
Other assets 149,193 147,734
---------- ----------
Total assets $3,752,592 $3,890,667
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities --
Current portion of long-term debt $ 21,516 $ 21,306
Accounts payable 106,082 96,504
Accrued closure, post-closure and environmental costs 41,938 38,853
Other accrued liabilities 236,826 255,805
Unearned revenue 48,511 53,928
---------- ----------
Total current liabilities 454,873 466,396
Long-term debt, less current portion 2,118,927 2,190,313
Accrued closure, post-closure and environmental costs 205,982 207,968
Other long-term obligations 42,736 44,973
Commitments and contingencies
Stockholders' equity 930,074 981,017
---------- ----------
Total liabilities and stockholders' equity $3,752,592 $3,890,667
========== ==========
</TABLE>
The accompanying Notes to Condensed Consolidated Financial Statements are an
integral part of these statements.
3
<PAGE> 4
ALLIED WASTE INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except for per share amounts; unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------
1998 1999
---- ----
<S> <C> <C>
Revenues $ 357,900 $ 408,045
Cost of operations 205,816 230,014
Selling, general and administrative expenses 39,680 33,809
Depreciation and amortization 35,190 38,873
Goodwill amortization 6,333 8,771
Acquisition related and unusual costs 2,456 1,116
--------- ---------
Operating income 68,425 95,462
Interest income (184) (375)
Interest expense 22,318 27,845
--------- ---------
Income before income taxes 46,291 67,992
Income tax expense 14,727 27,537
--------- ---------
Net income $ 31,564 $ 40,455
========= =========
Basic EPS:
Net income per share $ 0.17 $ 0.22
========= =========
Weighted average common shares outstanding 181,578 186,403
========= =========
Diluted EPS:
Net income per share $ 0.17 $ 0.21
========= =========
Weighted average common and common
equivalent shares outstanding 186,333 190,562
========= =========
</TABLE>
The accompanying Notes to Condensed Consolidated Financial Statements are an
integral part of these statements.
4
<PAGE> 5
ALLIED WASTE INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands; unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------
1998 1999
---- ----
<S> <C> <C>
Operating activities --
Net income .......................................................... $ 31,564 $ 40,455
Adjustments to reconcile net income to cash
provided by operating activities--
Provisions for:
Depreciation and amortization .................................. 41,523 47,644
Non-cash acquisition related and unusual costs ................. -- 571
Doubtful accounts .............................................. 429 1,238
Accretion of senior discount notes ............................ 7,195 --
Deferred income taxes .......................................... 5,358 12,242
Gain on sale of fixed assets ................................... (515) (1,643)
Change in operating assets and liabilities, excluding the
Effects of purchase acquisitions --
Accounts receivable, prepaid expenses, inventories and other ... (14) (14,231)
Accounts payable, accrued liabilities, unearned income
and other .................................................. 13,698 5,887
Closure and post-closure provision ............................. 3,650 5,079
Closure, post-closure and environmental expenditures ........... (2,752) (6,178)
--------- ---------
Cash provided by operating activities ............................... 100,136 91,064
--------- ---------
Investing activities --
Cash expenditures for acquisitions, net of cash acquired ....... (46,620) (137,946)
Capital expenditures, other than for acquisitions .............. (43,671) (23,923)
Capitalized interest ........................................... (16,325) (16,029)
Proceeds from sale of assets ................................... 1,322 17,299
Change in deferred acquisition costs and notes receivable ...... 4,933 (6,654)
--------- ---------
Cash used in investing activities ...................................(100,361) (167,253)
--------- ---------
Financing activities --
Net proceeds from sale of common stock, and exercise of
stock options and warrants ..................................... 1,079 4,682
Proceeds from long-term debt, net of issuance costs ............ 59,411 158,924
Repayments of long-term debt ................................... (33,157) (91,519)
Other long-term obligations ................................... (8,209) 1,403
Equity transactions of pooled companies ........................ (4,354) --
--------- ---------
Cash provided by financing activities ............................ 14,770 73,490
--------- ---------
Increase (decrease) in cash and cash equivalents ................ 14,545 (2,699)
Cash and cash equivalents, beginning of period ................... 33,320 39,742
--------- ---------
Cash and cash equivalents, end of period ......................... $ 47,865 $ 37,043
========= =========
</TABLE>
The accompanying Notes to Condensed Consolidated Financial Statements are an
integral part of these financial statements.
5
<PAGE> 6
ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Allied Waste Industries, Inc. ("Allied" or the "Company"), is
incorporated under the laws of the state of Delaware. Allied is a solid waste
management company providing non-hazardous waste collection, transfer, recycling
and disposal services in selected markets.
The condensed consolidated financial statements include the accounts of
Allied and its subsidiaries. All significant intercompany accounts and
transactions are eliminated in consolidation. The condensed consolidated balance
sheet as of December 31, 1998, which has been derived from audited consolidated
financial statements, and the unaudited interim condensed consolidated financial
statements included herein have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission (the "SEC"). As applicable
under such regulations, certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. The Company believes that
the presentations and disclosures herein are adequate to make the information
not misleading when read in conjunction with the Company's Annual Report on Form
10-K for the year ended December 31, 1998. The condensed consolidated financial
statements as of March 31, 1999 and for the three months ended March 31, 1998
and 1999 reflect, in the opinion of management, all adjustments (which include
only normal recurring adjustments) necessary to fairly state the financial
position and results of operations for such periods. The condensed consolidated
financial statements and accompanying notes have also been restated to reflect
acquisitions accounted for as poolings-of-interests in 1998 (See Note 2).
Operating results for interim periods are not necessarily indicative of
the results for full years. These condensed consolidated financial statements
should be read in conjunction with the consolidated financial statements of
Allied for the year ended December 31, 1998 and the related notes thereto
included in the Company's Annual Report on Form 10-K filed with the SEC on March
31, 1999.
There have been no significant additions to or changes in accounting
policies of the Company since December 31, 1998. For a description of these
policies, see Note 1 of Notes to Consolidated Financial Statements for the year
ended December 31, 1998 in the Company's Annual Report on Form 10-K.
Certain reclassifications have been made in prior period financial
statements to conform to the current presentation.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards 133 - "Accounting for Derivative Instruments
and Hedging Activities". This statement establishes accounting and reporting
standards for derivative instruments, including derivative instruments embedded
in other contracts, and for hedging activities. The statement, which is to be
applied prospectively, is effective for the Company's quarter ending March 31,
2000. The Company is currently evaluating the impact of SFAS 133 on its future
results of operations and financial position.
During 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-5 ("SOP 98-5") Reporting on the Costs of
Start-Up Activities. SOP 98-5 requires costs of start-up activities and
organization costs to be expensed as incurred. The new statement is effective
for fiscal years beginning after December 15, 1998. The Company adopted this
statement effective January 1, 1999. Initial application of SOP 98-5 is required
to be reported as the cumulative effect of a change in accounting. Adoption of
this standard did not have an impact on the Company's financial position or
results of operations.
6
<PAGE> 7
ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
ACQUISITION RELATED AND UNUSUAL COSTS
During the first quarter of 1999, the Company recorded a $1.1 million
acquisition related and unusual charge for transaction and restructuring costs
associated primarily with acquisitions accounted for as poolings-of-interest.
Transaction costs include stock registration, legal, accounting, consulting,
engineering and other direct third-party costs incurred to complete the
acquisitions. Restructuring costs include employee termination and relocation,
write down of fixed assets, lease termination and other one-time charges related
to the acquisitions.
During 1998, the Company implemented employee severance and
restructuring plans in connection with acquisitions accounted for as
poolings-of-interests. These plans and associated costs consist of the
following:
Restructuring and abandonment costs include costs to consolidate or
relocate redundant operations and to transition to common information
systems. Approximately $7.6 million and $5.5 million of restructuring
costs were accrued at December 31, 1998 and March 31, 1999,
respectively, and are expected to be paid in 1999.
Employee severance and transition costs consist of termination payments
made to employees of acquired companies based on change of control
provisions in preexisting contracts and costs associated with severance
payments under exit or integration plans implemented in connection with
the acquisitions. The exit and integration plans call for the
termination of approximately 800 employees who were performing
managerial, sales, administrative support, maintenance and repair, or
hauling and landfill operations duties. All employees were identified
and notified of their severance or transition benefits at the time
management approved the plan, which occurred at or around the time of
the acquisitions, and as of March 31, 1999, substantially all employees
identified had been terminated. Approximately $10.1 million and $6.9
million was accrued at December 31, 1998 and March 31, 1999,
respectively, for amounts remaining to be paid in 1999.
Employee severance and restructuring costs expensed during the first
quarter of 1999 relating to plans implemented in 1998 were
approximately $0.3 million.
STATEMENTS OF CASH FLOWS
The non-cash transactions for the three months ended March 31, 1998 and
1999 are as follows (in thousands):
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------
1998 1999
---- ----
<S> <C> <C>
Non-cash Transactions:
Common stock issued in acquisitions .................... 6,971 1,571
Debt and liabilities incurred or assumed
in acquisitions ..................................... 11,843 17,486
</TABLE>
7
<PAGE> 8
ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
2. BUSINESS COMBINATIONS AND DIVESTITURES
Acquisitions accounted for as purchases are reflected in the results of
operations since the date of purchase in Allied's condensed consolidated
financial statements. The results of operations for acquisitions accounted for
as poolings-of-interests are included in Allied's condensed consolidated
financial statements for all periods presented. Often, the final determination
of the cost, and the allocation thereof, of certain of the Company's
acquisitions is subject to resolution of certain contingencies. Once such
contingencies are resolved, the purchase price is adjusted.
In the first quarter of 1999, the Company acquired two companies in
transactions accounted for as poolings-of-interests. As the effect of these
business combinations was not significant, prior period financial statements
were not restated to include historical operating results of the acquired
companies.
In the first quarter of 1999, the Company sold certain assets for
approximately $11.2 million. These assets were included in assets held for sale
as of December 31, 1998.
The following table summarizes acquisitions for the three months ended
March 31, 1998 and 1999:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------
1998 1999
---- ----
(unaudited)
<S> <C> <C>
Number of businesses acquired and accounted for as:
Poolings-of-interests ........................... 3 2
Purchases ....................................... 8 17
Total consideration (in millions) ................. $ 53.6 $ 175.0
Shares of common stock issued ..................... 1,025,957(1) 1,476,977(2)
</TABLE>
__________
(1) Includes 129,090 shares of contingently issuable common stock.
(2) Includes 168,792 shares of contingently issuable common stock.
8
<PAGE> 9
ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
UNAUDITED PRO FORMA INCOME STATEMENT DATA
The following unaudited pro forma consolidated data for the year ended
December 31, 1998 and the three months ended March 31, 1999 presents the results
of operations of Allied as if the companies purchased and sold in 1998 and
through March 31, 1999, had all occurred as of January 1, 1998. This data does
not purport to be indicative of the results of operations of Allied that might
have occurred during the periods indicated nor that might occur in the future
(in thousands, except per share data).
<TABLE>
<CAPTION>
December 31, 1998
-----------------
Reported(1) Pro Forma
----------- ---------
(unaudited)
<S> <C> <C>
Revenues .......................... $ 1,575,612 $ 1,670,445
Net loss to common shareholders ... (98,251) (105,957)
Net loss per common share - basic . (0.54) (0.57)
Net loss per common share - diluted (0.54) (0.57)
</TABLE>
<TABLE>
<CAPTION>
March 31, 1999
--------------
Reported Pro Forma
-------- ---------
(unaudited)
<S> <C> <C>
Revenues ........................... $ 408,045 $ 409,152
Net income to common shareholders .. 40,455 40,118
Net income per common share - basic 0.22 0.22
Net income per common share -diluted 0.21 0.21
</TABLE>
(1) Amounts have been restated to reflect acquisitions made during 1998
using the pooling-of-interests method of accounting for business
combinations.
3. ASSETS HELD FOR SALE
The ability to successfully implement the Company's vertical
integration business plan is a key consideration in determining whether the
Company will continue to operate in a specific market. In the normal course of
business, the Company has exited markets in which the execution of the vertical
integration business plan was not practicable. In October 1998, the Company
formalized plans to dispose of certain operating districts that represented
non-core or non-integrated assets. The Company has entered into agreements to
sell these assets and in accordance with Statement of Financial Accounting
Standard 121 ("SFAS 121"), Accounting for the Impairment of Long-lived Assets
and Long-lived Assets to be Disposed of recorded an impairment loss to reduce
the carrying value of the assets to net realizable value including an accrual
for the cost of disposal. In the first quarter of 1999, the Company completed
the sale of approximately $11.2 million of these assets. The remaining sales are
expected to be completed in the second quarter of 1999.
9
<PAGE> 10
ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The results of operations before depreciation and amortization of these
operating districts included in consolidated operating income, in accordance
with SFAS 121, was approximately $4.5 million in the first quarter of 1999.
During the period from January 1, 1999 through March 31, 1999, the Company
excluded from consolidated statements of operations, in accordance with SFAS
121, depreciation and amortization relating to assets held for sale in the
amount of $2.6 million. At December 31, 1998 and March 31, 1999, the net assets
subject to sale totaled $143.8 million and $132.5 million, respectively, which
are classified as assets held for sale in current assets on the Condensed
Consolidated Balance Sheets and are summarized as following (in thousands):
<TABLE>
<CAPTION>
December 31, March 31,
1998 1999
---- ----
<S> <C> <C>
Accounts receivable, net .. $ 16,608 $ 14,962
Other current assets ...... 4,460 2,252
Property and equipment, net 55,869 52,704
Goodwill, net ............. 106,214 99,025
Other long-term assets .... 1,595 1,383
Current liabilities ....... (1,785) (1,085)
Long-term liabilities ..... (39,211) (36,711)
--------- ---------
Total net assets .......... $ 143,750 $ 132,530
========= =========
</TABLE>
4. CLOSURE, POST-CLOSURE AND ENVIRONMENTAL COSTS
Closure and post-closure costs --
The net present value of the closure and post-closure commitment is
calculated assuming inflation of 2.0% and a risk-free capital rate of 6.5%.
Discounted amounts previously recorded are accreted to reflect the effects of
the passage of time. The Company's current estimate of total future payments for
closure and post-closure, in accordance with Subtitle D, is $1.2 billion,
adjusted for inflation, as shown below, while the present value of such estimate
is $396.5 million. At December 31,1998, accruals for landfill closure and
post-closure costs (including costs assumed through acquisitions) were
approximately $154.5 million. The accruals reflect relatively young landfills
whose estimated remaining lives, based on current waste flows, range from 1 to
over 75 years, with an estimated average remaining life of greater than 30
years.
The Company's estimate of total future payments for closure and
post-closure liabilities as of December 31, 1998 for currently owned and
operated landfills is as follows (in thousands):
<TABLE>
<S> <C>
1999 $ 28,938
2000 25,218
2001 13,264
2002 19,960
2003 20,646
Thereafter 1,119,766
-----------
$ 1,227,792
===========
</TABLE>
10
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ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Environmental costs --
In connection with the acquisition of companies, Allied engages an
independent environmental consulting firm to assist in conducting an
environmental assessment of companies acquired from third-parties. The ultimate
amounts for environmental liabilities cannot be determined and estimates of such
liabilities made by the Company, after consultation with its independent
environmental engineers, require assumptions about future events due to a number
of uncertainties including the extent of the contamination, the appropriate
remedy, the financial viability of other potentially responsible parties and the
final apportionment of responsibility among the potentially responsible parties.
Where the Company has concluded that its estimated share of potential
liabilities is probable, a provision has been made in the consolidated financial
statements. Since the ultimate outcome of these matters may differ from the
estimates used in the Company's assessment to date, the recorded liabilities
will be periodically evaluated as additional information becomes available to
ascertain that the accrued liabilities are adequate. The Company has determined
that the recorded liability for environmental matters as of December 31, 1998 of
approximately $93.4 million represents the most probable outcome of these
contingent matters.
11
<PAGE> 12
ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
5. NET INCOME PER COMMON SHARE
Net income per common share is calculated by dividing net income less
dividend requirements on preferred stock by the weighted average number of
common shares and common share equivalents outstanding during each period, as
restated to reflect acquisitions accounted for as poolings-of-interests in 1998.
The computation of basic earnings per share and diluted earnings per share is as
follows (in thousands, except per share data; unaudited):
<TABLE>
<CAPTION>
Three Months Ended
March 31, 1999
--------------
1998 1999
---- ----
<S> <C> <C>
Basic earnings per share computation:
Net income available to common shareholders $ 31,564 $ 40,455
======== ========
Weighted average common shares outstanding 181,578 186,403
======== ========
Basic earnings per share .................. $ 0.17 $ 0.22
======== ========
Diluted earnings per share computation:
Net income available to common shareholders $ 31,564 $ 40,455
======== ========
Weighted average common shares outstanding 181,578 186,403
Effect of stock options and warrants,
assumed exercisable ................... 3,916 2,655
Effect of shares assumed
pursuant to hold-back arrangements .... 839 1,504
-------- --------
Weighted average common and common
equivalent shares outstanding ......... 186,333 190,562
======== ========
Diluted earnings per share ................ $ 0.17 $ 0.21
======== ========
</TABLE>
6. COMMITMENTS AND CONTINGENCIES
The Company is subject to extensive and evolving laws and regulations
and has implemented its own environmental safeguards to respond to regulatory
requirements. In the normal course of conducting its operations, Allied may
become involved in certain legal and administrative proceedings. Some of these
actions may result in fines, penalties or judgements against the Company which
may have an impact on earnings for a particular period. Management expects that
such matters in process at March 31, 1999 which have not been accrued in the
consolidated balance sheet will not have a material adverse effect on the
Company's consolidated liquidity, financial position or results from operations.
In connection with the 1996 acquisition of substantially all of the
non-hazardous solid waste management business conducted by Laidlaw Inc.
("Laidlaw"), Laidlaw disclosed to the Company the existence of a tax controversy
relating to disallowed deductions in income tax returns with the United States
Internal Revenue Service (the "IRS"). In the first quarter of 1999, Laidlaw
negotiated a settlement of the tax case with the IRS. The total net after tax
cash cost will be $226 million. The amount includes $121 million in taxes
together with interest penalties of $161 million ($105 million after tax). The
agreement satisfies assessments upheld in the tax court opinion received on July
1, 1998, in reference to the years 1986 through 1988, as well as claims asserted
by the IRS for the six subsequent years (1989 through 1994) of a nine-year
Netherlands-based financial program.
12
<PAGE> 13
ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The Company has obtained an indemnity from Laidlaw and certain of its
subsidiaries (the "Laidlaw Group") which covers the amounts at issue in the tax
controversy for which any direct or indirect subsidiary that was acquired from
Laidlaw in 1996 may ultimately be found liable. The obligation of the Laidlaw
Group to indemnify the Company in respect of amounts at issue in the tax
controversy is a general, unsecured obligation of the Laidlaw Group.
In connection with certain acquisitions, the Company has entered into
agreements to pay royalties based on waste tonnage disposed at specified
landfills. The royalties are generally payable quarterly and amounts earned, but
not paid are accrued in the accompanying consolidated balance sheets.
Allied has operating lease agreements for service facilities, office
space and equipment. Future minimum payments under non-cancelable operating
leases with terms in excess of one year are as follows (in thousands):
<TABLE>
<CAPTION>
December 31, 1998
-----------------
<S> <C>
1999 $ 12,629
2000 11,606
2001 10,462
2002 8,821
2003 9,239
Thereafter 26,274
</TABLE>
Rental expense under such operating leases was approximately $13.9 million, $2.8
million and $6.5 million for the year ended December 31, 1998, and the three
months ended March 31, 1998 and 1999, respectively.
The Company has entered into employment agreements with certain of its
executive officers for periods up to five years. The Company has agreed to
severance pay amounts equal to a multiple of defined compensation under certain
circumstances. In the event of a material change in control or termination of
all executive officers under such agreements, Allied would be required to make
payments of approximately $10.7 million, in addition to a reimbursement payment
to eliminate the effect of any excise taxes associated with this payment.
Allied carries a broad range of insurance coverage for protection of
its assets and operations from certain risks including environmental impairment
liability insurance for certain landfills.
The Company is also required to provide financial assurances to
governmental agencies under applicable environmental regulations relating to its
landfill operations and collection contracts. These financial assurance
requirements are satisfied by the Company issuing performance bonds, letters of
credit, insurance policies or trust deposits to secure the Company's obligations
as they relate to landfill closure and post-closure costs and performance under
certain collection contracts. At March 31, 1999, the Company had outstanding
approximately $448.5 million in financial assurance instruments, represented by
$288.9 million of performance bonds, $135.3 million of insurance policies and
$24.3 million of trust deposits. During 1999, the Company expects to be required
to provide approximately $460 million in financial assurance obligations
relating to its landfill operations and collection contracts. The Company
expects that financial assurance obligations will increase in the future as it
acquires and expands its landfill activities and that a greater percentage of
the financial assurance instruments will be comprised of performance bonds and
insurance policies.
13
<PAGE> 14
ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
7. SUMMARIZED FINANCIAL INFORMATION OF ALLIED WASTE NORTH AMERICA, INC.
As discussed in Note 5 of the Company's Annual Report on Form 10-K, the
$525 million of 10.25% senior subordinated notes due 2006 (the "1996 Notes") and
the aggregate of $1.7 billion of senior notes consisting of $225 million 7 3/8%
senior notes due 2004, $600 million 7 5/8% senior notes due 2006 and $875
million 7 7/8% senior notes due 2009 (the "1998 Senior Notes") issued by Allied
Waste North America, Inc. ("Allied NA"; a wholly owned, consolidated subsidiary
of the Company) are guaranteed by Allied and substantially all subsidiaries of
the Company. The 1996 Notes were repaid in December 1998. The separate complete
financial statements of Allied NA have not been included herein as management
has determined that such disclosure is not material. However, summarized
financial information for Allied NA and subsidiaries as of December 31, 1998 and
March 31, 1999 is as follows (in thousands):
SUMMARIZED CONSOLIDATED BALANCE SHEET INFORMATION
<TABLE>
<CAPTION>
December 31, 1998 March 31, 1999
----------------- --------------
(unaudited)
<S> <C> <C>
Current assets ....................... $ 499,904 $ 491,788
Property and equipment, net .......... 1,776,025 1,799,733
Goodwill, net ........................ 1,327,470 1,451,412
Other non-current assets ............. 149,193 147,734
Current liabilities .................. 445,528 466,396
Long-term debt, net of current portion 2,118,927 2,190,313
Due to parent ........................ 1,083,515 1,170,970
Other long-term obligations .......... 268,407 252,941
Equity ............................... (163,785) (189,953)
</TABLE>
SUMMARIZED CONSOLIDATED STATEMENT OF OPERATIONS INFORMATION
<TABLE>
<CAPTION>
Three Months
Ended March 31,
---------------
1998 1999
---- ----
(unaudited)
<S> <C> <C>
Revenue .................... $357,900 $408,045
Operating costs and expenses 289,475 312,583
Operating income ........... 68,425 95,462
Net income ................. 35,985 40,455
</TABLE>
14
<PAGE> 15
ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
8. SEGMENT REPORTING
The Company classifies its operations into six geographic regions:
Northeast, Southeast, Great Lakes, Midwest, Southwest and West United States.
The Company's revenues are derived from one industry segment, which includes the
collection, transfer, recycling and disposal of non-hazardous solid waste. The
Company evaluates performance based on several factors, of which the primary
financial measure is business segment earnings before depreciation and
amortization ("EBITDA") before acquisition related and unusual costs and asset
impairments. The accounting policies of the business segments are the same as
those described in the Organization and Summary of Significant Accounting
Policies (see Note 1). The tables below reflect certain geographic information
relating to the Company's operations for the quarters ended March 31, 1998 and
1999 (in thousands):
<TABLE>
<CAPTION>
North- South- Great South-
1998 east east Lakes Midwest West West Other(1) Total
---- ---- ----- ------- ---- ---- -------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues from
external
customers ... $ 51,107 $ 38,541 $112,284 $ 46,290 $ 30,892 $ 77,479 $ 1,307 $357,900
Intersegment
revenues .... 7,839 5,606 19,734 10,769 6,912 6,725 -- 57,585
EBITDA before
non-recurring
charges(2) .. 11,950 10,882 36,670 19,309 12,316 23,877 (2,600) 112,404
1999
Revenues from
external
customer .... $ 68,538 $ 39,542 $113,872 $ 48,271 $ 39,239 $ 97,324 $ 1,259 $408,045
Intersegment
revenues .... 8,940 9,360 33,302 11,587 9,759 9,624 -- 82,572
EBITDA before
non-recurring
charges(2) .. 15,679 12,792 45,300 22,188 16,581 33,357 (1,675) 144,222
</TABLE>
(1) Amounts relate primarily to the Company's subsidiaries which provide
services throughout the organization and not on a regional basis.
(2) EBITDA before non-recurring charges excludes acquisition related and
unusual costs and asset impairments.
15
<PAGE> 16
ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Reconciliation of reportable segment primary financial measure to operating
income (amounts in thousands):
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------
Operating income: 1998 1999
- ----------------- ---- ----
<S> <C> <C>
Total EBITDA before
non-recurring charges
for reportable segments .. $112,404 $144,222
Depreciation and amortization
for reportable segments .. 41,523 47,644
Acquisition related and
unusual costs ............ 2,456 1,116
-------- --------
Operating income ......... $ 68,425 $ 95,462
======== ========
</TABLE>
Percentage of Company's total revenue attributable to services provided:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------
1998 1999
---- ----
<S> <C> <C>
Collection ... 57% 56%
Transfer ..... 6 7
Landfill (1) . 28 31
Other ........ 9 6
--- ---
Total revenues 100% 100%
=== ===
</TABLE>
(1) The portion of collection revenues attributable to disposal charges for
waste collected by the Company and disposed at the Company's landfills
have been excluded from collection revenues and included in landfill
revenues.
16
<PAGE> 17
ALLIED WASTE INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
9. SUBSEQUENT EVENTS
In March 1999, Allied and Browning-Ferris Industries, Inc. ("BFI")
announced that they entered into a definitive merger agreement under which
Allied will acquire BFI for $45 in cash per BFI common share, as well as assume
approximately $1.8 billion in debt, in a transaction valued at approximately
$9.1 billion. Allied has bank commitments to finance the acquisition consisting
of $7 billion senior secured debt and $2.5 billion senior unsecured debt at
interest rates ranging from Libor plus 2.50% to Libor plus 3.50%, and a
commitment from Apollo Management IV, L.P., Blackstone Capital Partners III
Merchant Banking Fund L.P. and other investors to purchase $1 billion of 6.5%
convertible preferred stock. The transaction is structured as a merger of BFI
with a subsidiary of Allied and is subject to the approval of BFI stockholders
and other customary conditions. In April 1999, Allied and Stericycle, Inc.
("Stericycle") announced that they entered into a binding definitive agreement
under which Stericycle will purchase all of the medical waste operations, which
Allied intends to acquire from BFI for a purchase price of approximately $440
million. This transaction is subject to the consummation of Allied's acquisition
of BFI and certain other conditions.
Subsequent to March 31, 1999, the Company acquired solid waste
companies representing approximately $122.6 million in annual revenues ($98.8
million, net of intercompany eliminations) for consideration of approximately
$153.5 million comprised of cash and notes. Additionally, the Company completed
the previously announced sales of certain non-core and non-integrated assets.
These assets were classified as "Assets held for sale" in the consolidated
balance sheets at December 31, 1998 and March 31, 1999.
17
<PAGE> 18
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
Company's Condensed Consolidated Financial Statements and the notes thereto,
included elsewhere herein.
INTRODUCTION
The Company has experienced significant growth, a substantial portion
of which has resulted from the acquisition of solid waste businesses. Since
January 1, 1993, the Company has completed more than 185 acquisitions. In 1998,
the Company acquired 54 businesses and, subsequent to 1998 through March 31,
1999, it has acquired 19 businesses. The Company's Condensed Consolidated
Financial Statements have been restated to reflect the acquisition of companies
accounted for using the pooling-of-interests method for business combinations in
1998. The results of operations for the acquisitions accounted for under the
purchase method for business combinations are included in the Company's
financial statements only from the applicable date of acquisition. As a result,
the Company believes its historical results of operations for the periods
presented are not directly comparable to its current results of operations.
In June 1998, the Company completed the acquisition of the Rabanco
Companies ("Rabanco") in a transaction accounted for using the
pooling-of-interests method for business combinations. Rabanco provides solid
waste collection, recycling, transportation and disposal services in the Pacific
Northwest and generated annual revenue of approximately $160 million excluding
the effects of the internalization of waste volumes.
In August 1998, the Company acquired Illinois Recycling Services, Inc.
and its affiliates ("Illinois Recycling") in a transaction accounted for using
the pooling-of-interests method for business combinations. Illinois Recycling
provides solid waste collection, recycling and transportation services primarily
in the Chicago metro area and northern Indiana and generated annual revenue of
approximately $80 million excluding the effects of the internalization of waste
volumes.
In October 1998, Allied acquired American Disposal Services, Inc.
("ADSI") in a transaction accounted for using the pooling-of-interests method
for business combinations. ADSI is a vertically integrated solid waste
management company providing collection, transfer, recycling and disposal
services to approximately 485,000 customers in 12 states, primarily in the
Midwest and Northeast United States and generated annual revenue of
approximately $240 million, excluding the effects of the internalization of
waste volumes.
In December 1998, the Company completed a private offering of an
aggregate of $1.7 billion of senior notes consisting of $225 million 7 3/8%
senior notes due 2004 (the "Five Year Senior Notes"), $600 million 7 5/8% senior
notes due 2006 (the "Seven Year Senior Notes") and $875 million 7 7/8% senior
notes due 2009 (the "Ten Year Senior Notes", and together with the Five Year
Senior Notes and the Seven Year Senior Notes, the "1998 Senior Notes"). The
Company used the net proceeds from the 1998 Senior Notes to fund the purchase of
the Company's $525 million of 10.25% senior subordinated notes due 2006 (the
"1996 Notes") and $418 million face value 11.3% senior discount notes (the
"Senior Discount Notes") pursuant to tender offers the Company commenced in
November 1998, to repay borrowings outstanding under the Senior Credit Facility
(as defined herein) and certain capital lease obligations, and for general
corporate purposes.
18
<PAGE> 19
In March 1999, Allied and Browning-Ferris Industries, Inc. ("BFI")
announced that they entered into a definitive merger agreement under which
Allied will acquire BFI for $45 in cash per BFI common share, as well as assume
approximately $1.8 billion in debt, in a transaction valued at approximately
$9.1 billion. Allied has bank commitments to finance the acquisition consisting
of $7 billion senior secured debt and $2.5 billion senior unsecured debt at
interest rates ranging from Libor plus 2.50% to Libor plus 3.50%, and a
commitment from Apollo Management IV, L.P., Blackstone Capital Partners III
Merchant Banking Fund L.P. and other investors to purchase $1 billion of 6.5%
convertible preferred stock. The transaction is structured as a merger of BFI
with a subsidiary of Allied and is subject to the approval of BFI stockholders
and other customary conditions. In April 1999, Allied and Stericycle, Inc.
("Stericycle") announced that they entered into a binding definitive agreement
under which Stericycle will purchase all of the medical waste operations, which
Allied intends to acquire from BFI for a purchase price of approximately $440
million. This transaction is subject to the consummation of Allied's acquisition
of BFI and certain other conditions.
GENERAL
Revenues. The Company's revenues are attributable primarily to fees
charged to customers for waste collection, transfer, recycling and disposal
services. The Company's collection services are generally provided under direct
agreements with its customers or pursuant to contracts with municipalities.
Commercial and municipal contract terms, where used, generally range from 1 to 5
years and commonly have automatic renewal options. The Company's landfill
operations include both Company-owned landfills and those operated for
municipalities for a fee. The Company is fully integrated in each geographic
region in which it is located as it provides collection, transfer and disposal
services. The following tables show for the periods indicated the percentage of
the Company's total reported revenues attributable to services provided and
revenues attributable to geographic regions. The following data have been
restated to give effect to acquisitions that were accounted for using the
pooling-of-interests method for business combinations.
<TABLE>
<CAPTION>
Three Months
Ended
Year Ended December 31, March 31,
1996 1997 1998 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Collection(1) 58% 57% 56% 56%
Transfer 6 7 7 7
Landfill (1) 26 26 30 31
Other 10 10 7 6
--- --- --- ---
Total revenues 100% 100% 100% 100%
=== === === ===
</TABLE>
<TABLE>
<CAPTION>
Three Months
Ended
Year Ended December 31, March 31,
1996 1997 1998 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Great Lakes 32% 32% 32% 28%
Midwest 9 13 12 12
Northeast 12 15 14 16
Southeast 14 9 10 10
Southwest 2 10 10 10
West 31 21 22 24
---- ---- ---- ---
Total revenues 100% 100% 100% 100%
==== ==== ==== ===
</TABLE>
_________
(1) The portion of collection and third-party transfer revenues attributable to
disposal charges for waste collected by the Company and disposed at the
Company's landfills has been excluded from collection and transfer revenues
and included in landfill revenues.
19
<PAGE> 20
The Company's strategy is to develop vertically integrated operations
to ensure internalization of waste it collects and thus realize higher margins
from its operations. By disposing of waste at Company-owned and/or operated
landfills, the Company retains the margin generated through disposal operations
that would otherwise be earned by third-party landfills. Approximately 68% of
Company-collected waste was disposed of at Company-owned and/or operated
landfills as measured using volume in the first three months of 1999. In
addition, transfer stations are an integral part of the disposal process. The
Company locates its transfer stations in areas where its landfills are outside
of the population centers in which it collects waste. Such waste is transferred
to long-haul trailers or railcars and transported to its landfills.
Expenses. Cost of operations includes labor, maintenance and repairs,
equipment and facility rent, utilities and taxes, the costs of ongoing
environmental compliance, safety and insurance, disposal costs and costs of
independent haulers transporting Company waste to the disposal site. Disposal
costs include certain landfill taxes, host community fees, payments under
agreements with respect to landfill sites that are not owned, landfill site
maintenance, fuel and other equipment operating expenses and accruals for
estimated closure and post-closure monitoring expenses anticipated to be
incurred in the future.
Selling, general and administrative expenses include management,
clerical and administrative compensation and overhead, sales costs, community
relations expenses and provisions for estimated uncollectible accounts
receivable and potentially unrealizable acquisition costs.
Depreciation and amortization expense includes depreciation of fixed
assets and amortization of landfill airspace, goodwill and other intangible
assets.
In connection with potential acquisitions, the Company incurs and
capitalizes certain transaction costs and integration costs which include stock
registration, legal, accounting, consulting, engineering and other direct costs.
When an acquisition is completed and is accounted for using the
pooling-of-interests method for business combinations, these costs are charged
to the statement of operations as acquisition related costs. When a completed
acquisition is accounted for using the purchase method for business
combinations, these costs are capitalized. The Company routinely evaluates
capitalized transaction and integration costs, and expenses those costs related
to acquisitions not likely to occur. Indirect acquisition costs, such as
executive salaries, general corporate overhead and other corporate services, are
expensed as incurred.
Certain direct landfill development costs, such as engineering,
construction and permitting costs, are capitalized and amortized based on
consumed airspace. The Company believes that the costs associated with
engineering, owning and operating landfills will increase in the future as a
result of federal, state and local regulation and a growing community awareness
of the landfill permitting process. Although there can be no assurance, the
Company believes that it will be able to implement price increases sufficient to
offset these increased expenses. All indirect landfill development costs, such
as executive salaries, general corporate overhead, public affairs and other
corporate services, are expensed as incurred.
Accrued closure and post-closure costs represent an estimate of the
present value of the future obligation associated with closure and post-closure
monitoring of non-hazardous solid waste landfills currently owned and/or
operated by the Company. Site specific closure and post-closure engineering cost
estimates are prepared annually for landfills owned and/or operated by the
Company for which it is responsible for closure and post-closure. The present
value of estimated future costs is accrued based on accepted tonnage as landfill
airspace is consumed. Discounting of future costs is applied where the Company
believes that both the amounts and timing of related payments are reliably
determinable. The Company periodically updates its estimates of future closure
and post-closure costs. The impact of changes which are determined to be changes
in estimates are accounted for on a prospective basis.
20
<PAGE> 21
The net present value of the closure and post-closure commitment is
calculated assuming inflation of 2.0% and a risk-free capital rate of 6.5%.
Discounted amounts previously recorded are accreted to reflect the effects of
the passage of time. The Company's current estimate of total future payments for
closure and post-closure is $1.2 billion, adjusted for inflation, while the
present value of such estimate is $396.5 million. At December 31, 1998 and March
31, 1999, accruals for landfill closure and post-closure costs (including costs
assumed through acquisitions) were approximately $154.5 million and $156.5
million. The accruals reflect relatively young landfills with estimated
remaining lives, based on current waste flows, that range from approximately 1
to over 75 years, and an estimated average remaining life of greater than 30
years.
Year 2000 Systems Modifications. Certain computer program software has
been written using two digits rather than four digits to define the applicable
year. If left uncorrected, a system failure or miscalculations causing
disruptions of operations could result. The Company is implementing a formal
plan which will require programming modifications to ensure the Company's
systems will operate properly in the year 2000 ("Year 2000"). This plan includes
four phases consisting of awareness, assessment and renovation, validation and
implementation. In management's opinion, the scope of Year 2000 systems
modifications will not be extensive and the costs associated with addressing
them are not expected to exceed $300,000.
AWARENESS. All Year 2000 projects with respect to internal systems are
approved by senior management and evaluated and reviewed by the Board
of Directors as deemed necessary if they are expected to result in
material cost.
ASSESSMENT AND RENOVATION. The assessment and renovation phase of the
plan includes both information technology-related systems and
non-information technology areas.
Information technology-related systems. To date, the Company has
assessed all information technology-related systems, which includes
hardware, applications software, operating systems and databases.
The Company's core business systems, including general ledger,
accounts payable, fixed assets, customer billing and operations
support, function properly with respect to dates in the year 2000.
Non-information technology areas. The Company's assessment of Year
2000 issues will include non-information technology areas such as
equipment and communications systems. Non-information technology
systems will be assessed during the second quarter of 1999 and, if
necessary, a plan for modification will be reviewed for approval by
senior management. In addition, the Company is working with outside
vendors to determine if their information systems will function in
the Year 2000. The Company will monitor this through periodic
questionnaires and discussions with suppliers.
VALIDATION. Validation included testing and verifying the performance,
functionality, and integration of the system after Year 2000
modifications were made. During the first quarter of 1999, the Company
successfully completed the validation of the modifications made to the
information technology-related systems.
IMPLEMENTATION. Implementation of the Company's plan includes both
information technology-related systems and non-information technology
areas.
Information technology-related systems. The Company has begun
implementing modifications to its information systems. To date, two of the
Company's six regions has been converted to the modified applications. The
Company intends to complete the implementation of all modified information
systems, vendor supplied Local Area Network ("LAN") applications, and LAN
operating-systems patches by the end of the second quarter of 1999.
21
<PAGE> 22
Non-Information technology areas. The Company plans to modify
necessary non-information technology equipment and systems, establish
contingency plans, and update existing disaster recovery plans throughout 1999.
Upon completion of its Year 2000 plan in 1999, the Company expects to
be Year 2000 compliant and expects to have no material exposure with respect to
information technology-related systems. Companies acquired during 1999 will be
converted to Allied's Year 2000 compliant information technology-related systems
in a timely manner subsequent to acquisition. With respect to non-information
technology areas, it is uncertain what risks are associated with the Year 2000
issue and any risks that may be identified could have a material, adverse effect
on the Company's business, financial condition, results of operations and cash
flows. There can be no assurances that the information systems of customers and
vendors on which the Company relies will be Year 2000 compliant in a timely
manner and will not have a material and adverse effect on the Company's
business, financial condition, results of operations and cash flow.
22
<PAGE> 23
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1998 AND 1999
The following table sets forth the percentage relationship that the
various items bear to revenues and the percentage change in dollar amounts for
the periods indicated. The statement of operations data have been restated to
give effect to acquisitions that were accounted for using the
pooling-of-interests method for business combinations during 1998. See Note 2 to
the Company's Condensed Consolidated Financial Statements.
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1999
Compared
to 1998
% Change
1998 1999 in Amounts
---- ---- ----------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues ................................... 100.0% 100.0% 14.0%
Cost of operations ......................... 57.5 56.4 11.8
Selling, general and administrative expenses 11.1 8.3 (14.9)
Depreciation and amortization expense ...... 11.6 11.7 14.7
Acquisition related and unusual costs ...... 0.7 0.3 (54.6)
----- -----
Operating income .......................... 19.1 23.3 39.5
Interest expense, net ...................... 6.2 6.7 24.4
Income tax expense ......................... 4.1 6.7 87.0
----- -----
Net income ................................ 8.8% 9.9% 28.2%
===== =====
</TABLE>
Revenues. Revenues in 1999 were $408.0 million compared to $357.9 million in
1998, an increase of 14.0%. The increase in revenues attributable to existing
operations ("Internal Growth") was 7%, with approximately 3% attributable to net
volume increases and approximately 4% attributable to price increases. The
additional revenue growth is attributable to companies acquired, net of revenues
sold, subsequent to the end of the same period in the prior year.
Cost of Operations. Cost of operations in 1999 was $230.0 million compared to
$205.8 million in 1998, an increase of 11.8%. The increase in cost of operations
was primarily attributable to the increase in revenues described above. As a
percentage of revenues, cost of operations decreased to 56.4% in 1999 from 57.5%
in 1998. The 1998 operating margin decreased from the previously reported margin
due to the restatements for companies acquired subsequent to March 31, 1998 and
accounted for using the pooling-of-interests method for business combinations.
The operating margin was favorably impacted by increased volumes at the
landfills and other cost savings from the integration of acquisitions.
Selling, General and Administrative Expenses. SG&A expenses in 1999 were $33.8
million compared to $39.7 million in 1998, a decrease of 14.9%. As a percentage
of revenues, SG&A decreased to 8.3% in 1999 compared to 11.1% in 1998. The 1998
SG&A expense increased from the previously reported amount due to the
restatements for companies acquired subsequent to March 31, 1998 and accounted
for using the pooling-of-interests method for business combinations. The 1999
SG&A expense decreased due to cost savings from the integration of businesses
acquired. Additionally, the decrease in SG&A as a percentage of revenues can be
attributed to the continued increase in revenues while reducing overhead costs.
23
<PAGE> 24
Depreciation and amortization. Depreciation and amortization in 1999 was $47.6
million compared to $41.5 million in 1998, an increase of 14.7%. The increase in
depreciation and amortization is primarily the result of acquisitions. Excluded
from depreciation and amortization expense in the first quarter of 1999 is
approximately $2.6 million associated with certain assets that have been held
for sale since the beginning of the fourth quarter of 1998. Adjusting for the
suspended depreciation and amortization associated with assets held for sale,
depreciation and amortization would have been approximately $50.2 million. The
increase in depreciation and amortization expense was due to an increase in
goodwill of approximately $318 million, increased internalized landfill tonnage
and increased capital expenditures in 1998.
Acquisition related and unusual costs. During the first quarter of 1999, the
Company recorded a $1.1 million acquisition related and unusual charge for
transaction and restructuring costs associated primarily with acquisitions
accounted for as poolings-of-interest. Transaction costs include stock
registration, legal, accounting, consulting, engineering and other direct
third-party costs incurred to complete the acquisitions. Restructuring costs
include employee termination and relocation, write down of fixed assets, lease
termination, and other one-time charges related to the acquisitions.
During 1998, the Company recorded acquisition related and unusual
charges in connection with acquisitions accounted for as poolings-of-interests.
These plans and associated costs consist of the following:
Restructuring and abandonment costs include costs to consolidate or
relocate redundant operations and to transition to common information
systems. Approximately $7.6 million and $5.5 million of restructuring
costs were accrued at December 31, 1998 and March 31, 1999,
respectively, and are expected to be paid in 1999.
Employee severance and transition costs consist of termination payments
made to employees of acquired companies based on change of control
provisions in preexisting contracts and costs associated with severance
payments under exit or integration plans implemented in connection with
the acquisitions. The exit and integration plans call for the
termination of approximately 800 employees who were performing
managerial, sales, administrative support, maintenance and repair, or
hauling and landfill operations duties. All employees were identified
and notified of their severance of transition benefits at the time
management approved the plan, which occurred at or around the time of
the acquisitions, and as of March 31, 1999, substantially all employees
identified had been terminated. Approximately $10.1 million and $6.9
million was accrued at December 31, 1998 and March 31, 1999,
respectively, for benefits remaining to be paid in 1999.
Employee severance and restructuring costs expensed during the first
quarter of 1999 relating to plans implemented in 1998 were
approximately $0.3 million.
Net interest expense. Net interest expense was $27.5 million in 1999 compared
to $22.1 million in 1998, an increase of 24.4%. Interest expense increased due
to an increase in the average outstanding debt due primarily to acquisitions
completed since March 31, 1998 and the refinancing of the 1996 Notes and the
Senior Discount Notes. This increase was partially offset by a reduction in the
average interest rate due to the issuance of the 1998 Senior Notes in December
1998. Additionally, capitalized interest decreased to $16.0 million in 1999
compared to $16.3 million in 1998.
Income taxes. Income taxes reflect a 40.5% effective income tax rate in 1999
and 31.8% in 1998. The increase is primarily caused by the income tax accounting
effects of applying the pooling-of-interests method of accounting for business
combinations (including the initial recording of deferred income taxes and
non-deductible transaction costs, partially offset by the absence of income
taxes on S-Corporation pre-combination earnings). The first quarter 1999
effective tax rate of 40.5% deviates from the federal statutory rate of 35% due
to the effects of differences in the treatment of goodwill for book and tax
purposes, state income taxes, and other permanent differences.
24
<PAGE> 25
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company has satisfied its acquisition, capital
expenditure and working capital needs primarily through bank financing and
public offerings and private placements of debt and equity securities. Between
December 1996 and March 31, 1999, the Company has completed debt financings in
excess of $3.5 billion.
Due to the acquisition driven and the capital intensive nature of the
Company's business strategy, the Company has used, and believes that it is
reasonably possible that it will continue using amounts in excess of the cash
generated from operations to fund acquisitions and capital expenditures,
including landfill development. In connection with acquisitions, the Company has
assumed or incurred indebtedness with relatively short-term repayment schedules,
thereby increasing its current and medium-term liabilities. Additionally, some
operating equipment has been acquired using financing leases which have short
and medium-term maturities. Additionally, the Company uses excess cash generated
from operations to pay down amounts owed on its revolver which is classified as
long-term debt. As a result, the Company has periodically had low levels of
working capital or working capital deficits.
During the three months ended March 31, 1998 and 1999, the Company's
cash flows from operating, investing and financing activities were as follows
(in millions):
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------
1998 1999
---- ----
<S> <C> <C>
OPERATING ACTIVITIES:
Net income ................................................. $ 31.6 $ 40.5
Non-cash operating expenses(1) ............................. 58.1 66.7
Gain on sale of assets ..................................... (0.5) (1.6)
Increase (decrease) in operating assets and liabilities, net 10.9 (14.5)
-------- --------
Cash provided by operating activities ...................... 100.1 91.1
-------- --------
INVESTING ACTIVITIES:
Cost of acquisitions, net of cash acquired ................. (46.6) (138.0)
Capital expenditures ....................................... (60.0) (39.9)
Proceeds from sale of assets ............................... 1.3 17.3
Other ...................................................... 4.9 (6.7)
-------- --------
Cash used for investing activities ......................... (100.4) (167.3)
-------- --------
FINANCING ACTIVITIES:
Net proceeds from sale and
redemption of preferred stock and common stock .......... 1.1 4.7
Net proceeds from long-term debt ........................... 59.4 158.9
Payments of long-term debt ................................. (33.1) (91.5)
Other ...................................................... (12.6) 1.4
-------- --------
Cash provided by financing activities ...................... 14.8 73.5
-------- --------
Increase (decrease) in cash ................................ $ 14.5 $ (2.7)
======== ========
</TABLE>
__________________
(1) Consists principally of provisions for depreciation and amortization,
allowance for doubtful accounts, potentially unrealizable acquisition
costs and deferred income taxes.
25
<PAGE> 26
As of March 31, 1999, the Company had cash and cash equivalents of
$37.0 million. The Company's capital expenditure and working capital
requirements have increased significantly, reflecting the Company's rapid growth
by acquisition and development of revenue producing assets, and will increase
further as the Company continues to pursue its business strategy. During the
three months ended March 31, 1999, the Company acquired solid waste operations
representing approximately $106.9 million in annual revenues ($92.1 million net
of intercompany eliminations), and sold operations representing approximately
$6.0 million in annual revenue. Net consideration of approximately $175.0
million comprised of cash, notes and Common Stock, was paid in these
transactions. Subsequent to March 31, 1999, the Company acquired solid waste
companies representing approximately $122.6 million in annual revenues ($98.8
million net of intercompany eliminations) for approximately $153.5 million
comprised of cash and notes. Additionally, the Company sold operations
representing approximately $91.6 million in annual revenues for approximately
$124.9 million in cash. For the calendar year 1999, the Company expects to spend
approximately $315 million for capital expenditures, closure and post-closure,
and remediation expenditures relating to its landfill operations. As the Company
continues to acquire waste operations in 1999, additional capital amounts will
be required during 1999 for the acquisition of businesses and the capital
expenditure requirements related to those acquired businesses.
On March 31, 1999, the Company's debt structure consisted primarily of
$1.7 billion of the 1998 Senior Notes and $300 million outstanding under the
Term Loan Facility (as defined herein) and $74 million under the Revolving
Credit Facility. As of March 31, 1999 there is aggregate availability under the
Revolving Credit Facility of approximately $667 million to be used for working
capital, letters of credit, acquisitions and other general corporate purposes.
The indentures relating to the 1998 Senior Notes and the Credit Agreement
contain financial and operating covenants and restrictions on the ability of the
Company to complete acquisitions, pay dividends, incur indebtedness, make
investments and take certain other corporate actions. A substantial portion of
the Company's available cash will be required to be applied to service
indebtedness. Currently, on an annualized basis, this is expected to include
approximately $214.9 million in annual principal and interest payments.
The Company is also required to provide financial assurances to
governmental agencies under applicable environmental regulations relating to its
landfill operations and collection contracts. These financial assurance
requirements are satisfied by the Company issuing performance bonds, letters of
credit, insurance policies or trust deposits to secure the Company's obligations
as they relate to landfill closure and post-closure costs and performance under
certain collection contracts. At March 31, 1999, the Company had outstanding
approximately $448.5 million in financial assurance instruments, represented by
$288.9 million of performance bonds, $135.3 million of insurance policies and
$24.3 million of trust deposits. During 1999, the Company expects to be required
to provide approximately $460 million in financial assurance obligations
relating to its landfill operations and collection contracts. The Company
expects that financial assurance obligations will increase in the future as it
acquires and expands its landfill activities and that a greater percentage of
the financial assurance instruments will be comprised of performance bonds and
insurance policies.
The Company has lease facilities (the "Lease Facilities") that allow it
to enter into equipment leases at rates ranging from similar term treasury note
rates plus 1.55% for terms of 36 to 84 months. The Company has equipment leases
outstanding at December 31, 1998 and March 31, 1999 of $36.6 million and $34.8
million, respectively.
26
<PAGE> 27
Subtitle D and other regulations that apply to the non-hazardous waste
disposal industry have required the Company, as well as others in the industry,
to alter operations and to modify or replace pre-Subtitle D landfills. Such
expenditures have been and will continue to be substantial. Further regulatory
changes could accelerate expenditures for closure and post-closure monitoring
and obligate the Company to spend sums in addition to those presently reserved
for such purposes. These factors, together with the other factors discussed
above, could substantially increase the Company's operating costs and impair the
Company's ability to invest in its facilities.
The Company's ability to meet future capital expenditure and working
capital requirements, to make scheduled payments of principal, to pay interest,
or to refinance its indebtedness, and to fund capital amounts required for the
acquisition of businesses and the expansion of existing businesses depends on
its future performance, which, to a certain extent, is subject to general
economic, financial, competitive, legislative, regulatory and other factors
beyond its control. Based upon the current level of operations and anticipated
growth, management of the Company believes that available cash flow, together
with available borrowing under the Credit Agreement, the Lease Facilities and
other sources of liquidity, will be adequate to meet the Company's anticipated
future requirements for working capital, letters-of-credit, capital
expenditures, scheduled payments of principal and interest on debt incurred
under the Credit Agreement, interest on the 1998 Senior Notes, and capital
amounts required for acquisitions and expansion. However, the principal payment
at maturity on the 1998 Senior Notes (beginning in 2004) may require
refinancing. There can be no assurance that the Company's business will generate
sufficient cash flow from operations or that future financings will be available
in an amount sufficient to enable the Company to service its indebtedness or to
make necessary capital expenditures, or that any refinancing would be available
on commercially reasonable terms if at all. Additionally, depending on the
timing, amount and structure of any future acquisitions and the availability of
funds under the Credit Agreement, the Company may need to raise additional
capital to fund the acquisition and integration of additional solid waste
businesses. The Company may raise such funds through additional bank financings
or public or private offerings of its debt and equity securities. There can be
no assurance that the Company will be able to secure such funding, if necessary,
on favorable terms, if at all. If the Company is not successful in securing such
funding, the Company's ability to pursue its business strategy may be impaired
and results of operations for future periods may be negatively affected.
SIGNIFICANT FINANCING EVENTS
In June 1998, the Company repaid $486.8 million outstanding under the
1997 Credit Agreement and entered into a new credit agreement (the "Credit
Agreement"). The Credit Agreement provides a $800 million five year senior
secured revolving credit facility (the "Revolving Credit Facility") and a $300
million five year senior secured term loan facility (the "Term Loan Facility"
and together with the Revolving Credit Facility, the "Senior Credit Facility").
The Term Loan Facility is a funded, amortizing senior secured term loan with
annual principal payments increasing from $75 million in 2001, to $105 million
in 2002, and to $120 million in 2003. Principal under the Revolving Credit
Facility is due upon maturity
In addition to the scheduled principal payments above, the Company is
also required to make mandatory prepayments on the Senior Credit Facility equal
to 75% or 50% of the net proceeds from certain debt issues and up to 75% or 50%
of the net proceeds from the sale of assets if the Company's Leverage Ratio, as
defined in the Credit Agreement, exceeds 4.5 to 1.0 or 4.0 to 1.0, respectively.
Mandatory prepayments shall be applied first to the outstanding revolving credit
advances and Term Loans pro rata based on outstandings, until no revolving
credit advances are outstanding, and then to repay outstanding Term Loans.
Borrowings under the Credit Agreement may be used for acquisitions, the
issuance of letters of credit, working capital and other general corporate
purposes. Of the $800 million available under the Revolving Credit Facility, no
more than $250 million may be used to support the issuance of letters of credit.
27
<PAGE> 28
The Senior Credit Facility bears interest, at the Company's option, at
the lesser of (a) a Base Rate, or (b) a Eurodollar Rate, both terms defined in
the Credit Agreement, plus, in either case, an agreed upon applicable margin.
The applicable margin will be adjusted from time to time pursuant to a pricing
grid based upon the Company's Total Debt to EBITDA ratio, as defined in the
Credit Agreement, and varies between zero percent and 0.50% for Base Rate loans,
and 0.75% and 1.75% for Eurodollar loans.
The Senior Credit Facility is guaranteed by substantially all of the
Company's present and future subsidiaries. In addition, the Senior Credit
Facility is secured by substantially all the personal property and a pledge of
the stock of substantially all the Company's present and future subsidiaries.
The Credit Agreement contains certain financial covenants including,
but not limited to, a Total Debt to EBITDA ratio, a Fixed Charge Coverage ratio,
and an Interest Expense Coverage ratio, all terms as defined in the Credit
Agreement. In addition, the Credit Agreement also limits the Company's ability
to make acquisitions, purchase fixed assets above certain amounts, pay
dividends, incur additional indebtedness and liens, make optional prepayments on
certain subordinated indebtedness, make investments, loans or advances, enter
into certain transactions with affiliates or enter into a merger, consolidation
or sale of all or a substantial portion of the Company's assets. The Company is
in compliance with all applicable covenants at March 31, 1999.
In December 1998, Allied NA issued an aggregate of $1.7 billion of
senior notes consisting of $225 million 7 3/8% senior notes due 2004 (the "Five
Year Senior Notes"), $600 million 7 5/8% senior notes due 2006 (the "Seven Year
Senior Notes"), and $875 million 7 7/8% senior notes due 2009 (the "Ten Year
Senior Notes" and collectively the "1998 Senior Notes") in a Rule 144A offering
which was subsequently registered for public trading with the Securities and
Exchange Commission (the "SEC") in January, 1999. The Company used the net
proceeds from the 1998 Senior Notes to fund the purchase of all of the
outstanding 1996 Notes and Senior Discount Notes, to repay borrowings
outstanding under the Senior Credit Facility and certain capital lease
obligations, and for general corporate purposes. The Five Year Senior Notes and
Seven Year Senior Notes will be redeemable, at the option of the Company, in
whole or from time to time in part, at a redemption price equal to the greater
of (i) 100% of their principal amount or (ii) the sum of the present values of
the remaining scheduled payments of principal and interest thereon discounted to
maturity on a semi-annual basis at the treasury yield plus 50 basis points, plus
in each case accrued but unpaid interest to but excluding the date of
redemption. The Ten Year Senior Notes will be redeemable at the option of the
Company, in whole or in part, at any time on or after January 1, 2004 in cash at
the redemption price plus accrued and unpaid interest to but excluding the date
of redemption. Prior to January 1, 2004, the Ten Year Senior Notes will be
redeemable, at the option of the Company, in whole or in part, at any time, in
cash, at a redemption price equal to the greater of (i) 100% of their principal
amount or (ii) the sum of the present values of the remaining scheduled payments
of principal and interest thereon discounted to maturity on a semi-annual basis
at the treasury yield plus 50 basis points, plus accrued but unpaid interest to
but excluding the date of redemption. In addition, at any time prior to January
1, 2002, the Company may on any one or more occasions redeem up to 33 1/3% of
the aggregate principal amount of Ten Year Senior Notes originally issued at a
redemption price equal to 107.9% of the principal amount thereof, plus accrued
and unpaid interest to the date of redemption, with the net cash proceeds of one
or more public offerings of capital stock; provided that the notice of
redemption with respect to any such redemption is mailed within 30 days
following the closing of the corresponding public offering. The 1998 Senior
Notes will not be subject to any redemption at the option of any holder thereof
prior to the final maturity of such notes except as set forth in the applicable
indenture. The 1998 Senior Notes are guaranteed by the Company and substantially
all of Allied NA's current and future subsidiaries, the guarantees of which are
expressly subordinated to the guarantees of Allied NA's Credit Agreement.
28
<PAGE> 29
DISCLOSURE REGARDING FORWARD LOOKING STATEMENTS
This quarterly report includes forward looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended ("Forward Looking
Statements"). All statements other than statements of historical fact included
in this report, are Forward Looking Statements. Although the Company believes
that the expectations reflected in such Forward Looking Statements are
reasonable, it can give no assurance that such expectations will prove to have
been correct. Generally, these statements relate to business plans or
strategies, projected or anticipated benefits or other consequences of such
plans or strategies, number of acquisitions and projected or anticipated
benefits from acquisitions made by or to be made by the Company, or projections
involving anticipated revenues, earnings, levels of capital expenditures or
other aspects of operating results. All phases of the Company operations are
subject to a number of uncertainties, risks and other influences, many of which
are outside the control of the Company and any one of which, or a combination of
which, could materially affect the results of the Company's operations and
whether Forward Looking Statements made by the Company ultimately prove to be
accurate. Such important factors ("Important Factors") that could cause actual
results to differ materially from the Company's expectations are disclosed in
this section and elsewhere in this report. All subsequent written and oral
Forward Looking Statements attributable to the Company or persons acting on its
behalf are expressly qualified in their entirety by the Important Factors
described below that could cause actual results to differ from the Company's
expectations. The forward-looking statements made herein are only made as of the
date of this filing and the Company undertakes no obligation to publicly update
such forward-looking statements to reflect subsequent events or circumstances.
Competition. The solid waste collection and disposal business is highly
competitive and requires substantial amounts of capital. The Company competes
with numerous waste management companies, some of which have significantly
larger operations and greater resources than the Company. The Company also
competes with those counties and municipalities that maintain their own waste
collection and disposal operations. Forward Looking Statements assume that the
Company will be able to effectively compete with the other waste management
companies and municipalities.
Availability of Acquisition Targets. The Company's ongoing acquisition
program is a key element of its expansion strategy. In addition, obtaining
landfill permits has become increasingly difficult, time consuming and
expensive. There can be no assurance that the Company will succeed in obtaining
landfill permits or locating appropriate acquisition candidates that can be
acquired at price levels that the Company considers appropriate and that
reflects historical prices. The Forward Looking Statements assume that a number
of acquisition candidates and landfill properties sufficient to meet the
Company's goals will be available for purchase and that the Company will be able
to complete the acquisitions at prices that the Company has experienced in the
past two years.
Integration. The Company's financial position and results of operations
depend to a large extent on the integration of recently acquired businesses. The
Forward Looking Statements assume that integration of acquired companies,
including the internalization of waste, will require from three to nine months
from the date the acquisition closes. Failure to achieve effective integration
in the anticipated time period or at all could have an adverse effect on the
Company's future results of operations.
Ongoing Capital Requirements. To the extent that internally generated
cash and cash available under the Company's existing credit facilities are not
sufficient to provide the cash required for future operations, capital
expenditures, acquisitions, debt repayment obligations and/or financial
assurance obligations, the Company will require additional equity and/or debt
financing in order to provide such cash. The Company has incurred significant
debt obligations in the last two years, which entail substantial debt service
costs. The Forward Looking Statements assume that the Company will be able to
raise the capital necessary to finance such requirements at rates that are as
good as or better than those it is currently experiencing. There can be no
assurance, however, that such financing will be available or, if available, will
be available on terms satisfactory to the Company.
29
<PAGE> 30
Economic Conditions. The Company's business is affected by general
economic conditions. The Forward Looking Statements assume that the Company will
be able to achieve internal volume and price growth which is not impacted by an
economic downturn. As revenue of the Company continues to grow it is likely that
the rates of internal growth will reflect growth rates which are less than those
experienced in 1998. There can be no assurance that an economic downturn will
not result in a reduction in the volume of waste being disposed of at the
Company's operations and/or the price that the Company can charge for its
services.
Weather Conditions. Protracted periods of inclement weather may
adversely affect the Company's operations by interfering with collection and
landfill operations, delaying the development of landfill capacity and/or
reducing the volume of waste generated by the Company's customers. In addition,
particularly harsh weather conditions may result in the temporary suspension of
certain of the Company's operations. The Forward Looking Statements do not
assume that such weather conditions will occur.
Dependence on Senior Management. The Company is highly dependent upon
its senior management team. In addition, as the Company continues to grow, its
requirements for operations management with waste industry experience will also
increase. The availability of such experienced management is not known. The
Forward Looking Statements assume that experienced management will be available
when needed by the Company at compensation levels that are within industry
norms. The loss of the services of any member of senior management or the
inability to hire experienced operations management could have a material
adverse effect on the Company.
Influence of Government Regulation. The Company's operations are
subject to and substantially affected by extensive federal, state and local
laws, regulations, orders and permits, which govern environmental protection,
health and safety, zoning and other matters. These regulations may impose
restrictions on operations that could adversely affect the Company's results,
such as limitations on the expansion of disposal facilities, limitations on or
the banning of disposal of out-of-state waste or certain categories of waste or
mandates regarding the disposal of solid waste. Because of heightened public
concern, companies in the waste management business may become subject to
judicial and administrative proceedings involving federal, state or local
agencies. These governmental agencies may seek to impose fines or to revoke or
deny renewal of operating permits or licenses for violations of environmental
laws or regulations or to require remediation of environmental problems at sites
or nearby properties, or resulting from transportation or predecessors'
transportation and collection operations, all of which could have a material
adverse effect on the Company. Liability may also arise from actions brought by
individuals or community groups in connection with the permitting or licensing
of operations, any alleged violations of such permits and licenses or other
matters. The Forward Looking Statements assume that there will be no materially
negative impact on the Company's operations due to government regulation.
Potential Environmental Liability. The Company may incur liabilities
for the deterioration of the environment as a result of its operations. Any
substantial liability for environmental damage could materially adversely affect
the operating results and financial condition of the Company. Due to the limited
nature of the Company's insurance coverage of environmental liability, if the
Company were to incur liability for environmental damage, its business and
financial condition could be materially adversely affected. The Forward Looking
Statements assume that the Company will not incur any material environmental
liabilities other than those for which a provision has been recorded in the
consolidated financial statements and disclosed in the notes thereto.
Year 2000 Systems Modifications. The Company expects to be Year 2000
compliant in a timely manner and expects to have no material exposure with
respect to information technology-related systems. With respect to
non-information technology areas, it is uncertain what risks are associated with
the Year 2000 issue and any risks that may be identified could have a material,
adverse effect on the Company's business, financial condition, results of
operations and cash flows. There can be no assurances that the systems of
customers and vendors on which the Company relies will be converted in a timely
manner and will not have an adverse effect on the Company's systems or
operations. The Forward-Looking Statements assume that there will be no material
adverse effect on the Company's systems or operations related to the Year 2000
issue.
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<PAGE> 31
INFLATION AND PREVAILING ECONOMIC CONDITIONS
To date, inflation has not had a significant impact on the Company's
operations. Consistent with industry practice, most of the Company's contracts
provide for a pass through of certain costs, including increases in landfill
tipping fees and, in some cases, fuel costs. The Company therefore believes it
should be able to implement price increases sufficient to offset most cost
increases resulting from inflation. However, competitive factors may require the
Company to absorb cost increases resulting from inflation.
The Company is unable to determine the future impact of a sustained economic
slowdown.
SEASONALITY
The Company believes that its collection, transfer and landfill
operations can be adversely affected by protracted periods of inclement weather
which could delay the development of landfill capacity or transfer of waste
and/or reduce the volume of waste generated.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is subject to interest rate risk on its long-term debt.
Although no exposure exists with respect to the Company's fixed rate long-term
corporate debt instruments, the Company runs the risk of interest rate
fluctuations with respect to its Libor variable rate Senior Credit Facility at
December 31, 1998. To modify the risk from these interest rate fluctuations, the
Company enters into hedging transactions that have been authorized pursuant to
the Company's policies and procedures. The Company does not use financial
instruments for trading purposes and is not a party to any leveraged
derivatives. The following table sets forth, as of December 31, 1998, the
Company's long-term debt obligations, principal cash flows by scheduled
maturity, average interest rate and estimated fair market value (amounts in
thousands, except interest rates):
<TABLE>
<CAPTION>
Senior Credit Average
Facility Interest Rate
-------- -------------
<S> <C> <C>
1999 $ --
2000 --
2001 75,000
2002 105,000
2003 120,000
Thereafter --
----------
Total $ 300,000 6.0%
==========
Estimated Fair Value
at December 31, 1998 $ 300,000
==========
</TABLE>
31
<PAGE> 32
The Company has effectively converted its long-term debt, which
requires payment at variable rates of interest, to fixed rate obligations
through interest rate swap transactions. These transactions require the Company
to pay fixed rates of interest on notional amounts of principal to
counter-parties. The counter-parties, in turn, pay to the Company variable rates
of interest on the same notional amounts of principal. Increases or decreases in
short-term market rates would not impact earnings and cash flow as all variable
rate debt has been swapped for fixed rates. In addition, decreases in long-term
market interest rates would have the effect of increasing the fair value of the
Company's long-term debt and other long-term, fixed rate obligations. The
following interest rate table shows the interest rate swaps that were in effect
and their fair value as of December 31, 1998:
<TABLE>
<CAPTION>
Notional Fair
Principal Interest Underlying Interest Market Value
(in thousands) Maturity Paid Obligations Received in thousands)
- -------------- -------- ---- ----------- -------- -------------
<S> <C> <C> <C> <C> <C>
$ 50,000 April 1999 5.12% Credit Agreement Term Loan Facility Libor $ 6.0
50,000 October 1999 6.02 Credit Agreement Term Loan Facility Libor 497.4
50,000 November 1999 5.90 Credit Agreement Term Loan Facility Libor 442.9
50,000 November 1999 5.91 Credit Agreement Term Loan Facility Libor 439.5
50,000 March 2000 6.06 Credit Agreement Term Loan Facility Libor 618.5
50,000 September 2000 6.08 Credit Agreement Term Loan Facility Libor 894.3
</TABLE>
MARKET PRICE RISK
The Company has risk exposure associated with the market price on the
1998 Senior Notes. The 1998 Senior Notes are recorded at book value, which could
vary from current market prices. At December 31, 1998, the 1998 Senior Notes had
a value of $1.7 billion based on quoted average market prices.
32
<PAGE> 33
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
No changes to previously reported information.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
33
<PAGE> 34
EXHIBITS --
2.1 Stock Purchase Agreement dated September 17, 1996 among the Company,
Allied NA, 3294862 Canada Inc., Laidlaw Inc., Laidlaw Transportation,
Inc., Laidlaw Waste Systems, Inc., Laidlaw Waste Systems (Canada) Ltd.
and Laidlaw Medical Services Ltd. Exhibit 2.1 to the Company's Current
Report on Form 8-K dated October 2, 1996, is incorporated herein by
reference.
2.2 Purchase Agreement relating to the 1996 Notes dated November 25, 1996.
Exhibit 2.1 to the Company's Current Report on Form 8-K dated December
19, 1996, is incorporated herein by reference.
2.3 Share Purchase Agreement dated January 15, 1997 among the Company,
Allied Waste Holdings (Canada) Ltd., Laidlaw Waste Systems, Inc., USA
Waste Services, Inc. and Canadian Waste Services, Inc. Exhibit 10.0 to
the Company's Current Report on Form 8-K dated January 30, 1997, is
incorporated herein by reference.
2.4 Amended and Restated Agreement and Plan of Reorganization between
Allied Waste Industries, Inc. and Rabanco Acquisition Company, Rabanco
Acquisition Company Two, Rabanco Acquisition Company Three, Rabanco
Acquisition Company Four, Rabanco Acquisition Company Five, Rabanco
Acquisition Company Six, Rabanco Acquisition Company Seven, Rabanco
Acquisition Company Eight, Rabanco Acquisition Company Nine, Rabanco
Acquisition Company Ten, Rabanco Acquisition Company Eleven, and
Rabanco Acquisition Company Twelve. Exhibit 2.4 to the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1998 is
incorporated herein by reference.
2.5 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. Exhibit 2 to the Company's Current
Report on Form 8-K filed August 21, 1998 is incorporated hereby by
reference.
2.6 Agreement and Plan of Merger dated as of March 7, 1999 by and among
Allied Waste Industries, Inc., AWIN I Acquisition Corporation and
Browning-Ferris Industries, Inc. Exhibit 2 to the Company's Current
Report on Form 8-K filed March 16, 1999 is incorporated herein by
reference.
3.1 Amended Certificate of Incorporation of the Company (Incorporated
herein by reference to Exhibit 3.1 to the Company's Report on Form 10-K
for the fiscal year ended December 31, 1996).
3.2 Amended and Restated Bylaws of the Company as of May 13, 1997. Exhibit
3.2 to the Company's Report on Form 10-Q for the quarter ended June 30,
1997 is incorporated herein by reference.
3.3 Amendment to Amended Certificate of Incorporation of the Company dated
October 15, 1998. Exhibit 3.4 to the Company's Report on Form 10-Q for
the quarter ended September 30, 1998 is incorporated herein by
reference.
4.1 Specimen certificate for shares of Common Stock par value $.01 per
share. Exhibit 4.2 of the Company's Registration Statement on Form S-1
(No. 33-48507) is incorporated herein by reference.
4.2 Indenture relating to the 1994 Notes dated January 15, 1994 between the
Company and First Trust National Association, as trustee ("First
Trust"). Exhibit 4.1 to the Company's Registration Statement on Form
S-1 (No. 33-73110) is incorporated herein by reference.
4.3 Specimen certificate representing the 1994 Notes. Exhibit 4.2 of the
Company's Registration Statement on Form S-1 (No. 33-48507) is
incorporated herein by reference.
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.
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<PAGE> 35
4.6 Fourth Supplemental Indenture relating to the 1994 Notes dated January
23, 1996, between the Company and First Trust. Exhibit 10.1 to the
Company's Current Report on Form 8-K dated January 22, 1996, is
incorporated herein by reference.
4.7 Fifth Supplemental Indenture relating to the 1994 Notes dated July 30,
1996 between the Company and First Trust. Exhibit 10.2 to the Company's
Quarterly Report on Form 10-Q dated August 14, 1996, is incorporated
herein by reference.
4.8 Indenture relating to the 1996 Notes dated February 28, 1997 between
the Company and First Trust. Exhibit 4.1 to the Company's Registration
Statement on Form S-4 (No. 333-22575) is incorporated herein by
reference.
4.9 1991 Incentive Stock Plan of the Company. Exhibit 10.T to the Company's
Form 10 dated May 14, 1991, is incorporated herein by reference.
4.10 1991 Non-Employee Director Stock Plan of the Company. Exhibit 10.U to
the Company's Form 10 dated May 14, 1991, is incorporated herein by
reference.
4.11 1993 Incentive Stock Plan of the Company. Exhibit 10.3 to the Company's
Registration Statement on Form S-1 (No. 33-73110) is incorporated
herein by reference.
4.12 1994 Amended and Restated Non-Employee Director Stock Option Plan of
the Company. Exhibit B to the Company's Definitive Proxy Statement in
accordance with Schedule 14A dated April 28, 1994, is incorporated
herein by reference.
4.13 Amendment to the 1994 Amended and Restated Non-Employee Director Stock
Option Plan. Exhibit 10.2 to the Company's Quarterly Report on Form
10-Q dated August 10, 1995, is incorporated herein by reference.
4.14 Amended and Restated 1994 Incentive Stock Plan. Exhibit 10.1 to the
Company's Quarterly Report on Form 10-Q dated May 31, 1996, is
incorporated herein by reference.
4.15 Indenture, dated as of May 15, 1997, by and among the Company and First
Bank National Association with respect to the Senior Discount Notes and
Exchange Notes. Exhibit 4.1 to the Company's Registration Statement on
Form S-4 (No. 333-31231) is incorporated herein by reference.
4.16 Indenture, dated as of December 1, 1996, by and among the Company, the
Guarantors and First Bank National Association with respect to the 1996
Notes and Exchange Notes. Exhibit 4.1 to the Company's Registration
Statement on Form S-4 (No. 333-22575) is incorporated herein by
reference.
4.17 First Supplemental Indenture dated December 30, 1996 related to the
1996 Notes. Exhibit 4.2 to the Company's Registration Statement on Form
S-4 (No. 333-22575) is incorporated herein by reference.
4.18 Second Supplemental Indenture dated April 30, 1997 related to the 1996
Notes. Exhibit 4.3 to the Company's Registration Statement on Form S-4
(No. 333-22575) is incorporated herein by reference.
4.19 Senior Subordinated Guarantee dated as of December 1, 1996 related to
the 1996 Notes. Exhibit 4.5 to the Company's Registration Statement on
Form S-4 (No. 333-22575) is incorporated herein by reference.
4.20 Amendment No. 1 to the 1991 Incentive Stock Plan dated November 1,
1996. Exhibit 4.20 to the Company's Annual Report on Form 10-K dated
March 31, 1998 is incorporated herein by reference.
4.21 Indenture relating to the 1998 Senior Notes, dated as of December 23,
1998, by and among the Company and U.S. Bank Trust National
Association, as Trustee, with respect to the 1998 Senior Notes and
Exchange Notes. Exhibit 4.1 to the Company's Registration Statement on
Form S-4 (No.333-70709) is incorporated herein by reference.
4.22 Five Year Series Supplement Indenture relating to the 1998 Five Year
Notes, dated December 23, 1998, among the Company, the Guarantors and
the Trustee. Exhibit 4.2 to the Company's Registration Statement on
Form S-4 (No.333-70709) is incorporated herein by reference.
4.23 Form of Series B Five Year Notes (included in Exhibit 4.22). Exhibit
4.3 to the Company's Registration Statement on Form S-4 (No.333-70709)
is incorporated herein by reference.
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<PAGE> 36
4.24 Seven Year Series Supplement Indenture relating to the 1998 Seven Year
Notes, dated December 23, 1998, among the Company, the Guarantors and
the Trustee. Exhibit 4.4 to the Company's Registration Statement on
Form S-4 (No.333-70709) is incorporated herein by reference.
4.25 Form of Series B Seven Year Notes (included in Exhibit 4.24). Exhibit
4.5 to the Company's Registration Statement on Form S-4 (No.333-70709)
is incorporated herein by reference.
4.26 Ten Year Series Supplement Indenture relating to the 1998 Ten Year
Notes, dated December 23, 1998, among the Company, the Guarantors and
the Trustee. Exhibit 4.6 to the Company's Registration Statement on
Form S-4 (No.333-70709) is incorporated herein by reference.
4.27 Form of Series B Ten Year Notes (included in Exhibit 4.26). Exhibit 4.7
to the Company's Registration Statement on Form S-4 (No.333-70709) is
incorporated herein by reference.
4.28 Certificate of Designation, Preferences, Rights and Limitations of 7%
Cumulative Convertible Preferred Stock, par value $.10 per share dated
April 27, 1994. Exhibit 3.2 to Post-Effective Amendment Number 1 to the
Company's Registration Statement on Form S-1 (No. 33-75070) is
incorporated herein by reference.
10.1 Agreement dated September 17, 1996, between Allied Waste Industries,
Inc., and the Laidlaw Group. Exhibit 10.1 to the Company's Current
Report on Form 8-K dated October 2, 1996, is incorporated herein by
reference.
10.2 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.
10.3 Securities Purchase Agreement dated April 21, 1997 between Apollo
Investment Fund III, L.P., Apollo Overseas Partners III, L.P., and
Apollo (U.K.) Partners III, L.P.; Blackstone Capital Partners II
Merchant Banking Fund L.P., Blackstone Offshore Capital Partners II
L.P. and Blackstone Family Investment Partnership II L.P.; Laidlaw Inc.
and Laidlaw Transportation, Inc.; and Allied Waste Industries. Exhibit
10.1 to the Company's Report on Form 10-Q for the quarter ended March
31, 1997 is incorporated herein by reference.
10.4 Shareholders Agreement dated as of April 14, 1997 between Allied Waste
Industries, Inc. and Apollo Investment Fund III, L.P., Apollo Overseas
Partners III, L.P., and Apollo (U.K.) Partners III, L.P.; Blackstone
Capital Partners II Merchant Banking Fund L.P., Blackstone Offshore
Capital Partners II L.P. and Blackstone Family Investment Partnership
II L.P. Exhibit 10.2 to the Company's Report on Form 10-Q for the
quarter ended March 31, 1997 is incorporated herein by reference.
10.5 Amended and Restated Shareholders Agreement dated as of April 21, 1997
between Allied Waste Industries, Inc. and Apollo Investment Fund III,
L.P., Apollo Overseas Partners III, L.P., and Apollo (U.K.) Partners
III, L.P.; Blackstone Capital Partners II Merchant Banking Fund L.P.,
Blackstone Offshore Capital Partners II L.P. and Blackstone Family
Investment Partnership II L.P. Exhibit 10.3 to the Company's Report on
Form 10-Q for the quarter ended March 31, 1997 is incorporated herein
by reference.
10.6 Registration Rights Agreement dated as of April 21, 1997 between Allied
Waste Industries, Inc. and Apollo Investment Fund III, L.P., Apollo
Overseas Partners III, L.P., and Apollo (U.K.) Partners III, L.P.;
Blackstone Capital Partners II Merchant Banking Fund L.P., Blackstone
Offshore Capital Partners II L.P. and Blackstone Family Investment
Partnership II L.P. Exhibit 10.4 to the Company's Report on Form 10-Q
for the quarter ended March 31, 1997 is incorporated herein by
reference.
10.7 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.
36
<PAGE> 37
10.8 Executive Employment Agreement between the Company and with Henry L.
Hirvela dated June 6, 1997. Exhibit 10.2 to the Company's Report on
Form 10-Q for the quarter ended June 30, 1997 is incorporated herein by
reference.
*10.9 Executive Employment Agreement between the Company and with Thomas H.
Van Weelden dated January 1, 1999.
10.10 Executive Employment Agreement between the Company and with Larry D.
Henk dated June 6, 1997. Exhibit 10.4 to the Company's Report on Form
10-Q for the quarter ended June 30, 1997 is incorporated herein by
reference.
10.11 Executive Employment Agreement between the Company and with Steven M.
Helm dated June 6, 1997. Exhibit 10.5 to the Company's Report on Form
10-Q for the quarter ended June 30, 1997 is incorporated herein by
reference.
*10.12 Executive Employment Agreement between the Company and with Donald W.
Slager dated January 1, 1999.
10.13 Registration Rights Agreement, dated as of December 5, 1996, by and
among the Company, Goldman Sachs & Co., Merrill Lynch & Co., and Credit
Suisse First Boston. Exhibit 10.1 to the Company's Registration
Statement on Form S-4 (No. 333-31231) is incorporated herein by
reference.
10.14 Executive Employment Agreement between the Company and with Peter S.
Hathaway dated June 6, 1997. Exhibit 10.14 to the Company's Report on
Form 10-K for the year ended December 31, 1997 is incorporated herein
by reference.
10.15 Executive Employment Agreement between the Company and with Michael G.
Hannon dated June 6, 1997. Exhibit 10.15 to the Company's Report on
Form 10-K for the year ended December 31, 1997 is incorporated herein
by reference.
10.16 Share Purchase Agreement between Allied Waste Industries, Inc. and
Allied Waste Holdings (Canada) Ltd. and Laidlaw Waste Systems, Inc. and
USA Waste Services, Inc. and Canadian Waste Services Inc. dated January
15, 1997. Exhibit 10.0 to the Company's Report on Form 8-K dated
January 30, 1997 is incorporated herein by reference.
10.17 Credit Agreement dated as of June 18, 1998 among Allied Waste North
America, Inc., Allied Waste Industries, Inc., certain lenders, Credit
Suisse, First Boston and Goldman Sachs Credit Partners L.P., as
Co-Syndication Agents, Citibank, N.A., as Issuing Bank and Citicorp
USA, Inc., as Administrative Agent. Exhibit 10.1 to the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1998 is
incorporated herein by reference.
10.18 Registration Rights Agreement, dated as of December 23, 1998, by and
among the Company, the Guarantors, and Donaldson, Lufkin & Jenrette
Securities Corporation, relating to the $225,000,000 7 3/8% Senior
Notes due 2004. Exhibit 10.1 to the Company's Registration Statement on
Form S-4 (No.333-70709) is incorporated herein by reference.
10.19 Registration Rights Agreement, dated as of December 23, 1998, by and
among the Company, the Guarantors, and Donaldson, Lufkin & Jenrette
Securities Corporation, relating to the $600,000,000 7 5/8% Senior
Notes due 2006. Exhibit 10.2 to the Company's Registration Statement on
Form S-4 (No.333-70709) is incorporated herein by reference.
10.20 Registration Rights Agreement, dated as of December 23, 1998, by and
among the Company, the Guarantors, and Donaldson, Lufkin & Jenrette
Securities Corporation, Goldman Sachs & Co., Credit Suisse First
Boston, Merrill Lynch, Pierce, Fenner & Smith Incorporated, Morgan
Stanley Dean Witter Incorporated, Bear, Stearns, & Co, Inc., BT Alex.
Brown, CIBC Oppenheimer, Salomon Smith Barney, Inc., relating to the
$875,000,000 7 7/8% Senior Notes due 2009. Exhibit 10.3 to the
Company's Registration Statement on Form S-4 (No.333-70709) is
incorporated herein by reference.
10.21 Purchase Agreement dated December 14, 1998, by and among the Company,
the Guarantors and Donaldson, Lufkin & Jenrette Securities Corporation,
with respect to the 1998 Senior Notes. Exhibit
37
<PAGE> 38
10.4 to the Company's Registration Statement on Form S-4 (No.333-70709)
is incorporated herein by reference.
*10.22 Equity Commitment Letter dated March 7, 1999 among the Company, Apollo
Management IV, L.P., Blackstone Management Associates III L.L.C.,
Greenwich Street Investments II, L.L.C., DLJMB Funding, Inc., DLJ
Merchant Banking II, Inc., DLJ Diversified Partners, Inc., and DLJ LBO
Plans Management Corporation.
*10.23 Side Letter Agreement between the Company, Apollo Investors II, L.P.,
Apollo Capital Management II, Inc., Blackstone Management Associates
II, L.L.C., and Blackstone Management Associates III, L.L.C.
*12 Ratio of earnings to fixed charges.
*27 Financial Data Schedule for the three months ended March 31, 1999.
* Filed herewith.
38
<PAGE> 39
REPORTS ON FORM 8-K DURING THE QUARTER ENDED MARCH 31, 1999
March 8, 1999 The Company's Current Report on Form 8-K reports the
merger agreement between Allied Waste Industries,
Inc. and Browning-Ferris Industries, Inc. under which
Allied will acquire Browning-Ferris Industries, Inc.
for $45.00 in cash per Browning-Ferris Industries,
Inc. common share.
39
<PAGE> 40
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant, Allied Waste Industries, Inc., has caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
ALLIED WASTE INDUSTRIES, INC.
By: /s/ HENRY L. HIRVELA
-----------------------------------------
Henry L. Hirvela
Vice President and Chief Financial Officer
(Principal Financial Officer)
By: /s/ PETER S. HATHAWAY
-----------------------------------------
Peter S. Hathaway
Vice President and Chief Accounting Officer
(Principal Accounting Officer)
Date: May 14, 1999
40
<PAGE> 41
EXHIBIT INDEX
Exhibits --
2.1 Stock Purchase Agreement dated September 17, 1996 among the Company,
Allied NA, 3294862 Canada Inc., Laidlaw Inc., Laidlaw Transportation,
Inc., Laidlaw Waste Systems, Inc., Laidlaw Waste Systems (Canada) Ltd.
and Laidlaw Medical Services Ltd. Exhibit 2.1 to the Company's Current
Report on Form 8-K dated October 2, 1996, is incorporated herein by
reference.
2.2 Purchase Agreement relating to the 1996 Notes dated November 25, 1996.
Exhibit 2.1 to the Company's Current Report on Form 8-K dated December
19, 1996, is incorporated herein by reference.
2.3 Share Purchase Agreement dated January 15, 1997 among the Company,
Allied Waste Holdings (Canada) Ltd., Laidlaw Waste Systems, Inc., USA
Waste Services, Inc. and Canadian Waste Services, Inc. Exhibit 10.0 to
the Company's Current Report on Form 8-K dated January 30, 1997, is
incorporated herein by reference.
2.4 Amended and Restated Agreement and Plan of Reorganization between
Allied Waste Industries, Inc. and Rabanco Acquisition Company, Rabanco
Acquisition Company Two, Rabanco Acquisition Company Three, Rabanco
Acquisition Company Four, Rabanco Acquisition Company Five, Rabanco
Acquisition Company Six, Rabanco Acquisition Company Seven, Rabanco
Acquisition Company Eight, Rabanco Acquisition Company Nine, Rabanco
Acquisition Company Ten, Rabanco Acquisition Company Eleven, and
Rabanco Acquisition Company Twelve. Exhibit 2.4 to the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1998 is
incorporated herein by reference.
2.5 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. Exhibit 2 to the Company's Current
Report on Form 8-K filed August 21, 1998 is incorporated hereby by
reference.
2.6 Agreement and Plan of Merger dated as of March 7, 1999 by and among
Allied Waste Industries, Inc., AWIN I Acquisition Corporation and
Browning-Ferris Industries, Inc. Exhibit 2 to the Company's Current
Report on Form 8-K filed March 16, 1999 is incorporated herein by
reference.
3.1 Amended Certificate of Incorporation of the Company (Incorporated
herein by reference to Exhibit 3.1 to the Company's Report on Form 10-K
for the fiscal year ended December 31, 1996).
3.2 Amended and Restated Bylaws of the Company as of May 13, 1997. Exhibit
3.2 to the Company's Report on Form 10-Q for the quarter ended June 30,
1997 is incorporated herein by reference. 3.3 Amendment to Amended
Certificate of Incorporation of the Company dated October 15, 1998.
Exhibit 3.4 to the Company's Report on Form 10-Q for the quarter ended
September 30, 1998 is incorporated herein by reference.
4.1 Specimen certificate for shares of Common Stock par value $.01 per
share. Exhibit 4.2 of the Company's Registration Statement on Form S-1
(No. 33-48507) is incorporated herein by reference.
4.2 Indenture relating to the 1994 Notes dated January 15, 1994 between the
Company and First Trust National Association, as trustee ("First
Trust"). Exhibit 4.1 to the Company's Registration Statement on Form
S-1 (No. 33-73110) is incorporated herein by reference.
4.3 Specimen certificate representing the 1994 Notes. Exhibit 4.2 of the
Company's Registration Statement on Form S-1 (No. 33-48507) is
incorporated herein by reference.
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.
<PAGE> 42
4.6 Fourth Supplemental Indenture relating to the 1994 Notes dated January
23, 1996, between the Company and First Trust. Exhibit 10.1 to the
Company's Current Report on Form 8-K dated January 22, 1996, is
incorporated herein by reference.
4.7 Fifth Supplemental Indenture relating to the 1994 Notes dated July 30,
1996 between the Company and First Trust. Exhibit 10.2 to the Company's
Quarterly Report on Form 10-Q dated August 14, 1996, is incorporated
herein by reference.
4.8 Indenture relating to the 1996 Notes dated February 28, 1997 between
the Company and First Trust. Exhibit 4.1 to the Company's Registration
Statement on Form S-4 (No. 333-22575) is incorporated herein by
reference.
4.9 1991 Incentive Stock Plan of the Company. Exhibit 10.T to the Company's
Form 10 dated May 14, 1991, is incorporated herein by reference.
4.10 1991 Non-Employee Director Stock Plan of the Company. Exhibit 10.U to
the Company's Form 10 dated May 14, 1991, is incorporated herein by
reference.
4.11 1993 Incentive Stock Plan of the Company. Exhibit 10.3 to the Company's
Registration Statement on Form S-1 (No. 33-73110) is incorporated
herein by reference.
4.12 1994 Amended and Restated Non-Employee Director Stock Option Plan of
the Company. Exhibit B to the Company's Definitive Proxy Statement in
accordance with Schedule 14A dated April 28, 1994, is incorporated
herein by reference.
4.13 Amendment to the 1994 Amended and Restated Non-Employee Director Stock
Option Plan. Exhibit 10.2 to the Company's Quarterly Report on Form
10-Q dated August 10, 1995, is incorporated herein by reference.
4.14 Amended and Restated 1994 Incentive Stock Plan. Exhibit 10.1 to the
Company's Quarterly Report on Form 10-Q dated May 31, 1996, is
incorporated herein by reference.
4.15 Indenture, dated as of May 15, 1997, by and among the Company and First
Bank National Association with respect to the Senior Discount Notes and
Exchange Notes. Exhibit 4.1 to the Company's Registration Statement on
Form S-4 (No. 333-31231) is incorporated herein by reference.
4.16 Indenture, dated as of December 1, 1996, by and among the Company, the
Guarantors and First Bank National Association with respect to the 1996
Notes and Exchange Notes. Exhibit 4.1 to the Company's Registration
Statement on Form S-4 (No. 333-22575) is incorporated herein by
reference.
4.17 First Supplemental Indenture dated December 30, 1996 related to the
1996 Notes. Exhibit 4.2 to the Company's Registration Statement on Form
S-4 (No. 333-22575) is incorporated herein by reference.
4.18 Second Supplemental Indenture dated April 30, 1997 related to the 1996
Notes. Exhibit 4.3 to the Company's Registration Statement on Form S-4
(No. 333-22575) is incorporated herein by reference.
4.19 Senior Subordinated Guarantee dated as of December 1, 1996 related to
the 1996 Notes. Exhibit 4.5 to the Company's Registration Statement on
Form S-4 (No. 333-22575) is incorporated herein by reference.
4.20 Amendment No. 1 to the 1991 Incentive Stock Plan dated November 1,
1996. Exhibit 4.20 to the Company's Annual Report on Form 10-K dated
March 31, 1998 is incorporated herein by reference.
4.21 Indenture relating to the 1998 Senior Notes, dated as of December 23,
1998, by and among the Company and U.S. Bank Trust National
Association, as Trustee, with respect to the 1998 Senior Notes and
Exchange Notes. Exhibit 4.1 to the Company's Registration Statement on
Form S-4 (No.333-70709) is incorporated herein by reference.
4.22 Five Year Series Supplement Indenture relating to the 1998 Five Year
Notes, dated December 23, 1998, among the Company, the Guarantors and
the Trustee. Exhibit 4.2 to the Company's Registration Statement on
Form S-4 (No.333-70709) is incorporated herein by reference.
4.23 Form of Series B Five Year Notes (included in Exhibit 4.22). Exhibit
4.3 to the Company's Registration Statement on Form S-4 (No.333-70709)
is incorporated herein by reference.
<PAGE> 43
4.24 Seven Year Series Supplement Indenture relating to the 1998 Seven Year
Notes, dated December 23, 1998, among the Company, the Guarantors and
the Trustee. Exhibit 4.4 to the Company's Registration Statement on
Form S-4 (No.333-70709) is incorporated herein by reference.
4.25 Form of Series B Seven Year Notes (included in Exhibit 4.24). Exhibit
4.5 to the Company's Registration Statement on Form S-4 (No.333-70709)
is incorporated herein by reference.
4.26 Ten Year Series Supplement Indenture relating to the 1998 Ten Year
Notes, dated December 23, 1998, among the Company, the Guarantors and
the Trustee. Exhibit 4.6 to the Company's Registration Statement on
Form S-4 (No.333-70709) is incorporated herein by reference.
4.27 Form of Series B Ten Year Notes (included in Exhibit 4.26). Exhibit 4.7
to the Company's Registration Statement on Form S-4 (No.333-70709) is
incorporated herein by reference.
4.28 Certificate of Designation, Preferences, Rights and Limitations of 7%
Cumulative Convertible Preferred Stock, par value $.10 per share dated
April 27, 1994. Exhibit 3.2 to Post-Effective Amendment Number 1 to the
Company's Registration Statement on Form S-1 (No. 33-75070) is
incorporated herein by reference.
10.1 Agreement dated September 17, 1996, between Allied Waste Industries,
Inc., and the Laidlaw Group. Exhibit 10.1 to the Company's Current
Report on Form 8-K dated October 2, 1996, is incorporated herein by
reference.
10.2 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.
10.3 Securities Purchase Agreement dated April 21, 1997 between Apollo
Investment Fund III, L.P., Apollo Overseas Partners III, L.P., and
Apollo (U.K.) Partners III, L.P.; Blackstone Capital Partners II
Merchant Banking Fund L.P., Blackstone Offshore Capital Partners II
L.P. and Blackstone Family Investment Partnership II L.P.; Laidlaw Inc.
and Laidlaw Transportation, Inc.; and Allied Waste Industries. Exhibit
10.1 to the Company's Report on Form 10-Q for the quarter ended March
31, 1997 is incorporated herein by reference.
10.4 Shareholders Agreement dated as of April 14, 1997 between Allied Waste
Industries, Inc. and Apollo Investment Fund III, L.P., Apollo Overseas
Partners III, L.P., and Apollo (U.K.) Partners III, L.P.; Blackstone
Capital Partners II Merchant Banking Fund L.P., Blackstone Offshore
Capital Partners II L.P. and Blackstone Family Investment Partnership
II L.P. Exhibit 10.2 to the Company's Report on Form 10-Q for the
quarter ended March 31, 1997 is incorporated herein by reference.
10.5 Amended and Restated Shareholders Agreement dated as of April 21, 1997
between Allied Waste Industries, Inc. and Apollo Investment Fund III,
L.P., Apollo Overseas Partners III, L.P., and Apollo (U.K.) Partners
III, L.P.; Blackstone Capital Partners II Merchant Banking Fund L.P.,
Blackstone Offshore Capital Partners II L.P. and Blackstone Family
Investment Partnership II L.P. Exhibit 10.3 to the Company's Report on
Form 10-Q for the quarter ended March 31, 1997 is incorporated herein
by reference.
10.6 Registration Rights Agreement dated as of April 21, 1997 between Allied
Waste Industries, Inc. and Apollo Investment Fund III, L.P., Apollo
Overseas Partners III, L.P., and Apollo (U.K.) Partners III, L.P.;
Blackstone Capital Partners II Merchant Banking Fund L.P., Blackstone
Offshore Capital Partners II L.P. and Blackstone Family Investment
Partnership II L.P. Exhibit 10.4 to the Company's Report on Form 10-Q
for the quarter ended March 31, 1997 is incorporated herein by
reference.
10.7 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.
<PAGE> 44
10.8 Executive Employment Agreement between the Company and with Henry L.
Hirvela dated June 6, 1997. Exhibit 10.2 to the Company's Report on
Form 10-Q for the quarter ended June 30, 1997 is incorporated herein by
reference.
*10.9 Executive Employment Agreement between the Company and with Thomas H.
Van Weelden dated January 1, 1999.
10.10 Executive Employment Agreement between the Company and with Larry D.
Henk dated June 6, 1997. Exhibit 10.4 to the Company's Report on Form
10-Q for the quarter ended June 30, 1997 is incorporated herein by
reference.
10.11 Executive Employment Agreement between the Company and with Steven M.
Helm dated June 6, 1997. Exhibit 10.5 to the Company's Report on Form
10-Q for the quarter ended June 30, 1997 is incorporated herein by
reference.
*10.12 Executive Employment Agreement between the Company and with Donald W.
Slager dated January 1, 1999.
10.13 Registration Rights Agreement, dated as of December 5, 1996, by and
among the Company, Goldman Sachs & Co., Merrill Lynch & Co., and Credit
Suisse First Boston. Exhibit 10.1 to the Company's Registration
Statement on Form S-4 (No. 333-31231) is incorporated herein by
reference.
10.14 Executive Employment Agreement between the Company and with Peter S.
Hathaway dated June 6, 1997. Exhibit 10.14 to the Company's Report on
Form 10-K for the year ended December 31, 1997 is incorporated herein
by reference.
10.15 Executive Employment Agreement between the Company and with Michael G.
Hannon dated June 6, 1997. Exhibit 10.15 to the Company's Report on
Form 10-K for the year ended December 31, 1997 is incorporated herein
by reference.
10.16 Share Purchase Agreement between Allied Waste Industries, Inc. and
Allied Waste Holdings (Canada) Ltd. and Laidlaw Waste Systems, Inc. and
USA Waste Services, Inc. and Canadian Waste Services Inc. dated January
15, 1997. Exhibit 10.0 to the Company's Report on Form 8-K dated
January 30, 1997 is incorporated herein by reference.
10.17 Credit Agreement dated as of June 18, 1998 among Allied Waste North
America, Inc., Allied Waste Industries, Inc., certain lenders, Credit
Suisse, First Boston and Goldman Sachs Credit Partners L.P., as
Co-Syndication Agents, Citibank, N.A., as Issuing Bank and Citicorp
USA, Inc., as Administrative Agent. Exhibit 10.1 to the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1998 is
incorporated herein by reference.
10.18 Registration Rights Agreement, dated as of December 23, 1998, by and
among the Company, the Guarantors, and Donaldson, Lufkin & Jenrette
Securities Corporation, relating to the $225,000,000 7 3/8% Senior
Notes due 2004. Exhibit 10.1 to the Company's Registration Statement on
Form S-4 (No.333-70709) is incorporated herein by reference.
10.19 Registration Rights Agreement, dated as of December 23, 1998, by and
among the Company, the Guarantors, and Donaldson, Lufkin & Jenrette
Securities Corporation, relating to the $600,000,000 7 5/8% Senior
Notes due 2006. Exhibit 10.2 to the Company's Registration Statement on
Form S-4 (No.333-70709) is incorporated herein by reference.
10.20 Registration Rights Agreement, dated as of December 23, 1998, by and
among the Company, the Guarantors, and Donaldson, Lufkin & Jenrette
Securities Corporation, Goldman Sachs & Co., Credit Suisse First
Boston, Merrill Lynch, Pierce, Fenner & Smith Incorporated, Morgan
Stanley Dean Witter Incorporated, Bear, Stearns, & Co, Inc., BT Alex.
Brown, CIBC Oppenheimer, Salomon Smith Barney, Inc., relating to the
$875,000,000 7 7/8% Senior Notes due 2009. Exhibit 10.3 to the
Company's Registration Statement on Form S-4 (No.333-70709) is
incorporated herein by reference.
10.21 Purchase Agreement dated December 14, 1998, by and among the Company,
the Guarantors and Donaldson, Lufkin & Jenrette Securities Corporation,
with respect to the 1998 Senior Notes. Exhibit
<PAGE> 45
10.4 to the Company's Registration Statement on Form S-4 (No.333-70709)
is incorporated herein by reference.
*10.22 Equity Commitment Letter dated March 7, 1999 among the Company, Apollo
Management IV, L.P., Blackstone Management Associates III L.L.C.,
Greenwich Street Investments II, L.L.C., DLJMB Funding, Inc., DLJ
Merchant Banking II, Inc., DLJ Diversified Partners, Inc., and DLJ LBO
Plans Management Corporation.
*10.23 Side Letter Agreement between the Company, Apollo Investors II, L.P.,
Apollo Capital Management II, Inc., Blackstone Management Associates
II, L.L.C., and Blackstone Management Associates III, L.L.C.
*12 Ratio of earnings to fixed charges.
*27 Financial Data Schedule for the three months ended March 31, 1999.
* Filed herewith.
<PAGE> 1
EXHIBIT 10.9
EXECUTIVE EMPLOYMENT AGREEMENT
This EXECUTIVE EMPLOYMENT AGREEMENT is made and entered into effective
January 1, 1999, by and between ALLIED WASTE INDUSTRIES, INC., a Delaware
corporation having its principal executive office at 15880 North Greenway Hayden
Loop, Suite 100, Scottsdale, Arizona 85260 ("Company") and THOMAS H. VAN WEELDEN
("Executive").
W I T N E S S E T H:
WHEREAS, the Company desires to employ the Executive in an executive
capacity and the Executive desires to enter the Company's employ.
NOW, THEREFORE, for and in consideration of the mutual promises,
covenants and obligations contained herein, and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
Company and the Executive hereby agree as follows:
CERTAIN DEFINITIONS. As used in this Agreement, the following terms
have the meanings prescribed below:
Affiliate is used in this Agreement to define a relationship to a
person or entity and means a person or entity who, directly or indirectly
through one or more intermediaries, controls, is controlled by, or is under
common control with, such person or entity.
Annual Bonus shall have the meaning assigned thereto in Section 4.2
hereof. Base Salary shall have the meaning, assigned thereto in Section 4.1
hereof.
Beneficial Owner shall have the meaning assigned thereto in Rule
13(d)-3 under the Exchange Act; provided, however, and without limitation, that
any individual, corporation, partner ship, group, association or other person or
entity that has the right to acquire any Voting Stock at any time in the future,
whether such right is (a) contingent or absolute or (b) exercisable presently or
at any time in the future, pursuant to any agreement or understanding or upon
the exercise or conversion of rights, options or warrants, or otherwise, shall
be the Beneficial Owner of such Voting Stock.
Cause shall have the meaning assigned thereto in Section 5.3 hereof.
Change in Control of the Company shall be deemed to have occurred if
(i) the Company merges or consolidates, or agrees to merge or to consolidate,
with any other corporation (other than a wholly-owned direct or indirect
subsidiary of the Company) and is not the surviving corporation (or survives as
a subsidiary of another corporation), (ii) the Company sells, or agrees to sell,
all or substantially all of its assets to any other person or entity, (iii) the
Company is dissolved, (iv) any third person or entity (other than a trustee or
committee of any qualified employee benefit plan of the Company) together with
its Affiliates shall become or shall have
<PAGE> 2
publicly announced its intention to become (by tender offer or otherwise),
directly or indirectly, the Beneficial Owner of at least 30% of the Voting Stock
of the Company, or (v) the individuals who constitute the Board of Directors of
the Company as of the Effective Date ("Incumbent Board") shall cease for any
reason to constitute at least a majority of the Board of Directors; provided,
that any person becoming a director whose election or nomination for election
was approved by a majority of the members of the Incumbent Board shall be
considered, for the purposes of this Agreement, a member of the Incumbent Board.
Code means the Internal Revenue Code of 1986, as amended, and the rules
and regulations promulgated by the Internal Revenue Service thereunder, all as
in effect from time to time during the Employment Period.
Common Stock means the Company's common stock, par value $.01 per
share.
Company means Allied Waste Industries, Inc., a Delaware corporation,
the principal executive office of which is located at 15880 North Greenway
Hayden Loop, Suite 100, Scottsdale, Arizona 85260.
Confidential Information shall have the meaning assigned thereto in
Section 8.2 hereof.
Date of Termination means the earliest to occur of (i) the date of the
Executive's death, (ii) the date on which the Executive terminates this
Agreement for any reason other than Good Reason or (iii) the date of receipt of
the Notice of Termination, or such later date as may be prescribed in the Notice
of Termination in accordance with Section 5.6 hereof.
Disability means an illness or other disability which prevents the
Executive from discharging his responsibilities under this Agreement for a
period of 180 consecutive calendar days, or an aggregate of 180 calendar days in
any calendar year, during the Employment Period, all as determined in good faith
by the Board of Directors of the Company (or a committee thereof).
Effective Date means January 1, 1999.
Employment Period shall have the meaning assigned thereto in Section 3
hereof.
Exchange Act means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated by the Securities and Exchange Commission
thereunder, all as in effect from time to time during the Employment Period.
Executive means Thomas H. Van Weelden.
Good Reason shall have the meaning assigned thereto in Section 5.5
hereof.
Notice of Termination shall have the meaning assigned thereto in
Section 5.6 hereof.
Vacation Time shall have the meaning assigned thereto in Section 4.3
hereof.
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Voting Stock means all outstanding shares of capital stock of the
Company entitled to vote generally in an election of directors; provided,
however, that if the Company has shares of Voting Stock entitled to more or less
than one vote per share, each reference to a proportion of the issued and
outstanding shares of Voting Stock shall be deemed to refer to the proportion of
the aggregate votes entitled to be cast by the issued and outstanding shares of
Voting Stock.
Without Cause shall have the meaning assigned thereto in Section 5.4
hereof.
GENERAL DUTIES OF COMPANY AND EXECUTIVE.
The Company agrees to employ the Executive, and the
Executive agrees to accept employment by the Company and to serve the Company as
its President, Chief Executive Officer, and Chairman of the Board. The
authority, duties and responsibilities of the Executive shall include those
described in Schedule A to this Agreement, and such other or additional duties
as may from time to time be assigned to the Executive by the Board of Directors
(or a committee thereof) and agreed to by the Executive, which will be reflected
in an amended Schedule A. While employed hereunder, the Executive shall devote
reasonable time and attention during normal business hours to the affairs of the
Company and use his best efforts to perform faithfully and efficiently his
duties and responsibilities. The Executive may (i) serve on corporate, civic or
charitable boards or committees, (ii) deliver lectures, fulfill speaking
engagements or teach at educational institutions, and (iii) manage personal
investments, so long as such activities do not significantly interfere with the
performance of the Executive's duties and responsibilities.
The Executive agrees and acknowledges that he owes a
fiduciary duty of loyalty, fidelity and allegiance to act at all times in the
best interests of the Company and to do no act and to make no statement, oral or
written, which would injure Company's business, its interests or its reputation.
The Executive agrees to comply at all times during the
Employment Period with all applicable policies, rules and regulations of the
Company, including, without limitation, the Company's Code of Ethics and the
Company's policy regarding trading Common Stock, as each is in effect from time
to time during the Employment Period.
TERM. Unless sooner terminated pursuant to other provisions hereof,
the Executive's period of employment under this Agreement shall be a period of
three (3) years beginning on the Effective Date (the "Initial Term"). After the
expiration of the first year of the Initial Term, and at the conclusion of each
year during the term hereof, the Employee's period of employment under this
Agreement shall be automatically renewed for successive three-year terms on each
anniversary of the Effective Date (the Initial Term and any and all renewals
thereof are referred to herein collectively as the "Employment Period").
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COMPENSATION AND BENEFITS.
Base Salary. As compensation for services to the Company,
the Company shall pay to the Executive until the Date of Termination an annual
base salary of $_______________ ("Base Salary"). The Board of Directors (or a
committee thereof), in its discretion, may increase the Base Salary based upon
relevant circumstances. The Base Salary shall be payable in equal semimonthly
installments or in accordance with the Company's established policy, subject
only to such payroll and withholding deductions as may be required by law and
other deductions applied generally to employees of the Company for insurance and
other employee benefit plans. For all purposes under this Agreement, the
Executive's Base Salary shall include any amount which is deferred under any
nonqualified plan or arrangement.
Bonus. In addition to the Base Salary, the Executive shall
be awarded, for each fiscal year until the Date of Termination, an annual bonus
(either pursuant to a bonus or incentive plan or program of the Company or
otherwise) in an amount to be determined by the Board of Directors (or a
committee thereof) in its sole discretion ("Annual Bonus"). Each such Annual
Bonus shall be payable at a time to be determined by the Board of Directors (or
a committee thereof) in its sole discretion. For all purposes under this
Agreement, the Executive's Annual Bonus shall include any amount which is
deferred under any nonqualified plan or arrangement.
Vacation. Until the Date of Termination, the Executive
shall be entitled to four weeks paid vacation during each one year period
commencing on the Effective Date ("Vacation Time"). Any Vacation Time not taken
during the applicable one year period will not accrue and will expire on the
applicable anniversary of the Effective Date.
Automobile Allowance. Until the Date of Termination, the
Executive shall receive an automobile allowance of $600.00 per month
("Automobile Allowance"). The Board of Directors (or a committee thereof), in
its discretion, may increase the Automobile Allowance based upon relevant
circumstances.
Club Membership Dues. Until the Date of Termination, the
Executive shall receive an amount per month equal to the monthly membership dues
which the Executive pays for one club or organization of Executive's choice.
Incentive, Savings, Retirement and Stock Plans. The
Executive shall participate in and be eligible to receive all benefits under all
executive incentive, savings, retirement and stock (including any stock option,
restricted stock, phantom stock and other stock rights) plans and programs
currently maintained or hereinafter established by the Company for the benefit
of its executive officers and/or employees (collectively "Compensation Plans").
The Executive's participation in all such Plans shall be governed by the terms
and provisions of each such Plan.
Welfare Benefit Plans. The Executive and/or the
Executive's family, as the case may be, shall be eligible to participate in and
shall receive all benefits under each welfare benefit plan of the Company
currently maintained or hereinafter established by the Company for the benefit
of its employees. Such welfare benefit plans may include, without limitation,
medical,
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dental, disability, group life, accidental death and travel accident insurance
plans and programs (collectively "Welfare Plans"). The Executive's and/or the
Executive's family's participation in the Welfare Plans shall be subject to the
terms and conditions of each Welfare Plan.
Reimbursement of Expenses. The Executive may from time to
time until the Date of Termination incur various business expenses customarily
incurred by persons holding positions of like responsibility, including, without
limitation, travel, entertainment and similar expenses incurred for the benefit
of the Company. Subject to the Company's policy regarding the reimbursement of
such expenses as in effect from time to time during the Employment Period, which
does not necessarily allow reimbursement of all such expenses, the Company shall
reimburse the Executive for such expenses from time to time, at the Executive's
request, and the Executive shall account to the Company for all such expenses.
TERMINATION.
Death. This Agreement shall terminate automatically upon
the death of the Executive.
Disability. The Company may terminate this Agreement, upon
written notice to the Executive delivered in accordance with Sections 5.6 and
12.1 hereof, upon the Disability of the Executive.
Cause. The Company may terminate this Agreement, upon
written notice to the Executive delivered in accordance with Sections 5.6 and
12.1 hereof, for Cause. For purposes of this Agreement, "Cause" means (i) the
conviction of the Executive for a felony, (ii) the Executive's willful refusal,
without proper legal cause, to perform his duties and responsibilities as
contemplated in this Agreement or (iii) the Executive's willfully engaging in
activities which would (A) constitute a breach of any term of this Agreement,
the Company's Code of Ethics, the Company's policies regarding trading Common
Stock or reimbursement of business expenses or any other applicable policies,
rules or regulations of the Company, or (B) result in a material injury to the
business, condition (financial or otherwise), results of operations or prospects
of the Company or its Affiliates (as determined in good faith by the Board of
Directors of the Company or a committee thereof). For purposes of the definition
of "Cause," no act or failure to act shall be considered "wilful" unless it is
done, or omitted to be done, in bad faith without reasonable belief that the
action or omission was in the best interests of the Company.
Without Cause. The Company may terminate this Agreement
Without Cause, upon written notice to the Executive delivered in accordance with
Sections 5.6 and 12.1 hereof. For purposes of this Agreement, the Executive will
be deemed to have been terminated "Without Cause" if the Executive is terminated
by the Company for any reason other than Cause, Disability or Death.
Good Reason. The Executive may terminate this Agreement
for Good Reason, upon written notice to the Company delivered in accordance with
Sections 5.6 and 12.1 hereof. For purposes of this Agreement, "Good Reason"
means (i) the assignment to the Executive of any duties inconsistent in any
respect with the Executive's duties or responsibilities as
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contemplated in this Agreement, (ii) any other action by the Company which
results in a diminishment in the Executive's position (including status,
offices, titles and reporting requirements), authority, duties or
responsibilities, (iii) any breach by the Company of any of the provisions of
this Agreement, (iv) requiring the Executive to relocate permanently to any
office or location other than the Phoenix-Scottsdale metropolitan area, without
his consent, or (v) any reduction, or attempted reduction, at any time during
the Employment Period, of the Base Salary of the Executive.
Notice of Termination. Any termination of this Agreement
by the Company for Cause, Without Cause or as a result of the Executive's
Disability, or by the Executive for Good Reason, shall be communicated by Notice
of Termination to the other party hereto given in accordance with this
Agreement. For purposes of this Agreement, a "Notice of Termination" means a
written notice which (i) indicates the specific termination provision in this
Agreement relied upon, (ii) sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated and (iii) specifies the termination
date, if such date is other than the date of receipt of such notice (which
termination date shall not be more than 15 days after the giving of such
notice).
OBLIGATIONS OF COMPANY UPON TERMINATION.
Cause, Other than Good Reason. If this Agreement is
terminated either by the Company for Cause or by the Executive for any reason
other than Good Reason, the Company shall pay to the Executive, in a lump sum
cash payment within 30 days after the Date of Termination, the aggregate of the
Executive's Base Salary (as in effect on the Date of Termination) owing as of
the Date of Termination, if not theretofore paid, and, in the case of
compensation previously deferred by the Executive, all amounts of such
compensation previously deferred and not yet paid by the Company (unless such
payment is inconsistent with the terms of any payment election made by the
Executive with respect to such deferred compensation). The Company also shall,
promptly upon submission by the Executive of supporting documentation, pay or
reimburse to the Executive any costs and expenses (including moving and
relocation expenses) paid or incurred by the Executive which would have been
payable under Section 4.8 of this Agreement if the Executive's employment had
not terminated.
All other obligations of the Company and rights of the Executive
hereunder shall terminate effective as of the Date of Termination; provided,
however, that the Executive's rights under any Compensation Plan shall be
governed by the terms and provisions of each such Plan and are not necessarily
severed on the Date of Termination.
Death or Disability.
Subject to the provisions of this Section 6.2, if this
Agreement is terminated as a result of the Executive's death or Disability, the
Company shall pay to the Executive or his estate, in a lump sum cash payment
within 30 days of the Date of Termination, the greater of (i) that portion of
the Executive's Base Salary (as in effect on the Date of Termination) owing in
respect of the balance of the Employment Period pursuant to Section 3 hereof or
(ii) the Executive's Base Salary (as in effect on the Date of Termination). The
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Company may purchase insurance to cover all or any part of the obligation
contemplated in the foregoing sentence, and the Executive agrees to submit to a
physical examination to facilitate the procurement of such insurance. The
Company also shall, promptly upon submission by the Executive of supporting
documentation, pay or reimburse to the Executive any costs and expenses
(including moving and relocation expenses) paid or incurred by the Executive
which would have been payable under Section 4.8 of this Agreement if the
Executive's employment had not terminated. Until the Executive obtains other
health coverage through another employer's health plan or, if longer, for a
period of five (5) years, the Company shall continue providing health coverage
to the Executive and/or the Executive's family at least equal to that which
would have been provided to them under Section 4.7 if the Executive's employment
had not terminated; provided that any such coverage shall cease immediately if
the Executive violates any of the applicable provisions of Article 11.
Whenever compensation is payable to the Executive
hereunder during a period in which he is partially or totally disabled, and such
Disability would (except for the provisions hereof) entitle the Executive to
Disability income or salary continuation payments from the Company according to
the terms of any plan or program presently maintained or hereafter established
by the Company, the Disability income or salary continuation paid to the
Executive pursuant to any such plan or program shall be considered a portion of
the payment to be made to the Executive pursuant to this Section 6.2 and shall
not be in addition hereto. If Disability income is payable directly to the
Executive by an insurance company under the terms of an insurance policy paid
for by the Company, the amounts paid to the Executive by such insurance company
shall be considered a portion of the payment to be made to the Executive
pursuant to this Section 6.2 and shall not be in addition hereto.
Good Reason; Without Cause. If this Agreement is terminated either by
the Executive for Good Reason or by the Company Without Cause:
the Company shall pay to the Executive, in a lump sum cash
payment within 30 days after the Date of Termination, the aggregate of the
following amounts:
if not theretofore paid, the Executive's Base Salary
(as in effect on the Date of Termination) through the Date of
Termination;
an amount equal to the largest Annual Bonus paid to
the Executive out of the last three (3) fiscal years preceding the Date
of Termination; and
in the case of compensation previously deferred by
the Executive, all amounts of such compensation previously deferred and
not yet paid by the Company (unless such payment is inconsistent with
the terms of any payment election made by the Executive with respect to
such deferred compensation).
the Company shall, promptly upon submission by the Executive
of supporting documentation, pay or reimburse to the Executive any costs and
expenses (including moving and relocation expenses) paid or incurred by the
Executive which would have been
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payable under Section 4.8 of this Agreement if the Executive's employment had
not terminated; and
until the Executive obtains other health coverage through
another employer's health plan or, if longer, for a period of five (5) years,
the Company shall continue providing health coverage to the Executive and/or the
Executive's family at least equal to that which would have been provided to them
under Section 4.7 if the Executive's employment had not terminated; provided
that any such coverage shall cease immediately if the Executive violates any of
the applicable provisions of Article 11.
the Company shall pay to the Executive, in equal
semi-monthly installments, the greater of (i) that portion of the Executive's
Base Salary (as in effect on the Date of Termination) owing, in respect of the
balance of the Employment Period pursuant to Section 3 hereof or (ii) the
Executive's Base Salary (as in effect on the Date of Termination); provided that
such payments shall cease immediately if the Executive violates any applicable
provision of Article 11.
Change in Control. If (a) this Agreement is terminated either by the
Executive for Good Reason or by the Company Without Cause and (b) a Change in
Control of the Company has occurred within the two-year period preceding, or
within the one-year period following, the Date of Termination, then, in addition
to the obligations of the Company set forth in Section 6.3 hereof, the Company
shall pay to the Executive, in a lump sum cash payment within 30 days after the
Date of Termination, two times the sum of (x) the Executive's Base Salary (as in
effect on the Date of Termination or such higher rate as may have been in effect
at any time during the 90-day period preceding the Date of Termination) and (y)
the Annual Bonus paid to the Executive for the last full fiscal year. The rights
given to the Executive herein do not apply to the Change of Control of the
Company which occurred when Apollo Advisors, L.P. and The Blackstone Group
acquired the Common Stock of Laidlaw Transportation, Inc.
EXECUTIVE'S OBLIGATION TO AVOID CONFLICTS OF INTEREST.
In keeping with the Executive's fiduciary duties to the Company, the
Executive agrees that he shall not knowingly become involved in a conflict of
interest with the Company, or upon discovery thereof, allow such a conflict to
continue. The Executive further agrees to disclose to the Company, promptly
after discovery, any facts or circumstances which might involve a conflict of
interest with the Company.
The Company and the Executive recognize that it is impossible to
provide an exhaustive list of actions or interests which constitute a "conflict
of interest." Moreover, the Company and the Executive recognize that there are
many borderline situations. In some instances, full disclosure of facts by the
Executive to the Company is all that is necessary to enable the Company to
protect its interests. In others, if no improper motivation appears to exist and
the Company's interests have not suffered, prompt elimination of the outside
interest will suffice. In still others, it may be necessary for the Company to
terminate the employment relationship. The Company and the Executive agree that
the Company's determination as to whether or not a conflict of interest exists
shall be conclusive. The Company reserves the right to take such action as, in
its judgment, will end the conflict of interest.
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In this connection, it is agreed that any direct or indirect interest
in, connection with or benefit from any outside activities, particularly
commercial activities, which interest might in any way adversely affect the
Company or its Affiliates, involves a possible conflict of interest.
Circumstances in which a conflict of interest on the part of the Executive would
or might arise, and which should be reported immediately to the Company,
include, but are not limited to, the following:
Ownership of a material interest in any lender, supplier,
contractor, subcontractor, customer or other entity with which the Company does
business.
Acting in any capacity, including director, officer,
partner, consultant, employee, distributor, agent or the like, for any lender,
supplier, contractor, subcontractor, customer or other entity with which the
Company does business.
Acceptance, directly or indirectly, of payments, services
or loans from a lender, supplier, contractor, subcontractor, customer or other
entity with which the Company does business, including, without limitation,
gifts, trips, entertainment or other favors of more than a nominal value, but
excluding loans from publicly held insurance companies and commercial or savings
banks at market rates of interest.
Use of information or facilities to which the Executive
has access in a manner which will be detrimental to the Company's interests,
such as use for the Executive's own benefit of know-how or information developed
through the Company's business activities.
Disclosure or other misuse of information of any kind
obtained through the Executive's connection with the Company.
Acquiring or trading in, directly or indirectly, other
properties or interests connected with the design or marketing of products or
services designed or marketed by the Company.
EXECUTIVE'S CONFIDENTIALITY OBLIGATION.
The Executive hereby acknowledges, understands and agrees that all
Confidential Information is the exclusive and confidential property of the
Company and its Affiliates which shall at all times be regarded, treated and
protected as such in accordance with this Section 8. The Executive acknowledges
that all such Confidential Information is in the nature of a trade secret.
For purposes of this Agreement, "Confidential Information" means
information, that is used in the business of the Company or its Affiliates and
(i) is proprietary to, about or created by the Company or its Affiliates, (ii)
gives the Company or its Affiliates some competitive business advantage or the
opportunity of obtaining such advantage or the disclosure of which could be
detrimental to the interests of the Company or its Affiliates, (iii) is
designated as Confidential Information by the Company or its Affiliates, is
known by the Executive to be
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considered confidential by the Company or its Affiliates, or from all the
relevant circumstances should reasonably be assumed by the Executive to be
confidential and propriety to the Company or its Affiliates, or (iv) is not
generally known by non-Company personnel. Such Confidential Information
includes, without limitation, the following types of information and other
information of a similar nature (whether or not reduced to writing or designed
as confidential):
Internal personnel and financial information of the
Company or its Affiliates, vendor information (including vendor characteristics,
services, prices, lists and agreements), purchasing and internal cost
information, internal service and operational manuals, and the manner and
methods of conducting the business of the Company or its Affiliates;
Marketing and development plans, price and cost data,
price and fee amounts, pricing and billing policies, quoting procedures,
marketing techniques, forecasts and forecast assumptions and volumes, and future
plans and potential strategies (including, without limitation, all information
relating to any acquisition prospect and the identity of any key contact within
the organization of any acquisition prospect) of the Company or its Affiliates
which have been or are being discussed;
Names of customers and their representatives, contracts
(including their contents and parties), customer services, and the type,
quantity, specifications and content of products and services purchased, leased,
licensed or received by customers of the Company or its Affiliates; and
Confidential and proprietary information provided to the
Company or its Affiliates by any actual or potential customer, government agency
or other third party (including businesses, consultants and other entities and
individuals).
As a consequence of the Executive's acquisition or anticipated
acquisition of Confidential Information, the Executive shall occupy a position
of trust and confidence with respect to the affairs and business of the Company
and its Affiliates. In view of the foregoing, and of the consideration to be
provided to the Executive, the Executive agrees that it is reasonable and
necessary that the Executive make each of the following covenants:
At any time during the Employment Period and thereafter,
the Executive shall not disclose Confidential Information to any person or
entity, either inside or outside of the Company, other than as necessary in
carrying out his duties and responsibilities as set forth in Section 2 hereof,
without first obtaining the Company's prior written consent (unless such
disclosure is compelled pursuant to court orders or subpoena, and at which time
the Executive shall give notice of such proceedings to the Company).
At any time during the Employment Period and thereafter,
the Executive shall not use, copy or transfer Confidential Information other
than as necessary in carrying out his duties and responsibilities as set forth
in Section 2 hereof, without first obtaining the Company's prior written
consent.
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On the Date of Termination, the Executive shall promptly
deliver to the Company (or its designee) all written materials, records and
documents made by the Executive or which came into his possession prior to or
during the Employment Period concerning, the business or affairs of the Company
or its Affiliates, including, without limitation, all materials containing
Confidential Information.
DISCLOSURE OF INFORMATION, IDEAS, CONCEPTS, IMPROVEMENTS, DISCOVERIES
AND INVENTIONS. Consistent with the Executive's fiduciary duties to the Company,
the Executive agrees that during his employment by the Company, the Executive
shall promptly disclose in writing to the Company all information, ideas,
concepts, improvements, discoveries and inventions, which are conceived,
developed, made or acquired by the Executive, either individually or jointly
with others, and which relate to the business, products or services of the
Company or its Affiliates, irrespective of whether the Executive used the
Company's time or facilities and irrespective of whether such information, idea,
concept, improvement, discovery or invention was conceived, developed,
discovered or acquired by the Executive on the job, at home, or elsewhere. This
obligation extends to all types of information, ideas and concepts, including,
information, ideas and concepts relating to new types of services, corporate
opportunities, acquisition prospects, the identity of key representatives within
acquisition prospect organizations, prospective names or service marks for the
Company's business activities, and the like.
OWNERSHIP OF INFORMATION, IDEAS, CONCEPTS, IMPROVEMENTS, DISCOVERIES
AND ALL ORIGINAL WORKS OF AUTHORSHIP.
All information, ideas, concepts, improvements, and discoveries which
are conceived, made, developed or acquired by the Executive or which are
disclosed or made known to the Executive, individually or in conjunction with
others, during the Executive's employment by the Company and which relate to the
business, products or services of the Company or its Affiliates (including,
without limitation, all such information relating to corporate opportunities,
research, financial and sales data, pricing and trading terms, evaluations,
opinions, interpretations, acquisition prospects, the identity of customers or
their requirements, the identity of key contacts within the customers'
organizations or within the organization of acquisition prospects, marketing and
merchandising techniques, and prospective names and service marks) are and shall
be the sole and exclusive property of the Company. Furthermore, all drawings,
memoranda, notes, records, files, correspondence, manuals, models,
specifications, computer programs, maps and all other writings or materials of
any type embodying any of such information, ideas, concepts, improvements, and
discoveries are and shall be the sole and exclusive property of the Company.
In particular, the Executive hereby specifically sells, assigns,
transfers and conveys to the Company all of his worldwide right, title and
interest in and to all such information, ideas, concepts, improvements, and
discoveries, and any United States or foreign applications therefor. The
Executive shall assist the Company and its nominee at all times and in all
manners, during the Employment Period and thereafter, in the protection of such
information, ideas, concepts, improvements, or discoveries.
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In the event the Executive creates, during the Employment Period, any
original work of authorship fixed in any tangible medium of expression which is
the subject matter of copyright such as videotapes, written presentations on
acquisitions, computer programs, drawings, maps, architectural renditions,
models, manuals, brochures or the like relating to the Company's business
products or services, whether such work is created solely by the Executive or
jointly with others, the Company shall be deemed the author of such work if the
work is prepared by the Executive within the scope of his employment; or, if the
work is not prepared by the Executive within the scope of his employment but is
specially ordered by the Company as a contribution to a collective work, as a
part of a motion picture or other audiovisual work, as a translation, as a
supplementary work, as a compilation or as an instructional text, then the work
shall be considered to be a work made for hire, and the Company shall be the
author of such work. If such work is neither prepared by the Executive within
the scope of his employment nor a work specially ordered and deemed to be a work
made for hire, then the Executive hereby agrees to sell, transfer, assign and
convey, and by these presents, does sell, transfer, assign and convey, to the
Company all of the Executive's worldwide right, title and interest in and to
such work and all rights of copyright therein. The Executive agrees to assist
the Company and its Affiliates, at all times, during the Employment Period and
thereafter, in the protection of the Company's worldwide right, title and
interest in and to such work and all rights of copyright therein, which
assistance shall include, but shall not be limited to, the execution of all
documents requested by the Company or its nominee and the execution of all
lawful oaths and applications for registration of copyright in the United States
and foreign countries.
EXECUTIVE'S NON-COMPETITION AND NON-SOLICITATION OBLIGATIONS.
Until the Date of Termination, the Executive shall not, acting alone or
in conjunction with others, directly or indirectly, engage, participate, invest,
accept employment or render services as a principal, director, officer, agent,
employee, employer, consultant or in any other individual or representative
capacity in or with any business which competes, directly or indirectly, with
the Employer's business in any of the business territories in which the Company
or any of its Affiliates is presently or from time to time during the Employment
Period conducting business, or take any action inconsistent with the fiduciary
relationship of an employee to his employer; provided, however, that the
beneficial ownership by the Executive of up to three (3) percent of the Voting
Stock of any corporation subject to the periodic reporting requirements of the
Exchange Act shall not violate this Section 11.1(a).
In addition to the other obligations agreed to by the
Executive in this Agreement, the Executive agrees that until the Date of
Termination, he shall not, directly or indirectly, (i) induce, entice or solicit
any employee of the Company to leave his employment, (ii) contact, communicate
or solicit any customer or acquisition prospect of the Company derived from any
customer list, customer lead, mail, printed matter or other information secured
from the Company or its present or past employees (other than in connection with
the performance of his services for the Company in accordance with Section 2 of
this Agreement) or (iii) in any other manner use any customer lists or customer
leads, mail, telephone numbers, printed material or other information of the
Company relating thereto (other than in connection with the performance of his
services for the Company in accordance with Section 2 of this Agreement).
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If this Agreement is terminated either by the Company for Cause or by
the Executive for any reason other than Good Reason, then for a period of three
(3) years following the Date of Termination, the Executive shall not, acting
alone or in conjunction with others, directly or indirectly, engage,
participate, invest, accept employment, or render services as a principal,
director, officer, agent, employee, employer, consultant or in any other
individual or representative capacity in or with any business which competes,
directly or indirectly, with the Employer's business and which is located in any
of the business territories in which the Company or any of its Affiliates is
presently or at the Date of Termination conducting business, or take any action
inconsistent with the fiduciary relationship of an employee to his employer;
provided, however, that the beneficial ownership by the Executive of up to three
(3) percent of the Voting Stock of any corporation subject to the periodic
reporting requirements of the Exchange Act shall not violate this Section
11.2(a).
In addition to the other obligations agreed to by the
Executive in this Agreement, the Executive agrees that if this Agreement is
terminated either by the Company for Cause or by the Executive for any reason
other than Good Reason, then for a period of three (3) years following the Date
of Termination, he shall not, directly or indirectly, (i) induce, entice or
solicit any employee of the Company to leave his employment, (ii) contact,
communicate or solicit any customer or acquisition prospect of the Company
derived from any customer list, customer lead, mail, printed matter or other
information secured from the Company or its present or past employees or (iii)
in any other manner use any customer lists or customer leads, mail, telephone
numbers, printed material or other information of the Company relating thereto.
If this Agreement is terminated either by the Executive for Good Reason
or by the Company Without Cause, provided that no Change in Control of the
Company has occurred during the two-year period preceding or within the one-year
period following the Date of Termination then, for a period of one (1) year
following the Date of Termination, the Executive shall not, acting alone or in
conjunction with others, directly or indirectly, engage, participate, invest,
accept employment, or render services as a principal, director, officer, agent,
employee, employer, consultant, or in any other individual or representative
capacity in or with any business which competes, directly or indirectly, with
the Employer's business and which is located in any of the business territories
in which the Company or any of its Affiliates is presently or at the Date of
Termination conducting business, or take any action inconsistent with the
fiduciary relationship of an employee to his employer; provided, however, that
the beneficial ownership by the Executive of up to three (3) percent of the
Voting Stock of any corporation subject to the periodic reporting requirements
of the Exchange Act shall not violate this Section 11.3(a).
In addition to the other obligations agreed to by the
Executive in this Agreement, the Executive agrees that if this Agreement is
terminated either by the Executive for Good Reason or by the Company Without
Cause, provided that no Change in Control of the Company has occurred during the
two-year period preceding or within the one-year period following the Date of
Termination, then for a period of one (1) year following the Date of
Termination, he shall not, directly or indirectly, (i) induce, entice or solicit
any employee of the Company to leave his employment, (ii) contact, communicate
or solicit any customer or acquisition prospect of the Company derived from any
customer list, customer lead, mail, printed matter
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or other information secured from the Company or its present or past employees
or (iii) in any other manner use any customer lists or customer leads, mail,
telephone numbers, printed material or other information of the Company relating
thereto.
If this Agreement is terminated (a) either by the Executive for Good
Reason or by the Company Without Cause and (b) a Change in Control of the
Company has occurred during the two-year period preceding, or the one-year
period following, the Date of Termination, or if this Agreement is terminated,
as a result of the Executive's Disability, then the Executive shall not be
subject to any obligations under this Section 11.
MISCELLANEOUS.
Notices. All notices and other communications required or permitted
here under or necessary or convenient in connection herewith shall be in writing
and shall be deemed to have been given when delivered by hand or mailed by
registered or certified mail, return receipt requested, as follows (provided
that notice of a change of address shall be deemed given only when received):
If to the Company:
Allied Waste Industries, Inc.
15880 North Greenway Hayden Loop, Suite 100
Scottsdale, Arizona 85260
If to the Executive:
Thomas H. Van Weelden
11015 East Adele Court
Scottsdale, Arizona 85255
or to such other names or addresses as the Company or the Executive, as the case
may be, shall designate by notice to the other party hereto in the manner
specified in this Section 12.1.
Waiver of Breach. The waiver by any party hereto of a breach of any
provision of this Agreement shall neither operate nor be construed as a waiver
of any subsequent breach by any party.
Assignment. This Agreement shall be binding upon and inure to the
benefit of the Company, its successors, legal representatives and assigns, and
upon the Executive, his heirs, executors, administrators, representatives and
assigns; provided, however, the Executive agrees that his rights and obligations
hereunder are personal to him and may not be assigned without the express
written consent of the Company.
Entire Agreement, No Oral Amendments. This Agreement, together with any
schedule or exhibit attached hereto and any document, policy, rule or regulation
referred to herein, replaces and merges all previous agreements and discussions
relating to the same or
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similar subject matter between the Executive and the Company and constitutes the
entire agreement between the Executive and the Company with respect to the
subject matter of this Agreement. This Agreement may not be modified in any
respect by any verbal statement, representation or agreement made by any
employee, officer, or representative of the Company or by any written agreement
unless signed by an officer of the Company who is expressly authorized by the
Company to execute such document.
Enforceability. If any provision of this Agreement or application
thereof to anyone or under any circumstances shall be determined to be invalid
or unenforceable, such invalidity or unenforceability shall not affect any other
provisions or applications of this Agreement which can be given effect without
the invalid or unenforceable provision or application.
Jurisdiction, Venue. The laws of the State of Arizona shall govern the
interpretation, validity and effect of this Agreement without regard to the
place of execution or the place for performance thereof, and the Company and the
Executive agree that the courts situated in Maricopa County, Arizona shall have
personal jurisdiction over the Company and the Executive to hear all disputes
arising under this Agreement. This Agreement is to be at least partially
performed in Maricopa County, Arizona, and as such, the Company and the
Executive agree that venue shall be proper with the courts in Maricopa County,
Arizona to hear such disputes. In the event either the Company or the Executive
is not able to effect service of process upon the other party hereto with
respect to such disputes, the Company and the Executive expressly agree that the
Secretary of State for the State of Arizona shall be an agent of the Company
and/or the Executive to receive service of process on behalf of the Company
and/or the Executive with respect to such disputes.
Injunctive Relief. The Company and the Executive agree that a breach of
any term of this Agreement by the Executive would cause irreparable damage to
the Company and that, in the event of such breach, the Company shall have, in
addition to any and all remedies of law, the right to any injunction, specific
performance and other equitable relief to prevent or to redress the violation of
the Executive's duties or responsibilities hereunder.
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IN WITNESS WHEREOF, the undersigned, intending to be early bound, have
executed this Agreement as of the date first written above.
ALLIED WASTE INDUSTRIES, INC.
By ____________________________________
Its ___________________________________
"Company"
_______________________________________
Thomas H. Van Weelden
"Executive"
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SCHEDULE "A"
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EXHIBIT 10.12
EXECUTIVE EMPLOYMENT AGREEMENT
This EXECUTIVE EMPLOYMENT AGREEMENT is made and entered into effective
January 1, 1999, by and between ALLIED WASTE INDUSTRIES, INC., a Delaware
corporation having its principal executive office at 15880 North Greenway Hayden
Loop, Suite 100, Scottsdale, Arizona 85260 ("Company") and DONALD W. SLAGER
("Executive").
W I T N E S S E T H:
WHEREAS, the Company desires to employ the Executive in an executive
capacity and the Executive desires to enter the Company's employ.
NOW, THEREFORE, for and in consideration of the mutual promises,
covenants and obligations contained herein, and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
Company and the Executive hereby agree as follows:
CERTAIN DEFINITIONS. As used in this Agreement, the following terms
have the meanings prescribed below:
Affiliate is used in this Agreement to define a relationship to a
person or entity and means a person or entity who, directly or indirectly
through one or more intermediaries, controls, is controlled by, or is under
common control with, such person or entity.
Annual Bonus shall have the meaning assigned thereto in Section 4.2
hereof. Base Salary shall have the meaning, assigned thereto in Section 4.1
hereof.
Beneficial Owner shall have the meaning assigned thereto in Rule
13(d)-3 under the Exchange Act; provided, however, and without limitation, that
any individual, corporation, partner ship, group, association or other person or
entity that has the right to acquire any Voting Stock at any time in the future,
whether such right is (a) contingent or absolute or (b) exercisable presently or
at any time in the future, pursuant to any agreement or understanding or upon
the exercise or conversion of rights, options or warrants, or otherwise, shall
be the Beneficial Owner of such Voting Stock.
Cause shall have the meaning assigned thereto in Section 5.3 hereof.
Change in Control of the Company shall be deemed to have occurred if
(i) the Company merges or consolidates, or agrees to merge or to consolidate,
with any other corporation (other than a wholly-owned direct or indirect
subsidiary of the Company) and is not the surviving corporation (or survives as
a subsidiary of another corporation), (ii) the Company sells, or agrees to sell,
all or substantially all of its assets to any other person or entity, (iii) the
Company is dissolved, (iv) any third person or entity (other than a trustee or
committee of any qualified employee benefit plan of the Company) together with
its Affiliates shall become or shall have publicly announced its intention to
become (by tender offer or otherwise), directly or indirectly,
<PAGE> 2
the Beneficial Owner of at least 30% of the Voting Stock of the Company, or (v)
the individuals who constitute the Board of Directors of the Company as of the
Effective Date ("Incumbent Board") shall cease for any reason to constitute at
least a majority of the Board of Directors; provided, that any person becoming a
director whose election or nomination for election was approved by a majority of
the members of the Incumbent Board shall be considered, for the purposes of this
Agreement, a member of the Incumbent Board.
Code means the Internal Revenue Code of 1986, as amended, and the rules
and regulations promulgated by the Internal Revenue Service thereunder, all as
in effect from time to time during the Employment Period.
Common Stock means the Company's common stock, par value $.01 per
share.
Company means Allied Waste Industries, Inc., a Delaware corporation,
the principal executive office of which is located at 15880 North Greenway
Hayden Loop, Suite 100, Scottsdale, Arizona 85260.
Confidential Information shall have the meaning assigned thereto in
Section 8.2 hereof.
Date of Termination means the earliest to occur of (i) the date of the
Executive's death, (ii) the date on which the Executive terminates this
Agreement for any reason other than Good Reason or (iii) the date of receipt of
the Notice of Termination, or such later date as may be prescribed in the Notice
of Termination in accordance with Section 5.6 hereof.
Disability means an illness or other disability which prevents the
Executive from discharging his responsibilities under this Agreement for a
period of 180 consecutive calendar days, or an aggregate of 180 calendar days in
any calendar year, during the Employment Period, all as determined in good faith
by the Board of Directors of the Company (or a committee thereof).
Effective Date means January 1, 1999.
Employment Period shall have the meaning assigned thereto in Section 3
hereof.
Exchange Act means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated by the Securities and Exchange Commission
thereunder, all as in effect from time to time during the Employment Period.
Executive means Donald W. Slager.
Good Reason shall have the meaning assigned thereto in Section 5.5
hereof.
Notice of Termination shall have the meaning assigned thereto in
Section 5.6 hereof.
Vacation Time shall have the meaning assigned thereto in Section 4.3
hereof.
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Voting Stock means all outstanding shares of capital stock of the
Company entitled to vote generally in an election of directors; provided,
however, that if the Company has shares of Voting Stock entitled to more or less
than one vote per share, each reference to a proportion of the issued and
outstanding shares of Voting Stock shall be deemed to refer to the proportion of
the aggregate votes entitled to be cast by the issued and outstanding shares of
Voting Stock.
Without Cause shall have the meaning assigned thereto in Section 5.4
hereof.
GENERAL DUTIES OF COMPANY AND EXECUTIVE.
The Company agrees to employ the Executive, and the Executive
agrees to accept employment by the Company and to serve the Company as its Vice
President, Operations. The authority, duties and responsibilities of the
Executive shall include those described in Schedule A to this Agreement, and
such other or additional duties as may from time to time be assigned to the
Executive by the Board of Directors (or a committee thereof) and agreed to by
the Executive, which will be reflected in an amended Schedule A. While employed
hereunder, the Executive shall devote reasonable time and attention during
normal business hours to the affairs of the Company and use his best efforts to
perform faithfully and efficiently his duties and responsibilities. The
Executive may (i) serve on corporate, civic or charitable boards or committees,
(ii) deliver lectures, fulfill speaking engagements or teach at educational
institutions, and (iii) manage personal investments, so long as such activities
do not significantly interfere with the performance of the Executive's duties
and responsibilities.
The Executive agrees and acknowledges that he owes a fiduciary
duty of loyalty, fidelity and allegiance to act at all times in the best
interests of the Company and to do no act and to make no statement, oral or
written, which would injure Company's business, its interests or its reputation.
The Executive agrees to comply at all times during the
Employment Period with all applicable policies, rules and regulations of the
Company, including, without limitation, the Company's Code of Ethics and the
Company's policy regarding trading Common Stock, as each is in effect from time
to time during the Employment Period.
TERM. Unless sooner terminated pursuant to Section 5 of this Agreement,
the Executive's Employment Period under this Agreement shall be a period of
three (3) years beginning on the Effective Date; provided that, beginning on the
first anniversary of the Effective Date, the Employment Period shall be for a
continuous period of two (2) years, such that on any given date thereafter, the
Executive's Employment Period shall always be two (2) years from the date in
question.
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COMPENSATION AND BENEFITS.
Base Salary. As compensation for services to the Company, the
Company shall pay to the Executive until the Date of Termination an annual base
salary of $_______________ ("Base Salary"). The Board of Directors (or a
committee thereof), in its discretion, may increase the Base Salary based upon
relevant circumstances. The Base Salary shall be payable in equal semimonthly
installments or in accordance with the Company's established policy, subject
only to such payroll and withholding deductions as may be required by law and
other deductions applied generally to employees of the Company for insurance and
other employee benefit plans. For all purposes under this Agreement, the
Executive's Base Salary shall include any amount which is deferred under any
nonqualified plan or arrangement.
Bonus. In addition to the Base Salary, the Executive shall be
awarded, for each fiscal year until the Date of Termination, an annual bonus
(either pursuant to a bonus or incentive plan or program of the Company or
otherwise) in an amount to be determined by the Board of Directors (or a
committee thereof) in its sole discretion ("Annual Bonus"). Each such Annual
Bonus shall be payable at a time to be determined by the Board of Directors (or
a committee thereof) in its sole discretion. For all purposes under this
Agreement, the Executive's Annual Bonus shall include any amount which is
deferred under any nonqualified plan or arrangement.
Vacation. Until the Date of Termination, the Executive shall
be entitled to four weeks paid vacation during each one year period commencing
on the Effective Date ("Vacation Time"). Any Vacation Time not taken during the
applicable one year period will not accrue and will expire on the applicable
anniversary of the Effective Date.
Automobile Allowance. Until the Date of Termination, the
Executive shall receive an automobile allowance of $600.00 per month
("Automobile Allowance"). The Board of Directors (or a committee thereof), in
its discretion, may increase the Automobile Allowance based upon relevant
circumstances.
Club Membership Dues. Until the Date of Termination, the
Executive shall receive an amount per month equal to the monthly membership dues
which the Executive pays for one club or organization of Executive's choice.
Incentive, Savings, Retirement and Stock Plans. The Executive
shall participate in and be eligible to receive all benefits under all executive
incentive, savings, retirement and stock (including any stock option, restricted
stock, phantom stock and other stock rights) plans and programs currently
maintained or hereinafter established by the Company for the benefit of its
executive officers and/or employees (collectively "Compensation Plans"). The
Executive's participation in all such Plans shall be governed by the terms and
provisions of each such Plan.
Welfare Benefit Plans. The Executive and/or the Executive's
family, as the case may be, shall be eligible to participate in and shall
receive all benefits under each welfare benefit plan of the Company currently
maintained or hereinafter established by the Company for the benefit of its
employees. Such welfare benefit plans may include, without limitation, medical,
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dental, disability, group life, accidental death and travel accident insurance
plans and programs (collectively "Welfare Plans"). The Executive's and/or the
Executive's family's participation in the Welfare Plans shall be subject to the
terms and conditions of each Welfare Plan.
Reimbursement of Expenses. The Executive may from time to time
until the Date of Termination incur various business expenses customarily
incurred by persons holding positions of like responsibility, including, without
limitation, travel, entertainment and similar expenses incurred for the benefit
of the Company. Subject to the Company's policy regarding the reimbursement of
such expenses as in effect from time to time during the Employment Period, which
does not necessarily allow reimbursement of all such expenses, the Company shall
reimburse the Executive for such expenses from time to time, at the Executive's
request, and the Executive shall account to the Company for all such expenses.
TERMINATION.
Death. This Agreement shall terminate automatically upon the
death of the Executive.
Disability. The Company may terminate this Agreement, upon
written notice to the Executive delivered in accordance with Sections 5.6 and
12.1 hereof, upon the Disability of the Executive.
Cause. The Company may terminate this Agreement, upon
written notice to the Executive delivered in accordance with Sections 5.6 and
12.1 hereof, for Cause. For purposes of this Agreement, "Cause" means (i) the
conviction of the Executive for a felony, (ii) the Executive's willful refusal,
without proper legal cause, to perform his duties and responsibilities as
contemplated in this Agreement or (iii) the Executive's willfully engaging in
activities which would (A) constitute a breach of any term of this Agreement,
the Company's Code of Ethics, the Company's policies regarding trading Common
Stock or reimbursement of business expenses or any other applicable policies,
rules or regulations of the Company, or (B) result in a material injury to the
business, condition (financial or otherwise), results of operations or prospects
of the Company or its Affiliates (as determined in good faith by the Board of
Directors of the Company or a committee thereof). For purposes of the definition
of "Cause," no act or failure to act shall be considered "wilful" unless it is
done, or omitted to be done, in bad faith without reasonable belief that the
action or omission was in the best interests of the Company.
Without Cause. The Company may terminate this Agreement
Without Cause, upon written notice to the Executive delivered in accordance with
Sections 5.6 and 12.1 hereof. For purposes of this Agreement, the Executive will
be deemed to have been terminated "Without Cause" if the Executive is terminated
by the Company for any reason other than Cause, Disability or Death.
Good Reason. The Executive may terminate this Agreement
for Good Reason, upon written notice to the Company delivered in accordance with
Sections 5.6 and 12.1 hereof. For purposes of this Agreement, "Good Reason"
means (i) the assignment to the Executive of any duties inconsistent in any
respect with the Executive's duties or responsibilities as
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contemplated in this Agreement, (ii) any other action by the Company which
results in a diminishment in the Executive's position (including status,
offices, titles and reporting requirements), authority, duties or
responsibilities, (iii) any breach by the Company of any of the provisions of
this Agreement, (iv) requiring the Executive to relocate permanently to any
office or location other than the Phoenix-Scottsdale metropolitan area, without
his consent, or (v) any reduction, or attempted reduction, at any time during
the Employment Period, of the Base Salary of the Executive.
Notice of Termination. Any termination of this Agreement
by the Company for Cause, Without Cause or as a result of the Executive's
Disability, or by the Executive for Good Reason, shall be communicated by Notice
of Termination to the other party hereto given in accordance with this
Agreement. For purposes of this Agreement, a "Notice of Termination" means a
written notice which (i) indicates the specific termination provision in this
Agreement relied upon, (ii) sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated and (iii) specifies the termination
date, if such date is other than the date of receipt of such notice (which
termination date shall not be more than 15 days after the giving of such
notice).
OBLIGATIONS OF COMPANY UPON TERMINATION.
Cause, Other than Good Reason. If this Agreement is terminated
either by the Company for Cause or by the Executive for any reason other than
Good Reason, the Company shall pay to the Executive, in a lump sum cash payment
within 30 days after the Date of Termination, the aggregate of the Executive's
Base Salary (as in effect on the Date of Termination) owing as of the Date of
Termination, if not theretofore paid, and, in the case of compensation
previously deferred by the Executive, all amounts of such compensation
previously deferred and not yet paid by the Company (unless such payment is
inconsistent with the terms of any payment election made by the Executive with
respect to such deferred compensation). The Company also shall, promptly upon
submission by the Executive of supporting documentation, pay or reimburse to the
Executive any costs and expenses (including moving and relocation expenses) paid
or incurred by the Executive which would have been payable under Section 4.8 of
this Agreement if the Executive's employment had not terminated.
All other obligations of the Company and rights of the Executive
hereunder shall terminate effective as of the Date of Termination; provided,
however, that the Executive's rights under any Compensation Plan shall be
governed by the terms and provisions of each such Plan and are not necessarily
severed on the Date of Termination.
Death or Disability.
Subject to the provisions of this Section 6.2, if this
Agreement is terminated as a result of the Executive's death or Disability, the
Company shall pay to the Executive or his estate, in a lump sum cash payment
within 30 days of the Date of Termination, the greater of (i) that portion of
the Executive's Base Salary (as in effect on the Date of Termination) owing in
respect of the balance of the Employment Period pursuant to Section 3 hereof or
(ii) the Executive's Base Salary (as in effect on the Date of Termination). The
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Company may purchase insurance to cover all or any part of the obligation
contemplated in the foregoing sentence, and the Executive agrees to submit to a
physical examination to facilitate the procurement of such insurance. The
Company also shall, promptly upon submission by the Executive of supporting
documentation, pay or reimburse to the Executive any costs and expenses
(including moving and relocation expenses) paid or incurred by the Executive
which would have been payable under Section 4.8 of this Agreement if the
Executive's employment had not terminated. Until the Executive obtains other
health coverage through another employer's health plan or, if longer, for a
period of five (5) years, the Company shall continue providing health coverage
to the Executive and/or the Executive's family at least equal to that which
would have been provided to them under Section 4.7 if the Executive's employment
had not terminated; provided that any such coverage shall cease immediately if
the Executive violates any of the applicable provisions of Article 11.
Whenever compensation is payable to the Executive
hereunder during a period in which he is partially or totally disabled, and such
Disability would (except for the provisions hereof) entitle the Executive to
Disability income or salary continuation payments from the Company according to
the terms of any plan or program presently maintained or hereafter established
by the Company, the Disability income or salary continuation paid to the
Executive pursuant to any such plan or program shall be considered a portion of
the payment to be made to the Executive pursuant to this Section 6.2 and shall
not be in addition hereto. If Disability income is payable directly to the
Executive by an insurance company under the terms of an insurance policy paid
for by the Company, the amounts paid to the Executive by such insurance company
shall be considered a portion of the payment to be made to the Executive
pursuant to this Section 6.2 and shall not be in addition hereto.
Good Reason; Without Cause. If this Agreement is terminated either by
the Executive for Good Reason or by the Company Without Cause:
the Company shall pay to the Executive, in a lump sum cash
payment within 30 days after the Date of Termination, the aggregate of the
following amounts:
if not theretofore paid, the Executive's Base Salary
(as in effect on the Date of Termination) through the Date of
Termination;
an amount equal to the largest Annual Bonus paid to
the Executive out of the last three (3) fiscal years preceding the Date
of Termination; and
in the case of compensation previously deferred by
the Executive, all amounts of such compensation previously deferred and
not yet paid by the Company (unless such payment is inconsistent with
the terms of any payment election made by the Executive with respect to
such deferred compensation).
the Company shall, promptly upon submission by the
Executive of supporting documentation, pay or reimburse to the Executive any
costs and expenses (including moving and relocation expenses) paid or incurred
by the Executive which would have been
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payable under Section 4.8 of this Agreement if the Executive's employment had
not terminated; and
until the Executive obtains other health coverage through
another employer's health plan or, if longer, for a period of five (5) years,
the Company shall continue providing health coverage to the Executive and/or the
Executive's family at least equal to that which would have been provided to them
under Section 4.7 if the Executive's employment had not terminated; provided
that any such coverage shall cease immediately if the Executive violates any of
the applicable provisions of Article 11.
the Company shall pay to the Executive, in equal
semi-monthly installments, the greater of (i) that portion of the Executive's
Base Salary (as in effect on the Date of Termination) owing, in respect of the
balance of the Employment Period pursuant to Section 3 hereof or (ii) the
Executive's Base Salary (as in effect on the Date of Termination); provided that
such payments shall cease immediately if the Executive violates any applicable
provision of Article 11.
Change in Control. If (a) this Agreement is terminated either by the
Executive for Good Reason or by the Company Without Cause and (b) a Change in
Control of the Company has occurred within the two-year period preceding, or
within the one-year period following, the Date of Termination, then, in addition
to the obligations of the Company set forth in Section 6.3 hereof, the Company
shall pay to the Executive, in a lump sum cash payment within 30 days after the
Date of Termination, two times the sum of (x) the Executive's Base Salary (as in
effect on the Date of Termination or such higher rate as may have been in effect
at any time during the 90-day period preceding the Date of Termination) and (y)
the Annual Bonus paid to the Executive for the last full fiscal year. The rights
given to the Executive herein do not apply to the Change of Control of the
Company which occurred when Apollo Advisors, L.P. and The Blackstone Group
acquired the Common Stock of Laidlaw Transportation, Inc.
EXECUTIVE'S OBLIGATION TO AVOID CONFLICTS OF INTEREST.
In keeping with the Executive's fiduciary duties to the Company, the
Executive agrees that he shall not knowingly become involved in a conflict of
interest with the Company, or upon discovery thereof, allow such a conflict to
continue. The Executive further agrees to disclose to the Company, promptly
after discovery, any facts or circumstances which might involve a conflict of
interest with the Company.
The Company and the Executive recognize that it is impossible to
provide an exhaustive list of actions or interests which constitute a "conflict
of interest." Moreover, the Company and the Executive recognize that there are
many borderline situations. In some instances, full disclosure of facts by the
Executive to the Company is all that is necessary to enable the Company to
protect its interests. In others, if no improper motivation appears to exist and
the Company's interests have not suffered, prompt elimination of the outside
interest will suffice. In still others, it may be necessary for the Company to
terminate the employment relationship. The Company and the Executive agree that
the Company's determination as to whether or not a conflict of interest exists
shall be conclusive. The Company reserves the right to take such action as, in
its judgment, will end the conflict of interest.
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In this connection, it is agreed that any direct or indirect interest
in, connection with or benefit from any outside activities, particularly
commercial activities, which interest might in any way adversely affect the
Company or its Affiliates, involves a possible conflict of interest.
Circumstances in which a conflict of interest on the part of the Executive would
or might arise, and which should be reported immediately to the Company,
include, but are not limited to, the following:
Ownership of a material interest in any lender, supplier,
contractor, subcontractor, customer or other entity with which the Company does
business.
Acting in any capacity, including director, officer,
partner, consultant, employee, distributor, agent or the like, for any lender,
supplier, contractor, subcontractor, customer or other entity with which the
Company does business.
Acceptance, directly or indirectly, of payments, services
or loans from a lender, supplier, contractor, subcontractor, customer or other
entity with which the Company does business, including, without limitation,
gifts, trips, entertainment or other favors of more than a nominal value, but
excluding loans from publicly held insurance companies and commercial or savings
banks at market rates of interest.
Use of information or facilities to which the Executive
has access in a manner which will be detrimental to the Company's interests,
such as use for the Executive's own benefit of know-how or information developed
through the Company's business activities.
Disclosure or other misuse of information of any kind
obtained through the Executive's connection with the Company.
Acquiring or trading in, directly or indirectly, other
properties or interests connected with the design or marketing of products or
services designed or marketed by the Company.
EXECUTIVE'S CONFIDENTIALITY OBLIGATION.
The Executive hereby acknowledges, understands and agrees that all
Confidential Information is the exclusive and confidential property of the
Company and its Affiliates which shall at all times be regarded, treated and
protected as such in accordance with this Section 8. The Executive acknowledges
that all such Confidential Information is in the nature of a trade secret.
For purposes of this Agreement, "Confidential Information" means
information, that is used in the business of the Company or its Affiliates and
(i) is proprietary to, about or created by the Company or its Affiliates, (ii)
gives the Company or its Affiliates some competitive business advantage or the
opportunity of obtaining such advantage or the disclosure of which could be
detrimental to the interests of the Company or its Affiliates, (iii) is
designated as Confidential Information by the Company or its Affiliates, is
known by the Executive to be
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considered confidential by the Company or its Affiliates, or from all the
relevant circumstances should reasonably be assumed by the Executive to be
confidential and propriety to the Company or its Affiliates, or (iv) is not
generally known by non-Company personnel. Such Confidential Information
includes, without limitation, the following types of information and other
information of a similar nature (whether or not reduced to writing or designed
as confidential):
Internal personnel and financial information of the
Company or its Affiliates, vendor information (including vendor characteristics,
services, prices, lists and agreements), purchasing and internal cost
information, internal service and operational manuals, and the manner and
methods of conducting the business of the Company or its Affiliates;
Marketing and development plans, price and cost data,
price and fee amounts, pricing and billing policies, quoting procedures,
marketing techniques, forecasts and forecast assumptions and volumes, and future
plans and potential strategies (including, without limitation, all information
relating to any acquisition prospect and the identity of any key contact within
the organization of any acquisition prospect) of the Company or its Affiliates
which have been or are being discussed;
Names of customers and their representatives, contracts
(including their contents and parties), customer services, and the type,
quantity, specifications and content of products and services purchased, leased,
licensed or received by customers of the Company or its Affiliates; and
Confidential and proprietary information provided to the
Company or its Affiliates by any actual or potential customer, government agency
or other third party (including businesses, consultants and other entities and
individuals).
As a consequence of the Executive's acquisition or anticipated
acquisition of Confidential Information, the Executive shall occupy a position
of trust and confidence with respect to the affairs and business of the Company
and its Affiliates. In view of the foregoing, and of the consideration to be
provided to the Executive, the Executive agrees that it is reasonable and
necessary that the Executive make each of the following covenants:
At any time during the Employment Period and thereafter,
the Executive shall not disclose Confidential Information to any person or
entity, either inside or outside of the Company, other than as necessary in
carrying out his duties and responsibilities as set forth in Section 2 hereof,
without first obtaining the Company's prior written consent (unless such
disclosure is compelled pursuant to court orders or subpoena, and at which time
the Executive shall give notice of such proceedings to the Company).
At any time during the Employment Period and thereafter,
the Executive shall not use, copy or transfer Confidential Information other
than as necessary in carrying out his duties and responsibilities as set forth
in Section 2 hereof, without first obtaining the Company's prior written
consent.
10
<PAGE> 11
On the Date of Termination, the Executive shall promptly
deliver to the Company (or its designee) all written materials, records and
documents made by the Executive or which came into his possession prior to or
during the Employment Period concerning, the business or affairs of the Company
or its Affiliates, including, without limitation, all materials containing
Confidential Information.
DISCLOSURE OF INFORMATION, IDEAS, CONCEPTS, IMPROVEMENTS, DISCOVERIES
AND INVENTIONS. Consistent with the Executive's fiduciary duties to the Company,
the Executive agrees that during his employment by the Company, the Executive
shall promptly disclose in writing to the Company all information, ideas,
concepts, improvements, discoveries and inventions, which are conceived,
developed, made or acquired by the Executive, either individually or jointly
with others, and which relate to the business, products or services of the
Company or its Affiliates, irrespective of whether the Executive used the
Company's time or facilities and irrespective of whether such information, idea,
concept, improvement, discovery or invention was conceived, developed,
discovered or acquired by the Executive on the job, at home, or elsewhere. This
obligation extends to all types of information, ideas and concepts, including,
information, ideas and concepts relating to new types of services, corporate
opportunities, acquisition prospects, the identity of key representatives within
acquisition prospect organizations, prospective names or service marks for the
Company's business activities, and the like.
OWNERSHIP OF INFORMATION, IDEAS, CONCEPTS, IMPROVEMENTS, DISCOVERIES
AND ALL ORIGINAL WORKS OF AUTHORSHIP.
All information, ideas, concepts, improvements, and discoveries which
are conceived, made, developed or acquired by the Executive or which are
disclosed or made known to the Executive, individually or in conjunction with
others, during the Executive's employment by the Company and which relate to the
business, products or services of the Company or its Affiliates (including,
without limitation, all such information relating to corporate opportunities,
research, financial and sales data, pricing and trading terms, evaluations,
opinions, interpretations, acquisition prospects, the identity of customers or
their requirements, the identity of key contacts within the customers'
organizations or within the organization of acquisition prospects, marketing and
merchandising techniques, and prospective names and service marks) are and shall
be the sole and exclusive property of the Company. Furthermore, all drawings,
memoranda, notes, records, files, correspondence, manuals, models,
specifications, computer programs, maps and all other writings or materials of
any type embodying any of such information, ideas, concepts, improvements, and
discoveries are and shall be the sole and exclusive property of the Company.
In particular, the Executive hereby specifically sells, assigns,
transfers and conveys to the Company all of his worldwide right, title and
interest in and to all such information, ideas, concepts, improvements, and
discoveries, and any United States or foreign applications therefor. The
Executive shall assist the Company and its nominee at all times and in all
manners, during the Employment Period and thereafter, in the protection of such
information, ideas, concepts, improvements, or discoveries.
11
<PAGE> 12
In the event the Executive creates, during the Employment Period, any
original work of authorship fixed in any tangible medium of expression which is
the subject matter of copyright such as videotapes, written presentations on
acquisitions, computer programs, drawings, maps, architectural renditions,
models, manuals, brochures or the like relating to the Company's business
products or services, whether such work is created solely by the Executive or
jointly with others, the Company shall be deemed the author of such work if the
work is prepared by the Executive within the scope of his employment; or, if the
work is not prepared by the Executive within the scope of his employment but is
specially ordered by the Company as a contribution to a collective work, as a
part of a motion picture or other audiovisual work, as a translation, as a
supplementary work, as a compilation or as an instructional text, then the work
shall be considered to be a work made for hire, and the Company shall be the
author of such work. If such work is neither prepared by the Executive within
the scope of his employment nor a work specially ordered and deemed to be a work
made for hire, then the Executive hereby agrees to sell, transfer, assign and
convey, and by these presents, does sell, transfer, assign and convey, to the
Company all of the Executive's worldwide right, title and interest in and to
such work and all rights of copyright therein. The Executive agrees to assist
the Company and its Affiliates, at all times, during the Employment Period and
thereafter, in the protection of the Company's worldwide right, title and
interest in and to such work and all rights of copyright therein, which
assistance shall include, but shall not be limited to, the execution of all
documents requested by the Company or its nominee and the execution of all
lawful oaths and applications for registration of copyright in the United States
and foreign countries.
EXECUTIVE'S NON-COMPETITION AND NON-SOLICITATION OBLIGATIONS.
Until the Date of Termination, the Executive shall not, acting alone or
in conjunction with others, directly or indirectly, engage, participate, invest,
accept employment or render services as a principal, director, officer, agent,
employee, employer, consultant or in any other individual or representative
capacity in or with any business which competes, directly or indirectly, with
the Employer's business in any of the business territories in which the Company
or any of its Affiliates is presently or from time to time during the Employment
Period conducting business, or take any action inconsistent with the fiduciary
relationship of an employee to his employer; provided, however, that the
beneficial ownership by the Executive of up to three (3) percent of the Voting
Stock of any corporation subject to the periodic reporting requirements of the
Exchange Act shall not violate this Section 11.1(a).
In addition to the other obligations agreed to by the
Executive in this Agreement, the Executive agrees that until the Date of
Termination, he shall not, directly or indirectly, (i) induce, entice or solicit
any employee of the Company to leave his employment, (ii) contact, communicate
or solicit any customer or acquisition prospect of the Company derived from any
customer list, customer lead, mail, printed matter or other information secured
from the Company or its present or past employees (other than in connection with
the performance of his services for the Company in accordance with Section 2 of
this Agreement) or (iii) in any other manner use any customer lists or customer
leads, mail, telephone numbers, printed material or other information of the
Company relating thereto (other than in connection with the performance of his
services for the Company in accordance with Section 2 of this Agreement).
12
<PAGE> 13
If this Agreement is terminated either by the Company for Cause or by
the Executive for any reason other than Good Reason, then for a period of three
(3) years following the Date of Termination, the Executive shall not, acting
alone or in conjunction with others, directly or indirectly, engage,
participate, invest, accept employment, or render services as a principal,
director, officer, agent, employee, employer, consultant or in any other
individual or representative capacity in or with any business which competes,
directly or indirectly, with the Employer's business and which is located in any
of the business territories in which the Company or any of its Affiliates is
presently or at the Date of Termination conducting business, or take any action
inconsistent with the fiduciary relationship of an employee to his employer;
provided, however, that the beneficial ownership by the Executive of up to three
(3) percent of the Voting Stock of any corporation subject to the periodic
reporting requirements of the Exchange Act shall not violate this Section
11.2(a).
In addition to the other obligations agreed to by the
Executive in this Agreement, the Executive agrees that if this Agreement is
terminated either by the Company for Cause or by the Executive for any reason
other than Good Reason, then for a period of three (3) years following the Date
of Termination, he shall not, directly or indirectly, (i) induce, entice or
solicit any employee of the Company to leave his employment, (ii) contact,
communicate or solicit any customer or acquisition prospect of the Company
derived from any customer list, customer lead, mail, printed matter or other
information secured from the Company or its present or past employees or (iii)
in any other manner use any customer lists or customer leads, mail, telephone
numbers, printed material or other information of the Company relating thereto.
If this Agreement is terminated either by the Executive for Good Reason
or by the Company Without Cause, provided that no Change in Control of the
Company has occurred during the two-year period preceding or within the one-year
period following the Date of Termination then, for a period of one (1) year
following the Date of Termination, the Executive shall not, acting alone or in
conjunction with others, directly or indirectly, engage, participate, invest,
accept employment, or render services as a principal, director, officer, agent,
employee, employer, consultant, or in any other individual or representative
capacity in or with any business which competes, directly or indirectly, with
the Employer's business and which is located in any of the business territories
in which the Company or any of its Affiliates is presently or at the Date of
Termination conducting business, or take any action inconsistent with the
fiduciary relationship of an employee to his employer; provided, however, that
the beneficial ownership by the Executive of up to three (3) percent of the
Voting Stock of any corporation subject to the periodic reporting requirements
of the Exchange Act shall not violate this Section 11.3(a).
In addition to the other obligations agreed to by the
Executive in this Agreement, the Executive agrees that if this Agreement is
terminated either by the Executive for Good Reason or by the Company Without
Cause, provided that no Change in Control of the Company has occurred during the
two-year period preceding or within the one-year period following the Date of
Termination, then for a period of one (1) year following the Date of
Termination, he shall not, directly or indirectly, (i) induce, entice or solicit
any employee of the Company to leave his employment, (ii) contact, communicate
or solicit any customer or acquisition prospect of the Company derived from any
customer list, customer lead, mail, printed matter
13
<PAGE> 14
or other information secured from the Company or its present or past employees
or (iii) in any other manner use any customer lists or customer leads, mail,
telephone numbers, printed material or other information of the Company relating
thereto.
If this Agreement is terminated (a) either by the Executive for Good
Reason or by the Company Without Cause and (b) a Change in Control of the
Company has occurred during the two-year period preceding, or the one-year
period following, the Date of Termination, or if this Agreement is terminated,
as a result of the Executive's Disability, then the Executive shall not be
subject to any obligations under this Section 11.
MISCELLANEOUS.
Notices. All notices and other communications required or permitted
here under or necessary or convenient in connection herewith shall be in writing
and shall be deemed to have been given when delivered by hand or mailed by
registered or certified mail, return receipt requested, as follows (provided
that notice of a change of address shall be deemed given only when received):
If to the Company:
Allied Waste Industries, Inc.
15880 North Greenway Hayden Loop, Suite 100
Scottsdale, Arizona 85260
If to the Executive:
Donald W. Slager
9530 East Cortez
Scottsdale, Arizona 85260
or to such other names or addresses as the Company or the Executive, as the case
may be, shall designate by notice to the other party hereto in the manner
specified in this Section 12.1.
Waiver of Breach. The waiver by any party hereto of a breach of any
provision of this Agreement shall neither operate nor be construed as a waiver
of any subsequent breach by any party.
Assignment. This Agreement shall be binding upon and inure to the
benefit of the Company, its successors, legal representatives and assigns, and
upon the Executive, his heirs, executors, administrators, representatives and
assigns; provided, however, the Executive agrees that his rights and obligations
hereunder are personal to him and may not be assigned without the express
written consent of the Company.
Entire Agreement, No Oral Amendments. This Agreement, together with any
schedule or exhibit attached hereto and any document, policy, rule or regulation
referred to herein, replaces and merges all previous agreements and discussions
relating to the same or
14
<PAGE> 15
similar subject matter between the Executive and the Company and constitutes the
entire agreement between the Executive and the Company with respect to the
subject matter of this Agreement. This Agreement may not be modified in any
respect by any verbal statement, representation or agreement made by any
employee, officer, or representative of the Company or by any written agreement
unless signed by an officer of the Company who is expressly authorized by the
Company to execute such document.
Enforceability. If any provision of this Agreement or application
thereof to anyone or under any circumstances shall be determined to be invalid
or unenforceable, such invalidity or unenforceability shall not affect any other
provisions or applications of this Agreement which can be given effect without
the invalid or unenforceable provision or application.
Jurisdiction, Venue. The laws of the State of Arizona shall govern the
interpretation, validity and effect of this Agreement without regard to the
place of execution or the place for performance thereof, and the Company and the
Executive agree that the courts situated in Maricopa County, Arizona shall have
personal jurisdiction over the Company and the Executive to hear all disputes
arising under this Agreement. This Agreement is to be at least partially
performed in Maricopa County, Arizona, and as such, the Company and the
Executive agree that venue shall be proper with the courts in Maricopa County,
Arizona to hear such disputes. In the event either the Company or the Executive
is not able to effect service of process upon the other party hereto with
respect to such disputes, the Company and the Executive expressly agree that the
Secretary of State for the State of Arizona shall be an agent of the Company
and/or the Executive to receive service of process on behalf of the Company
and/or the Executive with respect to such disputes.
Injunctive Relief. The Company and the Executive agree that a breach of
any term of this Agreement by the Executive would cause irreparable damage to
the Company and that, in the event of such breach, the Company shall have, in
addition to any and all remedies of law, the right to any injunction, specific
performance and other equitable relief to prevent or to redress the violation of
the Executive's duties or responsibilities hereunder.
15
<PAGE> 16
IN WITNESS WHEREOF, the undersigned, intending to be early
bound, have executed this Agreement as of the date first written above.
ALLIED WASTE INDUSTRIES, INC.
By _____________________________________
Its ____________________________________
"Company"
_______________________________________
Donald W. Slager
"Executive"
16
<PAGE> 17
SCHEDULE "A"
17
<PAGE> 1
Confidential
Exhibit 10.22
March 7, 1999
Allied Waste Industries, Inc.
15880 North Greenway-Hayden Loop
Scottsdale, Arizona 85260
Equity Commitment Letter
Ladies and Gentlemen:
You have advised us that you have entered into an agreement, dated
the date hereof (the "Agreement"), with the corporation referred to as Blue (the
"Target") pursuant to which you will acquire (the "Acquisition") all of the
outstanding capital stock of the Target. References to the "Company" mean you
and your subsidiaries. Capitalized terms used but not otherwise defined herein
shall have the meaning given thereto in the Agreement.
You have advised us that the total funds necessary to consummate
the Acquisition and to pay related fees and expenses will be approximately $9
billion. (The approximate sources and uses of the funds necessary to consummate
the Acquisition are set forth on Exhibit A hereto.) Such funds will be provided
by (i) the incurrence of up to $9.750 billion principal amount of indebtedness
(the "Bank Financing") under a replacement bank credit facility on the terms set
forth in the bank commitment letter, dated the date hereof (the "Bank Commitment
Letter"), and (ii) the issuance and sale by you of 1,000,000 shares (the
"Shares") of a newly created series of preferred stock having the terms set
forth on Exhibit B hereto, at an aggregate purchase price of $1.0 billion
(together with the Bank Financing, the "Financing"). The Acquisition, the
Financing and the other transactions contemplated hereby are collectively
referred to herein as the "Transactions."
You agree to sell to each of the undersigned, or one or more of
their respective affiliated investment funds under management and/or designees
(collectively,
<PAGE> 2
the "Investors"), and each of the undersigned, severally and not jointly,
commits to purchase, or to cause one or more of its affiliated investment funds
under management and/or designees to purchase, upon the terms and subject to the
conditions set forth or referred to herein and the Exhibits attached hereto,
including, but not limited to Exhibit C (collectively, the "Commitment Letter"),
the number of Shares set forth under its name on the signature page hereto. The
purchase of the Shares shall take place simultaneously with the consummation of
the Merger, on a date that you will designate to us in writing no later than ten
days prior to such date.
Upon the earlier of (i) the effective time of the Merger and (ii)
the Target paying or becoming obligated to pay the Company any amounts by reason
of, or in connection with, the termination of the Agreement (including, without
limitation, any amounts payable pursuant to Section 5.11(b) of the Agreement),
you shall as promptly as reasonably practicable pay by wire transfer of
immediately available funds to Apollo Management IV, LP or its designees
("Apollo"), Blackstone Management Partners III LLC ("Blackstone"), GSCP, Inc.
and DLJ Merchant Banking II, Inc., or its designee, a non-refundable transaction
fee of $11.0 million, $8.75 million, $2.5 million and $2.75 million,
respectively.
You agree (a) to indemnify and hold harmless us, our affiliates
and partners, and the respective officers, directors, members, employees,
advisors and agents of each of us, our affiliates and partners (each, an
"indemnified person"), from and against (and to reimburse each indemnified
person as the same are incurred) any and all losses, claims, damages,
liabilities, costs and expenses (collectively, "Losses") to which any
indemnified person may become subject or incur directly or indirectly based
upon, arising out of, or in connection with this Commitment Letter, the
Financing, the use of the proceeds thereof, the other Transactions (including
the Acquisition) or any related transaction or any claim, litigation,
investigation or proceeding relating to any of the foregoing, regardless of
whether any indemnified person is a party thereto, and to reimburse each
indemnified person upon demand for any reasonable legal or other reasonable out
of pocket expenses incurred in connection with investigating or defending any of
the foregoing, provided that the foregoing indemnity will not, as to any
indemnified person, apply to Losses to the extent they are found by a final,
non-appealable judgment of a court to arise from the willful misconduct or gross
negligence of such indemnified person, and (b) whether or not the Financing is
consummated, to reimburse us and our affiliates on demand for all reasonable
out-of-pocket expenses (including, but not limited to, reasonable expenses of
due diligence, consultant's fees and expenses, travel expenses, and reasonable
fees, charges and disbursements of counsel) incurred in connection with the
Transactions and any related documentation
2
<PAGE> 3
or the amendment, modification or waiver thereof. No indemnified person shall be
liable for any indirect, consequential or punitive damages in connection with
this Commitment Letter, the definitive financing documentation or its activities
related to the Transactions.
You hereby represent and covenant that (a) to the best of your
knowledge, all information (excluding information of a general economic nature
and financial projections) concerning you, the Target, the Acquisition, and the
other Transactions (the "Information") that has been or will be prepared by or
on behalf of you or any of your authorized representatives and that has been
made or will be made available to us or any of our authorized representatives in
connection with the Transactions, when taken as a whole, will at the time made
available be correct in all material respects and will not contain any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements contained therein not materially misleading in light of
the circumstances under which such statements are made, (b) all financial
projections concerning you, the Acquisition, and the other Transactions or, to
the best of your knowledge, the Target (the "Projections") that have been
prepared by or on behalf of you or the Target or any of your or its authorized
representatives and that have been or will be made available to us or any of our
authorized representatives in connection with the Transactions have been and at
the time made available will be prepared in good faith based upon assumptions
believed by you to be reasonable and (c) the transactions contemplated by the
Commitment Letter have been approved by a majority of the members of the
Company's board of directors who are not affiliated with the purchasers of the
Shares and the directors have received an opinion of Chase Securities Inc. to
the effect that the transactions contemplated by this Commitment Letter are fair
to the Company from a financial point of view. You agree to supplement the
Information and the Projections from time to time until the effective time of
the Merger so that the representations and covenants in the preceding sentence
remain correct.
This Commitment Letter and our commitment hereunder shall not be
assignable by you (and any purported assignment shall be null and void), are
solely for the benefit of the parties hereto and do not confer any benefits
upon, or create any rights in favor of, any person other than the parties hereto
and the indemnified persons referred to above. This Commitment Letter may not be
amended or waived except by an instrument in writing signed by each party
hereto. This Commitment Letter may be executed in any number of counterparts,
each of which shall be an original, and all of which, when taken together, shall
constitute one agreement. Delivery of an executed signature page of this
Commitment Letter by facsimile transmission shall be as effective
3
<PAGE> 4
as delivery of a manually executed counterpart hereof. This Commitment Letter is
the only agreement that has been entered into between us relating to our
commitment with respect to any Shares and sets forth the entire understanding of
the parties with respect thereto (other than a separate agreement regarding
certain modifications to the existing shareholders' and registration rights
agreements among you and certain of our affiliates).
This Commitment Letter shall be governed by and construed in
accordance with the laws of the State of New York. EACH OF THE PARTIES HERETO
IRREVOCABLY AGREES TO WAIVE TRIAL BY JURY IN ANY ACTION, PROCEEDING, CLAIM OR
COUNTERCLAIM BROUGHT BY OR ON BEHALF OF ANY PARTY RELATED TO OR ARISING OUT OF
THIS COMMITMENT LETTER OR THE PERFORMANCE OF SERVICES HEREUNDER. You irrevocably
and unconditionally submit to the exclusive jurisdiction of any state or federal
court sitting in the Borough of Manhattan, The City of New York, over any suit,
action or proceeding arising out of or relating to this Commitment Letter.
Service of any process, summons, notice or document by registered mail addressed
to you at your address set forth above shall be effective service of process
against you for any such suit, action or proceeding brought in any such court.
You irrevocably and unconditionally waive any objection to the laying of venue
of any such suit, action or proceeding brought in any such court and any claim
that any such suit, action or proceeding has been brought in an inconvenient
forum. A final judgment in any such suit, action or proceeding brought in any
such court may be enforced in any other courts to whose jurisdiction you are or
may be subject, by suit upon judgment.
This Commitment Letter is delivered to you on the understanding
that you shall not, and shall cause your directors, officers, employees, agents
and advisors (collectively, "Representatives") not to, directly or indirectly,
disclose this Commitment Letter or any of its terms or substance to any other
person except (i) on a confidential basis to your Representatives who are
directly involved in the consideration of this matter and agree to keep this
Commitment Letter and its terms and substance confidential, (ii) as may be
compelled in a judicial or administrative proceeding (in which case you agree to
inform us promptly thereof), (iii) on a confidential basis, to Target and its
Representatives who are directly involved in the consideration of the
Acquisition so long as Target has agreed to keep, and to cause its
Representatives to keep, this Commitment Letter and its terms and substance
confidential (except as contemplated by clause (iv) of this sentence), (iv) the
reference to this Commitment Letter in the Agreement and (v) to the extent
required under applicable securities laws. Notwithstanding the foregoing, any
press release or filing with the Securities and Exchange Commission disclosing
this Commitment Letter or the terms or substance
4
<PAGE> 5
hereof shall be subject to our prior review and consent, which shall not be
unreasonably withheld or delayed.
Our commitment in this Commitment Letter will terminate at 5:00
p.m., New York City time, on March 8, 1999, unless on or prior to such time you
sign and return an enclosed counterpart of this Commitment Letter and, if so
accepted on or prior to such time, the commitment contained herein will
terminate at 5:00 p.m., New York City time, on the earliest of (i) the
termination of the Agreement, (ii) the material amendment of the Agreement or
the waiver by the Company of any of the conditions or covenants contained
therein, in each case without the approval of Apollo and Blackstone, which may
be given or withheld in their sole discretion, (iii) the date you notify us that
you have elected not to consummate the Merger, (iv) the date of execution and
delivery of a definitive agreement among us with respect to the purchase and
sale of the Shares and (v) December 31, 1999 (or such later date as may be
agreed to by you and us). The reimbursement, fee, indemnification, choice of
law, submission to jurisdiction and confidentiality provisions contained herein
shall remain in full force and effect regardless of whether definitive financing
documentation shall be executed and delivered and notwithstanding the
termination of this Commitment Letter or our commitment contained herein.
5
<PAGE> 6
If the foregoing correctly sets forth our agreement, please
indicate your acceptance of the terms hereof by returning to us executed
counterparts hereof.
Very truly yours,
APOLLO MANAGEMENT IV, L.P.
By:____________________________
Name:
Title: Vice President
Number of shares: 440,000
Aggregate purchase price: $440,000,000
BLACKSTONE CAPITAL PARTNERS III
MERCHANT BANKING FUND L.P.
By: Blackstone Management
Associates III L.L.C.,
its General Partner
By:____________________________
Name:
Title:
Number of shares: 350,000
Aggregate purchase price: $350,000,000
<PAGE> 7
GREENWICH STREET CAPITAL PARTNERS II, L.P.
GSCP OFFSHORE FUND, L.P.
GREENWICH FUND, L.P.
GREENWICH STREET EMPLOYEES FUND, L.P.
TRV EXECUTIVE FUND, L.P.
By: GREENWICH STREET
INVESTMENTS II, L.L.C.,
their General Partner
By:____________________________
Name:
Title:
Number of shares 100,000
Aggregate purchase price $100,000,000
<PAGE> 8
DLJMB FUNDING II, INC.
By: DLJMB Funding, Inc.
By:____________________________
Name:
Title:
Number of shares: 15,707.286
Aggregate purchase price: $15,707,286
DLJ MERCHANT BANKING PARTNERS II, L.P.
By: DLJ Merchant Banking II, Inc.
Managing General Partner
By:____________________________
Name:
Title:
Number of shares: 68,155.846
Aggregate purchase price: $68,155,846
DLJ MERCHANT BANKING PARTNERS II-A, L.P.
By: DLJ Merchant Banking II, Inc.
Managing General Partner
By:____________________________
Name:
Title:
Number of shares: 2,714.282
Aggregate purchase price: $2,714,282
<PAGE> 9
DLJ DIVERSIFIED PARTNERS, L.P.
By: DLJ Diversified Partners, Inc.
Managing General Partner
By:____________________________
Name:
Title:
Number of shares: 3,984.699
Aggregate purchase price: $3,984,699
DLJ DIVERSIFIED PARTNERS-A, L.P.
By: DLJ Diversified Partners, Inc.
Managing General Partner
By:____________________________
Name:
Title:
Number of shares: 1,479.781
Aggregate purchase price: $1,479,781
DLJ MILLENNIUM PARTNERS, L.P.
By: DLJ Merchant Banking II, Inc.
Managing General Partner
By:____________________________
Name:
Title:
Number of shares: 1,102.004
Aggregate purchase price: $1,102,004
<PAGE> 10
DLJ MILLENNIUM PARTNERS-A, L.P.
By: DLJ Merchant Banking II, Inc.
Managing General Partner
By:____________________________
Name:
Title:
Number of shares: 214.936
Aggregate purchase price: $214,936
DLJ FIRST ESC L.P.
By: DLJ LBO Plans Management Corporation
General Partner
By:____________________________
Name:
Title:
Number of shares: 131.148
Aggregate purchase price: $131,148
DLJ OFFSHORE PARTNERS II, C.V.
By: DLJ Merchant Banking II, Inc.
Managing General Partner
By:____________________________
Name:
Title:
Number of shares: 3,351.548
Aggregate purchase price: $3,351,548
<PAGE> 11
DLJ EAB PARTNERS, L.P.
By: DLJ LBO Plans Management Corporation
General Partner
By:____________________________
Name:
Title:
Number of shares: 306.011
Aggregate purchase price: $306,011
DLJ ESC II L.P.
By: DLJ LBO Plans Management Corporation
General Partner
By:____________________________
Name:
Title:
Number of shares: 12,852.459
Aggregate purchase price: $12,852,459
Accepted and agreed to as
of the date first written above by:
ALLIED WASTE INDUSTRIES, INC.
By:____________________________
Name:
Title:
<PAGE> 12
Exhibit A
Sources and Uses of Funds on the Merger Date
(in million of dollars)
For Consolidated Entity
<TABLE>
<CAPTION>
Use of Funds Sources of Funds
------------ ----------------
<S> <C> <C> <C>
Consideration for Shares $7,065.0 Revolving Facility $ 0.0
Consideration for Options for BFI 291.7 Senior Unsecured Increasing 2,500.0
Rate Note Facility and/or Senior
Subordinated Notes
Severance and Termination 177.0 Asset Sale Term Loan Facility 1,500.0
Payments
Repayment of Commercial Paper 740.5 Tranche A Facility 2,250.0
of BFI
Repayment of existing Senior 319.8 Tranche B Facility 1,000.0
Secured Credit Facility of
Borrower
Excess Cash 47.3 Tranche C Facility 1,000.0
Transaction Costs 100.0 Equity Contribution 750.0
--------
Financing Fees 258.7 Total Sources $9,000.0
-------- ========
Total Uses $9,000.0
========
</TABLE>
<PAGE> 13
EXHIBIT B
$1,000,000,000 CONVERTIBLE PREFERRED STOCK
SUMMARY OF PROPOSED TERMS
INVESTORS............. Those parties signatory to the commitment letter to
which this term sheet is attached (the "Commitment
Letter") and their respective affiliated funds under
management and/or designees (the "Investors").
ISSUER................ Allied Waste Industries, Inc., a Delaware corporation
(the "Company").
ISSUE................. 1,000,000 shares of Series _ Senior Convertible
Preferred Stock, par value $.10 per share (the
"Preferred Stock").
LIQUIDATION
PREFERENCE............ $1,000 per share of Preferred Stock, plus the value
of accrued and unpaid dividends through and including
the date of determination (the "Liquidation
Preference").
Upon any liquidation, dissolution or other winding up
of the affairs of the Company, before any
distribution or payment is made to any equity
security of the Company ranking junior to the
Preferred Stock, the holders of the Preferred Stock
shall be paid the greater of (a) the Liquidation
Preference or (b) the amount that would be payable to
the holders of shares of Preferred Stock if the
holders of the Preferred Stock had converted all
outstanding shares of Preferred Stock into shares of
common stock, par value $.01 per share, of the
Company (the "Common Stock"), immediately prior to
such liquidation, dissolution or other winding up.
INITIAL AGGREGATE
LIQUIDATION
PREFERENCE............ $1,000,000,000.
<PAGE> 14
PURCHASE PRICE........ On the date of issuance of the Preferred Stock (the
"Issue Date"), the Investors shall purchase the
Preferred Stock for total cash consideration equal to
$1,000,000,000 or $1,000 per share.
REGISTRATION/
TRANSFER.............. The Preferred Stock will be sold in a private
placement directly by the Company to the Investors
and initially shall not be registered under the
Securities Act of 1933, as amended.
The Company shall enter into an amended and restated
registration rights agreement with the Investors
providing the rights contemplated by that certain
letter agreement dated the date of the Commitment
Letter (the "Letter Agreement").
DIVIDENDS............. Dividends shall accrue from the Issue Date at an
annual rate equal to the greater of:
(a) (i) with respect to dividends accruing prior to
the earlier of the date the Stockholder Approval (as
defined below) is obtained and the tenth anniversary
of the Issue Date, (A) 6.5% of the Liquidation
Preference per annum during the first six months
following the Issue Date and (B) thereafter, 6.5% of
the Liquidation Preference per annum plus an
additional 1% of the Liquidation Preference per annum
for each six month period after the Issue Date until
the Stockholder Approval is obtained, (ii) with
respect to dividends accruing on or after the date
the Stockholder Approval has been obtained and on or
before the tenth anniversary of the Issue Date, 6.5%
of the Liquidation Preference per annum, or (iii)
with respect to dividends accruing after the tenth
anniversary of the Issue Date, 12% of the Liquidation
Preference per annum; and
2
<PAGE> 15
(b) the quarterly dividend last declared, as of such
Dividend Payment Date, by the board of directors of
the Company with respect to the Common Stock.
Notwithstanding the foregoing, (i) dividends shall
never accrue at a rate in excess of 12% of the
Liquidation Preference per annum and (ii) any
dividends accruing on or after the fifth anniversary
of the Issue Date that are not paid in cash on the
applicable Dividend Payment Date shall accrue at 12%
of the Liquidation Preference per annum.
Dividends shall be payable, in cash, when, as and if
declared by the board of directors of the Company,
and if not paid on the applicable Dividend Payment
Date, shall be added to the Liquidation Preference on
such Dividend Payment Date. Thereafter, such dividend
will no longer be payable in cash. "Dividend Payment
Date" means March 31, June 30, September 30 and
December 31 of each year.
CONVERSION
RIGHTS................ From and after receipt of the Stockholder Approval,
each share of Preferred Stock shall be convertible at
the option of the holder initially into the number of
fully paid and nonassessable shares of Common Stock
equal to the Liquidation Preference at the time of
conversion divided by $18.00.
For so long as the Stockholder Approval is not
obtained, the Preferred Stock shall be convertible at
the option of the holder into the number of shares of
Series _ Junior Preferred Stock, par value $.10 per
share, of the Company (the "Junior Preferred Stock"),
determined pursuant to the preceding paragraph.
Depositary share arrangements will be put in place to
the extent necessary due to authorized share
limitations. The Junior Preferred Stock shall be
non-redeemable and shall at least have all rights of
a share of Common Stock (including, but not limited
3
<PAGE> 16
to, ranking no less than pari passu with the Common
Stock as to dividends and any other distributions
declared on the Common Stock and payment upon
liquidation). The Junior Preferred Stock will be
entitled to vote with the Common Stock on a share for
share basis and shall, to the extent permitted by the
rules of any applicable stock exchange or other
trading market, be convertible share for share into
Common Stock, subject to adjustments to voting and
conversion rights, if any, for depositary share
arrangements.
The conversion privileges set forth above shall
include customary anti-dilution protection.
LISTING............... The Company shall use its reasonable best efforts to
cause the shares of Common Stock and, to the extent
permitted, the Junior Preferred Stock (if, as and
when issued and offered pursuant to an effective
registration statement) issuable upon conversion of
the Preferred Stock to be listed or otherwise
eligible for trading on each principal trading market
for the Common Stock.
OPTIONAL
REDEMPTION
RIGHTS................ The Company shall not have the right to redeem the
Preferred Stock prior to the later of (a) the third
anniversary of the Issue Date and (b) receipt of the
Stockholder Approval. Thereafter, the Company shall
have the right to redeem the Preferred Stock, in
whole but not in part, at the Liquidation Preference;
provided, if such redemption is prior to the fifth
anniversary of the Issue Date, the Company shall have
such right only if the average closing price of the
Common Stock (as reported (absent manifest error) in
The Wall Street Journal), for the thirty consecutive
trading days ending on the date of notice of the
Company's intent to redeem the Preferred Stock
exceeds 150% of the conversion price, as then in
effect. Any such redemption shall be effected no
earlier than thirty days after the Investors receive
such notice of redemption.
4
<PAGE> 17
RANKING............... The Preferred Stock shall rank senior to all existing
and future classes of common or preferred stock of
the Company.
VOTING RIGHTS......... The Preferred Stock and the Junior Preferred Stock
shall have the right to vote, together with the
Common Stock, as a single class, on all matters on
which the Company's common stockholders are entitled
to vote. For purposes of such voting, (a) each share
of Preferred Stock shall have the number of votes
equal to the number of shares of Common Stock then
issuable upon conversion of such share of Preferred
Stock (without regard to whether the Stockholder
Approval has been obtained) and (b) each share of
Junior Preferred Stock will have the number of votes
that would otherwise be represented by the number of
shares of Common Stock in lieu of whose issuance such
share of Junior Preferred Stock is issued.
For so long as any shares of Preferred Stock or
Junior Preferred Stock are outstanding, the holders
of Preferred Stock and Junior Preferred Stock, voting
separately as a class, shall have the right to elect
the number of directors of the Company that Apollo
and Blackstone or their affiliates would be entitled
to elect pursuant to the Second Amended and Restated
Share Agreement (the "Stockholders' Agreement"), by
and among the Company and the Investors. Such
directors will be deemed to be the directors elected
by Apollo and Blackstone under the Stockholders'
Agreement.
The Preferred Stock and the Junior Preferred Stock
shall each be entitled to vote as a separate class
with respect to amendments to the Company's
certificate of incorporation, by merger or otherwise,
that adversely affect the rights of each such class
of stock.
STOCKHOLDER
APPROVAL.............. To comply with the requirements of the New York Stock
Exchange, the Company shall use its reasonable best
5
<PAGE> 18
efforts to obtain stockholder approval of the
conversion of the Preferred Stock into shares of
Common Stock (the "Stockholder Approval"). If
feasible, the Company shall present a proposal for
the Stockholder Approval (together, to the extent
consistent with their fiduciary duties, with the
affirmative recommendation of a majority of the
members of the Company's board of directors not
affiliated with the Investors or their affiliates) at
the Company's 1999 annual meeting of its
stockholders. Unless previously adopted, the Company
shall resubmit a proposal for the Stockholder
Approval at the next two annual meetings of its
stockholders, at two special meetings of its
stockholders convened at the Investors' request and
at any other meetings chosen by the Company.
CHANGE OF
CONTROL............... Upon the occurrence of a change of control, the
Company shall offer to purchase any and all of the
shares of Preferred Stock at 101% of the Liquidation
Preference.
PREFERRED STOCK
PURCHASE
AGREEMENT............. The shares of Preferred Stock shall be issued
pursuant to a stock purchase agreement reasonably
satisfactory to the Investors (including the form of
the certificate of designation attached thereto).
Such stock purchase agreement shall contain (a)
representations and warranties substantially similar
to those in the definitive documentation for the Debt
Financing (which shall not serve as conditions to
closing but shall otherwise survive the closing) and
(b) other representations and warranties relating to
organization, capitalization, validity of the shares
and similar matters (which shall serve as conditions
to, and survive, the closing); indemnities;
covenants; and conditions precedent subject to the
foregoing, customary for agreements of such type and
a covenant on the part of (i) the Investors to vote
any shares of Common Stock, Preferred Stock and
Junior Preferred Stock beneficially owned by them, or
their affiliates, entitled to vote with respect to
the Stockholder Approval for such proposal
6
<PAGE> 19
and (ii) the Company to provide Rule 144A(d)
information. Those matters that are not covered or
made clear by the Commitment Letter or this term
sheet are subject to approval by the Investors (it
being understood that the terms and conditions of the
definitive documents shall not be inconsistent with
the provisions of this term sheet or the Commitment
Letter).
OTHER
AGREEMENTS............ The Investors and the Company will also enter into
the Stockholders Agreement contemplated by the Letter
Agreement. The Investors will enter into an amendment
of the existing Investment Agreement which will,
among other things, add the new Investors as parties,
provide that each party thereto will vote in
accordance with the terms thereof, and provide
certain restrictions on the transfer of shares of the
Investors other than Apollo and Blackstone to the
effect that such Investors shall not transfer any
shares, beneficially owned by them, of the Company in
a manner not available to affiliates under the
Federal securities laws.
7
<PAGE> 20
EXHIBIT C
CONDITIONS
Each Investor's several commitment pursuant to the Commitment
Letter, dated March 7, 1999 (the "Commitment Letter"), is subject to the
satisfaction of the following conditions (capitalized terms used but not defined
herein shall, unless otherwise specified, have the meanings assigned to such
terms in the Commitment Letter):
(1) the preparation, execution and delivery of definitive
documents relating to the purchase and sale of the Shares reasonably
satisfactory to each of the Investors;
(2) the Acquisition and each of the other Transactions (other than
the purchase by such Investor of the Shares to be purchased by it)
shall have been consummated or shall be consummated simultaneously with
the other Transactions, without any waiver by the Company of the
conditions thereto without the prior written consent of the Investors
affiliated with Apollo and Blackstone, which may be given or withheld
in their sole discretion; and the Bank Financing shall be consummated
on terms that in all material respects are as favorable to the Company
and the Investors as those set forth in the Bank Commitment Letter;
(3) the termination or expiration of all applicable waiting
periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1975,
as amended, and the rules promulgated thereunder (the "HSR Act"),
provided, that with respect to the purchase of the Shares such Investor
has used its reasonable best efforts to obtain clearance under the HSR
Act prior to satisfaction of the conditions to the Agreement and the
Bank Financing (other than the purchase of the Shares).
<PAGE> 1
EXHIBIT 10.23
March 7, 1999
Allied Waste Industries, Inc.
15880 North Greenway-Hayden Loop
Scottsdale, Arizona 85260
Ladies and Gentlemen:
Reference is made to (a) the letter agreement dated the date hereof
(the "Commitment Letter") among you (the "Company"), Apollo Management IV LP
("Apollo"), Blackstone Capital Partners III Merchant Banking Fund L.P.
("Blackstone") and certain non- Apollo/Blackstone-affiliated investors, pursuant
to which Apollo and Blackstone and such other investors have severally agreed to
purchase shares (the "Additional Shares") of the Company's convertible preferred
stock (having the terms described therein) in connection with the Company's
acquisition (the "Acquisition") of the corporation referred to as Blue (the
"Target"), (b) the Amended and Restated Shareholders Agreement, dated as of
April 21, 1997 (the "Shareholders Agreement"), by and between the Company, on
the one hand, and certain affiliates of Apollo (collectively, the "Apollo
Funds") and certain affiliates of Blackstone (collectively, the "Blackstone
Funds"), on the other hand, and (c) the Registration Rights Agreement, dated as
of April 21, 1997 (the "Registration Rights Agreement"), by and between the
Company, on the one hand, and the Apollo Funds and the Blackstone Funds, on the
other hand. Capitalized terms used but not defined herein shall have the
meanings set forth in the Shareholders Agreement.
In consideration of the execution and delivery by Apollo, Blackstone
and the non- Apollo/Blackstone-affiliated investors of the Commitment Letter,
the Company hereby agrees with Apollo, the Apollo Funds, Blackstone, the
Blackstone Funds and such other investors as follows:
1. Waiver of Standstill Provisions. The Company waives any breach by
the Shareholders of Article 2 of the Shareholders Agreement to the extent such
breach relates to the Additional Shares to be acquired pursuant to the
Commitment Letter (including the shares into which the Additional Shares are
convertible) or the matters covered by this letter agreement.
2. Amendment of Shareholders Agreement. The Company, the Shareholders,
Apollo and Blackstone agree that, concurrent with the execution and delivery of
a definitive purchase agreement with respect to the Additional Shares, they
(together with any additional designees of Apollo or Blackstone who purchase any
Additional Shares) will enter into a Second Amended and Restated Shareholders
Agreement substantially identical to the Shareholders Agreement but reflecting
the modifications described below. The effectiveness of such amendment will be
conditioned on issuance of the Additional Shares to Apollo, Blackstone and any
of their designees as contemplated by the Commitment Letter. All of the
purchasers of the Additional Shares will be Shareholders for purposes of such
amended
<PAGE> 2
2
Shareholders Agreement, except as specified below. The Company represents that
this letter agreement and the amendments to the Shareholders Agreement
contemplated hereby have been approved by a majority of the directors of the
Company other than the Shareholder Designees.
(a) Definitions.
(i) For purposes of the definitions of "Actual Voting Power" and
"Voting Securities" and other defined terms in which such terms appear, the
Additional Shares and the shares of Junior Preferred Stock (as described in
Exhibit C to the Commitment Letter) into which Additional Shares are
converted shall be deemed from the date of issuance thereof to be shares
then entitled to vote for the general election of directors, notwithstanding
that such shares may not then possess such power due to the absence of the
Stockholders Approval (as defined in Exhibit C to the Commitment Letter) or
otherwise. Each Additional Share will be deemed at each date of
determination to have the number of votes that would be represented by the
number of shares of Common Stock into which such Additional Share would
otherwise then be convertible. Each share of Junior Preferred Stock will be
deemed at each date of determination to have the number of votes that would
otherwise be represented by the number of shares of Common Stock in lieu of
whose issuance such share of Junior Preferred Stock is issued.
(ii) For purposes of all calculations throughout the amended
Shareholders Agreement concerning Share ownership and percentage interests,
the Additional Shares acquired by investors other than Apollo and Blackstone
and their affiliates shall be disregarded, provided, that for purposes of
the proviso contained in subclause (D) of clause (ii) of Section 3.1(b),
Additional Shares (including the shares into which they are converted) that
are held by all the Shareholders will be included.
(b) Representations and Warranties. The representations and warranties
in Article 1 shall be restated, with appropriate modifications as warranted by
the circumstances. The accuracy of representations and warranties in the
Shareholders Agreement shall not serve as conditions to closing under the
purchase agreement.
(c) Standstill.
(i) Clause (A) of Section 2.1 will refer to the tenth anniversary of
the issuance of the Additional Shares. In subclause (ii) of clause (B) of
Section 2.1, the following language will be added: "; PROVIDED, that the
Shareholders at such time are entitled to designate not more than one
director pursuant to Article 3".
(ii) Subparagraph (iv) of Section 2.1 will be modified to make clear
that the Shareholders can participate in any election contest to the extent
it relates to the solicitation of proxies to elect Shareholder Designees and
Unaffiliated Directors nominated by the Nominating Committee (as such terms
are defined in the Shareholders Agreement) in the circumstance where there
is a competing slate of nominees in respect of which proxies are being
solicited.
<PAGE> 3
3
(iii) The Company will consider in good faith appropriate carve-outs
from the standstill provisions as they would otherwise apply to customary
investment banking and brokerage activities of Shareholders' affiliates.
(d) Board Representation and Voting.
(i) The director designation rights contained in Article 3 will be
vested exclusively in the Apollo/Blackstone-affiliated Shareholders and
their respective Related Transferees.
(ii) Section 3.1(a) will refer to the tenth anniversary of the issuance
of the Additional Shares. During the Shareholder Designee Period, the Board
of Directors will consist of no more than 13 directors. The additional two
directors will be designated exclusively by the Nominating Committee in
accordance with the procedures set forth in the Shareholders Agreement.
(iii) Section 3.1(b) will refer to the Company's obligation to support
the nomination and election of the persons specified in clauses (i), (ii)
and (iii) of such Section.
(iv) Subclauses (A) through (D) of clause (ii) of Section 3.1(b) will
be modified to reflect the following matrix:
<TABLE>
<CAPTION>
% of Shares Owned # of Shareholder Designees
----------------- --------------------------
<S> <C>
80% - 100.0% 5
60% - 79.9% 4
40% - 59.9% 3
20% - 39.9% 2
10% - 19.9% 1
0% - 9.9% 0
</TABLE>
For purposes of such matrix, "Shares" will be deemed to include the TPG
Group Block, the Laidlaw Block and the Additional Shares (calculated on an
as converted basis).
(v) The proviso contained in subclause (D) of clause (ii) of Section
3.1(b) will be modified, such that the number of Shareholder Designees will
be reduced to three (even if the above matrix would otherwise call for a
greater number) if the Shareholders are diluted below the 9% threshold
referred to therein.
<PAGE> 4
4
(vi) The Company will provide those Investors whose designees are not
on the board of directors such access to information and opportunity for
consultation with the Company as will enable such Investors to comply with
venture capital operating company requirements.
(vii) The Company's bylaws will be amended as appropriate to reflect
the changes described herein.
(e) Transfer Restrictions. The transfer restrictions of Article 4 of
the amended Shareholders Agreement will apply to the Additional Shares and the
shares into which they are converted, except that paragraphs (a), (b), (c) and
(d) will refer to the first anniversary of the date of issuance of the
Additional Shares.
3. Amendment of Registration Rights Agreement. The Company, the
Shareholders, Apollo and Blackstone agree that, concurrent with the execution
and delivery of a definitive purchase agreement with respect to the Additional
Shares, they (together with any additional designees of Apollo or Blackstone who
purchase any Additional Shares) will enter into an Amended and Restated
Registration Rights Agreement substantially identical to the Registration Rights
Agreement but reflecting the following modifications. The effectiveness of such
amendment will be conditioned on issuance of the Additional Shares to Apollo,
Blackstone and any of their designees as contemplated by the Commitment Letter.
The Company represents that the amendments to the Registration Rights Agreement
contemplated hereby have been approved by a majority of the directors of the
Company other than the Shareholder Designees.
(a) Appropriate modifications will be made to reflect that the
Registrable Securities (as defined in the Registration Rights Agreement) also
include the Additional Shares and the securities into which they may be
converted.
(b) There will be a total of nine (as opposed to the current three)
demand registrations, which will be vested exclusively in the
Apollo/Blackstone-affiliated Shareholders and their Related Transferees.
(c) Clause (y) of Section 2.3(c) will refer to six months rather than
twelve months, i.e., the Shareholders will have the ability to demand up to two
registrations per year. For purposes of clause (x) of Section 2.3(c), an
incidental registration opportunity with respect to Common Stock will not serve
to prevent the exercise of a demand registration right with respect to
Additional Shares during the 90 day period referred to in such clause (x),
provided, that the securities to be marketed and sold are limited to shares of
preferred stock in the form of Additional Shares.
(d) Clause (z) of Section 2.3(c) will be clarified to provide that the
Company's ability to rely on such clause in order not to be required to effect a
registration or file a post-effective amendment (as contemplated by the
introduction to Section 2.3) will continue only so long as the Company continues
in good faith to pursue the proposed filing and offer.
<PAGE> 5
5
(e) The last sentence of the first paragraph of Section 2.2 will
provide that a demand registration may be invoked if it involves at least
2,500,000 shares or such lesser number of shares as would yield gross proceeds
of not less than $50 million based on the average closing price of the Common
Stock over the ten trading day period preceding the date of the demand.
Comparable levels will be established if the shares to be registered and sold
consist of Preferred Stock (with the gross proceeds based on liquidation
preference). An appropriate conforming modification will be made to Section 4.4
as it applies to transferees of demand registration rights.
(f) The second parenthetical in Section 2.4(j) will be modified to
state that appropriate members of senior management of the Company will provide
customary due diligence assistance and will participate in customary "road show"
presentations in substantially the same manner as they would in a primary
registered public offering by the Company of its Common Stock after taking into
account reasonable business requirements of the Company in determining the
scheduling and duration of the road show.
(g) The non-Apollo/Blackstone-affiliated Shareholders will not have
piggyback rights with respect to the first three demand registrations unless
such registrations involve Additional Shares (or shares into which they are
converted). If during such first three demand registrations, both TPG/Laidlaw
equity and Additional Shares are included, the TPG/Laidlaw equity shall have
priority in the case of underwriters cutbacks, with any Additional Shares being
entitled to participate (subject to cutbacks) pro rata based on the Investors'
relative holdings of Additional Shares (including for all purposes the shares
into which they are converted). Piggyback rights will be available on a full pro
rata basis with respect to the next six demand registrations.
4. Miscellaneous. This letter agreement will be governed by, and
construed and enforced in accordance with, the laws of the State of Delaware,
without regard to conflict of laws principles thereof. This letter agreement may
not be amended except pursuant to an instrument in writing signed by each party
hereto. This letter agreement may be executed in one or more counterparts, each
of which will be deemed an original and all of which will constitute one and the
same instrument.
<PAGE> 6
6
If the foregoing corresponds with your understanding of our agreement,
kindly sign this letter agreement in the appropriate space below, and this
letter agreement will become a binding agreement among the undersigned.
APOLLO INVESTMENT FUND III, L.P.
APOLLO OVERSEAS PARTNERS III, L.P.
APOLLO (U.K.) PARTNERS III, L.P.
By: Apollo Advisors II, L.P.
By: Apollo Capital Management II, Inc.
By:______________________________________
Title:____________________________________
BLACKSTONE CAPITAL PARTNERS II
MERCHANT BANKING FUND L.P.
BLACKSTONE OFFSHORE CAPITAL
PARTNERS II L.P.
BLACKSTONE FAMILY INVESTMENT
PARTNERSHIP II L.P.
By: Blackstone Management Associates II L.L.C.
By:______________________________________
Title: Senior Managing Director
APOLLO MANAGEMENT IV LP
By:______________________________________
Title:____________________________________
BLACKSTONE CAPITAL PARTNERS III
MERCHANT BANKING FUND L.P.
By: Blackstone Management Associates III L.L.C.,
its general partner
By:______________________________________
Title: Member
<PAGE> 7
7
Accepted and agreed to:
ALLIED WASTE INDUSTRIES, INC.
By:_____________________________
Name:
Title:
<PAGE> 1
EXHIBIT 12
ALLIED WASTE INDUSTRIES, INC.
RATIO OF EARNINGS TO FIXED CHARGES
(in thousands except for ratios)
<TABLE>
<CAPTION>
Three Months
March 31,
---------
1998 1999
---- ----
(unaudited)
<S> <C> <C>
Fixed Charges:
Interest expensed .................... $ 21,336 $ 26,219
Interest capitalized ................. 16,325 16,029
-------- --------
Total interest expense ............. 37,661 42,248
Interest component of rent expense.... 1,322 2,147
Amortization of debt issuance costs... 982 1,626
-------- --------
Total fixed charges ................ $ 39,965 $ 46,021
======== ========
Earnings:
Income before income taxes .......... $ 46,291 $ 67,992
Plus fixed charges .................. 39,965 46,021
Less interest capitalized ........... (16,325) (16,029)
-------- --------
Total earnings .................... $ 69,931 $ 97,984
======== ========
Ratio of earnings to fixed charges 1.75x 2.13x
======== ========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 37,043
<SECURITIES> 0
<RECEIVABLES> 239,626
<ALLOWANCES> 13,291
<INVENTORY> 12,283
<CURRENT-ASSETS> 491,788
<PP&E> 2,322,956
<DEPRECIATION> 523,222
<TOTAL-ASSETS> 3,890,667
<CURRENT-LIABILITIES> 466,396
<BONDS> 2,190,313
0
0
<COMMON> 1,866
<OTHER-SE> 979,151
<TOTAL-LIABILITY-AND-EQUITY> 3,890,667
<SALES> 408,045
<TOTAL-REVENUES> 408,045
<CGS> 230,014
<TOTAL-COSTS> 230,014
<OTHER-EXPENSES> 82,569
<LOSS-PROVISION> 1,238
<INTEREST-EXPENSE> 27,845
<INCOME-PRETAX> 67,992
<INCOME-TAX> 27,537
<INCOME-CONTINUING> 40,455
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 40,455
<EPS-PRIMARY> 0.22
<EPS-DILUTED> 0.21
</TABLE>
