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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997
Commission file number 0-20854
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PHILIP SERVICES CORP.
(Exact Name of Registrant as Specified in its Charter)
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<S> <C>
ONTARIO N/A
(State or Other Jurisdiction of Incorporation (I.R.S. Employer Identification Number)
or Organization)
100 KING STREET WEST, HAMILTON, ONTARIO L8N 4J6
(Address of Principal Executive Offices) (Zip Code)
</TABLE>
(905) 521-1600
(Registrant's Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
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TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
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Common Shares, No Par Value New York Stock Exchange
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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 by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates of
the Registrant, based on the closing price of Common Shares on the New York
Stock Exchange on March 26, 1998, was approximately $1,409,526,154 (assumes
officers, directors and all shareholders beneficially owning 5% or more of the
outstanding Common Shares are affiliates).
The number of Common Shares of the Registrant outstanding on March 26, 1998
was 131,118,712.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Proxy Statement for the Annual General and Special
Meeting of Shareholders to be held in June, 1998 are Incorporated by Reference
in Part III
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INDEX
TO FORM 10-K
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10-K PART AND ITEM NO. PAGE NO.
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PART I
Item 1. Business.................................................... 1
Item 2. Properties.................................................. 16
Item 3. Legal Proceedings........................................... 17
Item 4. Submission of Matters to a Vote of Security Holders......... 17
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters....................................... 18
Item 6. Selected Financial Data..................................... 21
Item 7. Management's Discussion and Analysis of Financial Condition
and
Results of Operations..................................... 22
Item 8. Financial Statements and Supplementary Data................. 28
Item 9. Changes in and Disagreements with Accountants on Accounting
and
Financial Disclosure...................................... 51
PART III
Item 10. Directors and Executive Officers of the Registrant.......... 52
Item 11. Executive Compensation...................................... 52
Item 12. Security Ownership of Certain Beneficial Owners and
Management................................................ 52
Item 13. Certain Relationships and Related Transactions.............. 52
PART IV
Item 14. Exhibits, Financial Statements Schedules and Reports on Form
8-K....................................................... 53
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PART I
ITEM 1. BUSINESS
INTRODUCTION
Philip Services Corp. ("Philip" or the "Company") is one of North America's
leading suppliers of metals recovery and industrial services. The Company has
one of the largest integrated networks of metals recovery and industrial
services operations, servicing more than 50,000 industrial and commercial
customers from over 320 locations across North America and Europe. The Company
applies proprietary technologies to reduce the cost and downtime associated with
industrial cleaning and plant turnaround activities, and to recover value from
industrial by-products and metal bearing residuals. The Company's primary base
of operations is in the United States. See Note 21 to the audited Consolidated
Financial Statements which appears on pages 48 and 49.
Philip is a company amalgamated under the laws of the Province of Ontario
pursuant to a Certificate and Articles of Amalgamation dated April 15, 1991. On
May 22, 1997, a Certificate and Articles of Amendment under the Business
Corporations Act (Ontario) were issued changing the name of the Company from
Philip Environmental Inc. to Philip Services Corp.
The Company's business is organized into two operating divisions, the
Metals Services Group and the Industrial Services Group. The Metals Services
Group's primary business operations are ferrous (steel), copper and aluminum
processing and recycling and related industrial and mill services. The ferrous
metals operations include the collection and processing of ferrous scrap
materials for shipment to steel mills and the provision of related mill
services. Ferrous operations also include steel service centers that process and
distribute structural steel products. Copper operations are comprised of cold
process mechanical recovery facilities, scrap management, management of material
recycling centers for the telecommunications industry and copper refining. The
group's aluminum recycling operations process aluminum dross, a by-product of
primary aluminum production, and produce aluminum deoxidizing products and
alloys from aluminum scrap. Both the non-ferrous and ferrous operations of
Philip provide significant brokerage capabilities for scrap materials and
primary metals, including steel, copper, aluminum and tin. The Metals Services
Group services the steel, telecommunications, aluminum, wire and cable and
automotive industries. See Note 21 to the Company's audited Consolidated
Financial Statements which appears on pages 48 and 49 of this Form 10-K for the
revenue, income (loss) from operations and identifiable assets of the Metals
Services Group for the fiscal years ended December 31, 1997, 1996 and 1995.
The Company believes its Industrial Services Group is the largest
integrated provider of on-site industrial services, by-products recovery and
environmental services in North America, with a network of approximately 250
facilities. The Industrial Services Group's operations are divided into four
main activities: on-site industrial services, by-products recovery,
environmental services and utilities management. On-site industrial services
include industrial cleaning and maintenance, waste collection and
transportation, container services and tank cleaning, turnaround and outage
services, mechanical contracting and refractory services. By-products recovery
includes distillation, engineered fuel blending, paint overspray recovery,
organic and inorganic processing and polyurethane recycling. Environmental
services include strategic resource management, decommissioning, remediation,
environmental consulting and engineering, and analytical and emergency response
services. See Note 21 to the Company's audited Consolidated Financial Statements
which appears on pages 48 and 49 of this Form 10-K for the revenue, income
(loss) from operations and identifiable assets of the Industrial Services Group
for the fiscal years ended December 31, 1997, 1996 and 1995.
See Note 21 to the Company's audited Consolidated Financial Statements
which appears on pages 48 and 49 of this Form 10-K for a geographic breakdown of
the Company's revenue, income (loss) from operations and total assets.
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RESTATEMENT OF 1996 AND 1995 FINANCIAL STATEMENTS
The Company's audited Consolidated Financial Statements for the years ended
December 31, 1996 and 1995 have been restated. See Note 3 to the Company's
audited Consolidated Financial Statements which appears on pages 34 to 36 of
this Form 10-K.
INDUSTRY OVERVIEW
Manufacturers are seeking to improve competitiveness by focusing on their
core business and by reducing costs in non-core, non-revenue producing
activities. Three key trends that have developed as a result are: (i) increased
outsourcing of non-core services, (ii) a reduction by manufacturers in the
number of vendors from which outsourced services are purchased and (iii)
maximizing resource recovery opportunities from waste and by-product streams.
The Company believes that the industrial services and resource recovery
industries are positioned to benefit from these three major trends.
Many non-core activities can be performed on a more cost effective basis by
specialized industrial service and resource recovery providers that have greater
expertise, technology advantages, access to markets for recovered materials and
economies of scale. As a result, companies which outsource non-core activities
are able to lower operating and capital costs, increase access to new
technologies, enhance by-product recovery and reduce liabilities by redirecting
accountability. In addition, by reducing the number of vendors from which
outsourced activities are purchased, and acquiring services from those suppliers
that can provide a "total service" solution on a national basis, manufacturers
can further lower administrative costs, reduce management overhead and increase
supplier accountability while reducing potential liabilities. Recovery of
resources from waste and by-product streams improves manufacturing efficiency by
reducing and reusing manufacturing residuals and by-products, thereby lowering
operating costs, including raw material costs, and reducing environmental
liabilities.
BUSINESS UNITS
METALS SERVICES
The Company's Metals Services Group applies customized process technologies
to recover metals from industrial by-products. The group's three primary
businesses include ferrous (steel), copper and aluminum processing and
recycling. The Company is North America's leading processor of wire and cable
scrap, is the most fully integrated provider of services to the steel industry
in North America and is the largest manufacturer of aluminum deoxidizing
products, an essential element in the manufacture of steel, in the northeastern
United States. The Company is also one of the largest ferrous scrap processors
in the United Kingdom. The Metals Services Group has approximately 3,250
employees.
The following table sets forth acquisitions in 1997 in the Metals Services
Group for which the purchase price, including debt assumed, was in excess of $10
million.
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COMPANY OR
CLOSING DATE ASSETS ACQUIRED PRIMARY LOCATION BUSINESS UNIT
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October 1997......... Steiner-Liff Metals Nashville, Tennessee Metals Services (Ferrous)
October 1997......... Southern Foundry Supply Chattanooga, Tennessee Metals Services (Ferrous)
October 1997......... Luria Brothers Cleveland, Ohio Metals Services (Ferrous)
August 1997.......... Intermetco Limited Hamilton, Ontario Metals Services (Ferrous)
July 1997............ Roth Bros. Smelting Corp. Syracuse, New York Metals Services (Aluminum)
May 1997............. Reynolds Metals Bellwood, Bellwood, Virginia Metals Services (Aluminum)
Virginia facility
February 1997........ Conversion Resources, Inc. Cleveland, Ohio Metals Services (Copper)
February 1997........ Warrenton Resources, Inc. Warrenton, Missouri Metals Services (Copper)
January 1997......... Allied Metals Limited Great Britain Metals Services (Ferrous)
</TABLE>
FERROUS PROCESSING OPERATIONS. The Metals Services Group is a processor
and broker of ferrous scrap to steel mills and foundries located in the lower
Great Lakes region, the Pittsburgh-Ohio corridor, Tennessee and
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in the United Kingdom. As a result of the 1997 acquisitions of the assets of
Luria Brothers, and all of the outstanding shares of Intermetco Inc.,
Steiner-Liff Iron and Metal Company and affiliated companies and Southern
Foundry Supply, Inc., and affiliated companies the Company's processing capacity
increased from 2 million tons in 1996 to more than ten million tons annually.
The Company is also the most fully integrated service provider to the North
American steel industry, supplying scrap steel, deoxidizing product, electric
arc furnace dust management and other services such as mill scale recovery,
industrial vacuum, slag recovery, wastewater treatment, decommissioning and
analytical and emergency response services.
Ferrous scrap is generated as a by-product of automotive stamping and
fabrication and is also derived from post-consumer sources (cars, refrigerators,
etc.). It is processed by baling, separation or shredding during which time the
material is graded and sorted. The primary consumer of ferrous scrap is the
mini-mill steel industry, which uses electric arc furnace technology to reduce
scrap to molten form to produce steel.
The Company's operations are regionally concentrated close to industrial
scrap producers and other suppliers and to local steel mills. Unlike many of the
Company's competitors that secure their supply of ferrous scrap indirectly
through ferrous scrap dealers, the Metals Services Group obtains most of its
ferrous scrap directly from industrial scrap producers pursuant to long standing
relationships. Accordingly, the Metals Services Group has access to consistent
volumes of high quality ferrous scrap from which it can supply the necessary
grades and mixtures required by the steel industry. As production capacity of
the mini-mill industry continues to increase, the Company believes that its
ability to consistently supply required volumes of quality scrap will make it
the supplier of choice in the regions it serves, and that the resulting
relationships will provide opportunities to sell additional services to such
customers.
The Metals Services Group also processes and distributes a broad range of
heavy carbon steel products through distribution and processing facilities
located in Houston, Texas, and five additional distribution centers located
across the southwestern and southeastern United States. The Company is one of
the largest distributors of structural steel products in these regions. Through
its acquisition of Intermetco Inc., the Company also provides processing of
steel coils and produces spiral weld pipe. These operations enable the Company
to provide further services to the steel industry through bulk purchases that
are inventoried and further processed, cut or formed, for resale to steel
purchasers. This service expands the Company's package of integrated services to
the steel industry and provides the Company with another entry point through
which to sell additional services.
The Company has also established itself in the European scrap processing
and mill services industry with its 1997 acquisition of Allied Metals Limited
("Allied Metals") from ASW Holdings PLC ("ASW"). Allied Metals is one of the
largest steel scrap processing and mill services companies in the United
Kingdom. Allied Metals' principal business involves the collection of
post-consumer scrap and the sale of processed metal as a raw material to steel
mills and foundries that use electric arc furnace technology. At its heavy media
separation facility, Allied Metals uses a proprietary process to recover copper,
aluminum and zinc from the residue of its auto shredding operations. Allied
Metals' facilities are concentrated in Southwest England and South Wales from
which it supplies local steel mills and foundries and the export market through
its two seaport facilities. The Company also provides on-site slag management
and electric arc furnace dust recycling at ASW's steel mill.
The Metals Services Group sets and adjusts its prices for ferrous metals
sold based upon prices set monthly by the major steel producers. The Company
manages its commodity price risk by acquiring ferrous metal scrap as it is
needed for its customers and maintaining relatively low inventories of scrap and
processed metals.
COPPER PROCESSING OPERATIONS. The Metals Services Group is North America's
leading processor of wire and cable scrap, processing approximately 500 million
pounds annually. The primary metal recovered is copper. The wire and cable
manufacturing industry is the largest generator of scrap wire and cable in North
America. Other principal generators include the telecommunications industry
(through the dismantling and regeneration of telecommunications lines),
utilities and the automotive industry. The availability of wire and cable scrap
depends upon a number of factors, including the general level of economic
activity in the industries served by the Metals Services Group, many of which
are cyclical in nature, and market prices for copper and
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the other metals recovered. The Metals Services Group has not historically had
difficulties in obtaining volumes of wire and cable scrap. Through its use of
proprietary technology and expertise, the Company believes that its Metals
Services Group is able to recover more components and generate higher yields
from wire and cable scrap than its competitors.
Depending on the grade of the material, recovered copper is either sold as
#1 or #2 scrap, or refined into prime ingots for sale to brass mills or rod
mills, or to copper smelters throughout North America. The Metals Services Group
also negotiates toll and conversion contracts for its wire and cable
manufacturing customers through which scrap materials are exchanged for new raw
materials. Under tolling contracts, the Metals Services Group receives a fee for
processing scrap and returning the recovered metals to the customer. Under
conversion contracts, the Metals Services Group acquires wire and cable scrap
from the customer and delivers back, directly or through secondary metals
processors, specified amounts of merchant copper and other metals. The Metals
Services Group also enters into brokerage contracts to supply merchant copper
and other metals to significant customers where quantities required exceed the
amounts recovered from the scrap supplied. This service results in the customer
having to deal with fewer suppliers.
The Metals Services Group also manages recycling centers for four regional
Bell operating companies under multi-year contracts. Under these contracts, the
Company collects scrap from the dismantling and regeneration of
telecommunications lines, categorizes it and prepares the scrap for resale. In
certain cases, the Company has the first right to purchase the wire and cable
scrap, and in other cases the Company is paid a fee for collecting the material
and may also bid for the scrap once it is collected.
Through Conversion Resources, Inc. of Cleveland, Ohio the Metals Services
Group also provides resource recovery programs that separate and process copper,
brass and aluminum from scrap produced by industrial clients. These metals are
then sold to tube mills, brass mills, foundries, specialty consumers and copper
refineries. Through Warrenton Resources Inc. of Warrenton, Missouri
("Warrenton"), the Metals Services Group refines copper scrap into copper ingots
and other customer specified shapes and is the sole manufacturer of fire-refined
copper ingot in North America. Warrenton uses #2 copper scrap as input for the
production of its ingots, which is generated from the Company's copper wire and
cable chopping operations. Through the Warrenton operations, wire and cable
scrap processing is vertically integrated to include collection, processing and
refining. This integration permits the Company to maximize the value of
recovered copper by enabling it to sell either into the lower grade commodity
markets or into the higher value added refined copper markets, as market
conditions vary.
The Company is exposed to commodity price risk during the period that it
has title to materials that are held in inventory for processing and/or resale.
The Company reduces its commodity price risk through matching purchases of
recoverable materials with current and future physical sales and the use of
certain financial instruments.
ALUMINUM PROCESSING OPERATIONS. Through its Guelph, Ontario and Syracuse,
New York plants, the Company is a leading producer of aluminum alloys for the
automotive industry situated in the Great Lakes region. The Company operates
furnaces for the production of foundry alloys, primarily from aluminum scrap.
The facilities have an annual capacity of approximately 350 million pounds. The
use of lightweight aluminum in automotive production continues to increase as
manufacturers comply with increasingly stringent fuel consumption and air
emission guidelines. The Company's alloys facilities also provide molten
aluminum to its customers, primarily automotive parts manufacturers. The Company
is one of a small number of molten aluminum suppliers which requires the use of
high cost "crucibles" and specialized vehicles to transport the molten aluminum.
This also requires that the Company's facilities be close to those of its
customers, which proximity provides a competitive advantage.
The Company is also a major producer of aluminum deoxidizing product for
the steel industry at facilities located in Painesville, Ohio and Richmond,
Virginia. Aluminum deoxidizing product is used in the manufacture of steel to
eliminate gas bubbles during the production process. The Company's aluminum
deoxidizing product is marketed to over 30 major North American steel mills and
provides another essential product offering to steel mills. Production of the
aluminum deoxidizing product also supports the vertical
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integration of the Company's aluminum operations since aluminum recovered from
dross provides a raw material for aluminum deoxidizing production.
The Metals Services Group aluminum processing operations also recover
aluminum from dross, a by-product formed in the primary smelting of aluminum.
Aluminum producers deliver dross to the Company's rotary kiln furnaces where it
is melted and processed to produce aluminum ingots that are returned to the
customer for a tolling fee. The Metals Services Group operates three rotary kiln
furnaces in two locations in the province of Quebec which service the major
aluminum producers located within the province. Transportation costs associated
with aluminum dross recycling require that the Metals Services Group's recycling
operations be located closely to the primary smelters served. The proximity of
the Metals Services Group's Quebec operations to the aluminum smelters, in
combination with its contractual relationships with the smelters, has resulted
in the absence of significant competitors for the Metals Services Group's
aluminum dross recycling operations.
INDUSTRIAL SERVICES
Through its Industrial Services Group, the Company believes it is the
single largest integrated industrial services provider in North America with
approximately 250 locations and about 10,750 employees and provides a wide range
of services geared towards the industrial customer. The Company is a leading
provider of on-site industrial services and operates the largest network of
solid and liquid industrial by-product recovery facilities. The Industrial
Services Group is headquartered in Houston, Texas.
The increasing focus by industrial enterprises on their core competencies
has led to greater outsourcing of non-core, non-revenue generating activities in
order to reduce costs. Such activities can generally be performed on a more cost
effective basis by specialized industrial service companies which have greater
expertise, technology advantages and economies of scale. Such activities include
industrial cleaning and maintenance, waste management and transportation,
demolition and remediation, and resource recovery. In addition, industrial
customers are evidencing a desire to reduce the number of vendors of industrial
services and to acquire services from those suppliers that can provide a "total
service" solution on a national basis thereby providing further administrative
and cost reductions.
The Company has expanded rapidly through acquisitions to provide it with
the range of products and services and the geographic coverage necessary to
respond to these trends. The acquisitions of Allwaste, Inc. ("Allwaste") and
Serv-Tech, Inc. ("Serv-Tech") have resulted in a significant expansion of
Philip's historical by-products recovery and environmental services businesses
by adding industrial cleaning and maintenance, container services, waste
transportation, refinery turnaround and refactory services. This broader range
of services better positions the Company to take advantage of the vendor
reduction trend. It has also provided the Company with significant cross selling
opportunities to the customer base of each company, since Philip has
historically been strong in the steel, telecommunications, automotive, aluminum,
chemical and paint industries, whereas Allwaste and Serv-Tech serve the
refining, petrochemical, electric utility, pulp and paper and food processing
industries. In addition, Allwaste and Serv-Tech were previously reliant upon
third parties for processing and disposal of wastes generated from their
industrial cleaning and turnaround projects. These waste streams may now be
processed at Philip's network of by-product recovery facilities. This
integration of on-site cleaning and maintenance with transportation, processing
and disposal allows the Company to provide to its customers single source
environmental accountability and competitive pricing.
The acquisitions of Allwaste and Serv-Tech have also given the Company a
significant presence in the heavily industrialized regions of the Gulf coast and
southeastern and southwestern United States, which complements Philip's
concentration in the Great Lakes and industrial northeast regions. The
Industrial Services Group is now organized into six operating regions:
Automotive, Central, Midwest, Northeast, Southeast and Western, each with a
mandate to provide the complement of industrial services to customers in that
region. In addition, many of the Company's specialized services are marketed
across all regions by specialized groups through the coordination of sales,
analysis, delivery and execution, and technical support. These specialized
services include demolition and decommissioning services, turnaround services,
chemical services and products, analytical laboratories, container services and
tank cleaning.
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The following table sets forth acquisitions in 1997 in the Industrial
Services Group for which the purchase price, including debt assumed, was in
excess of $10 million.
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COMPANY OR
CLOSING DATE ASSETS ACQUIRED PRIMARY LOCATION BUSINESS UNIT
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<S> <C> <C> <C>
July 1997............ Allwaste, Inc. Houston, Texas Industrial Services
July 1997............ Serv-Tech, Inc. Houston, Texas Industrial Services
July 1997............ 21st Century Environmental Management Providence, Rhode Island Industrial Services
Inc.
July 1997............ International Alliance Services, Inc. Hatfield, Pennsylvania Industrial Services
February 1997........ RMF Global, Inc. Toledo, Ohio Industrial Services
</TABLE>
The Industrial Services Group is divided into four principal divisions:
on-site industrial services, by-products recovery operations; environmental
services and utilities management.
ON-SITE INDUSTRIAL SERVICES. The Industrial Services Group is a leading
provider of on-site industrial services throughout North America. Industries
served include the refining, petrochemical, oil and gas, electric utility, pulp
and paper, automotive, food processing, paint and coatings, and transportation
industries. The Industrial Services Group provides industrial and commercial
customers with a range of industrial and environmental services, including
on-site industrial cleaning and maintenance (including hydroblasting,
gritblasting, air-moving and liquid vacuuming and container services, and tank
cleaning), waste collection and transportation, turnaround and outage services,
refactory services, project management services, inspection and analysis
services, electrical and instrumentation, and other general plant support
services.
Hydroblasting is performed using high pressure pumps to remove hard
deposits from surfaces, such as heat exchangers, boilers, aboveground storage
tanks and pipelines, that may be unsuitable for other conventional cleaning
techniques. Gritblasting utilizes both abrasive and non-abrasive media to clean
surfaces on electrostatic precipitators and boilers and to prepare metal
surfaces for protective coatings and non-destructive testing. Air-moving and
liquid vacuuming remove and handle industrial wastes or salvageable materials
contained in customers' tanks, containers or other process configurations.
Container services include cleaning, inspection and repair of highway
tank-trailers, railcar tanks, intermodal containers and intermediate bulk
containers. The Industrial Services Group also inspects all cleaned containers
in accordance with applicable governmental regulations to ensure no product or
moisture remains in the cleaned container. Tank cleaning involves the removal of
sludge and residual products from the interior of storage tanks to allow
inspection, repair and/or product changeover. The Company believes that the
Industrial Services Group has the most comprehensive mix of tank cleaning
technologies and service capabilities of any contractor in North America.
Waste collection and transportation services provide comprehensive on-site
by-product and waste management programs for facility waste streams. Waste is
tested and classified in order to determine the recyclability of the material
and third party disposal requirements. Manifests and other shipping
documentation are prepared and the waste material is sent to the Company's
recycling and reclamation facilities wherever possible, or to contracted third
party treatment and disposal facilities. The Industrial Services Group operates
a large fleet of collection vehicles.
Turnaround and outage services provide customers in refineries,
petrochemical facilities and power plants a single source integrated package of
turnaround maintenance services and other specialty services for the scheduled
maintenance, repair or replacement of process equipment, operating machinery and
piping systems. Sophisticated maintenance programs play an increasingly
important role in the continuous improvement of performance in plant operations.
Services provided include project management, planning and scheduling,
decontamination, heat exchange maintenance, refactory services and heat treating
services. The Company is a North American leader in providing turnaround
services to the petrochemical industry. This is largely due to its patented
technologies that reduce labor costs and turnaround costs, including those
associated with the cost of down-time. These technologies also significantly
reduce the safety risks associated with heat bundle extraction and cleaning. The
Company intends to expand the application of these technologies to other key
industry sectors, including steel, chemicals and utilities.
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BY-PRODUCTS RECOVERY. The Industrial Services Group's by-products recovery
operations apply customized process technologies to recover or create useable
products from liquid and solid industrial by-products (primarily hazardous and
non-hazardous chemical waste) and thereby reduce the cost and quantity of
materials destined for final disposal. The Industrial Services Group collects
organic industrial by-products which are processed into engineered fuels or
distilled into solvents and also provides on-site waste minimization and
inorganic waste processing.
Producing engineered fuels involves the blending of liquid and solid
industrial by-products into a customized fuel for use in industrial furnaces,
principally cement kilns. Distillation of spent solvents occurs through both
simple and fractional methods with recovered solvents either returned to the
generator or sold to the automotive aftermarket. Inorganic processing
capabilities include the treatment of waste waters and cyanide residuals, and
the recovery of metals from sludges, slags and foundry sands. The Industrial
Services Group also provides wastewater treatment, sludge management and paint
overspray recovery services to automotive and parts manufacturers that use paint
spray booth systems.
The Company's network of facilities and application of proprietary
technologies enables Philip to process higher volumes of by-products at reduced
cost. By developing new technologies or customizing available technologies, the
Company has achieved competitive processing and recovery efficiencies. For
example, the Company has developed a container processing system which enables
it to handle large volumes of drummed by-products quickly and effectively. The
system operates in an inert atmosphere using automatic control and video
monitoring to empty or shred drummed by-products which are then transferred to
feed storage tanks where product separation is controlled. Supplemental fuels
can then be blended from this material. By using this technology, the
by-products recovery facility in Detroit can process approximately 15,000 drums
of material per month. Philip has also established an engineered fuel processing
system ("Super Blender"), which emulsifies solids with liquid chemical
by-products and suspends these solids in a supplemental fuel for industrial use.
Through this process, the Company produces a supplemental fuel that contains up
to 50% solids by weight, providing its customers a more environmentally suitable
and lower cost alternative to the disposal of solid hazardous waste. Super
Blenders are located at the Company's Detroit and Kansas City facilities.
Solid and liquid chemical and industrial waste residues constitute the bulk
of materials managed by the by-products recovery operations. The hazardous waste
management industry, which provides disposal services, including incineration
and hazardous waste landfills, is a significant competitor to the Company for
by-product waste streams. As a result of overbuilding and the success of its
customer's waste minimization efforts, significant excess capacity has developed
in the hazardous waste management industry, leading to downward pricing
pressures in the markets served by the Company's by-products operations. To
counter this situation, the Company continues to develop and employ innovative
technologies that minimize on-site waste generation for its customers and
maximize the value and reuse opportunities for industrial by-products. By
developing increasingly value-added applications for the materials it manages,
in partnership with its key industrial customers, the Company maximizes its
margins and differentiates itself from conventional disposal alternatives.
Examples of this strategy include the patented Emulsion for Paint Overspray
Control ("EPOC") system installed at automotive and equipment manufacturing
facilities. In consultation with automotive manufacturers, the Industrial
Services Group developed the EPOC system for paint overspray recovery. This
technology eliminates the need to landfill paint sludge, a significant waste
stream and production bottleneck in automotive manufacturing. The system
captures paint overspray in an emulsion and then recovers for reuse the active
ingredient in the emulsion, together with the residual paint, at the Company's
dedicated processing facility. The EPOC system improves the efficiency of the
painting process and reduces costs by eliminating build up in the paint booth
and decreasing paint usage. The EPOC system is used in over 20 parts
manufacturing and automotive assembly plants throughout the United States,
including automotive production facilities where the Company provides on-site
operating personnel.
A further example is the Company's association with BASF Company ("BASF")
to recycle rigid polyurethane for the automotive sector. Approximately 2.5
million tons of polyurethanes are produced annually in North America. The
majority are used in flexible foam systems of which approximately 800 million
pounds are recycled. Molded parts made from rigid polyurethanes such as bumpers,
interior panels and steering wheels are not recycled and are disposed of in
landfills. Philip has been chosen by BASF to build
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and operate the first polyurethane recycling facility in North America using
BASF technology. This Detroit based facility has an initial processing capacity
of 10 million pounds per year. At the facility, polyurethane scrap is ground,
chopped and added to a reactor containing solvents such as glycol, catalysts and
other ingredients. It is then thermally treated and cooled to ambient
temperature. The polyol produced from this process can be used as a virgin
material in rigid polyurethane applications.
Philip owns a rock quarry covering approximately 190 acres in Stoney Creek,
Ontario ("Taro-East"). Philip has received regulatory authority to utilize the
Taro-East site as an industrial non-hazardous landfill with a total capacity of
11 million tons and an annual fill rate of 825,000 tons. The site is used for
the disposal of solid non-hazardous residuals from the Company's by-products
management and recovery operations located in Hamilton, Ontario.
ENVIRONMENTAL SERVICES. The Industrial Services Group's environmental
services operations include a broad range of remediation and environmental
services, including strategic resource management, site remediation,
decommissioning and investment recovery, abatement, environmental consulting and
engineering, and analytical and emergency response services.
Site remediation includes project management, risk assessment, demolition,
on-site treatment and transportation services to address environmental
contamination problems. Remediation can range from simple soil excavation and
disposal to complex programs that in some cases involve assumption by the
Company of management of all aspects of its customers' environmental and
regulatory programs. Combined with investment recovery, the Industrial Services
Group's site remediation services not only address environmental problems and
support the closure and decommissioning of facilities, they can generate revenue
for customers.
Decommissioning involves the closing down of operations, removal of process
equipment, buildings and structures and site cleanup and remediation. The
Industrial Services Group provides project planning and management, including
design, planning and control, health and safety, waste reduction, demolition,
and final site rehabilitation. All decommission projects start with an
investment recovery audit. The Company's extensive resource and by-products
recovery capabilities enables it to recover value from equipment, building
components, and ferrous and non ferrous metals. Proceeds from the sale of these
materials reduce the cost of demolition and decommissioning for customers.
The Industrial Services Group operates one of the largest networks of
environmental laboratories in Canada from which it provides analytical testing
for its customers across North America and from as far away as Japan. The
Company provides advanced air quality analysis and dioxin testing. The
Industrial Services Group also provides emergency response services, including
containment, clean-up, remediation and disposal of material resulting from the
inadvertent release of dangerous goods or hazardous materials, and wastes or
spills of material that are unusual to the environment in quantity or quality.
The competitive strengths of the Company's environmental services
operations include its ability to provide integrated cost competitive "back end"
solutions, such as decommissioning, remediation and investment recovery, to
problems identified through the risk assessment and consulting services phase of
the contract. Remediation services focus on proven technical solutions, such as
the treatment of solvent contamination by methane injection, and other acquired
or developed technologies.
UTILITIES MANAGEMENT. The Company provides turnkey wastewater treatment at
customers' facilities, including design, procurement, installation, start-up and
operation. The Company is able to design and construct economical and efficient
treatment systems and provide a guarantee of performance and assurance of
operability. The Company has operational responsibility for over 30 industrial
wastewater treatment facilities.
A portion of the Company's utilities management business is operated
through 70%-controlled Philip Utilities Management Corporation ("PUMC"), which
designs, builds, operates and manages municipal water and wastewater treatment
facilities. PUMC has contracts with eight Ontario municipalities to operate and
manage their water and wastewater treatment facilities. PUMC also designs and
installs supervisory control and data acquisition systems which increase
operating efficiencies of water and wastewater treatment plants and reduce
emergency maintenance and overtime costs.
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<PAGE> 11
The Company also specializes in water and sewer pipeline rehabilitation and
maintenance and services the rapidly growing North American market for
trenchless technologies. Trenchless technologies allow pipeline repairs to take
place through entry and exit points, rather than excavation of entire pipelines.
This results in lower costs and reduces interruption of services. The Company
also cleans commercial and industrial pipelines using high-pressure water
systems and provides pipeline inspection, survey and mapping services using
closed-circuit television and licensed asset management software.
CDM Philip Inc., a joint venture owned 80% by PUMC and 20% by Camp Dresser
& McKee Inc., a large US engineering firm, announced in 1997 that it had signed
a twenty-five year contract to design, build and operate a water treatment
facility for the city of Seattle. The design and build component of the project
is valued at $68 million and is expected to take three years to complete.
IMPACT OF INFLATION, ECONOMIC CONDITIONS AND SEASONALITY
A general economic slowdown over the Christmas holiday period, client year
end shutdowns and weather related circumstances during winter months results in
the Company experiencing lower levels of activity in December and during the
first quarter of its fiscal year. Therefore, first quarter results may not be
indicative of the results that will be achieved during an entire year.
PROPRIETARY TECHNOLOGY
The Company develops and applies proprietary technologies to provide
on-site waste minimization, by-products recovery and industrial services that
reduce customer costs, safety risks and potential environmental liabilities.
In its Metals Services Group, the Company applies proprietary technology to
obtain better yields from scrap and by-products and to develop further uses for
material that would otherwise be landfilled. Development and use of this
technology increases margins, reduces environmental risk for the Company and its
customers and adds to the integrated package of services provided by the
Company, making it more attractive as a single source vendor. For example, the
Company's second stage electrostatic separator used in its copper recovery
operations increases the percentage of copper or aluminum recovered from wire
and cable scrap. This results in a higher yield of metal. Through a joint
venture with Harbison Walker Refactories, the Company has developed a technology
to process the residual material from its dross operations into calcium
aluminate, which acts as a slag conditioner in steel production. This process
increases yield and margin from the dross operations, provides an alternative to
disposal for its customers in the aluminum industry and adds to the Company's
integrated steel services portfolio.
The Industrial Services Group applies proprietary technologies to minimize
waste, increase recovery and reuse of industrial by-products and provide on-site
industrial services that minimize downtime and costs associated with industrial
cleaning, maintenance and turnaround projects. These technologies include
engineered fuel blending, using a "Super Blender" to emulsify solid and liquid
chemical by-products into a fuel for cement kilns, the EPOC paint overspray
recovery system that reduces paint usage and eliminates the landfilling of paint
sludge, and the Company's association with BASF to recycle rigid polyurethane,
primarily generated from automotive production and automotive scrap, into
polyols for reuse in polyurethane applications. Turnaround technologies
primarily for the petrochemical and oil and gas industries include Fast Draw, a
remote control heat exchanger bundle extraction technology, Fast Clean, a
semi-robotic heat exchanger bundle cleaning process, and Life Guard, a
technology for decontaminating hydrocarbons in refinery towers and vessels to
reduce potential health and safety impacts during cleaning and maintenance
activities.
Although the Company possesses patents for certain of its technologies, it
relies primarily on trade secret protection and confidentiality to protect its
proprietary technology. While the time and capital associated with these
technologies provide a barrier to entry, there can be no assurance that the
Company will be able to maintain the confidentiality of its technology.
9
<PAGE> 12
The following table outlines certain of the Company's proprietary
technologies.
<TABLE>
<CAPTION>
TECHNOLOGY APPLICATION COMPETITIVE ADVANTAGE INDUSTRY SERVED
- ---------- ----------- --------------------- ---------------
<S> <C> <C> <C>
Fast Draw...................... Remote control extraction of Reduced turnaround time and Petrochemical,
heat exchanger bundles labor, Hydrocarbon
Enhanced safety processing
Fast Clean..................... Semi-robotic cleaning of Reduced turnaround time and Petrochemical,
heat exchanger bundles labor, Hydrocarbon
Enhanced safety processing
Life Guard..................... Decontamination of Elimination of personal Petrochemical,
hydrocarbons in refinery safety risks, Hydrocarbon
towers and vessels Improved heat transfer processing
performance
WeldSmart...................... Welding, Reduces energy consumption All welding
Heat treatment and increases productivity applications
EPOC........................... Paint overspray capture and Reduces paint usage and Automotive and
recovery eliminates landfilling of equipment
paint sludge manufacturers
Super Blender.................. Processing of solid and Reduces disposal costs and Petrochemical,
liquid by-products into eliminates landfilling, Paint,
engineered fuels Automotive,
Cement
Fuel Smart..................... Computer based method to Optimizes combustion, All industrial
regulate industrial minimizes the formation of furnaces
furnaces pollutants uniform furnace
temperatures
Calcium Aluminate Recovery..... Processes aluminum dross Eliminates landfilling, Aluminum,
residuals for reuse Raw material for steel Steel
manufacturing
Electric Arc Furnace ("EAF")
Dust Recycling............... Thermal treatment of EAF to Eliminates landfilling and Steel
produce zinc concentrate reduces disposal costs
Rigid Polyurethane Recycling... Thermal/chemical processing Eliminates landfilling, Automotive,
of rigid polyurethane Supports "recyclable car" Polyurethane
automotive parts into objective of automotive applications
virgin polyols manufacturers
</TABLE>
SALES AND MARKETING
The Company's sales and marketing strategy is focused on establishing close
working relationships with customers, developing a thorough understanding of
their business, working jointly on research and development to achieve waste
reduction and by-products recovery efficiency and bundling services to achieve
maximum efficiencies and cost reductions for customers. Philip strives to become
an integral part of its customers business through redesigning process
technologies, operating resource recovery facilities and delivering a broad
range of industrial outsourcing services.
The Company's relationship managers, who are assigned to industrial
accounts, are critical to the success of the sales and marketing program. These
individuals are responsible for managing all aspects of service delivery to that
customer, ensuring the customer has one point of contact for information,
service and accountability. This individual then consults other Company
specialists drawing upon their expertise as required to provide information and
implement a broad range of services.
The Company places less emphasis on traditional sales approaches and more
on cross selling a broad range of services to its existing large industrial
customer base. The Company has established a large customer
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<PAGE> 13
base in all key industrial sectors. Through the integration process, the Company
identifies services it is providing these customers and opportunities for
additional cross-selling. This process is carried out in conjunction with the
sales or operating personnel who have relationships with these customers.
The Company also participates in competitive bidding processes to obtain
contracts granted by municipalities, local governments or private enterprises
for services such as site redemption and decommissioning contract services.
Contracts are generally awarded on the basis of sealed bids submitted by
interested bidders and competition for these contracts is generally intense.
CUSTOMERS
Philip provides a broad range of metals recovery and industrial services to
major industry sectors including aluminum, automotive, chemical, food and
beverage, oil and gas, paint and coatings, petrochemical, pulp and paper, steel,
telecommunications, transportation, utilities, and wire and cable.
The Company's ferrous processing and mill services operations serve
customers in the steel industry while the processing and distribution operations
primarily serve industrial and commercial construction clients and manufacturing
industries such as barge and ship building, copper processing operations
purchase materials from the wire and cable, automotive and telecommunications
sectors and provide processed copper and materials management services to brass
and copper mills, and the wire and cable, automotive and telecommunications
industries, and aluminum processing operations purchase materials from primary
smelters and industrial aluminum scrap generators and supply aluminum
deoxidizing product, secondary aluminum alloys and recovered aluminum ingots to
the steel, automotive and aluminum industries, respectively. The Company's
industrial services cross a number of industry sectors, primarily automotive,
refining and petrochemical, oil and gas, pulp and paper, steel, transportation
and utilities.
Philip seeks to enter into master service agreements with large customers
to establish the Company as an approved vendor. Master service agreements are a
primary vehicle for large companies to reduce their suppliers while concurrently
establishing high standards of service delivery with fewer suppliers which can
provide more services and which are financially strong and geographically
diverse. In some cases, these agreements approve less than three suppliers in
the area of resource recovery and industrial services, providing the Company
with a strong competitive advantage. In other cases, a number of suppliers are
approved and the master service agreement serves only to assist the Company in
selling its services on a plant by plant basis.
COMPETITION
The metals recovery and industrial services industries are highly
competitive and require substantial capital resources. Competition is both
national and regional in nature and the level of competition faced by the
Company in its various lines of business is significant. Potential customers of
the Company typically evaluate a number of criteria, including price, service,
reliability, prior experience, financial capability and liability management. In
servicing its customers, the Company believes its primary competitive strengths
are: (i) that it offers the broadest range of metals recovery, by-products
recovery and industrial and environmental services in the industry, (ii) its
broad geographic network, (iii) its proprietary technologies, and (iv) the fact
that it is a leading consolidator in the industry due to its financial strength,
focused strategy and multi-service capabilities. Although the Company believes
it is the leading integrated provider of metals recovery and industrial services
in North America, it competes with a variety of companies that may be larger in
particular business lines in which the Company operates.
The primary competitors of the Metals Services Group are other scrap
processors in regions where the Metals Services Group operates. Although the
Metals Services Group competes in both the purchase and sale sides of its
businesses, competition is primarily on the purchase side for access to scrap
which may become more intense during times of scrap scarcity. Availability
depends upon the level of economic activity in the industries from which the
Company acquires its scrap and market prices. The Company believes that its
longstanding relationship with generators of metal bearing scrap give it an
advantage over its competitors, a majority of which purchase scrap from dealers.
In its ferrous metals processing operations, the Company competes for access to
scrap with a small number of larger regional operators as well as a large number
of
11
<PAGE> 14
smaller operators. In its copper operations the Metals Services Group competes
for scrap with a limited number of regional competitors in the regions that it
serves. The Company enhances its competitive position through the use of
proprietary technology to separate and recycle the polymer streams, thereby
providing additional service and reducing landfilling costs and liability for
the scrap producing customer. The Company's aluminum dross recycling operations
face limited competition due to their geographic proximity to the primary
aluminum refiners. In its aluminum alloys business, the Company faces
substantial competition for aluminum scrap from a number of larger competitors,
including primary refiners. One advantage the Company has is that it generates
substantial amounts of aluminum scrap internally through its ferrous operations
(e.g., automobile engine blocks). In the Company's aluminum deoxidizing product
business, the Company competes for scrap supply with a number of smaller
regional competitors.
On the sales side of the Metals Services Group, the Company seeks to
enhance its competitive position by enhancing the efficiency of its operations
through economies of scale and increased recovery rates, thereby lowering its
costs which increases margins and gives it pricing flexibility. The Company also
accompanies its product sales with a broad range of services, or vertically
integrates its operations to gain access to multiple markets. In its ferrous
operations, the Company's acquisitions have resulted in economies of scale that
generate efficiencies in its delivery capabilities. The Metals Services Group
also competes on the sale side by offering a more secure supply of high quality
scrap than a majority of its competitors and by providing a broad range of
additional mill services. In its copper operations, the Metals Services Group's
products are generally sold into commodity markets where prices are set by the
marketplace. However, the Company competes through its use of proprietary
technology to maximize yield and margins. In addition, the Company now has the
alternative of selling its processed scrap into the lower grade commodity
markets or refining it and selling it into the higher value added markets as
market conditions vary. In the Company's alloys business, the Company competes
against two competitors whose alloy operations are larger than those of the
Company. In the aluminum deox business, the Company competes against a number of
smaller regional competitors. The Company believes that the size of its
operations and the broad range of aluminum deoxidizing products it supplies
provide it with a competitive advantage.
The industrial services sector is also highly competitive and fragmented.
The Company competes with numerous local, regional and national companies of
varying sizes and financial resources. Competition for industrial services is
based primarily on hourly rates, productivity, safety, innovative approaches and
quality of service. The hazardous waste management industry competes with the
Company's industrial services operations by providing a price competitive
disposal alternative to a number of the Company's waste management and
by-products recovery services. The hazardous waste management industry currently
has substantial excess capacity caused by overbuilding, continuing efforts by
hazardous waste generators to reduce volumes and to manage their waste on-site,
and the uncertain regulatory environment regarding hazardous waste management
and remediation requirements. These factors have led to downward pressure on
pricing in a number of the markets served by the Company's industrial services
operations. The Company expects these conditions to continue for the foreseeable
future. The Company competes by developing and employing innovative technologies
that minimize on-site waste generation for its customers and maximize the value
and reuse opportunities for the industrial by-products. Through developing
increasingly value-added applications for the materials it manages, in
partnership with its key industrial customers, the Company maximizes its margins
and differentiates itself from conventional disposal alternatives. Examples of
this strategy include the patented EPOC system installed at automotive and
equipment manufacturing facilities and the Company's association with BASF to
recycle rigid polyurethane for the automotive sector.
GOVERNMENT REGULATION
The Company is subject to government regulation including stringent
environmental laws and regulations. Among other things, these laws and
regulations impose requirements to control air, soil and water pollution, and
regulate health, safety, zoning, land use and the handling and transportation of
industrial by-products and waste materials. This regulatory framework imposes
compliance burdens and costs on the Company. See Item 7, Capital Expenditures in
the Management's Discussion and Analysis of Financial Condition and Results of
Operation which appears on page 27 of this Form 10-K for a discussion of the
12
<PAGE> 15
Company's estimated capital expenditures in relation to environmental compliance
matters. Notwithstanding the burdens of this compliance, the Company believes
that its business prospects are enhanced by the enforcement of laws and
regulations by government agencies.
Applicable federal and state or provincial laws and regulations regulate
many aspects of the resource recovery and industrial services industry. Laws and
regulations typically provide operating standards for treatment, storage,
management and disposal facilities and monitoring and spill containment
requirements and set limits on the release of contaminants into the environment.
Such laws and regulations, among other things, (i) regulate the nature of the
industrial by-products and wastes that the Company can accept for processing at
its treatment, storage and disposal facilities, and the nature of the treatment
they can provide at such facilities and the location and expansion of such
facilities, (ii) impose liability for remediation and clean-up of environmental
contamination, both on-site and off-site, resulting from past and present
operations at the Company's facilities, and (iii) may require financial
assurance that funds will be available for the closure and post-closure care of
sites. Such laws and regulations also require manifests to be completed and
delivered in connection with any shipment of prescribed materials so that the
movement and disposal of such material can be traced and the persons responsible
for any mishandling of such material identified.
In particular, the regulatory process requires the Company to obtain and
retain numerous governmental approvals, licenses and permits to conduct its
operations, any of which may be subject to revocation, modification or denial.
Operating permits need to be renewed periodically and may be subject to
revocation, modification, denial or non-renewal for various reasons, including
failure of the Company to satisfy regulatory concerns. Adverse decisions by
governmental authorities on permit applications submitted by the Company may
result in abandonment or delay of projects, premature closure of facilities or
restriction of operations, all of which could have a material adverse effect on
the Company's earnings for one or more fiscal quarters or years.
Federal, state, provincial, local and foreign governments have also from
time to time proposed or adopted other types of laws, regulations or initiatives
with respect to the resource recovery and industrial services industry. Included
among them are laws, regulations and initiatives to ban or restrict the
international, interprovincial, intraprovincial, interstate or intrastate
shipment of wastes, impose higher taxes on out-of-state-waste shipments than
in-state shipments, reclassify certain categories of non-hazardous wastes as
hazardous and regulate disposal facilities as public utilities. Certain state
and local governments have promulgated "flow control" regulations which attempt
to require that all waste generated within the state or local jurisdiction must
go to certain disposal sites. From time to time legislation is considered that
would enable or facilitate such laws, regulations or initiatives. Due to the
complexity of regulation of the industry and to public pressure, implementation
of existing or future laws, regulations or initiatives by different levels of
governments may be inconsistent and are difficult to foresee.
Also subject to regulation are spills of certain industrial by-products and
waste materials. While the specific provisions of spills related laws and
regulations vary among jurisdictions, such laws and regulations typically
require that the relevant authorities be notified promptly, that the spill be
cleaned up promptly and that remedial action be taken by the responsible party
to restore the environment to its pre-spill condition. Generally, the
governmental authorities are empowered to act to clean up and remediate spills
and environmental damage and to charge the costs of such clean-up to one or more
of the owners of the property, the person responsible for the spill, the
generator of the contaminant and certain other parties. Such authorities may
also impose a tax or other liens to secure such parties' reimbursement
obligations.
The Company's facilities are subject to periodic unannounced inspection by
federal, provincial, state and local authorities to ensure compliance with
license terms and applicable laws and regulations. The Company works with such
authorities to remedy any deficiencies found during such inspections. If serious
violations are found or deficiencies, if any, are not remedied, the Company
could incur substantial fines and could be required to close a site.
Environmental laws and regulations impose strict operational requirements
on the performance of certain aspects of hazardous substances remedial work.
These requirements specify complex methods for identifica-
13
<PAGE> 16
tion, storage, treatment and disposal of waste materials managed during a
project. Failure to meet these requirements could result in termination of
contracts, substantial fines and other penalties.
Governmental authorities have a variety of administrative enforcement and
remedial orders available to them to cause compliance with environmental laws or
remedy or punish violations of such laws. Such orders may be directed to various
parties, including present or former owners or operators of the concerned sites,
or parties that have or had control over the sites. In certain instances, fines
may be imposed.
In the event that administrative actions fail to cure the perceived problem
or where the relevant regulatory agency so desires, an injunction or temporary
restraining order or damages may be sought in a court proceeding. In addition,
public interest groups, local citizens, local municipalities and other persons
or organizations may have a right to seek relief from court for purported
violations of law. In some jurisdictions recourse to the courts for individuals
under common law principles such as nuisance have been or may be enhanced by
legislation providing members of the public with statutory rights of action to
protect the environment. In such cases, even if an industrial by-products or
waste materials treatment, storage or disposal facility is operated in full
compliance with applicable laws and regulations, local citizens and other
persons and organizations may seek compensation for damages caused by the
operation of the facility.
While, in general, the Company's businesses have benefited substantially
from increased governmental regulation, the resource recovery and industrial
services industry in North America has become subject to extensive and evolving
regulation. The Company makes a continuing effort to anticipate relevant
material regulatory, political and legal developments, but it cannot predict the
extent to which any future legislation or regulation may affect its operations.
The Company believes that with heightened legal, political and citizen awareness
and concerns, all companies in the resource recovery and industrial services
industry may be faced, in the normal course of operating their businesses, with
fines and penalties and the need to expend funds for capital projects, remedial
work and operating activities, such as environmental contamination monitoring,
and related activities. Regulatory or technological developments relating to the
environment may require companies engaged in the industrial services and
resource recovery industry to modify, supplement or replace equipment and
facilities at costs which may be substantial. Because the businesses in which
the Company is engaged are intrinsically connected with the protection of the
environment and the potential discharge of materials into the environment, a
substantial portion of the Company's capital expenditures is expected to relate,
directly or indirectly, to such equipment and facilities. Moreover, it is
possible that future developments, such as increasingly strict requirements of
environmental laws and regulations, and enforcement policies thereunder, could
affect the manner in which the Company operates its projects and conducts its
business, including the handling, processing or disposal of the industrial
by-products and waste materials generated thereby.
HAZARDOUS SUBSTANCES LIABILITY
Canadian and U.S. laws impose liability on the present or former owners or
operators of facilities which release hazardous substances into the environment.
Furthermore, companies may be required by law to provide financial assurances
for operating facilities in order to ensure their performance of obligations
complies with applicable laws and regulations. Similar liability may be imposed
upon the generators and transporters of waste which contain hazardous
substances. All such persons may be liable for waste site investigation costs,
waste site clean-up costs and natural resource damages, regardless of fault, the
exercise of due care or compliance with relevant laws and regulations; such
costs and damages can be substantial.
In the United States, such liability stems primarily from Comprehensive
Environmental Response Compensation and Liability Act of 1980 ("CERCLA") and its
state equivalents (collectively, "Superfund") and Resource Conservation and
Recovery Act of 1976 ("RCRA") and similar state statutes. CERCLA imposes joint
and several liability for the costs of remediation and natural resource damages
on the owner or operator of a facility from which there is a release or a threat
of a release of a hazardous substance into the environment and on the generators
and transporters of those hazardous substances. Under RCRA and equivalent state
laws, regulatory authorities may require, pursuant to administrative order or as
a condition of an operating permit, that the owner or operator of a regulated
facility take corrective action with respect to
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<PAGE> 17
contamination resulting from past or present operations. Such laws also require
that the owner or operator of regulated facilities provide assurance that funds
will be available for the closure and post-closure care of its facilities. Since
the Company has operations in, and has shipped and continues to ship hazardous
waste to disposal sites in the United States, the Company is exposed to
potential liability in the United States under RCRA, CERCLA and their state law
equivalents resulting from the handling and transportation of such wastes and
for alleged environmental damage associated with past, present and future waste
disposal practices.
The Company is aware that hazardous substances are present in some of the
landfills and transfer, storage processing and disposal facilities used by it.
Certain of these sites have experienced environmental problems and clean-up and
remediation is required. The Company has grown in the past (and expects to
continue to grow in part in the future) by acquiring other businesses. As a
result, the Company has acquired, or may in the future acquire, landfills and
other transfer and processing sites which contain hazardous substances or which
have other potential environmental problems and related liabilities, and may
acquire businesses which may in the future incur substantial liabilities arising
out of their respective past practices, including past disposal practices.
Certain of Philip's and its U.S. subsidiaries' transfer, storage,
processing and disposal facilities are contaminated as a result of operating
practices at the sites, and remediation will be required at a substantial cost.
Investigations of these sites have characterized to varying degrees the nature
and extent of the contamination. Philip and these subsidiaries, in conjunction
with environmental regulatory agencies, have in some instances commenced to
remediate the sites in accordance with approved corrective action plans,
pursuant to permits or other agreements with regulatory authorities. The
Company, in conjunction with an environmental consultant, has developed or is
developing cost estimates for these sites that are periodically reviewed and
updated. Estimated remediation costs, for individual sites and in the aggregate,
are substantial. While the Company maintains reserves for these matters based
upon cost estimates, there can be no assurance that the ultimate cost and
expense of corrective action will not exceed such reserves and have a material
adverse impact on the Company's operations or financial condition.
The Company is required under certain U.S. and Canadian laws and
regulations to demonstrate financial responsibility for possible bodily injury
and property damage to third parties caused by both sudden and non-sudden
occurrences. The Company is also required to provide financial assurance that
funds will be available when needed for closure and post-closure care at certain
of its treatment, storage and disposal facilities, the costs of which could be
substantial. Such laws and regulations allow the financial assurance
requirements to be satisfied by various means, including letters of credit,
surety bonds, trust funds, a financial (net worth) test and a guarantee by a
parent Company. In the United States, a company must pay the closure costs for a
waste treatment, storage or disposal facility owned by it upon the closure of
the facility and thereafter pay post-closure care costs. There can be no
certainty that these costs will not materially exceed the amounts provided
pursuant to financial assurance requirements. In addition, if such a facility is
closed prior to its originally anticipated time, it is unlikely that sufficient
funds will have been accrued over the life of the facility to fund such costs,
and the owner of the facility could suffer a material adverse impact as a
result. Consequently, it may be difficult to close such facilities to reduce
operating costs at times when, as is currently the case in the hazardous waste
services industry, excess treatment, storage or disposal capacity exists.
Subsidiaries acquired by Philip have been named as potentially responsible
or liable parties ("PRPs") under US federal and state Superfund laws, with
respect to several sites. These proceedings are based principally on allegations
that subsidiaries of Philip (or their predecessors) disposed of hazardous
substances at the sites in question. The Company routinely reviews and evaluates
its potential liability at third-party sites based upon its judgment and
experience at similar sites and the advice of environmental consultants and
maintains reserves based upon such review and evaluation. There can be no
assurance that the Company will not subsequently incur liabilities at such sites
or at additional sites that materially exceed the amounts reserved.
Estimates of the Company's liability for remediation of a particular site
and the method and ultimate cost of remediation require a number of assumptions
and are inherently difficult, and the ultimate outcome may differ from current
estimates. As additional information becomes available, estimates are adjusted.
While the Company does not anticipate that any such adjustment would be material
to its financial statements, it is possible that technological, regulatory or
enforcement developments, the results of environmental studies or
15
<PAGE> 18
other factors could alter this expectation and necessitate the recording of
additional liabilities which could be material. Moreover, because the Philip and
various of its subsidiaries have disposed of waste materials at more than 200
third-party disposal facilities, it is possible that Philip and its subsidiaries
will be identified as PRPs at additional sites. The impact of such future events
cannot be estimated at the current time.
The Company may also be required to indemnify customers who incur liability
in connection with the foregoing pursuant to the terms of contracts between such
customers and the subsidiaries involved.
EMPLOYEES
As at December 31, 1997, Philip employed over 14,000 people, approximately
2,000 of whom are unionized. Of such employees, approximately 3,250 work in the
Metals Services Group, approximately 10,750 work in the Industrial Services
Group and approximately 140 work in the Company's corporate office.
ITEM 2. PROPERTIES
The Company currently operates approximately 320 service locations
primarily in North America, with some locations in South America and Western
Europe. The Company believes that its primary existing facilities are
effectively utilized, well maintained and in good condition. The Company
believes that its facilities are adequate for its current needs and that
suitable additional space will be available as required.
The Company's corporate office is located in Hamilton, Ontario and is
comprised of leased premises occupying 46,982 square feet.
The following is a list of the principal sites from which the Company
conducts its operations. Unless otherwise indicated, all of the listed sites are
held in fee by Philip or a wholly-owned subsidiary.
METALS SERVICES GROUP
<TABLE>
<CAPTION>
FACILITY LOCATION NATURE OF SERVICES PROVIDED (1)
-------- -------- -------------------------------
<S> <C> <C>
Philip Metals Recovery (USA), Inc.... Chandler, Arizona material sorting and wire chopping (leased)
Truesdale, Missouri collection, processing and transfer, copper
alloys production
Richmond, Virginia collection, processing and transfer
Painesville, Ohio collection, processing and transfer,
aluminium de-ox production (leased)
Philip Metals Inc.................... Chesterton, Indiana collection, processing and transfer
St. Louis, Missouri collection, processing and transfer
Coatesville, Pennsylvania collection, processing and transfer
Nashville, Tennessee collection, processing and transfer
Memphis, Tennessee collection, processing and transfer
Chattanooga, Tennessee collection, processing and transfer
Cleveland, Ohio collection, processing and transfer
Philip Services (New York), Inc...... Syracuse, New York collection, processing, transfer and
aluminium alloys production
Intsel Southwest Partnership......... Houston, Texas steel distribution
Allied Metals Limited................ Bristol, United Kingdom collection, processing and transfer
Philip Enterprises Inc............... Hamilton, Ontario (4 sites) collection, processing and transfer
Guelph, Ontario collection, processing and transfer
Barrie, Ontario collection, processing and transfer
LaPrairie, Quebec collection, processing and transfer
</TABLE>
16
<PAGE> 19
INDUSTRIAL SERVICES GROUP
<TABLE>
<CAPTION>
FACILITY LOCATION NATURE OF SERVICES PROVIDED (1)
-------- -------- -------------------------------
<S> <C> <C>
Burlington Environmental Inc......... Kansas City, Missouri collection, processing and transfer
Seattle, Washington collection, processing and transfer
Kent, Washington collection, processing and transfer
Tacoma, Washington collection, processing and transfer
Thermal KEM, Inc..................... Rock Hill, South Carolina collection, processing and transfer
Nortru, Inc.......................... Detroit, Michigan collection, processing and transfer
Nortru, Inc.......................... Detroit, Michigan collection, processing and transfer
RMF Global, Inc...................... Toledo, Ohio industrial services contracting
Republic Environmental............... Hatfield, Pennsylvania collection, processing and transfer
Philip Industrial Services Group,
Inc................................ Irving, Texas waste water treatment facility
Philip Environmental Services
Limited............................ Etobicoke, Ontario decommissioning service
Philip Enterprises Inc............... Barrie, Ontario collection, processing and transfer
Rexdale, Ontario collection, processing and transfer
Hamilton, Ontario collection, processing and transfer
</TABLE>
- ---------------
(1) A number of the Company's subsidiaries operate sites which provide services
in more than one category.
ITEM 3. LEGAL PROCEEDINGS
From time to time, the Company is named a defendant in legal actions
arising out of the normal course of business. The Company maintains liability
insurance against risks arising out of the normal course of business. There can
be no assurance that such insurance will be adequate to cover all such
liabilities. The following describes pending legal proceedings other than
ordinary, routine litigation incidental to its business.
In January 1997, the State of Missouri brought an enforcement action
against Solvent Recovery Company and the Company in state court alleging
numerous violations of hazardous waste regulations at the Company's Kansas City,
Missouri facility. Included were allegations that alterations or additions to
the facility's operations had been implemented without required modification of
the facility's hazardous waste permit as well as allegations of numerous
deficiencies under regulations and the permit in the accumulation, record
keeping, inspection, labeling, transportation and handling of such waste. The
Company and the State of Missouri have agreed upon a current payment of
$255,000, with a remaining future payment of $125,000 still the subject of
ongoing negotiations. The Company does not expect that the matter will have a
material adverse effect on the Company's results of operations or financial
position.
As at the date of this Form 10-K, the Company is aware of eighteen separate
class actions by shareholders of the Company which have been filed against the
Company and various directors and officers. Each action alleges that Philip's
financial disclosures for various time periods between 1995 and 1997 contained
material misstatements or omissions in violation of U.S. federal securities laws
(provisions of the Securities Act of 1933 and the Securities Exchange Act of
1934) and seeks to represent a class of purchasers of Philip's Common Shares.
The Company intends to vigorously defend these actions.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of shareholders of the Company during
the fourth quarter of the fiscal year ended December 31, 1997.
17
<PAGE> 20
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
MARKET INFORMATION
The Company's Common Shares trade under the symbol "PHV" in the United
States on the New York Stock Exchange (the "NYSE"), and in Canada on The Toronto
Stock Exchange (the "TSE") and the Montreal Exchange. The Company's Common
Shares traded in the United States on the Nasdaq National Market System
("Nasdaq") prior to April 30, 1996. The following table sets forth for the
fiscal periods indicated (based on the fiscal year ending December 31) the high
and low sale prices per share and trading volume of the Company's Common Shares
as reported by the NYSE, Nasdaq and the TSE, the principal Canadian exchange for
the trading of the Company's Common Shares.
<TABLE>
<CAPTION>
PRICE RANGE AND TRADING VOLUME OF THE COMMON SHARES
------------------------------------------------------------------
NYSE & NASDAQ TSE
------------------------------- -------------------------------
HIGH LOW VOLUME HIGH LOW VOLUME
------ ------ ----------- ------ ------ -----------
(CANADIAN
(US DOLLARS) DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
1996
First quarter............. $ 6.88 $ 6.13 368,900 $ 9.38 $ 8.00 3,399,100
Second quarter............ 8.88 6.50 29,040,400 12.00 8.75 1,760,100
Third quarter............. 9.75 6.63 8,773,100 13.20 9.25 5,580,800
Fourth quarter............ 15.75 9.38 19,652,000 21.50 12.75 2,781,100
1997
First quarter............. $18.38 $13.63 26,356,700 $24.75 18.50 8,232,300
Second quarter............ 16.00 14.00 11,561,000 22.10 19.45 2,858,000
Third quarter............. 19.94 17.38 9,720,300 27.91 24.00 5,467,100
Fourth quarter............ 19.25 11.81 29,761,000 26.75 17.00 11,244,000
1998
January................... 14.31 7.38 44,899,000 20.80 10.75 14,640,000
February.................. 9.81 7.88 47,303,000 14.75 11.45 8,493,000
Through March 26, 1998.... 11.00 9.19 24,708,000 15.50 13.00 4,796,000
</TABLE>
On March 26, 1998, the last reported sale price on the NYSE of the Common
Shares was $10.75 and the last reported sales price on the TSE was Cdn$15.10. At
March 26, 1998, there were 131,118,712 Common Shares issued and outstanding and
held of record by approximately 1,500 shareholders.
DIVIDEND AND POLICY RECORD
The Company has not declared or paid cash dividends on its Common Shares
during the last five years. The Company currently intends to retain any earnings
for use in its business and does not anticipate paying any cash dividends on its
Common Shares in the foreseeable future. Any future declaration and payment of
dividends will be subject to the discretion of the Company's Board of Directors
and to applicable law and will depend upon the Company's results of operations,
earnings, financial condition, contractual limitations, cash requirements,
future prospects and other factors deemed relevant by the Company's Board of
Directors. The Company's Credit Facility restricts the payment of cash
dividends.
SALES OF UNREGISTERED SECURITIES
(a) On October 31, 1997, the Company issued 129,511 Common Shares in
connection with the conversion of a 7% Convertible Subordinated Note
assumed by Philip pursuant to the Allwaste, Inc. acquisition. The
transaction was exempt under Section 3(a)(9) of the Securities Act.
(b) On October 28, 1997, the Company issued 2,963,235 Common Shares in
connection with the acquisition of Steiner-Liff Iron and Metal
Company, Southern alloys and Metals Corp., Southeast-
18
<PAGE> 21
ern Scrap Trading, Inc., McKinley Iron, Inc. and Shredders, Inc. The
transaction was exempt under Section 4(2) of the Securities Act.
(c) On October 28, 1997, the Company issued 2,638,234 Common Shares in
connection with the acquisition of Southern Foundry Supply, Inc., Knox
Metals Company and Southern Foundry of Cooksville, Inc. The
transaction was exempt under Section 4(2) of the Securities Act.
(d) On July 31, 1997, the Company issued 286,418 Common Shares in
connection with the acquisition of the stock of D&L, Inc. The
transaction was exempt under Section 4(2) of the Securities Act.
(e) On July 3, 1997, the Company issued 422,331 Common Shares in
connection with the acquisition of the stock of Roth Bros. Smelting
Corp. The transaction was exempt under Section 4(2) of the Securities
Act.
(f) On February 12, 1997, the Company issued 556,390 Common Shares in
connection with the acquisitions of Conversion Resources, Inc. and
Warrenton Resources, Inc. The transactions were exempt under Section
4(2) of the Securities Act.
(g) On February 7, 1997, the Company issued 222,165 Common Shares in
connection with the acquisition of RMF Global, Inc. The transaction
was exempt under Section 4(2) of the Securities Act.
(h) On January 7, 1997, the Company issued 2,222,222 Common Shares in
connection with the acquisition of Luntz Company. The transaction was
exempt under Section 4(2) of the Securities Act.
FOREIGN ISSUER
There are no governmental laws, decrees or regulations in Canada relating
to restrictions on the import of capital or affecting the remittance of
interest, dividends or other payments to non-resident holders of the Company's
Common Shares, except for withholding tax provisions discussed below. There are
no limitations on the right of non-resident or foreign owners to hold or vote
the Common Shares of the Company except as provided in the Investment Canada Act
(the "Act"). The Act provides for the review and approval by the Canadian
government of direct or indirect acquisitions of control of Canadian businesses
where the investment exceeds specified thresholds and for the divestment of
investments which have not been approved. The Company is not aware of any such
control positions held by U.S. investors.
The following paragraphs summarize certain Canadian federal income tax
considerations in connection with the receipt of dividends paid on Common Shares
and a disposition of Common Shares by non-residents of Canada. These tax
considerations are stated in brief and general terms and are based on Canadian
law currently in effect. There are other potentially significant Canadian and
U.S. federal income tax considerations and provincial, state or local income tax
considerations with respect to ownership and disposition of the Common Shares
which are not discussed herein. The tax considerations relative to ownership and
disposition of the Common Shares may vary from taxpayer to taxpayer depending on
the taxpayer's particular status.
Generally, under the Income Tax Act (Canada) (the "Tax Act"), dividends
paid or credited or deemed to be paid or credited on a share of a corporation
resident in Canada to a shareholder who is not resident in Canada, and who does
not use or hold and is not deemed to use or hold such shares in or in the course
of carrying on a business or providing independent personal services in Canada,
are subject to a withholding tax of 25% of the gross amount of such dividends.
However, Article X to the Canada-United States Income Tax Convention, 1980 (the
"Convention") reduces to 15% the rate of such withholding tax where the
beneficial owner of the dividends is resident in the United States for the
purposes of the Convention. The rate of such withholding tax will be further
reduced to 5% where the beneficial owner of the dividends owns at least 10% of
the voting stock of the company paying the dividends.
A shareholder who is not resident in Canada under the Tax Act who holds
Common Shares of the Company as capital property will not be subject to tax in
Canada on capital gains realized on the disposition or deemed disposition of
such Common Shares unless such Common Shares are "taxable Canadian property"
19
<PAGE> 22
within the meaning of the Tax Act at the time of the disposition or deemed
disposition, as the case may be. Common Shares are generally not taxable
Canadian property provided such shares are listed on a prescribed stock exchange
and at no time within the five-year period immediately preceding the disposition
or deemed disposition did the shareholder, persons with whom the shareholder did
not deal at arm's length, or the shareholder together with such persons, own 25%
or more of the issued shares (and, in the view of Revenue Canada, taking into
account any interest therein or options in respect thereof that belonged to the
shareholder, persons with whom the shareholder did not deal at arm's length, or
the shareholder and such persons) of any class or series of the Company's
shares. A deemed disposition of shares held by a shareholder will arise on the
death of that shareholder. If shares are taxable Canadian property to a
shareholder who is resident in the United States for the purposes of the
Convention, any capital gain realized on the disposition or deemed disposition
of such shares will generally be exempt from tax under the Tax Act by virtue of
the Convention if the value of such shares at the time of the disposition or
deemed disposition is not derived principally from real property situated in
Canada (as defined by the Convention).
Shares of stock in the Company held by a citizen or resident of the United
States would normally be subject to tax on capital gains upon disposition under
the laws of the United States.
NORMAL COURSE ISSUER BID
On March 13, 1998, the Company announced its intention to make a normal
course issuer bid through which Philip will make open market purchases of its
Common Shares on the New York Stock Exchange, The Toronto Stock Exchange and the
Montreal Exchange. The bid commenced on March 17, 1998 and will end on March 16,
1999. Philip may repurchase up to 6,555,830, or approximately 5% of its
outstanding Common Shares from time to time in the open market. Shareholders of
the Company may obtain a copy of the Company's notice of such bid by contacting
the Company's Vice President, Investor Relations at (905) 540-6619.
20
<PAGE> 23
ITEM 6. SELECTED FINANCIAL DATA
The following table presents selected financial data of Philip for the
periods indicated, including the accounts of all companies acquired prior to the
end of the respective reporting periods. The companies, all of which were
acquired in transactions accounted for as purchases during the past five years,
are included from their respective dates of acquisition. For all periods
indicated, the selected financial data reflects Philip's former municipal and
commercial solid waste operations, which were sold in August 1996, as a
discontinued operation. See Notes 4 and 5 to the Company's audited Consolidated
Financial Statements which appear on pages 36 and 37.
The selected financial data should be read in conjunction with the
accompanying Consolidated Financial Statements of the Company and the related
Notes thereto. Philip did not pay any cash dividends during the periods set
forth below.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------------------------
1997 1996 1995 1994 1993
---------- -------- -------- -------- --------
(RESTATED) (RESTATED)
(IN THOUSANDS OF US DOLLARS, EXCEPT SHARE AND PER SHARE
AMOUNTS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF EARNINGS DATA:
Revenue........................... $1,750,930 $532,344 $463,244 $358,784 $131,969
Operating expenses................ 1,516,476(a) 413,013 356,699 268,606 83,957
Special charges................... 155,720 65,056 27,179 -- --
Selling, general and
administrative costs............ 130,778 56,063 48,496 37,522 21,103
Depreciation and amortization..... 61,953 24,225 18,587 15,644 8,012
---------- -------- -------- -------- --------
Income (loss) from operations..... (113,997) (26,013) 12,283 37,012 18,897
Interest expense.................. 46,807 16,263 18,621 14,167 6,682
Other income and expense -- net... (14,328) (3,456) (2,688) (1,553) (1,463)
---------- -------- -------- -------- --------
Earnings (loss) from continuing
operations before tax........... (146,476) (38,820) (3,650) 24,398 13,678
Income taxes...................... (42,235) (19,563) (4,790) 6,424 2,630
---------- -------- -------- -------- --------
Earnings (loss) from continuing
operations...................... $ (104,241) $(19,257) $ 1,140 $ 17,974 $ 11,048
========== ======== ======== ======== ========
Basic earnings per share --
continuing...................... $ (1.18) $ (0.39) $ 0.03 0.50 $ 0.34
Diluted earnings per share --
continuing...................... $ (1.18) $ (0.39) $ 0.03 0.40 $ 0.30
Weighted average number of common
shares outstanding (000s)....... 88,191 50,073 37,342 36,209 32,827
BALANCE SHEET DATA: (END OF
PERIOD)
Working capital................... $ 395,509 $139,326 $ 41,805 $ 63,050 $ 15,568
Total assets...................... 2,819,426 953,761 731,234 611,213 539,789
Total debt including current
maturities...................... 988,188 302,781 320,220 299,347 244,261
Shareholders' equity.............. 1,238,967 379,010 191,109 181,541 166,288
OTHER DATA:
Amortization...................... $ 17,899 $ 8,085 $ 7,139 $ 5,765 $ 2,725
Depreciation...................... 44,054 16,140 11,448 9,879 5,287
Additions to property, plant and
equipment....................... 62,391 30,004 23,347 17,223 19,236
</TABLE>
Note:
(a) 1997 operating expenses include non-recurring charges for operating losses
in business units to be exited and losses in the copper division of the
Company's Metals Services Group of $43.2 million and inventory costing
errors of $32.9 million. See Note 3 to the Company's audited Consolidated
Financial Statements which appears on pages 34 to 36 of this Form 10-K.
21
<PAGE> 24
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion reviews the Company's operations for the years
ended December 31, 1997, 1996 and 1995 and should be read in conjunction with
the Company's audited Consolidated Financial Statements and related notes
thereto included elsewhere herein. The Company reports in US dollars and in
accordance with US generally accepted accounting principles.
INTRODUCTION
The Company is a supplier of metals and industrial services. The Company
has over 320 operating facilities and over 14,000 employees located throughout
North America and Europe, that provide services to more than 50,000 industrial
and commercial customers. The Company has achieved its position in the metals
recovery and industrial services market through internal growth and through the
acquisition and integration of over 40 companies since the beginning of 1996.
The Company's primary base of operations is in the United States. See Note 21 to
the Company's audited Consolidated Financial Statements which appears on pages
48 and 49 of this Form 10-K.
The Company's business is organized into two operating divisions -- the
Metals Services Group and the Industrial Services Group. The Metals Services
Group processes or recycles ferrous (scrap), copper and aluminum materials at 78
locations throughout North America and Europe. The ferrous operations include
the collection and processing of ferrous scrap materials for shipment to steel
mills. The Company also processes and distributes structural steel products.
Copper operations include processing of wire and cable scrap to recover copper,
aluminum, refining of second grade copper into prime ingot, and on-site
management of materials recycling centers for the telecommunications industry.
Aluminum operations process aluminum dross to recover primary aluminum, and
produce aluminum deoxidizing products and alloys from aluminum scrap for reuse
in the steel and automotive industries respectively. Both the ferrous and
non-ferrous operations of Philip provide significant brokerage services for
scrap materials and primary metals including ferrous, copper, and aluminum. The
Metals Services Group services the steel, telecommunications, aluminum, wire and
cable and automotive industry sectors.
The Industrial Services Group provides industrial outsourcing services,
by-products recovery and environmental services through a network of
approximately 250 facilities in North America. The Industrial Services Group's
operations are divided into four main activities: on-site industrial services,
by-products recovery, environmental services and utilities management. On-site
industrial services include cleaning and maintenance, waste collection and
transportation, container services and tank cleaning, turnaround and outage
services, mechanical contracting and refractory services. By-products recovery
includes distillation, fuel blending, paint overspray recovery, organic and
inorganic processing and polyurethane recycling. Environmental services range
from decommissioning and remediation to emergency response and analytical
services. The utilities management business includes the provision of services
to industrial and municipal water and wastewater treatment plants, power plants
and related infrastructure. The Industrial Services Group services the
automotive, chemical, food, beverage, oil and gas, paint and coatings,
petrochemical and pulp and paper industry sectors, as well as public sector
clients responsible for water and wastewater treatment.
The Company earns revenue from the delivery of on-site industrial services,
the sale of recovered commodities and from fees charged to customers for
by-product transfer and processing, collection and disposal services. The
Company receives by-products and, after processing, disposes of the residuals at
a cost lower than the fees charged to its customers. Other sources of revenue
include fees charged for environmental consulting and engineering and other
services, and revenue from the sale of steel products.
The Company's operating expenses include direct and indirect labor and the
related taxes and benefits, fuel, maintenance and repairs of equipment and
facilities, depreciation, property taxes, and accrual for future closure and
remediation costs. Selling, general and administrative expenses include
management salaries,
22
<PAGE> 25
clerical and administrative costs, professional services, facility rentals and
insurance costs, as well as costs related to the Company's marketing and sales
force.
RESULTS OF OPERATIONS
The following table presents, for the periods indicated, the results of
operations and the percentage relationships which the various items in the
Consolidated Statements of Earnings bear to the consolidated revenue from
continuing operations.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
($ MILLIONS)
-----------------------------------------------
1997 1996 1995
--------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Revenue
Metals Services............................... $1,113.5 64% $275.3 52% $215.9 47%
Industrial Services........................... 637.4 36% 257.0 48% 247.3 53%
-------- ---- ------ ---- ------ ----
1,750.9 100% 532.3 100% 463.2 100%
Operating expenses.............................. 1,516.5 87% 413.0 78% 356.7 77%
Special charges................................. 155.7 9% 65.1 12% 27.2 6%
Selling, general and administrative............. 130.8 7% 56.0 10% 48.5 10%
Depreciation and amortization................... 61.9 4% 24.2 5% 18.5 4%
-------- ---- ------ ---- ------ ----
Income (loss) from operations................... (114.0) (7%) (26.0) (5%) 12.3 3%
Interest expense................................ 46.8 2% 16.3 3% 18.6 4%
Other income and expense-net.................... (14.3) (1%) (3.5) (1%) (2.6) --
-------- ---- ------ ---- ------ ----
Earnings (loss) from continuing operations
before tax.................................... (146.5) (8%) (38.8) (7%) (3.7) (1%)
Income taxes.................................... (42.3) (2%) (19.5) (3%) (4.8) (1%)
-------- ---- ------ ---- ------ ----
Earnings (loss) from continuing operations...... (104.2) (6%) (19.3) (4%) 1.1 --
Discontinued operations (net of tax)............ -- -- (0.7) -- 2.1 1%
-------- ---- ------ ---- ------ ----
Net earnings (loss)............................. $ (104.2) (6%) $(20.0) (4%) $ 3.2 1%
======== ==== ====== ==== ====== ====
</TABLE>
EARNINGS FROM CONTINUING OPERATIONS
For the year ended December 31, 1997, the Company incurred a loss from
continuing operations of $104.2 million or $1.18 per share on a diluted basis.
This compares to a loss of $19.3 million from continuing operations and $0.39
per share on a diluted basis from continuing operations for the year ended
December 31, 1996. For the year ended December 31, 1995, earnings from
continuing operations were $1.1 million and diluted earnings per share were
$0.03.
The results of operations for the years ended December 31, 1997, 1996 and
1995 were impacted by special and non-recurring charges recorded by the Company
and amounting to $231.8 million, $78.1 million and $36.3 million (before tax)
respectively, which are more fully discussed below. Excluding these charges, the
Company had earnings from continuing operations of $60.0 million for the year
ended December 31, 1997 or $0.66 per share on a diluted basis.
23
<PAGE> 26
REVENUE
Consolidated revenue for the year ended December 31, 1997 compared with
1996 and 1995 is shown in the following table:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
($ MILLIONS)
-----------------------------------------------
1997 % 1996 % 1995 %
-------- ---- ------ ---- ------ ----
<S> <C> <C> <C> <C> <C> <C>
Metals Services............................ $1,113.5 64% $275.3 52% $215.9 47%
Industrial Services........................ 637.4 36% 257.0 48% 247.3 53%
-------- ---- ------ ---- ------ ----
Total...................................... $1,750.9 100% $532.3 100% $463.2 100%
======== ==== ====== ==== ====== ====
</TABLE>
The 229% increase in consolidated revenue for the year ended December 31,
1997 was attributable to internal growth of approximately $66 million and
approximately $1,153 million from acquisitions.
Consolidated revenue in 1996 of $532.3 million represented an increase of
$69 million or 15% over 1995. The increase was attributable to internal growth
of approximately $2 million and approximately $67 million from acquisitions.
The Metals Services Group acquired thirteen new businesses in 1997 and four
new businesses in late 1996 which contributed substantially all of the 1997
revenue increase. The Industrial Services Group revenue for the year ended
December 31, 1997, increased by $380 million compared to the same period in
1996. The acquisition of 20 new businesses, including Allwaste and Serv-Tech
which were completed on July 31, 1997, contributed $314 million of the revenue
increase for the year ended December 31, 1997 compared to the same period in
1996. The remainder of the increase, or approximately $66 million came from the
expansion of service offerings of existing businesses.
OPERATING EXPENSES
Operating expenses for the year ended December 31, 1997 were $1,516.5
million, an increase of $1,103 million or 267% over 1996. As a percentage of
revenue, operating expenses increased from 78% in 1996 to 87% in 1997. This
increase is the result of including newly acquired businesses in the Metals
Services Group which generally have higher operating expenses than Industrial
Services Group businesses and the recording of special and non-recurring charges
in operating expenses which are discussed below.
Operating expenses in 1996 were $413.0 million, an increase of $56.3
million or 16% over 1995. These increased costs result from the increased level
of business activity in 1996 and from acquisitions completed during the year.
SPECIAL CHARGES
As at December 31, 1997, the Company recorded a pre-tax charge of $155.7
million ($117.1 million after tax) reflecting the effects of (i) restructuring
decisions made in its Industrial Services Group following the mergers of
Allwaste and Serv-Tech, (ii) integration decisions in various of its acquired
Metals Services Group businesses, the most significant of which were acquired in
late October 1997 and (iii) impairments of fixed assets and related goodwill
resulting both from decisions to exit various business locations and dispose of
the related assets, as well as assessments of the recoverability of fixed assets
and related goodwill of business units in continuing use.
At the end of the second quarter of 1997, the Company monetized
approximately $27.3 million of its copper inventory. Concurrent with this
transaction, the Company entered into an agreement to process this inventory
over a period of future months and also entered into certain copper swap
contracts. In the third and fourth quarter of 1997, the Company incurred
unrealized pre-tax losses as a result of these copper swap contracts, totalling
$10 million ($4.9 million in the third quarter and $5.1 million in the fourth
quarter) which have been recorded in operating expenses. In addition, during the
fourth quarter of 1997, the Company incurred operating losses in business units
to be exited and losses in the copper division of the Company's Metals Services
Group totalling $33.2 million. The copper division losses were incurred
principally because
24
<PAGE> 27
the Company's copper inventory and related operations were exposed to the
downturn in the market price of copper experienced during the period since the
inventory was unhedged in the fourth quarter.
The Company has also recorded a pre-tax charge in 1997 of $32.9 million
($20.4 million after tax) as a result of inventory costing errors, which
occurred in the same copper division and which resulted in the overstatement of
copper inventory for resale and the understatement of operating expenses.
In addition, the Company has recorded a pre-tax charge of $92.2 million
($57.2 million after tax) resulting from speculative trading of copper cathode
outside of the Company's normal business practices. The trading took place
within the copper division of the Company's Metals Services Group over a three
year period ended December 31, 1997. The losses from the trading were deferred
principally through unrecorded liabilities and to a lesser extent were also
improperly recorded through various balance sheet accounts. During 1997, the
previously unrecorded amounts were improperly capitalized into the inventory
accounts. The trading losses were not recorded in the profit and loss records of
the copper division, and therefore were not included in the Consolidated
Statement of Earnings of the Company. Net trading losses incurred during 1997
were immaterial. As a result of the trading losses, the Company has restated its
financial statements for 1996 and 1995 to record as special charges the
previously unrecorded trading losses of $65.1 million and $27.2 million,
respectively.
The Company has also restated its financial statements for 1996 and 1995 to
reflect the recording of revenue in the appropriate periods. The total
adjustment was $22.1 million which resulted in an overstatement of revenue and
an overstatement of accounts receivable in 1996 and 1995 by $13 million and $9.1
million, respectively on a pre-tax basis ($8.1 million and $5.7 million after
tax).
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses were $130.8 million in 1997
representing an increase of $74.7 million or 133% over 1996. Selling, general
and administrative expenses in 1996 were 15.7% higher than 1995. The increase is
attributable to the consolidation of selling, general and administrative
expenses of companies acquired and to the addition of sales and marketing staff
and corporate staff to manage the increased volume of business. However, as a
percentage of revenue, selling, general and administrative expenses decreased to
7% of consolidated revenue in 1997 compared to 10% in 1996. This is due to the
fact that selling, general and administrative costs in the Metals Services
Group, as a percentage of revenue, were lower than these same costs for
Industrial Services Group businesses.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization of fixed assets and goodwill in 1997 was
$61.9 million, representing an increase of $37.7 million or 156% over 1996. This
increase was due to acquisitions in the year, to a continued high level of fixed
asset additions, and to the full year effect of acquisitions completed by the
Company in the prior year.
Depreciation and amortization of fixed assets and goodwill in 1996 was
$24.2 million, an increase of $5.6 million over 1995. This increase was due
primarily to acquisitions in the year as well as further fixed asset additions
in 1996.
INTEREST EXPENSE
Interest expense in 1997 was $46.8 million, representing an increase of
$30.5 million or 187% over 1996. This increase was primarily attributable to
increased borrowings to finance the Company's growth by acquisition and fixed
asset expansion, together with working capital requirements to support the
Company's increased revenue base.
Aggregate interest expense in 1996 was $16.3 million or $2.3 million lower
than 1995. In May of 1996, the Company issued common shares and used the
proceeds to reduce the amount of long-term debt outstanding. In addition, in
1996, all the remaining 6% convertible subordinated debentures were converted
into Common Shares of the Company, further reducing the Company's outstanding
debt. Both these factors contributed to a lowering of interest costs in 1996
compared to 1995.
25
<PAGE> 28
OTHER INCOME AND EXPENSE -- NET
Other income and expense -- net for 1997 includes a $2.8 million gain
before tax on the sale of shares received as part of the proceeds on the sale of
the municipal and commercial solid waste business in 1996. The shares which were
restricted at the time of receipt, were sold by the Company in February 1997
following the removal of the restriction.
In addition, a gain of $7.6 million before tax was recorded in 1997 on the
cancellation of a derivative instrument which was put in place in anticipation
of a debt offering which was later abandoned.
INCOME TAXES
The Company recorded income taxes recoverable in each of the years in the
three year period ended December 31, 1997. The amount recoverable resulted
primarily from the deduction, for income tax purposes, of losses arising from
the matters discussed in Note 3 to the Company's audited Consolidated Financial
Statements which appears on pages 34 to 36 of this Form 10-K regarding special
charges. The composition of the income tax recovery in each of the years ended
December 31, 1997, 1996 and 1995 is discussed in Note 14 to the Company's
audited Consolidated Financial Statements which appears on pages 44 to 46 of
this Form 10-K.
DISCONTINUED OPERATIONS
Loss from discontinued operations (net of tax) of $0.7 million for the year
ended December 31, 1996 and income from discontinued operations (net of tax) of
$2.1 million for the year ended December 31, 1995 consists of the Company's
municipal and commercial solid waste business. These operations have been
treated as discontinued as a result of the sale of the Company's municipal and
commercial solid waste business in 1996. See Notes 4 and 5 of the Company's
audited Consolidated Financial Statements which appear on pages 36 and 37 of
this Form 10-K. Interest expense has been allocated to the municipal and
commercial solid waste business segment based upon the relationship of the net
assets of the solid waste business to the Company's consolidated net assets.
FINANCIAL CONDITION
LIQUIDITY AND CREDIT FACILITY
At December 31, 1997, the Company's working capital was $395.5 million,
representing an increase of $256.2 million from December 31, 1996. Inventory for
resale is a significant component of the working capital at December 31, 1997
and increased by $51 million over December 31, 1996. In addition, at December
31, 1997, accounts receivable were $364.7 million higher than December 31, 1996,
due primarily to $345.3 million of accounts receivable acquired as part of new
business combinations.
In August 1997, the Company signed a five year term revolving credit
agreement which was amended in October, 1997 and February, 1998 (the "Credit
Facility") with a syndicate of international lenders which provides up to $1.5
billion in borrowings, subject to compliance with specified availability tests.
Borrowings under the Credit Facility are guaranteed by the Company's
wholly-owned subsidiaries and are secured by a pledge of all of the issued and
outstanding securities and all the present and future assets held by the Company
in all of its subsidiaries.
At December 31, 1997, the Company had undrawn credit capacity under the
Credit Facility of approximately $543 million, net of letters of credit
outstanding, which amounted to $59 million.
The Company believes that cash generated from operations, together with
amounts available under the Credit Facility, will be adequate to meet its
capital expenditures and working capital needs for the foreseeable future,
although no assurance can be given in this regard.
ACQUISITIONS
During 1997, the Company concluded a number of acquisitions the most
significant of which were the following:
26
<PAGE> 29
On July 31, 1997, the shareholders of Allwaste and Serv-Tech voted in
favour of the mergers which were jointly announced by the companies earlier in
the year. Under the terms of the respective merger agreements, each share of
Allwaste stock was exchanged for 0.611 Common Shares and each share of Serv-Tech
stock was exchanged for 0.403 Common Shares.
In October, 1997, the Company acquired the assets of Luria Brothers and all
of the issued and outstanding shares of the Steiner-Liff Metals group of
companies and the Southern Foundry Supply group of companies. The aggregate
purchase price of such acquisitions was $486 million which includes the
assumption of $32.6 million in debt. Part of the purchase price was satisfied by
the issuance of 5.6 million Philip Common Shares.
In addition to the above acquisitions, the Company completed 28 other
acquisitions during the year ended December 31, 1997.
CAPITAL EXPENDITURES
Capital expenditures for continuing operations were $62.4 million during
1997 compared to $30.0 million in 1996 and $23.3 million in 1995.
The Company's capital expenditure program for 1998 is expected to be $114
million. Approximately $20.5 million of the 1998 capital expenditure program is
expected to be spent on environmental compliance matters relating to facilities
operated by the Company.
CAPITAL STRUCTURE
In November 1997, the Company issued 23 million Common Shares at $16.50 per
share. The net proceeds of $362.5 million were used to repay indebtedness
outstanding under the Credit Facility.
In addition to the equity offering in November of 1997, the Company issued
38.2 million common shares during 1997 for a total consideration of $622.5
million. The Common Shares were issued primarily as a result of acquisitions or
as the result of the exercise of employee stock options. The share capital of
the Company increased from $363.1 at December 31, 1996 to $1,348.1 million at
December 31, 1997.
YEAR 2000
Philip has undertaken a review of all of its computer based systems to
mitigate problems that could occur as the result of the year 2000 century
change. This issue affects computer systems that have time sensitive programs
that may not properly recognize the year 2000. A project team has been assembled
and has prepared a plan to address these potential problems. Activities in
support of this plan are in progress to ensure that problems which are
identified from both internal and external sources are addressed before they
present a problem for the Company. The total cost for 1998 associated with any
required modifications which is expected to be $5.0 million, is included as part
of the Company's capital expenditure program discussed above and will be
expensed as incurred.
FORWARD-LOOKING STATEMENTS
This Form 10-K contains certain forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995 with respect to
the results of operations and businesses of the Company. These forward-looking
statements involve certain risks and uncertainties. Factors that may cause
actual results to differ materially from those contemplated or projected,
forecast, estimated or budgeted in such forward-looking statements include,
among others, the following possibilities: (1) heightened competition, including
the intensification of price competition and the entry of new competitors; (2)
adverse state, federal and Canadian legislation and regulation; (3) failure to
obtain new customers or retain existing customers; (4) inability to carry out
marketing and/or expansion plans; (5) failure to successfully integrate acquired
businesses and/or to acquire additional businesses on favorable terms; (6) loss
of key executives; (7) changes in interest rates; (8) general economic and
business conditions which are less favorable than expected and (9) unanticipated
changes in industry trends. These factors and other risks are discussed in the
Company's Prospectus dated November 6, 1997 included in its Registration
Statement in Form S-1 (File No. 333-36549) and from time to time in the
Company's filings with the Securities and Exchange Commission and other
regulatory authorities.
27
<PAGE> 30
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEPENDENT AUDITORS' REPORT
To the Shareholders of Philip Services Corp.
We have audited the consolidated balance sheets of Philip Services Corp. as
at December 31, 1997 and 1996 and the consolidated statements of earnings,
retained earnings and cash flows for each of the three years in the period ended
December 31, 1997. Our audit also included the financial schedules included in
the Index at Item 14. These financial statements and financial schedules are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and financial schedules based on our
audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
In our opinion, these consolidated financial statements present fairly, in
all material respects, the financial position of the Company as at December 31,
1997 and 1996 and the results of its operations and the cash flows for each of
the three years in the period ended December 31, 1997 in accordance with the
generally accepted accounting principles.
Also in our opinion, such financial schedules when considered in relation
to the basic consolidated financial statements taken as a whole, present fairly
in all material respects the information set forth therein.
As discussed in Note 3, the accompanying financial statements for the years
ended December 31, 1995 and 1996 have been restated.
<TABLE>
<S> <C>
Mississauga, Ontario Deloitte & Touche
March 4, 1998 Chartered Accountants
</TABLE>
28
<PAGE> 31
PHILIP SERVICES CORP.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS OF US DOLLARS)
<TABLE>
<CAPTION>
DECEMBER 31
------------------------
1997 1996
---------- ----------
(RESTATED)
<S> <C> <C>
ASSETS
Current assets
Cash and equivalents...................................... $ 48,809 $ 6,044
Accounts receivable (net of allowance for doubtful
accounts of $22,437; 1996 -- $5,907)................... 537,674 173,021
Inventory for resale...................................... 223,613 172,280
Other current assets...................................... 69,073 44,690
---------- --------
879,169 396,035
Fixed assets (Note 6)....................................... 605,710 254,087
Goodwill.................................................... 1,094,401 235,622
Deferred income taxes (Note 14)............................. 72,972 12,225
Other assets (Note 7)....................................... 167,174 55,792
---------- --------
$2,819,426 $953,761
========== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable.......................................... $ 271,726 $189,846
Accrued liabilities (Note 8).............................. 190,741 46,907
Current maturities of long-term debt and loans from
related parties (Notes 9 and 17(b)).................... 21,193 19,956
---------- --------
483,660 256,709
Long-term debt (Note 9)..................................... 966,995 282,825
Other liabilities (Note 11)................................. 129,804 35,217
Contingencies (Note 18)
Shareholders' equity (Note 12).............................. 1,238,967 379,010
---------- --------
$2,819,426 $953,761
========== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
29
<PAGE> 32
PHILIP SERVICES CORP.
CONSOLIDATED STATEMENTS OF EARNINGS
(IN THOUSANDS OF US DOLLARS EXCEPT
SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
----------------------------------
1997 1996 1995
---------- -------- --------
(RESTATED) (RESTATED)
<S> <C> <C> <C>
Revenue (Note 3)........................................ $1,750,930 $532,344 $463,244
Operating expenses (Note 3)............................. 1,516,476 413,013 356,699
Special charges (Note 3)................................ 155,720 65,056 27,179
Selling, general and administrative costs............... 130,778 56,063 48,496
Depreciation and amortization........................... 61,953 24,225 18,587
---------- -------- --------
Income (loss) from operations........................... (113,997) (26,013) 12,283
Interest expense........................................ 46,807 16,263 18,621
Other income and expense -- net......................... (14,328) (3,456) (2,688)
---------- -------- --------
Earnings (loss) from continuing operations before tax... (146,476) (38,820) (3,650)
Income taxes (Note 14).................................. (42,235) (19,563) (4,790)
---------- -------- --------
Earnings (loss) from continuing operations.............. (104,241) (19,257) 1,140
Discontinued operations (net of tax) (Note 5)........... -- (716) 2,109
---------- -------- --------
Net earnings (loss)..................................... $ (104,241) $(19,973) $ 3,249
========== ======== ========
Basic earnings per share (Note 15)
Continuing operations................................. $ (1.18) $ (0.39) $ 0.03
Discontinued operations............................... -- (0.01) 0.06
---------- -------- --------
$ (1.18) $ (0.40) $ 0.09
========== ======== ========
Diluted earnings per share (Note 15)
Continuing operations................................. $ (1.18) $ (0.39) $ 0.03
Discontinued operations............................... -- (0.01) 0.05
---------- -------- --------
$ (1.18) $ (0.40) $ 0.08
========== ======== ========
Weighted average number of common shares outstanding
(000's)............................................... 88,191 50,073 37,342
========== ======== ========
</TABLE>
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS (DEFICIT)
(IN THOUSANDS OF US DOLLARS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
----------------------------------
1997 1996 1995
---------- -------- --------
(RESTATED) (RESTATED)
<S> <C> <C> <C>
Balance, beginning of year.............................. $ 39,993 $ 59,966 $ 56,717
Net earnings (loss)..................................... (104,241) (19,973) 3,249
---------- -------- --------
Balance, end of year.................................... $ (64,248) $ 39,993 $ 59,966
========== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
30
<PAGE> 33
PHILIP SERVICES CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS OF US DOLLARS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
-------------------------------------
1997 1996 1995
------------ ---------- ---------
(RESTATED) (RESTATED)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net earnings(loss) from continuing operations......... $ (104,241) $ (19,257) $ 1,140
Items included in earnings not affecting cash
Depreciation and amortization.................... 47,348 18,630 13,449
Amortization of goodwill......................... 14,605 5,595 5,138
Deferred income taxes............................ (15,446) (15,315) (2,467)
Net gain on sale of assets....................... (2,559) (1,645) (885)
Special charges (net of tax) (Note 3)............ 117,081 -- --
------------ ---------- ---------
Cash flow from continuing operations.................. 56,788 (11,992) 16,375
Changes in non-cash working capital (Note 13)......... (205,966) (35,139) (850)
------------ ---------- ---------
Cash provided by (used in) continuing operating
activities.......................................... (149,178) (47,131) 15,525
Cash provided by discontinued operating activities.... -- 21,161 11,012
------------ ---------- ---------
Cash provided by (used in) operating activities....... (149,178) (25,970) 26,537
------------ ---------- ---------
INVESTING ACTIVITIES
Proceeds from sale of solid waste operations
(Notes 4 and 5)..................................... 19,800 137,632 --
Acquisitions -- including acquired cash (bank
indebtedness) (Note 4).............................. (596,574) (111,437) (2,832)
Purchase of fixed assets.............................. (62,391) (30,004) (23,347)
Other -- net.......................................... 3,965 (32,509) (22,441)
------------ ---------- ---------
Cash used in continuing investing activities.......... (635,200) (36,318) (48,620)
Cash used in investing activities of discontinued
operations.......................................... -- (12,703) (11,102)
------------ ---------- ---------
Cash used in investing activities..................... (635,200) (49,021) (59,722)
------------ ---------- ---------
FINANCING ACTIVITIES
Proceeds from long-term debt.......................... 1,748,155 216,398 32,484
Principal payments on long-term debt.................. (1,301,249) (187,841) (8,690)
Common shares issued for cash......................... 380,237 61,787 138
------------ ---------- ---------
Cash provided by continuing financing activities...... 827,143 90,344 23,932
Cash used in financing activities of discontinued
operations.......................................... -- (9,309) (2,036)
------------ ---------- ---------
Cash provided by financing activities................. 827,143 81,035 21,896
------------ ---------- ---------
Net change in cash for the year....................... 42,765 6,044 (11,289)
Cash and equivalents, beginning of year............... 6,044 -- 11,289
------------ ---------- ---------
Cash and equivalents, end of year..................... $ 48,809 $ 6,044 $ --
============ ========== =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
31
<PAGE> 34
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
Philip Services Corp. (the "Company") is an integrated metals recovery and
industrial services company, which provides metal recovery and processing
services, by-products recovery, and industrial services to major industry
sectors throughout North America and Europe.
2. SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements have been prepared in US dollars
using accounting principles generally accepted in the United States ("US GAAP").
The preparation of financial statements in conformity with generally
accepted accounting principles requires the Company to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingencies at the date of the financial statements and the
reported amounts of revenue and expenses during the reporting period. Actual
results could differ from the Company's estimates.
For all periods presented, the Consolidated Financial Statements and Notes
to the Consolidated Financial Statements disclose the Company's municipal and
commercial solid waste business as discontinued operations, as discussed in Note
5.
PRINCIPLES OF CONSOLIDATIONS
These consolidated financial statements include the accounts of the Company
and all of its subsidiaries. The equity method of accounting is used for
investment ownership ranging from 20 percent to 50 percent and where the Company
has the ability to exercise significant influence over the investee.
REVENUE RECOGNITION
Revenue from industrial services are recorded as the services are
performed, using the percentage of completion basis for fixed rate contracts and
as the related service is provided for time and material contracts. Revenue from
by-product recovery operations is recognized upon receipt and acceptance of
materials for processing since the Company accepts title to the materials at
such time and provides contractual indemnification to customers against future
liability with respect to the materials. Treatment, transportation and disposal
costs are accrued when the related revenue is recognized.
Revenue from the sale of recovered commodities and steel products is
recognized at the time of shipment. For contracts where the Company brokers
materials between two parties, only the commission on the transaction is
recorded.
CASH AND EQUIVALENTS
Cash and equivalents consist of cash on deposit and term deposits in money
market instruments with maturity dates of less than three months from the date
they are acquired.
INVENTORY
Inventory is recorded at the lower of average purchased cost and net
realizable value.
FIXED ASSETS
Fixed assets are stated at cost and are depreciated over their estimated
useful lives generally on the following basis: buildings 20 to 40 years
straight-line; equipment 5% to 30% straight-line. Landfill sites and
improvements thereto are recorded at cost and amortized over the life of the
landfill site based on the estimated landfill capacity utilized during the year.
Operating costs associated with landfill sites are charged to operations as
incurred. Assets under development include the direct cost of land, buildings
and equipment acquired for future use together with engineering, legal and other
costs incurred before the assets are brought into operation.
32
<PAGE> 35
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
The Company periodically reviews the carrying value of its fixed assets to
determine whether such values are recoverable. Any resulting write-downs are
charged to earnings.
GOODWILL
Goodwill represents the excess of the purchase price of businesses acquired
over the fair value of the identifiable assets acquired and is amortized over
periods not exceeding 40 years. At each balance sheet date management assesses
the appropriateness of the goodwill balance based on the undiscounted future
cash flow from operating results.
OTHER ASSETS
Deferred financing costs are amortized over the life of the related debt
instrument. Other intangibles such as non-compete agreements are amortized over
periods relating to the terms of the agreements.
ENVIRONMENTAL LIABILITY
The Company accrues the estimated costs relating to the closure and
post-closure monitoring of its landfill sites as well as remediation costs
associated with its transfer and processing facilities. The Company charges
earnings with these estimated future costs based on engineering estimates over
the fill rate of landfill sites. The accrued liability for environmental and
closure costs is disclosed in the consolidated balance sheet under other
liabilities. Amounts required to dispose of waste materials located at the
Company's transfer and processing facilities are included in accounts payable
and accrued liabilities.
INTEREST CAPITALIZATION
The Company includes, as part of the cost of its fixed assets, all
financing costs incurred prior to the asset becoming available for operation.
FOREIGN CURRENCY TRANSLATION
In 1997, the Company changed the designation of the parent company's
functional currency to the US dollar. The Company designates as its functional
currency the Canadian dollar for all its Canadian based operations and the US
dollar for all operations based in the United States. The assets and liabilities
denominated in a foreign currency for foreign operations, all of which are
self-sustaining, are translated at exchange rates in effect at the balance sheet
date. Revenue and expense items are translated at average exchange rates
prevailing during the period. The resulting gains and losses are accumulated in
a separate component of shareholders' equity.
CONCENTRATION OF CREDIT RISK
The Company's accounts receivable constitute financial instruments. The
Company's accounts receivable approximated their fair value as at December 31,
1997 and 1996. Concentration of credit risk in accounts receivable is limited,
due to the large number of customers the Company services throughout North
America. The Company performs ongoing credit evaluations of its customers, but
does not require collateral to support customer accounts receivable. The Company
establishes an allowance for doubtful accounts based on the credit risk
applicable to particular customers, historical and other information.
DERIVATIVE FINANCIAL AND COMMODITY INSTRUMENTS
Interest rate swaps and collars are designated as hedges, with net cash
settlement accrued as an adjustment to interest expense, when their interest
rate characteristics are opposite from the debt instrument they hedge.
Derivative commodity futures and collars are designated as hedges when the
Company can establish a high degree of inverse correlation between changes in
the market value of inventory being hedged and the market value of the
derivative instrument. Such instruments are marked to market with unrealized
gains and losses deferred and reflected in the balance sheet as a basis
adjustment of inventory. Upon
33
<PAGE> 36
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
settlement or termination, gains and losses on these hedge instruments are
recorded in the statement of earnings as operating expenses. Premiums paid for
purchased commodity put options are amortized over the life of the options with
any gains on settlement recorded as an adjustment to the basis of inventory.
Changes in the market value of written commodity call options are accrued as
operating expenses.
Derivative instruments and contracts not qualifying for hedge accounting
are marked to market and recorded in the statement of earnings.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 130, "Reporting Comprehensive Income" which is effective for fiscal years
beginning after December 15, 1997. Comprehensive income is defined as the change
in equity of a business enterprise during a period from transactions and other
events and circumstances from nonowner sources and includes all changes in
equity during a period except those resulting from investment by owners and
distributions to owners. Comprehensive income for the Company would not be
materially different than the net earnings disclosed for the year ended December
31, 1997.
3. SPECIAL CHARGES (in thousands)
(a) Special and non-recurring charges
The following table summarizes the special and non-recurring charges
recorded by the Company in 1997, and identifies where they are disclosed in the
Statements of Earnings:
<TABLE>
<S> <C>
Non-recurring charges and asset impairments recorded as
special charges........................................... $155,720
Non-recurring charges recorded as operating expenses........ 43,241
Costing errors recorded as operating expenses............... 32,875
--------
Pre-tax..................................................... $231,836
========
After tax................................................... $164,264
========
</TABLE>
As at December 31, 1997, the Company recorded a pre-tax charge of $155,720
($117,081 after tax) reflecting the effects of (i) restructuring decisions made
in its Industrial Services Group following the mergers of Allwaste and
Serv-Tech, (ii) integration decisions in various of its acquired Metal Services
Group businesses, the most significant of which were acquired in late October
1997 and (iii) impairments of fixed assets and related goodwill resulting both
from decisions to exit various business locations and dispose of the related
assets, as well as assessments of the recoverability of fixed assets and related
goodwill of business units in continuing use.
All businesses assessed for asset impairment were acquired in purchase
business combinations and, accordingly, the goodwill that arose in those
transactions was included in the tests for recoverability. Assets to be disposed
of were valued at their estimated net realizable value while the value of the
assets of the business units to be continued were assessed at fair value
principally using discounted cash flow methods.
34
<PAGE> 37
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
3. SPECIAL CHARGES (in thousands) (Continued)
Special and non-recurring charges relate to the impairment of fixed assets
and related goodwill and are comprised of the following items:
<TABLE>
<S> <C>
Business units, locations or activities to be exited:
Goodwill written off...................................... $ 10,032
Fixed assets written down to estimated net realizable
value of $4,843........................................ 47,584
Unavoidable future lease and other costs associated with
properties............................................. 9,358
Other assets to be disposed, including $7,800 accrued
disposal costs......................................... 17,740
Business units to be continued:
Goodwill impairment....................................... 49,558
Fixed assets written down to estimated net realizable
value of $8,810........................................ 10,984
Severance, $2,000 paid before year end...................... 4,464
Accrued costs............................................... 6,000
--------
$155,720
========
</TABLE>
At the end of the second quarter of 1997, the Company monetized
approximately $27,300 of its copper inventory. Concurrent with this transaction,
the Company entered into an agreement to process this inventory over a period of
future months and also entered into certain copper swap contracts. In the third
and fourth quarter of 1997, the Company incurred unrealized pre-tax losses as a
result of these copper swap contracts, totalling $10,000 ($4,900 in the third
quarter and $5,100 in the fourth quarter) which have been recorded in operating
expenses. In addition, during the fourth quarter of 1997, the Company incurred
operating losses in business units to be exited and losses in the copper
division of the Company's Metals Services Group totalling $33,241. The copper
division losses were incurred principally because the Company's copper inventory
and related operations were exposed to the downturn in the market price of
copper experienced during the period since the inventory was unhedged in the
fourth quarter.
The Company has also recorded a pre-tax charge in 1997 of $32,875 ($20,383
after tax) as a result of inventory costing errors, which occurred in the same
copper division and which resulted in the overstatement of copper inventory for
resale and the understatement of operating expenses.
(b) Restatement for Trading Losses and Cut Off Errors
In January, 1998, the Company discovered previously incurred but unrecorded
trading losses amounting to $92,235 on a pre-tax basis ($57,186 after tax)
resulting from speculative trading of copper cathode outside of the Company's
normal business practices. The trading took place within the copper division of
the Company's Metals Services Group over a three year period ended December 31,
1997. The losses from the trading were deferred principally through unrecorded
liabilities and to a lesser extent were also improperly recorded through various
balance sheet accounts. During 1997, the previously unrecorded amounts were
improperly capitalized into the inventory accounts. The trading losses were not
recorded in the profit and loss accounts of the copper division, and therefore
were not included in the Consolidated Statement of Earnings of the Company. Net
trading losses incurred during 1997 were immaterial. As a result of the trading
losses, the Company has restated its financial statements for 1996 and 1995 to
record as special charges the previously unrecorded trading losses of $65,056
and $27,179, respectively.
The Company has also restated its financial statements for 1996 and 1995 to
reflect the recording of revenue in the appropriate periods. The total
adjustment was $22,114 which resulted in an overstatement of revenue and an
overstatement of accounts receivable in 1996 and 1995 by $13,000 and $9,114,
respectively on a pre-tax basis ($8,060 and $5,652 after tax).
35
<PAGE> 38
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
3. SPECIAL CHARGES (in thousands) (Continued)
The following table summarizes the restatement adjustments recorded by the
Company:
<TABLE>
<CAPTION>
1996 1995
--------- ---------
INCREASE (DECREASE)
----------------------
<S> <C> <C>
BALANCE SHEETS:
Current assets.............................................. $ (35,700) $ --
Current liabilities......................................... 78,649 36,293
Deferred taxes.............................................. (43,452) (13,791)
Shareholders' equity........................................ (70,897) (22,502)
STATEMENTS OF EARNINGS:
Revenue..................................................... $ (13,000) $ (9,114)
Special charges............................................. 65,056 27,179
--------- ---------
Earnings (loss) from continuing operations.................. (78,056) (36,293)
Income taxes................................................ (29,661) (13,791)
--------- ---------
Net income.................................................. $ (48,395) $ (22,502)
========= =========
Effect on diluted earnings per share........................ $ (0.90) $ (0.46)
========= =========
</TABLE>
4. ACQUISITIONS AND DIVESTITURES (in thousands)
During 1997, the Company acquired over 30 businesses, including Allwaste
Inc. ("Allwaste") and Luria Brothers ("Luria"). Allwaste, an integrated provider
of industrial and environmental services based in Houston, Texas was acquired on
July 31, 1997 for a total consideration of $443.8 million, paid for by the
issuance of approximately 23 million common shares. Luria, based in Cleveland,
Ohio was acquired on October 10, 1997 for total cash consideration of $175.3
million. In 1996, the Company acquired eleven businesses, including Intsel
Southwest Limited Partnership ("Intsel") and Luntz Corporation ("Luntz"). During
1995, six businesses were acquired. All business combinations have been
accounted for using the purchase method of accounting and are summarized below:
<TABLE>
<CAPTION>
1997 1996 1995
------------------------------------------- -------- --------
ALLWASTE LURIA OTHER TOTAL
-------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
PURCHASE CONSIDERATION
Cash........................... $ -- $163,001 $397,488 $ 560,489 $109,301 $ 1,869
Company's common shares........ 391,719 -- 210,913 602,632 29,571 1,239
Deferred payments and long-term
debt........................ -- -- 22,828 22,828 22,373 4,474
Acquisition costs and
accruals.................... 52,047 12,300 19,158 83,505 3,875 687
-------- -------- -------- ---------- -------- --------
$443,766 $175,301 $650,387 $1,269,454 $165,120 $ 8,269
======== ======== ======== ========== ======== ========
FAIR VALUE OF NET ASSETS ACQUIRED
Cash (bank indebtedness)....... $ 8,601 $ 688 $ (7,645) $ 1,644 $ 1,849 $ (275)
Long-term debt................. (142,363) -- (86,002) (228,365) (14,513) (246)
Assets, excluding cash &
intangibles................. 267,720 115,556 495,184 878,460 171,861 14,104
Liabilities.................... (77,318) (44,673) (228,010) (350,001) (63,092) (13,436)
Goodwill....................... 387,126 101,130 452,278 940,534 63,535 7,510
Other intangibles.............. -- 2,600 24,582 27,182 5,480 612
-------- -------- -------- ---------- -------- --------
$443,766 $175,301 $650,387 $1,269,454 $165,120 $ 8,269
======== ======== ======== ========== ======== ========
</TABLE>
36
<PAGE> 39
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
4. ACQUISITIONS AND DIVESTITURES (in thousands) (Continued)
The unaudited pro forma information set forth below assumes the
acquisitions of Allwaste and Luria and the material acquisitions in 1996 of
Luntz and Intsel, occurred at the beginning of 1996. The unaudited pro forma
information is presented for informational purposes only and is not necessarily
indicative of the results of operations that would have resulted if the
acquisitions had occurred on January 1, 1996.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
------------------------
1997 1996
---------- ----------
(UNAUDITED)
<S> <C> <C>
Revenue..................................................... $2,062,027 $1,316,149
Earnings (loss) from continuing operations.................. $ (103,175) $ (15,770)
Basic earnings per share from continuing operations......... $ (0.97) $ (0.21)
</TABLE>
In November 1995, the Company reached an agreement to sell its Greater
Montreal Area solid waste collection and transfer business (the "Intersan
Business") for $31,685. As part of the sale of the Intersan Business, the
Company entered into a disposal services agreement with the purchaser and
received proceeds of $7,947. The proceeds from the sale of the Intersan
Business, which amounted to $39,632, were received in January 1996.
5. DISCONTINUED OPERATIONS (in thousands)
In August 1996, the Company sold its municipal and commercial solid waste
business (the "Solid Waste Business") for a total consideration of $115,000 to
USA Waste Services, Inc. ("USA Waste"). The consideration included $60,000 in
cash, $38,000 in unrestricted common shares of USA Waste, and $17,000 in
restricted common shares of USA Waste (in total, representing less than 2% of
USA Waste's voting stock). The unrestricted common shares of USA Waste were sold
in September 1996 for $39,508, resulting in a gain of $1,508 which is included
in Other Income and Expense -- net in the Consolidated Statements of Earnings.
The restriction on the $17,000 common shares of USA Waste was removed in January
1997 and in February 1997, the Company sold these shares for $19,800, resulting
in a further gain before tax of $2,800.
The sale of the Solid Waste Business in 1996 included the remaining portion
of the Quebec solid waste division, and the related disposal services agreement,
as described in Note 4.
Revenue of the Solid Waste Business, net of intercompany revenue, was
$38,140 and $61,093 for the fiscal years ended December 31, 1996 and 1995,
respectively. Income from discontinued operations in the Consolidated Statements
of Earnings is presented net of allocated interest expense of $3,768 and $5,100
and net of applicable income taxes of $3,225 and $1,722 for the fiscal years
ended December 31, 1996 and 1995, respectively. Interest was allocated based
upon the ratio of the net assets of the Solid Waste Business to the Company's
consolidated net assets. No general corporate overhead was allocated to the
discontinued operations.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
----------------------------
1997 1996 1995
------- ------- ------
<S> <C> <C> <C>
Loss on sale of Solid Waste Business, net of income taxes
recoverable of $2,568..................................... $ -- $(5,588) $ --
Income from discontinued operations (net of tax)............ -- 4,872 2,109
------- ------- ------
Discontinued operations..................................... $ -- $ (716) $2,109
======= ======= ======
</TABLE>
37
<PAGE> 40
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
6. FIXED ASSETS (in thousands)
<TABLE>
<CAPTION>
1997 1996
------------------------------------ ------------------------------------
ACCUMULATED NET BOOK ACCUMULATED NET BOOK
COST DEPRECIATION VALUE COST DEPRECIATION VALUE
-------- ------------ -------- -------- ------------ --------
<S> <C> <C> <C> <C> <C> <C>
Land................. $ 73,329 $ -- $ 73,329 $ 40,030 $ -- $ 40,030
Landfill sites....... 22,855 2,950 19,905 15,534 651 14,883
Buildings............ 128,924 11,417 117,507 59,375 7,807 51,568
Equipment............ 447,938 87,212 360,726 186,033 54,094 131,939
Assets under
development........ 34,243 -- 34,243 15,667 -- 15,667
-------- -------- -------- -------- ------- --------
$707,289 $101,579 $605,710 $316,639 $62,552 $254,087
======== ======== ======== ======== ======= ========
</TABLE>
7. OTHER ASSETS (in thousands)
<TABLE>
<CAPTION>
1997 1996
-------- -------
<S> <C> <C>
Restricted investments (a).................................. $ 27,970 $23,667
Deferred financing costs.................................... 19,616 11,087
Investments (b)............................................. 53,685 4,739
Other intangibles........................................... 35,426 6,698
Due from an officer and director............................ -- 538
Other....................................................... 30,477 9,063
-------- -------
$167,174 $55,792
======== =======
</TABLE>
(a) Restricted investments support the Company's self-insurance program and are
invested and managed by the Company's wholly-owned insurance subsidiary.
(b) Investments in 1997 include:
(i) a 29.9% interest in Innovative Valve Technologies Inc. ("Invatec")
representing 2,340,716 common shares amounting to $30.8 million. The
Invatec investment is accounted for using the equity method of
accounting. The difference between the carrying value of the
investment and the underlying equity in the net assets which is
approximately $12.8 million will be amortized over a period not
exceeding forty years. Invatec is a publicly traded company providing
comprehensive maintenance, repair, replacement and value added
distribution services of industrial valves and process system
components. The quoted market price of the Invatec shares at December
31, 1997 was $20.25 per share,
(ii) a $9.7 million investment in Strategic Holdings Inc. which was
obtained on the acquisition of Allwaste, Inc. The investment, which
is accounted for at cost, represents $8.1 million in redeemable
preferred stock with a dividend rate of $0.06 per share, redeemable
beginning in 2002, $1.5 million of common stock warrants with
exercise prices ranging from $0.4643 to $1.50 per share and $0.1
million of common shares.
38
<PAGE> 41
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
8. ACCRUED LIABILITIES (in thousands)
Accrued liabilities consist of the following:
<TABLE>
<CAPTION>
1997 1996
-------- -------
<S> <C> <C>
Accrued employee compensation and benefit costs............. $ 47,062 $11,478
Accrued purchases........................................... 26,212 20,085
Accrued insurance costs..................................... 19,078 4,262
Income taxes payable........................................ 11,629 --
Accrued restructuring costs (Note 3)........................ 25,622 --
Accrued other............................................... 61,138 11,082
-------- -------
$190,741 $46,907
======== =======
</TABLE>
9. LONG-TERM DEBT (in thousands)
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Bank term loan (a).......................................... $897,352 $248,119
Convertible subordinated debentures (b)..................... 25,625 --
Loans collateralized by certain assets of subsidiaries of
the Company having a net book value of $33,865 bearing
interest at a weighted average fixed rate of 6.6% (1996
-- 5.7%) maturing at various dates up to 2020............. 19,627 5,175
Loans collateralized by certain assets of subsidiaries of
the Company having a net book value of $18,340 bearing
interest at prime plus a weighted average floating rate of
0.8% (1996 -- 1.9%) maturing at various dates up to
2007...................................................... 6,582 5,481
Loans unsecured, bearing interest at prime plus a weighted
average floating rate of 5.4% (1996 -- 3.4%) maturing at
various dates up to 2001.................................. 21,908 26,060
Obligations under capital leases on equipment bearing
interest at rates varying from 6% to 12% maturing at
various dates to 2004..................................... 15,793 14,484
Other....................................................... 1,301 2,636
-------- --------
988,188 301,955
Less current maturities of long-term debt (c)............... 21,193 19,130
-------- --------
$966,995 $282,825
======== ========
</TABLE>
(a) In August 1997, the Company signed a $1.5 billion revolving credit agreement
which was amended in October, 1997 and February, 1998 (the "Credit
Facility") with a syndicate of international lenders which replaced the 1996
revolving term loan agreement and refinanced certain other long-term debt.
The Credit Facility expires in August of 2002, and contains certain
restrictive covenants and financial covenants including the following:
- the Company must meet an interest ratio coverage test as well as total
debt and fixed charge ratio coverage tests
- the Company must maintain a prescribed level of working capital
- certain acquisitions by the Company must be reviewed by the lenders
prior to completion
At December 31, 1997 the Company is in compliance with all of the covenants
of the Credit Facility.
Borrowings under the Credit Facility are guaranteed, jointly and severally
by the Company's wholly owned subsidiaries and are secured by a pledge of
all of the issued and outstanding securities, and all the present and
future assets, held by the Company in all of its subsidiaries. The Credit
Facility bears interest based on a moving grid. At December 31, 1997, the
Company was paying approximately 7.1%, on these borrowings.
39
<PAGE> 42
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
9. LONG-TERM DEBT (Continued)
At December 31, 1997, the Company had undrawn credit capacity under the
Credit Facility of approximately $543 million net of outstanding letters of
credit which amounted to $59 million.
In February of 1998, the Company signed an amending agreement to the
revolving credit agreement which would permit the Company to draw up to
$210 million by way of subordinated debt to finance the Company's equity
interest in SK Parent Corp. (Note 18).
(b) On the acquisition of Allwaste, the Company assumed the indenture with
respect to Allwaste's 7 1/4% Convertible Subordinated Debentures
("debenture") which are due 2014. At any time up to and including June 1,
2014 the holder of any debenture will have the right to convert the
principal amount of such debenture into common shares equal to the principal
amount of the debenture surrendered for conversion divided by $19.5376. The
debentures are redeemable for cash at the option of the Company. The
debentures provide for annual mandatory sinking fund payments equal to 5% of
the aggregate principal amount of the debenture issued, commencing June 1,
1999. Interest is payable semi-annually on June 1 and December 1.
The Company's acquisition of Allwaste constituted a "redemption event"
pursuant to the indenture. Accordingly, each holder of the debentures had
the right to require the redemption of all or any portion of such holder's
debenture for cash to the 90(th) day following the acquisition. During the
90 day period, $3.3 million of debentures were redeemed.
(c) The aggregate amount of payments required to meet long-term debt
installments in each of the next five years is as follows:
<TABLE>
<S> <C>
1998.................................................... $ 21,193
1999.................................................... 21,375
2000.................................................... 10,283
2001.................................................... 4,720
2002.................................................... 898,947
</TABLE>
10. DERIVATIVE FINANCIAL AND COMMODITY INSTRUMENTS (in thousands except
rate/strike price and term)
The Company utilizes interest rate swaps and collars to fix the interest
rate on a portion of its floating rate debt and thereby manage the interest rate
risk associated therewith. Additionally, the Company hedges the market risk of
foreign currency exchange rate movements on debt denominated in Canadian
currency through the forward purchase of Canadian dollars. The credit risk of
counterparty fulfillment on all such contracts is mitigated by dealing only with
credit worthy major public financial institutions.
The speculative copper trading activities referred to in Note 3 consisted
primarily of physical forward purchase and sale contracts for copper cathode and
copper scrap entered into with various counterparties. In many instances, the
final settlement pricing on these contracts remained open after the delivery of
the underlying copper commodity. At December 31, 1996 the Company had sold and
delivered 7,145 pounds of copper cathode on which settlement pricing was not
finalized until 1997. Additionally, at December 31, 1996, the Company was
obligated to deliver 23,573 pounds of copper cathode and 25,471 pounds of copper
scrap. At December 31, 1997, there were no remaining open positions on such
contracts and the Company is no longer engaged in copper trading except as
described in the following paragraphs.
At December 31, 1997, the Company had outstanding 31,500 lbs of copper swap
contracts entered into in connection with the processing agreement associated
with the monetization of the copper inventory referred to in Note 3. Under these
swaps the Company is obligated to pay the counterparty an average fixed price of
$0.87/lb and receives a variable price based upon the market price of copper.
These swaps have no carrying value and resulted in a mark to market loss of
$10,000 at December 31, 1997.
40
<PAGE> 43
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
10. DERIVATIVE FINANCIAL AND COMMODITY INSTRUMENTS (in thousands except
rate/strike price and term) (Continued)
The Company enters into copper and aluminum collar and purchased put option
contracts, as well as written covered call option contracts with major public
financial institutions to hedge market price fluctuations in its copper and
aluminum inventories.
The Company also has forward physical copper sales commitments to customers
totalling 22,000 lbs. during 1998 and copper futures purchase contracts with
major public broker dealers which are, collectively designated as hedges in its
copper processing operations and inventory.
The following table summarizes outstanding derivative instruments:
<TABLE>
<CAPTION>
1997 1996
---------------------------------------------- ---------------------------------------------
CONTRACT/ TERM CONTRACT/ TERM
INSTRUMENTS NOTIONAL AMOUNT (YEARS) RATE/STRIKE PRICE NOTIONAL AMOUNT (YEARS) RATE/STRIKE PRICE
----------- --------------- ------- ------------------ --------------- ------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Interest rate swaps / collars... $ 319,406 0.7 5.91% $189,800 0.7 5.91%
Forward Canadian dollar
purchases..................... $ 99,393 0.2 Cdn$1.42/$1US 73,966 0.1 Cdn$1.34/$1US
Copper swaps.................... 31,500 lbs. 0.5 $0.87/lb. -- -- --
Copper price collars............ 45,000 lbs. 0.1 $0.75 to $0.95/lb. -- n/a n/a
Written copper call options..... 51,750 lbs. 0.2 $0.88/lb. -- n/a n/a
Purchased copper put options.... 13,500 lbs. 0.5 $0.78/lb. -- n/a n/a
Aluminum price collars.......... 10,000 lbs. 0.1 $0.65 to $0.74/lb. -- n/a n/a
Written aluminum call options... 10,000 lbs. 0.2 $0.72/lb. -- n/a n/a
Copper futures purchases........ 11,805 lbs. 0.4 $0.89/lb. -- n/a n/a
</TABLE>
Other than the copper swaps discussed in the above paragraphs, neither the
carrying value nor the related fair value of the instruments summarized in the
above table were individually or collectively material at December 31, 1997 or
1996.
11. OTHER LIABILITIES (in thousands)
<TABLE>
<CAPTION>
1997 1996
----------- ----------
<S> <C> <C>
Deferred payments (a)....................................... $ 15,839 $ 11,774
Accrued environmental costs................................. 59,638 18,848
Other....................................................... 54,327 4,595
----------- ----------
$ 129,804 $ 35,217
=========== ==========
</TABLE>
(a) Deferred payments relate to acquisitions (see Note 4), whereby the former
owners of the businesses have agreed to accept part of their payment over
future periods of time. All such amounts are non-interest bearing and are
unsecured.
41
<PAGE> 44
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
12. SHAREHOLDERS' EQUITY (in thousands except number of shares/options and per
share amounts)
<TABLE>
<CAPTION>
1997 1996
----------- ----------
<S> <C> <C>
Share capital............................................... $ 1,348,066 $ 363,079
Retained earnings (deficit)................................. (64,248) 39,993
Cumulative foreign currency translation adjustment.......... (44,851) (24,062)
----------- ----------
$ 1,238,967 $ 379,010
=========== ==========
SHARE CAPITAL CONSISTS OF:
AUTHORIZED
Unlimited number of common shares
ISSUED
Common shares and equivalents
Number...................................................... 131,058,393 69,876,868
Dollars..................................................... $ 1,348,066 $ 363,079
</TABLE>
The issued share capital of the Company is comprised of the following:
<TABLE>
<CAPTION>
COMMON SHARES
-------------------------
NUMBER AMOUNT
----------- ----------
<S> <C> <C>
Balance -- December 31, 1994................................ 37,271,522 $ 152,881
Shares issued in respect of acquisitions during 1995........ 194,116 1,239
Shares cancelled............................................ (68,404) (527)
Other....................................................... 32,985 189
Share options exercised for cash............................ 23,614 138
----------- ----------
Balance -- December 31, 1995................................ 37,453,833 153,920
Shares issued in respect of acquisitions during 1996........ 3,600,102 29,571
Shares issued on conversion of convertible subordinated
debentures................................................ 19,180,000 117,720
Shares issued for cash...................................... 8,625,000 55,345
Share options exercised for cash............................ 953,724 6,159
Other....................................................... 64,209 364
----------- ----------
Balance -- December 31, 1996................................ 69,876,868 363,079
Shares issued in respect of acquisitions during 1997........ 35,880,758 602,632
Shares issued on conversion of convertible subordinated
debentures................................................ 129,511 1,550
Shares issued for cash...................................... 23,000,000 362,501
Share options exercised for cash............................ 1,774,414 12,657
Other....................................................... 396,842 5,647
----------- ----------
Balance -- December 31, 1997................................ 131,058,393 $1,348,066
=========== ==========
</TABLE>
42
<PAGE> 45
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
12. SHAREHOLDERS' EQUITY (in thousands except number of shares/options and per
share amounts) (Continued)
STOCK OPTIONS
Common share options issued and outstanding are as follows:
<TABLE>
<CAPTION>
NUMBER $/SHARE
--------- --------------------
<S> <C> <C>
Employee stock option plans (a)
Year of grant
1992..................................................... 30,000 Cdn $ 8.00 to 10.375
1993..................................................... 57,000 Cdn $ 9.00
1994..................................................... 514,088 Cdn $ 6.75 to 8.00
1995..................................................... 619,504 Cdn $ 9.88
1996..................................................... 1,024,650 Cdn $ 10.90 to 11.90
1997..................................................... 3,821,500 Cdn $ 18.10 to 22.70
1997 Serv-Tech acquisition............................... 400,010 $7.44 to 22.64
1997 Allwaste acquisition................................ 1,742,194 $6.55 to 17.80
Issued in conjunction with the acquisition of Philip
Environmental Corporation (c).......................... 776,386 Cdn $ 7.05 to 8.00
Issued to a director of the Company (b)(c)............... 200,000 Cdn $ 7.35
---------
Total outstanding December 31,1997....................... 9,185,332
=========
</TABLE>
(a) The Company has allotted and reserved 10,257,149 common shares under its
1991 and 1997 Employee Stock Option Plans and the Serv-Tech Long Term
Incentive Plan, the Serv-Tech Amended and Restated 1989 Incentive Stock
Option Plan and the Allwaste Amended and Restated 1989 Replacement Non-
Qualified Stock Option Plan and any supplements thereto. Under the stock
option plans, options may be granted to purchase common shares of the
Company at the then current market price. All options currently expire five
to ten years from the date of grant. All the options outstanding were issued
at the then current market price.
(b) These options were issued in 1991 at a discount to the then current market
price.
(c) These options expire on November 26, 2000.
SFAS No. 123 "Accounting for Stock Based Compensation", issued in October
1995, defines a fair value based method of accounting for employee stock
options. Under this fair value method, compensation cost is measured at the
grant date based on the fair value of the award and is recognized over the
exercise period. However, SFAS No. 123 allows an entity to continue to measure
compensation cost in accordance with Accounting Principle Board Statements No.
25 ("APB 25"). The Company has elected to measure compensation costs related to
stock options in accordance with ABP 25 and recognizes no compensation expense
for stock options granted. Accordingly, the Company has adopted the disclosure
only provisions of SFAS No. 123.
If compensation costs were measured using the fair value of the stock
options on the date of grant, during 1995, 1996 and 1997, in accordance with
SFAS No. 123, the Company's net earnings would be as follows:
<TABLE>
<CAPTION>
1997 1996 1995
----------------------- ---------------------- ----------------------
AS REPORTED PROFORMA AS REPORTED PROFORMA AS REPORTED PROFORMA
----------- --------- ----------- -------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
Net earnings.................... $(104,241) $(109,285) $(19,973) $(22,210) $3,249 $2,328
Basic earnings per share........ $ (1.18) $ (1.24) $ (0.40) $ (0.44) $ 0.09 $ 0.06
Diluted earnings per share...... $ (1.18) $ (1.24) $ (0.40) $ (0.44) $ 0.08 $ 0.06
</TABLE>
The weighted average fair value of options granted in 1997, 1996 and 1995
were $1.33, $1.45 and $1.19 respectively. The fair value of each option was
determined using the Black-Scholes option valuation model
43
<PAGE> 46
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
12. SHAREHOLDERS' EQUITY (in thousands except number of shares/options and per
share amounts) (Continued)
with the following assumptions for 1997, 1996 and 1995: (i) risk free interest
rate of 5.62, 6.96, and 7.58 percent, respectively, (ii) expected volatility of
46.28, 32.74 and 23.95 percent, respectively, (iii) expected option life ranging
from 5 to 10 years and (iv) no annualized dividend yield.
13. CHANGE IN NON-CASH WORKING CAPITAL (in thousands)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
---------------------------------
1997 1996 1995
--------- -------- --------
<S> <C> <C> <C>
Accounts receivable..................................... $ (77,991) $(10,633) $(19,729)
Inventory for resale.................................... 8,116 (45,502) (24,132)
Other................................................... (24,870) (17,893) (12,714)
Accounts payable and accrued liabilities................ (113,439) 43,057 50,149
Income taxes............................................ 2,218 (4,168) 5,576
--------- -------- --------
Additional working capital provided by changes in
non-cash working capital.............................. $(205,966) $(35,139) $ (850)
========= ======== ========
</TABLE>
STATEMENTS OF CASH FLOWS
The supplemental cash flow disclosures and non-cash transactions for the
years ended December 31, 1997, 1996 and 1995.
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- -------
<S> <C> <C> <C>
SUPPLEMENTAL DISCLOSURES:
Interest paid........................................... $ 45,632 $ 19,476 $27,469
Income taxes paid....................................... 4,035 1,119 2,308
NON CASH TRANSACTIONS:
Common stock issued on acquisitions..................... 602,632 29,571 1,239
Capital leases and debt obligations for the purchase of
property and equipment............................... 7,708 13,924 3,623
Debt and liabilities incurred or assumed in
acquisitions......................................... 67,064 25,473 4,474
Debt converted to common stock.......................... 2,130 117,720 --
Common stock issued for property........................ 5,084 -- --
</TABLE>
14. INCOME TAXES (in thousands)
The Company accounts for income taxes under SFAS No. 109, "Accounting for
Income Taxes". Under SFAS No. 109, the Company provides deferred income taxes
for the tax effects of temporary differences between the financial reporting and
income tax bases of the Company's assets and liabilities.
The Company is organized under the laws of Ontario, Canada and it is
regarded as a Canadian domestic corporation for the purposes of this note.
44
<PAGE> 47
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
14. INCOME TAXES (in thousands) (Continued)
Federal, provincial and foreign income tax provisions (benefits) are as
follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
-------------------------------
1997 1996 1995
-------- -------- -------
<S> <C> <C> <C>
Canadian -- federal and provincial
Current................................................. $ 702 $ (5,407) $(3,029)
Deferred................................................ (33,741) (14,759) (3,511)
-------- -------- -------
(33,039) (20,166) (6,540)
Foreign
Current................................................. 6,735 1,159 706
Deferred................................................ (15,931) (556) 1,044
-------- -------- -------
(9,196) 603 1,750
-------- -------- -------
$(42,235) $(19,563) $(4,790)
======== ======== =======
</TABLE>
The Company's income tax benefit is comprised of the following:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
--------------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Income tax expense (benefit)
based on Canadian Federal
and Provincial effective
income tax rates....................................... $(65,357) $(17,321) $ (1,628)
(Increase) decrease in
income tax benefit resulting from:
Lower income tax rates in
the USA and other jurisdictions................ (5,229) (4,393) (3,824)
Manufacturing and processing allowances................ 4,232 425 (20)
Non-deductible expenses for income tax purposes,
principally
goodwill and amortization........................... 4,796 2,420 1,970
Utilization of unrecognized loss carryforwards......... -- -- (845)
Other non-deductible expenses
relating to special charges............................ 20,353 -- --
Other.................................................... (1,030) (694) (443)
-------- -------- --------
Income tax recovery...................................... $(42,235) $(19,563) $ (4,790)
======== ======== ========
</TABLE>
The net deferred tax asset consists of the following temporary differences:
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Difference in fixed assets and goodwill basis............... $ 65,829 $ 44,528
Net operating loss carryforwards............................ (94,733) (59,134)
Accruals not yet deductible................................. (44,630) 423
Other....................................................... 562 1,958
-------- --------
Net deferred tax asset...................................... $(72,972) $(12,225)
======== ========
</TABLE>
The net operating loss carryforwards expire between the years 2001 and
2012. In assessing the value of the deferred tax assets, management considers
whether it is more likely than not that all of the deferred tax assets will be
realized. Projected future income tax planning strategies and the expected
reversal of deferred tax liabilities are considered in making this assessment.
Based on the level of historical taxable income and
45
<PAGE> 48
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
14. INCOME TAXES (in thousands) (Continued)
projections for future taxable income over the periods in which the net
operating losses are deductible, management believes it is more likely than not
that the Company will realize the benefits of these deferred tax assets and
therefore, has recorded no valuation allowance. The amount of the deferred tax
asset considered realizable, however, could be reduced in the future if
estimates of future taxable income during the carryforward period are reduced.
Deferred income tax expense (benefit) results principally from the use of
different revenue and expense recognition methods for tax and financial
accounting purposes, and the deferral of loss carryforwards for tax purposes.
The sources of these temporary differences and related tax effects are as
follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
--------------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Depreciation and amortization............................ $(18,211) $ 2,005 $ 3,113
Accruals and reserves not deductible until paid.......... (1,085) -- 1,183
Deferred revenue......................................... 3,151 -- --
Losses carried forward................................... (31,796) (14,628) (15,117)
Other, net............................................... (1,731) (2,692) 8,354
-------- -------- --------
Total deferred income tax benefit........................ $(49,672) $(15,315) $ (2,467)
======== ======== ========
</TABLE>
15. COMPUTATION OF EARNINGS PER SHARE (in thousands)
<TABLE>
<CAPTION>
1997 1996 1995
--------- -------- --------
<S> <C> <C> <C>
Net earnings (loss) for the period -- basic and
diluted............................................... $(104,241) $(19,973) $ 3,249
========= ======== ========
Number of common shares outstanding..................... 131,058 69,877 37,454
Effect of using weighted average number of common shares
outstanding........................................... (42,867) (19,804) (112)
--------- -------- --------
Basic weighted average number of commons shares
outstanding........................................... 88,191 50,073 37,342
Effect from conversion of common stock equivalents...... -- -- 4,666
--------- -------- --------
Diluted weighted average number of common shares
outstanding........................................... 88,191 50,073 42,008
========= ======== ========
</TABLE>
16. INTEREST CAPITALIZATION (in thousands)
During the years ended December 31, 1997, 1996 and 1995 the Company
included $699, $2,219 and $1,778 respectively of financing costs as part of the
cost of assets under development.
17. RELATED PARTIES (in thousands)
(a) The following transactions were recorded with the directors and officers of
the Company:
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Advances from (repayments to) directors.................. $ (826) $ (2,894) $(13,341)
-------- -------- --------
Interest paid to directors............................... $ 21 $ 196 $ 1,378
-------- -------- --------
Services acquired from a company controlled by an officer
and director........................................... $ 2,387 $ 839 --
-------- -------- --------
Property purchased from a company partially owned by a
director............................................... $ 5,084 -- --
-------- -------- --------
Unsecured advances to an officer and director -- net..... -- $ (38) $ (36)
-------- -------- --------
</TABLE>
46
<PAGE> 49
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
17. RELATED PARTIES (in thousands) (continued)
(b) Loans from related parties consist of:
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Note payable to the former owner of an acquired company who
is a director of the Company.............................. $ -- $ 826
Less current maturities of loans............................ -- 826
------- -------
$ -- $ --
======= =======
</TABLE>
(c) An amount due from an officer and a director at December 31, 1997 of $515
has been included in other current assets. The loan is unsecured,
non-interest bearing and payable on demand. The amount outstanding at
December 31, 1996 of $538 was included, in other long-term assets.
18. CONTINGENCIES (in thousands except per share amounts)
(a) On November 20, 1997, SK Parent Corp., a corporation equally owned by the
Company, affiliates of Apollo Management, LP and affiliates of The
Blackstone Group entered into a merger agreement to acquire Safety-Kleen
Corp. ("Safety-Kleen") pursuant to which Safety-Kleen shareholders would
receive $27 per share. Subsequent to the year-end, a meeting of the
shareholders of Safety-Kleen to consider the approval of the merger was
held. At the meeting, the necessary two-thirds ( 2/3) approval from
Safety-Kleen shareholders was not obtained and the merger agreement was
terminated.
(b) The Company in the normal course of its business expends funds for
environmental protection and remediation but does not expect these
expenditures to have a materially adverse effect on it's financial
condition or results of operations since its business is based on
compliance with environmental laws and regulations.
Certain of the Company's facilities are contaminated as a result of
operating practices at the sites prior to their acquisition by the Company.
The Company has established procedures to routinely evaluate these sites
giving consideration to the nature and extent of the contamination. The
Company has provided for the remediation of these sites based upon
management's judgement and prior experience. The Company has estimated the
liability to remediate these sites to be $59,967 (1996 -- $19,455).
As well, certain subsidiaries acquired by the Company have been named as a
potentially responsible or liable party in connection with sites listed on
the Superfund National Priority List ("NPL") In the majority of situations
the Company's connection with NPL sites relates to allegations that its
subsidiaries or their predecessors transported waste to the site in
question. The Company has reviewed the nature and extent of its alleged
connection to these sites, the number, connection and financial ability of
other named and unnamed potentially responsible parties and the nature and
estimated cost of the likely remedy. Based on its review, the Company has
estimated its liability to remediate these sites to be $5,086 (1996 --
$419).
The liabilities discussed above are disclosed in the Consolidated Balance
Sheets as follows:
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Accrued liabilities......................................... $ 5,415 $ 1,026
Accrued environmental costs (Note 11)....................... 59,638 18,848
------- -------
$65,053 $19,874
======= =======
</TABLE>
(c) As of March 4, 1998, the Company is aware of sixteen separate class actions
which have been filed against it and various directors and officers. Each
action alleges that Philip's financial disclosures in relation to 1997
contained material misstatements or omissions in violation of US federal
securities laws
47
<PAGE> 50
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
18. CONTINGENCIES (in thousands except per share amounts)(Continued)
(provisions of the Securities Act of 1933 and of the Securities and
Exchange Act of 1934) and seeks to represent a class of purchasers of
Philip's common stock. The Company has conducted a review of the claims and
has determined that it is premature to express an opinion in respect of the
claims. The Company intends to vigorously defend all claims.
(d) The Company is named as a defendant in several lawsuits which have arisen in
the ordinary course of its business. Management believes that none of these
suits is likely to have a material adverse effect on the Company's business
or financial condition and therefore has made no provision in these
financial statements for the potential liability if any.
19. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS (in thousands)
The carrying value of long-term debt is estimated to approximate fair value
based on the Company's current incremental borrowing rates for similar types of
borrowing arrangements.
The Company's fair value obligation for all interest rate derivative
contracts disclosed in Note 10 to the Consolidated Financial Statements as of
December 31, 1997 and December 31, 1996 approximate the face value due to the
short-term nature of these instruments.
20. COMMITMENTS (in thousands)
Future rental payments required under operating leases for premises and
equipment are as follows:
<TABLE>
<S> <C>
1998........................................................ $22,844
1999........................................................ 18,193
2000........................................................ 18,182
2001........................................................ 12,406
2002 and thereafter......................................... 11,003
</TABLE>
Letters of credit issued in relation to various supply contracts and third
party insurance policies amounted to $58,960 as at December 31, 1997 (1996 --
$13,432).
21. SEGMENTED INFORMATION (in thousands)
The Company operates in one business segment but has a significant
component of US based revenues and earnings. The geographic segmentation of the
Company's business is as follows:
<TABLE>
<CAPTION>
INCOME (LOSS) FROM
REVENUE OPERATIONS TOTAL ASSETS
---------- ------------------ ------------
<S> <C> <C> <C>
1997
United States................................... $1,209,783 $ (11,318) $2,129,532
Canada.......................................... 442,663 (107,027) 602,548
Europe.......................................... 98,484 4,348 87,346
1996
United States................................... 230,430 4,110 408,317
Canada.......................................... 301,914 (30,123) 545,444
Europe.......................................... -- -- --
1995
United States................................... 155,523 20,376 217,850
Canada.......................................... 307,721 (8,093) 513,384
Europe.......................................... -- -- --
</TABLE>
48
<PAGE> 51
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
21. SEGMENTED INFORMATION (in thousands)(Continued)
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131 "Disclosures about Segments of an
Enterprise and Related Information". The Company has reviewed its definition of
segments under the new standard and has determined that in the future, it will
report two business segments, Industrial Services and Metals Services. The
Industrial Services segment provides on-site industrial services, by-products
recovery, environmental services and utilities management. The Metals Services
segment has three primary business operations: ferrous, copper and aluminum
processing and recycling. Segmentation of the business is as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------------------------ ---------------------- ----------------------
INDUSTRIAL METALS INDUSTRIAL METALS INDUSTRIAL METALS
SERVICES SERVICES SERVICES SERVICES SERVICES SERVICES
---------- ---------- ---------- -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Revenues............. $ 637,448 $1,113,482 $256,627 $275,717 $247,378 $215,866
Income (loss) from
operations......... (50,606) (48,083) 6,591 (16,803) 25,315 152
Total assets......... 1,934,924 1,498,364 402,976 434,091 344,472 155,081
Depreciation and
amortization....... 34,745 15,650 14,401 2,019 11,760 834
Capital
expenditures....... 20,417 27,866 16,601 5,869 14,471 4,034
</TABLE>
The following is a reconciliation of income from operations by business
segments to the Company's consolidated income from operations.
<TABLE>
<CAPTION>
1997 1996 1995
--------- -------- --------
<S> <C> <C> <C>
INCOME FROM OPERATIONS:
Industrial Services..................................... $ (50,606) $ 6,591 $ 25,315
Metals Services......................................... (48,083) (16,803) 152
Corporate selling, general and administrative expense... (15,308) (15,801) (13,184)
--------- -------- --------
$(113,997) $(26,013) $ 12,283
========= ======== ========
</TABLE>
49
<PAGE> 52
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
22. UNAUDITED QUARTERLY FINANCIAL DATA (in thousands except per share amounts)
The table below sets forth consolidated operating results by fiscal quarter
for the years ended December 31, 1997 and 1996, with the municipal and
commercial solid waste operations, which were sold in August 1996 shown as
discontinued operations. The quarterly financial statements have been restated
as a result of the special and non-recurring charges described in Note 3.
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
---------- ---------- ---------- ----------
(RESTATED) (RESTATED) (RESTATED) (RESTATED)
<S> <C> <C> <C> <C>
1997
Revenue...................................... $269,601 $353,757 $506,780 $ 620,792
Income from operations....................... 10,825 16,622 39,374 (180,818)
Earnings (loss) from continuing operations... 6,388 7,486 19,463 (137,578)
Discontinued operations...................... -- -- -- --
-------- -------- -------- ---------
Net earnings (loss).......................... 6,388 7,486 19,463 (137,578)
======== ======== ======== =========
Basic earnings per share
Continuing................................. $ 0.09 $ 0.11 $ 0.21 $ (1.16)
Discontinued............................... -- -- -- --
-------- -------- -------- ---------
$ 0.09 $ 0.11 $ 0.21 $ (1.16)
======== ======== ======== =========
Diluted earnings per share
Continuing................................. $ 0.09 $ 0.10 $ 0.21 $ (1.16)
Discontinued............................... -- -- -- --
-------- -------- -------- ---------
$ 0.09 $ 0.10 $ 0.21 $ (1.16)
======== ======== ======== =========
1996
Revenue...................................... $113,376 $123,130 $145,153 $ 150,685
Income from operations....................... 1,304 (992) 11,541 (37,866)
Earnings (loss) from continuing operations... (1,366) (2,224) 7,455 (23,122)
Discontinued operations...................... 463 4,835 (6,014) --
-------- -------- -------- ---------
Net earnings (loss).......................... (903) 2,611 1,441 (23,122)
======== ======== ======== =========
Basic earnings per share
Continuing................................. $ (0.03) $ (0.05) $ 0.14 $ (0.35)
Discontinued............................... 0.01 0.11 (0.11) --
-------- -------- -------- ---------
$ (0.02) $ 0.06 $ 0.03 $ (0.35)
======== ======== ======== =========
Diluted earnings per share
Continuing................................. $ (0.03) $ (0.05) $ 0.14 $ (0.35)
Discontinued............................... 0.01 0.11 (0.11) --
-------- -------- -------- ---------
$ (0.02) $ 0.06 $ 0.03 $ (0.35)
======== ======== ======== =========
</TABLE>
50
<PAGE> 53
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
51
<PAGE> 54
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information under "Management" in the Proxy Statement to be filed
within 120 days of the end of the Company's fiscal year relating to the Annual
General and Special Meeting of Shareholders to be held in June, 1998 is
incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information under "Executive Compensation" in the Proxy Statement to be
filed within 120 days of the end of the Company's fiscal year relating to the
Annual General and Special Meeting of Shareholders to be held in June, 1998 is
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information under "Management -- Stock Ownership of Directors and
Executive Officers" and "-- Stock Ownership of Certain Beneficial Owners" in the
Proxy Statement to be filed within 120 days of the end of the Company's fiscal
year relating to the Annual General and Special Meeting of Shareholders to be
held in June, 1998 is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information under "Certain Relationships and Related Transactions" in
the Proxy Statement to be filed within 120 days of the end of the Company's
fiscal year relating to the Annual General and Special Meeting of Shareholders
to be held in June, 1998 is incorporated herein by reference.
52
<PAGE> 55
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES AND REPORTS ON FORM 8-K
ITEM 14(A)1. LIST OF FINANCIAL STATEMENTS
The following consolidated financial statements of the Company are filed as
part of this Form 10-K.
<TABLE>
<CAPTION>
REPORT NAME PAGE NO.
----------- --------
<S> <C>
Report of Deloitte & Touche, Independent Auditors........... 28
Consolidated Balance Sheets for the fiscal years ended
December 31, 1997 and 1996................................ 29
Consolidated Statements of Earnings for the fiscal years
ended December 31, 1997, 1996 and 1995.................... 30
Consolidated Statements of Retained Earnings (Deficit) for
the fiscal years ended December 31, 1997, 1996 and 1995... 30
Consolidated Statements of Cash Flow for the fiscal years
ended December 31, 1997, 1996 and 1995.................... 31
Notes to the Consolidated Financial Statements.............. 32
</TABLE>
ITEM 14(A)2. FINANCIAL STATEMENT SCHEDULE
The Financial Statement Schedule appears on page 56 of this Form 10-K.
53
<PAGE> 56
ITEM 14(A)3. LIST OF EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER NOTES DESCRIPTION
- ------- ----- -----------
<C> <C> <S>
3.1 Articles of Amalgamation of Lincoln Waste Management Inc.
(previous name of the Registrant) dated April 15, 1991
3.2 Articles of Amendment of the Registrant dated June 26, 1991
3.3 Articles of Amendment of the Registrant dated July 10, 991
3.4 Articles of Amendment of the Registrant dated May 22, 1997
3.5 Bylaws of Lincoln Waste Management Inc. (previous name of
the Registrant) dated August 16, 1990
4.1 Indenture dated as of June 1, 1989, 7% Convertible
Subordinated Debentures due 2014 between Allwaste, Inc. and
Texas Commerce Trust Company of New York
4.2 Specimen of Common Stock Certificate
10.1 1991 Stock Option Plan
10.2 1997 Amended and Restated Stock Option Plan
10.3 Amended and Restated Shareholder Rights Plan Agreement dated
as of May 19, 1995 between Philip Environmental Inc.
(previous name of Registrant) and Montreal Trust Company of
Canada
10.4+ Credit Agreement dated as of August 11, 1997 among Philip
Services Corp., Philip Environmental (Delaware), Inc.,
Canadian Imperial Bank of Commerce, Bankers Trust Company,
Dresdner Bank of Canada, Dresdner Bank AG/New York/New York
Branch), Royal Bank of Canada and the various persons from
time to time subject to the Credit Agreement as Lenders
10.5 Amending Agreement No. 1 to the Credit Agreement dated as of
August 11, 1997 among Philip Services Corp., Philip Services
(Delaware), Inc. and Canadian Imperial Bank of Commerce made
as of October 31, 1997
10.6 Amending Agreement No. 2 to the Credit Agreement dated as of
August 11, 1997 among Philip Services Corp., Philip Services
(Delaware), Inc. and Canadian Imperial Bank of Commerce made
as of February 19, 1998
21 Subsidiaries of the Registrant
27 Financial Data Schedule
</TABLE>
- ---------------
+ incorporated by reference to the exhibits filed with the Company's
Registration Statement on Form S-1
(Registration Statement No. 333-36549)
ITEM 14(B).
Form 8-K dated August 15, 1997 relating to the acquisitions of Allwaste,
Inc. and Serv-Tech, Inc.
Form 8-K dated September 8, 1997 relating to its quarterly report for the
six month period ended June 30, 1997.
Form 8-K dated September 29, 1997 relating to the issuance of Common Shares
to A-C-I Holdings, Inc. pursuant to Regulation S.
Form 8-K dated October 27, 1997 relating to the acquisition of the assets
of Luria Bros.
Form 8-K/A dated December 24, 1997 amending the October 27, 1997 8-K
relating to the Luria Bros. acquisition.
54
<PAGE> 57
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated March 31, 1998 PHILIP SERVICES CORP.
By: /s/ ALLEN FRACASSI
Allen Fracassi
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Registrant in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<C> <S> <C>
/s/ ALLEN FRACASSI President, Chief Executive March 31, 1998
- -------------------------------------------- Office
Allen Fracassi
/s/ MARVIN BOUGHTON Chief Financial Officer and March 31, 1998
- -------------------------------------------- Chief Accounting Officer
Marvin Boughton
/s/ HOWARD L. BECK Chairman and Director March 31, 1998
- --------------------------------------------
Howard L. Beck
/s/ ROY CAIRNS Director March 31, 1998
- --------------------------------------------
Roy Cairns
/s/ PHILIP FRACASSI Director March 31, 1998
- --------------------------------------------
Philip Fracassi
/s/ NORMAN FOSTER Director March 31, 1998
- --------------------------------------------
Norman Foster
/s/ WILLIAM E. HAYNES Director March 31, 1998
- --------------------------------------------
William E. Haynes
/s/ ROBERT L. KNAUSS Director March 31, 1998
- --------------------------------------------
Robert L. Knauss
/s/ FELIX PARDO Director March 31, 1998
- --------------------------------------------
Felix Pardo
/s/ DERRICK ROLFE Director March 31, 1998
- --------------------------------------------
Derrick Rolfe
/s/ HERMAN TURKSTRA Director March 31, 1998
- --------------------------------------------
Herman Turkstra
</TABLE>
55
<PAGE> 58
PHILIP SERVICES CORP.
VALUATION AND QUALIFYING ACCOUNTS SCHEDULE II
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C -- ADDITIONS COLUMN D COLUMN E
-------- ------------ ------------------------- -------------- ------------
BALANCE, CHARGED TO CHARGED TO
BEGINNING OF COSTS AND OTHER BALANCE, END
DESCRIPTION PERIOD EXPENSES ACCOUNTS (1) DEDUCTIONS (2) OF PERIOD
----------- ------------ ---------- ------------ -------------- ------------
<S> <C> <C> <C> <C> <C>
ALLOWANCE FOR DOUBTFUL ACCOUNTS
December 31, 1997................. (5,906,845) (8,235,581) (13,652,894) 6,358,894 (22,436,901)
December 31, 1996................. (4,057,582) (1,947,220) (728,809) 826,767 (5,906,845)
December 31, 1995................. (3,548,511) (1,369,863) -- 860,792 (4,057,582)
</TABLE>
- ---------------
(1) Opening balances in companies acquired in the year
(2) Write-off of uncollectible accounts
56
<PAGE> 59
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <S> <C>
3.1 Articles of Amalgamation of Lincoln Waste Management Inc.
(previous name of the Registrant) dated April 15, 1991......
3.2 Articles of Amendment of the Registrant dated June 26,
1991........................................................
3.3 Articles of Amendment of the Registrant dated July 10,
1991........................................................
3.4 Articles of Amendment of the Registrant dated May 22,
1997........................................................
3.5 Bylaws of Lincoln Waste Management Inc. (previous name of
the Registrant) dated August 16, 1990.......................
4.1 Indenture dated as of June 1, 1989, 7% Convertible
Subordinated Debentures due 2014 between Allwaste, Inc. and
Texas Commerce Trust Company of New York....................
4.2 Specimen of Common Stock Certificate........................
10.1 1991 Stock Option Plan......................................
10.2 1997 Amended and Restated Stock Option Plan.................
10.3 Amended and Restated Shareholder Rights Plan Agreement dated
as of May 19, 1995 between Philip Environmental Inc.
(previous name of Registrant) and Montreal Trust Company of
Canada......................................................
10.4+ Credit Agreement dated as of August 11, 1997 among Philip
Services Corp., Philip Environmental (Delaware), Inc.,
Canadian Imperial Bank of Commerce, Bankers Trust Company,
Dresdner Bank of Canada, Dresdner Bank AG/New York/New York
Branch), Royal Bank of Canada and the various persons from
time to time subject to the Credit Agreement as Lenders.....
10.5 Amending Agreement No. 1 to the Credit Agreement dated as of
August 11, 1997 among Philip Services Corp., Philip Services
(Delaware), Inc. and Canadian Imperial Bank of Commerce made
as of October 31, 1997......................................
10.6 Amending Agreement No. 2 to the Credit Agreement dated as of
August 11, 1997 among Philip Services Corp., Philip Services
(Delaware), Inc. and Canadian Imperial Bank of Commerce made
as of February 19, 1998.....................................
21 Subsidiaries of the Registrant..............................
27 Financial Data Schedule.....................................
</TABLE>
- ---------------
+ incorporated by reference to the exhibits filed with the Company's
Registration Statement on Form S-1
(Registration Statement No. 333-36549)
57
<PAGE> 1
EXHIBIT 3.1
For Ministry Use Only Ontario Corporation Number
A l'usage exclusif du ministere Numero de la compagnie en Ontario
[LOGO] Ministry of Minstere de 937896
Consumer and
Commercial la Consommation
Ontario Relations et du Commerce
CORRECTED CERTIFICATE CERTIFICAT RECTIFIE
This is a corrected Le present certificat est
certificate endorsed rectifie et signe con-
pursuant to Section 273 formement a l'article 273
of the Business de la loi de 1982
Corporations Act, 1982 sur les compagnies.
and effective on Il entre en vigueur le
April 15 Avril 1991
/s/
Director Le Directeur
Companies Branch Direction des compagnies
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Trans Line Comp Method
Code No. Stat. Type Incorp. Share
A O O A 3 S
18 20 28 29 30 31
Notice
Req'd Jurisdiction
N ONTARIO A
32 33 47 57
___________________________________________________________________________________________________________________________________
</TABLE>
ARTICLES OF AMALGAMATION
STATUTS DE FUSION
<TABLE>
<S> <C> <C>
Form 4
Business 1. The name of the amalgamated corporation is: Denomination sociale de la compagnie issue de la fusion:
Corporations
Act, 1982 LINCOLN WASTE MANAGEMENT INC.
_______________________________________________________________________________________________________________
Formule _______________________________________________________________________________________________________________
numero 4
Loi de 1982 _______________________________________________________________________________________________________________
sur les
compagnies _______________________________________________________________________________________________________________
2. The address of the registered office is: Adresse du siege social:
Suite 1910, 7 King Street East
____________________________________________________________________________________________________________________
(Street & Number or R.R. Number & if Multi-Office Building give Room No.)
(Rue et numero, ou numero de la R.R. et s'il s'agit d'un edifice a bureaux, numero du bureau)
Toronto, Ontario M 5 C 1 A 2
____________________________________________________________________________________________________________________
(Name of Municipality or Post Office) (Postal Code)
(Nom de la municipalite ou du bureau de poste) (Code Postal)
City of Toronto Municipality of Metropolitan Toronto
_______________________________________________ in the ________________________________________________________
(Name of Municipality, Geographical Township) dans le/la (County, District, Regional Municipality)
(Nom de la municipalite, du canton) (Comte, district, municipalite regionale)
3. Number (or minimum and maximum number) Nombre (ou nombres minimal et maximal)
of directors is: d'administrateurs:
Minimum of three (3), Maximum of twelve (12).
4. The director(s) is/are: Administrateur(s):
First name, initials and surname Resident address, giving Street & No. or Resident
Prenom, initiales et nom de famille R.R. No., Municipality and Postal Code Canadian
Adresse personnelle, y compris la rue et le State
numero, le numero de la R.R. ou le nom de la Yes or No
municipalite et le code postal Resident
Canadian
Oui/Non
____________________________________________________________________________________________________________________
Kenneth Fowler 364 Martindale Road Yes
St. Catharines, Ontario L2R 6P9
Jack Kiervin 216 Dunwoody Drive Yes
Oakville, Ontario L6J 4G6
Roy Cairns 25-5 Carn Castle Gate Yes
St. Catharines, Ontario L2N 5V4
Howard Beck 3 Ormsby Crescent Yes
Toronto, Ontario M5P 2V2
</TABLE>
<PAGE> 2
<TABLE>
<S> <C> <C>
4. The director(s) is/are: Administrateur(s):
First name, initials and surname Resident address, giving Street & No. or Resident
Prenom, initiales et nom de famille R.R. No., Municipality and Postal Code Canadian
Adresse personnelle, y compris la rue et le State
numero, le numero de la R.R. ou le nom de la Yes or No
municipalite et le code postal Resident
Canadian
Oui/Non
____________________________________________________________________________________________________________________
Allen Fracassi 80 Mountain Brow Yes
Hamilton, Ontario L8T 1A4
Philip Fracassi 149 Hanover Place Yes
Hamilton, Ontario L8K 6B4
Derek Rolfe 151 Silverbirch Avenues Yes
Toronto, Ontario M4E 3L3
William G. Townsend R.R. #5 Yes
Milton, Ontario L9T 2X9
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C> <C> <C> <C>
5. A) The amalgamation agreement has been duly A) Les actionnaires de chaque compagnie
adopted by the shareholders of each of the qui fusionne ont dument adopte la
amalgamating corporations as required by [ ] convention de fusion conformement
subsection 175(4) of the Business au paragraphe 175(4) de la Loi sur
Corporations Act on the date set out below. les compagnies a la date mentionnee
ci-dessous.
Check Cocher
A or B A ou B
B) The amalgamation has been approved by the [ X ] B) Les administrateurs de chaque compagnie qui
directors of each amalgamating corporation fusionne ont approuve la fusion par voie de
by a resolution as required by section 176 resolution conformement a l'article 176 de
of the Business Corporations Act on the date la Loi sur les compagnies a la date mentionnee
set out below. ci-dessous. Les statuts de fusion reprennent
essentiellement les dispositions des statuts
The articles of amalgamation in substance constitutifs de
contain the provisions of the articles of
incorporation of
LINCOLN WASTE MANAGEMENT INC.
________________________________________________________________________________________________________________________
and are more particularly set out in these articles. et sont enonces textuellement aux presents statuts.
Names of amalgamating Ontario Corporation Number Date of Adoption/Approval
corporations Numero de la compagnie en Ontario Date d'adoption ou d'approbation
Denomination sociale des
compagnies qui fusionnent
_________________________________________________________________________________________________________________________
Lincoln Waste
Management Inc. 907720 March 27, 1991
603296 Ontario Inc. 603296 March 28, 1991
</TABLE>
<PAGE> 4
- 3 -
6. Restrictions, if any, Limites, s'il y a lieu,
on business the imposees aux activites
corporation may carry commerciales ou aux
on or on powers the pouvoirs de la compagnie.
corporation exercise.
No restrictions.
7. The classes and any maximum Categories et nombre
number of shares that the maximal, s'il y a lieu,
corporation is authorized d'actions que la compagnie
to issue. est autorisee a emettre:
An unlimited number of common shares and an unlimited number of
special shares.
8. Rights, privileges, Droits, privileges,
restrictions and conditions restrictions et conditions,
(if any) attaching to each s'il y a lieu, rattaches a
class of shares and chaque categorie d'actions
directors authority with et pouvoirs des
respect to any class of administrateurs relatifs a
shares which is to be issued chaque categorie d'actions
in series: qui peut etre emise en serie:
The special shares and the common shares of the Corporation shall
have attached thereto the respective rights, privileges, restrictions
and conditions hereinafter set forth, that is to say:
(a) The holders of the special shares shall not, as such, be entitled
to receive notice of or to attend at any meetings of the
shareholders of the Corporation and shall not be entitled to vote
at any such meetings (except where the holders of a specified
class of shares are entitled to vote separately as a class as
provided in the Business Corporations Act, 1982 (Ontario) (the
"Act")). Notwithstanding the aforesaid restrictions, conditions
or prohibitions on the right to vote, the holders of the special
shares are entitled to notice of meetings of shareholders called
for the purpose of authorizing the dissolution of the Corporation
or the sale, lease or exchange of all or substantially all the
property of the Corporation other than in the ordinary course of
business of the Corporation under subsection 183(3) of the Act,
as such subsection may be amended from time to time.
<PAGE> 5
- 4 -
(b) The holders of the special shares shall in each fiscal year of
the Corporation in the discretion of the directors, but always in
preference and priority to any payment of dividends on the common
shares for such fiscal year, be entitled to non-cumulative
dividends in the amount of 8% per annum of the redemption price;
if in any fiscal year, after providing for the full dividend on
the special shares, there shall remain any profits or surplus
available for dividends, such profits or surplus, or any part
thereof, may, in the discretion of the directors, be applied to
dividends on the common shares; the holders of the special shares
shall not be entitled to any dividends other than or in excess of
the non-cumulative dividends in the amount hereinbefore provided
for.
(c) The Corporation may, at its option, redeem all or from time to
time any part of the outstanding special shares on payment to the
holders thereof, for each share to be redeemed, of the sum of
$1.00 per share, together with all dividends declared thereon and
unpaid. Before redeeming any special shares the Corporation shall
mail to each person who, at the date of such mailing, is a
registered holder of shares to be redeemed, notice of the
intention of the Corporation to redeem such shares held by such
registered holder; such notice shall be mailed by ordinary
prepaid post addressed to the last address of such holder as it
appears on the records of the Corporation or, in the event of the
address of any such holder not appearing on the records of the
Corporation, then to the last known address of such holder, at
least 30 days before the date specified for redemption; such
notice shall set out the date on which redemption is to take
place and, if part only of the shares held by the person to whom
it is addressed is to be redeemed, the number thereof so to be
redeemed; on or after the date so specified for redemption the
Corporation shall pay or cause to be paid the redemption price to
the registered holders of the shares to be redeemed, on
presentation and surrender of the certificates for the shares so
called for redemption at such place or places as may be specified
in such notice, and the certificates for such shares shall
thereupon be cancelled, and the shares
<PAGE> 6
- 5 -
represented thereby shall thereupon be redeemed. In case a part
only of the outstanding special shares is at any time to be
redeemed, the shares to be redeemed shall be selected, at the
option of the directors, either by lot in such manner as the
directors in their sole discretion shall determine or as nearly
as may be pro rata (disregarding fractions) according to the
number of special shares held by each holder. In case a part
only of the special shares represented by any certificate shall
be redeemed, a new certificate for the balance shall be issued
at the expense of the Corporation. From and after the date
specified for redemption in such notice, the holders of the
shares called for redemption shall cease to be entitled to
dividends and shall not be entitled to any rights in respect
thereof, except to receive the redemption price, unless payment
of the redemption price shall not be made by the Corporation in
accordance with the foregoing provisions, in which case the
rights of the holders of such shares shall remain unimpaired. On
or before the date specified for redemption the Corporation
shall have the right to deposit the redemption price of the
shares called for redemption in a special account with any
chartered bank or trust company in Canada named in the notice of
redemption, such redemption price to be paid to or to the order
of the respective holders of such shares called for redemption
upon presentation and surrender of the certificates representing
the same and, upon such deposit being made, the shares in
respect whereof such deposit shall have been made shall be
redeemed and the rights of the several holders thereof, after
such deposit, shall be limited to receiving, out of the moneys so
deposited, without interest, the redemption price applicable to
their respective shares against presentation and surrender of
the certificates representing such shares.
(d) (i) Subject to paragraph 8(d)(ii) below, a holder of special
shares shall be entitled to require the Corporation to
redeem at any time and from time to time after the date of
issue of any special shares, upon giving notice as
hereinafter provided, all or any number of the special
shares registered in the name of such holder on the books of
the
<PAGE> 7
- 6 -
Corporation at a redemption price per share of $1.00
together with all dividends declared thereon and unpaid. A
holder of special shares exercising his option to have the
Corporation redeem, shall give notice to the Corporation,
which notice shall set out the date on which the Corporation
is to redeem, which date shall not be less than 10 days nor
more than 30 days from the date of mailing of the notice,
and if the holder desires to have less than all of the
special shares registered in his name redeemed by the
Corporation, the number of the holder's shares to be
redeemed. The date on which the redemption at the option of
the holder is to occur is hereafter referred to as the
"option redemption date". The holder of any special shares
may, with the consent of the Corporation, revoke such notice
prior to the option redemption date. Upon delivery to the
Corporation of a share certificate or certificates
representing the special shares which the holder desires to
have the Corporation redeem, the Corporation shall, on the
option redemption date, redeem such special shares by paying
to the holder the redemption price therefor. Upon payment of
the redemption price of the special shares to be redeemed by
the Corporation, the holders thereof shall cease to be
entitled to dividends or to exercise any rights of holders
in respect thereof.
(ii) If the redemption by the Corporation on any option
redemption date of all of the special shares to be redeemed
on such date would be contrary to any provisions of the Act
or any other applicable law, the Corporation shall be
obligated to redeem only the maximum number of special
shares which the Corporation determines it is then permitted
to redeem, such redemptions to be made pro rata
(disregarding fractions of shares) according to the number
of special shares required by each such holder to be
redeemed by the Corporation and the Corporation shall issue
new certificates representing the special shares not
redeemed by the Corporation; the Corporation shall, before
redeeming any
<PAGE> 8
- 7 -
other special shares, redeem in the manner contemplated by
paragraph 8(c) on the 1st day of each month thereafter the
maximum number of such special shares as would not then be
contrary to any provisions of the Act or any other
applicable law, until all of such shares have been redeemed,
provided that the Corporation shall be under no obligation
to give any notice to the holders of the special shares in
respect of such redemption or redemptions as provided for in
paragraph 8(c).
(e) The Corporation may purchase for cancellation the whole or any
part of the special shares at the lowest price at which, in the
opinion of the directors, such shares are obtainable, but not
exceeding the sum of $1.00 per share, together with all dividends
declared thereon and unpaid.
(f) In the event of the liquidation, dissolution or winding-up of the
Corporation, whether voluntary or involuntary, the holders of the
special shares shall be entitled to receive, before any
distribution of any part of the assets of the Corporation among
the holders of any other shares, for each special share, an
amount of $1.00 per share and any dividends declared thereon and
unpaid and no more.
(g) The holders of the common shares shall be entitled to receive
notice of and to attend and vote at all meetings of the
shareholders of the Corporation (except where the holders of a
specified class are entitled to vote separately as a class as
provided in the Act) and each common share shall confer the right
to 1 vote in person or by proxy at all meetings of shareholders
of the Corporation.
(h) Subject to the prior rights of the holders of the special
shares, in the event of the liquidation, dissolution or
winding-up of the Corporation, whether voluntary or involuntary,
the holders of the common shares shall be entitled to receive the
remaining property of the Corporation.
9. The issue, transfer or L'emission, le transfert ou
ownership of shares is/is la propriete d'actions est/
not restricted and the n'est pas restreinte. Les
<PAGE> 9
- 8 -
restrictions (if any) are restrictions, s'il y a lieu,
as follows: sont les suivantes:
No restrictions.
10. Other provisions, (if any): Autres dispositions, s'il
y a lieu.
(a) Without in any way limiting the powers conferred upon the Corporation
and its directors by the Business Corporations Act, 1982 (Ontario), or
any successor statute, the board of directors may from time to time,
in such amounts and on such terms as it deems expedient charge,
mortgage, hypothecate or pledge all or any of the currently owned or
subsequently acquired real or personal, movable or immovable, property
of the Corporation, including book debts, rights, powers, franchises
and undertaking, to secure any debt obligations or any money borrowed,
or other debt or liability of the Corporation.
The board of directors may from time to time delegate to such one or
more of the directors and officers of the Corporation as may be
designated by the board all or any of the powers conferred on the
board above to such extent and in such manner as the board shall
determine at the time of each such delegation.
11. The statements required by Les declarations exigees aux
subsection 177(2) of the termes du paragraphe 177(2)
Business Corporations Act de la Loi sur les compagnies
are attached as Schedule "A". constituent l'annexe "A".
12. A copy of the amalgamation Une copie de la convention
agreement or directors de fusion ou les resolutions
resolutions (as the case may des administrateurs (selon
be) is/are attached as le cas) constitute(nt)
Schedule "B". l'annexe "B".
<PAGE> 10
- 9 -
These articles are signed in Les presents statuts sont
duplicate. signes en double exemplaire.
______________________________________________________________________
Names of the amalgamating Denomination sociale des
corporations and signatures compagnies qui fusionnent,
and descriptions of office of signature et fonction de
their proper officers. leurs dirigeants regulierement
designes.
LINCOLN WASTE
MANAGEMENT INC.
Per: /s/ ALLEN FRACASSI
__________________________
Allen Fracassi
President
Per: /s/ R. JON WILLIAMS
__________________________
R. Jon Williams
Secretary-Treasurer
603296 ONTARIO INC.
Per: /s/ R. JON WILLIAMS
__________________________
R. Jon Williams
President
<PAGE> 11
SCHEDULE "A"
STATEMENT OF DIRECTOR OR OFFICER
PURSUANT TO SUBSECTION 177(2) OF
THE BUSINESS CORPORATIONS ACT, 1982 (ONTARIO)
I, R. Jon Williams, of the City of Toronto, in the Province of Ontario,
hereby certify and state as follows:
1. This Statement is made pursuant to subsection 177(2) of the Business
Corporations Act, 1982 (Ontario) (the "Act");
2. I am the Secretary-Treasurer and a director of Lincoln Waste Management
Inc. and as such have knowledge of its affairs.
3. I am the Secretary and a director of 603296 Ontario Inc. and as such have
knowledge of its affairs.
4. I have conducted such examinations of the books and records of Lincoln
Waste Management Inc. and 603296 Ontario Inc. (the "Amalgamating
Corporations") as are necessary to enable me to make the statements
hereinafter set forth.
5. There are reasonable grounds for believing that:
(a) each of the Amalgamating Corporations is and Lincoln Waste Management
Inc., the corporation continuing from the amalgamation of the
Amalgamating Corporations (the "Corporation"), will be able to pay its
liabilities as they become due, and
(b) the realizable value of the Corporation's assets will not be less than
the aggregate of its liabilities and stated capital of all classes.
6. There are reasonable grounds for believing that no creditor of either of
the Amalgamating Corporations will be prejudiced by the amalgamation.
<PAGE> 12
- 2 -
7. Based on the statements made above, neither of the Amalgamating
Corporations is obligated to give notice to any creditor.
DATED at Toronto, this 12th day of April, 1991.
/s/ R. JON WILLIAMS
_____________________
R. Jon Williams
Secretary-Treasurer
<PAGE> 13
SCHEDULE "B"
LINCOLN WASTE MANAGEMENT INC.
(the "Corporation")
"WHEREAS the Corporation has decided to amalgamate with its wholly-owned
subsidiary, 603296 Ontario Inc., pursuant to subsection 176(1) of the Business
Corporations Act, 1982 (Ontario):
NOW THEREFORE BE IT RESOLVED THAT:
1. The amalgamation of the Corporation and 603296 Ontario Inc. under the
Business Corporations Act, 1982 (Ontario) pursuant to subsection 176(1)
thereof, be and the same is hereby approved;
2. Upon the endorsement of a Certificate of Amalgamation pursuant to
subsection 177(4) of the Business Corporations Act, 1982 (Ontario), none of
the shares of the capital of the Corporation shall be cancelled in
connection with the amalgamation;
3. The articles of amalgamation of the amalgamated corporation shall be the
same as the articles of incorporation, as amended, of the Corporation;
4. No securities shall be issued and no assets shall be distributed by the
amalgamated corporation in connection with the amalgamation; and
5. Any officer or director of the Corporation be and is hereby authorized to
do all things and execute all instruments and documents necessary or
desirable to carry out and give effect to the foregoing."
CERTIFIED to be a true and accurate copy of a resolution of the directors of the
Corporation, passed by or consented to in accordance with the provisions of the
Business Corporations Act, 1982 (Ontario), on the 27th day of March, 1991, which
resolution is still in full force and effect unamended, as of the date hereof.
DATED this 12th day of April, 1991.
/s/ R. JON WILLIAMS
_________________________________c/s
R. Jon Williams
Secretary
<PAGE> 14
SCHEDULE "B"
603296 ONTARIO INC.
(the "Corporation")
"WHEREAS the Corporation is a wholly-owned subsidiary of and has agreed to
amalgamate with Lincoln Waste Management Inc. pursuant to subsection 176(1) of
the Business Corporations Act, 1982 (Ontario);
NOW THEREFORE BE IT RESOLVED THAT:
1. The amalgamation of the Corporation and Lincoln Waste Management Inc.
under the Business Corporations Act, 1982 (Ontario) pursuant to subsection
176(1) thereof, be and the same is hereby approved;
2. Subject to the endorsement of a Certificate of Amalgamation pursuant to
subsection 177(4) of the Business Corporations Act, 1982 (Ontario), and
without affecting the validity of the incorporation and existence of the
Corporation under its articles of incorporation and of any act thereunder,
all shares of the capital of the Corporation, including all shares which
have been issued and are outstanding at the date hereof, be and the same
are hereby cancelled without any repayment of capital in respect thereof;
3. The articles of amalgamation of the amalgamated corporation shall be the
same as the articles of incorporation, as amended, of Lincoln Waste
Management Inc.;
4. No securities shall be issued and no assets shall be distributed by the
amalgamated corporation in connection with the amalgamation; and
5. Any officer or director of the Corporation is hereby authorized to do all
things and execute all
<PAGE> 15
- 2 -
instruments and documents necessary or desirable to carry out and give
effect to the foregoing."
CERTIFIED to be a true and accurate copy of a resolution of the directors of the
Corporation, passed by or consented to in accordance with the provisions of the
Business Corporations Act, 1982 (Ontario), on the 28th day of March, 1991, which
resolution is still in full force and effect unamended, as of the date hereof.
DATED this 12th day of April, 1991.
/s/ R. JON WILLIAMS
_____________________c/s
R. Jon Williams
Secretary
<PAGE> 1
EXHIBIT 3.2
For Ministry Use Only Ontario Corporation Number
A l'usage exclusif du ministere Numero de la compagnie en Ontario
[LOGO] Ministry of Ministere de 937896
Consumer and
Commercial la Consommation
Relations et du Commerce
CERTIFICATE CERTIFICAT
This is to certify that Ceci certifie que les
these articles are cresents statuts entrent
effective on en vigueur le
June 26 Juin, 1991
/s/
Director Directeur
Business Corporations Act Loi ce sur les compagnies
Trans
Code
C
18
ARTICLES OF AMENDMENT
STATUTS DE MODIFICATION
<TABLE>
<S> <C> <C>
Form 3
Business 1. The present name of the corporation is: Denomination sociale actuelle de la compagnie:
Corporations
Act, LINCOLN WASTE MANAGEMENT INC.
1982 _____________________________________________________________________________________________________
Formule 2. The name of the corporation is changed to Nouvelle denomination sociale de la compagnie
numero 3 (if applicable): (s'il y a lieu):
Loi de 1982
sur les N/A
compagnies _____________________________________________________________________________________________________
3. Date of incorporation/amalgamation: Date de la constitution ou de la fusion:
15 April 1991
_____________________________________________________________________________________________________
(Day, Month, Year)
(jour, mois, annee)
4. The articles of the corporation are amended Les statuts de la compagnie sont modifies de
as follows: la facon suivante:
To change the number of shares that the
Corporation is authorized to issued by:
Deleting the special shares from the
Corporation's authorized capital.
</TABLE>
<PAGE> 2
<TABLE>
<C> <C>
5. The amendment has been duly authorized as La modification a ete dument autorisee conformement
required by Sections 167 and 169 (as applicable) a l'article 167 et, s'il y a lieu, a l'article 169
of the Business Corporations Act. de la Loi sur les compagnies.
6. The resolution authorizing the amendment was Les actionnaires ou les administrateurs (le cas
approved by the shareholders/directors (as echeant) de la compagnie ont approuve la resolution
applicable) of the corporation on autorisant la modification
25 June 1991
__________________________________________________________________________________________________________
(Day, Month, Year)
(jour, mois, annee)
These articles are signed in duplicate. Les presents statuts sont signes en double exemplaire.
LINCOLN WASTE MANAGEMENT INC.
___________________________________________________
(Name of Corporation)
(Denomination sociale de la compagnie)
/s/ R. Jon Williams Secretary
By/Par: ___________________________________________________
(Signature) (Description of Office)
(Signature) (Fonction)
</TABLE>
<PAGE> 1
EXHIBIT 3.3
For Ministry Use Only Ontario Corporation Number
A l'usage exclusif du ministere Numero de la compagnie en Ontario
[LOGO] Ministry of Ministere de 937896
Consumer and
Commercial la Consommation
Relations et du Commerce
CERTIFICATE CERTIFICAT
This is to certify that Ceci certifie que les
these articles are cresents statuts entrent
effective on en vigueur le
July 10 Juillet, 1991
/s/
Director Directeur
Business Corporations Act Loi ce sur les compagnies
Trans
Code
C
18
ARTICLES OF AMENDMENT
STATUTS DE MODIFICATION
<TABLE>
<S> <C> <C>
Form 3
Business 1. The present name of the corporation is: Denomination sociale actuelle de la compagnie:
Corporations
Act, LINCOLN WASTE MANAGEMENT INC.
1982 _____________________________________________________________________________________________________
Formule 2. The name of the corporation is changed to Nouvelle denomination sociale de la compagnie
numero 3 (if applicable): (s'il y a lieu):
Loi de 1982
sur les PHILIP ENVIRONMENTAL INC.
compagnies _____________________________________________________________________________________________________
3. Date of amalgamation: Date de la constitution ou de la fusion:
15 April 1991
_____________________________________________________________________________________________________
(Day, Month, Year)
(jour, mois, annee)
4. The articles of the corporation are amended Les statuts de la compagnie sont modifies de la
as follows: facon suivante:
To change the name of the Corporation to:
PHILIP ENVIRONMENTAL INC.
DYE & DURHAM
FORM 3 (B.C.A.)
</TABLE>
<PAGE> 2
<TABLE>
<C> <C>
5. The amendment has been duly authorized as La modification a ete dument autorisee conformement
required by Sections 167 and 169 (as applicable) a l'article 167 et, s'il y a lieu, a l'article 169
of the Business Corporations Act. de la Loi sur les compagnies.
6. The resolution authorizing the amendment was Les actionnaires ou les administrateurs (le cas
approved by the shareholders (as applicable) echeant) de la compagnie ont approuve la resolution
of the corporation on autorisant la modification
25 June 1991
__________________________________________________________________________________________________________
(Day, Month, Year)
(jour, mois, annee)
These articles are signed in duplicate. Les presents statuts sont signes en double exemplaire.
LINCOLN WASTE MANAGEMENT INC.
___________________________________________________
(Name of Corporation)
(Denomination sociale de la compagnie)
/s/ R. Jon Williams Secretary
By/Par: ___________________________________________________
(Signature) (Description of Office)
(Signature) (Fonction)
</TABLE>
<PAGE> 1
EXHIBIT 3.4
For Ministry Use Only Ontario Corporation Number
A l'usage exclusif du ministere Numero de la compagnie en Ontario
[LOGO] Ministry of Minstere de 937896
Consumer and
Commercial la Consommation
Relations et du Commerce
CERTIFICATE CERTIFICAT
This is to certify that Ceci certifie que les
these articles are presents statuts entrent Trans
effective on en vigueur le Code
C
18
May 22 Mai, 1997
/s/ --------------------------------
Director Directeur
Business Corporations Act Loi ce sur les compagnies
ARTICLES OF AMENDMENT
STATUTS DE MODIFICATION
<TABLE>
<S> <C> <C>
Form 3
Business 1. The present name of the corporation is: Denomination sociale actuelle de la compagnie:
Corporations
Act PHILIP ENVIRONMENTAL INC.
_____________________________________________________________________________________________________
Formule
numero 3 2. The name of the corporation is changed to Nouvelle denomination sociale de la compagnie
Loi (if applicable): (s'il y a lieu):
sur les
compagnies PHILIP SERVICES CORP.
_____________________________________________________________________________________________________
3. Date of incorporation/amalgamation: Date de la constitution ou de la fusion:
15 APRIL 1991
_____________________________________________________________________________________________________
(Day, Month, Year)
(jour, mois, annee)
4. The articles of the corporation are amended Les statuts de la compagnie sont modifies de la
as follows: facon suivante:
TO CHANGE THE NAME OF THE CORPORATION TO:
PHILIP SERVICES CORP.
07119 (01/92)
</TABLE>
<PAGE> 2
<TABLE>
<C> <C>
5. The amendment has been duly authorized as La modification a ete dument autorisee conformement
required by Sections 168 & 170 (as applicable) a l'article 168 et, s'il y a lieu, a l'article 170
of the Business Corporations Act. de la Loi sur les compagnies.
6. The resolution authorizing the amendment was Les actionnaires ou les administrateurs (le cas
approved by the shareholders/directors (as echeant) de la compagnie ont approuve la resolution
applicable) of the corporation on autorisant la modification
21 MAY 1997
__________________________________________________________________________________________________________
(Day, Month, Year)
(jour, mois, annee)
These articles are signed in duplicate. Les presents statuts sont signes en double exemplaire.
PHILIP ENVIRONMENTAL INC.
___________________________________________________
(Name of Corporation)
(Denomination sociale de la compagnie)
/s/ Colin Soule SECRETARY
By/Par: ___________________________________________________
(Signature) (Description of Office)
(Signature) (Fonction)
</TABLE>
<PAGE> 1
EXHIBIT 3.5
BY-LAW NO. 1
A by-law relating generally to the transaction of the business and affairs of
LINCOLN WASTE MANAGEMENT INC.
CONTENTS
ARTICLE ONE -- INTERPRETATION
ARTICLE TWO -- BUSINESS OF THE CORPORATION
ARTICLE THREE -- BORROWING AND SECURITIES
ARTICLE FOUR -- DIRECTORS
ARTICLE FIVE -- COMMITTEES
ARTICLE SIX -- OFFICERS
ARTICLE SEVEN -- PROTECTION OF DIRECTORS, OFFICERS, AND OTHERS
ARTICLE EIGHT -- SHARES
ARTICLE NINE -- DIVIDENDS AND RIGHTS
ARTICLE TEN -- MEETINGS OF SHAREHOLDERS
ARTICLE ELEVEN -- NOTICES
ARTICLE TWELVE -- EFFECTIVE DATE
BE IT ENACTED as a by-law of the Corporation as follows:
<PAGE> 2
ARTICLE ONE
INTERPRETATION
1.01 DEFINITIONS -- In the by-laws of the Corporation, unless the context
otherwise requires:
"Act" means the Business Corporation Act, 1982 (Ontario) and any
statute that may be substituted therefor, as from time to time
amended;
"appoint" includes "elect" and vice versa;
"articles" means the articles on which is endorsed the certificate of
incorporation of the Corporation as from time to time amended or
restated;
"board" means the board of directors of the Corporation and "director"
means a member of the board;
"by-laws" means this by-law and all other by-laws of the Corporation
from time to time in force and effect;
"cheque" includes a draft;
"Corporation" means the corporation incorporated under the Act on
August 10, 1990 by the said certificate endorsed on the articles and
named Lincoln Waste Management Inc.;
"day" means a clear day and a period of days shall be deemed to
commence the day following the event that began the period and shall
be deemed to terminate at midnight of the last day of the period
except that if the last day of the period falls on a Sunday or holiday
the period shall terminate at midnight of the day next following that
is not a Sunday or holiday;
"meeting of shareholders" includes an annual meeting of shareholders
and a special meeting of shareholders;
"non-business day" means Saturday, Sunday and any other day that is a
holiday as defined in the Interpretation Act (Ontario) as from time to
time amended;
<PAGE> 3
"recorded address" means in the case of a shareholder his address as
recorded in the securities register; and in the case of joint
shareholders the address appearing in the securities register in
respect of such joint holding or the first address so appearing if
there are more than one; in the case of an officer, auditor or member
of a committee of the board, his latest address as recorded in the
records of the Corporation; and, in the case of a director, his latest
address as recorded in the records of the Corporation or in the most
recent notice filed under the Corporations Information Act, whichever
is the more current;
"resident Canadian" means an individual who is
(a) a Canadian citizen ordinarily resident in Canada;
(b) a Canadian citizen not ordinarily resident in Canada who is a
member of a class of persons prescribed by the regulations under
the Act, or
(c) a permanent resident within the meaning of the Immigration Act,
1976 (Canada) and ordinarily resident in Canada, except a
permanent resident who has been ordinarily resident in Canada
for more than one year after the time at which he first became
eligible to apply for Canadian citizenship;
"signing officer" means, in relation to any instrument, any person
authorized to sign the same on behalf of the Corporation by or
pursuant to section 2.04;
"special meeting of shareholders" includes a meeting of any class or
classes of shareholders and a special meeting of all shareholders
entitled to vote at an annual meeting of shareholders;
"unanimous shareholder agreement" means a written agreement among all
the shareholders of the Corporation or among all such shareholders and
one or more persons who are not shareholders, or a written declaration
of the beneficial owner of all of the issued shares of the
Corporation, that restricts, in whole or in part, the powers of the
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directors to manage or supervise the management of the business and
affairs of the Corporation, as from time to time amended;
Save as aforesaid, words and expressions defined in the Act have the
same meanings when used herein. Words importing the singular number
include the plural and vice versa; words importing gender include the
masculine, feminine and neuter genders; and words importing a person
include an individual, sole proprietorship, partnership,
unincorporated association, unincorporated syndicate, unincorporated
organization, trust, body corporate, and a natural person in his
capacity as trustee, executor, administrator, or other legal
representative.
WHERE ANY PROVISION IN THESE BY-LAWS CONFLICTS WITH ANY PROVISION OF A
UNANIMOUS SHAREHOLDER AGREEMENT THE PROVISION OF SUCH UNANIMOUS
SHAREHOLDER AGREEMENT SHALL GOVERN.
ARTICLE TWO
BUSINESS OF THE CORPORATION
2.01 REGISTERED OFFICE -- The registered office of the Corporation shall be
in the municipality or geographic township within Ontario initially specified in
the articles and thereafter as the shareholders may from time to time determine
by special resolution and at such location therein as the board may from time to
time determine by resolution.
2.02 CORPORATE SEAL -- Until changed by the board, the corporate seal of
the Corporation shall be in the form impressed hereon.
2.03 FINANCIAL YEAR -- Until changed by the board, the financial year of
the Corporation shall end on the last day of December in each year.
2.04 EXECUTION OF INSTRUMENTS -- Deeds, transfers, assignments, contracts,
obligations, certificates and other instruments may be signed on behalf of the
Corporation by two persons, one of whom holds the office of chairman of the
board, managing director, president, vice-president or director and the other of
whom holds one of the said offices or the office of secretary, treasurer,
assistant secretary
<PAGE> 5
or assistant treasurer or any other office created by by-law or by resolution of
the board. In addition, the board may from time to time direct the manner in
which and the person or persons by whom any particular instrument or class of
instruments may or shall be signed. Any signing officer may affix the corporate
seal to any instrument requiring the same.
2.05 BANKING ARRANGEMENTS -- The banking business of the Corporation
including, without limitation, the borrowing of money and the giving of security
therefor, shall be transacted with such banks, trust companies or other bodies
corporate or organizations as may from time to time be designated by or under
the authority of the board. Such banking business or any part thereof shall be
transacted under such agreements, instructions and delegations of powers as the
board may from time to time prescribe or authorize.
2.06 VOTING RIGHTS IN OTHER BODIES CORPORATE -- The signing officers of the
Corporation may execute and deliver proxies and arrange for the issuance of
voting certificates or other evidence of the right to exercise the voting rights
attaching to any securities held by the Corporation. Such instruments,
certificates or other evidence shall be in favour of such person or persons as
may be determined by the officers executing such proxies or arranging for the
issuance of voting certificates or such other evidence of the right to exercise
such voting rights. In addition, the board may from time to time direct the
manner in which and the person or persons by whom any particular voting rights
or class of voting rights may or shall be exercised.
2.07 DIVISIONS -- The board may cause the business and operations of the
Corporation or any part thereof to be divided or segregated into one or more
divisions upon such basis, including without limitation, character or type of
businesses or operations, geographical territories, product lines or goods or
services as the board may consider appropriate in each case. From time to time
the board or, if authorized by the board, the chief executive officer may
authorize, upon such basis as may be considered appropriate in each case:
(a) SUB-DIVISION AND CONSOLIDATION -- The further division of the business
and operations of any such division into sub-units and the
consolidation of the business and operations of any such divisions and
sub-units;
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(b) NAME - The designation of any such division or sub-unit by, and the
carrying on of the business and operations of any such division or
sub-unit under, a name other than the name of the Corporation;
provided that the Corporation shall set out its name in legible
characters in all contracts, invoices, negotiable instruments and
orders for goods or services issued or made by or on behalf of the
Corporation; and
(c) OFFICERS - The appointment of officers for any such division or
sub-unit, the determination of their powers and duties, and the
removal of any such officer so appointed without prejudice to such
officer's rights under any employment contract or in law, provided
that any such officers shall not, as such, be officers of the
Corporation, unless expressly designated as such.
ARTICLE THREE
BORROWING AND SECURITIES
3.01 BORROWING POWER - Without limiting the borrowing
powers of the Corporation as set forth in the Act, the board
may from time to time on behalf of the Corporation, without
authorization of the shareholders:
(a) borrow money upon the credit of the Corporation;
(b) issue, reissue, sell of pledge bonds, debentures, notes or other
similar obligations or guarantee of such an obligation of a body
corporate, whether secured or unsecured;
(c) to the extent permitted by the Act, give a guarantee on behalf of the
Corporation to secure performance of any present or future
indebtedness, liability or obligation of any person; and
(d) mortgage, hypothecate, pledge, or otherwise create a security interest
in all or any currently owned or subsequently acquired real or
personal, movable or immovable, property of the Corporation, including
book debts, rights, powers, franchises and undertakings, to secure any
such bonds, debentures, notes or other evidences of
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indebtedness or guarantee or any other present or future indebtedness,
liability or obligation of the Corporation.
Nothing in this section limits or restricts the borrowing of money by the
Corporation on bills of exchange or promissory notes made, drawn, accepted or
endorsed by or on behalf of the Corporation.
3.02 DELEGATION -- The board may from time to time delegate to a committee
of the board, one or more directors or officers of the Corporation or any other
person as may be designated by the board all or any of the powers conferred on
the board by section 3.01 or by the Act to such extent and in such manner as the
board shall determine at the time of each such delegation.
ARTICLE FOUR
DIRECTORS
4.01 NUMBER OF DIRECTORS AND QUORUM -- Until changed in accordance with the
Act, the board shall consist of such number of directors within the minimum and
maximum number of directors provided for in the articles, as is determined by
special resolution or, if such special resolution empowers the board to
determine the number, by a resolution of the board, provided, however, that in
the latter case the directors may not, between meetings of shareholders,
increase the number of directors on the board to a total number greater than one
and one-third times the number of directors required to have been elected at the
last annual meeting of shareholders. Subject to section 4.08, the quorum for the
transaction of business at any meeting of the board shall consist of a majority
of the number of directors determined in the manner set forth above or such
other number of directors, in compliance with the Act, as the board may from
time to time determine. If the Corporation has fewer than three directors, all
directors must be present to constitute a quorum.
4.02 QUALIFICATION -- No person shall be qualified for election as a
director (i) if he is less than eighteen years of age; (ii) if he is of unsound
mind and has been so found by a court in Canada or elsewhere; (iii) if he is not
an individual, or; (iv) if he has the status of bankrupt. A director need not be
a shareholder. A majority of the directors shall be resident Canadians but where
the Corporation has only one or two directors, that director or
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one of the two directors, as the case may be, shall be a resident Canadian.
4.03 ELECTION AND TERM -- The election of directors shall take place at the
first meeting and thereafter at each annual meeting of shareholders and all the
directors then in office shall retire but, if qualified, shall be eligible for
re-election. The number of directors to be elected at an such meeting shall, if
a minimum and maximum number of directors is authorized by the articles, be the
number of directors determined in accordance with section 4.01 or shall, if a
fixed number of directors is authorized, be such fixed number. The election
shall be by ordinary resolution. If any election of directors is not held at the
proper time, the incumbent directors shall continue in office until their
successors are elected.
4.04 REMOVAL OF DIRECTORS -- Subject to the provisions of the Act, the
shareholders may by ordinary resolution passed at an annual or special meeting
called for such purpose remove any director or directors from office and the
vacancy created by such removal may be filled at the same meeting failing which,
provided a quorum remains in office, it may be filled by the board. Where the
holders of any class or series of shares of the Corporation have an exclusive
right to elect one or more directors, a director so elected may only be removed
by an ordinary resolution at a meeting of the shareholders of that class or
series.
4.05 VACATION OF OFFICE -- A director ceases to hold office when he dies;
he is removed from office by the shareholders; he ceases to be qualified for
election as a director; or his written resignation is received by the
Corporation, or, if a time is specified in such resignation, at the time so
specified, whichever is later.
4.06 VACANCIES -- Subject to the provisions of the Act, a quorum of the
board may fill a vacancy in the board, except a vacancy resulting from an
increase in the number or, except as set out hereunder in the maximum number of
directors, as the case may be, or a failure to elect the number of directors
required to be elected at any meeting of shareholders. Where the articles of the
Corporation provide for a minimum and maximum number of directors and a special
resolution has been passed empowering the directors to determine the number of
directors, the directors may not, between meetings of shareholders, appoint an
additional director if, after such appointment, the total number of directors
would be greater than one and one-third times the number of directors required
to have been elected at the
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last annual meeting of shareholders. In the absence of a quorum of the
board, or if the vacancy has arisen from a failure of the shareholders to elect
the number of directors required by section 4.01 hereof, the directors then in
office shall forthwith call a special meeting of shareholders to fill the
vacancy and, if they fail to call a meeting or if there are no directors then in
office, the meeting may be called by any shareholder.
4.07 ACTION BY THE BOARD -- Subject to any unanimous shareholder agreement,
the board shall manage or supervise the management of the business and affairs
of the Corporation. Subject to sections 4.08 and 4.09, the powers of the board
may be exercised by resolution passed at a meeting at which a quorum is present
or by resolution in writing signed by all the directors entitled to vote on that
resolution at a meeting of the board. Where there is a vacancy in the board, the
remaining directors may exercise all the powers of the board so long as a quorum
remains in office. Where the Corporation has only one director, that director
may constitute a meeting.
4.08 CANADIAN MAJORITY AT MEETINGS -- The board shall not transact business
at a meeting of directors, other than filling a vacancy in the board, unless a
majority of the directors present are resident Canadians or, where the
Corporation has fewer than three directors, one of the directors present is a
resident Canadian, except where
(a) a resident Canadian director who is unable to be present approves in
writing or by telephone or other communications facilities the
business transacted at the meeting; and
(b) a majority of resident Canadians would have been present had that
director been present at the meeting.
4.09 MEETING BY TELEPHONE -- If all the directors of the Corporation
present at or participating in a meeting consent, a meeting of the board or of a
committee of the board may be held by means of such telephone, electronic or
other communications facilities as permit all persons participating in the
meeting to communicate with each other simultaneously and instantaneously, and a
director participating in such a meeting by such means is deemed for the
purposes of the Act to be present at that meeting. Any such consent shall be
effective whether given before or after the meeting to which it relates and may
be given with
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respect to all meetings of the board and of committees of the board.
4.10 PLACE OF MEETINGS -- Meetings of the board may be held at any place
within or outside Ontario, and in any financial year of the Corporation, a
majority of the meetings of the board need not be held in Canada.
4.11 CALLING OF MEETINGS -- Meetings of the board shall be held from time
to time at such time and at such place as the board, the chairman of the board,
the managing director, the president, the secretary or any two directors may
determine.
4.12 NOTICE OF MEETING -- Notice of the time and place of each meeting of
the board shall be given in the manner provided in section 11.01 to each
director not less than 48 hours before the time when the meeting is to be held.
A notice of a meeting of directors need not specify the purpose of or the
business to be transacted at the meeting except where the Act requires such
purpose or business to be specified. A director may in any manner and at any
time waive a notice of or otherwise consent to a meeting of the board and,
subject to the Act, attendance of a director at a meeting of the board is a
waiver of notice of the meeting.
4.13 FIRST MEETING OF NEW BOARD -- Provided a quorum of directors is
present, each newly elected board may without notice hold its first meeting
immediately following the meeting of shareholders at which such board is
elected.
4.14 ADJOURNED MEETING -- Notice of an adjourned meeting of the board is
not required if the time and place of the adjourned meeting is announced at the
original meeting.
4.15 REGULAR MEETINGS -- The board may appoint a day or days in any month
or months for regular meetings of the board at a place and hour to be named. A
copy of any resolution of the board fixing the place and time of such regular
meetings shall be sent to each director forthwith after being passed, but no
other notice shall be required for any such regular meeting except where the Act
requires the purpose thereof or the business to be transacted thereat to be
specified.
4.16 CHAIRMAN -- The Chairman of any meeting of the board shall be the
first mentioned of such of the following officers as have been appointed and who
is a director and is present at the meeting: chairman of the board, managing
director, president or a vice-president. If no such officer
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is present, the directors present shall choose one of their number to be
chairman.
4.17 VOTES TO GOVERN -- At all meetings of the board every question shall
be decided by a majority of the votes cast on the question. In case of an
equality of votes the chairman of the meeting shall not be entitled to a second
or casting vote.
4.18 CONFLICT OF INTEREST -- A director or officer of the Corporation who
is a party to, or who is a director or officer of or has a material interest in,
any person who is a party to, a material contract or transaction or proposed
material contract or transaction with the Corporation, shall disclose the nature
and extent of his interest at the time and in the manner provided by the Act.
Any such contract or transaction or proposed contract or transaction shall be
referred to the board or shareholders for approval even if such contract is one
that in the ordinary course of the Corporation's business would not require
approval by the board or shareholders. Such a director shall not vote on any
resolution to approve the same unless the material contract or transaction is:
(a) an arrangement by way of security for money lent to or obligations
undertaken by him for the benefit of the Corporation or an affiliate;
(b) one relating primarily to his remuneration as a director, officer,
employee or agent of the Corporation or an affiliate;
(c) one for indemnity or insurance as specified under the Act; or
(d) one with an affiliate.
Notwithstanding the foregoing prohibition on voting by such a director, he
may be present at and counted to determine the presence of a quorum at the
relevant meeting of directors as provided in the Act.
4.19 REMUNERATION AND EXPENSES -- Subject to any unanimous shareholder
agreement, the directors shall be paid such remuneration for their services as
the board may from time to time determine. The directors shall also be entitled
to be reimbursed for travelling and other expenses properly incurred by them in
attending meetings of the board or any committee thereof. Nothing herein
contained shall
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preclude any director from serving the Corporation in any other capacity and
receiving remuneration therefore.
ARTICLE FIVE
COMMITTEES
5.01 COMMITTEES OF THE BOARD -- The board may appoint one or more
committees of the board, however designated, and delegate to any such committee
any of the powers of the board except those which pertain to items which, under
the Act, a committee of the board has no authority to exercise. A majority of
the members of any such committee shall be resident Canadians.
5.02 TRANSACTIONS OF BUSINESS -- Subject to the provisions of section 4.09,
the powers of a committee of the board may be exercised by a meeting at which a
quorum is present or by resolution in writing signed by all members of such
committee who would have been entitled to vote on that resolution at a meeting
of the committee. Meetings of such committee may be held at such place or places
designated in section 4.10.
5.03 ADVISORY BODIES -- The board may from time to time appoint such
advisory bodies as it may deem advisable.
5.04 PROCEDURE -- Unless otherwise determined by the board, each committee
and advisory body shall have power to fix its quorum at not less than a majority
of its members, to elect its chairman, and to regulate its procedure.
5.05 LIMITS ON AUTHORITY -- Notwithstanding any other provision hereof, no
managing director and no committee of directors has authority to:
(a) submit to the shareholders any question or matter requiring the
approval of the shareholders;
(b) fill a vacancy among the directors or in the office of auditor or
appoint or remove any of the chief executive officer, however
designated, the chief financial officer, however designated, the
chairman or the president of the Corporation;
(c) subject to the Act, issue securities except in the manner and on the
terms authorized by the directors;
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(d) declare dividends;
(e) purchase, redeem or otherwise acquire shares issued by the Corporation;
(f) pay a commission referred to in the Act;
(g) approve a management information circular referred to in the Act;
(h) approve a take-over bid circular, directors' circular, or issuer bid
circular referred to in the Securities Act (Ontario);
(i) approve any financial statements referred to in the Securities Act
(Ontario); or
(j) adopt, amend or repeal by-laws.
ARTICLE SIX
OFFICERS
6.01 APPOINTMENT -- Subject to any unanimous shareholder agreement, the
board may from time to time appoint a president, one or more vice-presidents (to
which title may be added words indicating seniority or function), a secretary, a
treasurer and such other officers as the board may determine, including one or
more assistants to any of the officers so appointed. The board may specify the
duties of and, in accordance with this by-law and subject to the provisions of
the Act, delegate to such officers powers to manage the business and affairs of
the Corporation. Subject to sections 6.02 and 6.03, an officer may but need not
be a director and one person may hold more than one office.
6.02 CHAIRMAN OF THE BOARD -- The board may from time to time also appoint
a chairman of the board who shall be a director. If appointed, the board may
assign to him any of the powers and duties that are by any provisions of this
by-law assigned to the managing director or to the president, and he shall,
subject to the provisions of the Act, have such other powers and duties as the
board may specify. During the absence or disability of the chairman of the
board, his duties shall be performed and his powers exercised by the managing
director, if any, or by the president.
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6.03 MANAGING DIRECTOR -- The board may from time to time also appoint a
managing director who shall be a resident Canadian and a director. If appointed,
he shall be the chief executive officer and, subject to the authority of the
board, shall have general supervision of the business and affairs of the
Corporation; and he shall, subject to the provisions of the Act and section
5.05, have such other powers and duties as the board may specify. During the
absence or disability of the president, or if no president has been appointed,
the managing director shall also have the powers and duties of that office.
6.04 PRESIDENT -- If appointed, the president shall be the chief operating
officer and, subject to the authority of the board, shall have general
supervision of the business of the Corporation; and he shall have such other
powers and duties as the board may specify. During the absence or disability of
the managing director, or if no managing director has been appointed, the
president shall also have the powers and duties of that office and shall be the
chief executive officer.
6.05 VICE-PRESIDENT -- A vice-president shall have such powers and duties
as the board or the chief executive officer may specify.
6.06 SECRETARY -- The secretary shall attend and be the secretary of all
meetings of the board (or arrange for another individual to so act),
shareholders and committees of the board and shall enter or cause to be entered
in records kept for that purpose minutes of all proceedings thereat; he shall
give or cause to be given, as and when instructed, all notices to shareholders,
directors, officers, auditors and members of committees of the board; he shall
be the custodian of the stamp or mechanical device generally used for affixing
the corporate seal of the Corporation and of all books, papers, records,
documents, and instruments belonging to the Corporation, except when some other
officer or agent has been appointed for that purpose; and he shall have such
other powers and duties as the board or the chief executive officer may specify.
6.07 TREASURER -- The treasurer shall keep proper accounting records in
compliance with the Act and shall be responsible for the deposit of money, the
safekeeping of securities and the disbursement of the funds of the Corporation;
he shall render to the board whenever required an account of all his
transactions as treasurer and of the financial position of the Corporation; and
he shall have
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such other powers and duties as the board or the chief executive office may
specify.
6.08 POWERS AND DUTIES OF OTHER OFFICERS -- The powers and duties of all
other officers shall be such as the terms of their engagement call for or as the
board or the chief executive officer may specify. Any of the powers and duties
of an officer to whom an assistant has been appointed may be exercised and
performed by such assistant, unless the board or the chief executive officer
otherwise directs.
6.09 VARIATION OF POWERS AND DUTIES -- The board may from time to time and
subject to the provisions of the Act, vary, add to or limit the powers and
duties of any officer.
6.10 TERM OR OFFICE -- The board, in its discretion, may remove any officer
of the Corporation, without prejudice to such officer's rights under any
employment contract. Otherwise each officer appointed by the board shall hold
office until his successor is appointed, or until his earlier resignation.
6.11 TERMS OF EMPLOYMENT AND REMUNERATION -- The terms of employment and
the remuneration of an officer appointed by the board shall be settled by it
from time to time.
6.12 CONFLICT OF INTEREST -- An officer shall disclose his interest in any
material contract or proposed material contract with the Corporation in
accordance with section 4.18 and the Act.
6.13 AGENTS AND ATTORNEYS -- The Corporation, by or under the authority of
the board shall have power from time to time to appoint agents or attorneys for
the Corporation in or outside Canada with such powers of management,
administration or otherwise (including the power to sub-delegate) as may be
thought fit, subject to the provisions of the Act.
6.14 FIDELITY BONDS -- The board may require such officers, employees and
agents of the Corporation as the board deems advisable to furnish bonds for the
faithful discharge of their powers and duties, in such form and with such surety
as the board may from time to time determine.
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ARTICLE SEVEN
PROTECTION OF DIRECTORS, OFFICERS AND OTHERS
7.01 LIMITATION OF LIABILITY -- Every director and officer of the
Corporation in exercising his powers and discharging his duties shall act
honestly and in good faith with a view to the best interests of the Corporation
and shall exercise the care, diligence and skill that a reasonably prudent
person would exercise in comparable circumstances. Subject to the foregoing, no
director or officer shall be liable for the acts, receipts, neglects or defaults
of any other director, officer or employee, or for joining in any receipt or
other act for conformity, or for any loss, damage or expense happening to the
Corporation through the insufficiency or deficiency of title to any property
acquired for or on behalf of the Corporation, or for the insufficiency or
deficiency of any security in or upon which any of the monies of the Corporation
shall be invested, or for any loss or damage arising from the bankruptcy,
insolvency or tortious acts of any person with whom any of the monies,
securities or effects of the Corporation shall be deposited, or for any loss
occasioned by any error of judgment or oversight on his part, or for any other
loss, damage or misfortune whatever which shall happen in the execution of the
duties of his office or in relation thereto; provided that nothing herein shall
relieve any director or officer from the duty to act in accordance with the Act
and the regulations thereunder or from liability for any breach thereof.
7.02 INDEMNITY -- Subject to the limitations contained in the Act, the
Corporation shall indemnify a director or officer, a former director or officer,
or a person who acts or acted at the Corporation's request as a director or
officer of a body corporate of which the Corporation is or was a shareholder or
creditor, and his heirs and legal representatives, against all costs, charges
and expenses, including an amount paid to settle an action or satisfy a
judgment, reasonably incurred by him in respect of any civil, criminal or
administrative action or proceeding to which he is made a party by reason of
being or having been a director or officer of the Corporation or such body
corporate, if
(a) he acted honestly and in good faith with a view to the best interests
of the Corporation; and
(b) in the case of a criminal or administrative action or proceeding that
is enforced by a monetary
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penalty, he had reasonable grounds for believing that his conduct was
lawful.
The Corporation shall also indemnify such person in such other circumstances as
the Act permits or requires. Nothing in this by-law shall limit the right of any
person entitled to indemnity to claim indemnity apart from the provisions of
this by-law.
7.03 INSURANCE -- Subject to the Act, the Corporation may purchase and
maintain insurance for the benefit of any person referred to in section 7.02
against such liabilities and in such amounts as the board may from time to time
determine and as are permitted by the Act.
ARTICLE EIGHT
SHARES
8.01 ALLOTMENT OF SHARES -- Subject to the Act, the articles and any
unanimous shareholder agreement, the board may from time to time allot or grant
options to purchase the whole or any part of the authorized and unissued shares
of the Corporation at such times and to such persons and for such consideration
as the board shall determine, provided that no share shall be issued until it is
fully paid as provided by the Act.
8.02 COMMISSIONS -- The board may from time to time authorize the
Corporation to pay a reasonable commission to any person in consideration of his
purchasing or agreeing to purchase shares of the Corporation, whether from the
Corporation or from any other person, or procuring or agreeing to procure
purchasers for any such shares.
8.03 REGISTRATION OF A SHARE TRANSFER -- Subject to the provisions of the
Act, no transfer of a share shall be registered in a securities register except
upon presentation of the certificate representing such share with an endorsement
which complies with the Act made thereon or delivered therewith duly executed by
an appropriate person as provided by the Act, together with such reasonable
assurance that the endorsement is genuine and effective as the board may from
time to time prescribe, upon payment of all applicable taxes and any reasonable
fee, not to exceed $3, prescribed by the board, upon compliance with such
restrictions on transfer as are authorized by the articles and upon satisfaction
of any lien referred to in section 8.10.
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8.04 TRANSFER AGENTS -- The board may from time to time appoint, for each
class of securities and warrants issued by the Corporation, (a) a trustee,
transfer agent or other agent to keep the securities register and the register
of transfers and one or more persons to keep branch registers and (b) a
registrar, trustee or agent to maintain a record of issued security certificates
and warrants, and, subject to the Act, one person may be appointed for the
purposes of both clauses (a) and (b) above in respect of all securities and
warrants of the Corporation or any class or classes, thereof. The board may at
any time terminate such appointment.
8.05 NON-RECOGNITION OF TRUSTS -- Subject to the provisions of the Act, the
Corporation may treat the registered holder of a share as the person exclusively
entitled to vote, to receive notices, to receive any interest, dividend or other
payments in respect of the share, and otherwise to exercise all the rights and
powers of a holder of the share.
8.06 SHARE CERTIFICATES -- Every shareholder is entitled at his option to
a share certificate in respect of the shares held by him that complies with this
Act or to a non-transferable written acknowledgement of his right to obtain a
share certificate from the Corporation in respect of the shares of the
Corporation held by him. A share certificate shall be signed manually by at
least one director or officer of the Corporation or by or on behalf of a
registrar, transfer agent, branch transfer agent or issuing or other
authenticating agent of the Corporation. Additional signatures
required on a share certificate may be printed or otherwise mechanically
reproduced thereon. If a share certificate contains a printed or mechanically
reproduced signature of a person, the Corporation may issue the share
certificate notwithstanding that the person has ceased to be a director or an
officer of the Corporation, and the share certificate is as valid as if he were
a director or an officer at the date of its issue.
8.07 REPLACEMENT OF SHARE CERTIFICATES -- The board or any officer or agent
designated by the board may in its or his discretion direct the issue of a new
share or other such certificate in lieu of and upon cancellation of a
certificate that has been mutilated or in substitution for a certificate claimed
to have been lost, apparently destroyed or wrongfully taken on payment of such
reasonable fee, not to exceed $3, and on such terms as to indemnity,
reimbursement of expenses and evidence of loss and of title
<PAGE> 19
- 19 -
as the board may from time to time prescribe, whether generally or in any
particular case.
8.08 JOINT HOLDERS -- If two or more persons are registered as joint
holders of any share, the Corporation shall not be bound to issue more than one
certificate in respect thereof, and delivery of such certificate to one of such
persons shall be sufficient delivery to all of them. Any one of such persons may
give effectual receipts for the certificate issued in respect thereof or for any
dividend, bonus, return of capital or other money payable or warrant issuable in
respect of such share.
8.09 DECEASED SHAREHOLDERS -- In the event of the death of a holder, or of
one of the joint holders, of any share, the Corporation shall not be required to
make any entry in the securities register in respect thereof or to make any
dividend or other payments in respect thereof, except upon production of all
such documents as may be required by law and upon compliance with the reasonable
requirements of the Corporation and its transfer agents.
8.10 LIEN FOR INDEBTEDNESS -- If the articles provide that the Corporation
shall have a lien on shares registered in the name of a shareholder indebted to
the Corporation, such lien may be enforced, subject to any other provision of
the articles and to any unanimous shareholder agreement, by the sale of the
shares thereby affected or by any other action, suit, remedy or proceeding
authorized or permitted by law or by equity and, pending such enforcement, the
Corporation may refuse to register a transfer of the whole or any part of such
shares.
ARTICLE NINE
DIVIDENDS AND RIGHTS
9.01 DIVIDENDS -- Subject to the provisions of the Act, the board may from
time to time declare dividends payable to the shareholders according to their
respective rights and interest in the Corporation. Dividends may be paid in
money or property or by issuing fully paid shares of the Corporation or options
or rights to acquire fully paid shares of the Corporation.
9.02 DIVIDEND CHEQUES -- A dividend payable in money shall be paid by
cheque drawn on the Corporation's bankers or one of them to the order of each
registered holder of shares of the class or series in respect of which it has
<PAGE> 20
- 20 -
been declared and mailed by prepaid ordinary mail to such registered holder at
his recorded address, unless such holder otherwise directs. In the case of joint
holders the cheque shall, unless such joint holders otherwise direct, be made
payable to the order of all of such joint holders and mailed to them at their
recorded address. The mailing of such cheque as aforesaid, unless the same is
not paid on due presentation, shall satisfy and discharge the liability for the
dividend to the extent of the sum represented thereby plus the amount of any tax
which the Corporation is required to and does withhold.
9.03 NON-RECEIPT OF CHEQUES -- In the event of non-receipt of any dividend
cheque by the person to whom it is sent as aforesaid, the Corporation shall
issue to such person a replacement cheque for a like amount on such terms as to
indemnity, reimbursement of expenses, and evidence of non-receipt and of title
as the board may from time to time prescribe, whether generally or in any
particular case.
9.04 RECORD DATE FOR DIVIDENDS AND RIGHTS -- The board may fix in advance a
date, preceding by not more than 50 days the date for the payment of any
dividend or the date for the issue of any warrant or other evidence of the right
to subscribe for securities of the Corporation, as a record date for the
determination of the persons entitled to receive payment of such dividend or to
exercise the right to subscribe for such securities; and notice of any such
record date, unless waived in accordance with the Act, shall be given not less
than seven days before such record date in the manner provided for by the Act.
If no record date is so fixed, the record date for the determination of the
persons entitled to receive payment of any dividend or to exercise the right to
subscribe for securities of the Corporation shall be at the close of business on
the day on which the resolution relating to such dividend or right to subscribe
is passed by the board.
9.05 UNCLAIMED DIVIDENDS -- Any dividend unclaimed after a period of six
years from the date on which the same has been declared to be payable shall be
forfeited and shall revert to the Corporation.
ARTICLE TEN
MEETINGS OF SHAREHOLDERS
10.01 ANNUAL MEETINGS -- The annual meeting of shareholders shall be held
at such time in each year and,
<PAGE> 21
- 21 -
subject to section 10.03, at such place as the board, the chairman of the board,
the managing director, or the president may from time to time determine, for the
purpose of considering the financial statements and reports required by the Act
to be placed before the annual meeting, electing directors, appointing an
auditor (unless the Corporation is exempted under the Act from appointing an
auditor), and for the transaction of such other business as may properly be
brought before the meeting.
10.02 SPECIAL MEETINGS -- The board, the chairman of the board, the
managing director, or the president shall have power to call a special meeting
of shareholders at any time.
10.03 PLACE OF MEETINGS -- Subject to the articles and any unanimous
shareholder agreement, meetings of shareholders shall be held at such place in
or outside Ontario as the directors determine or, in the absence of such a
determination, at the place where the registered office of the Corporation is
located.
10.04 NOTICE OF MEETINGS -- Notice of the time and place of each meeting of
shareholders shall be given in the manner provided in section 11.01 not less
than ten nor more than fifty days before the date of the meeting to each
director, to the auditor, and to each shareholder who at the close of business
on the record date for notice is entered in the securities register as the
holder of one or more shares carrying the right to vote at the meeting. Notice
of a meeting of shareholders called for any purpose other than the consideration
of minutes of an earlier meeting, consideration of the financial statements and
auditor's report, election of directors and reappointment of the incumbent
auditor shall state the nature of such business in sufficient detail to permit
the shareholder to form a reasoned judgment thereon and shall state the text of
any special resolution or by-law to be submitted to the meeting. A shareholder
and any other person entitled to attend a meeting of shareholders may in any
manner waive notice of or otherwise consent to a meeting of shareholders, and,
subject to the Act, attendance of any such shareholder or any such other person
is a waiver of notice of the meeting.
10.05 LIST OF SHAREHOLDERS ENTITLED TO NOTICE -- For every meeting of
shareholders, the Corporation shall prepare a list of shareholders entitled to
receive notice of the meeting, arranged in alphabetical order and showing the
number of shares held by each shareholder entitled to vote at the meeting in
accordance with the Act. If a record date
<PAGE> 22
- 22 -
for the meeting is fixed pursuant to section 10.06, the shareholders listed
shall be those registered at the close of business on such record date. If no
record date is fixed, the shareholders listed shall be those registered at the
close of business on the day immediately preceding the day on which notice of
the meeting is given or, where no such notice is given, on the day on which the
meeting is held. The list shall be available for examination by any shareholder
during usual business hours at the registered office of the Corporation or at
the place where the central securities register is maintained and at the meeting
for which the list was prepared. Where a separate list of shareholders has not
been prepared, the names of persons appearing in the securities register at the
requisite time as the holder of one or more shares carrying the right to vote at
such meeting shall be deemed to be a list of shareholders.
10.06 RECORD DATE FOR NOTICE -- The board may fix in advance a date,
preceding the date of any meeting of shareholders by not more than fifty days
and not less than twenty-one days, as a record date for the determination of the
shareholders entitled to notice of the meeting, and notice of any such record
date shall, unless waived in accordance with the Act, be given not less than
seven days before such record date, by newspaper advertisement in the manner
provided in the Act. If no record date is so fixed, the record date for the
determination of the shareholders entitled to receive notice of the meeting
shall be at the close of business on the day immediately preceding the day on
which the notice is given or, if no notice is given, the day on which the
meeting is held.
10.07 MEETINGS WITHOUT NOTICE -- A meeting of shareholders may be held
without notice at any time and place permitted by the Act (a) if all the
shareholders entitled to vote thereat are present in person or represented by
proxy or if those not present or represented by proxy waive notice of or
otherwise consent to such meeting being held, and (b) if the auditors and the
directors are present or waive notice of or otherwise consent to such meeting
being held; so long as such shareholders, auditors or directors present are not
attending for the express purpose of objecting to the transaction of any
business on the grounds that the meeting is not lawfully called. At such a
meeting any business may be transacted which the Corporation at a meeting of
shareholders may transact. If the meeting is held at a place outside Ontario,
shareholders not present or represented by proxy, but who have waived notice of
or
<PAGE> 23
- 23 -
otherwise consented to such meeting, shall also be deemed to have consented to
the meeting being held at such place.
10.08 CHAIRMAN, SECRETARY AND SCRUTINEERS -- The chairman of any meeting of
shareholders shall be the first mentioned of such of the following officers as
have been appointed and who is present at the meeting: managing director,
president, chairman of the board, or a vice-president who is a shareholder. If
no such officer is present within 15 minutes from the time fixed for holding the
meeting, the persons present and entitled to vote shall choose one of their
number to be chairman. If the secretary of the Corporation is absent, the
chairman shall appoint some person, who need not be a shareholder, to act as
secretary of the meeting. If desired, one or more scrutineers, who need not be
shareholders, may be appointed by a resolution or by the chairman with the
consent of the meeting.
10.09 PERSONS ENTITLED TO BE PRESENT -- The only persons entitled to be
present at a meeting of shareholders shall be those entitled to vote thereat,
the directors and auditor of the Corporation and others who, although not
entitled to vote, are entitled or required under any provision of the Act or the
articles or by-laws to be present at the meeting. Any other person may be
admitted only on the invitation of the chairman of the meeting or with the
consent of the meeting.
10.10 QUORUM -- Subject to the Act and to Section 10.20, a quorum for the
transaction of business at any meeting of shareholders shall be two or more
persons present in person, each being a shareholder entitled to vote thereat or
a duly appointed proxyholder or representative for an absent shareholder so
entitled, and together holding or representing by proxy not less than 34%* of
the outstanding shares of the Corporation entitled to vote at the meeting.z If a
quorum is present at the opening of any meeting of shareholders, the
shareholders present or represented by proxy may proceed with the business of
the meeting notwithstanding that a quorum is not present throughout the meeting.
If a quorum is not present at the opening of any meeting of shareholders, the
shareholders present or represented by proxy may adjourn the meeting to a fixed
time and place but may not transact any other business.
10.11 RIGHT TO VOTE -- Subject to the provisions of the Act as to authorized
representatives of any other body corporate or association, at any meeting of
shareholders for which the Corporation has prepared the list referred to in
section 10.05, every person who is named in such list shall
* approved by directors on April 7/93 and confirmed by shareholders on May 26/93
<PAGE> 24
- 24 -
be entitled to vote the shares shown thereon opposite his name at the
meeting to which such list relates except to the extent that, where the
Corporation has fixed a record date in respect of such meeting pursuant to
section 10.06, such person has transferred any of his shares after such record
date and the transferee, having produced properly endorsed certificates
evidencing such shares or having otherwise established that he owns such shares,
has demanded not later than 10 days before the meeting that his name be included
in such list. In any such case the transferee shall be entitled to vote the
transferred shares at the meeting. At any meeting of shareholders for which the
Corporation has not prepared the list referred to in section 10.05,every person
shall be entitled to vote at the meeting who at the time is entered in the
securities register as the holder of one or more shares carrying the right to
vote at such meeting.
10.12 PROXYHOLDERS AND REPRESENTATIVES -- Every shareholder entitled to
vote at a meeting of shareholders may appoint a proxyholder, or one or more
alternate proxyholders, who need not be shareholders, to attend and act as his
representative at the meeting in the manner and to the extent authorized and
with the authority conferred by the proxy. A proxy shall be in writing executed
by the shareholder or his attorney or, if the shareholder is a body corporate,
by an officer or attorney thereof duly authorized, and shall conform with the
requirements of the Act.
Alternatively, every such shareholder which is a body corporate or
association may authorize by resolution of its directors or governing body an
individual to represent it at a meeting of shareholders and such individual may
exercise on the shareholder's behalf all the powers it could exercise if it were
an individual shareholder. The authority of such an individual shall be
established by depositing with the Corporation a certified copy of such
resolution, or in such other manner as may be satisfactory to the secretary of
the Corporation or the chairman of the meeting. Any such proxyholder or
representative need not be a shareholder.
10.13 TIME FOR DEPOSIT OF PROXIES -- The board may by resolution fix a time
not exceeding forty-eight hours, excluding Saturdays and holidays, preceding any
meeting or adjourned meeting of shareholders before which time proxies to be
used at that meeting must be deposited with the Corporation or an agent thereof,
and any period of time so fixed shall be specified in the notice calling the
meeting. A proxy shall be acted upon only if, prior to the
<PAGE> 25
- 25 -
time so specified, it shall have been deposited with the Corporation or an
agent thereof specified in such notice or, if no such time is specified in such
notice, unless it has been received by the secretary of the Corporation or by
the chairman of the meeting or any adjournment thereof prior to the time of
voting.
10.14 JOINT SHAREHOLDERS -- If two or more persons hold shares jointly, any
one of them present in person or duly represented by proxy at a meeting of
shareholders may, in the absence of the other or others, vote the shares; but if
two or more of those persons are present in person or represented by proxy and
vote, they shall vote as one the shares jointly held by them.
10.15 VOTES TO GOVERN -- At any meeting of shareholders every question
shall, unless otherwise required by the articles or by-laws or by-law, be
determined by a majority of the votes cast on the question. In case of an
equality of votes either upon a show of hands or upon a poll, the chairman of
the meeting shall not be entitled to a second or casting vote.
10.16 SHOW OF HANDS -- Subject to the provisions of the Act, any question
at a meeting of shareholders shall be decided by a show of hands, unless a
ballot thereon is required or demanded as hereinafter provided. Upon a show of
hands every person who is present and entitled to vote shall have one vote.
Whenever a vote by show of hands shall have been taken upon a question, unless a
ballot thereon is so required or demanded, a declaration by the chairman of the
meeting that the vote upon the question has been carried or carried by a
particular majority or not carried and an entry to that effect in the minutes of
the meeting shall be prima facie evidence of the fact without proof of the
number or proportion of the votes recorded in favour of or against any
resolution or other proceeding in respect of the said question, and the result
of the vote so taken shall be the decision of the shareholders upon the said
question.
10.17 BALLOTS -- On any question proposed for consideration at a meeting of
shareholders, and whether or not a show of hands has been taken thereon, the
chairman or any person who is present and entitled to vote, whether as
shareholder, proxyholder or representative, on such questions at the meeting may
demand a ballot. A ballot so required or demanded shall be taken in such manner
as the chairman shall direct. A requirement or demand for a ballot may be
withdrawn at any time prior to the taking of the ballot. If a ballot is taken
each person present shall be
<PAGE> 26
- 26 -
entitled, in respect of the shares which he is entitled to vote at the
meeting upon the question, to that number of votes provided by the Act or the
articles, and the result of the ballot so taken shall be the decision of the
shareholders upon the said question.
10.18 ADJOURNMENT -- The chairman at a meeting of shareholders may, with
the consent of the meeting and subject to such conditions as the meeting may
decide, adjourn the meeting from time to time and place to place. If a meeting
of shareholders is adjourned for less than thirty days, it shall not be
necessary to give notice of the adjourned meeting, other than by announcement at
the earliest meeting that is adjourned. Subject to the Act, if a meeting of
shareholders is adjourned by one or more adjournment for an aggregate of thirty
days or more, notice of the adjourned meeting shall be given as for an original
meeting.
10.19 RESOLUTION IN WRITING -- A resolution in writing signed by all the
shareholders entitled to vote on that resolution at a meeting of shareholders is
as valid as if it had been passed at a meeting of the shareholders unless a
written statement or written representation with respect to the subject matter
of the resolution is submitted by a director or the auditor, respectively, in
accordance with the Act.
10.20 ONLY ONE SHAREHOLDER -- Where the Corporation has only one
shareholder or only one holder of any class or series of shares, the shareholder
present in person or duly represented by proxy constitutes a meeting.
ARTICLE ELEVEN
NOTICES
11.01 METHOD OF GIVING NOTICES -- Any notice (which term includes any
communication or document) to be given (which term includes sent, delivered, or
served) pursuant to the Act, the regulations thereunder, the articles, the
by-laws or otherwise to a shareholder, director, officer, auditor or member of a
committee of the board shall be sufficiently given if delivered personally to
the person to whom it is to be given; or if delivered to his recorded address;
or if mailed to him at his recorded address by prepaid ordinary or air mail; or
if sent to him at his recorded address by any means of prepaid transmitted or
recorded communication. A notice so delivered shall be deemed to have been given
when
<PAGE> 27
-27-
it is delivered personally or to the recorded address as aforesaid; a notice so
mailed shall be deemed to have been given when deposited in a post office or
public letter box and deemed to have been received on the fifth day after
mailing; and a notice so sent by any means of transmitted or recorded
communication shall be deemed to have been given when dispatched or delivered to
the appropriate communication company or agency or its representative for
dispatch. The secretary may change or cause to be changed the recorded address
of any shareholder, director, officer, auditor or member of a committee of the
board in accordance with any information believed by him to be reliable.
11.02 NOTICE TO JOINT HOLDERS -- If two or more persons are registered as
joint holders of any share, any notice shall be addressed to all of such joint
holders but notice addressed to one of such persons shall be sufficient notice
to all of them.
11.03 UNDELIVERED NOTICES -- If any notice given to a shareholder pursuant
to section 11.01 is returned on three consecutive occasions because he cannot be
found, the Corporation shall not be required to give any further notices to such
shareholder until he informs the Corporation in writing of his new address.
11.04 OMISSIONS AND ERRORS -- The accidental omission to give any notice to
any shareholder, director, officer, auditor or member of a committee of the
board or the non-receipt of any notice by any such person or any error in any
notice not affecting the substance thereof shall not invalidate any action taken
at any meeting held pursuant to such notice or otherwise founded thereon.
11.05 PERSONS ENTITLED BY DEATH OR OPERATION OF LAW -- Every person who, by
operation of law, transfer, death of a shareholder or any other means
whatsoever, shall become entitled to any share, shall be bound by every notice
in respect of such share which shall have been duly given to the shareholder
from whom he derives his title to such share prior to his name and address being
entered on the securities register (whether such notice was given before or
after the happening of the event upon which he became so entitled) and prior to
his furnishing to the Corporation the proof of authority or evidence of his
entitlement prescribed by the Act.
11.06 WAIVER OF NOTICE -- Any shareholder, proxyholder, representative,
other person entitled to attend a meeting of shareholders, director, officer,
auditor or member of a
<PAGE> 28
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committee of the board may at any time waive any notice, or waive or abridge the
time for any notice, required to be given to him under any provision of the Act,
the regulations thereunder, the articles, the by-law or otherwise and such
waiver or abridgement, whether given before or after the meeting or other event
of which notice is required to be given, shall cure any default in the giving or
in the time of such notice, as the case may be. Any such waiver or abridgement
shall be in writing except a waiver of notice of a meeting of shareholders or of
the board or of a committee of the board which may be given in any manner.
ARTICLE TWELVE
EFFECTIVE DATE
12.01 EFFECTIVE DATE -- This by-law shall come into force when made by the
board in accordance with the Act.
MADE by the board the 16th day of August,
/s/ JACK KIERVIN /s/ R. JON WILLIAMS
____________________ ____________________
Jack Kiervin R. Jon Williams
President Secretary
CONFIRMED by the sole shareholder in accordance with the Act the 16th day
of August, 1990.
/s/ R. JON WILLIAMS
___________________
R. Jon Williams
Secretary
<PAGE> 1
EXHIBIT 4.1
ALLWASTE, INC.
AND
TEXAS COMMERCE TRUST COMPANY OF NEW YORK
as Trustee
-----------------
INDENTURE
Dated as of June 1, 1989
-----------------
$30,000,000
7 1/4% Convertible Subordinated Debentures due 2014
<PAGE> 2
CROSS REFERENCE TABLE*
----------------------
of provisions of Trust Indenture Act of 1939 with Indenture dated as of June 1,
1989, between Allwaste, Inc., and Texas Commerce Bank National Association, as
Trustee:
<TABLE>
<CAPTION>
Section of Act Section of Indenture
- -------------- --------------------
<S> <C>
310(a) (1) and (2) ...................................... 8.09
310(a) (3) and (4) ...................................... Not Applicable
310(b) ................................................. 8.08, 8.10(b) and (d)
310(c) .................................................. Not Applicable
311(a) and (b) .......................................... 8.13
311(c) .................................................. Not Applicable
312(a) .................................................. 6.01 and 6.02(a)
312(b) and (c) .......................................... 6.02(b) and (c)
313(a) .................................................. 6.04(a)
313(b) (1) .............................................. Not Applicable
313(b) (2) .............................................. 6.04(b)
313(c) .................................................. 6.04(c)
313(d) .................................................. 6.04(d)
314(a) .................................................. 6.03
314(b) .................................................. Not Applicable
314(c) (1) and (2) ...................................... 16.07
314(c) (3) .............................................. Not Applicable
314(d) .................................................. Not Applicable
314(e) .................................................. 16.07
315(a), (c) and (d) ..................................... 8.01
315(b) .................................................. 7.07
315(e) .................................................. 7.08
315(f) .................................................. Not Applicable
316(a) (1) .............................................. 7.06
316(a) (2) .............................................. Omitted
316(a) last sentence .................................... 9.04
316(b) .................................................. 7.04
317(a) .................................................. 7.02
317(b) .................................................. 5.05(a)
318(a) .................................................. 16.09
</TABLE>
- ----------------
* This Cross Reference Table is not part of the Indenture.
-ii-
<PAGE> 3
TABLE OF CONTENTS*
<TABLE>
<CAPTION>
Page
----
<S> <C>
PARTIES................................................................... 1
RECITALS.................................................................. 1
ARTICLE ONE
DEFINITIONS
Section 1.01. Definitions................................................ 10
ARTICLE TWO
ISSUANCE, DESCRIPTION, EXECUTION, REGISTRATION OF
TRANSFER AND EXCHANGE OF DEBENTURES
Section 2.01. Designation, Amount, Authentication and Delivery
of Debentures........................................... 16
Section 2.02. Form of Debenture and Trustee's Certificate................ 17
Section 2.03. Date and Denominations of Debentures;
Payment of Interest..................................... 17
Section 2.04. Execution of Debentures.................................... 18
Section 2.05. Exchange and Registration of Transfer of Debentures........ 18
Section 2.06. Temporary Debentures....................................... 20
Section 2.07. Mutilated, Destroyed, Lost or Stolen Debentures............ 20
Section 2.08. Cancellation of Surrendered Debentures..................... 21
</TABLE>
- ----------------
*The Table of Contents, comprising pages i to ix inclusive,
is not part of the Indenture.
- iii -
<PAGE> 4
ARTICLE THREE
SUBORDINATION OF DEBENTURES
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 3.01. Agreement of Subordination................................... 22
Section 3.02. Payment Over of Proceeds Upon Dissolution, etc............... 22
Section 3.03. No Waiver of Subrogation Provision........................... 27
Section 3.04. Payments to Debentureholders................................. 27
Section 3.05. Authorization of Debentureholders to
Trustee to Effect Subordination............................ 27
Section 3.06. Knowledge of Trustee and Paying Agent........................ 28
Section 3.07. All Provisions of Indenture Qualified by
Article Three.............................................. 28
Section 3.08. Applicability of Article Three to Paying Agents.............. 28
</TABLE>
ARTICLE FOUR
REDEMPTION OF DEBENTURES - SINKING FUND
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 4.01. Redemption Prices - Sinking Fund and
Voluntary Redemptions...................................... 29
Section 4.02. Notice of Redemption; Selection of Debentures................ 29
Section 4.03. Payment of Debentures Called for Redemption.................. 30
Section 4.04. Sinking Fund................................................. 31
Section 4.05. Credits Against Sinking Fund................................. 31
Section 4.06. Certificates and Debentures to be
Delivered to the Trustee................................... 32
Section 4.07. Cash to be Delivered to the Trustee.......................... 33
Section 4.08. Application of Sinking Fund Payments......................... 33
Section 4.09. Manner of Redeeming Debentures............................... 34
Section 4.10. Sinking Fund Moneys to be held as Security During
Continuation of Default; Exceptions........................ 34
Section 4.11. Cancellation and Destruction of Redeemed Debentures.......... 35
</TABLE>
-iv-
<PAGE> 5
ARTICLE FOUR-A
REDEMPTION OF DEBENTURES; HOLDER'S OPTION
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 4A.01. Right to Redemption ......................... 35
Section 4A.02. Applicability of Article .................... 36
Section 4A.03. Notice of Redemption Event .................. 36
Section 4A.04. Notice of Election .......................... 37
Section 4A.05. Deposit of Funds ............................ 37
Section 4A.06. Debentures Payable on Redemption Date ....... 37
Section 4A.07. Debentures Redeemed in Part ................. 38
ARTICLE FIVE
PARTICULAR COVENANTS OF THE COMPANY
Section 5.01. Payment of Principal, Premium and
Interest on Debentures ..................... 38
Section 5.02. Office for Notices and Payments, etc. ........ 38
Section 5.03. Prohibition of Extension of Claims
for Interest ............................... 39
Section 5.04. Appointment to Fill a Vacancy in the
Office of Trustee .......................... 39
Section 5.05. Provision as to Paying Agent ................. 39
Section 5.06. Company to Furnish Annual Compliance
Certificate ................................ 40
ARTICLE SIX
DEBENTUREHOLDERS' LISTS AND REPORTS
BY THE COMPANY AND THE TRUSTEE
Section 6.01. Debentureholders' List ....................... 41
Section 6.02. Preservation and Disclosure of List .......... 41
Section 6.03. Annual and Other Reports to be Filed
by the Company with the Trustee ............ 43
Section 6.04. Reports by the Trustee ....................... 43
</TABLE>
-v-
<PAGE> 6
ARTICLE SEVEN
REMEDIES OF THE TRUSTEE AND
DEBENTUREHOLDERS IN EVENT OF DEFAULT
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 7.01. Events of Default ........................... 45
Section 7.02. Payment of Debentures on Default;
Suit Therefor ............................. 48
Section 7.03. Application of Moneys Collected by
Trustee ................................... 49
Section 7.04. Limitation on Suits by Holders of
Debentures ................................ 51
Section 7.05. Remedies Cumulative and Continuing .......... 52
Section 7.06. Direction of Proceedings and Waiver of
Defaults by Majority of Debentureholders .. 52
Section 7.07. Notice of Defaults .......................... 52
Section 7.08. Undertaking to Pay Costs .................... 53
ARTICLE EIGHT
CONCERNING THE TRUSTEE
Section 8.01. Duties and Responsibilities of Trustee ...... 53
Section 8.02. Reliance on Documents, Opinions, etc. ....... 55
Section 8.03. No Responsibility for Recitals, etc. ........ 56
Section 8.04. Trustee, Paying Agent or Debenture
Registrar May Own Debentures .............. 56
Section 8.05. Moneys to be Held in Trust .................. 56
Section 8.06. Compensation and Expenses of Trustee ........ 57
Section 8.07. Officers' Certificate as Evidence ........... 58
Section 8.08. Conflicting Interest of Trustee ............. 58
Section 8.09. Eligibility of Trustee ...................... 64
Section 8.10. Resignation or Removal of Trustee ........... 64
Section 8.11. Acceptance by Successor Trustee ............. 66
Section 8.12. Succession by Merger, etc. .................. 66
Section 8.13. Limitations on Rights of Trustee as a
Creditor .................................. 67
Section 8.14. Authenticating Agent of the Trustee ......... 72
</TABLE>
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<PAGE> 7
ARTICLE NINE
CONCERNING THE DEBENTUREHOLDERS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 9.01. Action by Debentureholders ................... 73
Section 9.02. Proof of Execution by Debentureholders ....... 73
Section 9.03. Who May be Deemed Owners of
Debentureholders ........................... 74
Section 9.04. Company-Owned Debentures Disregarded ......... 74
Section 9.05. Instruments Executed by Debentureholders
Bind Future Holders ........................ 75
ARTICLE TEN
DEBENTUREHOLDERS' MEETINGS
Section 10.01. Purposes of Meetings ........................ 75
Section 10.02. Manner of Calling Meetings .................. 76
Section 10.03. Call of Meetings by Company or
Debentureholders ........................... 76
Section 10.04. Who May Attend and Vote at Meetings ......... 76
Section 10.05. Regulations May be Made by Trustee .......... 76
Section 10.06. Manner of Voting at Meetings and
Record to be Kept ......................... 77
Section 10.07. No Delay of Rights by Meeting ............... 78
ARTICLE ELEVEN
SUPPLEMENTAL INDENTURE
Section 11.01. Supplemental Indentures Without Consent
of Debentureholders ....................... 78
Section 11.02. Supplemental Indentures With Consent
of Debentureholders ....................... 79
Section 11.03. Effect of Supplemental Indentures ........... 81
Section 11.04. Debentures May Bear Notation of Changes
by Supplemental Indentures ................ 81
</TABLE>
-vii-
<PAGE> 8
ARTICLE TWELVE
CONSOLIDATION, MERGER, SALE OR CONVEYANCE
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 12.01. Consolidations and Mergers of Company and
Conveyances Permitted ..................... 81
Section 12.02. Successor Corporation Substituted ........... 82
Section 12.03. Opinion of Counsel .......................... 83
ARTICLE THIRTEEN
SATISFACTION AND DISCHARGE OF INDENTURE;
UNCLAIMED MONEYS
Section 13.01. Satisfaction and Discharge of Indenture ..... 83
Section 13.02. Application by Trustee of Funds
Deposited for Payment of Debentures ....... 84
Section 13.03. Repayment of Moneys Held by
Paying Agent .............................. 85
Section 13.04. Repayment of Moneys Held by Trustee ......... 85
ARTICLE FOURTEEN
CONVERSION OF DEBENTURES
Section 14.01. Conversion Right and Conversion Price ....... 85
Section 14.02. Issuance of Common Stock on Conversion ...... 86
Section 14.03. Interest and Dividends; Fractions
and Shares ................................ 87
Section 14.04. Adjustments of Conversion Price ............. 88
Section 14.05. Certain Notices and Calculations ............ 91
Section 14.06. Effect of Consolidation, Merger, etc. ....... 92
Section 14.07. Reserves .................................... 93
Section 14.08. Certain Covenants ........................... 94
Section 14.09. Taxes Upon Conversion ....................... 94
Section 14.10. Certain Notices ............................. 94
Section 14.11. Determination of Facts ...................... 95
Section 14.12. Common Stock Defined ........................ 96
</TABLE>
-viii-
<PAGE> 9
ARTICLE FIFTEEN
IMMUNITY OF INCORPORATORS, STOCKHOLDERS,
OFFICERS AND DIRECTORS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 15.01. Indenture and Debentures Solely Corporate
Obligations ............................ 96
ARTICLE SIXTEEN
MISCELLANEOUS PROVISIONS
Section 16.01. Successors and Assigns of Company Bound
by Indenture ........................... 97
Section 16.02. Acts of Board, Committee or Officer of
Successor Corporation Valid ............ 97
Section 16.03. Indenture for Sole Benefit of Parties
and Debentureholders ................... 97
Section 16.04. Service of Certain Required Notices or
Demands ................................ 97
Section 16.05. Notice of Debentureholders................ 97
Section 16.06. New York Contract ........................ 98
Section 16.07. Evidence of Compliance with Conditions
Precedent .............................. 98
Section 16.08. Legal Holidays ........................... 100
Section 16.09. Trust Indenture Act to Control ........... 100
Section 16.10. Severability ............................. 100
Section 16.11. Execution in Counterparts ................ 100
Section 16.12. Computation of Interest .................. 100
Section 16.13. Table of Contents, Headings, etc. ........ 100
TESTIMONIUM .............................................. 101
SIGNATURES ............................................... 101
ACKNOWLEDGMENTS .......................................... 102
</TABLE>
-ix-
<PAGE> 10
INDENTURE, dated as of June 1, 1989, between ALLWASTE, INC., a Delaware
corporation (hereinafter sometimes referred to as the "Company") and Texas
Commerce Trust Company of New York, a trust company organized under the laws
of the State of New York, as trustee (hereinafter sometimes referred to as the
"Trustee").
WHEREAS, the Company has duly authorized the issuance of its 7&1/4%
Convertible Subordinated Debentures due 2014 (hereinafter referred to as
the "Debentures"), for an aggregate principal amount not to exceed Thirty
Million Dollars ($30,000,000), to be issued as registered Debentures
without coupons; and
WHEREAS, the Debentures, the Trustee's and Authenticating Agent's
certificate of authentication and, without limiting the Company's ability to
accept another form, the conversion notice to be borne by the Debentures
are to be substantially in the following forms, respectively:
[FORM OF FACE OF DEBENTURE]
No. . . . . $
ALLWASTE, INC.
7 1/4% Convertible Subordinated Debenture due 2014
Allwaste, Inc., a Delaware corporation (herein called the "Company"), for
value received, hereby promises to pay to __________________ or registered
assigns, the principal sum of _________ Dollars, on June 1, 2014, in such coin
or currency of the United States of America as at the time of payment shall be
legal tender for the payment of public and pri-rate debts, and to pay-interest,
semi-annually on June 1 and December 1 of each year, commencing December 1,
1989, on said principal sum, in like coin or currency, at the rate per annum
specified in the title of this Debenture, to the registered holder hereof as of
the close of business on the May 15 or November 15, as the case may be,
preceding the date on which an interest payment is due, except as otherwise
provided in the Indenture hereinafter referred to, all at the office or agency
of the Company maintained for that purpose in the City of Houston, Texas or, at
the option of the registered holder, at the office or agency of the Company
maintained for that purpose in the Borough of Manhattan, The City of New York,
from the June 1 or December 1, as the case may be, next preceding the date of
this Debenture to which interest has been paid (unless the date hereof is a June
1 or December 1 to which interest has been paid, in which case from the date of
this Debenture or unless the date hereof is prior to the payment of any interest
on the Debentures, in which case from the date of original issuance of this
Debenture by the Company, or unless the date hereof is between the May 15 or
November 15, as the case may be, and the
<PAGE> 11
following June 1 or December 1, in which case from such June 1 or December 1,
except that, if the Company shall default in payment of the interest due on
such June 1 or December 1, then from the next preceding June 1 or December 1
to which interest has been paid or, if no interest has been paid on the
Debentures, from the date of original issuance of this Debenture by the
Company as aforesaid), until payment of said principal sum has been made or
duly provided for; provided, however, that payment of interest may be made at
the option of the Company by check mailed to the address of the person entitled
thereto as such address shall appear in the Debenture register. Interest
shall be calculated on the basis of a 360-day year of twelve 30-day months.
Reference is made to the further provisions of this Debenture set forth on
the reverse hereof. Such further provisions shall for all purposes have the same
effect as though fully set forth at this place.
This Debenture shall not be valid or become obligatory for any purpose
until the certificate of authentication hereon shall have been signed by or on
behalf of the Trustee under the Indenture referred to on the reverse hereof.
IN WITNESS WHEREOF, the Company has caused this instrument to be executed
manually or in facsimile by its duly authorized officers and has caused a
facsimile of its corporate seal to be imprinted hereon.
Dated: ALLWASTE, INC.
[SEAL] By:
---------------------------------
Chairman of the Board
ATTEST:
- -----------------------
Secretary
-2-
<PAGE> 12
[FORM OF TRUSTEE'S OR AUTHENTICATING AGENT'S
CERTIFICATE OF AUTHENTICATION]
This is one of the Debentures referred to in the within-mentioned Indenture.
- ----------------------------- TEXAS COMMERCE TRUST COMPANY OF NEW YORK
as Authenticating Agent as Trustee
of the Trustee
By: By:
------------------------- --------------------------------------
Authorized Signatory Authorized Signatory
-3-
<PAGE> 13
(FORM OF REVERSE OF DEBENTURE]
ALLWASTE, INC.
7 1/4% CONVERTIBLE SUBORDINATED DEBENTURE DUE 2014
This Debenture is one of a duly authorized issue of Debentures of
the Company, designated as its "7 1/4% Convertible Subordinated Debentures
due 2014" (herein referred to as the "Debentures"), limited in aggregate
principal amount as provided in the within-mentioned Indenture, all
issued or to be issued under and pursuant to an indenture dated as of
June 1, 1989 (the "Indenture"), duly executed and delivered by the
Company and Texas Commerce Trust Company of New York, as Trustee (the
"Trustee"), to which Indenture and all indentures supplemental thereto
reference is hereby made for a description of the rights, limitations of
rights, obligations, duties and immunities thereunder of the Trustee, the
Company and the holders of the Debentures. All terms used in this Debenture
which are defined in the Indenture shall have the meanings assigned to them in
the Indenture.
The indebtedness evidenced by this Debenture is, to the extent and in the
manner provided in the Indenture, expressly subordinated and subject in right
of payment to the prior payment in full of all Senior Indebtedness of the
Company. As provided in the Indenture, each holder of this Debenture, by his
acceptance hereof, irrevocably covenants and agrees to and shall be bound by
all the provisions of the Indenture relating to such subordination and
authorizes the Trustee to take such action in his behalf as may be necessary or
appropriate to effectuate, as between the holders of the Debentures and the
holders of Senior Indebtedness, the subordination of the indebtedness
evidenced by this Debenture as provided in the Indenture and irrevocably
appoints the Trustee his attorney-in-fact for any and all such purposes.
If an Event of Default, as defined in the Indenture, shall have occurred and
be continuing, the principal hereof and the interest accrued thereon may be
declared, and upon such declaration shall become, due and payable, in the
manner, with the effect and subject to the conditions provided in the
Indenture.
The Indenture contains provisions permitting the Company and the
Trustee, with the consent of the holders of not less than 66-2/3% in
aggregate principal amount of the Debentures at the time outstanding,
evidenced as in the Indenture provided, to execute supplemental
indentures adding any provisions to or changing in any manner or
eliminating any of the provisions of the Indenture or of any supplemental
indenture or modifying in any manner the rights of the holders of the
-4-
<PAGE> 14
Debentures; provided, however, that no such supplemental indenture shall (i)
extend the fixed maturity of any Debenture, or reduce the principal amount
thereof or any premium thereon, or reduce the rate or extend the time of payment
of interest thereon, or make the principal amount thereof or premium, if any, or
interest thereon payable in any coin or currency other than that hereinbefore
provided, or adversely affect the right to convert any Debentures as provided in
the Indenture or modify the subordination provisions in a manner adverse to the
Debentureholder without the consent of the holder of each Debenture so affected,
or (ii) reduce the aforesaid percentage of Debentures, the consent of the
holders of which is required for any such supplemental indenture, without the
consent of the holders of all Debentures then outstanding. It is also provided
in the Indenture that the holders of not less than a majority in aggregate
principal amount of the Debentures at the time outstanding may on behalf of the
holders of all the Debentures waive any past default under the Indenture and its
consequences, except a default in the payment of interest on or any premium on,
or the principal of, any of the Debentures. Any such consent or waiver by the
holder of this Debenture (unless revoked as provided in the Indenture) shall be
conclusive and binding upon such holder and upon all future holders and owners
of this Debenture and of any Debentures issued in exchange or substitution
therefor, whether or not any notation of such consent or waiver is made upon
this Debenture or such other Debentures.
No reference herein to the Indenture and no provision of this Debenture or
of the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of and premium, if any, and
interest on this Debenture at the place, at the respective times, at the rate
and in the coin or currency herein prescribed.
The Debentures are issuable in registered form without coupons in
denominations of $1,000 and any integral multiple of $1,000.
Subject to the provisions of the Indenture, the holder hereof has the right
at his option, at any time on or prior to the close of business on June 1, 2014,
(except, that in case this Debenture or a portion hereof shall be called for
redemption prior to such date, such right shall terminate as to this Debenture
or such portion hereof at the close of business on the fifth day prior to such
redemption date, unless the Company shall default in the payment due upon such
redemption) to convert the principal hereof or any portion hereof which is
$1,000 or an integral multiple of $1,000 into that number of fully paid and
nonassessable shares of Common Stock of the Company, obtained by dividing the
principal amount of this Debenture or portion hereof surrendered for conversion
by the conversion price of $23-7/8 per share, subject to such adjustment, if
-5-
<PAGE> 15
any, of the conversion price and the securities issuable upon conversion, as
may be required by the provisions of the Indenture, upon surrender of this
Debenture to the Company at its office or agency maintained for that purpose in
the City of Houston, Texas or, at the option of the registered holder, at the
office or agency of the Company maintained for that purpose in the Borough of
Manhattan, The City of New York, New York (or such other locations as the
Company shall determine), accompanied by written notice to the Company that
the holder hereof elects to convert this Debenture, or a specified portion
hereof, and by instruments of transfer, in form satisfactory to the Trustee,
duly executed by the registered holder or by his duly authorized attorney, all
in accordance with the provisions of the Indenture. Subject to the right of
the person in whose name this Debenture is registered on the record
date (established as provided in the Indenture) next preceding an interest
payment date to receive the interest payable with respect hereto on such
interest payment date, no adjustments in respect of interest or dividends
will be made upon any conversion. No fractional shares will be issued upon
any conversion, but in lieu thereof the Company shall pay therefor in cash as
provided in the Indenture.
If a Debenture is converted during any period beginning at the opening of
business on an interest payment date and ending at the close of business on the
next succeeding regular record date, no payment of accrued interest will be
made. If any Debenture is surrendered for conversion between a record date
for the payment of interest and the next succeeding interest payment date,
such Debenture must be accompanied by funds equal to the interest payable on
such succeeding interest payment date on the principal amount so converted;
provided, however, that if on or before June 1, 1991, the Company shall have
given notice of redemption of the Debentures in accordance with the Indenture,
the holders of record of the Debentures on May 15, 1991 will be entitled to
be paid the interest thereon on June 1, 1991, whether or not the Debentures
shall have been converted prior to June 1, 1991, without any requirement that
such converted Debentures be accompanied by funds in the amount of the interest
payable on June 1, 1991.
The Debentures may be redeemed at the option of the Company as a whole, or
from time to time in part, on any date on or after June 1, 1991 and prior to
maturity, upon mailing a notice of such redemption not less than 30 nor more
than 60 days prior to the date fixed for redemption to the holders
of Debentures to be redeemed at their registered addresses, all as provided in
the Indenture, at the following optional redemption prices (expressed in
percentages of principal amount), together with accrued interest to the date
fixed for redemption:
-6-
<PAGE> 16
<TABLE>
<CAPTION>
If redeemed during the twelve-month period beginning June 1,
Year Percentage Year Percentage
<S> <C> <C> <C>
1991 . . . . 105.800% 1995 . . . . 102.900%
1992 . . . . 105.075% 1996 . . . . 102.175%
1993 . . . . 104.350% 1997 . . . . 101.450%
1994 . . . . 103.625% 1998 . . . . 100.725%
</TABLE>
and thereafter at 100% of the principal amount thereof, together with accrued
interest to the date fixed for redemption.
The Debentures are also subject to redemption in part, through the
operation of the mandatory sinking fund provided for in the Indenture, on June
1, 1999 and on each June 1 thereafter to and including June 1, 2013, on notice
as set forth above and at 100% of the Principal amount thereof (the sinking fund
redemption price), together with accrued interest to the date fixed for
redemption. Debentures acquired (by conversion or otherwise) or redeemed by
the Company otherwise than through the operation of the mandatory sinking
fund may be credited against subsequent mandatory sinking fund requirements.
In the event of redemption or conversion of this Debenture in part only, a
new Debenture or Debentures for the unredeemed or unconverted portion hereof
will be issued in the name of the holder hereof upon the cancellation hereof.
Upon due presentment for registration of transfer of this Debenture at the
designated office or agency of the Company maintained for that purpose in the
City of Houston, Texas or, at the option of the registered holder, at the
office or agency of the Company maintained for that purpose in the Borough of
Manhattan, The City of New York, a new Debenture or Debentures of authorized
denominations for an equal aggregate principal amount will be issued to the
transferee in exchange herefor, subject to the limitations provided in the
Indenture, without charge except for any tax or other governmental charge
imposed in connection therewith, and the Debentures may in like manner be
exchanged for one or more new Debentures of other authorized denominations but
of the same aggregate principal amount.
The Company, the Trustee, the Authenticating Agent of the Trustee (as
defined in the Indenture), any paying agent and any Debenture Registrar (as
defined in the Indenture) may deem and treat the registered holder at the times
provided for in the Indenture as the absolute owner of this Debenture (whether
or not this Debenture shall be overdue and notwithstanding any notation of
ownership or other writing hereon made by
-7-
<PAGE> 17
anyone other than the Company or any Debenture Registrar), for the purpose of
receiving payment hereof or on account hereof and for all other purposes, and
neither the Company nor the Trustee nor any Authenticating Agent of
the Trustee nor any paying agent nor any Debenture Registrar shall be affected
by any notice to the contrary. All payments made to or upon the order of such
registered holder shall, to the extent of the sum or sums so paid, satisfy
and discharge the liability for moneys payable on this Debenture.
No recourse shall be had for the payment of the principal of or premium,
if any, or the interest on this Debenture, or for any claim based hereon, or
otherwise in respect hereof, or based on or in respect of the Indenture or any
indenture supplemental thereto, against any incorporator, stockholder,
officer or director, as such, past, present or future, of the Company or the
Trustee or of any successor, either directly or through the Company or the
Trustee or any successor, whether by virtue of any constitution, statute or
rule of law or by the enforcement of any assessment or penalty or otherwise,
all such liability being, by the acceptance hereof and as part of the
consideration for the issuance hereof, expressly waived and released.
-8-
<PAGE> 18
[FORM OF CONVERSION NOTICE]
To Allwaste, Inc.
The undersigned registered holder of this Debenture hereby irrevocably
exercises the option to convert this Debenture, or portion hereof (which is
$1,000 or an integral multiple thereof) below designated, into shares of Common
Stock of Allwaste, Inc. in accordance with the terms of the Indenture
referred to in this Debenture, and directs that the shares issuable and
deliverable upon such conversion, together with any check in payment for
fractional shares, be issued and delivered to the registered holder hereof
unless a different name has been indicated below. Unless otherwise
directed, a new Debenture representing any unconverted principal amount hereof
shall be delivered to the registered holder hereof. If shares are to be issued
in the name of a person other than the undersigned, this Debenture must be duly
endorsed by, or accompanied by instruments of transfer in form
satisfactory to the Trustee duly executed by, the undersigned, and the
undersigned will pay all transfer taxes payable with respect thereto.
_____________________________
Dated: ________________________ Signature of Debentureholder
If different from that of Principal amount to be con-
Debentureholder, print name, verted (if less than all):
address (including zip code)
and social security or other $
taxpayer identification
number of person in whose
name the Common Stock will
be issued:
________________________________
________________________________ ___________________________
Social Security or Other
Taxpayer Identification
________________________________ Number of Debentureholder
; and
WHEREAS, all acts and things necessary to constitute these presents
a valid indenture and agreement according to its terms have been done and
performed, and the execution of this Indenture has been duly authorized;
and, upon a determination by the Board of Directors of the Company to
issue such Debentures in exchange for the Preferred Stock of the Company,
all acts and things necessary to make the Debentures, when executed by
-9-
<PAGE> 19
the Company and authenticated and delivered by or on behalf of the Trustee, as
in this Indenture provided, and issued, the valid, binding and legal
obligations of the Company, will have been done and performed, and the issue of
the Debentures will have in all respects been duly authorized;
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
That in order to declare the terms and conditions upon which the Debentures
are authenticated and are to be executed, issued and delivered, and in
consideration of the premises, of the purchase and acceptance of the Debentures
by the holders thereof and of the sum of one dollar duly paid to it by the
Trustee at the execution of these presents, the receipt whereof is hereby
acknowledged, the Company covenants and agrees with the Trustee, for the equal
proportionate benefit of the re-spective holders from time to time of the
Debentures, as follows:
ARTICLE ONE
Definitions
Section 1.01. Definitions. The terms defined in this Section 1.01
(except as herein otherwise expressly provided or unless the context otherwise
requires) for all purposes of this Indenture and of any indenture supplemental
hereto shall have the respective meanings specified in this Section 1.01.
All other terms used in this Indenture which are defined in the Trust Indenture
Act of 1939 or which are by reference therein defined in the Securities Act of
1933, as amended, shall (except as herein otherwise expressly provided or
unless the context otherwise requires) have the meanings assigned to such terms
In said Trust Indenture Act and in said Securities Act as in force at the date
of this Indenture as originally executed.
Authenticating Agent:
The term "Authenticating.Agent" shall mean any agent of the Trustee which
shall at the time be appointed and acting pursuant to Section 8.14.
Authorized Newspaper:
The term "authorized newspaper" shall mean a newspaper printed in
the English language and customarily published at least once a day for at
least 5 days in each calendar week, whether or not published on
Saturdays, Sundays or legal holidays, and of general circulation in the
Borough of Manhattan, The City of New York. Whenever under the pro-
visions of this Indenture two or more publications of a notice or other
-lO-
<PAGE> 20
communication are required or permitted, such publications may be in the same
or different newspapers.
Bankruptcy Code:
The term "Bankruptcy Code" shall mean the United States Bankruptcy Code,
11 United States Code Subsection 101 et seq., or any successor statute thereto.
Board of Directors:
The term "Board of Directors", when used with reference to the
Company, shall mean the Board of Directors of the Company, or any
committee of such Board authorized to exercise the powers and authority
of such Board with respect to the action purportedly taken by such
committee.
Business Day:
The term "business day" shall mean any day except a Saturday, a Sunday or a
day on which banking institutions in the City of New York or the City of
Houston, Texas are authorized or required by law to close.
Capitalized Lease Obligation:
The term "Capitalized Lease Obligation" shall mean any obligation of the
Company or any Subsidiary, as lessee or guarantor, to pay rent under a lease of
real or personal property, which obligation, in the judgment of the
independent public accountants employed by the Company, is required to be
capitalized on the balance sheet of the lessee or guarantor in accordance with
generally accepted accounting principles.
Certificate of a Firm of Independent Public Accountants:
The term "Certificate of a Firm of Independent Public Accountants" shall
mean a certificate signed by a nationally recognized firm of independent
public accountants who may be the accountants regularly employed by the
Company. Each such certificate shall include the statements provided for in
Section 16.07 if and to the extent required, by the provisions thereof.
-11-
<PAGE> 21
Common Stock:
The term "Common Stock", except as provided in Section 14.12, shall mean
any stock of any class of the Company which has no preference in respect of
dividends or of amounts payable in the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Company and which is not subject
to redemption by the Company.
Company:
The term "Company" shall mean ALLWASTE, INC., a Delaware
corporation, and, subject to the provisions of Article Twelve, shall also
include its successors and assigns.
Corporate trust office:
The term "corporate trust office" of the Trustee shall mean the
principal office of the Trustee at which at any particular time its
corporate trust business shall be administered, which office at the date
hereof is located at 80 Broad Street, 4th Floor, New York, New York
10004, Attention: Corporate Trust Department, and for purposes of this
Indenture, shall also include the office of the Trustee's agent, Texas
Commerce Bank National Association, located at 600 Travis, Houston, Texas
77002, Attention: Corporate Trust Department; or at such other address
as the Trustee may designate from time to time by notice to the
Debentureholders and the Company, or the principal corporate trust office of
any successor Trustee.
Debenture or Debentures; Outstanding:
The term "Debenture" or "Debentures" shall mean any Debenture or
Debentures, as the case may be, authenticated and delivered under this
Indenture.
The term "outstanding", when used with reference to Debentures,
shall mean, subject to the provisions of Section 9.04, as of any
particular time, all Debentures authenticated and delivered by or on
behalf of the Trustee under this Indenture, except
(a) Debentures theretofore cancelled by the Debenture Registrar or
delivered to the Debenture Registrar for cancellation;
(b) Debentures, or portions thereof, for the payment or redemption of
which moneys in the necessary amount shall have been deposited in trust with
the Trustee or with any paying agent (other than the Company) or shall have been
set aside and segregated in trust by the
-12-
<PAGE> 22
Company (if the Company shall act as its own paying agent); provided
that, if such Debentures are to be redeemed prior to the maturity thereof,
notice of such redemption shall have been given as in Article Four
provided, or provision satisfactory to the Trustee shall have been made
for giving such notice; and
(c) Debentures in lieu of or in substitution for which other Debentures
shall have been authenticated and delivered pursuant to the terms of
Section 2.07.
Debentureholder:
The term "Debentureholder", "holder of Debentures", or other similar
terms, shall mean any person in whose name at the time a Debenture shall
be registered in the Debenture Register kept for that purpose in
accordance with the terms hereof.
Debenture Register; Debenture Registrar:
The terms "Debenture Register" and "Debenture Registrar" shall have the
respective meanings specified in Section 2.05.
Event of Default; default:
The term "Event of Default" shall have the meaning specified in Section
7.01, continued for the period of time, if any, and after the giving of
notice, if any, therein designated.
Unless the context otherwise requires, the term "default" shall mean any
event specified in Section 7.01 not including any period of grace, if any,
therein provided for and irrespective of the giving of notice, if any, therein
designated.
Indenture:
The term "Indenture" shall mean this instrument as originally executed,
or, if amended or supplemented as herein provided, as so amended or
supplemented.
Junior Indebtedness:
The term "Junior Indebtedness" shall mean indebtedness of the Company
heretofore or hereafter created which, by the terms of the instrument by which
such indebtedness is created or evidenced, ranks junior and subordinate in
right of payment to the Debentures.
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Officers' Certificate:
The term "Officers' Certificate" shall mean a certificate signed by the
Chairman of the Board, the President or any Vice President and the Treasurer,
any Assistant Treasurer or the Secretary or any Assistant Secretary of the
Company. Each such certificate shall include the statements provided for in
Section 16.07, if and to the extent required by the provisions of such Section.
Opinion of Counsel:
The term "Opinion of Counsel" shall mean an opinion in writing signed
by legal counsel who may be counsel to or an employee of the Company, or may be
other counsel satisfactory to the Trustee. Each such opinion shall include the
statements provided for in Section 16.07, if and to the extent required by the
provisions of such Section.
Pari Passu Debt:
"Pari Passu Debt" shall mean any indebtedness of the Company heretofore
or hereafter created which, by the terms of the instrument by which such
indebtedness is created or evidenced, ranks pari passu in right of payment with
the Debentures and is entitled to like rights of subrogation.
Responsible Officer:
The term "responsible officer", when used with respect to the Trustee,
shall mean the chairman or vice chairman of the board of directors, the
chairman of the executive committee of the board of directors, the chairman
of the trust committee, the president, any vice president, any second or
assistant vice president, the cashier, any assistant cashier, the secretary, any
assistant secretary, the treasurer, any assistant treasurer, any senior trust
officer or trust officer, or any other officer or assistant officer of the
Trustee customarily performing functions similar to those performed by the
persons who at the time shall be such officers, respectively, or to whom any
corporate trust matter is referred because of his knowledge of and familiarity
with the particular subject.
Securities and Exchange Commission:
The term "Securities and Exchange Commission" shall mean the
Securities and Exchange Commission, as from time to time constituted, created
under the Securities and Exchange Act of 1934, or, if at any time after the
execution of this Indenture, the Securities and Exchange
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Commission is not existing and performing the duties now assigned to it under
the Trust Indenture Act of 1939, then the body performing such duties on such
date.
Senior Indebtedness:
The term "Senior Indebtedness" shall mean the following, whether
outstanding on the date hereof or hereafter created, incurred, assumed or
guaranteed, (a) the principal of, premium if any, and interest on (i)
indebtedness (other than the Debentures) of the Company for money borrowed
(including any indebtedness representing the deferred and unpaid balance of the
purchase price of any property, if such indebtedness is payable by its terms
over a period of more than 12 months); (ii) indebtedness of the Company
evidenced by bonds, notes, debentures or similar obligations sold by the
Company for money (other than the Debentures), (iii) Capitalized Lease
Obligations, (iv) indebtedness or obligations incurred, assumed or guaranteed by
the Company in connection with the acquisition or improvement of any property
or asset or the acquisition by it or a Subsidiary of any business, (v)
indebtedness of others of the kinds described in any of the preceding clauses
(i), (ii), (iii), and (iv), assumed or guaranteed by the Company or in effect
guaranteed by the Company through an agreement to purchase or otherwise, (vi)
obligations which would be classified as liabilities on the balance sheet of the
Company in accordance with generally accepted accounting principles,
evidencing the purchase price for the acquisition of assets of any kind,
tangible or intangible, by the Company, except in the ordinary course of
business; unless, in each case referred to in clauses (i), (ii), (iii), (iv),
(v) and (vi) above, by the terms of the instrument creating or evidencing the
indebtedness or obligation it is expressly provided that such indebtedness is
Pari Passu Debt or Junior Indebtedness under this Indenture, (b) any other
indebtedness, liability or obligation, contingent or otherwise other than that
arising pursuant to the Debentures, of the Company (any such indebtedness,
liability or obligation being hereinafter in this definition referred to as an
"Obligation"), and any guaranty, endorsement or other contingent
obligation in respect of any Obligation of another, which is created, assumed or
incurred by the Company after the date of this Indenture and which, when
created, assumed or incurred, is specifically designated by the Company as
Senior Indebtedness for the purposes hereof in the instrument creating or
evidencing such Obligation or in the instrument creating or evidencing the
Company's liability with respect to the Obligation of another, and (c) any
increases, refundings, renewals, rearrangements or extensions of and
amendments, modifications and supplements to any indebtedness, liability or
obligation described in clause (a) or (b) above.
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Subsidiary:
The term "Subsidiary" shall mean any corporation of which the Company,
or the Company and one or more Subsidiaries, or any one or more Subsidiaries,
directly or indirectly own voting securities entitling the holders thereof to
elect a majority of the directors, either at all times or so long as there is
no default or contingency which permits the holders of any other class or
classes of securities to vote for the election of one or more directors.
Trustee:
The term "Trustee" shall mean Texas Commerce Bank National
Association, acting in its trust capacity, and, subject to the provisions of
Article Eight, shall also include its successors and assigns as Trustee
hereunder.
Trust Indenture Act of 1939:
The term "Trust Indenture Act of 1939" shall mean the Trust Indenture Act of
1939 as in force at the date of this Indenture as originally executed, except
as otherwise expressly provided.
U.S. Government Obligations:
The term "U.S. Government Obligations" means direct obligations of the
United States for the payment of which the full faith and credit of the United
States is pledged.
ARTICLE TWO
Issuance, Description, Execution, Registration
of Transfer and Exchange of Debentures
Section 2.01. Designation, Amount, Authentication and Delivery of
Debentures. The Debentures shall be designated as "7 1/4% Convertible
Subordinated Debentures due 2014". Debentures in the aggregate principal amount
not to exceed Thirty Million Dollars ($3O,OOO,OOO), upon the execution of this
Indenture, or from time to time thereafter, may be executed by the Company and
delivered to the Trustee for authentication, and the Trustee shall thereupon,
or from time to time thereafter, authenticate and deliver said Debentures to
and upon the written order of the Company, signed by its Chairman of the Board,
its President or a Vice President and by its Treasurer, Assistant Treasurer,
Secretary or an Assistant Secretary, without any further action by the Company.
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Section 2.02. Form of Debentures and Trustee's Certificate. The
Debentures and the Trustee's certificate of authentication shall be
substantially of the tenor and purport as in this Indenture above recited,
and may have such letters, numbers or other marks of identification
or designation and such legends or endorsements printed, lithographed or
engraved thereon as the officers executing the same may approve (execution
thereof to be conclusive evidence of such approval) and as are not inconsistent
with the provisions of this Indenture, or as may be required, as determined by
the Company, to comply with any law or with any rule or regulation made
pursuant thereto or with any rule or regulation of any national securities
exchange on which the Debentures may be listed, or to conform to usage. The
definitive Debentures shall be printed, lithographed or engraved or produced by
any combination of these methods or may be produced in any other manner
permitted by the rules of any national securities exchange on which the
Debentures may be listed, all as determined by the officers executing such
Debentures, as conclusively evidenced by their execution of such Debentures.
Section 2.03. Date and Denominations of Debentures: Pavment of Interest.
The Debentures shall be issuable as registered Debentures without coupons in
denominations provided for in the form of Debenture hereinbefore set forth. Each
Debenture shall be dated the date of its authentication, shall bear interest
from the applicable date, and shall be payable on the dates, and computed in
the manner, specified in the form of Debenture hereinbefore set forth.
The person in whose name a Debenture is registered at the close of business
on any record date (as hereinafter defined) with respect to any interest payment
date shall be entitled to receive the interest payable on such interest payment
date (subject to the provisions of Article Four or Article Four-A in the case of
any Debenture or Debentures, or portion thereof, redeemed on a date subsequent
to the record date and on or prior to such interest payment date), except if and
to the extent the Company shall default in the payment of the interest due and
payable on such interest payment date, in which case such defaulted interest
shall be paid to the persons in whose names outstanding Debentures are
registered at the closing of business on a subsequent special record date
established by notice given by mail by or on behalf of the Company to the
holders of Debentures not less than 15 days preceding such special record date,
which special record date shall be not more than 30 days nor less than 10 days
prior to the date of payment of such defaulted interest. The term "record
date" as used with respect to any regular interest payment date shall mean the
fifteenth day of the calendar month next preceding such interest payment date.
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Both principal of and premium, if any, and interest on the Debentures
shall be payable at the office or agency of the Company designated for that
purpose in the City of Houston, Texas or, at the option of the registered
holder, at the office or agency of the Company maintained for that purpose in
the Borough of Manhattan, The City of New York; provided, however, that interest
may be payable at the option of the Company by check mailed to the address of
the person entitled thereto as such address shall appear on the Debenture
Register.
Section 2.04. Execution of Debentures. The Debentures shall be executed
manually or by facsimile signatures in the name and on behalf of the Company by
its Chairman of the Board, its President or any of its Vice President under its
corporate seal (which may be printed, engraved or otherwise reproduced thereon,
by facsimile or otherwise) attested by the manual or facsimile signature of its
Secretary or an Assistant Secretary.
Only such Debentures as shall bear thereon a certificate of authentication
substantially in the form hereinabove recited, manually executed by the Trustee
or the Authenticating Agent of the Trustee, shall be entitled to the benefits of
this Indenture or be valid or obligatory for any purpose. Such certificate by
the Trustee or the Authenticating Agent of the Trustee upon any Debenture
executed by the Company shall be conclusive evidence that the Debenture so
authenticated has been duly authenticated and delivered hereunder.
If any officer of the Company who shall have (manually or by facsimile)
executed or attested any of the Debentures shall cease to be such officer before
the Debentures so signed shall have been authenticated and delivered by or on
behalf of the Trustee, or disposed of by the Company, such Debentures
nevertheless may be authenticated and delivered or disposed of as though the
person who executed such Debentures had not ceased to be such officer of the
Company; and any Debenture may be executed on behalf of the Company by such
persons as, at the actual date of the execution of such Debenture, shall be the
proper officers of the Company, although at the date of the execution of this
Indenture any such person was not such officer.
Section 2.05. Exchange and Registration of Transfer of Debentures.
The Debentures may be exchanged for a like aggregate principal amount of
Debentures of other authorized denominations. Debentures to be exchanged
shall be surrendered at the office or agency to be maintained by the
Company in accordance with the provisions of Section 5.02, and the
Company shall execute and the Trustee or the Authenticating Agent of the
Trustee shall authenticate and the Debenture Registrar shall register and
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deliver in exchange therefor the Debenture or Debentures which the
Debentureholder making the exchange shall be entitled to receive.
The Company shall keep or cause to be maintained at said office or agency
a register (herein sometimes referred to as the "Debenture Register") in which,
subject to such reasonable regulations as it may prescribe, the Company shall
register Debentures and shall register the transfer of Debentures as in this
Article Two provided. Such register shall be in written form or in any other
form capable of being converted into written form within a reasonable time. For
the purposes of registration, exchange or registration of transfer of the
Debentures, until otherwise designated by the Company, the Trustee shall
initially be designated as Debenture Registrar. Upon surrender for
registration of transfer of any Debenture at said office or agency, the Company
shall execute and the Trustee or the Authenticating Agent of the Trustee shall
authenticate and the Debenture Registrar shall register and deliver in the name
of the transferee or transferees a new Debenture or Debentures for an equal
aggregate principal amount. At all reasonable times, the Debenture Register
shall be open for inspection by the Trustee. No transfer of any Debenture shall
be valid unless made at said office or agency. The Trustee may at all times
conclusively rely on any certificates, reports or other information
delivered to it by the Debenture Registrar (if other than the Trustee) relating
to the principal amount of Debentures outstanding at any time and the registered
holders thereof.
All Debentures presented or surrendered for registration of transfer,
exchange, conversion, redemption or payment shall be accompanied by a
written instrument or instruments of transfer, in form satisfactory to the
Trustee or the Authenticating Agent of the Trustee duly executed by the
registered holder or his attorney duly authorized in writing.
No service charge shall be made for any exchange or registration of
transfer of Debentures, or issue of new Debentures in case of partial
redemption or conversion, but the Company or the Trustee may require payment
of a sum sufficient to cover any tax or other governmental charge that may be
imposed in relation thereto.
The Company shall not be required to register the transfer of or exchange
(i) any Debentures during a period of 15 days next preceding any selection of
Debentures to be redeemed, or (ii) any Debentures so selected, called or being
called for redemption in whole or in part, except the unredeemed portions of
Debentures to be redeemed in part.
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Section 2.06. Temporary Debentures. Pending the preparation of
definitive Debentures, the Company may execute and, upon written order of the
Company, the Trustee shall authenticate and deliver temporary Debentures
(printed, lithographed, typewritten or otherwise produced). Temporary Debentures
shall be of any authorized denomination, and substantially in the form of the
definitive Debentures, but with such omissions, insertions and variations as may
be appropriate for temporary Debentures, all as may be determined by the
officers of the Company, as conclusively evidenced by their execution of such
Debentures. Temporary Debentures may contain such reference to any provisions of
this Indenture as may be appropriate. Every temporary Debenture shall be
executed by the Company and authenticated by the Trustee upon the same
conditions and in substantially the same manner, and with the same effect, as
the definitive Debentures. The Company shall execute and deliver to the Trustee
definitive Debentures as soon as practicable, and thereupon any or all temporary
Debentures may be surrendered in exchange therefor at the office or agency to be
maintained by the Company for such purposes in the City of Houston, Texas or, at
the option of the registered holder, at the office or agency of the Company
maintained for that purpose in the Borough of Manhattan, The City of New York,
and the Trustee or the Authenticating Agent of the Trustee shall authenticate
and the Debenture Registrar shall register and deliver in exchange for such
temporary Debentures an equal aggregate principal amount of definitive
Debentures. Such exchange shall be made by the Company at its own expense and
without any charge therefor except that the Company or the Trustee may require
payment of a sum sufficient to cover any tax or other governmental charge that
may be imposed in relation thereto. Until so exchanged, the temporary
Debentures shall be entitled to the same benefits under this Indenture as
definitive Debentures authenticated and delivered hereunder.
Section 2.07. Mutilated, Destroyed. Lost or Stolen Debentures. In case
any temporary or definitive Debenture shall become mutilated or be destroyed,
lost or stolen, the Company in its discretion may execute, and upon its request
the Trustee or Authenticating Agent shall authenticate and the Debenture
Registrar shall register and deliver, a new Debenture, in exchange and
substitution for the mutilated Debenture or in lieu of and in substitution for
the Debenture destroyed, lost or stolen. In every case the applicant for a
substituted Debenture shall furnish to the Trustee, such security or indemnity
as may be required by it to save each of the Company and the Trustee harmless,
and, in every case of destruction, loss or theft the applicant shall also
furnish to the Trustee evidence to its satisfaction of the destruction, loss or
theft of such Debenture and of the ownership thereof. The Trustee or
Authenticating Agent shall authenticate any such substituted Debenture and the
Debenture Registrar shall register and deliver the same. Upon the issuance of
any substituted Debenture, the Company or the Trustee may
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require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses connected therewith. In case any Debenture which has matured or is
about to mature or has been called for redemption shall be mutilated or be
destroyed, lost or stolen, the Company may, instead of issuing a substitute
Debenture, pay or authorize the payment of the same (without surrender thereof
except in the case of a mutilated Debenture) if the applicant for such payment
shall furnish the Trustee with such security or indemnity as may be required by
it, to save each of the Company and the Trustee harmless, and, in the case of
destruction, loss or theft, evidence to the satisfaction of the Trustee of the
destruction, loss or theft of such Debenture and of the ownership thereof. If,
after delivery of such substituted Debenture or payment of a destroyed, lost or
stolen Debenture, a bona fide purchaser of the original Debenture in lieu of
which such substituted Debenture was issued presents for payment such original
Debenture, the Company and the Trustee shall be entitled to recover such
substituted Debenture (or such payment) from the person to whom it was delivered
or any person taking such substituted Debenture from such person, except a bona
fide purchaser, and shall be entitled to recover upon the security or indemnity
provided therefor to the extent of any loss, damage, cost or expense incurred
by the Company or the Trustee in connection therewith.
Every substituted Debenture issued pursuant to the provisions of this
Section 2.07 upon evidence that any Debenture is destroyed, lost or stolen
shall constitute an additional contractual obligation of the Company, whether
or not the destroyed, lost or stolen Debenture shall be found at any time, and
shall be entitled to all the benefits of this Indenture equally and
proportionately with any and all other Debentures duly issued hereunder. All
Debentures shall be held and owned upon the express condition that the
foregoing provisions are exclusive with respect to the replacement or payment of
mutilated, destroyed, lost or stolen Debentures, and shall preclude (to the
extent permitted by Law) any and all other rights or remedies with respect to
the replacement or payment of negotiable instruments or other securities
without their surrender.
Section 2.08. Cancellation of Surrendered Debentures. All Debentures
surrendered for payment, redemption, conversion, registration of transfer or
exchange, or delivered in satisfaction in whole or in part of any sinking fund
obligation, shall, if surrendered to the Company, the Trustee or any paying
agent, be delivered to the Debenture Registrar and promptly cancelled by it, or,
if surrendered to the Debenture Registrar, shall be promptly cancelled by it,
and no Debentures shall be issued in lieu thereof except as expressly permitted
by any of the provisions of this Indenture. The Debenture Registrar shall
safekeep such cancelled
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Debentures in accordance with its normal retention policies and
thereafter, on request of the Company, the Debenture Registrar shall deliver
to the Company cancelled Debentures held by the Debenture Registrar;
provided, however, that the Debenture Registrar may at any time destroy any
cancelled Debentures and deliver to the Company and to the Trustee a certificate
of such destruction. If the Company shall acquire any of the Debentures,
however, such acquisition shall not operate as a redemption or satisfaction of
the indebtedness represented by such Debentures for the purposes of this
Indenture unless and until the same are delivered or surrendered to the
Debenture Registrar for cancellation.
ARTICLE THREE
Subordination of Debentures
Section 3.01. Agreement of Subordination. The Company irrevocably
covenants and agrees, and each holder of Debentures, by his acceptance
thereof, likewise irrevocably covenants and agrees, that the payment of the
principal of (including any sinking fund payment) and premium, if any, and
interest on each and all of the Debentures is hereby expressly subordinated, to
the extent and in the manner hereinafter set forth, to the prior payment and/or
cancellation (as shall be appropriate) in full of all Senior Indebtedness. The
provisions of this Article Three are made for the benefit of the holders of
Senior Indebtedness, and such holders shall, at any time, be entitled to
enforce such provisions against the Company or any Debentureholders. No holder
of any Senior Indebtedness shall be deemed to owe any fiduciary duty or any
other obligation to the Trustee or any holder of any of the Debentures now or at
any time hereafter.
Section 3.02. Pavment Over of Proceeds Upon Dissolution. etc.
(a) In the event of (x) any insolvency, bankruptcy, receivership,
liquidation, reorganization, readjustment, composition or other similar
proceeding relative to the Company or its creditors or its property, (y) any
proceeding for voluntary liquidation, dissolution or other winding up of the
Company whether or not involving insolvency or bankruptcy proceedings, and (z)
any assignment for the benefit of creditors or any marshalling of the assets of
the Company, then and in any such event,
(i) all Senior Indebtedness (including interest accruing on such Senior
Indebtedness after the date of filing a petition or other action commencing any
such proceeding) shall first be paid in full, or have provision made for payment
and/or cancellation (as shall be appropriate) in full to the reasonable
satisfaction of the holder of any
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<PAGE> 32
Senior Indebtedness, before the holders of the Debentures are entitled to
receive any payment on account of the principal of (including any sinking fund
payment) or premium, if any, or interest on the indebtedness evidenced by
the Debentures, and
(ii) any payment or distribution of assets of the Company of any kind or
character, whether in cash, property or securities (other than securities of
the Company or any other corporation provided for by a plan of reorganization
or readjustment, provided the rights of the holders of Senior Indebtedness are
not altered by such reorganization or readjustment, the payment of which is
subordinate, at least to the extent provided in this Article Three with respect
to the Debentures, to the payment of all Senior Indebtedness at the time
outstanding and to the payment of all securities issued in exchange therefor to
the holders of Senior Indebtedness at the time outstanding), to which the
holders of the Debentures would be entitled except for the provisions of this
Article Three, shall be paid by the liquidating trustee or agent or other
person making such payment or distribution, whether a trustee in bankruptcy, a
receiver or liquidating trustee or other trustee or agent, directly to the
holders of Senior Indebtedness or their representative or representatives or to
the trustee or trustees under any indenture under which any instruments
evidencing any of such Senior Indebtedness may have been issued, ratably
according to the aggregate amounts remaining unpaid on account of the
principal of and premium, if any, and interest on, the Senior Indebtedness held
or represented by each, to the extent necessary to make payment and/or to cancel
(as may be appropriate) in full of all Senior Indebtedness remaining unpaid
and/or outstanding (as the case may be), after giving effect to any concurrent
payment or distribution, or provision therefor, to the holders of such Senior
Indebtedness.
(b) No payments on account of principal of (including any sinking fund
payment) or premium, if any, or interest on the Debentures shall be made unless
full payment of amounts then due for principal of (including any sinking fund
payment), premium, if any, and interest on all Senior Indebtedness has been made
and/or cancelled (as may be appropriate) or otherwise duly provided for to the
reasonable satisfaction of each holder of any Senior Indebtedness.
(c) In the event and during the continuation of any default or event of
default in respect of any Senior Indebtedness or under any agreement under
which any Senior Indebtedness was issued continuing beyond the period of grace,
if any, specified in such agreement, then, unless and until such default shall
have been cured or waived or shall have ceased to exist, no payment shall be
made by the Company and, except as provided in Section 3.06, no application of
funds shall be made by the
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<PAGE> 33
Trustee with respect to the principal of (or premium, if any) or interest on the
Debentures or as a sinking fund for the Debentures except that the Company's
obligation to make sinking fund payments may be reduced in accordance with the
provisions of Section 4.05.
(d) In the event that, notwithstanding the foregoing, any payment or
distribution of assets of the Company of any kind or character, whether in cash,
property or securities (other than securities of the Company or any other
corporation provided for by a plan of reorganization or readjustment, provided
that the rights of the holders of Senior Indebtedness are not altered by such
reorganization or readjustment, the payment of which is subordinate, at least
to the extent provided in this Article Three with respect to the Debentures, to
the payment of all Senior Indebtedness at the time outstanding and to the
payment of all securities issued in exchange therefor to the holders of Senior
Indebtedness at the time outstanding), shall be received by the Trustee or the
holders of the Debentures during the continuance of any event specified in
Sections 3.02(a), 3.02(b) or 3.02(c) prohibiting such payment and before all
Senior Indebtedness is paid in full and/or cancelled (as may be appropriate),
or provision made for its payment to the reasonable satisfaction of each
holder of any Senior Indebtedness, such payment or distribution (subject to
Sections 3.04 and 3.06) shall be immediately paid by the Trustee or such
holders, as the case may be, over to the holders of Senior Indebtedness
(or their representative or representatives or to the trustee or trustees
under any indenture under which any instruments evidencing any of such Senior
Indebtedness may have been issued), upon their written request received
by the Trustee, remaining unpaid or unprovided for as provided in the
foregoing subparagraph (ii) of paragraph (a) of this Section 3.02, for
application to the payment of such Senior Indebtedness until all such Senior
Indebtedness shall have been paid in full, after giving effect to any concurrent
payment or distribution, or provision therefor, to the holders of such Senior
Indebtedness.
(e) Subject to the payment in full and/or cancellation (as may be
appropriate) of all Senior Indebtedness and the irrevocable and complete
termination of all commitments and obligations to issue or fund any Senior
Indebtedness (and not before such time), the holders of the Debentures shall be
subrogated equally and ratably with the holders of all Pari Passu Debt to all
rights of the holders of Senior Indebtedness to receive payments or
distributions of cash, property or securities of the Company applicable to the
Senior Indebtedness until the principal of (including any sinking fund payment)
and premium, if any, and interest on the Debentures shall be paid in full; and,
for purposes of such subrogation, no payments or distributions to the holders
of Senior Indebtedness of cash, property or securities distributable or paid
over
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to the holders of Senior Indebtedness under the provisions hereof to which the
holders of Debentures or Pari Passu Debt, or any trustee of Pari Passu Debt,
would be entitled except for the provisions of this. Article Three shall, as
between the Company, its creditors other than the holders of Senior
Indebtedness, and the holders of the Debentures or of Pari Passu Debt, be
deemed to be a payment by the Company to or on account of the Senior
Indebtedness, it being understood that the provisions of this Article
Three are and are intended solely for the purpose of defining the relative
rights of the holders of the Debentures, the holders of Pari Passu Debt and
the holders of the Senior Indebtedness.
(f) Nothing contained in this Article Three or elsewhere in this
Indenture or in the Debentures is intended to or shall impair, as
between the Company, its creditors other than the holders of Senior
Indebtedness (and the persons and entities committed or obligated to
issue or fund any Senior Indebtedness), and the holders of the
Debentures, the obligation of the Company, which is absolute and
unconditional, to pay to the holders of the Debentures the principal of
(including any sinking fund payment) and premium, if any, and interest on the
Debentures, as and when the same shall become due and payable in accordance
with their terms, or is intended to or shall affect the relative rights of
the holders of the Debentures and other creditors of the Company other than
the holders of the Senior Indebtedness (and the persons and entities committed
or obligated to issue or fund any Senior Indebtedness), nor shall anything
herein or in the Debentures prevent the Trustee or the holder of any
Debenture from exercising all remedies otherwise permitted by applicable law
upon the happening of any Event of Default under this Indenture, subject to the
rights, if any, under this Article Three of the holders of Senior Indebtedness
(and the persons and entities committed or obligated to issue or fund any
Senior Indebtedness) in respect of cash, property or securities of the Company
received upon the exercise of any such remedy.
(g) The Company shall give prompt written notice to the Trustee of any
insolvency, bankruptcy, liquidation, reorganization, readjustment,
composition, dissolution, assignment, marshalling of assets or similar
proceedings of the Company within the meaning of this Section 3.02. Upon any
payment or distribution of assets of the Company referred to in this Article
Three, the Trustee (subject as between the Trustee and the holders of the
Debentures to the provisions of Sections 8.01 and 8.02) and the holders of the
Debentures shall be entitled to rely upon any order or decree made by any court
of competent jurisdiction in which such dissolution, winding up, liquidation or
reorganization proceedings are pending or a certificate of the liquidating
trustee or agent or other person making any distribution to the Trustee or to
the holders of the
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Debentures for the purpose of ascertaining the persons entitled to par-
ticipate in such distribution, the holders of the Senior Indebtedness and
other indebtedness of the Company, the amount thereof or payable thereon;
the amount or amounts paid or distributed thereon and all other facts
pertinent thereto or to this Article Three. If the Trustee determines,
in its sole discretion, that further evidence is required with respect to
the right of any person as a holder of Senior Indebtedness to participate
in any payment or distribution pursuant to this Section 3.02, the Trustee
may request such person to furnish evidence to the reasonable satisfac-
tion of the Trustee as to the amount of Senior Indebtedness held by such
person, as to the extent to which such person is entitled to participate
in such payment or distribution, and as to other facts pertinent to the
rights of such person under this Section 3.02, and if such evidence is
not furnished, the Trustee may defer any payment to such person pending
judicial determination as to the right of -person to receive such
payment. The Trustee shall be entitled to rely on the delivery to it of
a written notice by a person representing himself, herself or itself, to
be a holder of Senior Indebtedness (or a trustee on behalf of such
holder) to establish that notice pursuant to Section 3.06 has been given
by a holder of Senior Indebtedness or a trustee on behalf of any such
holder. With respect to the holders of Senior Indebtedness; the Trustee
undertakes to perform or to observe only such of its covenants and
obligations as are set forth in this Article Three, and no implied
covenants or obligations with respect to the holders of Senior Indebtedness
shall be read into this Indenture against the Trustee. The Trustee shall not be
deemed to owe any fiduciary duty to the holders of Senior Indebtedness and in
the absence of receipt of written request as provided for herein shall not be
Liable to any such holder if it shall pay over and distribute to the holders
of the Debentures or to the Company or to any other person, money or assets
to which any holder of Senior Indebtedness shall be entitled pursuant to this
Article Three or otherwise.
(h) Without notice to or the consent of the holders of the Debentures or
the Trustee, the holders of the Senior Indebtedness or the persons or entities
committed or obligated to issue or fund any Senior Indebtedness may at any time
and from time to time, without impairing or releasing the subordination herein
made, change the manner, place or terms of payment, or change or extend the
time of payment of or renew or alter the Senior Indebtedness or the commitment
or obligation to issue or fund any Senior Indebtedness, or amend or supplement
in any manner any instrument evidencing the Senior Indebtedness or the
commitment or obligation to issue or fund any Senior Indebtedness, any
agreement pursuant to which the Senior Indebtedness was issued or incurred or
any instrument securing or relating to the Senior Indebtedness or the
commitment or obligation to issue or fund any Senior Indebtedness;
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release any person liable in any manner for the payment or collection of the
Senior Indebtedness; exercise or refrain from exercising any rights in respect
of the Senior Indebtedness against the Company or any other person; apply any
money or other property paid by any person or released in any manner to the
Senior Indebtedness; accept or release any security for the Senior
Indebtedness; sell, exchange, release or otherwise deal with any property
pledged, mortgaged or otherwise securing Senior Indebtedness; or exercise or
refrain from exercising any rights against the Company or any other person; all
without thereby impairing in any respect the rights of such holders of Senior
Indebtedness as provided in this Article Three.
(i) The Trustee, any Authenticating Agent, any paying or conversion agent,
or any Debenture Registrar may be holders of Senior Indebtedness and shall be
entitled to all the rights set forth in this Article Three in respect of any
Senior Indebtedness at any time held by it, to the same extent as any holder
of Senior Indebtedness, and nothing in this Indenture shall deprive the
Trustee, any Authenticating Agent, any paying agent, any Debenture Registrar
or any conversion agent of any of its rights as such holder. Nothing in this
Article Three shall apply to claims of or payments to the Trustee under or
pursuant to Section 8.06.
Section 3.03. No Waiver of Subordination Provision. No right of any
present or future holder of any Senior Indebtedness of the Company to enforce
subordination, as herein provided, shall at any time in any way be prejudiced
or impaired by any act or failure to act on the part of the Company or by any
act or failure to act, in good faith, by any such holder, or by any
noncompliance by the Company with the terms, provisions and covenants of this
Indenture, regardless of any knowledge thereof any such holder may have or be
otherwise charged with.
Section 3.04. Payments to Debentureholders. Nothing contained in this
Article Three or elsewhere in this Indenture, or in any of the Debentures,
shall, however, (a) affect the obligation of the Company to make, or prevent
the Company from making, at any time, except as provided in Section 3.02,
payments of principal of (including any sinking fund payment) or premium, if
any, or interest on the Debentures or (b) prevent the application by the
Trustee of any moneys deposited with it hereunder by the Company to the
payment of or on account of the principal of (including any sinking fund
payment) or premium, if any, or interest on the Debentures if the Trustee did
not have written notice of any event prohibiting the payment of such principal
or interest on or prior to the third business day preceding the date such
payment is due.
Section 3.05. Authorization of Debentureholders to Trustee to Effect
Subordination. Each holder of Debentures by his acceptance
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thereof irrevocably authorizes and directs the Trustee in his behalf to take
such action as may be necessary or appropriate to effectuate the subordination
provided in this Article Three and appoints the Trustee his attorney-in-fact
for such purpose.
Section 3.06. Knowledge of Trustee and Paying Agent.
Notwithstanding the provisions of this Article Three or any other provisions of
this Indenture, the Trustee shall not be charged with notice or knowledge of
the existence of any Senior Indebtedness, or of any default or event of default
with respect to any Senior Indebtedness, or the existence of any facts which
would prohibit the making of any payment of moneys to or by the Trustee, or the
taking of any other actions by the Trustee, unless and until the Trustee shall
have received written notice at the corporate trust office thereof from the
Company or a holder (established to be such a holder to the reasonable
satisfaction of the Trustee), or a trustee or similar representative of any
class, of Senior Indebtedness; and, prior to the receipt of any such written
notice, the Trustee shall be entitled to assume that no such default or event of
default has occurred and that no such facts exist; provided, however, that,
unless on the third business day prior to the date upon which by the terms
hereof any such moneys may become payable for any purpose or any other action
should be taken (including, without limitation, the payment of either the
principal of (including any sinking fund payment) or the premium, if any, or
interest on any Debenture) the Trustee shall have received the written notice
provided for in this Section 3.06, then, anything herein contained to the
contrary notwithstanding, the Trustee shall have full power and authority to
receive such moneys and apply the same to the purpose for which they were
received, and shall not be affected by any notice to the contrary which may be
received by it on or after such date.
Section 3.07. All Provisions of Indenture Qualified by Article Three.
Notwithstanding anything herein contained to the contrary, all the provisions
of this Indenture shall, except as otherwise provided herein, be subject to
the provisions of this Article Three, so far as the same may be applicable
thereto.
Section 3.08. Applicability of Article Three to Paying Agents. In case at
any time any paying agent other than the Trustee shall have been appointed by
the Company and be then acting hereunder, the term "Trustee" as used in this
Article Three shall in such case (unless the context shall otherwise require)
be construed as extending to and including such paying agent within its meaning
as fully for all intents and purposes as if such paying agent were named in
this Article Three in place of the Trustee.
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ARTICLE FOUR
Redemption of Debentures -
Sinking Fund
Section 4.01. Redemption Prices - Sinking Fund and Voluntary Redemptions.
(a) The Debentures shall be redeemed in part on June 1, 1999, and on each June 1
thereafter to and including June 1, 2013, through the operation of the sinking
fund provided for in Section 4.04, at 100% of the principal amount thereof (the
"sinking fund redemption price"), together with accrued interest to the date
fixed for redemption.
(b) Subject to the provisions of Article Three hereof, the Company may, at
its option, otherwise than through the operation of the sinking fund provided
for in Section 4.04, redeem all or from time to time any part of the Debentures
on any date on or after June 1, 1991 and prior to maturity, upon notice as,set
forth in Section 4.02 and at the optional redemption prices set forth in the
form of Debenture hereinabove recited, together with accrued interest to the
date fixed for redemption.
Section 4.02. Notice of Redemption: Selection of Debentures. If the
Company shall desire to exercise the right to redeem all or any part of the
Debentures pursuant to Section 4.01(b), it shall fix a date for redemption and
shall mail a notice of such redemption at least 30 and not more than 60 days
prior to the date fixed for redemption to the holders of Debentures so to be
redeemed as a whole or in part at their last address as the same appears on the
Debenture Register and to the Trustee. Such mailing shall be by first class
mail. The notice if mailed in the manner herein provided shall be conclusively
presumed to have been duly given, whether or not the holder receives such
notice. In any case, failure to give such notice by mail or any defect in the
notice to the holder of any Debenture designated for redemption in whole or in
part shall not affect the validity of the proceedings for the redemption of any
other Debenture.
Each such notice of redemption shall be given in the name of the Company
and shall specify the date fixed for redemption, the redemption price at which
Debentures are to be redeemed, the place of payment, that payment will be made
upon presentation and surrender of such Debentures, that interest accrued to the
date fixed for redemption will be paid as specified in said notice, that on and
after said date interest thereon or on the portions thereof to be redeemed will
cease to accrue and that the right to convert any Debenture or portion thereof
into Common Stock will terminate at the close of business on the fifth day prior
to the date fixed for redemption. If any Debenture is to be redeemed in part
only, the notice of redemption shall state the portion of the principal amount
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thereof to be redeemed and shall state that on and after the date fixed for
redemption, upon surrender of such Debenture, a new Debenture or Debentures
in aggregate principal amount equal to the unredeemed portion thereof will be
issued without charge to the holder. No Debenture of the denomination of
$1,000 shall be redeemed in part and Debentures may be redeemed in part only in
multiples of $1,000.
If less than all the Debentures are to be redeemed, the Company will
notify the Trustee and the Debenture Registrar not less than 60 days (or such
lesser number of days as the Trustee and the Debenture Registrar shall
approve) prior to the date fixed for redemption as to the aggregate principal
amount of Debentures to be redeemed, and thereupon the Trustee shall select,
on pro rata basis or by lot, the Debentures or portions thereof to be redeemed,
and shall as promptly as practicable notify the Company and the Trustee of the
Debentures or portions thereof so selected. For the purposes of such
selection, the Debenture Registrar shall close the Debenture Register for the
purpose of exchange and transfer of Debentures, for a period not exceeding
five days prior to such selection.
Prior to the date fixed for redemption specified in the notice of
redemption given as provided in this Section, the Company will deposit with
the Trustee or with the paying agent an amount of money sufficient to redeem on
the date fixed for redemption all the Debentures so called for redemption at
the appropriate redemption price, together with accrued interest to the date
fixed for redemption.
Section 4.03. Payment of Debentures Called for Redemption. If notice of
redemption has been given as above provided, the Debentures or portions of
Debentures with respect to which such notice has been given shall become due
and payable on the date and at the place stated in such notice at the
applicable redemption price, together with interest accrued to the date
fixed for redemption, and on and after said date (unless the Company shall
default in the payment of such Debentures or portions thereof at such
redemption price, together with interest accrued to said date) interest on the
Debentures and portions of Debentures so called for redemption shall cease to
accrue, and such Debentures and portions of Debentures shall be deemed not to
be outstanding hereunder and shall not be entitled to any benefit under this
Indenture except to receive payment of such redemption price, together with
accrued interest to the date fixed for redemption. On presentation and
surrender of such Debentures at the place of payment in said notice specified,
the said Debentures or the specified portions thereof shall be paid and
redeemed by the Company at the applicable redemption price, together with
interest accrued thereon to the date fixed for redemption.
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Upon presentation and surrender of any Debentures redeemed in part only,
the Company shall execute and the Trustee or Authenticating Agent shall
authenticate and the Debenture Registrar shall register and deliver to the
holder thereof, at the expense of the Company, a new Debenture or Debentures, of
authorized denominations, in aggregate principal amount equal to the unredeemed
portion of the Debenture so presented and surrendered.
Section 4.04. Sinking Fund. As and for a mandatory sinking fund for the
retirement of Debentures and so long as any of the Debentures remain outstanding
and unpaid, the Company shall pay to the Trustee an amount in cash, except as
provided in Section 4.05, not less than one business day before June 1, 1999 and
before June 1 in each year thereafter to and including June 1, 2013, equal to 5%
of the aggregate principal amount of Debentures theretofore authenticated and
delivered under this Indenture (excluding Debentures authenticated and delivered
in exchange for or in lieu of the Debentures), or such lesser amount equal to
the principal amount of the Debentures then outstanding. The last date on which
a payment under this Section 4.04 may be made in each year is herein referred to
as the "sinking fund payment date".
All cash paid to the Trustee pursuant to this Section 4.04 shall be applied
in accordance with the provisions of this Article Four.
Section 4.05. Credits Against Sinking Fund. (a) In lieu of making all or
any part of any sinking fund payment as required by Section 4.04 hereof in cash,
the Company may (x) take credit for the principal amount of and deliver to the
Debenture Registrar for cancellation Debentures theretofore issued and acquired
by the Company at any time prior to the April 1 preceding the due date of such
payment and not theretofore made the basis for the reduction of a sinking fund
payment, (y) take credit for the principal amount of any Debentures theretofore
redeemed pursuant to the provisions of this Article Four (otherwise than by
means of a mandatory sinking fund payment) or Article Four-A or which shall have
been duly called for redemption (otherwise than through the operation of the
mandatory sinking fund) or for which a Notice of Election has been delivered to
the Company pursuant to Section 4 A.04 and the redemption price of which,
together with accrued interest thereon, shall have been deposited in trust for
that purpose, as provided in this Article Four or Article Four-A, as the case
may be, and not theretofore made the basis of the reduction of a sinking fund
payment, or (z) take credit for the principal amount of Debentures surrendered
for conversion at any time prior to the April 1 preceding the due date for such
payment in accordance with the provisions of Article Fourteen, and not
theretofore made the basis of the reduction of a sinking fund payment; and in
each such case the amount of cash required by Section 4.04 to be paid to the
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Trustee shall be reduced to the extent of the principal amount of the
Debentures so delivered or so redeemed or so called for redemption or so
converted.
(b) Anything contained in this Article Four to the contrary
notwithstanding, the amount of cash payable to the Trustee pursuant to Section
4.04 hereof shall be reduced by the aggregate sinking fund redemption price of
Debentures called for redemption under Section 4.09 on the next sinking fund
payment date but which are converted as provided in Article Fourteen hereof
prior to such sinking fund payment date. The Company shall deliver to the
Trustee, together with or in Lieu of the cash required to be delivered to the
Trustee pursuant to Section 4.04, an Officers' Certificate with respect to
such conversions of Debentures called for redemption pursuant to the operation
of the sinking fund, together with the Debentures so converted. The Trustee
shall promptly deliver a copy of such Officer's Certificate to the Debenture
Registrar, together with such Debentures for cancellation in accordance with
Section 4.11.
Section 4.06. Certificates and Debentures to be Delivered to the
Trustee. On or before April 1 of each year in which the Company is obligated
to make a sinking fund payment (unless a shorter notice shall be accepted by
the Trustee and the Debenture Registrar), the Company shall:
(a) Deliver to the Trustee and the Debenture Registrar an Officers'
Certificate stating:
(i) the manner in which the Company will fulfill its sinking fund
obligation under this Article Four for such year;
(ii) the amount of cash, if any, which the Company will (subject to
Section 4.05(C)) pay to the Trustee or any paying agent, as and for sinking
fund payments, on or before the next sinking fund payment date;
(iii) the principal amount of Debentures, if any, which pursuant to
clause (x) of Section 4.05(a), the Company will surrender to the Debenture
Registrar for cancellation in Lieu of the payment of cash, and that such
Debentures were therefore issued and acquired by the Company prior to said
April 1 and have not therefore been made the basis for the reduction of a
sinking fund payment;
(iv) the principal amount of Debentures, if any, for which credit is
claimed pursuant to clause (y) of Section 4.05(a),
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together with such facts as shall demonstrate that the Company is entitled to
such credit; and
(v) the principal amount of Debentures, if any, for which credit is claimed
pursuant to clause (z) of Section 4.05(a), together with such facts as shall
demonstrate that the Company is entitled to such credit.
(b) Deliver to the Trustee the Debentures, if any, referred to in clauses
(iii) and (v) of the Officers' Certificate given pursuant to this Section 4.06.
The Trustee shall promptly deliver a copy of such Officer's Certificate to the
Debenture Registrar, together with such Debentures for cancellation in
accordance with Section 4.11.
Section 4.07. Cash to be Delivered to the Trustee. At least one business
day prior to the sinking fund payment date of each year in which the Company is
obligated to make a sinking fund payment, the Company shall pay to the Trustee
the amount of cash, if any, payable on or before such sinking fund payment date,
after giving credit pursuant to Section 4.05 for Debentures previously acquired,
redeemed, called for redemption or converted, as evidenced by the certificates
delivered pursuant to Sections 4.05(b) and 4.06, together with a sum, in cash,
equal to all interest accrued to the date fixed for redemption of Debentures to
be redeemed on such sinking fund payment date, after taking into account in the
calculation of such interest the giving of such credit.
Section 4.08. Application of Sinking Fund Payments. The Trustee shall,
as soon as practicable after the receipt of the certificate delivered pursuant
to Section 4.06, take the action herein specified to call for redemption on the
next June 1, at 100% of the principal amount thereof together with accrued
interest to the date fixed for redemption, of a sufficient principal amount of
Debentures to absorb, as nearly as may be practicable, the amount of any unused
balance of any preceding sinking fund payments made in cash plus the amount of
cash which, as indicated in such certificate, the Company will pay to the
Trustee, as and for sinking fund payments, on or before the next succeeding
sinking fund payment date; provided, however, that, if such amount does not in
the aggregate exceed $1OO,OOO, the Trustee shall not take such action except on
request of the Company (made at the time of delivery of such certificate) and,
in the absence of any such request, such moneys shall be retained by the
Trustee. Subject to the preceding proviso, the Trustee shall apply the amount
of any cash sinking fund payment to the redemption of Debentures on the
appropriate sinking fund redemption date.If, after any sinking fund payment
date, the amount of cash in the hands of the Trustee in the sinking fund which
is not required for payment of
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Debentures previously called for redemption or purchased through operation of
the sinking fund is $100,000 or Less, such moneys, upon request of the Company,
shall be applied by the Trustee on a best efforts basis prior to the next
succeeding April 1 to the purchase of Debentures, by public or private purchase
in the open market or otherwise, at prices (excluding accrued interest and
brokerage commissions, funds for which shall be supplied by the Company from
sources other than the sinking fund) not exceeding the sinking fund redemption
price. Any and all sinking fund moneys held by the Trustee on June 1, 2014, and
not held for the payment or redemption of particular Debentures shall be applied
by the Trustee, together with other moneys, if necessary, to be deposited
sufficient for the purpose, to the payment of the principal of the Debentures at
maturity.
Section 4.09. Manner of Redeeming Debentures. The Debentures to be
redeemed from time to time as in Sections 4.01(b), 4.04 and 4.08 provided shall
be selected by the Trustee for redemption in the manner provided in Section 4.02
and notice thereof shall be given to the Company and the Debenture Registrar,
and the Company hereby irrevocably authorizes the Trustee, in the name of and at
the expense of the Company, to give notice on behalf of the Company of the call
of such,Debentures, all in the manner and with the effect in this Article Four
specified, except that, with respect to redemptions pursuant to Section 4.04, in
addition to the matters required to be included in such notice by Section 4.02,
such notice shall also state that the Debentures therein designated for
redemption are to be redeemed through operation of the sinking fund. The
Trustee shall cause such Debentures to be so redeemed and paid in accordance
with such notice in the manner and with the effect provided in Sections 4.02 and
4.03.
Section 4.10. Sinking Fund Moneys to be held as Security During
Continuation of Default; Exceptions. The Trustee shall not redeem any Debenture
with sinking fund moneys or mail any notice of redemption of Debentures by
operation of the sinking fund during the continuance of any default in payment
of interest on the Debentures when due or of any Event of Default, except that
if the notice of redemption of any Debentures shall theretofore have been mailed
in accordance with the provisions hereof, the Trustee shall redeem such
Debentures if cash sufficient for that purpose shall be deposited with the
Trustee for that purpose in accordance with the terms of this Article Four.
Except as aforesaid, any moneys in the sinking fund at the time when any such
default or Event of Default shall occur and any moneys thereafter paid into the
sinking fund shall, during the continuance of such default or Event of Default,
be held as security for the payment of all the Debentures; provided, however,
that in case such default or Event of
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Default shall have been cured or waived as provided herein, such moneys shall
thereafter be applied pursuant to the provisions of Section 4.08.
Section 4.11. Cancellation and Destruction of Redeemed Debentures. All
Debentures surrendered to or purchased by the Trustee or any paying agent,
pursuant to the provisions of this Article Four or Article Four-A, shall be
delivered to the Debenture Registrar and forthwith cancelled by it, and evidence
of such cancellation shall be furnished to the Trustee, and thereafter held or
disposed of in accordance with Section 2.08.
ARTICLE FOUR-A
Redemption of Debentures; Holder's Option
Section 4A.01 Right to Redemption. In the event that a Redemption Even
shall have occurred, then subject to the terms and conditions of this Article
Four-A each holder of Debentures shall have the right, at the holder's option,
to require the Company to redeem all or any portion (equal to $1,000 or any
integral multiple thereof) of the holder's Debentures for cash at the principal
amount thereof together in each case with accrued interest thereon to the
Redemption Date.
The "Redemption Date" shall be the ninetieth (90th) day after the date on
which a Redemption Event shall have occurred.
A "Redemption Event" shall be deemed to have occurred upon the happening
of any of the following events:
(a) Any person or group (within the meaning of section 13(d) (3) of
the Exchange Act), together with any affiliates and associates of any
thereof, shall beneficially own (within the meaning of Rule 13d-3 under the
Exchange Act) at least a majority of the total voting power of all classes
of capital stock of the Company entitled to vote generally in the election
of directors of the Company; or
(b) The Company, directly or indirectly, consolidates with, merges
with or into, or sells, leases or conveys all or substantially all its
assets to any other Person in a transaction pursuant to which all or
substantially all of the Company's Common Stock shall be exchanged for,
converted into, acquired for or constitute the right to receive
consideration less than 90% of which (in terms of value) is common stock
which is (or, upon consummation of or immediately following such
transaction or event, will be) listed on a national securities exchange or
approved for quotation
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in the NASDAQ National Market System or any successor to such system.
Notwithstanding the right of the holders of the Debentures to require the
Company to redeem the Debentures as described above, the Company shall not be
obligated to redeem any Debenture at any time when the subordination provisions
of the Debentures would not permit the Company to make a payment of principal,
premium or interest on the Debentures. Notwithstanding the provisions of this
Article Four-A, the Trustee shall not be charged with notice or knowledge of the
existence of any Redemption Event unless and until the Trustee shall have
received written notice thereof at the corporate trust office from the Company
or a Debentureholder; and, prior to the receipt of any such written notice, the
Trustee shall be entitled to assume that no such Redemption Event has occurred.
Section 4A.02 Applicability of Article. Redemption of Debentures in
accordance with this Article Four-A shall be at the election of the holder
thereof and shall be made in accordance with the provisions of this Article.
Section 4A.03 Notice of Redemption Event. Unless the Company shall have
theretofore called all the outstanding Debentures for redemption pursuant to
Article Four, notice of the occurrence of a Redemption Event shall be given by
first class mail, postage prepaid, mailed not more than ten (10) days after the
occurrence of such Redemption Event, to each holder of Debentures at his address
appearing in the Debenture Register and to the Trustee at its corporate trust
office, but failure to give such notice by mailing in the manner herein provided
to the holder of any Debenture, or any defect in the notice to any holder, shall
not affect the validity of the proceedings for the redemption of any other
Debenture.
All such notices shall state:
(a) the event constituting the Redemption Event;
(b) the Redemption Date;
(c) that the redemption price will be the principal amount of the
Debentures a holder elects to redeem, plus accrued interest thereon;
(d) that on the Redemption Date the redemption price will become due
and payable upon each Debenture with respect to which a
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holder has elected redemption, and that interest thereon shall cease to
accrue on and after such date;
(e) the place or places where such Debentures are to be surrendered
for payment of the redemption price;
(f) the Conversion Price then in effect, the date on which the right
to convert the principal amount of the Debentures to be redeemed will
terminate and the place or places where such Debentures may be surrendered
for conversion; and
(g) a redemption election by a holder shall be irrevocable.
Notice of a Redemption Event shall be given by the Company, or by the Trustee at
the Company's written request in the name and at the expense of the Company.
No failure of the Company to give the foregoing notice shall limit any
Debentureholder's right to require the redemption of Debentures pursuant to this
Article Four-A.
Section 4A.04 Notice of Election. A holder of Debentures electing to
require redemption of all or any portion of such Debentures shall make such
election by delivering to the office or agency to be maintained by the Company
pursuant to Section 5.02 not later than the fifth (5th) day prior to the
Redemption Date a validly executed Notice of Election ("Notice of Election")
setting forth the name of the Debentureholder, the principal amount of the
Debentures, or portions thereof, with respect to which an election to require
redemption is being made, and a statement that the election to require
redemption is being made thereby. Such Notice of-Election shall be irrevocable.
Section 4A.05 Deposit of Funds. On or prior to the Redemption Date, the
Company shall deposit with the Trustee an amount of money in same day funds
sufficient to pay the principal amount of, and (except if the Redemption Date
shall be on a June 1 or December 1) accrued interest on, all the Debentures with
respect to which properly completed and validly executed Notices of Election
shall have been delivered pursuant to Section 4A.04.
Section 4A.06 Debentures Payable on Redemption Date. The Debentures with
respect to which Debentureholders shall have elected to require redemption
shall, on the Redemption Date, become due and payable at the redemption price as
set forth in Section 4A.01, and from and after such date (unless the Company
shall default in the payment of the redemption price) such Debentures shall
cease to bear interest. Upon
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surrender of any Debenture for redemption in accordance with any Notice of
Election, such Debenture shall be redeemed by the Company at the redemption
price.
If any Debenture to be redeemed shall not be so paid upon surrender thereof
for redemption, the principal shall, until paid, bear interest from the
Redemption Date at the rate borne by the Debenture.
Section 4A.07 Debentures Redeemed in Part. Any Debenture that is to be
redeemed only in part shall be surrendered at any office or agency of the
Company designated for that purpose pursuant to Section 5.02 (with due
endorsement by, or a written instrument of transfer in form satisfactory to the
Trustee duly executed by, the holder thereof or his attorney duly authorized in
writing), and the Company shall execute, and the Trustee shall authenticate and
make available for delivery to the holder of such Debenture without service
charge, a new Debenture or Debentures, of any authorized denomination as
requested by such Debentureholder, in aggregate principal amount equal to and in
exchange for the unredeemed portion of the principal of the Debenture so
surrendered.
For all purposes of this Article Four-A, unless the context otherwise
requires, all provisions relating to the redemption of Debentures shall relate,
in the case of any Debenture redeemed or to be redeemed only in part, to the
portion of the principal amount of such Debentures that has been or is to be
redeemed.
ARTICLE FIVE
Particular Covenants of the Company
Section 5.01. Payment of Principal, Premium and Interest on Debentures. The
Company covenants and agrees that it will duly and punctually pay or cause to be
paid the principal of (and premium, if any) and the interest on each of the
Debentures at the place, at the respective times and in the manner provided in
the Debentures.
Section 5.02. Office for Notices and Payments, etc. So long as any of the
Debentures remain outstanding, the Company will maintain in the City of Houston,
Texas, and in the Borough of Manhattan, The City of New York, an office or
agency where the Debentures may be presented for payment, an office or agency
where the Debentures may be presented for registration of transfer or exchange
or for conversion as in this Indenture provided, and an office or agency where
notices and demands to or upon the Company in respect of the Debentures or of
this Indenture may be served. Until otherwise designated by the Company in a
written notice
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to the Trustee, such offices or agencies in the City of Houston, Texas, and in
the Borough of Manhattan, The City of New York, for purposes of presentation for
payment and presentation for registration of transfer and exchange and for
conversion and for purposes of services of notices and demands shall be the
corporate trust offices of the Trustee. If the Company shall at any time fail
to maintain any such offices or agencies, or shall fail to give notice to the
Trustee of any change in the location thereof, presentation may be made and
notice and demand may be served in respect of the Debentures or of this
Indenture at said offices of the Trustee.
Section 5.03. Prohibition of Extension of Claims for Interest. In order to
prevent any accumulation of claims for interest after maturity thereof, the
Company will not directly or indirectly extend or consent to the extension of
the time for the payment of any claim for interest on any of the Debentures and
will not directly be a party to or approve any such arrangement by the purchase
or funding of said claims for interest or in any other manner; provided,
however, that this Section 5.03 shall not apply in any case where an extension
shall be made pursuant to a plan proposed by the Company to the holders of all
the Debentures then outstanding.
Section 5.04. Appointment to Fill a Vacancy in the Office of Trustee. The
Company, whenever necessary to avoid or fill a vacancy in the office of Trustee,
will appoint, in the manner provided in Section 8.10, a Trustee, so that there
shall at all times be a Trustee hereunder.
Section 5.05. Provision as to Paying Agent. (a) The Company initially
appoints the Trustee as paying agent. If the Company shall appoint a paying
agent other than the Trustee, it will cause such paying agent to execute and
deliver to the Trustee an instrument in which such agent shall agree with the
Trustee, subject to the provisions of this Section 5.05,
(i) that it will hold all sums held by it as such agent for the
payment of the principal of (and premium, if any) and interest on the
Debentures (whether such sums have been paid to it by the Company or by any
other obligor on the Debentures) in trust for the benefit of the holders of
the Debentures;
(ii) that it will give the Trustee notice of any failure by the
Company (or by any other obligor on the Debentures) in making any payment
of the principal of (or premium, if any) or interest on the Debentures when
the same shall be due and payable; and
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(iii) that it will, at any time during the continuance of any such failure,
upon the written request of the Trustee, forthwith pay to the Trustee all sums
so held in trust by such paying agent.
(b) If the Company shall act as its own paying agent, it will, on or before
each due date of the principal of (and premium, if any) or interest on any of
the Debentures, set aside, segregate and hold in trust for the benefit of the
holders of such Debentures entitled thereto a sum sufficient (together with any
sums deposited with any other paying agent for such purpose) to pay such
principal (and premium, if any) or interest so becoming due and will notify the
Trustee of any failure by it to take such action and of any failure by the
Company (or by other obligor under the Debentures) to make any payment of the
principal of or premium, if any, or interest on the Debentures when the same
shall become due and payable. Whenever the Company shall have one or more paying
agents, it will, on or before each due date of the principal of (or premium, if
any) or interest on any of the Debentures, deposit with a paying agent a sum
sufficient to pay such principal (or premium, if any) or interest so becoming
due, such sums to be held in trust for the benefit of the holders of such
Debentures entitled thereto, and (unless the paying agent is the Trustee) the
Company will notify the Trustee of its action or of any failure by it to take
such action.
(c) Anything in this Section 5.05 to the contrary notwithstanding, the
Company may, at any time, for the purpose of obtaining a satisfaction and
discharge of this Indenture, or for any other reason, pay or cause to be paid to
the Trustee all sums held in trust by it or any paying agent hereunder, as
required by this Section 5.05, such sums to be held by the Trustee upon the
trusts herein contained.
(d) Anything in this Section 5.05 to the contrary notwithstanding, the
agreement to hold sums in trust as provided in this Section 5.05 is subject to
the provisions of Sections 13.03 and 13.04.
Section 5.06. Company to Furnish Annual Compliance Certificate. On or
before the 90th day after the end of the Company's fiscal year beginning with
the year in which the Debentures are originally issued, the Company will file
with the Trustee an Officers' Certificate stating that in the course of the
performance by the signers of their duties as officers of the Company they would
normally have knowledge of any action or failure to act on the part of the
Company in violation of any covenant, agreement, provision or condition
contained in this Indenture, stating whether or not they have knowledge of any
action or failure to act on the part of the Company during the preceding fiscal
year, in violation of any covenant, agreement, provision or condition contained
in
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this Indenture and, if so, specifying each such default of which the signers
have knowledge and the nature thereof.
ARTICLE SIX
Debentureholders' Lists and Reports
by the Company and the Trustee
Section 6.01. Debentureholders' List. The Company shall furnish or cause
to be furnished to the Trustee
(a) semiannually, not more than 10 days after each May 15 and
November 15, commencing after the date of original issuance of the
Debentures, a list, in such form as the Trustee may reasonably require,
of the names and addresses of the holders of Debentures as of such
May 15 and November 15, and
(b) at such other times as the Trustee may request in writing,
within 25 days after the receipt by the Company of any such request, a
list of similar form and content as of a date not more than 15 days prior
to the time such list is furnished,
excluding from any such list names and addresses received by the Trustee in its
capacity as Debenture Registrar or paying agent if so acting.
Section 6.02. Preservation and Disclosure of List. (a) The Trustee shall
preserve, in as current a form as is reasonably practicable, all information as
to the names and addresses of the holders of Debentures (i) contained in the
most recent list furnished to it as provided in Section 6.01 and (ii) received
by it in the capacity of Debenture Registrar or of paying agent (if so acting)
hereunder. The Trustee may destroy any list furnished to it pursuant to Section
6.01 upon receipt of a new list so furnished.
(b) In case three or more holders of Debentures (hereinafter referred
to as "applicants") apply in writing to the Trustee, and furnish to the Trustee
reasonable proof that each such applicant has owned a Debenture for a period
of at least six months preceding the date of such application, and such
application states that the applicants desire to communicate with other holders
of Debentures with respect to their rights under this Indenture or under the
Debentures, and is accompanied by a copy of the form of proxy or other
communication which such applicants propose to transmit, then the Trustee
shall, within five business days after the receipt of such application, at its
election, either,
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(i) afford such applicants access to the information preserved at the time
by the Trustee in accordance with the provisions of subsection (a) of this
Section 6.02, or
(ii) inform such applicants as to the approximate number of holders of
Debentures whose names and addresses appear in the information preserved at the
time by the Trustee, in accordance with the provisions of subsection (a) of this
Section 6.02, and as to the approximate cost of mailing to such Debentureholders
the form of proxy or other communication, if any, specified in such application.
If the Trustee shall elect not to afford such applicants access to such
information, the Trustee shall, upon the written request of such applicants,
mail to each Debentureholder whose name and address appears in the information
preserved at the time by the Trustee in accordance with the provisions of
subsection (a) of this Section 6.02 and to the Company, a copy of the form of
proxy or other communication which is specified in such request, with reasonable
promptness after a tender to the Trustee of the material to be mailed and of
payment, or provision for the payment, of the reasonable expenses of such
mailing, unless within five days after such tender, the Trustee shall mail to
such applicants and file with the Securities and Exchange Commission, together
with a copy of the material to be mailed, a written statement to the effect
that, in the opinion of the Trustee, such mailing would be contrary to the best
interests of the holders of Debentures or would be in violation of applicable
law. Such written statement shall specify the basis of such opinion. If the
Securities and Exchange Commission, after opportunity for a hearing upon the
objections specified in the written statements so filed, shall enter an order
refusing to sustain any of such objections or if, after the entry of an order
sustaining one or more of such objections, the Securities and Exchange
Commission shall find, after notice and opportunity for hearing, that all the
objections so sustained have been met and shall enter an order so declaring, the
Trustee shall mail copies of such material to all such Debentureholders with
reasonable promptness after the entry of such order and the renewal of such
tender; otherwise the Trustee shall be relieved of any obligation or duty to
such applicants respecting their application.
(c) Each and every holder of the Debentures, by receiving and holding the
same, agrees with the Company and the Trustee that neither the Company nor the
Trustee nor any paying agent nor any Debenture Registrar shall be held
accountable by reason of the disclosure of any such information as to the names
and addresses of the holders of Debentures in accordance with the provisions of
subsection (b) of this Section 6.02, regardless of the source from which such
information was derived,
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and that the Trustee shall not be held accountable by reason of mailing any
material pursuant to a request made under said subsection (b).
Section 6.03. Annual and Other Reports to be Filed by the Company with the
Trustee. (a) The Company covenants and agrees to file with the Trustee, within
15 days after the Company is required to file the same with the Securities and
Exchange Commission, copies of the annual reports and of the information,
documents and other reports (or copies of such portions of any of. the foregoing
as the Securities and Exchange Commission may from time to time by rules and
regulations prescribe) which the Company may be required to file with the
Securities and Exchange Commission pursuant to section 13 or section 15(d) of
the Securities Exchange Act of 1934, or, if the Company is not required to file
information, documents or reports pursuant to either of such sections, then to
file with the Trustee and the Securities and Exchange Commission, in accordance
with rules and regulations prescribed from time to time by the Securities and
Exchange Commission, such of the supplementary and periodic information,
documents and reports which may be required pursuant to section 13 of the
Securities Exchange Act of 1934 in respect of a security listed and registered
on a national securities exchange as may be prescribed from time to time in such
rules and regulations.
(b) The Company covenants and agrees to file with the Trustee and the
Securities and Exchange Commission, in accordance with the rules and regulations
prescribed from time to time by the Securities and Exchange Commission, such
additional information, documents, and reports with respect to compliance by the
Company with the conditions and covenants provided for in this Indenture as may
be required from time to time by such rules and regulations.
(c) The Company covenants and agrees to transmit by mail to the holders of
Debentures within 30 days after the filing thereof with the Trustee, as their
names and addresses appear on the Debenture Register, such summaries of any
information, documents and reports required to be filed by the Company pursuant
to subsections (a) and (b) of this Section 6.03 as may be required by rules and
regulations prescribed from time to time by the Securities and Exchange
Commission.
Section 6.04. Reports by the Trustee. (a) Within 60 days after May 15 of
each year commencing with the first May 15 to occur after the date of this
Indenture, so long as any Debentures are outstanding hereunder, the Trustee
shall transmit to the Debentureholders as hereinafter in this Section 6.04
provided, a brief report dated as of the preceding May 15, with respect to:
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(i) its eligibility under Section 8.09 and its qualifications under Section
8.08, or in lieu thereof, if to the best of its knowledge it has continued to be
eligible and qualified under such Sections, a written statement to such effect:
(ii) the character and amount of any advances (and if the Trustee elects so
to state, the circumstances surrounding the making thereof) made by the Trustee
(as such) which remain unpaid on the date of such report, and for the
reimbursement of which it claims or may claim a lien or charge, prior to that of
the Debentures, on any property or funds held or collected by it as Trustee or
paying agent, except that the Trustee shall not be required (but may elect) to
report such advances if such advances so remaining unpaid aggregate not more
than one-half of 1 percent of the principal amount of the Debentures outstanding
on the date of such report;
(iii) the amount, interest rate and maturity date of all other indebtedness
owing by the Company (or by any other obligor on the Debentures) to the Trustee
in its individual capacity, on the date of such report, with a brief description
of any property held as collateral security therefor, except an indebtedness
based upon a creditor relationship arising in any manner described in paragraphs
(ii), (iii), (iv) or (vi) of subsection (b) of Section 8.13;
(iv) the property and funds, if any, physically in the possession of the
Trustee as such on the date of such report;
(v) any additional issuance of Debentures not previously reported; and
(vi) any action taken by the Trustee in the performance of its duties under
this Indenture which it has not previously reported and which in its opinion
materially affects the Debentures except action in respect of a default, notice
of which has been or is to be withheld by it in accordance with the provisions
of Section 7.07.
(b) The Trustee shall transmit to the Debentureholders, as hereinafter
provided, a brief report with respect to the character and amount of any
advances (and if the Trustee elects so to state, the circumstances surrounding
the making thereof) made by the Trustee (as such) since the date of the last
report transmitted pursuant to the pro- visions of subsection (a) of this
Section 6.04 (or if no such report has yet been so transmitted, since the date
of execution of this Indenture), for the reimbursement of which it claims or may
claim a lien or charge prior to that of the Debentures of the property or funds
held or collected by it as Trustee, and which it has not previously reported
pursuant to this
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subsection (b) except that the Trustee shall not be required (but may elect) to
report such advances if such advances remaining unpaid at any time aggregate 10
percent or less of the principal amount of Debentures outstanding at such time,
such report to be transmitted within 90 days after such time.
(c) Reports given pursuant to this Section 6.04 shall be transmitted by
mail to all holders of Debentures, as the names and addresses of such holders
appear upon the Debenture Register and to such holders of Debentures as have,
within the two years preceding such transmission, filed their names and
addresses with the Trustee for that purpose.
(d) A copy of each such report shall, at the time of such transmission to
Debentureholders, be filed by the Trustee with the Company, each stock exchange
upon which the Debentures are listed and also with the Securities and Exchange
Commission. The Company agrees to notify the Trustee when and as the Debentures
become listed on any stock exchange.
ARTICLE SEVEN
Remedies of the Trustee and
Debentureholders in Event of Default
Section 7.01. Events of Default. In case one or more of the following
Events of Default shall have occurred and be continuing:
(a) default in the payment (whether or not prohibited by the provisions of
Article Three) of any installment of interest upon any of the Debentures as and
when the same shall become due and payable, and continuance of such default for
a period of 30 days; or
(b) default in the payment (whether or not prohibited by the provisions of
Article Three) of the principal of and premium, if any, on any of the Debentures
as and when the same shall become due and payable either at maturity, upon
redemption, by declaration or otherwise; or
(c) default in the payment or satisfaction of any sinking fund obligation,
as and when such sinking fund obligation shall become due and payable in this
Indenture expressed; or
(d) failure on the part of the Company duly to observe or perform any
covenants or agreements (other than a covenant or agreement the breach or a
default in the performance of which is
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elsewhere in this Section 7.01 specifically dealt with) on the part of the
Company in the Debentures or in this Indenture contained for a period of 60
days after the date on which written notice (such written notice to state
it is a "Notice of Default" hereunder) of such failure, requiring the
Company to remedy the same, shall have been given to the Company by the
Trustee, or to the Company and each holder of any Senior Indebtedness and
each person or entity committed or obligated to issue or fund any Senior
Indebtedness (provided that such holder, person or entity has previously
given Trustee written notice to the effect that it is a holder of Senior
Indebtedness or a person or entity committed or obligated to issue or fund
Senior Indebtedness (as the case may be) and that such holder, person or
entity requests that he or it be given any such notice) and the Trustee by
the holders of at least 25 percent in aggregate principal amount of the
Debentures at the time outstanding; or
(e) without the consent of the Company a court having jurisdiction
shall enter an order for relief with respect to the Company under the
Bankruptcy Code or without the consent of the Company a court having
jurisdiction shall enter a judgment, order or decree adjudging the Company
a bankrupt or insolvent, or enter an order for relief for reorganization,
arrangement, adjustment or composition of or in respect of the Company
under the Bankruptcy Code or applicable state insolvency law and the
continuance of any such judgment, order or decree unstayed and in effect
for a period of 90 consecutive days; or
(f) the Company shall institute proceedings for entry of an order for
relief with respect to the Company under the Bankruptcy Code or for an
adjudication of insolvency, or shall consent to the institution of
bankruptcy or insolvency proceedings against it, or shall file a petition
seeking, or seek or consent to reorganization, arrangement, composition or
relief under the Bankruptcy Code or any applicable state law, or shall
consent to filing of such petition or to the appointment of a receiver,
custodian, liquidator, assignee, trustee, sequestrator or similar official
(other than a custodian pursuant to 8 Delaware Code Section 226 or any
similar statute under other state laws) of the Company or of substantially
all of its property, or the Company shall make a general assignment for the
benefit of creditors as recognized under the Bankruptcy Code;
then and in each and every such case, unless the principal of all the Debentures
shall have already become due and payable, either the Trustee or the holders of
not less than 25 percent in aggregate principal amount of the Debentures then
outstanding hereunder, by notice in writing to the
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Company and each holder of any Senior Indebtedness and each person or entity
committed or obligated to issue or fund any Senior Indebtedness (provided that
such holder, person or entity has previously given Trustee written notice to the
effect that it is a holder of Senior Indebtedness or a person or entity
committed or obligated to issue or fund Senior Indebtedness (as the case may be)
and that such holder, person or entity requests that he or it be given any such
notice) (and to the Trustee if given by Debentureholders), may declare the
principal of all the Debentures and any accrued interest to the date of
declaration to be due and payable immediately, and upon any such declaration the
same shall become and shall be immediately due and payable, anything in this
Indenture or in the Debentures contained to the contrary notwithstanding. The
foregoing provision, however, is subject to the condition that if, at any time
after the principal of the Debentures shall have been so declared due and
payable, and before any judgment or decree for the payment of the moneys due
shall have been obtained or entered as hereinafter provided, the Company shall
pay or shall deposit with the Trustee a sum sufficient to pay all matured
installments of interest upon all the Debentures and the principal of (or
premium, if any, on) any and all Debentures which shall have become due
otherwise than by acceleration (with interest upon such principal (and premium,
if any) and, to the extent that payment of such interest is enforceable under
applicable law, upon overdue installments of interest, at the rate borne by the
Debentures to the date of such payment or deposit) and such amount as shall be
sufficient to cover reasonable compensation, disbursements, expenses and
advances of the Trustee, and any and all defaults under the Indenture, other
than the non-payment of the principal of and premium, if any, and accrued
interest on Debentures which shall have become due by acceleration, shall have
been cured or shall have been waived in accordance with Section 7.06 or
provision deemed by the Trustee to be adequate shall have been made therefor --
then and in every such case the holders of a majority in aggregate principal
amount of the Debentures then outstanding, by written notice to the Company and
to the Trustee, may rescind and annul such declaration and its consequences; but
no such rescission and annulment shall extend to or shall effect any subsequent
default or shall impair any right consequent thereon.
If the Trustee shall have proceeded to enforce any right under this
Indenture and such proceedings shall have been discontinued or abandoned because
of such rescission or annulment or for any other reason or shall have been
determined adversely to the Trustee, then and in every such case the Company,
the Trustee and the holders of the Debentures shall be restored respectively to
their former positions and rights hereunder, and all rights, remedies and powers
of the Company and the Trustee and the holders of the Debentures shall continue
as though no such proceedings had been taken.
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Section 7.02. Payment of Debentures on Default: Suit Therefor. The Company
covenants that (a) if default shall be made in the payment of any installment of
interest on any of the Debentures, as and when the same shall become due and
payable, and such default shall have continued for a period of 30 days, or (b)
in case default shall be made in the payment of the principal of or premium, if
any, on any of the Debentures as and when the same shall have become payable,
whether upon maturity of the Debentures or upon redemption or upon declaration
or otherwise then, upon demand of the Trustee, the Company will pay to the
Trustee, for the benefit of the holders of the Debentures, the whole amount that
then shall have become due and payable on all such Debentures for principal (and
premium, if any) or interest, or both, as the case may be, with interest upon
the overdue principal and premium, if any, and (to the extent that payment of
such interest is enforceable under applicable law) upon overdue installments of
interest, at the rate borne by the Debentures; and, in addition thereto, such
further amount as shall be sufficient to cover the costs and expenses of
collection, including reasonable compensation to the Trustee, its agents,
attorneys and counsel, and any expenses or liabilities incurred by the Trustee
hereunder other than through its negligence or bad faith.
If the Company shall fail forthwith to pay such amounts upon such demand,
the Trustee, in its own name and as trustee of an express trust, shall be
entitled and empowered to institute any action or proceeding at law or in equity
for the collection of the sums so due and unpaid, and may prosecute any such
action or proceeding to judgment or final decree, and may enforce any such
judgment or final decree against the Company or other obligor upon the
Debentures and collect in the manner provided by law out of the property of the
Company or other obligor upon the Debentures wherever situated the moneys
adjudged or decreed to be payable.
If there shall be pending proceedings for the bankruptcy or for the
reorganization of the Company or any other obligor upon the Debentures under the
Bankruptcy Code or any other federal or state bankruptcy, insolvency or similar
laws relative to the Company or to such other obligor, or in case a receiver or
trustee shall have been appointed for the property of the Company or such other
obligor, or in case of any other similar judicial proceedings relative to the
Company or other obligor upon the Debentures, or to the creditors or the
property of the Company or such other obligor, the Trustee, irrespective of
whether the principal of the Debentures shall then be due and payable as therein
expressed or by declaration or otherwise and irrespective of whether the Trustee
shall have made any demand pursuant to the provisions of this Section 7.02,
shall be entitled and empowered, by intervention in such proceedings or
otherwise, to file and prove a claim or claims for the
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whole amount of principal (and premium, if any) and interest owing and unpaid in
respect of the Debentures, and to file such other papers or documents as may be
necessary or advisable in order to have the claims of the Trustee (including any
claim for reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel) and of the Debentureholders allowed in any
judicial proceedings relative to the Company, or other obligor upon the
Debentures, its or their creditors or its or their property, and to collect and
receive any moneys or other property payable or deliverable on any such claims,
and to distribute the same after the deduction of its charges and expenses; and
any receiver, assignee, liquidator, sequestrator or trustee in bankruptcy or
reorganization is hereby authorized by each of the Debentureholders to make such
payments to the Trustee, and, in the event that the Trustee shall consent to the
making of payments directly to the Debentureholders, to pay to the Trustee any
amount due it for reasonable compensation, expenses, disbursements and advances
of trustee, its agents and counsel, and any other amounts due to the Trustee
under Section 8.06.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Debentureholder any
plan of reorganization, arrangement, adjustment or composition affecting the
Debentures or the rights of any holder thereof or to authorize the Trustee to
vote in respect of the claim of any Debentureholder in any such proceeding.
All rights of action and of asserting claims under this Indenture, or under
any of the Debentures, may be enforced by the Trustee without the possession of
any of the Debentures, or the production thereof in any trial or other
proceedings relative thereto, and any such action or proceedings instituted by
the Trustee shall be brought in its own name and as trustee of an express trust,
and any recovery of judgment shall be for the equal and ratable benefit of the
holders of the Debentures.
In case of an Event of Default hereunder the Trustee may in its discretion
proceed to protect and enforce the rights vested in it by this Indenture by such
appropriate judicial proceedings as the Trustee shall deem most effectual to
protect and enforce any of such rights, either at law or in equity or in
bankruptcy or otherwise, whether for the specific enforcement of any covenant or
agreement contained in this Indenture or in aid of the exercise of any power
granted in this Indenture, or to enforce any other legal or equitable right
vested in the Trustee by this Indenture or by law.
Section 7.03. Application of Moneys Collected by Trustee. Subject to the
provisions of Article Three, any moneys collected by the Trustee pursuant to
Section 7.02 shall be applied in the following order, at the
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date or dates fixed by the Trustee and, in case of the distribution of such
moneys on account of principal and premium, if any, or interest, upon
presentation of the several Debentures for delivery of a new Debenture
representing the unpaid portion, if only partially paid, and upon surrender
thereof, if fully paid:
FIRST: To the payment of costs and expenses of collection, and
reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due to the Trustee
under Section 8.06;
SECOND: If the principal of the Debentures shall not have become due
and be unpaid, to the payment of interest on the Debentures, in the order
of the maturity of the installments of such interest, with interest (to the
extent that such interest has been collected by the Trustee and to the
extent-permitted by applicable law) upon the overdue installments of
interest at the rate borne by the Debentures, such payments to be made
ratably to the persons entitled thereto;
THIRD: If the principal of the Debentures shall have become due, by
declaration or otherwise, to the payment of the whole amount then owing and
unpaid upon the Debentures for principal, premium, if any, and interest,
with interest on the overdue principal and premium, if any, and (to the
extent that such interest has been collected by the Trustee and the payment
thereof is permitted by applicable law) upon overdue installments of
interest at the rate borne by the Debentures; and in case such moneys shall
be insufficient to pay in full the whole amount so due and unpaid upon the
Debentures, then to the payment of such principal and premium, if any, and
interest, without preference or priority of principal and premium, if any,
over interest, or of interest over principal and premium, if any, or of any
installment of interest over any other installment of interest, or of any
Debenture over any other Debenture, ratably to the aggregate of such
principal and premium, if any, and accrued and unpaid interest; and
FOURTH: To the payment of any surplus remaining to the Company, its
successors or assigns, or to whomever may be lawfully entitled to receive
the same.
No claim for interest which in any manner at or after maturity shall have
been transferred or pledged separate or apart from the Debentures to which it
relates, or which in any manner shall have been kept alive after maturity by an
extension (otherwise than pursuant to an extension made pursuant to a plan
proposed by the Company to the holders of all
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Debentures then outstanding), purchase, funding or otherwise by or on behalf or
with the consent or approval of the Company shall be entitled, in case of a
default hereunder, to any benefit of this Indenture, except after prior payment
in full of the principal of and the premium, if any, of all Debentures at the
time outstanding hereunder and of all claims for interest not so transferred,
pledged, kept alive, extended, purchased or funded.
Section 7.04. Limitation on Suits by Holders of Debentures. No holder of
any Debenture shall have any right by virtue or by availing of any provision of
this Indenture to institute any action, suit or proceeding at law or in equity
or in bankruptcy or otherwise, upon or under or with respect to this Indenture,
or for the appointment of a receiver or trustee or similar official, or, for any
other remedy hereunder, unless such holder previously shall have given to the
Trustee written notice of default and of the continuance thereof, as
hereinbefore provided, and unless also the holders of not less than 25 percent
in aggregate principal amount of the Debentures then outstanding shall have made
written request to the Trustee to institute such action, suit or proceeding in
its own name as Trustee hereunder and shall have offered to the Trustee such
reasonable indemnity as it may require against the costs, expenses and
liabilities to be incurred therein or thereby, and the Trustee, for 60 days
after its receipt of such notice, request and offer of indemnity, shall have
failed to institute any such action, suit or proceeding and no direction
inconsistent with such written request shall have been given to the Trustee
pursuant to Section 7.06; it being understood and intended, and being expressly
covenanted by the taker and holder of every Debenture with every other taker and
holder and the Trustee, that no one or more holders of Debentures shall have any
right in any manner whatever by virtue or by availing of any provision of this
Indenture to affect, disturb or prejudice the rights of the holders of any other
of such Debentures, or to obtain or seek to obtain priority over or preference
to any other such holder, or to enforce any right under this Indenture, except
in the manner herein provided and for the ratable and common benefit of all
holders of Debentures. For the protection and enforcement of the provisions of
this Section 7.04, each and every Debentureholder and the Trustee shall be
entitled to such relief as can be given either at law or in equity.
Notwithstanding any other provision in this Indenture, however, but subject
to the provisions of Article Three, the right of any holder of any Debenture to
receive payment of the principal of (and premium, if any) and interest on such
Debenture, on or after the respective due dates expressed in such Debenture, or
to institute suit for the enforcement of any such payment on or after such
respective dates, shall not be impaired or affected without the consent of such
holder.
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Section 7.05. Remedies Cumulative and Continuing All powers and remedies
given by this Article Seven to the Trustee or to the Debentureholders shall, to
the extent permitted by law, be deemed cumulative and not exclusive of any other
thereof or of any other powers and remedies available to the Trustee or the
Debentureholders, by judicial proceedings or otherwise, to enforce the
performance or observance of the covenants and agreements contained in this
Indenture, and no delay or omission of the Trustee or of any holder of any of
the Debentures to exercise any right or power accruing upon any default
occurring and continuing as aforesaid, shall impair any such right or power, or
shall be construed to be a waiver of any such default or an acquiescence
therein; and, subject to the provisions of Section 7.04, every power and remedy
given by this Article Seven or by law to the Trustee or to the Debentureholders
may be exercised from time to time, and as often as shall be deemed expedient,
by the Trustee or by the Debentureholders.
Section 7.06. Direction of Proceedings and Waiver of Defaults by Majority
of Debentureholders. The holders of a majority in aggregate principal amount of
the Debentures at the time outstanding shall have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Trustee, or exercising any trust or power conferred on the Trustee; provided,
however, that (subject to the provisions of Section 8.01), the Trustee shall
have the right to decline to follow any such direction if the Trustee, after
being advised by counsel, shall determine that the action so directed may not
lawfully be taken or if the Trustee in good faith shall, by a responsible
officer or officers, determine that the action so directed would be unduly
prejudicial to the holders of the Debentures not taking part in such direction.
The holders of a majority in aggregate principal amount of the Debentures at the
time outstanding may on behalf of the holders of all of the Debentures waive any
past default or Event of Default hereunder and its consequences except a default
in the payment of the principal of (or premium, if any) or interest on any of
the Debentures which has become due other than as a result of the acceleration
thereof. In the case of any such waiver, said default or Event of Default shall
for all purposes of the Debentures and this Indenture be deemed to have been
cured and to be not continuing, and the Company, the Trustee and the holders of
the Debentures shall be restored to their former positions and rights hereunder,
respectively; but no such waiver shall extend to any subsequent or other default
or impair any right consequent thereon.
Section 7.07. Notice of Defaults. The Trustee shall, within 90 days after
the occurrence of a default, give to the Debentureholders, in the manner and to
the extent provided in subsection (c) of Section 6.04, notice of all defaults
known to the Trustee, unless such default shall
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have been cured before the giving of such notice; provided, however, that, in
the case of any default of the character specified in clause (d) of Section
7.01, no such notice to Debentureholders shall be given until at least 60 days
after the giving of written notice thereof to the Company pursuant to said
clause (d); and provided, further, that except in the case of default in the
payment of the principal of (or premium, if any) or interest on any of the
Debentures, or in the making of any sinking fund payment, the Trustee shall be
protected in withholding such notice if and so long as the board of directors,
the executive committee, or a trust committee of directors and/or responsible
officers, of the Trustee in good faith determines that the withholding of such
notice is in the interests of the Debentureholders.
Section 7.08. Undertaking to Pay Costs. All parties to this Indenture
agree, and each holder of any Debenture by his acceptance thereof shall be
deemed to have agreed, that any court may in its discretion require, in any suit
for the enforcement of any right or remedy under this Indenture, or in any suit
against the Trustee for any action taken or omitted by it as Trustee, the filing
by any party litigant in such suit of an undertaking to pay the costs of such
suit, and that such court may in its discretion assess reasonable costs,
including reasonable attorneys' fees, against any party litigant in such suit,
having due regard to the merits and good faith of the claims or defenses made by
such party litigant; but the provisions of this Section 7.08 shall not apply to
any suit instituted by the Trustee, to any suit instituted by any
Debentureholder, or group of Debentureholders, holding in the aggregate more
than 10 percent in principal amount of the Debentures outstanding, or to any
suit instituted by any Debentureholder for the enforcement of the payment of the
principal of (or premium, if any), or interest on any Debenture against the
Company, on or after the due date expressed in such Debenture.
ARTICLE EIGHT
Concerning the Trustee
Section 8.01. Duties and Responsibilities of Trustee. The Trustee, prior to
the occurrence of an Event of Default and after the curing of all Events of
Default which may have occurred, undertakes to perform such duties and only such
duties as are specifically set forth in this Indenture. If an Event of Default
has occurred (which has not been cured), the Trustee shall exercise such of the
rights and powers vested in it by this Indenture, and use the same degree of
care and skill in their exercise, as a prudent man would exercise or use under
the circumstances in the conduct of his own affairs.
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No provision of this Indenture shall be construed to relieve the Trustee
from liability for its own negligent action, its own negligent failure to act,
or its own willful misconduct, except that
(a) prior to the occurrence of an Event of Default and after the curing of
all Events of Default that may have occurred:
(i) the duties and obligations of the Trustee shall be determined
solely by the express provisions of this Indenture, and the Trustee shall
not be liable except for the performance of such duties and obligations as
are specifically set forth in this Indenture, and no implied covenants or
obligations shall be read into this Indenture against the Trustee; and
(ii) in the absence of bad faith on the part of the Trustee, the
Trustee may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon any certificates or
opinions furnished to the Trustee and conforming to the requirements of
this Indenture; but in the case of any such certificates or opinions that
by any provision hereof are specifically required to be furnished to the
Trustee, the Trustee shall be under a duty to examine the same to determine
whether or not they conform to the requirements of this Indenture:
(b) the Trustee shall not be liable for any error of judgment made in good
faith by a responsible officer or officers of the Trustee, unless it shall be
proved that the Trustee was negligent in ascertaining the pertinent facts; and
(c) the Trustee shall not be liable with respect to any action taken or
omitted to be taken by it in good faith in accordance with the direction of the
holders of not less than a majority in principal amount of the Debentures at the
time outstanding relating to the time, method and place of conducting any
proceeding for any remedy available to the Trustee, or exercising any trust or
power conferred upon the Trustee, under this Indenture.
None of the provisions contained in this Indenture shall require the
Trustee to expend or risk its own funds or otherwise incur any financial
liability in the performance of any of its duties hereunder or in the exercise
of any of its rights or powers, if there is reasonable ground for believing that
the repayment of such funds or adequate indemnity against such risk or liability
is not reasonably assured to it.
For all purposes under the Indenture, the Trustee shall not be deemed to
have notice of the existence of any facts or circumstances
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described in clause (d) through (f) of Section 7.01 unless a Responsible Officer
assigned to and working in the Trustee's corporate trust department at the
corporate trust office has actual knowledge thereof or unless written notice of
any event that is in fact such a fact or circumstance is received by the Trustee
at the corporate trust office, and such notice references the Debentures
generally, the Company or the Indenture.
Whether or not therein expressly so provided, every provision of this
Indenture relating to the conduct or affecting the liability of or affording
protection to the Trustee shall be subject to the provisions of this Section
8.01.
Section 8.02. Reliance on Documents, Opinions, etc. Except as otherwise
provided in Section 8.01:
(a) The Trustee may rely and shall be protected in acting or refraining
from acting upon any resolution, certificate, statement, instrument, opinion,
report, notice, request, consent, direction, approval, order, bond, debenture,
or other paper or document believed by it to be genuine and to have been signed
or presented by the proper party or parties;
(b) Any request, direction, order or demand of the Company mentioned herein
shall be sufficiently evidenced by an Officers' Certificate (unless other
evidence in respect thereof be herein specifically prescribed); and any
resolution of the Board of Directors of the Company may be evidenced to the
Trustee by a copy thereof certified by the Secretary or an Assistant Secretary
of the Company;
(c) The Trustee may consult with counsel and the written advice of such
counsel or any Opinion of Counsel shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted by it hereunder
in good faith and in accordance with such advice or Opinion of Counsel;
(d) The Trustee shall be under no obligation to exercise any of the rights
or powers vested in it by this Indenture at the request, order or direction of
any of the Debentureholders, pursuant to the provisions of this Indenture,
unless such Debentureholders shall have offered to the Trustee reasonable
security or indemnity against the costs, expenses and liabilities that may be
incurred therein or thereby;
(e) The Trustee shall not be liable for any action taken or omitted by it
in good faith and believed by it to be authorized or
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within the discretion or rights or powers conferred upon it by this Indenture:
(f) Prior to the occurrence of an Event of Default and after the curing or
waiving of all Events of Default, the Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, consent, order,
direction, approval, bond, debenture or other paper or document, but the
Trustee, in its discretion, may, and upon the request in writing by the holders
of not less than a majority in principal amount of Debentures then outstanding
shall, make such further inquiry or investigation into such facts or matters as
it may see fit, and, if the Trustee shall determine to make such further inquiry
or investigation, it shall be entitled to examine the books, records and
premises of the Company, personally or by agent or attorney;
(g) The Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys, and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney (other than an employee of the
Trustee) appointed by it with due care hereunder; and
(h) Before the Trustee acts or refrains from acting, it may require an
Officer's Certificate or an Opinion of Counsel and the Trustee shall not be
liable for any action it takes or omits to take in reliance on such Officer's
Certificate or Opinion of Counsel.
Section 8.03. No Responsibility for Recitals, etc. The recitals contained
herein and in the Debentures (except in the Trustee's certificate of
authentication) shall be taken as the statements of the Company, and the Trustee
assumes no responsibility for the correctness of the same. The Trustee makes no
representations as to the validity or sufficiency of this Indenture or of the
Debentures. The Trustee shall not be accountable for the use or application by
the Company of any of the Debentures authenticated by or on behalf of the
Trustee in conformity with the requirements of this Indenture or of the proceeds
thereof.
Section 8.04. Trustee, Paying Agent or Debenture Registrar May Own
Debentures. The Trustee or any Authenticating Agent or any paying agent or
Debenture Registrar, in its individual or any other capacity, may become the
owner or pledgee of Debentures with the same rights it would have if it were not
Trustee, Authenticating Agent, paying agent or Debenture Registrar.
Section 8.05. Moneys to be Held in Trust. Subject to the provisions of
Article Three and Section 13.04, all moneys received by the
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Trustee shall, until used or applied as herein provided, be held in trust for
the purposes for which they were received, but need not be segregated from other
funds except to the extent required by law. Neither the. Trustee nor any paying
agent shall be under any liability for interest on any moneys received by it
hereunder except such as it may agree in writing with the Company to pay
thereon. So Long as no Event of Default shall have occurred and be continuing,
all interest, if any, allowed on any such moneys shall be paid from time to time
upon the written order of the Company, signed by its President or any Vice
President or its Treasurer or an Assistant Treasurer.
Section 8.06. Compensation and Expenses of Trustee. The Company covenants
and agrees to pay to the Trustee from time to time, and the Trustee shall be
entitled to, reasonable compensation for all services rendered by it hereunder
(which shall not be limited by any provision of law in regard to the
compensation of a trustee of an express trust), and, except as otherwise
expressly provided, the Company will pay or reimburse the Trustee upon its
request for all reasonable expenses, disbursements and advances incurred or made
by the Trustee in accordance with any of the provisions of this Indenture
(including the reasonable compensation and the expenses and disbursements of its
counsel and of all persons not regularly in its employ) except any such expense
disbursement or advance as may arise from its negligence or bad faith. If any
property other than cash shall at any time be subject to a lien in favor of the
Debentureholders, the Trustee, if and to the extent authorized by a receiver or
bankruptcy court of competent jurisdiction or by the supplemental instrument
subjecting such property to such lien, shall be entitled to make advances for
the purpose of preserving such property or of discharging tax liens or other
prior liens or encumbrances thereon, provided that the Trustee shall be under no
affirmative duty to make such advances. The Company also covenants to indemnify
the Trustee for, and to hold it harmless against, any loss, liability or expense
incurred without negligence or bad faith on the part of the Trustee, arising out
of or in connection with the acceptance or administration of this trust,
including the cost and expenses of defending itself against any claim of
liability in the premises. The obligations of the Company under this Section
8.06 to compensate the Trustee and to pay or reimburse the Trustee for expenses,
disbursements and advances shall constitute additional indebtedness hereunder.
Such additional indebtedness shall be secured by a lien prior to that of the
Debentures upon all property and funds held or collected by the Trustee as such,
except funds held in trust for the benefit of the holders of particular
Debentures. The Company's obligation to pay the Trustee and to pay and reimburse
the Trustee for such expenses, disbursements and advances pursuant to this
Section 8.06 shall not be subordinate to the payment of Senior Indebtedness
pursuant to Article III.
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Section 8.07. Officers' Certificate as Evidence. Except as otherwise
provided in Section 8.01, whenever in the administration of the provisions of
this Indenture the Trustee shall deem it necessary or desirable that a matter be
proved or established prior to taking or suffering any action hereunder, such
matter (unless other evidence in respect thereof be herein specifically
prescribed) may, in the absence of negligence or bad faith on the part of the
Trustee, be deemed to be conclusively proved and established by an Officers'
Certificate delivered to the Trustee and such Officers' Certificate, in the
absence of negligence or bad faith on the part of the Trustee, shall be full
warranty to the Trustee for any action taken, suffered or omitted by it under
the provisions of this Indenture upon the faith thereof.
Section 8.08. Conflicting Interest of Trustee. (a) If the Trustee has or
shall acquire any conflicting interest, as defined in this Section 8.08, it
shall, within 90 days after ascertaining that it has such conflicting interest,
either eliminate such conflicting interest or resign in the manner and with the
effect specified in Section 8.10, such resignation to become effective upon the
appointment of a successor trustee and such successor's acceptance of such
appointment, and the Company shall take prompt steps to have a successor
appointed in the manner provided in Section 8.10.
(b) If the Trustee shall fail to comply with the provisions of subsection
(a) of this Section 8.08; the Trustee shall, within 10 days after the expiration
of such 90 day period, transmit notice of such failure to the Debentureholders
in the manner and to the extent provided in subsection (C) of Section 6.04.
(c) For the purposes of this Section 8.08 the Trustee shall be deemed to
have a conflicting interest if:
(i) The Trustee is trustee under another indenture under which any other
securities, or certificates of interest or participation in any other
securities, of the Company, are outstanding, unless such other indenture is a
collateral trust indenture under which the only collateral consists of
Debentures issued under this Indenture, provided that there shall be excluded
from the operation of this paragraph any other indenture or indentures under
which other securities, or certificates of interest or participation in other
securities of the Company are outstanding if (A) this Indenture and such other
indenture or indentures are wholly unsecured and such other indenture or
indentures are hereafter qualified under the Trust Indenture Act of 1939, unless
the
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Securities and Exchange Commission shall have found and declared by order
pursuant to subsection (b) of Section 305 or subsection (c) of Section 307 of
the Trust Indenture Act of 1939 that differences exist between the provisions of
this Indenture and the provisions of such other indenture or indentures which
are so likely to involve a material conflict of interest as to make it necessary
in the public interest or for the protection of investors to disqualify the
Trustee from acting as such under this Indenture or such other indenture or
indentures, or (B) the Company shall have sustained the burden of proving, on
application to the Securities and Exchange Commission and after opportunity for
hearing thereon, that the trusteeship under this Indenture and such other
indenture or indentures is not so likely to involve a material conflict of
interest as to make it necessary in the public interest or for the protection of
investors to disqualify the Trustee from acting as such under one of such
indentures;
(ii) the Trustee or any of its directors or executive officers is an
obligor upon the Debentures or an underwriter for the Company;
(iii) the Trustee directly or indirectly controls or is directly or
indirectly controlled by or is under direct or indirect common control with the
Company or an underwriter for the Company;
(iv) the Trustee or any of its directors or executive officers is a
director, officer, partner, employee, appointee, or representative of the
Company, or of an underwriter (other than the Trustee itself) for the Company
who is currently engaged in the business of underwriting, except that (A) one
individual may be a director and/or an executive officer of the Trustee and a
director and/or an executive officer of the Company, but may not be at the same
time an executive officer of both the Trustee and the Company; (B) if and so
long as the number of directors of the Trustee in office is more than nine, one
additional individual may be a director and/or an executive officer of the
Trustee and a director of the Company; and (C) the Trustee may be designated by
the Company or by any underwriter for the Company to act in the capacity of
transfer agent, registrar, custodian, paying agent, fiscal agent, escrow agent,
subject to or depositary, or in any other similar capacity, or, the provisions
of paragraph (i) of this subsection (c) to act as trustee whether under an
indenture or otherwise;
(v) 10 percent or more of the voting securities of the Trustee is
beneficially owned either by the Company or by any director, partner or
executive officer thereof, or 20 percent or more of such voting securities is
beneficially owned, collectively, by any two or
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more of such persons; or 10 percent or more of the voting securities of the
Trustee is beneficially owned either by an underwriter for the Company or by any
director, partner or executive officer thereof, or is beneficially owned,
collectively, by any two or more such persons;
(vi) the Trustee is the beneficial owner of, or holds as collateral
security for an obligation which is in default (as hereinafter in this
subsection (c) defined), (A) 5 percent or more of the voting securities, or 10
percent or more of any other class of security, of the Company, not including
the Debentures issued under this Indenture and securities issued under any other
indenture under which the Trustee is also trustee, or (B) 10 percent or more of
any class of security of an underwriter for the Company;
(vii) the Trustee is the beneficial owner of, or holds as collateral
security, for an obligation which is in default (as hereinafter in this
subsection (c) defined), 5 percent or more of the voting securities of any
person who, to the knowledge of the Trustee, owns 10 percent or more of the
voting securities of, or controls directly or indirectly, or is under direct or
indirect common control with, the Company;
(viii) the Trustee is the beneficial owner of, or holds as collateral
security for an obligation which is in default (as hereinafter in this
subsection (c) defined), 10 percent or more of any class of security of any
person who, to. the knowledge of the Trustee, owns 50 percent or more of the
voting securities of the Company; or
(ix) the Trustee owns on May 15 in any calendar year, in the capacity of
executor, administrator, testamentary or inter vivos trustee, guardian,
committee or conservator, or in any other similar capacity, an aggregate of 25
percent or more of the voting securities, or of any class of security, of any
person, the beneficial ownership of a specified percentage of which would have
constituted a conflicting interest under paragraph (vi), (vii), or (viii) of
this subsection (c). As to any such securities of which the Trustee acquired
ownership through becoming executor, administrator, or testamentary trustee of
an estate which included them, the provisions of the preceding sentence shall
not apply, for a period of two years from the date of such acquisition, to the
extent that such securities included in such estate do not exceed 25 percent of
such voting securities or 25 percent of any such class of security. Promptly
after May 15, in each calendar year, the Trustee shall make a check of its
holdings of such securities in any of the
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above-mentioned capacities as of such May 15. If the Company fails to make
payment in full of principal of (or premium, if any) or interest on any of the
Debentures when and as the same become due and payable, and such failure
continues for 30 days thereafter, the Trustee shall make a prompt check of its
holdings of such securities in any of the above-mentioned capacities as of the
date of the expiration of such 30 day period, and after such date,
notwithstanding the foregoing provisions of this paragraph (ix), all such
securities so held by the Trustee, with sole or joint control over such
securities vested in it, shall, but only so long as such failure shall
continue, be considered as though beneficially owned by the Trustee for the
purposes of paragraph (vi), (vii) and (viii) of this subsection (c).
The specifications of percentages in paragraphs (v) to (ix), inclusive, of
this subsection (c) shall not be construed as indicating that the ownership of
such percentages of the securities of a person is or is not necessary or
sufficient to constitute direct or indirect control for the purposes of
paragraph (iii) or (vii) of this subsection (c).
For the purposes of paragraph (vi), (vii), (viii) and (ix) of this
subsection (c) only, (A) the terms "security" and "securities" shall include
only such securities as are generally known as corporate securities, but shall
not include any note or other evidence of indebtedness issued to evidence an
obligation to repay moneys lent to a person by one or more banks, trust
companies or banking firms, or any certificate of interest or participation in
any such note or evidence of indebtedness; (B) an obligation shall be deemed to
be "in default" when a default in payment of principal shall have continued for
30 days or more and shall not have been cured; and (C) the Trustee shall not be
deemed to be the owner or holder of (1) any security which it holds as
collateral security (as trustee or otherwise) for an obligation which is not in
default as defined in clause (B) above, or (2) any security which it holds as
collateral security under this Indenture, irrespective of any default hereunder
or (3) any security which it holds as agent for collection, or as custodian,
escrow agent, or depositary, or in any similar representative capacity.
Except as provided in the next preceding paragraph hereof, the word
"security" or "securities" as used in this Indenture shall mean any note,
stock, treasury stock, bond, debenture, evidence of indebtedness, certificate
of interest or participation in any profit-sharing agreement, collateral-trust
certificate, preorganization certificate or subscription, transferable share,
investment contract, voting-trust certificate, certificate of deposit for a
security, fractional undivided
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interest in oil, gas, or other mineral rights, or, in general, any interest or
instrument commonly known as a "security", or any certificate of interest or
participation in, temporary or interim certificate for, receipt for, guarantee
of or warrant or right to subscribe to or purchase, any of the foregoing.
(d) For the purposes of this Section 8.08:
(i) The term "underwriter" when used with reference to the Company shall
mean every person, who, within three years prior to the time as of which the
determination is made, has purchased from the Company with a view to, or has
offered for sale or has sold for the Company in connection with, the
distribution of any security of the Company outstanding at such time, or has
participated or has had a direct or indirect participation in any such
undertaking, or has participated or has had a participation in the direct or
indirect underwriting of any such undertaking, but such term shall not include a
person whose interest was limited to a commission from an underwriter or dealer
not in excess of the usual and customary distributors' or sellers' commission.
(ii) The term "director" shall mean any director of a corporation or any
individual performing similar functions with respect to any organization whether
incorporated or unincorporated.
(iii) The term "person" shall mean an individual, a corporation, a
partnership, an association, a joint-stock company, a trust, an unincorporated
organization, or a government or political subdivision thereof. As used in this
paragraph, the term "trust" shall include only a trust where the interest or
interests of the beneficiary or beneficiaries are evidenced by a security.
(iv) The term "voting security" shall mean any security presently entitling
the owner or holder thereof to vote in the direction or management of the
affairs of a person, or any security issued under or pursuant to any trust,
agreement or arrangement whereby a trustee or trustees or agent or agents for
the owner or holder of such security are presently entitled to vote in the
direction or management of the affairs of a person.
(v) The term "Company" shall mean any obligor upon the Debentures.
(vi) The term "executive officer" shall mean the president, every vice
president, every trust officer, the cashier, the secretary and the treasurer of
a corporation, and any individual
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customarily performing similar functions with respect to any organization
whether incorporated or unincorporated, but shall not include the chairman of
the board of directors.
(e) The percentage of voting securities and other securities specified in
this Section 8.08 shall be calculated in accordance with the following
provisions:
(i) A specified percentage of the voting securities of the Trustee,
the Company or any other person referred to in this Section 8.08 (each of
whom is referred to as a "person" in this paragraph) means such amount of
the outstanding voting securities of such person as entitles the holder or
holders thereof to cast such specified percentage of the aggregate votes
which the holders of all the outstanding voting securities of such person
are entitled to cast in the direction or management of the affairs of such
person.
(ii) A specified percentage of a class of securities of a person means
such percentage of the aggregate amount of securities of the class
outstanding.
(iii) The term "amount", when used in regard to securities, means the
principal amount if relating to evidences of indebtedness, the number of
shares if relating to capital shares, and the number of units if relating
to any other kind of security.
(iv) The term "outstanding" means issued and not held by or for the
account of the issuer. The following securities shall not be deemed
outstanding within the meaning of this definition:
(A) Securities of an issuer held in a sinking fund relating to
securities of the issuer of the same class;
(B) Securities of an issuer held in a sinking fund relating to
another class of securities of the issuer, if the obligation evidenced
by such other class of securities is not in default as to principal or
interest or otherwise;
(C) Securities pledged by the issuer thereof as security for an
obligation of the issuer not in default as to principal or interest or
otherwise; and
(D) Securities held in escrow if placed in escrow by the issuer
thereof;
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provided, however, that any voting securities of an issuer shall be
deemed outstanding if any person other than the issuer is entitled to
exercise the voting rights thereof.
(v) A security shall be deemed to be of the same class as another
security if both securities confer upon the holder or holders thereof
substantially the same rights and privileges; provided, however, that, in
the case of secured evidences of indebtedness, all of which are issued
under a single indenture, differences in the interest rates or maturity
dates of various series thereof shall not be deemed sufficient to
constitute such series different classes and provided, further, that, in
the case of unsecured evidences of indebtedness, differences in the
interest rates or maturity dates thereof shall not be deemed sufficient to
constitute them securities of different classes, whether or not they are
issued under a single indenture.
Section 8.09. Eligibility of Trustee. The Trustee hereunder, together with
its parent company, shall at all times be a corporation organized and doing
business under the laws of the United States or of any state or territory
thereof or of the District of Columbia, authorized under such laws to exercise
corporate trust powers, having a combined capital and surplus of at least 50
million dollars, and subject to supervision or examination by federal, state,
territorial or District of Columbia authority and having an office, place of
business or agency in the City of New York. If such corporation publishes
reports of condition or financial statements at least annually, pursuant to law
or to the requirements of the aforesaid supervising or examining authority, then
for the purposes of this Section 8.09, the combined capital and surplus of such
corporation shall be deemed to be its combined capital and surplus as- set forth
in its most recent report of condition or financial statements so published. In
case at any time the Trustee shall cease to be eligible in accordance with the
provisions of this Section 8.09, the Trustee shall resign immediately in the
manner and with the effect specified in Section 8.10.
Section 8.10. Resignation or Removal of Trustee. (a) The Trustee may at any
time resign by giving written notice of resignation to the Company and by
mailing notice thereof to the holders of Debentures at their addresses as shall
appear on the Debenture Register. Upon receiving such notice of resignation, the
Company shall promptly appoint a successor trustee by written instrument in
duplicate executed by order of the Board of Directors of the Company, the copy
of which instrument shall be delivered to the resigning Trustee and one copy to
the successor trustee. If no successor trustee shall have been so appointed and
have accepted appointment within 60 days after giving of such notice of
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resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor trustee, or any Debentureholder
who has been a bona fide holder of a Debenture or Debentures for at least 6
months may, subject to the provisions of Section 7.08, on behalf of himself and
all others similarly situated, petition any such court for the appointment of a
successor trustee. Such court may thereupon, after such notice, if any, as it
may deem proper and prescribe, appoint a successor trustee.
(b) In case at any time any of the following shall occur:
(i) the Trustee shall fail to comply with the provisions of subsection
(a) of Section 8.08 after written request therefor by the Company or by any
Debentureholder who has been a bona fide holder of a Debenture or
Debentures for at least six months, or
(ii) the Trustee shall cease to be eligible in accordance with the
provisions of Section 8.09 and shall fail to resign after written request
therefor by the Company or by any such Debentureholder, or
(iii) the Trustee shall become incapable of acting, or shall be
adjudged a bankrupt or insolvent, or a receiver of the Trustee or of its
property shall be appointed, or any public officer shall take charge or
control of the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation then, in any such case, the
Company may remove the Trustee and appoint a successor trustee by written
instrument, in duplicate, executed by order of the Board of Directors of
the Company, one copy of which instrument shall be delivered to the Trustee
so removed and one copy to the successor trustee, or, subject to the
provisions of Section 7.08, any Debentureholder who has been a bona fide
holder of a Debenture or Debentures for at least six months may, on behalf
of himself and all others similarly situated, petition any court of
competent jurisdiction for the removal of the Trustee and the appointment
of a successor trustee. Such court may thereupon, after such notice, if
any, as it may deem proper and prescribe, remove the Trustee and appoint a
successor trustee.
(c) The holders of a majority in aggregate principal amount of the
Debentures at the time outstanding may at any time remove the Trustee and
nominate a successor trustee by delivering to the Trustee so removed, to the
nominated successor trustee so appointed and to the Company, the evidence
provided for in Section 9.01 of the action taken by the Debentureholders, in
which case, unless within 10 days after such nomination the Company objects
thereto, the nominated successor trustee shall be deemed appointed a successor
trustee. If the Company so
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objects, the Trustee so removed or any Debentureholder, upon the terms, subject
to the conditions and otherwise as in subsection (a) of this Section 8.10
provided, may petition any court of competent jurisdiction for the appointment
of a successor trustee.
(d) Any resignation or removal of the Trustee and any appointment of a
successor trustee pursuant to any of the provisions of this Section 8.10 shall
become effective upon acceptance of appointment by the successor trustee as
provided in Section 8.11.
(e) The Company shall give notice of each resignation and each removal of
the Trustee and each appointment of a successor trustee by mailing written
notice of such event by first-class mail, postage pre-paid, to the
Debentureholders as their names and addresses appear in the Debenture Register.
Each notice shall include the name of the successor trustee and the address of
its principal corporate trust office. If the Company fails to mail such notice
within 10 days after acceptance of appointment by the successor trustee, the
successor trustee shall cause such notice to be mailed at the expense of the
Company.
Section 8.11. Acceptance by Successor Trustee. Any successor trustee
appointed as provided in Section 8.10 shall execute, acknowledge and deliver to
the Company and to its predecessor trustee an instrument accepting such
appointment, and thereupon the resignation or removal of the predecessor trustee
shall become effective and such successor trustee, without any further act, deed
or conveyance, shall become vested with all the rights, powers, duties and
obligations of its predecessor, with like effects as if originally named as
trustee herein; but, nevertheless, on the written request of the Company or of
the successor trustee, the trustee ceasing to act shall, upon payment of any
amounts then due it pursuant to the provisions of Section 8.06, execute and
deliver an instrument transferring to such successor trustee all the rights and
powers of the trustee so ceasing to act. Upon request of any such successor
trustee, the Company shall execute any and all instruments in writing for more
fully and certainly vesting in and confirming to such successor trustee all such
rights and powers.
No successor trustee shall accept appointment as provided in this Section
8.11 unless at the time of such acceptance such successor trustee. shall be
qualified under the provisions of Section 8.08 and eligible under the provisions
of Section 8.09.
Section 8.12. Succession by Merger. etc. Any corporation into which the
Trustee may be merged or converted or with which it may be consolidated, or any
corporation resulting from any merger or conversion or consolidation to which
the Trustee shall be a party, or any
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corporation succeeding to all or substantially all of the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder without
the execution or filing of any paper or any further act on the part of any of
the parties hereto, anything herein to the contrary notwithstanding; provided,
such corporation shall be qualified under the provisions of Section 8.08 and
eligible under the provisions of Section 8.09.
If at the time such successor trustee shall succeed to the trusts created
by this Indenture any of the Debentures shall have been authenticated but not
delivered, any such successor trustee may adopt the certificate of
authentication of any predecessor trustee, and deliver or cause to be delivered
such Debentures so authenticated; and in case at that time any of the Debentures
shall not have been authenticated, any successor to the Trustee may authenticate
such Debentures either in the name of any predecessor hereunder or in the name
of the successor trustee; and in all such cases such certificate shall have the
full force which it is anywhere in the Debentures or in this Indenture provided
that the certificate of the Trustee shall have; provided, however, that the
right to adopt the certificate of authentication of any predecessor trustee or
authenticate Debentures in the name of any predecessor trustee shall apply only
to the successor or successors by merger, conversion or consolidation.
Section 8.13. Limitations on Rights of Trustee as a Creditor. (a) Subject
to the provisions of subsection (b) of this Section 8.13, if the Trustee shall
be or shall become a creditor, directly or indirectly, secured or unsecured, of
the Company within four months prior to a default, as defined in subsection (c)
of this Section 8.13, or subsequent to such a default, then, unless and until
such default shall be cured, the Trustee shall set apart and hold in a special
account for the benefit of the Trustee individually, the holders of the
Debentures and the holders of other indenture securities (as defined in
subsection (c) of this Section 8.13)
(i) an amount equal to any and all reductions in the amount due and
owing upon, any claim as such creditor in respect of principal or interest,
effected after the beginning of such four month period and valid as against
the Company and its other creditors, except any such reduction resulting
from the receipt or disposition of any property described in paragraph (ii)
of this subsection, or from the exercise of any right of set-off which the
Trustee could have exercised if a petition in bankruptcy had been filed by
or against the Company upon the date of such default; and
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(ii) all property received by the Trustee in respect of any claim as
such creditor, either as security therefor, or in satisfaction or
composition thereof, or otherwise, after the beginning of such four month
period, or an amount equal to the proceeds of any such property, if
disposed of, subject, however, to the rights, if any, of the Company and
its other creditors in such property or such proceeds.
Nothing herein contained, however, shall affect the right of the Trustee
(A) to retain for its own account (1) payments made on account of any
such claim by any person (other than the Company) who is liable
thereon, (2) the proceeds of the bona fide sale of any such claim
by the Trustee to a third person, and (3) distributions made in
cash, securities or other property Respect of claims filed
against the Company in bankruptcy or receivership or in
proceedings for reorganization pursuant CO the Bankruptcy Code,
or any other federal or state bankruptcy, insolvency or similar
law;
(B) to realize, for its own account, upon any property held by it as
security for any such claim, if such property was so held prior
to the beginning of such four month period;
(C) to realize, for its own account, but only to the extent of the
claim hereinafter mentioned, upon any property held by it as
security for any such claim, if such claim was created after the
beginning of such four-month period and such property was
received as security therefor simultaneously with the creation
thereof, and if the Trustee shall sustain the burden of proving
that at the time such property was so received the Trustee had no
reasonable cause to believe that a default as defined in
subsection (c) of this Section 8.13 would occur within four
months; or
(D) to receive payment on any claim referred to in paragraph (B) or
(C), against the release of any property held as security for
such claim as provided in such paragraph (B) or (C), as the case
may be, to the extent of the fair value of such property.
For the purposes of paragraphs (B), (C) and (D), property substituted after
the beginning of such four month period for property held as security at the
time of such substitution shall, to the extent of the fair value of the property
released, have the same status as the property released, and, to the extent that
any claim referred to in any of such paragraphs is created in renewal of or in
substitution for or for the purpose of repaying or refunding any preexisting
claim of the Trustee
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as such creditor, such claim shall have the same status as such preexisting
claim.
If the Trustee shall be required to account, the funds and property held in
such special account and the proceeds thereof shall be apportioned between the
Trustee, the Debentureholders and the holders of other indenture securities in
such manner that the Trustee, the Debentureholders and the holders of other
indenture securities realize, as a result of payment from such special account
and payments of dividends on claims filed against the Company in bankruptcy or
receivership or in proceedings for reorganization pursuant to the Bankruptcy
Code, or any other federal or state bankruptcy, insolvency or similar law, the
same percentage of their respective claims, figured before crediting to the
claim of the Trustee anything on account of the receipt by it from the Company
of the funds and property in such special account and before crediting to the
respective claims of the Trustee, the Debentureholders and the holders of other
indenture securities dividends on claims filed against the Company in bankruptcy
or receivership or in proceedings for reorganization pursuant to the Bankruptcy
Code, or any other federal or state bankruptcy, insolvency or similar law, but
after crediting thereon receipts on account of the indebtedness represented by
their respective claims from all sources other than from such dividends and from
the funds and property so held in such special account. As used in this
paragraph, with respect to any claim, the term "dividends" shall include any
distribution with respect to such claim, in bankruptcy or receivership or in
proceedings for reorganization pursuant to the federal bankruptcy laws, as now
or hereafter constituted, or any other federal or state bankruptcy, insolvency
or similar law, whether such distribution is made in cash, securities or other
property, but shall not include any such distribution with respect to the
secured portion, if any, of such claim. The court in which said bankruptcy,
receivership or proceeding for reorganization is pending shall have jurisdiction
(1) to apportion between the Trustee, the Debentureholders and the holders of
other indenture securities, in accordance with the provisions of this paragraph,
the funds and property held in such special account and the proceeds thereof, or
(2) in lieu of such apportionment, in whole or in part, to give to the
provisions of this paragraph due consideration in determining the fairness of
the distributions to be made to the Trustee, the Debentureholders and the
holders of other indenture securities with respect to their respective claims,
in which event it shall not be necessary to liquidate or to appraise the value
of any securities or other property held in such special account or as security
for any such claim, or to make a specific allocation of such distributions as
between the secured and unsecured portions of such claims, or otherwise to apply
the provisions of this paragraph as a mathematical formula.
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Any Trustee who has resigned or been removed after the beginning of such
four month period shall be subject to the provisions of this subsection (a) as
though such resignation or removal had not occurred. If any Trustee has resigned
or been removed prior to the beginning of such four month period, it shall be
subject to the provisions of this subsection (a) if and only if the following
conditions exist:
(i) the receipt of property or reduction of claim which would have
given rise to the obligation to account, if such Trustee had continued as
Trustee, occurred after the beginning of such four month period; and
(ii) such receipt of property or reduction of claim occurred within
four months after such resignation or removal.
(b) There shall be excluded from the operation of subsection (a) of this
Section 8.13 a creditor relationship arising from
(i) the ownership or acquisition of securities issued under any
indenture, or any security or securities having a maturity of one year or
more at the time of acquisition by the Trustee;
(ii) advances authorized by a receivership or bankruptcy court of
competent jurisdiction, or by this Indenture, for the purpose of preserving
any property which shall at any time be subject to the lien of this
Indenture or of discharging tax liens or other prior liens or encumbrances
thereon, if notice of such advance and of the circumstances surrounding the
making thereof is given to the debentureholders at the time and in the
manner provided in Section 6.04 with respect to reports pursuant to
subsections (a) and (b) thereof, respectively, and to the holders of other
indenture securities;
(iii) disbursements made in the ordinary course of business in the
capacity of trustee under an indenture, transfer agent, registrar,
custodian, paying agent, fiscal agent or depositary, or other similar
capacity;
(iv) an indebtedness created as a result of services rendered or
premises rented; or an indebtedness created as a result of goods or
securities sold in a cash transaction as defined in subsection (c) of this
Section 8.13;
(vi) the ownership of stock or of other securities of a corporation
organized under the provisions of Section 25(a) of the
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Federal Reserve Act, as amended, which is directly or indirectly a creditor
of the Company; or
(vi) the acquisition, ownership, acceptance or negotiation of any drafts,
bills of exchange, acceptances or obligations which fall within the
classification of self-liquidating paper, as defined in subsection (c) of this
Section 8.13.
(c) As used in this Section 8.13:
(i) The term "default" shall mean any failure to make payment in full of
the principal of (or premium, if any) or interest upon any of the Debentures or
upon the other indenture securities when and as such principal (or premium, if
any) or interest becomes due and payable.
(ii) The term "other indenture securities" shall mean securities upon which
the Company is an obligor (as defined in the Trust Indenture Act of 1939)
outstanding under any other indenture (A) under which the Trustee is also a
trustee, (B) which contains provisions substantially similar to the provisions
of subsection (a) of this Section 8.13, and (C) under which a default exists at
the time of the apportionment of the funds and property held in said special
account.
(iii) The term "cash transaction" shall mean any transaction in which full
payment for goods or securities sold is made within seven days after delivery of
the goods or securities in currency or in checks or other orders drawn upon
banks or bankers and payable upon demand.
(iv) The term "self-liquidating paper" shall mean any draft, bill of
exchange, acceptance or obligation which is made, drawn, negotiated or incurred
by the Company for the purpose of financing the purchase, processing,
manufacture, shipment, storage or sale of goods, wares or merchandise and which
is secured by documents evidencing title to, possession of, or a lien upon, the
goods, wares or merchandise or the receivables or proceeds arising from the sale
of the goods, wares or merchandise previously constituting the security;
provided the security is received by the Trustee simultaneously with the
creation of the creditor relationship with the Company arising from the making,
drawing, negotiating or incurring of the draft, bill of exchange, acceptance or
obligation.
(v) The term "Company" shall mean any obligor upon the Debentures.
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Section 8.14. Authenticating Asent of the Trustee. As long as any of the
Debentures remain outstanding, the Trustee may appoint an authenticating agent
to act on the Trustee's behalf in connection with the authentication of the
Debentures which shall be a corporation organized and doing business under the
laws of the United States or of any state, authorized under such laws to
exercise corporate trust powers, having a combined capital and surplus of at
least $50,000,000 and subject to supervision or examination by Federal or state
authority. If such corporation publishes reports of condition at least annually,
pursuant to law or to the requirements of any supervising or examining authority
above referred to, then for the purposes of this Section 8.14 the combined
capital and surplus of such corporation shall be deemed to be its combined
capital and surplus as set forth in its most recent report of condition as
published. Any such Authenticating Agent shall be appointed by the Trustee by an
instrument in writing, shall be subject in all respects to the control and
direction of the Trustee and shall have no responsibility or liability for any
action taken by it in good faith at the direction of the Trustee.
Any corporation into which any Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which any Authenticating Agent
shall be a party, or any corporation succeeding to the corporate trust business
of any Authenticating Agent, shall continue to be the Authenticating Agent
without the execution or filing of any paper or any further act on the part of
the Trustee or the Authenticating Agent.
Any Authenticating Agent may at any time resign by giving written notice of
resignation to the Trustee and to the Company. The Trustee may at any time
terminate the agency of any Authenticating Agent by giving written notice of
termination to such Authenticating Agent and to the Company. Upon receiving such
a notice of resignation or upon such a termination, or in case at any time any
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section 8.14, the Trustee may appoint a successor
Authenticating Agent and shall give written notice of any such appointment to
the Company. The Company shall mail to the holders of Debentures by first class
mail notice thereof. If the Company fails to mail such notice within 30 days
after the appointment of any such successor Authenticating Agent, the Trustee
shall, in its discretion, cause such notice to be mailed at the expense of the
Company. Any successor Authenticating Agent upon acceptance of its appointment
hereunder shall become vested with all the rights, powers, duties and
responsibilities of its predecessor hereunder, with like effect as if originally
appointed by the Trustee as Authenticating
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Agent. No successor Authenticating Agent shall be appointed unless eligible
under the provisions of this Section 8.14.
To the extent that the Trustee shall be entitled to be reimbursed and is
reimbursed for such payments, subject to the provisions of Section 8.06, the
Trustee agrees to pay to any Authenticating Agent from time to time reasonable
compensation for its services, and the Trustee shall be entitled to be
reimbursed for such payments subject to the provisions of Section 8.06.
ARTICLE NINE
Concerning the Debentureholders
Section 9.01. Action by Debentureholders. Whenever in this Indenture it
is provided that the holders of a specified percentage in aggregate principal
amount of the Debentures may take any action (including the making of any demand
or request, the giving of any notice, consent or waiver or the taking of any
other action) the fact that at the time of taking any such action the holders of
such specified percentage have joined therein may be evidenced (a) by any
instrument or any number of instruments of similar tenor executed by
debentureholders in person or by agent or proxy appointed in writing, or (b) by
the record of the holders of Debentures voting in favor thereof at any meeting
of Debentureholders duly called and held in accordance with the provisions of
Article Ten, or (c) by a combination of such instrument or instruments and any
such record of such a meeting of Debentureholders.
Section 9.02. Proof of Execution bv Debentureholders. Subject to the
provisions of Sections 8.01, 8.02 and 10.05 hereof, the execution of any proxy,
consent or other instrument by a Debentureholder or his agent or proxy shall be
deemed sufficient and conclusive for all purposes of this Indenture if (a) the
Trustee, Debenture Registrar or Company, as the case may be, shall have mailed
or delivered to the Debentureholder at his address as shown on the Debenture
Register such proxy, consent or other instrument, (b) the proxy, consent or
other instrument shall have been returned to the Trustee, Debenture Registrar or
Company, as the case may be, bearing a signature purporting and reasonably
appearing to be that of the Debentureholder, his agent or proxy, and (c) the
person receiving the executed proxy, consent or other instrument shall have no
actual knowledge or notice of any irregularity, or of any fact or circumstance,
which, if substantiated, would impair the validity of such proxy consent or
other instrument. The matters referred to in clauses (a), (b) and (c), above, of
this Section 9.02 may be evidenced by a certificate of the Trustee or Debenture
Registrar or an Officers' Certificate of the Company, as the case may be.
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The ownership of Debentures shall be proved by the Debenture Register or
by a certificate of the Debenture Registrar thereof.
The Trustee shall not be bound to recognize any person as a
Debentureholder unless and until his title to the Debentures held by him is
proved in the manner in this Article Nine provided.
The Trustee may require such additional proof of any matter referred to in
this Section 9.02 as it shall deem necessary.
The record of any Debentureholders' meeting shall be proved in the manner
provided in Section 10.06.
Section 9.03. Who May be Deemed Owners of Debentures. The Company, the
Trustee, any Authenticating Agent; any paying agent and any Debenture Registrar
may deem and treat the person in whose name any Debenture shall be registered in
the Debenture Register as the absolute owner of such Debenture (whether or not
such Debenture shall be overdue and notwithstanding any notation of ownership or
other writing thereon made by anyone other than the Company or any Debenture
Registrar) for the purpose of receiving payment thereof or on account thereof
and for all other purposes, and neither the Company nor the Trustee nor any
Authenticating Agent nor any paying agent nor any Debenture Registrar shall be
affected by any notice to the contrary. All such payments so made to any such
registered holder for the time being, or upon his order, shall be valid, and, to
the extent of the sum or sums so paid, effectual to satisfy and discharge the
liability for monies payable upon any such Debenture.
Section 9.04. Company-Owned Debentures Disregarded. In determining whether
the holders of the requisite aggregate principal amount of Debentures have
concurred in any direction, consent or waiver under this Indenture, Debentures
which are owned by the Company or any other obligor on the Debentures or by any
person directly or indirectly controlling or controlled by or under direct or
indirect common control with the Company or any other obligor on the Debentures
shall be disregarded and deemed not to be outstanding for the purpose of any
such determination, except that for the purpose of determining whether the
Trustee shall be protected in relying on any such direction, consent or waiver
only Debentures which the Trustee knows are so owned shall be so disregarded.
Debentures so owned which have been pledged in good faith may be regarded as
outstanding for the purposes of this Section 9.04, if the pledgee shall
establish to the satisfaction of the Trustee the pledgee's right to vote such
Debentures and that the pledgee is not a person directly or indirectly
controlling or controlled by or under direct or indirect
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common control with the Company or any such other obligor. Upon request of the
Trustee, the Company shall furnish to the Trustee promptly an Officers'
Certificate listing and identifying all Debentures, if any, known by the Company
to be owned or held by or for the account of any of the above described persons;
and, subject to the provisions of Section 8.01, the Trustee shall be entitled to
accept such Officers' Certificate as conclusive evidence of the facts therein
set forth and of the fact that all Debentures not listed therein are outstanding
for the purposes of any such determination.
Section 9.05. Instruments Executed by Debentureholders Bind Future Holders.
At any time prior to (but not after) the evidencing to the Trustee, as provided
in Section 9.01, of the taking of any action by the holders of the percentage
in aggregate principal amount of the Debentures specified in this Indenture in
connection with such action, any holder of a Debenture which is shown by the
evidence to be included in the Debentures the holders of which have consented to
or are bound by consents to such action may, by filing written notice with the
Trustee at its office and upon proof of ownership as provided in Section 9.02,
revoke such action so far as concerns such Debenture. Except as aforesaid any
such action taken by the holder of any Debenture shall be conclusive and binding
upon such holder and upon all future holders and owners of such Debenture, and
of any Debenture issued in exchange or substitution therefor, irrespective of
whether or not any notation in regard thereto is made upon such Debenture.
ARTICLE TEN
Debentureholders' Meetings
Section 10.01. Purposes of Meetings. A Meetings of Debentureholders may be
called at any time and from time to time pursuant to the provisions of this
Article Ten for any of the following purposes:
(i) to give any notice to the Company or to the Trustee, or, to give any
directions to the Trustee, or to consent to the waiving of any default
hereunder and its consequences, or to take any other action
authorized to be taken by Debentureholders pursuant to any of the
provisions of Article Seven;
(ii) to remove the Trustee and nominate for appointment a successor
trustee pursuant to the provisions of Article Eight;
(iii)to consent to the execution of an indenture or indentures supplemental
hereto pursuant to the provisions of Section 11.02; or
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(iv) to take any other action authorized to be taken by or on behalf of
the holders of any specified aggregate principal amount of the
Debentures under any other provision of this Indenture or under
applicable law.
Section 10.02. Manner of Calling Meetings. The Trustee may at any
time call a meeting of Debentureholders to take any action specified in
Section 10.01, to be held at such time and at such place in Houston,
Texas or the Borough of Manhattan, the City of New York, as the Trustee
shall determine. Notice of every meeting of the Debentureholders,
setting forth the time and the place of such meeting and in general terms
the action proposed to be taken at such meeting, shall be mailed to the
holders of Debentures at their addresses as shown by the Debenture Reg-
ister not less than 20 nor more than 60 days prior to the date fixed for
the meeting.
Section 10.03. Call of Meetings by Company or Debentureholders. In case at
any time the Company, pursuant to a resolution of its Board of Directors, or
the holders of at least 10 percent in aggregate principal amount of the
Debentures then outstanding, shall have requested the Trustee to call a
meeting of Debentureholders to take any action authorized in Section 10.01,
by written request setting forth in reasonable detail the action proposed to be
taken at the meeting, and the Trustee shall not have mailed the notice of such
meeting within 20 days after receipt of such request, then the Company or the
holders of Debentures in the amount above specified may determine the time and
the place in the Borough of Manhattan, The City of New York, for such meeting
and may call such meeting to take any action authorized by Section
10.01, by mailing notice thereof as provided in Section 10.02.
Section 10.04. Who May Attend and Vote at Meetings. To be entitled to
vote at any meeting of Debentureholders, a person shall (a) be a holder of one
or more Debentures, or (b) be a person appointed by an instrument in writing as
proxy by a holder of one or more Debentures. The only persons who shall be
entitled to be present or to speak at any meeting of Debentureholders shall be
the persons entitled to vote at such meeting and their counsel and any
representatives of the Trustee and its counsel and any representatives of the
Company and its counsel.
Section 10.05. Regulations May be Made by Trustee. Notwithstanding
any other provisions of this Indenture, the Trustee may make such reason-
able regulations as it may deem advisable for any meeting of
Debentureholders, in regard to proof of the holding of Debentures and of
the appointment of proxies, and in regard to the appointment and duties
of inspectors of votes, the submission and examination of proxies,
certificates and other evidence of the right to vote, and such other
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matters concerning the conduct of the meeting as it shall think fit. Except
as otherwise permitted or required by any such regulations, the holding of
Debentures shall be proved in the manner specified in Section 9.02, and the
appointment of any proxy shall be proved in the manner specified in said
Section 9.02 or by having the signature of the person executing the proxy
witnessed or guaranteed by any bank, banker or trust company.
The Trustee shall, by an instrument in writing, appoint a temporary
chairman of the meeting, unless the meeting shall have been called by the
Company or by Debentureholders as provided in Section 10.03, in which
case the Company or the Debentureholders calling the meeting, as the case
may be, shall in like manner appoint a temporary chairman. A permanent
chairman and a permanent secretary of the meeting shall be elected by
vote of the holders of a majority in principal amount of the Debentures
represented at the meeting and entitled to vote.
Subject to the provisions of Section 9.04, at any meeting each
Debentureholder or proxy shall be entitled to one vote for each $1,000 principal
amount of Debentures held or represented by him; provided, however, that no
vote shall be cast or counted at any meeting in respect of any Debenture
challenged as not outstanding and ruled by the chairman of the meeting to be not
outstanding. The chairman of the meeting shall have no right to vote other than
by virtue of Debentures held by him or instruments in writing as aforesaid duly
designating him as the person to vote on behalf of other Debentureholders.
Any meeting of debentureholders duly called pursuant to the provisions of
Section 10.02 or 10.03 may be adjourned from time to time, and the meeting may
be held as so adjourned without further notice.
At any meeting of debentureholders, the presence of persons holding or
representing Debentures in an aggregate principal amount sufficient to take
action upon the business for the transaction of which such meeting was called
shall be necessary to constitute a quorum; but, if less than a quorum be
present, the persons holding or representing a majority of the Debentures
represented at the meeting may adjourn such meeting with the same effect as
though a quorum had been present.
Section 10.06. Manner of Voting at Meetings and Record to be Kept. The
vote upon any resolution submitted to any meeting of Debentureholders shall be
by written ballots on which shall be subscribed the signatures of the
Debentureholders or proxies and the principal amount of the Debentures held or
represented by them. The permanent chairman of the meeting shall appoint two
inspectors of votes who shall count all votes cast at the meeting for or against
any resolution and who shall make and file with the secretary of the meeting
their verified
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written reports in duplicate of all votes cast at the meeting. A record in
duplicate of the proceedings of each meeting of Debentureholders shall be
prepared by the secretary of the meeting and there shall be attached to said
record the original reports of the inspectors of votes on any vote by ballot
taken thereat and affidavits by one or more persons having knowledge of the
facts setting forth a copy of the notice of the meeting and showing that said
notice was mailed as provided in Section 10.02. The record shall be signed and
verified by the affidavits of the permanent chairman and secretary of the
meeting and one of the duplicates shall be delivered to the Company and the
other to the Trustee to be preserved by the Trustee, the latter to have
attached thereto the ballots voted at the meeting.
Any record so signed and verified shall be conclusive evidence of
the matters therein stated.
Section 10.07. No Delay of Rights by Meeting. Nothing in this Article Ten
contained shall be deemed or construed to authorize or permit, by reason of
any call of a meeting of Debentureholders or any rights expressly or impliedly
conferred hereunder to make such call, any hindrance or delay in the exercise
of any right or rights conferred upon or reserved to the Trustee or to the
Debentureholders under any of the provisions of this Indenture or of the
Debentures.
ARTICLE ELEVEN
Supplemental Indentures
Section 11.01. Supplemental Indentures Without Consent of Debentureholders. The
Company, when authorized by a resolution of its Board of Directors, and the
Trustee may from time to time and at any time enter into an indenture or
indentures supplemental hereto (which shall conform to the provisions of the
Trust Indenture Act of 1939 as in force at the date of the execution thereof)
for one or more of the following purposes:
(a) to evidence the succession of another corporation to the
Company or successive successions, and the assumption by the successor
corporation of the covenants, agreements and obligations of the Company
pursuant to Article Twelve and, if appropriate, an adjustment in the
conversion price pursuant to Section 14.06;
(b) to add to the covenants of the Company such further covenants,
restrictions, conditions or provisions as its Board of Directors and
the Trustee shall consider to be for the protection of the holders of
Debentures, and to make the occurrence, or the occur-
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rence and continuance, of a default in any of such additional covenants,
restrictions, conditions or provisions a default or an Event of Default
permitting the enforcement of all or any of the several remedies provided in
this Indenture as herein set forth; provided, however, that in respect of any
such additional covenant, restriction, condition or provision such supplemental
indenture may provide for a particular period of grace after default (which
period may be shorter or longer than that allowed in the case of other
defaults) or may provide for an immediate enforcement upon such default or may
limit the remedies available to the Trustee upon such default or may limit the
right of the holders of a majority in aggregate principal amount of the
Debentures to waive such default;
(c) to cure any ambiguity or to correct or supplement any provision
contained herein or in any supplemental indenture which may be defective
or inconsistent with any other provision contained herein or in any
supplemental indenture; to convey, transfer, assign, mortgage or pledge
any property to or with the Trustee; or to amend such other provisions in
regard to matters or questions arising under this Indenture, provided
that such action shall not adversely affect the interests of the holders
of the Debentures; and
(d) to modify, eliminate or add to the provisions of this Indenture to
such extent as shall be necessary or helpful to conform to any mandatory
or optional provisions of, or to retain the qualification of the
Indenture under, the Trust Indenture Act as the same may from time to time
be amended.
The Trustee is hereby authorized to join with the Company in the execution
of any such supplemental indenture, to make any further appropriate
agreements and stipulations which may be therein contained and to accept
the conveyance, transfer, assignment, mortgage or pledge of any property
thereunder, but the Trustee shall not be obligated to enter into any
such supplemental indenture which adversely affects the Trustee's
own rights, duties or immunities under this Indenture or otherwise.
Any supplemental indenture authorized by the provisions of this Section
11.01 may be executed by the Company and the Trustee without the
consent of the holders of any of the Debentures at the time outstanding,
notwithstanding any of the provisions of Section 11.02.
Section 11.02. Supplemental Indentures With Consent of
Debentureholders. With the consent (evidenced as provided in Section
9.01) of the holders of not less than 66-2/3% in aggregate principal
amount of the Debentures at the time outstanding, the Company, when
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authorized by a resolution of its Board of Directors, and the Trustee may from
time to time and at any time enter into an indenture or indentures supplemental
hereto (which shall conform to the provisions of the Trust Indenture Act of 1939
as in force at the date of the execution thereof) for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Indenture or of any supplemental indenture or of modifying in any manner
the rights of the holders of the Debentures; provided, however, that no such
supplemental indenture shall (a) extend the fixed maturity of any Debenture,
or reduce the principal amount thereof or any premium thereon, or reduce the
rate or extend the time of payment of interest thereon, or make the principal
thereof or premium, if any, or interest thereon payable in any coin or currency
other than that provided in the Debentures, or adversely affect the right to
convert any Debentures as provided in Article Fourteen or modify the provisions
of this Indenture with respect to the subordination of the Debentures in a
manner adverse to the Debentureholders, without the consent of the holder of
each Debenture so affected, or (b) reduce the aforesaid percentage of
Debentures, the consent of the holders of which is required for any such
supplemental indenture, without the consent of the holders of all Debentures
then outstanding.
Upon the request of the Company, accompanied by a copy of a resolution
of its Board of Directors certified by the Secretary or an Assistant Secretary
of the Company authorizing the execution of any such supplemental indenture, and
upon the filing with the Trustee of evidence of the consent of the
Debentureholders as aforesaid, the Trustee shall join with the Company in the
execution of such supplemental indenture unless such supplemental indenture
affects the Trustee's own rights, duties or immunities under this Indenture or
otherwise, in which case the Trustee may in its discretion but shall not be
obligated to enter into such supplemental indenture,
It shall not be necessary for the consent of the Debentureholders under
this Section 11.02 to approve the particular form of any proposed supplemental
indenture, but it shall be sufficient if such consent shall approve the
substance thereof.
Promptly after the execution by the Company and the Trustee of any
supplemental indenture pursuant to the provisions of this Section 11.02, the
Company shall mail to the Debentureholders a notice, setting forth in general
terms the substance of such supplemental indenture. Any failure of the Company
to mail such notice, or any defect therein, shall not, however, in any way
impair or affect the validity of any such supplemental indenture.
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Section 11.03. Effect of Supplemental Indentures. Upon the execution
of any supplemental indenture pursuant to the provisions of this Article
Eleven, this Indenture shall be and be deemed to be modified and amended in
accordance therewith and the respective rights, limitations of rights,
obligations, duties and immunities under this Indenture of the Trustee, the
Company and the holders of Debentures and of Senior Indebtedness shall
thereafter be determined, exercised and enforced hereunder subject in all
respects to such modifications and amendments, and all the terms and
conditions of any such supplemental indenture shall be and be deemed to be part
of the terms and conditions of this Indenture for any and all purposes.
The Trustee, subject to the provisions of Sections 8.01 and 8.02, may
receive an Opinion of Counsel as conclusive evidence that any such supplemental
indenture complies with the provisions of this Article Eleven.
Section 11.04. Debentures May Bear Notation of Changes by Supplemental
Indentures. Debentures authenticated and delivered after the execution of any
supplemental indenture pursuant to the provisions of this Article Eleven or
after any action taken at a Debentureholders' meeting pursuant to Article Ten,
may, and shall if required by the Company, bear a notation in form approved
by the Trustee as to any matter provided for in such supplemental indenture
or as to any such action. New Debentures so modified as to conform, in the
opinion of the Trustee and the Board of Directors of the Company, to any
modification of this Indenture contained in any such supplemental indenture or
reflecting such action may be prepared by the Company, authenticated by or on
behalf of the Trustee and delivered in exchange for the Debentures
then outstanding.
ARTICLE TWELVE
Consolidation, Merger, Sale or Conveyance
Section 12.01. Consolidations and Mergers of Company and
Conveyances Permitted. Nothing contained in this Indenture or in any of the
Debentures shall prevent any consolidation or merger of the Company with or
into any other corporation or corporations or successive consolidations or
mergers in which the Company or its successor or successors shall be a
party or parties, or shall prevent any sale, conveyance or lease of all or
substantially all of the property of the Company to any other corporation
authorized to acquire and operate the same; provided, however, and the
Company hereby covenants and agrees, that any such consolidation, merger, sale,
conveyance or lease shall be upon the condition that (a) immediately after such
consolidation, merger,
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sale, conveyance or lease the corporation (whether the Company or such other
corporation) formed by or surviving any such consolidation or merger, or to
which such sale, conveyance or lease shall have been made, shall not be in
default in the performance or observance of any of the terms, covenants and
conditions of this Indenture to be kept or performed by the Company; (b) the
corporation (if other than the Company) formed by or surviving any such
consolidation or merger, or to which such sale, conveyance or lease shall
have been made, shall be a corporation organized under the laws of the United
States of America or any state thereof; and (c) the due and punctual payment of
the principal of and premium, if any, and interest on all of the Debentures,
according to their tenor, and the due and punctual performance and observance
of all the covenants and conditions of this Indenture to be performed or
observed by the Company, shall be expressly assumed, by supplemental
indenture, executed and delivered to the Trustee, by the corporation (if other
than the Company) formed by such consolidation, or into which the Company shall
have been merged, or by the corporation which shall have acquired or leased
such property.
Section 12.02. Successor Corporation Substituted. In case of any such
consolidation, merger, sale, conveyance or lease and upon the assumption
by the successor corporation, by supplemental indenture, executed and delivered
to the Trustee, of the due and punctual payment of the principal and premium, if
any, and interest on all of the Debentures and the due and punctual
performance and observance of all of the covenants and conditions of this
Indenture to be performed or observed by the Company, such successor
corporation shall succeed to and be substituted for the Company, with the
same effect as if it had been named herein as the party of the first part, and
the Company (including any intervening successor to the Company which shall have
become the obligor hereunder) shall be relieved of any further obligation
under this Indenture and the Debentures; provided, however, that in the case of
a sale, conveyance or lease of the property of the Company (including any such
intervening successor) in connection with which there is not a plan providing
for the complete liquidation of the Company (including any such intervening
successor), the Company (including any such intervening successor) shall
continue to be liable on its obligations under this Indenture and the
Debentures to the extent, but only to the extent, of liability to pay the
principal of and premium, if any, and interest on the Debentures at the time,
places and rate, and in the coin or currency, prescribed in this Indenture and
the Debentures. Such successor corporation thereupon may cause to be signed,
and may issue either in its own name or in the name of Allwaste, Inc., any or
all of the Debentures issuable hereunder which theretofore shall not have been
signed by the Company and delivered to the Trustee; and, upon the order of
such successor corporation instead of the Company, and subject to all the
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terms, conditions and limitations in this Indenture prescribed, the Trustee
shall authenticate and shall deliver any Debentures which previously shall
have been signed and delivered by the officers of the Company to the Trustee
for authentication, and any Debentures which such successor corporation
thereafter shall cause to be signed and delivered to the Trustee for that
purpose. All the Debentures so issued shall in all respects have the same
legal rank and benefit under this Indenture as the Debentures theretofore or
thereafter issued in accordance with the terms of this Indenture as though all
of such Debentures had been issued at the date of the execution hereof.
In case of any such consolidation, merger, sale, conveyance or lease such
changes in phraseology and form (but not in substance) may be made in the
Debentures thereafter to be issued as may be appropriate.
Nothing contained in this Indenture or in any of the Debentures shall
prevent the Company from merging into itself any other corporation (whether or
not affiliated with the Company) or acquiring by purchase or otherwise all or
any part of the property of any other corporation (whether or not affiliated
with the Company).
Section 12.03. Opinion of Counsel. The Trustee, subject to the
provisions of Sections 8.01 and 8.02, may receive an Opinion of Counsel as
conclusive evidence that any such consolidation, merger, sale,
conveyance or lease complies with the provisions of this Article Twelve,
ARTICLE THIRTEEN
Satisfaction and Discharge of Indenture;
Unclaimed Moneys
Section 13.01. Satisfaction and Discharqe of Indenture. If at any time
(a) the Company shall have delivered to the Debenture Registrar for
cancellation all Debentures theretofore authenticated (other than any
Debentures which shall have been destroyed, lost or stolen and which shall
have been replaced or paid as provided in Section 2.07) and not theretofore
cancelled, or (b) all the Debentures not theretofore cancelled or delivered to
the Debenture Registrar for cancellation shall have become due and payable, or
are by their terms to become due and payable within one year or are to be
called for redemption within one year under arrangements satisfactory to the
Trustee for the giving of notice of redemption, and the Company shall deposit
with the Trustee in trust, funds or U.S. Government Obligations sufficient to
pay at maturity or upon redemption all the Debentures (other than any
Debenture which shall have been destroyed, lost or stolen and which shall have
been replaced or paid as provided in Section 2.07) not theretofore cancelled
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or delivered to the Debenture Registrar for cancellation, including principal
and premium, if any, and interest due or to become due to such date of
maturity or redemption date, as the case may be, but excluding, however, the
amount of any moneys for the payment of principal of or premium, if any, or
interest on the Debentures (1) theretofore deposited with the Trustee and
repaid by the Trustee to the Company in accordance with the provisions of
Section 13.04, or (2) paid to any governmental authority pursuant to its
unclaimed property or similar laws, and if in either case the Company shall
also pay or cause to be paid all other sums payable hereunder by the Company,
then, except with respect to the remaining rights of conversion of any
Debentures (which shall continue in full force and effect upon the terms set
forth in Article Fourteen) and as to any surviving rights of transfer or
exchange of Debentures herein expressly provided for, this Indenture shall
cease to be of further effect, and the Trustee, on demand of the Company
accompanied by an Officers' Certificate and an Opinion of Counsel acquired by
Section 16.07 and at the cost and expense of the Company, shall execute
proper instruments acknowledging satisfaction of and discharging this
Indenture. The Company agrees to reimburse the Trustee for any costs or
expenses thereafter reasonably and properly incurred by the Trustee in
connection with this Indenture or the Debentures. Notwithstanding the
satisfaction and discharge of this Indenture the obligations of the Company to
the Trustee under Section 8.06, the rights, privileges and immunities of the
Trustee under Article Eight, and the obligations of the Trustee under Sections
13.02 and 13.04 or any Authenticating Agent under Section 8.14 shall survive.
In order to have money available on a payment date to pay principal or
interest on the Debentures, the U.S. Government Obligations shall be payable
as to principal or interest before such payment date in such amounts as
will provide the necessary money. U.S. Government Obligations shall
not be callable at the issuer's option.
Section 13.02. Application by Trustee of Funds Deposited for Payment of
Debentures. Subject to the provisions of Section 13.04, all moneys and U.S.
Government Obligations deposited with the Trustee pursuant to Section 13.01
shall be held in trust and such moneys and the proceeds of U.S. Government
Obligations shall be applied by it to the payment, either directly or through
any paying agent (including the Company acting as its own paying agent) as the
Trustee may determine, to the persons entitled thereto, of the principal (and
premium, if any) and interest for the payment of which such moneys have been
deposited with the Trustee. All moneys and U.S. Government Obligations (or the
proceeds thereof) deposited with the Trustee pursuant to Section 13.01 and held
by it or any paying agent for the payment of Debentures subsequently
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converted shall be returned to the Company upon written request of the Company.
Section 13.03. Repayment of Moneys Held by Paying Agent. In connection
with the satisfaction and discharge of this Indenture all moneys then held by
any paying agent (other than the Trustee) under the provisions of this
Indenture shall, upon demand of the Company, be paid to the Trustee and
thereupon such paying agent shall be released from all further liability with
respect to such moneys.
Section 13.04. Repayment of Moneys Held by Trustee. Any moneys
deposited with the Trustee or any paying agent for the payment of the
principal of or premium, if any, or interest on any Debentures and not applied
but remaining unclaimed by the holders of Debentures for two years after the
date upon which such payment shall have become due and payable, shall be repaid
to the Company by the Trustee or by such paying agent on demand; and the
holder of any of the Debentures entitled to receive such payment shall
thereafter look only to the Company for the payment thereof and all liability
of the Trustee or any paying agent with respect to such moneys shall thereupon
cease; provided, however, that the Trustee or such paying agent, before being
required to make any such repayment, may at the expense of the Company cause to
be published once a week for two successive weeks (in each case on any day of
the week) in an Authorized Newspaper a notice that said moneys have not been so
applied and that after a date named therein any unclaimed balance of said
moneys then remaining will be returned to the Company.
ARTICLE FOURTEEN
Conversion of Debentures
Section 14.01. Conversion Right and Conversion Price. Subject to and
upon compliance with the provisions of this Article Fourteen, the holder of
any Debenture shall have the right, at his option, to convert the principal
amount of such Debenture or any portion thereof which is $1,000 or an integral
multiple thereof at any time up to and including June 1, 2014, or in case such
Debenture or portion thereof shall have been called for redemption prior to
such date, then in respect of such Debenture or portion thereof until and
including, but (unless the Company shall default in the payment due upon the
redemption thereof) not after, the close of business on the fifth day prior to
the redemption date therefor, into that number of fully-paid and nonassessable
shares (calculated as to such conversion to the nearest 1/100th of a share) of
Common Stock of the Company, obtained by dividing the principal amount of the
Debenture or portion thereof surrendered for conversion by the conversion
price, determined as hereinafter provided, in effect at the
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time of conversion, upon surrender of the Debenture, the principal (or portion
thereof) of which is so to be converted, accompanied by (i) a duly executed
notice of conversion which may be in the form appearing in the form of Debenture
herein or such other form as is satisfactory to the Company and the Trustee
(specifying, if less than the entire principal amount thereof is to be
converted, the portion thereof to be converted) at any time during usual
business hours at the office or agency to be maintained by the Company in
accordance with the provisions of Section 5.02, (ii) a written instrument or
instruments of transfer in form satisfactory to the Trustee duly executed by the
holder or his attorney duly authorized in writing, and (iii) the funds, if any,
required by Section 14.03. For convenience, the conversion of any portion of the
principal of any Debenture or Debentures into the Common Stock of the Company is
hereafter sometimes referred to as the conversion of such Debenture or
Debentures.
The price at which shares of Common Stock shall be delivered upon
conversion (herein called the "conversion price"), shall be initially $23-7/8
per share of Common Stock. The conversion price shall be subject to adjustment
from time to time in certain instances as hereinafter provided.
Section 14.02. Issuance of Common Stock on Conversion. (a) As promptly
as practicable after the surrender, as herein provided, of any Debenture or
Debentures for conversion, accompanied by the funds, if any, required by Section
14.03, the Company shall deliver or cause to be delivered at its said office or
agency, to or upon the written order of the holder of the Debenture or
Debentures so surrendered, certificates representing the number of fully paid
and nonassessable shares of Common Stock of the Company into which such
Debenture or Debentures may be converted in accordance with the provisions of
this Article Fourteen. Such conversion shall be deemed to have been made at
the close of business on the date that such Debenture or Debentures shall have
been surrendered for conversion with a notice of conversion duly executed,
accompanied by the funds, if any, required by Section 14.03, so that the rights
of the holder of such Debenture or Debentures as a Debentureholder shall cease
at such time and, subject to the following provisions of this paragraph, the
person or persons entitled to receive the shares of Common Stock upon conversion
of such Debenture or Debentures shall be treated for all purposes as having
become the record holder or holders of such shares of Common Stock at such time
and such conversion shall be at the conversion price in effect at such time;
provided, however, that no such surrender on any date when the stock transfer
books of the Company shall be closed shall be effective to constitute the person
or persons entitled to receive the shares of Common Stock upon such conversion
as the record holder or holders of such shares of Common Stock on such date, but
such
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surrender shall be effective to constitute the person or persons entitled to
receive such shares of Common Stock as the record holder or holders thereof for
all purposes at the close of business on the next succeeding day on which such
stock transfer books are open; and, in that event such conversion shall be at
the conversion price in effect on the date that such Debenture or Debentures
shall have been surrendered for conversion, as if the stock transfer books of
the Company had not been closed.
(b) All Debentures surrendered for conversion shall, if surrendered to the
Company or any conversion agent, be delivered to the Debenture Registrar for
cancellation and cancelled by it or, if surrendered to the Debenture Registrar,
shall be cancelled by it, and, subject to the next succeeding sentence, no
Debentures shall be issued in lieu thereof. Upon conversion of any Debenture
which is converted in part only, the Company shall execute and the Trustee or
Authenticating Agent shall authenticate and the Debenture Registrar shall
register and deliver to or on the order of the holder thereof, at the expense
of the Company, a new Debenture or Debentures of authorized denominations in
principal amount equal to the unconverted portion of such Debenture.
(c) If the last day for the exercise of the conversion right shall not be a
business day, then such conversion right may be exercised on the next succeeding
business day.
Section 14.03. Interest and Dividends; Fractions and Shares. No
adjustments in respect of interest or dividends shall be made upon the
conversion of any Debenture or Debentures; provided, however, that if a
Debenture or any portion hereof shall be surrendered for conversion subsequent
to the record date preceding an interest payment date but prior to such interest
payment date, such Debenture must be accompanied by funds equal to the interest
payable on such Debenture on such interest payment date on the principal amount
so converted; provided, however, that if on or before June 1, 1991 the Company
is given a notice of redemption of the Debenture in accordance with Section 4.02
of the Indenture, the holder of record of the Debentures on May 15, 1991 will be
entitled to be paid the interest thereon on June 1, 1991, whether or not the
Debenture shall have been converted prior to June 1, 1991, and without any
requirement that such Debenture be accompanied by funds in the amount of
interest payable on June 1, 1991.
No fractional shares of Common Stock shall be issued upon conversion of
Debentures. If more than one Debenture shall be surrendered for conversion at
one time by the same holder, the number of full shares which shall be issuable
upon conversion thereof shall be computed on the basis of the aggregate
principal amount of the Debentures (or specified portions thereof) so
surrendered. Instead of any fractional share of
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Common Stock which would otherwise be issuable upon conversion of any Debenture
or Debentures (or specified portions thereof), the Company shall pay a cash
adjustment in respect of such fraction in an amount equal to such fraction
multiplied by the Current Market Price defined in Section 14.04(iv) per share of
Common Stock at the close of business on the business day which next precedes
the day of conversion as determined in accordance with Section 14.04.
Section 14.04. Adjustments of Conversion Price. The conversion price in
effect at any time shall be subject to adjustments from time to time on or after
the date of original issuance of the Debentures as follows:
(i) In case the Company shall (A) declare a dividend or make a distribution
payable in Common Stock on the Common Stock, (B) subdivide or reclassify its
outstanding shares of Common Stock into a greater number of shares, or (C)
combine its outstanding shares of Common Stock into a smaller number of shares,
the conversion price in effect at the time of the record date for such dividend
or distribution or the effective date of such subdivision, combination or
reclassification shall be proportionately reduced in the case of any increase in
the number of shares of Common Stock outstanding, and increased in the case of
any reduction in the number of shares of Common Stock outstanding, so that the
holder of any Debenture surrendered for conversion after such time shall be
entitled to receive the kind and amount of shares which he would have owned or
have been entitled to receive had such Debenture been converted into Common
Stock immediately prior to such time and had such Common Stock received such
dividend or other distribution or participated in such subdivision, combination
or reclassification. Such adjustment shall be effective as of the record date
for such dividend or distribution or the effective date of such combination,
subdivision or reclassification and shall be made successively whenever any
event listed above shall occur. If, as a result of an adjustment made pursuant
to this Section 14.04(i), the holder of any Debenture thereafter surrendered for
conversion shall become entitled to receive shares of two or more classes of the
capital stock of the Company, the Board of Directors of the Company (whose
determination shall be conclusive if made in good faith and shall be described
in a statement provided to the Trustee and the registered holders of the
Debentures) shall in good faith determine the allocation of the conversion price
between and among shares of such classes of capital stock.
(ii) In case the Company shall issue rights or warrants to all holders of
its Common Stock entitling them (for a period expiring
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within 45 days of the date fixed for the determination of stockholders entitled
to receive such rights or warrants) to subscribe for or purchase shares of
Common Stock at a price per share less than the Current Market Price (as defined
in paragraph (iv) below) of the Common Stock, on the date fixed for the
determination of stockholders entitled to receive such rights or warrants (the
"Determination Date"), the conversion price at the opening of business on the
day following the Determination Date shall be reduced by multiplying the
conversion price by a fraction of which the numerator shall be the number of
shares of Common Stock outstanding at the close of business on the Determination
Date plus the number of shares of Common Stock which the aggregate of the
offering price of the total number of shares of Common Stock so offered for
subscription or purchase would purchase at such Current Market Price of the
Common Stock and the denominator shall be the number of shares of Common Stock
outstanding at the close of business on the Determination Date plus the number
of shares of Common Stock so offered for subscription or purchase, such
reduction to become effective immediately after the opening of business on the
day following the Determination Date. For purposes of determining under this
paragraph the number of shares of Common Stock outstanding at any time, there
shall be excluded all shares of Common Stock held in the treasury of the
Company. If any or all such rights or warrants are not so issued or expire or
terminate before being exercised, the conversion price then in effect shall be
appropriately readjusted, but such readjustment shall not be applied
retroactively to any conversion of Debentures effected prior to such
readjustment.
(iii) In case the Company shall distribute to all holders of its Common
Stock evidences of its indebtedness or assets (including securities, but
excluding cash dividends or a distribution referred to in paragraph (i) above or
paid out of surplus) or rights or warrants to subscribe for or purchase any of
the Company's securities (excluding those referred to in paragraph (ii) above),
the conversion price shall be adjusted so that it shall equal the price
determined by multiplying the conversion price in effect immediately prior to
the close of business on the date fixed for the determination of stockholders
entitled to receive such distribution by a fraction of which the numerator shall
be the Current Market Price per share of the Common Stock on the date fixed for
such determination less the then fair market value (as determined by the Board
of Directors of the Company, in good faith and in the exercise of its reasonable
business judgment and described in a resolution of the Board of Directors
certified by the Secretary or Assistant Secretary and filed with the Trustee),
of the portion of the assets
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or evidences of indebtedness so distributed applicable to one share of Common
Stock and the denominator shall be such Current Market Price per share of the
Common Stock; provided, however, if exercise of such right or warrant is subject
to the occurrence of a contingent event, adjustment of the conversion price
shall be made in the manner provided for in paragraph (ii) above and the date
that the right or warrant becomes exercisable shall be deemed to be the
Determination Date for purposes of such adjustment. The conversion price
adjustment made pursuant to this paragraph (iii) shall become effective
immediately prior to the opening of business on the day following the date fixed
for the determination of stockholders entitled to receive such distribution
(except in the case of rights or warrants subject to exercise upon the
occurrence of a contingent event, in which case such adjustment shall become
effective at the time such rights or warrants become exercisable).
(iv) For the purposes of this Article Fourteen, the "Current Market Price"
per share of Common Stock on any date shall be deemed to be the average of the
last reported sale prices for the twenty (20) consecutive Trading Days (as
defined below) next preceding the day in question. The last reported sale price
for each day shall be (i) the last reported sale price of Common Stock on the
National Market of the National Association of Securities Dealers, Inc.,
Automated Quotation System, or any similar system of automated dissemination of
quotations of securities prices then in common use, if so quoted, or (ii) if not
quoted as described in clause (i), the mean between the high bid and low asked
quotations for Common Stock as reported by the National Quotation Bureau
Incorporated if at least two securities dealers have inserted both bid and
asked quotations for such class of stock on at least 5 of the 10 preceding days,
or (iii) if the Common Stock is listed or admitted for trading on any national
securities exchange, the last sale price, or the closing bid price if no sale
occurred, of such class of stock on the principal securities exchange on which
such class of stock is listed. If the Common Stock is quoted on a national
securities or central market system, in lieu of a market or quotation system
described above, the closing price shall be determined in the manner set forth
in clause (ii) of the preceding sentence if bid and asked quotations are
reported but actual transactions are not, and in the manner set forth in clause
(iii) of the preceding sentence if actual transactions are reported. If none of
the conditions set forth above is met, the closing price of Common Stock on any
day or the average of such closing prices for any period shall be the fair
market value of such class of stock as determined in good faith in the exercise
of their reasonable business judgment by the Board of Directors of the Company.
As used herein the term "Trading Days"
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with respect to Common Stock means (i) if the Common Stock is quoted
on the National Market of the National Association of Securities
Dealers, Inc., Automated Quotation System or any similar system of
automated dissemination of quotations of securities prices, days on
which trades may be made on such system or (ii) if the Common Stock is
listed or admitted for trading on any national securities exchange,
days on which such national securities exchange is open for business.
(v) All calculations under this Section 14.04 shall be made to the nearest
cent or to the nearest one-hundredth of a share, as the case may be.
(vi) No adjustment in the conversion price shall be required pursuant to
any paragraph of this Section 14.04 unless such adjustment (together
with prior adjustments which by reason of this paragraph (vi) were not
required to be made at the time otherwise required by the above
paragraphs of this Section 14.04) would require a change of at least
1% in such price; provided, however, that any adjustments which by
reason of this paragraph (vi) are not required to be made shall be
carried forward and taken into account in any subsequent adjustment.
(vii) The Company from time to time may reduce the conversion price by any
amount for any period of time if the period is at Least twenty (20)
days and if the reduction is irrevocable during the period; provided,
however, that the Company may not reduce the conversion price per
share to an amount less than the par value per share of the Common
Stock into which a Debenture is at the time convertible. Whenever the
conversion price is reduced in such
manner, the Company shall mail to Debentureholders, with a copy to the
Trustee, a notice of the reduction. The Company shall mail the notice
at least fifteen (15) days before the date the reduced conversion
price takes effect. The notice shall state the reduced conversion
price and the period it will be in effect. A reduction of the
conversion price does not change or adjust the conversion price
otherwise in effect for purposes of this Article Fourteen.
Section 14.05. Certain Notices and Calculations. Whenever the conversion
price is adjusted as provided in Section 14.04, the Company shall promptly file
with the Trustee and each conversion agent (a) an Officers' Certificate in the
case of an adjustment pursuant to subsection (i) of Section 14.04, or (b) a
Certificate of a Firm of Independent Public Accountants in the case of any other
adjustment, in each case setting forth the conversion price after such
adjustment and setting forth a brief statement of the facts requiring such
adjustment
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and the computation thereof, which Officers' Certificate or Certificate of a
Firm of Independent Public Accountants, as the case may be, shall be conclusive
evidence of the correctness of any such adjustment and the Trustee and any
conversion agent may be protected in relying thereon, and promptly after such
filing shall mail or cause to be mailed a notice of such adjustment to each
Debentureholder at his last address as the same appears on the Debenture
Register. Neither the Trustee nor any conversion agent shall be under any
duty or responsibility with respect to any such Certificate except to exhibit
the same to any holder of Debentures desiring inspection thereof.
Section 14.06. Effect of Consolidation. Merger. etc. (a) In case of any
consolidation or merger of the Company with and into any other corporation
(other than a merger which does not result in any reclassification,
conversion, exchange or cancellation of outstanding shares of Common Stock),
or in case of any sale or transfer of all or substantially all of the assets of
the Company, or the reclassification of the Common Stock into another form of
capital stock of the Company, whether in whole or in part, the Company or such
successor or purchasing corporation, as the case may be, shall execute with
the Trustee a supplemental indenture providing that the holder of each Debenture
then outstanding shall have the right thereafter to convert such Debenture into
the kind and amount of shares of stock and other securities and property or cash
(including, if applicable, Common Stock) which such holder would have been
entitled to receive upon such consolidation, merger, sale, transfer or
reclassification if he had held the Common Stock issuable upon the conversion of
such Debenture immediately prior to such consolidation, merger, sale,
transfer, or reclassification. Notwithstanding the foregoing, if the holders
of Common Stock in any such consolidation, merger, sale, transfer or
reclassification are afforded an election or are otherwise permitted or required
to exchange such shares for two or more alternate forms of consideration, then
such supplemental indenture shall provide that the holder of each such
Debenture shall after such consolidation, merger, sale, transfer or
reclassification have the right to convert such Debenture into the kind and
amount of shares of stock and other securities and property or cash
(including, if applicable, Common Stock) into or for which the Common Stock
issuable upon conversion of such Debenture would have been converted or
exchanged as a result of such consolidation, merger, sale, transfer
or reclassification if held by a holder of Common Stock who failed to exercise
his rights of election (provided that if the kind and amount of shares of stock
and other securities and property or cash receivable upon such consolidation,
merger, sale, transfer or reclassification is not the same for each share of
Common Stock in respect of which such rights of election shall not have been
exercised ("non-electing share"), then for the purpose of this Section
14.06(a), the kind and amount of
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shares of stock and ocher securities and property or cash receivable upon such
consolidation, merger, sale, transfer or reclassification in respect of each
non-electing share shall be deemed to be the kind and amount so receivable per
share by a plurality of the non-electing shares).
(b) Any supplemental indenture entered into pursuant to this Section
14.06 shall (i) where appropriate, state the conversion price in terms of one
full share of Common Stock of the Company or one full share of the common stock
of any successor, leasing or purchasing corporation and (ii) provide for
adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Article Fourteen. The Company shall cause
notice of the execution of each such supplemental indenture to be mailed to
each Debentureholder at his address as the same appears in the Debenture
Register.
(c) Neither the Trustee nor any conversion agent shall be under any
responsibility to determine the correctness of any provisions contained in any
such supplemental indenture relating either to the kind or amount of shares of
stock or securities or property or cash receivable by Debentureholders upon the
conversion of their Debentures after any such consolidation, merger, sale,
transfer or reclassification or to any adjustment to be made with respect
thereto, but, subject to the provisions of Section 8.01, may accept as
conclusive evidence of the correctness of any such provisions, and shall be
protected in relying upon, a Certificate of a Firm of Independent Public
Accountants with respect thereto.
(d) The above provisions of this Section 14.06 shall similarly apply to
successive reclassification and changes of shares of Common Stock of the
Company and to successive consolidations, mergers, sales, transfers, or
reclassifications.
Section 14.07. Reserves. The Company covenants that it will at all times
reserve and keep available, free from pre-emptive rights, out of its authorized
but unissued Common Stock, solely for the purpose of issue upon conversion of
Debentures as herein provided, such number of shares of Common Stock as shall
then be issuable upon the conversion of all outstanding Debentures. The
Company covenants that all shares of Common Stock which shall be so issuable
shall, upon issuance, be duly and validly issued and fully paid and
non-assessable. For purposes of this Section 14.07, the number of shares of
Common Stock which shall be deliverable upon the conversion of all outstanding
Debentures shall be computed as if at the time of computation all outstanding
Debentures were held by a single holder. The Company shall from time to
time, in accordance with applicable law, increase the authorized amount of its
Common Stock if at any time the authorized amount of its Common Stock
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remaining unissued shall not be sufficient to permit the conversion of all
Debentures at the time outstanding.
Section 14.08. Certain Covenants. (a) Before taking any action which
would cause an adjustment reducing the conversion price below the then stated
or par value of the shares of Common Stock issuable upon conversion of the
Debentures, the Company will take any corporate action which may, in the
opinion of its counsel, be necessary in order that the Company may validly and
legally issue fully paid and non-assessable shares of such Common Stock at
such adjusted conversion price.
(b) The Company covenants that if any shares of Common Stock required to
be reserved for purposes of conversion of Debentures hereunder require
registration with or approval of any governmental authority under any Federal
or State law, or listing upon any national securities exchange, before such
shares may issued upon conversion, the Company will in good faith and as
expeditiously as possible endeavor to cause such shares to be duly registered
approved or listed, as the case may be.
Section 14.09. Taxes Uoon Conversion. The issuance of certificates for
shares of Common Stock upon the conversion of Debentures shall be made without
charge to the converting Debentureholders for any tax in respect of the
issuance of such certificates, and such certificates shall be issued in the
respective names of, or in such names as may be directed by, the holders of the
Debentures converted; provided, however, that the Company shall not be required
to pay any tax which may be payable in respect of any transfer involved in the
issuance and delivery of any such certificate in a name other than that of the
holder of the Debenture converted, and the Company shall not be required to
issue or deliver such certificates unless or until the person or person
requesting the issuance thereof shall have paid to the Company the amount of
such tax or shall have established to the satisfaction of the Company that such
tax has been paid; and provided, further, that in no event shall the Company
be required to pay or reimburse the holder for any income tax payable by such
holder as a result of such issuance.
Section 14.10. Certain Notices. In case:
(i) the Company shall authorize the distribution to all holders of its
Common Stock of evidences of its indebtedness or assets (other than cash
dividends or other cash distributions paid out of surplus); or
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(ii) the Company shall authorize the granting to the holders of its Common
Stock of rights or warrants to subscribe for or purchase any shares of
capital stock or any class or of any other rights; or
(iii) of any reclassification of the capital stock of the Company
(other than a subdivision or combination of its outstanding shares of
Common Stock), or of any consolidation or merger to which the Company
is a party and for which approval of any stockholders of the Company is
required, or of the sale, lease or transfer of all or substantially all
of the property of the Company, requiring the execution of a
supplemental indenture pursuant to Section 14.06; or
(iv) of the voluntary or involuntary dissolution, liquidation or winding
up of the Company;
then, in each case, the Company shall cause notice thereof to be filed with
the Trustee and each conversion agent, and shall cause to be mailed, to each
holder of a Debenture at such holder's last address as the same appears on
the Debenture Register, at least 20 days prior to the applicable record or
effective date hereinafter specified, a notice stating (x) the date on which
a record is to be taken for the purpose of such dividend, distribution,
rights or warrants, or, if a record is not to be taken, the date as of which
the holders of Common Stock of record to be entitled to such dividend,
distribution, rights or warrants are to be determined, or (y) the date on
which such reclassification, consolidation, merger, sale, lease, transfer,
dissolution, liquidation or winding up is expected to become effective, and
the date as of which it is expected that holders of Common Stock of record
shall be entitled to exchange their Common Stock for securities or other
property deliverable upon such reclassification, consolidation, merger, sale,
lease, transfer, dissolution, liquidation or winding up.
Section 14.11. Determination of Facts. Neither the Trustee nor any
conversion agent shall at any time be under any duty or responsibility to any
Debentureholder to determine the conversion price or whether any facts exist
which may require any adjustment of the conversion price, or with respect to
the nature or extent of such adjustment when made, or with respect to the
method employed, or herein or in any supplemental indenture provided to be
employed, in making the same. Neither the Trustee nor any conversion agent
shall be accountable with respect to the validity or value (or the kind or
amount or the registration or listing on any securities exchange) of any
shares of Common Stock or of any securities or property or cash which may at
any time be issued or delivered upon the conversion of any Debenture; and
neither the Trustee nor any conversion agent makes any representation with
respect thereto. Neither the Trustee nor any conversion agent shall be
responsible for any
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failure of the Company to make any cash payment or to issue, transfer or deliver
any shares of Common Stock or stock certificates or other securities or
property or cash upon the surrender of any Debenture for the purpose of
conversion, or, subject to Section 8.01 and 8.02, to comply with any of the
covenants of the Company contained in this Article Fourteen.
Section 14.12. Common Stock Defined. Whenever reference is made in this
Article Fourteen to the issue or sale of shares of Common Stock, the term
"Common Stock" shall include only shares of the class designated as
Common Stock, $.Ol par value, of the Company at the date hereof or shares of
any class or classes resulting from any reclassification or reclassifications
thereof and which have no preference in respect of dividends or of amounts
payable in the event of any voluntary or involuntary liquidation, dissolution or
winding up of the Company and which are not subject to redemption by the
Company; provided, that if at any time there shall be more than one such
resulting class, the shares of each such class than so deliverable shall be
substantially in the proportion which the total number of shares of such class
resulting from all such reclassifications bears to the total number of shares of
all such classes resulting from all such reclassifications.
ARTICLE FIFTEEN
Immunity of Incorporators, Stockholders,
Officers and Directors
Section 15.01. Indenture and Debentures Solely Corporate
Obligations. No recourse for the payment of the principal of or premium, if
any, or interest on any Debenture, or for any claim based thereon or otherwise
in respect thereof, and no recourse under or upon any obligation,
covenant or agreement of the Company in this Indenture or in any supplemental
indenture, or in any Debenture, or because of the creation of any indebtedness
represented thereby, shall be had against any incorporator, stockholder,
officer or director, as such, past, present or future, of the Company or of any
successor corporation, either directly or through the Company or any successor
corporation, whether by virtue of any constitution, statute, or rule of Law,
or by the enforcement of any assessment or penalty or otherwise; it being
expressly understood that all such liability is hereby expressly waived and
released as a condition of, and as a consideration for, the execution of this
Indenture and the issue of the Debentures. No recourse may be taken, directly
or indirectly, against any incorporator, stockholder, officer, director or
employee of the Trustee with respect to the Trustee's obligations under this
Indenture.
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ARTICLE SIXTEEN
Miscellaneous Provisions
Section 16.01. Successors and Assigns of Company Bound by
Indenture. All the covenants, stipulations, promises and agreements in this
Indenture contained by or in behalf of the Company shall bind its successors
and assigns, whether so expressed or not.
Section 16.02. Acts of Board. Committee or Officer of Successor
Corporation Valid. Any act or proceeding by any provision of this Indenture
authorized or required to be done or performed by any board, committee or
officer of the Company shall and may be done and performed with like force and
effect by the like board, committee or officer of any corporation that shall
at that time be the successor of the Company.
Section 16.03. Indenture for Sole Benefit of Parties and
Debentureholders. Nothing in this Indenture or in the Debentures, expressed
or implied, shall give or be construed to give to any person, firm or
corporation, other than the parties hereto, any paying agent, any Debenture
Registrar, any Authenticating Agent, the holders of Senior Indebtedness and
the holders of the Debentures, any legal or equitable right, remedy or claim
under or in respect of this Indenture, or under any covenant, condition
or provision herein contained; all such covenants, conditions and
provisions being, subject to the provisions of Articles Twelve and Fifteen,
for the sole benefit of the parties hereto, any paying agent, any Debenture
Registrar, any Authenticating Agent, the holders of Senior Indebtedness and the
holders of the Debentures.
Section 16.04. Service of Certain Required Notices or Demands. Any
notice or demand that by any provisions of this Indenture is required or
permitted to be given or served by the Trustee or by the holders of Debentures
to or on the Company shall be delivered by hand or sent by first-class mail
postage prepaid addressed (until another address is filed by the Company with
the Trustee), as follows: Allwaste, Inc., 3040 Post Oak Boulevard, Suite
1300, Houston, Texas 77056, Attention: Corporate Secretary. Any notice,
direction, request or demand by any Debentureholder or the Company to or upon
the Trustee shall be deemed to have been sufficiently given or made, for all
purposes, if given or made as set forth above and received at the Trustee's
corporate trust office (until the Company is notified by the Trustee of another
address).
Section 16.05. Notice of Debentureholders. Where this Indenture
provides for notice to Debentureholders of any event, such notice shall be
sufficiently given (unless otherwise herein expressly provided) if in writing
and mailed, first class, postage prepaid, to each Debentureholder
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affected by such event, at his address as it appears on the Debenture Register,
not later than the latest date, and not earlier than the earliest date,
prescribed for the giving of such notice. In any case where notice to
Debentureholders is given by mail, neither the failure to mail such notice, nor
any defect in any notice so mailed, to any particular Debentureholder shall
affect the sufficiency,of such notice with respect to other Debentureholders,
and any notice which is mailed to Debentureholders in the manner herein provided
shall be conclusively presumed to have been duly given.
Where this Indenture provides for notice in any manner, such notice may be
waived in writing by the person entitled to receive such notice, either before
or after the event, and such waiver shall be the equivalent of such notice.
Waivers of notice by Debentureholders shall be filed with the Trustee, but such
filing shall not be a condition precedent to the validity of any action taken
in reliance upon such waiver.
In case, by reason of the suspension of regular mail service as a result of
a strike, work stoppage or similar activity, it shall be impractical to mail
notice of any event to Debentureholders when such notice is required to be given
pursuant to any provision of this Indenture, then any manner of giving such
notice as shall be satisfactory to the Trustee shall be deemed to be a
sufficient giving of such notice.
Section 16.06. NEW YORK CONTRACT. THIS INDENTURE AND EACH DEBENTURE
SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF THE STATE OF NEW YORK,
AND FOR ALL PURPOSES SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF SAID
STATE.
Section 16.07. Evidence of Compliance with Conditions Precedent. Upon any
application or demand by the Company to the Trustee to take any action under any
of the provisions of this Indenture, the Company shall furnish to the Trustee an
Officers' Certificate stating that all conditions precedent, if any, provided
for in this Indenture relating to the proposed action have been complied with
and an Opinion of Counsel stating that in the opinion of such counsel all such
conditions precedent have been complied with, except that in the case of any
such application or demand as to which the furnishing of such document is
specifically required by any provision of this Indenture relating to such
particular application or demand, no additional certificate or opinion need be
furnished.
Each certificate or opinion provided for in this Indenture and delivered to
the Trustee with respect to compliance with a condition or covenant provided for
in this Indenture shall include (a) a statement
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that the person making such certificate or opinion has read such covenant or
condition and the definitions relating thereto; (b) a brief statement as to the
nature and scope of the examination or investigation upon which the statements
or opinions contained in such certificate or opinion are based; (c) a statement
that, in the opinion of such person, he has made such examination or
investigation as is necessary to enable him to express an informed opinion as to
whether or not such covenant or condition has been complied with; and (d) a
statement as to whether or not, in the opinion of such person, such condition or
covenant has been complied with.
Any Officers' Certificate may be based, insofar as it relates to legal
matters, upon a certificate or opinion of, or representations by, counsel,
unless such officer knows, or in the exercise of reasonable care should know,
that the certificate or opinion or representations with respect to the matters
upon which his Officers' Certificate is based are erroneous. Any Opinion of
Counsel may be based, insofar as it relates to factual matters, upon a
certificate or opinion of, or representations by, an officer or officers of the
Company stating that the information with respect to such factual matters is in
the possession of the Company, unless such counsel knows, or in the exercise or
reasonable care should know, that the certificate or opinion or representations
with respect to such matters are erroneous.
Wherever in this Indenture, in connection with any application or
certificate or report to the Trustee, it is provided that the Company shall
deliver any document as a condition of the granting of such application, or as
evidence of compliance with any term hereof, it is intended that the truth and
accuracy, at the time of the granting of such application or at the effective
date of such certificate or report (as the case may be), of the facts and
opinions stated in such document as of the date to which such facts and opinions
relate shall in such case be conditions precedent to the right of the Company to
have such application granted or to the sufficiency of such certificate or
report. The foregoing shall not, however, be construed to affect the Trustee's
right to rely upon the truth and accuracy of any statement or opinion contained
in any such document as provided in Section 8.01.
Whenever in the Indenture it is provided that the absence of the occurrence
and continuation of an Event of Default is a condition precedent to the taking
of any action by the Trustee at the request or direction of the Company, then,
notwithstanding that the satisfaction of such condition is a condition precedent
to the Company's right to make such request or direction, the Trustee shall be
protected in acting in accordance with such request or direction if it does not
have knowledge
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of the occurrence and continuation of such Event of Default as provided in
Section 8.01.
Section 16.08. Legal Holidays. In any case where the date of maturity of
interest on or principal of (or premium, if any) on the Debenture or the date
fixed for redemption of any Debenture shall not be a business day, then payment
of interest (or premium, if any) on or principal of the Debentures need not be
made on such date, but may be made on the next succeeding business day with the
same force and effect as if made on the date of maturity or the date fixed for
redemption, and no interest shall accrue for the period after such prior date.
Section 16.09. Trust Indenture Act to Control. If and to the extent that
any provision of this Indenture limits, qualifies or conflicts with another
provision included in this Indenture which is required to be included in this
Indenture by any of Sections 310 to 317, inclusive, of the Trust Indenture Act
of 1939, such required provision shall control.
Section 16.10. Severability. In case any provision in this Indenture or
in the Debentures shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
Section 16.11. Execution in Counterparts. This Indenture may be executed
in any number of counterparts, each of which shall be an original; but such
counterparts shall together constitute but one and the same instrument.
Section 16.12. Computation of Interest. Interest on the Debentures shall
be computed on the basis of a 360-day year consisting of twelve 30-day months.
Section 16.13. Table of Contents, Headings, etc. The table of contents
and the titles and headings of the articles and sections of this Indenture have
been inserted for convenience of reference only, are not to be considered a part
hereof, and shall in no way modify or restrict any of the terms or provisions
hereof.
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TEXAS COMMERCE TRUST COMPANY OF NEW YORK hereby accepts the trusts in this
Indenture declared and provided, upon the terms and conditions hereinabove set
forth.
IN WITNESS WHEREOF, ALLWASTE, INC. has caused this Indenture to be signed
and acknowledged by its Chairman of the Board, President or one of its Vice
Presidents, and its corporate seal to be affixed hereunto, and the same to be
attested by its Secretary or an Assistant Secretary, and TEXAS COMMERCE TRUST
COMPANY OF NEW YORK, as Trustee, has caused this Indenture to be signed and
acknowledged by one of its Trust Officers and its corporate seal to be
affixed hereunto, and the same to be attested by one of its Trust Officers,
all as of the day and year first written above.
ATTEST: ALLWASTE, INC.
By /s/ DOUGLAS M. CERNY By /s/ JIM A. HADDOX
____________________ __________________
[SEAL]
ATTEST: TEXAS COMMERCE
TRUST COMPANY OF NEW YORK, as Trustee
By /s/ STEVEN PATTERSON By /s/ ROY H. TRICE, JR.
_____________________ ______________________
Trust Officer Trust Officer
[SEAL]
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STATE OF TEXAS
COUNTY OF HARRIS
Before me, the undersigned authority, on this day personally appeared
James H. Haddox, Senior Vice President of ALLWASTE, INC., a Delaware
corporation, known to me to be the person whose name is subscribed to the
foregoing instrument, and acknowledged to me that he executed the same for the
purposes and consideration therein expressed, in the capacity therein stated,
and as the act and deed of said corporation.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this 1st day of June, 1989.
/s/ DIAN M. DUOTO
_____________________________________________
Notary Public, State of Texas
My commission expires 2-2-92
Printed or Typed Name of Notary:
SEAL: DIAN M. DUOTO
_____________________________________________
-102-
<PAGE> 112
STATE OF TEXAS
COUNTY OF HARRIS
Before me, the undersigned authority, on this day personally appeared Roy
H. Trice, Jr., Trust Officer of TEXAS COMMERCE TRUST COMPANY OF NEW YORK, a New
York trust company, known to me to be the person whose name is subscribed to the
foregoing instrument, and acknowledged to me that he executed the same for the
purposes and consideration therein expressed, in the capacity therein stated,
and as the act and deed of said corporation.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this 1st day of June, 1989
/s/ DIAN M. DUOTO
________________________________________________
Notary Public, State of Texas
My commission expires 2-2-92
Printed or Typed Name of Notary:
SEAL: DIAN M. DUOTO
________________________________________________
-103-
<PAGE> 113
Allwaste Inc.
__% Convertible Subordinated Debentures - $25,000,000
Schedule of Contacts
Exhibit III
TRUSTEE HOME ADDRESS & TELEPHONE
Texas Commerce Bank National
Association
600 Travis Street
8th Floor
Houston, Texas 77002
(713) 236-4181 Telephone
Roy H. Trite, Jr. 4008 Branard St.
Vice President & Trust Officer Houston, Texas 77027
(713) 236-4372 Telephone (713) 629-0741
(713) 236-4880 Telecopier
Robert E. Palmer, Jr. 1243 Columbia
Assistant Vice President Houston, Texas 77008
& Trust Officer (713) 869-1984
(713) 236-5614 Telephone
(713) 236-4880 Telecopier
COUNSEL TO TRUSTEE
Liddell, Sapp, Zivley, Hill
& LaBoon
Texas Commerce Tower
600 Travis
32nd Floor
Houston, TX 77002
Donna S. Burnett 6644 Wakeforest
(713) 226-1206 Telephone Houston, Texas 77005
(713) 223-3717 Telecopier (713) 663-7925
<PAGE> 114
Distribution List
Allwaste, Inc.
3040 Post Oak Boulevard
Suite 1300
Houston, Texas 77056
Clayton Trier
Doug M. Cerny
James Haddox
Gaston & Snow - Company's Counsel
14 Wall Street
New York, NY 10005
Fax: (212) 815-7499
William J. Lynch
David S. Rosenthal
Liddell Sapp & Zivley
3500 Texas Commerce Tower
Houston, TX 77002-3095
Donna Burnett
Smith Barney, Harris Upham & Co. Incorporated
200 Crescent Court, Suite 1200
Dallas, TX 75201
Fax: (214) 871-5335
Lawrence E. Fish
Scott B. Osuna
Smith Barney, Harris Upham & Co. Incorporated
1345 Avenue of the Americas
New York, NY 10105
Fax: (212) 956-4513
or (212) 307-1488
Michael J. Kessler
Dan Sell
Alex. Brown & Sons Incorporated
135 East Baltimore Street
Baltimore, MD 21202
Fax: (301) 783-3024
David Gray
<PAGE> 115
Texas Commerce Bank
712 Main Street
Houston, TX 77002
Roy Trite
Vinson & Elkins
1001 Fannin
First City Tower
Houston, TX 77002
Michael P. Finch
Shawn Cumberland
Arthur Andersen & Co.
711 Louisiana, Suite 1300
Houston, TX 77002
K. Eugene Frauenheim
Richard W. Russler
<PAGE> 1
EXHIBIT 4.2
<TABLE>
PSC
[LOGO] PHILIP SERVICES
--- C O R P. ---
AMALGAMATED UNDER THE LAWS OF THE PROVINCE OF ONTARIO
FUSIONNEE SOUS L'AUTORITE DES LOIS DE LA PROVINCE DE L'ONTARIO
<S> <C> <C> <C>
NUMBER NUMERO CUSIP 71819M 10 3 SHARES ACTIONS
PC 04184
This certifies that
La presente atteste que
SPECIMEN
is the registered holder of
est le porteur inscrit de
FULLY PAID AND NON-ASSESSABLE COMMON ACTIONS ORDINAIRES ENTIEREMENT LIBEREES ET
SHARES IN THE CAPITAL OF NON COTISABLES DE
PHILIP SERVICES CORP.
transferable in a securities register transferables uniquement dans un registre de
of the Corporation upon the surrender valeurs mobilieres de la Societe sur remise du
of this Certificate properly endorsed. present certificat dument endosse. Le present
COMMON This Certificate is not valid until certificat n'est valide que s'il est ORDINAIRES
countersigned and registered by a contresigne et immatricule par un agent des
Transfer Agent and Registrar of the transferts et agent charge de la tenue des
Corporation. registres de la Societe.
IN WITNESS WHEREOF the Corporation EN FOI DE QUOI la Societe a fait signer
has caused this Certificate to be signed le present certificat par ses representants
by its duly authorized officers. dument autorises.
Dated/Date
COUNTERSIGNED AND REGISTERED -- CONTRESIGNE ET IMMATRICULE
MONTREAL TRUST COMPANY OF CANADA TORONTO, MONTREAL,
COMPAGNIE MONTREAL TRUST DU CANADA CALGARY, VANCOUVER
TRANSFER AGENT AND REGISTRAR
AGENT DES TRANSFERTS ET AGENT CHARGE DE LA TENUE /s/ ALLEN FRACASSI
DES REGISTRES
OR/OU PRESIDENT AND CHIEF EXECUTIVE OFFICER
THE BANK OF NEW YORK NEW YORK PRESIDENT ET CHEF DE LA DIRECTION
CO-TRANSFER AGENT AND CO-REGISTRAR
CO-AGENT DES TRANSFERTS ET CO-AGENT
CHARGE DE LA TENUE DES REGISTRES
/s/ COLIN SOULE
BY -- PAR ____________________________________ SECRETARY
AUTHORIZED SIGNATURE SECRETAIRE
SIGNATAIRE AUTORISE
THIS CERTIFICATE IS TRANSFERABLE AT THE LE PRESENT CERTIFICAT EST TRANSFERABLE AUX
PRINCIPAL OFFICES OF MONTREAL TRUST PRINCIPAUX BUREAUX DE COMPAGNIE MONTREAL
COMPANY OF CANADA IN TORONTO, CALGARY, TRUST DU CANADA A TORONTO, CALGARY,
MONTREAL AND VANCOUVER AND AT THE OFFICES MONTREAL ET VANCOUVER ET AUX BUREAUX DE
OF THE BANK OF NEW YORK, IN NEW YORK CITY. THE BANK OF NEW YORK, A VILLE DE NEW YORK.
</TABLE>
<PAGE> 2
<TABLE>
<S> <C>
The class of shares represented by this certificate has La categorie d'actions representee par le present
rights, privileges, restrictions or conditions attaching certificat comporte des droits, privileges, restrictions
thereto and the Corporation will furnish to the shareholder, ou conditions et la Societe transmettra gratuitement
on demand and without charge, a full copy of the text of: aux actionnaires qui en font la demande le texte integral:
(i) the rights, privileges, restrictions and conditions (i) des droits, privileges, restrictions et conditions
attached to such shares and to each class authorized rattaches a ces actions, a chaque categorie dont
to be issued and to each series in so far as the same l'emission est autorisee et a chaque serie, dans la
have been fixed by the directors, and mesure ou ils ont ete etablis par les administrateurs,
(ii) the authority of the directors to fix the rights, (ii) du pouvoir des administrateurs d'etablir les droits,
privileges, restrictions and conditions of subsequent privileges, restrictions et conditions de series
series, if applicable. subsequentes, le cas echeant.
FOR VALUE RECEIVED the undersigned hereby sells, assigns POUR UNE CONTREPARTIE VALABLE, le soussigne vend et
and transfers unto transfere par les presentes a
_________________________________________________________________________________________________________________________________
(Name and address of transferee) (Nom et adresse du cessionnaire)
[ ] [ ] [ ] - [ ] [ ] [ ] - [ ] [ ] [ ]
SOCIAL INSURANCE NUMBER - NUMERO D'ASSURANCE SOCIALE
__________________________________________________________________________________________________________________________________
shares
__________________________________________________________________________________________________________________________ actions
registered in the name of the undersigned on the books of immatriculees au nom du soussigne dans les livres de la
the Corporation named on the face of this certificate and Societe nommee au recto du present certificat et representees
represented hereby, and irrevocably constitutes and appoints par les presentes et le soussigne nomme irrevocablement
__________________________________________________________________________________________________________________________________
the attorney of the undersigned to transfer the said shares comme son mandataire pour transferer ces actions dans le
on the register of transfers and books of the Corporation registre des transferts et les livres de la Societe, avec plein
with full power of substitution hereunder. pouvoir de substitution a cet egard.
DATED:
DATE:
__________________________________________________________________________________________________________________________________
(Signature of Shareholder) (Signature de l'actionnaire)
__________________________________________________________________________________________________________________________________
(Signature of Witness) (Signature du temoin)
</TABLE>
Until the Separation Time (as defined in the Rights Plan referred to below),
this certificate also evidences and entitles the holder hereof to certain Rights
as set forth in a Shareholder Rights Plan Agreement, dated as of April 11, 1995
and as amended and restated on the 19th day of May, 1995 (the "Rights Plan"),
between Philip Services Corp. (formerly known as Philip Environmental Inc.) (the
"Corporation") and Montreal Trust Company of Canada, as rights agent (the
"Rights Agent"), the terms of which are hereby incorporated herein by reference
and a copy of which is on file at the principal executive office of the
Corporation. Under certain circumstances, as set forth in the Rights Plan, such
Rights may be amended or redeemed, may expire, may become null and void (if, in
certain cases, they are issued to or "Beneficially Owned" by any Person who is,
was or becomes an "Acquiring Person", as such terms are defined in the Rights
Plan, whether currently held by or on behalf of such Person or any subsequent
holder) or may be evidenced by separate certificates and may no longer be
evidenced by this certificate.
The Corporation will mail or arrange for the mailing of a copy of the Rights
Plan to the holder of this certificate without charge upon receipt of a written
request therefor.
NOTICE: The signature to this assignment must correspond with the name as
written upon the face of the certificate in every particular, without
alteration or enlargement or any change whatever.
AVIS: La signature apposee sur le present transfert doit correspondre en tous
points au nom paraissant au recto du certificat, sans modification,
agrandissement ou ajout.
<PAGE> 1
EXHIBIT 10.1
LINCOLN WASTE MANAGEMENT INC.
STOCK OPTION PLAN FOR KEY EMPLOYEES
LINCOLN WASTE MANAGEMENT INC. (the "Corporation") hereby adopts a Stock
Option Plan (the "Plan") for key employees of the Corporation and its
affiliates, as follows:
1. DEFINITIONS. In this Plan, the following words and expressions shall have
the respective meanings ascribed to them below:
"AFFILIATE" shall have the meaning ascribed thereto in the Securities Act
(Ontario).
"BOARD" means the board of directors of the Corporation.
"ELIGIBLE PERSONS" shall mean key employees (including both full-time and
part-time employees) of the Corporation and its affiliates and shall constitute
the class of persons eligible for the granting of Options.
"EXERCISE PRICE" shall mean, with respect to a Share subject to Option, the
price determined by the Board (which may be subject to increase over the term of
the Option), provided that such price shall in no event be less than the latest
closing price of the Shares on The Toronto Stock Exchange (and such other stock
exchange on which the Shares are listed as the Board shall from time to time
prescribe) on the trading day immediately preceding the day on which the Option
is granted, less any permissible discount. If no Shares have been traded on such
day, the Exercise Price shall be established on the same basis on the last
previous day for which a trade was reported by such exchange.
"OPTION" shall mean an option granted under the terms of the Plan.
"OPTION PERIOD" shall mean the period during which an Option may be
exercised.
"OPTIONEE" shall mean an Eligible Person to whom an Option has been granted
under the terms of the Plan.
"SHARES" shall mean the common shares in the capital of the Corporation.
2. PURPOSE. The purpose of the Plan is to secure for the Corporation and its
shareholders the benefits of incentive inherent in share ownership by key
employees of
<PAGE> 2
- 2 -
the Corporation and its affiliates who, in the judgment of the Board, will be
largely responsible for its future growth and success.
3. Number of Shares and Lapsed Options. (1) The Shares which may be
issued and sold upon the exercise of Options granted pursuant to the Plan will
be authorized but unissued Shares, provided that in no event shall the aggregate
number of Shares available for issuance under the Plan, other employee stock
option plans, options for services and employee stock purchase plans involving
the issuance of Shares exceed 10% of the issued and outstanding Shares (on a
non-diluted basis, but taking into account until their exercise the 1,150,000
Special Warrants, Series "A" of the Corporation, which pursuant to their terms
are not subject to redemption) from time to time. In addition, the aggregate
number of Shares so available for issuance to any one person shall not exceed 5%
of the issued and outstanding Shares (on a non-diluted basis, but taking into
account until their exercise the 1,150,000 Special Warrants, Series "A" of the
Corporation, which pursuant to their terms are not subject to redemption) from
time to time. If Options are surrendered, terminate or expire without being
exercised in whole or in part, new Options may be granted covering the Shares
not purchased under such lapsed Options, but Options once issued cannot be
rescinded by mutual consent or agreement for the purpose of making optioned
Shares available for reallocation pursuant to a new Option in favour of the same
Optionee at a lower option price under the Plan.
(2) The Corporation shall not purchase any or all of the Special Warrants,
Series "A" for cancellation prior to December 31, 1991 without the prior consent
of The Toronto Stock Exchange.
4. Participation. Options shall be granted only to Eligible Persons.
5. Determination of Option Recipients. The Board shall make all necessary or
desirable determinations regarding the granting of Options to Eligible Persons
and may take into consideration the present and potential contributions of a
particular Eligible Person to the success of the Corporation and any other
factors which it may deem proper and relevant.
6. Price. The option price per Share shall be the Exercise Price calculated
in accordance with the Plan on the date of the grant. One Option may consist of
more than one group of Shares exercisable at different Exercise Prices.
7. Grant of Options. (1) the Board may at any time up to and including
December 31, 1999 authorize the granting of
<PAGE> 3
-3-
Options to such Eligible Persons as it or he may select for the number of Shares
that it or he shall designate, subject to the provisions of the Plan. The date
of each grant of Options shall be determined by the Board when the grant is
authorized.
(2) Each Option shall be evidenced by a stock option agreement with terms
and conditions consistent with the Plan and as approved by the Board (which
terms and conditions need not be the same in each case and may be changed from
time to time). Each agreement shall provide that the Optionee shall agree to
remain in the employ of the Corporation or one of its subsidiaries for a period
of one (1) year from the date of the grant of the Option but the right of the
Corporation and its affiliates to terminate the office or employment of the
Optionee for any reason, with or without cause, shall not be restricted thereby.
8. TERMS OF OPTIONS. (1) The Option Period shall commence on the date of
grant (subject to any ''earn-in'' requirements) and expire on the date that is
five (5) years from the date such Option is granted or such lesser period of
time as the Board may approve at the time of the grant of the Option, except as
the same may be reduced with respect to any such Option as provided in Section 9
hereof in respect of the termination of employment without cause of the
Optionee.
(2) Options may in the discretion of the Board be exercisable either
immediately or on an ''earn-in'' basis after one or more specified periods of
time.
(3) Options may be exercised in whole or in part (in each case to the
nearest full Share) at any time (subject to any ''earn-in'' requirements) during
the Option Period, but only in units of 1,000 Shares or such fewer number of
Shares as may remain subject to option in favour of the Optionee.
(4) Except as set forth in Section 9, no Option may be exercised unless
the Optionee is at the time of such exercise an employee of the Corporation or
one of its affiliates and shall have served continuously in such capacity since
the date of the grant of his Option. Absence on leave, having approval of the
Corporation, shall not be considered an interruption of service for any purpose
of the Plan.
(5) The exercise of any Option will be contingent upon receipt by the
Corporation of payment of the full purchase price of such Shares. No Optionee or
his legal representatives, legatees or distributees will be, or will be deemed
to be, a holder of any Shares subject to an Option, unless and until
certificates for such Shares are issued to him or them under the terms of the
Plan.
<PAGE> 4
- 4 -
9. EFFECT OF TERMINATION OF EMPLOYMENT, DEATH OR PERMANENT DISABILITY.
(1) If an Optionee shall die or become permanently disabled while an
employee of the Corporation or one of its affiliates, then, subject to and in
accordance with the terms of the option agreement, any Option held by him at the
date of death or permanent disability shall become exercisable in whole or in
part (without regard to any "earn-in" requirements), but in the case of death
only by the person or persons to whom the Optionee's rights under the Option
shall pass by the Optionee's will or the laws of descent and distribution. All
such Options shall be exercisable from the date of death or permanent
disability until the expiration of the Option Period in respect thereof.
(2) If an Optionee ceases to serve the Corporation as an employee of the
Corporation or one of its affiliates as a result of termination without cause,
then, subject to and in accordance with the terms of the option agreement, any
Option held by such Optionee shall (without regard to any "earn-in"
requirements), become exercisable in whole or in part but shall be exercisable
only until the earlier of the date which is twelve (12) months from the date of
termination or the expiration of the Option Period in respect thereof. In all
other cases of termination of employment as an employee of the Corporation or
one of its affiliates, then, subject to and in accordance with the terms of the
option agreement, any Option held by such Optionee may (subject to any
applicable "earn-in" requirements) be exercised in whole or in part but shall be
exercisable only until the earlier of the date which is thirty (30) days next
succeeding the date of termination of employment or the expiration of the Option
Period in respect thereof.
10. EFFECT OF TAKE-OVER BID. If a bona fide offer (the "Offer") is made to the
Optionee or to shareholders generally or to a class of shareholders which
includes the Optionee for Shares, which Offer, if accepted in whole or in part,
would result in the offeror exercising control over the Corporation within the
meaning of subsection 1(3) of the Securities Act (Ontario) (as amended from time
to time), then the Corporation shall, immediately upon receipt of notice of the
Offer, notify each Optionee currently holding an Option of the Offer, with full
particulars thereof; whereupon such Option may be exercised in whole or in part
by the Optionee (without regard to any "earn-in" requirements) so as to permit
the Optionee to tender the Shares received upon such exercise (the "Optioned
Shares") pursuant to the Offer. If the Offer is not completed within the time
specified therein, then, at the election of the Optionee upon notice to the
Secretary of the Corporation at
<PAGE> 5
- 5 -
its executive office within thirty (30) days following the termination of the
Offer, the Optioned Shares shall, to the extent permitted by the Business
Corporations Act, 1982 (Ontario), be purchased for cancellation by the
Corporation for the Exercise Price thereof and reinstated as authorized but
unissued Shares and the terms of the Option shall again apply as if the Offer
had never been made.
11. ADJUSTMENT IN SHARES SUBJECT TO THE PLAN. If there is any change in the
Shares of the Corporation through the declaration of stock dividends of Shares
or consolidations, subdivisions or reclassifications of Shares, or otherwise,
the number of Shares available for Option, the Shares subject to any Option
and/or the purchase price thereof shall be adjusted appropriately by the board
of directors of the Corporation and such adjustment shall be effective and
binding for all purposes of the Plan.
12. TRANSFERABILITY. Options shall not be assignable or transferable otherwise
than by will or by the laws of descent and distribution, and during the lifetime
of an Optionee shall be exercisable only by him.
13. NECESSARY APPROVALS. The obligation of the Corporation to sell and deliver
Shares on the exercise of Options is subject to the approval of any governmental
authority or stock exchanges on which the Shares are listed for trading which
may be required in connection with the authorization, issuance or sale of such
Shares by the Corporation. If any Shares cannot be issued to any Optionee for
any reason including, without limitation, the failure to obtain such approval,
then the obligation of the Corporation to issue such Shares shall terminate and
any option price paid to the Corporation shall be returned to the Optionee.
14. EXPIRATION AND TERMINATION OF THE PLAN. Options may be granted at any time
up to and including December 31, 1999, which Options shall remain in effect
until they have been exercised, have expired, have been properly surrendered to
the Corporation or have been terminated. The Plan may be abandoned or terminated
in whole or in part at any time by the Board, except with respect to any Option
then outstanding under the Plan.
15. ADMINISTRATION OF THE PLAN. The Board may interpret the Plan from time to
time and may adopt, amend and rescind rules and regulations for carrying out the
Plan. The interpretation and construction of any provision of the Plan by the
Board shall be final and conclusive. The administration of the Plan shall be the
responsibility of the appropriate officer(s) of the Corporation duly designated
for the purposes thereof by the Board and all costs in respect thereof shall be
paid by the Corporation.
<PAGE> 6
- 6 -
16. AMENDMENTS TO PLAN. The Board reserves the right to amend, modify or
terminate the Plan at any time if and when it is advisable in its absolute
discretion. However, any amendment of the Plan which would (a) materially
increase the benefits under the Plan, (b) materially increase the number of
Shares which may be issued under the Plan beyond that specified in paragraph 3
hereof, or (c) materially modify the requirements as to eligibility for
participation in the Plan, shall be effective only upon the approval of the
holders of the Corporation's Shares. Any amendment to any provision of the Plan
shall be subject to approval, if required, by any governmental authority or
stock exchanges having jurisdiction over the securities of the Corporation.
17. NO UNDERTAKING OR REPRESENTATION. The Corporation makes no undertaking or
representation as to the future value or price, or as to the listing on any
stock exchange, of any Shares issued in accordance with the provisions of the
Plan.
18. INTERPRETATION. The Plan will be governed by and construed in accordance
with the laws of the Province of Ontario.
19. COMPLIANCE WITH APPLICABLE LAW, ETC. If any provision of the Plan or any
Option contravenes any law or any order, policy, by-law or regulation of any
regulatory body or stock exchanges having jurisdiction or authority over the
securities of the Corporation or the Plan, then such provision shall be deemed
to be amended to the extent required to bring such provision into compliance
therewith.
ADOPTED by the board of directors of the Corporation on the day of
, 1991.
/s/ ALLEN FRACASSI /s/ R. JON WILLIAMS
______________________________ ______________________________
Allen Fracassi R. Jon Williams
President and Secretary-Treasurer
Chief Executive officer
<PAGE> 7
SCHEDULE "A"
------------
STOCK OPTION AGREEMENT
MEMORANDUM OF AGREEMENT made as of the -- day of -- , 19 -- .
B E T W E E N:
LINCOLN WASTE MANAGEMENT INC., a
corporation under the laws of the
Province of Ontario,
(hereinafter referred to as the "Corporation"),
OF THE FIRST PART,
- and -
-- , an individual residing in the City/Town of -- ,
in the -- of -- ,
(hereinafter referred to as the "Optionee"),
OF THE SECOND PART.
WHEREAS:
A. The Optionee is an employee of the Corporation or one of its affiliates
and will render faithful and efficient service to the Corporation or one of its
affiliates, as the case may be;
B. The Corporation desires to continue to receive the benefit of the services
of the Optionee and to more fully identify his interest with the Corporation's
future and success; and
C. The Corporation, acting through its board of directors (or authorized
delegates) by appropriate resolution adopted on the -- day of -- 19 -- ,
approved the granting of a stock option to the Optionee to purchase common
shares in the capital of the Corporation upon the terms and conditions
hereinafter provided.
NOW THEREFORE in consideration of the sum of $2.00 and the mutual
covenants herein contained, the sufficiency and receipt of which are hereby
acknowledged, the parties hereto agree as follows:
<PAGE> 8
- 2 -
1. OPTION TO PURCHASE. The Corporation hereby grants to the Optionee the
irrevocable right and option to purchase from the Corporation ________
authorized and unissued common shares without nominal or par value in the
capital of the Corporation (the "Shares"), upon the terms and conditions herein
contained, subject to a [three-year] "earn-in" requirement as follows: (i) as to
[one-third] of the Shares, at a price of $______ per Share, commencing on
______; (ii) as to an additional [one-third] of the Shares, at a price of $_____
per Shares, commencing on ______; and (iii) as to the final [one-third] of the
Shares, at a price of $_____ per Share, commencing on ____________.
2. BASIC TERM OF OPTION. Notwithstanding any other provisions of this
Agreement, this option shall not be exercisable after the expiration of _____
(___) years from the date this option is granted (the "Term").
3. MANNER OF EXERCISE OF OPTION. The Optionee, subject to the qualifications
and exceptions contained in paragraph 5, may exercise this option to purchase on
a cumulative basis, to the extent hereinafter provided, all or any part of the
number of Shares subject to this option, and such right shall be a continuing
and cumulative one during the Term until the number of Shares subject to the
option stated in paragraph 1 has been purchased; provided, however, that:
(i) this option may only be exercised (in each case to the nearest full Share)
during the Term in units of 1,000 Shares or such fewer number of Shares as may
remain subject to option in favour of the Optionee, and (ii) the exercise of
this option shall be subject to the [three-year] "earn-in" requirement set forth
in paragraph 1.
4. DEATH OR PERMANENT DISABILITY OF OPTIONEE. Notwithstanding paragraph 3,
upon the death or permanent disability of the Optionee while serving the
Corporation as an employee of the Corporation or one of its affiliates this
option shall, at any time commencing upon the date of death or permanent
disability and prior to the expiration of the Term, be exercisable in whole or
in part, without regard to the [three-year] "earn-in" requirement set forth in
paragraph 1, and may, in the case of death, be exercised in whole or in part by
the estate of the Optionee or by such person or persons to whom this option
shall be transferred by the will of the Optionee, or by the applicable laws of
descent and distribution.
5. TERMINATION AS OPTIONEE. (1) Upon the Optionee ceasing to serve the
Corporation as an employee of the Corporation or one of its affiliates as a
result of termination without cause, this option shall be exercisable by the
Optionee in whole or in part (without regard to the [three-year] "earn-in"
requirement set forth in paragraph 1)
<PAGE> 9
- 3 -
but only until the earlier of the date twelve months following the date of
termination or the expiration of the Term.
(2) In all other cases of termination of employment as an employee of the
Corporation or one of its affiliates, the Optionee may, but only for a period of
thirty (30) days next succeeding the date of termination of employment or prior
to the expiration of the Term, whichever is sooner, thereafter exercise this
option in whole or in part, but only to the extent the Shares are "earned" as
at the date of termination within the meaning of paragraph 1.
6. CONTINUED EMPLOYMENT. By the acceptance of this option and in
consideration thereof, the Optionee agrees to remain as an employee of the
Corporation or one of its affiliates for a period of one (1) year from the date
of the granting of this option, but the right of the Corporation and its
affiliates to terminate the employment of the Optionee at any time, and for any
reason, with or without cause, shall not be hereby restricted.
7. NOTICE OF EXERCISE OF OPTION. This option shall be exercised in whole
or in part upon providing payment in full of the option price, together with
notice in writing to the Corporation addressed to the Secretary of the
Corporation at such place as the Corporation's executive office may then be
located (the "Notice").
8. RIGHT OF A SHAREHOLDER. After receipt of the Notice and payment in
full of the option price for the total number of Shares to be purchased, the
Corporation shall cause to be issued and delivered such certificates in such
denominations as the Optionee may in the Notice direct, representing the number
of fully paid, non-assessable Shares so purchased, registered in the name of the
Optionee, but the Optionee shall have no right as a shareholder with respect to
any Shares covered by this option until the issuance of such share certificates,
and no adjustment shall be made for dividends or other rights for which the
record date is prior to the time such share certificates are issued. The
Corporation agrees to issue all Shares so purchased (including share
certificates in respect thereof) within thirty (30) business days after such
receipt of Notice and payment in full of the option price for the total number
of Shares to be purchased.
9. TRANSFER OF OPTION. The option granted pursuant to this Agreement
shall not be assignable or transferable otherwise than by will or by the laws of
descent and distribution, and during the lifetime of the Optionee shall be
exercisable only by him.
<PAGE> 10
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10. ADJUSTMENT IN SHARES SUBJECT TO THE OPTION. In the event there is any
change in the Shares of the Corporation through the declaration of stock
dividends of Shares or consolidations, subdivisions or reclassifications of
Shares, or otherwise, the number of Shares subject to this option, the Shares
subject to any option and in the option price thereof, shall be adjusted
appropriately by the board of directors of the Corporation and such adjustment
shall be effective and binding for all purposes of this Agreement.
11. EFFECT OF TAKE-OVER BID. If a bona fide offer (the "Offer") is made during
the Term of this option to the Optionee or to shareholders generally or to a
class of shareholders which includes the Optionee for Shares, which Offer, if
accepted in whole or in part, would result in the offeror exercising control
over the Corporation within the meaning of subsection 1(3) of the Securities Act
(Ontario) (as amended from time to time), then the Corporation shall,
immediately upon receipt of notice of the Offer notify the Optionee of the
Offer, with full particulars thereof; whereupon this option may be exercised
(without regard to the [three-year] "earn-in" requirement set forth in paragraph
1) in whole or in part by the Optionee so as to permit the Optionee to tender
the Shares received upon such exercise (the "Optioned Shares") pursuant to the
Offer. If the Offer is not completed within the time specified therein, then, at
the election of the Optionee upon notice to the Secretary of the Corporation at
its executive office within thirty (30) days following the termination of the
Offer, the Optioned Shares shall, to the extent permitted by the Business
Corporation Acts, 1982 (Ontario), be purchased for cancellation by the
Corporation for the Exercise Price thereof and reinstated as authorized but
unissued Shares and the terms of the Option shall again apply as if the Offer
had never been made.
12. REGULATORY APPROVAL. This agreement and the obligations of the Corporation
to sell and deliver Shares under the option granted hereunder shall be subject
to the prior approval of any governmental or other regulatory authority or stock
exchanges having jurisdiction over the securities of the Corporation.
<PAGE> 1
EXHIBIT 10.2
PHILIP SERVICES CORP.
(formerly, Philip Environmental Inc.)
1997 AMENDED AND RESTATED STOCK OPTION PLAN
PHILIP SERVICES CORP. (formerly, Philip Environmental Inc.) (the
"Corporation") hereby amends and restates its 1994 Stock Option Plan (as so
amended and restated, the "Plan") for employees and directors of the Corporation
and its Affiliates (as defined in Section 1 hereof), as follows:
1. DEFINITIONS. In this Plan, the following words and expressions shall have
the respective meanings ascribed to them below:
"AFFILIATE" shall have the meaning ascribed thereto in the Securities Act
(Ontario) as the same may be amended from time-to-time, or any successor
legislation thereto;
"ASSOCIATE" shall have the meaning ascribed thereto in the Securities Act
(Ontario), as the same may be amended from time to time, or any successor
legislation thereto.
"BOARD" means the board of directors of the Corporation;
"COMMITTEE" means the compensation committee of the Board if designated
to administer the Plan, or such other committee as may be appointed to
administer the Plan, or if no committee is designated or appointed to
administer the Plan, "Committee" shall mean the Board;
"ELIGIBLE PERSONS" shall mean employees (including both full-time and
part-time employees) and directors of the Corporation and its Affiliates
and shall constitute the class of persons eligible for the granting of
Options;
"EXERCISE PRICE" shall mean, with respect to a Share subject to option, the
price determined by the Committee (which may be subject to increase over
the term of the Option), provided that such price shall in no event be less
than the latest closing price of the shares on The Toronto Stock Exchange
on the trading day immediately preceding the day on which the Option is
granted. If no Shares have been traded on such day, the Exercise Price
shall be established on the same basis on the last previous day for which a
trade was reported by such exchange;
"INSIDER" shall mean an Eligible Person who is: (i) an insider as defined
in the Securities Act (Ontario), as the same may be amended from
time to time, or any successor legislation thereto, other than a person who
falls within such definition solely by virtue of being a director or senior
officer of a Subsidiary of the Corporation, or (ii) any Associate of a
person who is an Insider by virtue of (i).
"OPTION" shall mean an option granted under the terms of the Plan;
<PAGE> 2
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"OPTION PERIOD" shall mean the period during which an Option may be
exercised;
"OPTIONEE" shall mean an Eligible Person to whom an Option has been granted
under the terms of the Plan;
"OUTSTANDING ISSUE" shall mean the aggregate number of Shares issued and
outstanding on a non-diluted basis;
"SHARES" shall mean the common shares in the capital of the Corporation.
2. PURPOSES. The purpose of the Plan is to secure for the Corporation and its
shareholders the benefits of the incentive inherent in share ownership by
employees and directors of the Corporation and its Affiliates who, in the
judgment of the Committee, will be largely responsible for its future growth and
success.
3. ADMINISTRATION. This Plan shall be administered by the Committee, All
questions of interpretation and application of the Plan shall be subject to the
determination, which shall be final and conclusive. The administration of the
Plan shall be the responsibility of the appropriate officer(s) of the
Corporation duly designated for the purpose thereof by the Committee and all
costs in respect thereof shall be paid by the Corporation.
4. NUMBER OF SHARES AND LAPSED OPTIONS. The number of Shares that may be
issued pursuant to the grant of options under the Plan shall not exceed
8,700,000 shares. The Shares which may be issued and sold upon the exercise of
Options granted pursuant to the Plan will be authorized but unissued Shares,
provided that in no event shall the aggregate number of Shares available for
issuance under the Plan, other employee stock option plans, options for services
and employee stock purchase plans involving the issuance of Shares exceed 10% of
the Outstanding Issue. In addition, the aggregate number of Shares available for
issuance under the Plan, other employee stock option plans, options for services
and employees stock purchase plans to any one person shall not exceed 5% of the
Outstanding Issue. If Options are surrendered, terminate, are cancelled or
expire without being exercised in whole or in part, new Options may be granted
covering the Shares not purchased under such lapsed Options, but Options once
issued cannot be rescinded by mutual consent or agreement for the purpose of
making optioned Shares available for reallocation pursuant to a new Option in
favour of the same Optionee at a lower option price under the Plan.
At no time will Options be granted under the Plan if such grant would
result, at any time, in:
(a) the number of Shares reserved for issuance under stock options granted
to Insiders, collectively, pursuant to a share compensation
arrangement exceeding 10% of the Outstanding Issue at the time of such
grant;
(b) the issuance, pursuant to a share compensation arrangement, to
Insiders,
<PAGE> 3
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collectively, within a one-year period, of a number of Shares
exceeding 10% of the then Outstanding Issue (provided that when the
Outstanding Issue is calculated, Shares issued pursuant to any share
compensation arrangement over the preceding one-year period are
excluded); or
(c) the issuance, pursuant to a share compensation arrangement, to any one
Insider and such Insider's Associates, within a one year period, of a
number of Shares exceeding 5% of the then Outstanding Issue (provided
that when the Outstanding Issue is calculated, Shares issued pursuant
to any share compensation arrangement over the preceding one-year
period are excluded).
Nothing contained herein shall restrict or limit or be deemed to restrict
or limit the rights or powers of the Committee in connection with any allotment
and issuance of any Shares which are not allotted and issued under a share
compensation arrangement.
5. PARTICIPATION. Options shall be granted only to Eligible Persons.
6. DETERMINATION OF OPTION RECIPIENTS. The Committee shall make all necessary
or desirable determinations regarding the granting of Options to Eligible
Persons and may take into consideration the present and potential contributions
of a particular Eligible Person to the success of the Corporation and any other
factors which it may deem proper and relevant.
7. PRICE. The option price per Share shall be the Exercise Price calculated in
accordance with the Plan on the date of the grant. One Option may consist of
more than one group of Shares exercisable at different Exercise Prices.
8. GRANT OF OPTIONS. (1) The Committee may at any time authorize the granting
of Options to such Eligible Persons as it may select for the number of shares
that it shall designate, subject to the provisions of the Plan. The date of each
grant of Options shall be determined by the Committee when the grant is
authorized.
(2) Each Option shall be evidenced by a letter from the Corporation to the
Optionee or by stock option agreement with terms and conditions consistent with
the Plan and as approved by the Committee (which terms and conditions need not
be the same in each case and may be changed from time to time).
9. TERM OF OPTIONS. (1) The Option Period shall commence on the date of grant
(subject to any "earn-in" or vesting requirements) and expire on the date as the
Committee may approve at the time of the grant of the Option which will not be
later than 10 years from the date the option was granted.
(2) Options may in the discretion of the Committee be exercisable either
immediately or on an "earn-in" basis after one or more specified periods of
time.
<PAGE> 4
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(3) Options may be exercised in whole or in part (in each case to the
nearest full Share) at any time (subject to any "earn-in" requirements) during
the Option Period, but only in units of 1,000 Shares or such fewer number of
Shares as may remain subject or option in favour of the Optionee.
(4) Except as set forth in Section 10 or unless otherwise determined by the
Committee, no Option may be exercised unless the Optionee is at the time of such
exercise an employee of the Corporation or one of its Affiliates and shall have
served continuously in such capacity since the date of the grant of his Option.
Absence on leave, having approval of the Corporation, shall not be considered an
interruption of service for any purpose of the Plan.
(5) The exercise of any Option will be contingent upon receipt by the
Corporation of payment of the full purchase price of such Shares. No Optionee or
his legal representative, legatees or distributees will be, or will be deemed to
be, a holder of any Shares subject to an Option, unless and until certificates
for such Shares are issued to him or them under the terms of the Plan.
10. EFFECT OF TERMINATION OF EMPLOYMENT, DEATH OR PERMANENT DISABILITY. (1) If
an Optionee shall die or become permanently disabled while an employee or
director of the Corporation or one of its Affiliates, then, subject to and in
accordance with the terms of the relevant option agreement, any Option held by
him at the date of death or permanent disability shall become fully exercisable
(whether in whole or in part and without regard to any "earn-in" requirements),
but in the case of death only by the person or persons to whom the Optionee's
rights under the Option shall pass by the Optionee's will or the Laws of descent
and distribution. All such Options shall be exercisable from the date of death
or permanent disability until the expiration of the Option Period in respect
thereof.
(2) Unless otherwise determined by the Committee, if an Optionee ceases to
serve the Corporation as an employee of the Corporation or one of its Affiliates
as a result of termination without cause, then, subject to and in accordance
with the terms of the relevant option agreement, any Option held by such
Optionee shall (without regard to any "earn-in" requirements), become fully
exercisable (whether in whole or in part) but shall be exercisable only until
the earlier of the date which is twelve (12) months from the date of termination
or the expiration of the Option Period in respect thereof. Unless otherwise
determined by the Committee, in all other cases of termination of employment as
an employee of the Corporation or one of its Affiliates, then, subject to and
in accordance with the terms of the option agreement, any Option held by such
Optionee may (subject to any applicable "earn-in" requirements) be exercised in
whole or in part but shall be exercisable only until the earlier of the date
which is thirty (30) days next succeeding the date of termination of employment
or the expiration of the Option Period in respect thereof.
<PAGE> 5
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11. EFFECT OF TAKE-OVER BID. If a bona fide offer (the "Offer") is made to the
Optionee or to shareholders generally or to a class of shareholders which
includes the Optionee for Shares, which Offer, if accepted in whole or in part,
would result in the offeror exercising control over the Corporation within the
meaning of subsection 1(3) of the Securities Act (Ontario) (as amended from
time to time), then the Corporation shall, immediately upon receipt of notice of
the Offer, notify each Optionee currently holding an Option of the Offer, with
full particulars thereof; whereupon such Option may be exercised in whole or in
part by the Optionee (without regard to any "earn-in" requirements) so as to
permit the Optionee to tender the Shares received upon such exercise (the
"Optioned Shares") pursuant to the Offer.
12. ADJUSTMENT IN SHARES SUBJECT TO THE PLAN. If there is any change in the
Shares of the Corporation through the declaration of stock dividends of Shares
or consolidations, subdivisions or reclassification of Shares, or otherwise, the
number of Shares available for Option, the Shares subject to any Option and/or
the purchase price thereof shall be adjusted appropriately by the Committee and
such adjustment shall be effective and binding for all purposes of the Plan.
13. TRANSFERABILITY. Options shall not be assignable or transferable otherwise
than by will or by the laws of descent and distribution, and during the lifetime
of an Optionee shall be exercisable only by such Optionee.
14. NECESSARY APPROVALS. The obligation of the Corporation to sell and deliver
Shares on the exercise of Options is subject to the approval of any governmental
authority or stock exchanges on which the Shares are listed for trading which
may be required in connection with the authorization, issuance or sale of such
Shares by the Corporation. If any Shares cannot be issued to any Optionee for
any reason including, without limitation, the failure to obtain such approval,
then the obligation of the Corporation to issue such Shares shall terminate and
any option price paid to the Corporation shall be returned to the Optionee.
15. EXPIRATION AND TERMINATION OF THE PLAN. Options shall remain in effect
until they have been exercised, have expired, have been properly surrendered to
the Corporation or have been terminated. The Plan may be abandoned or terminated
in whole or in part at any time by the Committee, except with respect to any
Option then outstanding under the Plan.
16. AMENDMENTS TO PLAN. The Committee reserves the right to amend, modify or
terminate the Plan at any time if and when it is advisable in its absolute
discretion. However, any amendment to any provision of the Plan shall be subject
to approval, if required, by any governmental authority or stock exchanges
having jurisdiction over the securities of the Corporation or by the
shareholders of the Corporation, if required, by law or any order, policy,
by-law or regulation of any regulatory body or stock exchanges having
jurisdiction or authority over the securities of the Corporation or the Plan.
<PAGE> 6
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17. INTERPRETATION. The Plan will be governed by and construed in accordance
with the laws of the Province of Ontario.
18. COMPLIANCE WITH APPLICABLE LAW, ETC. If any provision of the Plan or any
Option contravenes any law or any order, policy, by-law or regulation of any
regulatory body or stock exchanges having jurisdiction or authority over the
securities of the Corporation or the Plan, then such provision shall be deemed
to be amended to the extent required to bring such provision into compliance
therewith.
19. COMING INTO EFFECT. The Plan shall come into effect upon its approval by
the shareholders of the Corporation.
<PAGE> 1
EXHIBIT 10.3
PHILIP ENVIRONMENTAL INC.
and
MONTREAL TRUST COMPANY OF CANADA
as Rights Agent
SHAREHOLDER RIGHTS PLAN AGREEMENT
DATED AS OF
APRIL 11, 1995
AND AMENDED AND RESTATED
AS OF MAY 19, 1995
<PAGE> 2
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NOW THEREFORE in consideration of the foregoing premises and
the respective covenants and agreements set forth herein the parties hereby
agree as follows:
ARTICLE 1 - INTERPRETATION
1.1 Certain Definitions
For purposes of the Agreement, the following terms have the meanings
indicated:
(a) "1933 SECURITIES ACT" means the Securities Act of 1933 of the United
States, as amended, and the rules and regulations thereunder, and any
comparable or successor laws or regulations thereto.
(b) "1934 EXCHANGE ACT" means the Securities Exchange Act of 1934 of the
United States, as amended, and the rules and regulations thereunder,
and any comparable or successor laws or regulations thereto.
(c) "ACQUIRING PERSON" means, any Person who is the Beneficial Owner of
twenty percent (20%) or more of the outstanding Voting Shares of the
Corporation; provided, however, that the term "Acquiring Person" shall
not include
(i) the Corporation or any Subsidiary of the Corporation;
(ii) any Person who becomes the Beneficial Owner of twenty percent
(20%) or more of the outstanding Voting Shares of the Corporation
as a result of (A) Corporate Acquisitions, (B) Permitted Bid
Acquisitions, (C) Corporate Distributions or (D) Exempt
Acquisitions; provided, however, that if a Person shall become
the Beneficial Owner of twenty percent (20%) or more of the
Voting Shares of the Corporation then outstanding by reason of
one or more or any combination of the operation of a Corporate
Acquisition, Permitted Bid Acquisition, Corporate Distribution or
Exempt Acquisition and, after such Corporate Acquisition,
Permitted Bid Acquisition, Corporate Distribution or Exempt
Acquisition, becomes the Beneficial Owner of an additional one
percent (1%) or more of the outstanding Voting Shares of the
Corporation other than pursuant to Corporate Acquisitions,
Permitted Bid Acquisitions, Corporate Distributions or Exempt
<PAGE> 3
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Acquisitions, then as of the date of such acquisition, such Person
shall become an Acquiring Person;
(iii) for a period of ten (1O) days after the Disqualification Date (as
hereinafter defined), any Person who becomes the Beneficial Owner of
twenty percent (20%) or more of the outstanding Voting Shares of the
Corporation as a result of such Person becoming disqualified from
relying on Section 1.1 (g)(4) hereof solely because such Person makes
or proposes to make a Take-over Bid in respect of securities of the
Corporation alone or by acting jointly or in concert with any other
Person (the first date of public announcement (which, for the purposes
of this definition, shall include, without limitation, a report filed
pursuant to section 101 of the Securities Act (Ontario)) by such
Person or the Corporation of the intent to commence such a Take-over
Bid being herein referred to as the "Disqualification Date");
(iv) an underwriter or member of a banking or selling group that acquires
Voting Shares of the Corporation from the Corporation in connection
with a bona fide distribution to the public of securities; and
(v) a Person (a "GRANDFATHERED PERSON") who is the Beneficial Owner of
twenty percent (20%) or more of the outstanding Voting Shares
determined as at the Record Time; provided, however, that this
exception shall not be, and shall cease to be, applicable to a
Grandfathered Person in the event that such Grandfathered Person
shall, after the Record Time, become the Beneficial Owner of any
additional Voting Shares that increase its Beneficial Ownership of
Voting Shares by more than one percent (1%) of the number of Voting
Shares outstanding as at the Record Time, other than as may be
acquired pursuant to Corporate Acquisitions, Permitted Bid
Acquisitions, Corporate Distributions or Exempt Acquisitions.
(d) "AFFILIATE" when used to indicate a relationship with a specified
Person, means a Person that directly or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common
control with, such specified Person.
(e) "AGREEMENT" means this agreement as amended, modified or supplemented
from time to time.
<PAGE> 4
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(f) "ASSOCIATE" when used to indicate a relationship with a specified
Person, means any relative of such specified Person who has the same
home as such specified Person, or any Person to whom such specified
Person is married or with whom such specified Person is living in a
conjugal relationship outside marriage, or any relative of such spouse
or other Person who has the same home as such specified Person.
(g) a Person shall be deemed the "BENEFICIAL OWNER", and to have
"BENEFICIAL OWNERSHIP" of, and to "BENEFICIALLY OWN":
(i) any securities as to which such Person or any Affiliate or
Associate of such Person or any other Person acting jointly or in
concert with such Person is or may be deemed to be the owner at
law or in equity, and for this purpose, a Person shall be deemed
to be an owner at law or in equity of all securities of which
such Person or any of the Affiliates or Associates of such Person
or any other Person acting jointly or in concert with such Person
is deemed to be the beneficial owner pursuant to Part XX of the
Securities Act (Ontario) or any comparable or successor Part
thereto:
provided, however, that a Person shall not be deemed the "BENEFICIAL
OWNER", or to have "BENEFICIAL OWNERSHIP" of, or to "BENEFICIALLY
OWN", any security as a result of the existence of any one or more of
the following circumstances:
(1) such security has been deposited or tendered pursuant to any
tender or exchange offer or take-over bid made by such Person
or made by any Affiliate or Associate of such Person or made
by any other Person acting jointly or in concert with such
Person, unless such deposited or tendered security has been
taken up or paid for, whichever shall first occur; or
(2) such Person or any Affiliate or Associate of such Person or
any other Person acting jointly or in concert with such
Person has or shares the power to vote or direct the voting
of such security pursuant to a revocable proxy given in
response to a public proxy solicitation or any such Person
has an agreement, arrangement or understanding with respect
to a particular shareholder proposal or proposals or a
particular matter or matters to come before a
<PAGE> 5
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meeting of shareholders, including the election of
directors; or
(3) such Person or any Affiliate or Associate of such Person or
any other Person acting jointly or in concert with such
Person has or shares the power to vote or direct the voting
of such security in connection with or in order to
participate in a public proxy solicitation; or
(4) (i) such Person or any Affiliate or Associate of such Person
or any other Person acting jointly or in concert with such
Person, holds or exercises dispositive power over such
security; provided that the ordinary business of any such
Person (the "Fund Manager") includes the management of
investment funds for others and such dispositive power over
such security is held by the Fund Manager in the ordinary
course of such business in the performance of such Fund
Manager's duties for the account of any other Person (a
"Client"), (ii) such Person (the "Trust Company") is licensed
to carry on the business of a trust company under applicable
law and, as such, acts as trustee or administrator or in a
similar capacity in relation to the estates of deceased or
incompetent Persons or in relation to other accounts and
holds or exercises dispositive power over such security in
the ordinary course of such duties for the estate of any such
deceased or incompetent Person (each an "Estate Account") or
for such other accounts (each an "Other Account"),(iii) the
ordinary business of any such Person includes acting as an
agent of the Crown in the management of public assets (the
"Crown Agent"), or (iv) the Person, any of such Person's
Affiliates or Associates or any other Person acting jointly
or in concert with such Person holds or exercises dispositive
power over such security, provided that the Person exercising
such dispositive power is the administrator or the trustee of
one or more pension funds or plans (each a "Pension Fund")
registered under the laws of Canada or any province thereof
or the United States or any state thereof (the "Independent
Person") and holds such securities solely for the purposes of
its activities as an Independent Person, and further provided
that such Person:
<PAGE> 6
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(a) does not hold or exercise dispositive power over more
than thirty percent (30%) of the Voting Shares of the
Corporation;
(b) holds such Voting Shares of the Corporation for
investment purposes; and
(c) is not acting jointly or in concert with any other
Person;
provided, however, that in any of the foregoing cases no one
of the Fund Manager, the Trust Company, the Crown Agent or
the Independent Person makes or proposes to make a Take-over
Bid in respect of securities of the Corporation alone or by
acting jointly or in concert with any other Person (other
than by means of ordinary market transactions (including
prearranged trades) executed through the facilities of a
stock exchange or organized over-the-counter market); or
(5) such Person is a Client of the same Fund Manager as another
Person on whose account the Fund Manager holds or exercises
dispositive power over such security, or such Person is an
Estate Account or an Other Account of the same Trust Company
as another Person on whose account the Trust Company holds or
exercises dispositive power over such security, or such
Person is a Pension Fund with the same Independent Person as
another Pension Fund; or
(6) such Person is a Client of a Fund Manager and such security
is owned at law or in equity by the Fund Manager, or such
Person is an Estate Account or an Other Account of a Trust
Company and such security is owned at law or in equity by
the Trust Company, or such Person is a Pension Fund and
such security is owned at law or in equity by the Independent
Person of the Pension Fund.
For purposes of this Agreement, the percentage of Voting Shares Beneficially
Owned by any Person, shall be and be deemed to be the product of one hundred
(100) and the number of which the numerator is the number of votes for the
election of all directors generally attaching to the Voting Shares Beneficially
Owned by such Person and the denominator of which is the number of votes for the
election of all
<PAGE> 7
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directors generally attaching to all outstanding Voting Shares. Where any Person
is deemed to Beneficially Own unissued Voting Shares, such Voting Shares shall
be deemed to be issued and outstanding for the purpose of calculating the
percentage of Voting Shares Beneficially Owned by such Person.
(h) "BOARD OF DIRECTORS" means, at any time, the duly
constituted board of directors of the Corporation.
(i) "BUSINESS CORPORATIONS ACT (ONTARIO)" means the
Business Corporations Act, R.S.O. 1990, c.B.16, as amended, and
the regulations thereunder, and any comparable or successor laws
or regulations thereto,
(j) "BUSINESS DAY" means any day other than a Saturday, Sunday or a
day on which banking institutions in Toronto are authorized
or obligated by law to close.
(k) "CANADIAN DOLLAR EQUIVALENT" means any amount which is expressed
in United States dollars shall mean on any day the Canadian dollar
equivalent of such amount determined by reference to the US. -
Canadian Exchange Rate on such date.
(l) "CLOSE OF BUSINESS" on any given date means the time on such date (or,
if such date is not a Business Day, the time on the next succeeding
Business Day at which the office of the transfer agent for the Common
Shares in the City of Toronto (or, after the Separation Time, the
office of the Rights Agent in the City of Toronto is closed to the
public.
(m) "COMMON SHARES", when used with reference to the Corporation, means the
common shares in the capital of the Corporation and, when used with
reference to any Person other than the Corporation, means the class or
classes of shares (or similar equity interest) with the greatest per
share voting power entitled to vote generally in the election of all
directors of such other Person or the equity securities or other equity
interest having power (whether or not exercised) to control or direct
the management of such other Person or, if such other Person is a
Subsidiary of another Person, the Person or Persons which ultimately
control such first-mentioned Person.
(n) "COMPETING BID" means a Take-over Bid that: (i) is made while another
Permitted Bid is in existence, and (ii) satisfies all the components of
the definition of a Permitted Bid, except that (1) the requirements set
out in Clause (ii) of the definition of a Permitted Bid shall be
satisfied if the Take-over Bid shall contain,
<PAGE> 8
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and the take up and payment for securities tendered or
deposited thereunder shall be subject to, an irrevocable and
unqualified condition that no Voting Shares shall be taken up or paid
for pursuant to the Competing Bid prior to the close of business on the
date that is no earlier than the date which is the later of twenty-one
(21) days after the date the Competing Bid is made or the earliest date
on which Voting Shares may be taken up or paid for under any other
Permitted Bid that is then in existence for the Voting Shares and only
if at that date, more than fifty percent (50%) of the then outstanding
Voting Shares held by Independent Shareholders have been deposited to
the Competing Bid and not withdrawn, and (2) if the Permitted Bid was
made for all Voting Shares of the Corporation, the Competing Bid must
also be made for all Voting Shares of the Corporation.
(n(A))"CONTROLLED": a corporation is "CONTROLLED" by another Person or
two or more Persons if:
(i) securities entitled to vote in the election of
directors carrying more than fifty percent (50%) of the votes for
the election of directors are held, directly or indirectly, by or
for the benefit of the other Person or Persons; and
(ii) the votes carried by such securities are entitled, if exercised, to
elect a majority of the board of directors of such corporation;
and "CONTROLS", "CONTROLLING" and "UNDER COMMON CONTROL WITH" shall
be interpreted accordingly.
(o) "CORPORATE ACQUISITION" means an acquisition by the Corporation
or a Subsidiary of the Corporation or the redemption by the
Corporation of Voting Shares of the Corporation which by reducing the
number of Voting Shares of the Corporation outstanding increases the
proportionate number of Voting Shares Beneficially Owned by any
Person.
(p) "CORPORATE DISTRIBUTION" means an acquisition of Voting Shares of
the Corporation as a result of:
(i) a stock dividend or a stock split or pursuant to any
dividend reinvestment plan or share purchase plan of the
Corporation;
(ii) any other event pursuant to which all holders of Voting
Shares of the Corporation are entitled to receive Voting Shares
on a pro rata basis, including, without limiting the
<PAGE> 9
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generality of the foregoing, the acquisition or the exercise of
rights to purchase Voting Shares distributed to all the holders of
a series or class of Voting Shares of the Corporation to subscribe
for or purchase Voting Shares of the Corporation, provided that
such rights are acquired directly from the Corporation and not from
any other Person; or
(iii) a distribution of Voting Shares, or securities convertible into,
exchangeable for or carrying the right to acquire Voting Shares
(and the conversion or exchange of such convertible or
exchangeable securities or the exercise of the right to acquire
Voting Shares carried by such securities), made pursuant to a
prospectus or by way of a private placement.
(q) "DEBENTURES" means the U.S. $120,000,000 6% Convertible Subordinated
Debentures of the Corporation due October 15,2000.
(r) "DISQUALIFICATION DATE" has the meaning ascribed thereto in Clause
1.1 (c)(iii).
(s) "EFFECTIVE DATE" has the meaning ascribed thereto in Section 5.13.
(t) "ELECTION TO EXERCISE" has the meaning ascribed thereto in
Subsection 2.2(d).
(u) "EXEMPT ACQUISITION" means an acquisition of Voting Shares of the
Corporation, in respect of which the Board of Directors has waived the
application of Section 3.1 hereof pursuant to the provisions of
Subsections 5.1 (b) or 5.1 (c) hereof or which were made on or prior to
the Record Time.
(v) "EXERCISE PRICE" means, as of any date, the price at which a holder may
purchase the securities issuable upon exercise of one whole Right.
Until adjustment thereof in accordance with the terms hereof, the
Exercise Price shall be $75.00.
(w) "EXPIRATION TIME" means the earlier of: (i) the Termination Time,
and (ii) the close of business on June 30, 1998.
(x) "FLIP-IN EVENT" means a transaction in or pursuant to which any
Person becomes an Acquiring Person.
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(y) "GRANDFATHERED PERSON" has the meaning ascribed thereto in Clause
1.1 (c)(v).
(z) "INDEPENDENT SHAREHOLDERS" means holders of Voting Shares of the
Corporation, but shall not include any Acquiring Person or any Offeror
(including an Offeror who has announced an intention to make or who
makes a Permitted Bid or Competing Bid), or any Affiliate or Associate
of any such Acquiring Person or Offeror, or any Person acting jointly
or in concert with any such Acquiring Person or Offeror or with any
Affiliate or Associate of any such Acquiring Person or Offeror, or any
Affiliate or Associate of such Person acting jointly or in concert with
such Person or Offeror, including any employee benefit plan, stock
purchase plan, deferred profit sharing plan or any similar plan or
trust for the benefit of employees of the Corporation or a Subsidiary
of the Corporation, unless the beneficiaries of any such plan or trust
direct the manner in which the Voting Shares are to be voted or direct
whether the Voting Shares are to be tendered to a Take-over Bid.
(aa) "MARKET PRICE" per share of any securities on any date of determination
means the average of the daily closing prices per share of such
securities (determined as described below) on each of the twenty (20)
consecutive Trading Days through and including the Trading Day
immediately preceding such date; provided, however, that if an event of
a type analogous to any of the events described in Section 2.3 hereof
shall have caused the closing prices used to determine the Market Price
on any Trading Days not to be fully comparable with the closing price
on such date of determination or, if the date of determination is not a
Trading Day, on the immediately preceding Trading Day, each such
closing price so used shall be appropriately adjusted in a manner
analogous to the applicable adjustment provided for in Section 2.3
hereof in order to make it fully comparable with the closing price on
such date of determination or, if the date of determination is not a
Trading Day, on the immediately preceding Trading Day. The closing
price per share of any securities on any date shall be (i) the closing
board lot sale price or, if such price is not available, the average of
the closing bid and asked prices, for each share as reported by The
Toronto Stock Exchange, or (ii) if for any reason none of such prices
is available on such day or the securities are not listed or admitted
to trading on The Toronto Stock Exchange, the closing board lot sale
price, or if such price is not available, the average of the closing
bid and asked prices, for each share as reported by The Montreal
Exchange, or (iii) if for any reason none of such prices is
<PAGE> 11
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available on such day or the securities are not listed or admitted to
trading on The Toronto Stock Exchange or The Montreal Exchange, the
closing board lot sale price or, if such price is not available, the
average of the closing bid and asked prices, for each share as reported
in the principal consolidated transaction reporting system with respect
to securities listed or admitted to trading on the securities exchange
in Canada or the United States on which the securities are primarily
traded, or (iv) if for any reason none of such prices is available on
such day or the securities are not listed or admitted to trading on The
Toronto Stock Exchange or The Montreal Exchange, the closing board lot
sale price, or if such price is not available, the average of the
closing bid and asked prices for each share as reported by the principal
stock exchange in the United States, or (v) if not so listed, the last
quoted price,or if not so quoted, the average of the high bid and low
asked prices for each share of such securities in the over-the-counter
market, as reported by Nasdaq or, if the securities are not quoted on
Nasdaq, as reported by such other system then in use, or (vi) if on any
such date the securities are not quoted by any such organization, the
average of the closing bid and asked prices as furnished by a
professional market maker making a market in the securities selected in
good faith by the Board of Directors; provided, however, that if on any
such date the securities are not traded in the over-the-counter market,
the closing price per share of such securities on such date shall mean
the fair value per share of such securities on such date as determined
in good faith by the Board of Directors, after consultation with a
nationally or internationally recognized investment dealer or investment
banker. The Market Price shall be expressed in Canadian dollars and if
initially determined in respect of any day forming part of the twenty
(20) consecutive trading day period in United States dollars, such
amount shall be translated into Canadian dollars at the Canadian Dollar
Equivalent thereof. Notwithstanding the foregoing, where the Board of
Directors is satisfied that the Market Price of securities as determined
herein was affected by an anticipated or actual Take-over Bid or by
improper manipulation, the Board of Directors may, acting in good faith,
determine the Market Price of securities, such determination to be based
on a finding as to the price of which a holder of securities of that
class could reasonably have expected to dispose of his securities
immediately prior to the relevant date excluding any change in price
reasonably attributable to the anticipated or actual Take-over Bid or to
the improper manipulation.
<PAGE> 12
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(bb) "Nasdaq" means The Nasdaq Stock Market.
(cc) "Offer to Acquire" shall include:
(i) an offer to purchase, a public announcement of an intention to make
an offer to purchase, or a solicitation of an offer to sell, Voting
Shares of the Corporation; and
(ii) an acceptance of an offer to sell Voting Shares of the Corporation,
whether or not such offer to sell has been solicited.
or any combination thereof, and the Person accepting an offer to sell
shall be deemed to be making an Offer to Acquire to the Person that made
the offer to sell;
(dd) "Offeror" means a Person who has announced an intention to make, or
who makes, a Take-over Bid.
(ee) "Offeror's Securities" means Voting Shares of the Corporation
Beneficially Owned by an Offeror, any Affiliate or Associate of such
Offeror, any Person acting jointly or in concert with the Offeror or
with any Affiliate of the Offeror and any Affiliates or Associates of
such Person so acting jointly or in concert.
(ff) "Permitted Bid" means a Take-over Bid made by an Offeror that is made
by means of a Take-over Bid circular and which also complies with the
following additional provisions:
(i) the take-over Bid shall be made to all holders of record of
Voting Shares wherever resident as registered on the books of the
Corporation;
(ii) the Take-over Bid shall contain, and the take up and payment for
securities tendered or deposited thereunder shall be subject to,
an irrevocable and unqualified condition that no Voting Shares
shall be taken up or paid for pursuant to the Take-over Bid prior
to the close of business on the date which is not less than sixty
(60) days following the date of the Take-over Bid and that no
Voting Shares shall be taken up or paid for pursuant to the
Take-over Bid unless, at such date, more than fifty percent (50%)
of the then outstanding Voting Shares held by Independent
Shareholders have been deposited to the Take-over Bid and not
withdrawn;
<PAGE> 13
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(iii) the Take-over Bid shall contain an irrevocable and unqualified
provision that, unless the Take-over Bid is withdrawn in accordance
with applicable law, Voting Shares of the Corporation may be
deposited pursuant to such Take-over Bid at any time during the
period of time described in Clause (ii) of this Subsection 1.1(ff)
and that any Voting Shares deposited pursuant to the Take-over Bid
may be with drawn at any time until taken up and paid for;
(iv) the Take-over Bid shall contain an irrevocable and unqualified
provision that should the condition referred to in Clause (ii) of
this Subsection 1.1(ff) be met: (A) the Offeror will make a public
announcement of that fact on the date the Take-over Bid would
otherwise expire and (B)the Take-over Bid will be extended for a
period of not less than ten (10) Business Days from the date it
would otherwise expire.
(gg) "PERMITTED BID ACQUISITIONS" means share acquisitions made
pursuant to a Permitted Bid or a Competing Bid.
(hh) "PERSON" means any individual, firm, partnership, association,
trust, trustee, executor, administrator, legal or personal
representative, government, governmental body, entity or authority,
group, body corporate, corporation, unincorporated organization or
association, syndicate, joint venture or any other entity, whether or
not having legal personality, and any of the foregoing in any
derivative, representative or fiduciary capacity, and pronouns have
a similar extended meaning.
(ii) "RECORD TIME" means 5:00 p.m. (Toronto time) on April 11,1995.
(jj) "REDEMPTION PRICE" has the meaning ascribed thefe to in Subsection
5.1(a).
(kk) "REGULAR PERIODIC CASH DIVIDENDS" means cash dividends paid
at regular intervals in any fiscal year of the Corporation to the
extent that such cash dividends do not exceed, in the aggregate, the
greatest of
(i) two hundred percent (200%) of the aggregate amount of
cash dividends declared payable by the Corporation on its Common
Shares in its immediately preceding fiscal year; and
<PAGE> 14
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(ii) one hundred percent (100%) of the aggregate
consolidated net income of the Corporation, before extraordinary
items, for its immediately preceding fiscal year.
(ll) "RIGHT" means a right issued pursuant to this Agreement.
(mm) "RIGHTS CERTIFICATE" has the meaning ascribed thereto in
Section 2.2(c).
(nn) "RIGHTS REGISTER" has the meaning ascribed thereto in
Subsection 2.6(a).
(oo) "SECURITIES ACT (ONTARIO)" means the Securities Act, R.S.O. 1990,
c. S.5, as amended, and the regulations, rules, policies, and notices
thereunder, and any comparable or successor laws, regulations, rules,
policies or notices thereto.
(pp) "SEPARATION TIME" means the close of business on the tenth (10th)
Trading Day after the earlier of (A) the Stock Acquisition Date and (B)
the date of the commencement of, or first public announcement of, the
intent of any person (other than the Corporation or any Subsidiary of
the Corporation) to commence, a Take-over Bid (other than a Permitted
Bid or Competing Bid) or such later date as may be determined by the
Board of Directors provided that, if the foregoing results in the
Separation Time being prior to the Record Time, the Separation Time
shall be the Record Time and provided further that, if any Take-over
Bid referred to in Clause (B) of this Subsection 1.1(pp) expires, is
cancelled, terminated or otherwise withdrawn prior to the Separation
Time, such Take-over Bid shall be deemed, for the purposes of this
Subsection 1.1(pp), never to have been made and provided further that
if the Board of Directors determines pursuant to Subsections 5.1 (b) or
5.1 (c) hereof to waive the application of Section 3.1 hereof to a
Flip-in Event, the Separation Time in respect of such Flip-in Event
shall be deemed never to have occurred.
(qq) "STOCK ACQUISITION DATA" means the first date of
public announcement (which, for purposes of this definition,
shall include, without limitation, a report filed pursuant to
section 101 of the Securities Act (Ontario) or Section 13(d) under
the 1934 Exchange Act) by the Corporation or an Offeror or Acquiring
Person of facts indicating that a Person has become an Acquiring
Person.
(rr) "SUBSIDIARY": a corporation shall be deemed to be a Subsidiary of
another corporation if:
<PAGE> 15
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(i) it is controlled by:
(A) that other; or
(B) that other and one or more corporations each of
which is controlled by that other; or
(C) two or more corporations each of which is
controlled by that other; or
(ii) it is a Subsidiary of a corporation that is that other's
Subsidiary.
(ss) "TAKE-OVER BID" means an Offer to Acquire Voting Shares of the
Corporation or securities convertible into or exchangeable for or
carrying a right to purchase Voting Shares of the Corporation where the
Voting Shares of the Corporation subject to the Offer to Acquire,
together with the Voting Shares of the Corporation into which the
securities subject to the Offer to Acquire are convertible,
exchangeable or exercisable, and the Offeror's Securities, constitute
in the aggregate twenty percent (20%) or more of the outstanding Voting
Shares of the Corporation at the date of the Offer to Acquire.
(tt) "TERMINATION TIME" means the time at which the right to exercise Rights
shall terminate pursuant to Subsections 5.1 (a), 5.1 (d) or 5.1 (g) or
Section 5.13 hereof.
(uu) "TRADING DAY", when used with respect to any securities, means a
day on which the principal Canadian stock exchange or American stock
exchange or market on which such securities are listed or admitted to
trading is open for the transaction of business or, if the securities
are not listed or admitted to trading on any Canadian stock exchange
or American stock exchange or market, a Business Day.
(vv) "U.S. - CANADIAN EXCHANGE RATE" means on any date:
(i) if on such date the Bank of Canada sets an average
noon spot rate of exchange for the conversion of one United States
dollar into Canadian dollars, such rate; and
(ii) in any other case, the rate for such date for the
conversion of one United States dollar into Canadian dollars which
is calculated in the manner which shall be determined by the Board
of Directors from time to time acting in good faith.
<PAGE> 16
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(ww) "VOTING SHARES" means, with respect to any Person, the Common
Shares of such Person and any other shares of capital stock or voting
interests of such Person entitled to vote generally in the election of
all directors.
1.2 CURRENCY
All sums of money which are referred to in this Agreement are
expressed in lawful money of Canada, unless otherwise specified.
1.3 HEADINGS
The division of this Agreement into Articles, Sections,
Subsections, Clauses and Subclauses and the insertion of headings, subheadings
and a table of contents are for convenience of reference only and shall not
affect the construction or interpretation of this Agreement.
1.4 NUMBER AND GENDER
Wherever the context so requires, terms used herein importing the
singular number only shall include the plural and vice-versa and words importing
only one gender shall include all others.
1.5 ACTING JOINTLY OR IN CONCERT
For the purposes of this Agreement, a Person shall be deemed to be
acting jointly or in concert with every Person who is a party to an agreement,
commitment or understanding, whether formal or informal, with the first Person
or any Associate or Affiliate of such Person for the purpose of acquiring or
making an Offer to Acquire Voting Shares of the Corporation.
1.6 STATUTORY REFERENCES
Unless the context otherwise requires or except as expressly
provided herein, any reference herein to a specific part, section, subsection,
clause or Rule of any statute or regulation shall be deemed to refer to the same
as it may be amended, reenacted or replaced or, if repealed and there shall be
no replacement therefor, to the same as it is in effect on the date of
this Agreement.
<PAGE> 17
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ARTICLE 2 - THE RIGHTS
2.1 Legend on Common Share Certificates
(a) Certificates issued for Common Shares, including Certificates issued
for Common Shares issued upon the conversion of Debentures, after the Record
Time but prior to the close of business on the earlier of the Separation Time
and the Expiration Time shall evidence one Right for each Common Share
represented thereby and shall have impressed on, printed on, written on or
otherwise affixed to them, a legend in substantially the following form:
Until the Separation Time (as defined in the Rights Plan referred to
below), this certificate also evidences and entitles the holder hereof to
certain Rights as set forth in a Shareholder Rights Plan Agreement, dated
as of April 11, 1995 and as amended and restated on the 19th day of May,
1995 (the "Rights Plan"), between Philip Environmental Inc. (the
"Corporation") and Montreal Trust Company of Canada, as rights agent (the
"Rights Agent"), the terms of which are hereby incorporated herein by
reference and a copy of which is on file at the principal executive
office of the Corporation. Under certain circumstances, as set forth in
the Rights Plan, such Rights may be amended or redeemed, may expire, may
become null and void (if, in certain cases, they are issued to or
"Beneficially Owned" by any Person who is, was or becomes an "Acquiring
Pearson", as such terms are defined in the Rights Plan, whether currently
held by or on behalf of such Person or any subsequent holder) or may be
evidenced by separate certificates and may no longer be evidenced by this
certificate.
The Corporation will mail or arrange for the mailing of a copy of the
Rights Plan to the holder of this certificate without charge upon receipt
of a written request therefor.
(b) Certificates representing Common Shares that are issued and
outstanding at the Record Time shall evidence one Right for each Common Share
evidenced thereby notwithstanding the absence of the foregoing legend until the
earlier of the Separation Time and the Expiration Time.
(c) All certificates bearing Common Shares that are issued and
outstanding on May 19, 1995 and bearing a similar legend (but for the absence
of a reference to the amendment and restatement of this Agreement on May 19,
1995) shall be deemed for all purposes to bear the foregoing legend.
<PAGE> 18
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2.2 Initial Exercise Price; Exercise of Rights; Detachment of
Rights
(a) Right to entitle holder to purchase one Common Share prior to
adjustment. Subject to adjustment as herein set forth, each Right will entitle
the holder thereof, from and after the Separation Time and prior to the
Expiration Time, to purchase, for the Exercise Price as at the Business Day
immediately preceding the date of exercise of the Right, one Common Share
(which price and number of Common Shares are subject to adjustment as set forth
below). Notwithstanding any other provision of this Agreement, any Rights held
by the Corporation and any of its Subsidiaries shall be void.
(b) Rights not exercisable until Separation Time. Until the Separation
Time, (A) the Rights shall not be exercisable and no Right may be exercised,
and (B) for administrative purposes each Right will be evidenced by the
certificates for the associated Common Shares registered in the names of the
holders thereof (which certificates shall also be deemed to be Rights
Certificates) and will be transferable only together with, and will be
transferred by a transfer of, such associated Common Shares.
(c) Delivery of Rights Certificate and disclosure statement. From and
after the Separation Time and prior to the Expiration Time, (i) the Rights
shall be exercisable, and (ii) the registration and transfer of the Rights
shall be separate from, and independent of, Common Shares. Promptly following
the Separation Time, the Corporation will prepare and the Rights Agent will
mail to each holder of record of Rights as of the Separation Time, or, in the
case of Debentures converted into Common Shares after the Separation Time and
prior to the close of business on the fifteenth (15th) day following notice of
the Stock Acquisition Date having been sent by the Corporation to the holders
of Debentures, promptly after such conversions, to the holders so converting
(other than an Acquiring Person and, in respect of any Rights Beneficially
Owned by such Acquiring Person which are not held of record by such Acquiring
Person, the holder of record of such Rights (a "Nominee")), at such holder's
address as shown by the records of the Corporation (the Corporation hereby
agreeing to furnish copies of such records to the Rights Agent for this
purpose), (A) a certificate (a "Rights Certificate") in substantially the form
of Exhibit A hereto appropriately completed, representing the number of Rights
held by such holder at the Separation Time, or, in the case of the conversion
of Debentures after the Separation Time, the number of Rights attached to the
Common Shares into which the Debentures are converted, and having such marks of
identification or designation and such legends, summaries or endorsements
printed thereon as the Corporation may deem appropriate and as are not
inconsistent with the provisions of this Agreement, or as may be required to
comply with any law, rule, regulation or judicial or administrative order or
with any rule or regulation made pursuant thereto or with any rule or
regulation of any self-regulatory organization, stock exchange or quotation
system on which the Rights may from time to time be listed or traded, or to
conform to usage, and (B) a disclosure statement describing the Rights,
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provided that a Nominee shall be sent the materials provided for in (A) and (B)
in respect of all Common Shares held of record by it which are not Beneficially
Owned by an Acquiring Person. In order for the Corporation to determine whether
any Person is holding Common Shares which are Beneficially Owned by another
Person, the Corporation may require such first mentioned Person to furnish it
with such information and documentation as the Corporation considers advisable.
(d) Exercise of Rights. Rights may be exercised in whole or in part on
any Business Day after the Separation Time and prior to the Expiration Time by
submitting to the Rights Agent the Rights Certificate evidencing such Rights
together with an election to exercise such Rights (an "Election to Exercise")
substantially in the form attached to the Rights Certificate duly completed,
accompanied by payment in cash, by certified cheque, banker's draft or money
order payable to the order of the Corporation, of a sum equal to the Exercise
Price multiplied by the number of Rights being exercised and a sum sufficient
to cover any transfer tax or charge which may be payable in respect of any
transfer involved in the transfer or delivery of Rights Certificates or the
issuance or delivery of certificates for Common Shares in a name other than
that of the holder of the Rights being exercised, all of the above to be
received before the Expiration Time by the Rights Agent at its principal office
in any of the cities listed on the Rights Certificate.
(e) Duties of Rights Agent upon receipt of Election to Exercise. Upon
receipt of a Rights Certificate, which is accompanied by (A) a completed
Election to Exercise that does not indicate that such Right is null and void as
provided by Subsection 3.1 (b) hereof, and (B) payment as set forth in
Subsection 2.2(d) above, the Rights Agent (unless otherwise instructed by the
Corporation) will thereupon promptly:
(i) requisition from the transfer agent for the Common Shares
certificates representing the number of Common Shares to be purchased
(the Corporation hereby irrevocably authorizing its transfer agent
to comply with all such requisitions);
(ii) when appropriate, requisition from the Corporation the amount of cash
to be paid in lieu of issuing fractional Common Shares;
(iii) after receipt of such certificates, deliver the same to or
upon the order of the registered holder of such Rights Certificate,
registered in such name or names as may be designated by such
registered holder;
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(iv) when appropriate, after receipt, deliver such cash (less any amounts
required to be withheld) to or to the order of the registered holder
of the Rights Certificate; and
(v) tender to the Corporation all payments received on exercise of the
Rights.
(f) Partial Exercise of Rights, In case the holder of any Rights shall
exercise less than all of the Rights evidenced by such holder's Rights
Certificate, a new Rights Certificate evidencing the Rights remaining
unexercised will be issued by the Rights Agent to such holder or to such
holder's duly authorized assigns.
(g) Duties of the Corporation. The Corporation covenants and agrees that it
will:
(i) take all such action as may be necessary and within its power to
ensure that all Common Shares or other securities delivered upon
exercise of Rights shall, at the time of delivery of the certificates
for such shares (subject to payment of the Exercise Price), be duly
and validly authorized, executed, issued and delivered and fully paid
and non-assessable;
(ii) take all such action as may be necessary and within its power to
ensure compliance with the provisions of Section 3.1 hereof including,
without limitation, all such action to comply with any applicable
requirements of the Business Corporations Act (Ontario), the
Securities Act (Ontario), the 1933 Securities Act, the 1934 Exchange
Act and any applicable comparable securities legislation of each of
the provinces of Canada and any other applicable law, rule or
regulation, in connection with the issuance and delivery of the Rights
Certificates and the issuance of any shares upon exercise of Rights;
(iii) use reasonable efforts to cause all Common Shares issued upon
exercise of Rights to be listed upon issuance on the principal stock
exchange on which the Common Shares were traded prior to the Stock
Acquisition Date;
(iv) cause to be reserved and kept available out of its authorized and
unissued Common Shares, the number of Common Shares that, as provided
in this Agreement, will from time to time be sufficient to permit the
exercise in full of all outstanding Rights;
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(v) pay when due and payable any and all Canadian and, if applicable, United
States, federal, provincial and state transfer taxes and charges (not including
any income or capital taxes of the holder or exercising holder or any liability
of the Corporation to withhold tax) which may be payable in respect of the
original issuance or delivery of the Rights Certificates, provided that the
Corporation shall not be required to pay any transfer tax or charge which may
be payable in respect of any transfer involved in the transfer or delivery of
Rights Certificates or the issuance or delivery of certificates for shares or
other securities in a name other than that of the registered holder of the
Rights being transferred or exercised; and
(vi) after the Separation Time, except as permitted by Sections 5.1 or 5.4
hereof, not take (or permit any Subsidiary to take) any action if at the time
such action is taken it is reasonably foreseeable that such action will
diminish substantially or otherwise eliminate the benefits intended to be
afforded by the Rights.
2.3 ADJUSTMENTS TO EXERCISE PRICE; NUMBER OF RIGHTS
The Exercise Price, the number and kind of Common Shares or other
securities subject to purchase upon exercise of each Right and the number of
Rights outstanding are subject to adjustment from time to time as provided in
this Section 2.3.
(a) ADJUSTMENTS TO EXERCISE PRICE UPON CHANGES TO SHARE CAPITAL. In the
event the Corporation shall at any time after the Record Time:
(A) declare or pay a dividend on the Common Shares payable in Common
Shares (or other securities exchangeable for or convertible into or
giving a right to acquire Common Shares or other securities) other than
the issue of Common Shares or such exchangeable or convertible
securities to holders of Common Shares in lieu of but not in an amount
which exceeds the value of regular periodic cash dividends;
(B) subdivide or change the outstanding Common Shares into a greater
number of Common Shares;
(C) combine or change the outstanding Common Shares into a smaller
number of Common Shares or;
(D) issue any Common Shares (or other securities exchangeable for or
convertible into or giving a right to acquire Common
<PAGE> 22
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Shares or other securities) in respect of, in lieu of or in exchange for
existing Common Shares, except as otherwise provided in this Section
2.3;
the Exercise Price in effect at the time of the record date for such dividend
or of the effective date of such subdivision, combination or reclassification,
and the number and kind of Common Shares, or other securities, as the case may
be, issuable on such date, shall be proportionately adjusted so that the holder
of any Right exercised after such time shall be entitled to receive, upon
payment of the Exercise Price then in effect, the aggregate number and kind of
Common Shares or other securities, as the case may be, which, if such Right had
been exercised immediately prior to such date and at a time when the Common
Share transfer books of the Corporation were open, such holder would have owned
upon such exercise and been entitled to receive by virtue of such dividend,
subdivision, combination or reclassification. If an event occurs which would
require an adjustment under both this Section 2.3 and Section 3.1 hereof, the
adjustment provided for in this Section 2.3 shall be in addition to, and shall
be made prior to, any adjustment required pursuant to Section 3.1 hereof.
(b) ADJUSTMENT TO EXERCISE PRICE UPON ISSUE OF RIGHTS OPTIONS AND
WARRANTS. In case the Corporation shall at any time after the Record Time fix a
record date for the issuance of rights, options or warrants to all holders of
Common Shares entitling them (for a period expiring within forty- five (45)
calendar days after such record date) to subscribe for or purchase Common Shares
(or shares having the same rights, privileges and preferences as Common Shares
("equivalent common shares")) or securities convertible into or exchangeable for
or carrying a right to purchase Common Shares or equivalent common shares at a
price per Common Share or per equivalent common share (or having a conversion
price or exchange price or exercise price per share, if a security convertible
into or exchangeable for or carrying a right to purchase Common Shares or
equivalent common shares) less than ninety percent 90%) of the Market Price per
Common Share on such record date, the Exercise Price to be in effect after such
record date shall be determined by multiplying the Exercise Price in effect
immediately prior to such record date by a fraction, the numerator of which
shall be the number of Common Shares outstanding on such record date, plus the
number of Common Shares that the aggregate offering price of the total number of
Common Shares and/or equivalent common shares so to be offered (and/or the
aggregate initial conversion, exchange or exercise price of the convertible or
exchangeable securities or rights so to be offered, including the price required
to be paid to purchase such convertible or exchangeable securities or rights so
to be offered) would purchase at such Market Price per Common Share, and the
denominator of which shall be the number of Common Shares outstanding on such
record date, plus the number of additional Common Shares and/or equivalent
common shares to be offered for subscription or purchase (or into which the
convertible or exchangeable securities are initially convertible, exchangeable
or exercisable).
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In case such subscription price may be paid by delivery of consideration, part
or all of which may be in a form other than cash, the value of such
consideration shall be as determined in good faith by the Board of Directors,
whose determination shall be described in a certificate filed with the Rights
Agent and shall be binding on the Rights Agent and the holders of the Rights.
Such adjustment shall be made successively whenever such a record date is
fixed, and in the event that such rights or warrants are not so issued, the
Exercise Price shall be adjusted to be the Exercise Price which would then be
in effect if such record date had not been fixed.
For purposes of this Agreement, the granting of the right to purchase Common
Shares (or equivalent common shares) (whether from treasury shares or
otherwise) pursuant to any dividend or interest reinvestment plan and/or any
Common Share purchase plan providing for the reinvestment of dividends or
interest payable on securities of the Corporation and/or the investment of
periodic optional payments and/or employee benefit, stock option or similar
plans (so long as such right to purchase is in no case evidenced by the
delivery of rights or warrants) shall not be deemed to constitute an issue of
rights, options or warrants by the Corporation; provided, however, that, in the
case of any dividend or interest reinvestment plan, the right to purchase
Common Shares (or equivalent common shares] is at a price per share of not less
than ninety percent (90%) of the current market price per share (determined
as provided in such plans) of the Common Shares.
(c) ADJUSTMENT TO EXERCISE PRICE UPON CORPORATE DISTRIBUTIONS. In case the
Corporation shall at anytime after the Record Time fix a record date for a
distribution to all holders of Common Shares (including any such distribution
made in connection with a merger, amalgamation, arrangement, plan, compromise
or reorganization in which the Corporation is the continuing or successor
corporation) of evidences of indebtedness, cash (other than a regular periodic
cash dividend or a regular periodic cash dividend paid in Common Shares, but
including any dividend payable in securities other than Common Shares), assets
or subscription rights, options or warrants (excluding those referred to in
Subsection 2.3(b) above), the Exercise Price to be in effect after such record
date shall be determined by multiplying the Exercise Price in effect
immediately prior to such record date by a fraction, the numerator of which
shall be the Market Price per Common Share on such record date, less the fair
market value (as determined in good faith by the Board of Directors, whose
determination shall be described in a statement filed with the Rights Agent) of
the portion of the cash, assets or evidences of indebtedness so to be
distributed or of such subscription rights, options or warrants applicable to a
Common Share and the denominator of which shall be such Market Price per Common
Share. Such adjustments shall be made successively whenever such a record date
is fixed, and in the event that such distribution is not so made, the Exercise
Price shall be adjusted to be the Exercise Price which would have been in
effect if such record date had not been fixed.
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(d) DE MINIMIS THRESHOLD FOR ADJUSTMENT TO EXERCISE PRICE. Notwithstanding
anything herein to the contrary, no adjustment in the Exercise Price shall be
required unless such adjustment would require an increase or decrease of at
least one percent (1%) in the Exercise Price; provided, however, that any
adjustments which by reason of this Subsection 2.3(d) are not required to be
made shall be carried forward and taken into account in any subsequent
adjustment. All calculations under this Section 2.3 shall be made to the
nearest cent or to the nearest one-hundredth of a Common Share or other share,
as the case may be. Notwithstanding the first sentence of this Subsection
2.3(d), any adjustment required by this Section 2.3 shall be made no later than
the earlier of (A) three (3) years from the date of the transaction which
mandates such adjustment or (B) the Expiration Time.
(e) CORPORATION MAY PROVIDE FOR ALTERNATE MEANS OF ADJUSTMENT. Subject to
the prior consent of the holders of Voting Shares or Rights obtained as set
forth in Subsections 5.4(b) or 5.4(c) hereof, as applicable, in the event the
Corporation shall at any time after the Record Time issue any shares of capital
stock (other than Common Shares), or rights or warrants to subscribe for or
purchase any such capital stock, or securities convertible into or exchangeable
for any such capital stock, in a transaction referred to in Clauses 2.3(a)(A)
or 2.3(a)(D) or Subsections 2.3(b) or 2.3(c) above, if the Board of Directors
acting in good faith determines that the adjustments contemplated by
Subsections 2.3(a), (b) and (c) above in connection with such transaction will
not appropriately protect the interests of the holders of Rights, the
Corporation shall be entitled to determine what other adjustments to the
Exercise Price, number of Rights and/or securities purchasable upon exercise of
Rights would be appropriate and, notwithstanding Subsections 2.3(a), (b) and
(c) above, such adjustments, rather than the adjustments contemplated by
Subsections 2.3(a), (b) and (c) above, shall be made. The Corporation and the
Rights Agent shall amend this Agreement as appropriate to provide for such
adjustments.
(f) ADJUSTMENT TO RIGHTS EXERCISABLE INTO SHARES OTHER THAN COMMON SHARES.
If as a result of an adjustment made pursuant to Section 3.1 hereof, the holder
of any Right thereafter exercised shall become entitled to receive any shares
other than Common Shares, thereafter the number of such other shares so
receivable upon exercise of any Right and the Exercise Price thereof shall be
subject to adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to the Common Shares
contained in Subsections 2.3(a), (b), (c), (d), (g), (h), (j), and (m) above
and below, as the case may be, and the provisions of this Agreement with
respect to the Common Shares shall apply on like terms to any such other
shares.
(g) RIGHTS TO EVIDENCE RIGHT TO PURCHASE COMMON SHARES AT ADJUSTED
EXERCISE PRICE. Each Right originally issued by the Corporation subsequent to
any adjustment made to the Exercise Price hereunder shall evidence the right to
purchase, at the adjusted Exercise Price, the number of Common Shares
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purchasable from time to time hereunder upon exercise of such Right, all
subject to further adjustment as provided herein.
(h) ADJUSTMENT TO NUMBER OF COMMON SHARES PURCHASABLE UPON ADJUSTMENT TO
EXERCISE PRICE. Unless the Corporation shall have exercised its election as
provided in Subsection 2.3(i) below, upon each adjustment of the Exercise Price
as a result of the calculations made in Subsections 2.3(b) and (c) above, each
Right outstanding immediately prior to the making of such adjustment shall
thereafter evidence the right to purchase, at the adjusted Exercise Price, that
number of Common Shares (calculated to the nearest one ten-thousandth) obtained
by (A} multiplying (x) the number of shares purchasable upon exercise of a
Right immediately prior to this adjustment by (y) the Exercise Price in effect
immediately prior to such adjustment of the Exercise Price, and (B) dividing
the product so obtained by the Exercise Price in effect immediately after such
adjustment of the Exercise Price.
(i) ELECTION TO ADJUST NUMBER OF RIGHTS UPON ADJUSTMENT TO EXERCISE
PRICE. The Corporation shall be entitled to elect on or after the date of any
adjustment of the Exercise Price to adjust the number of Rights, in lieu of any
adjustment in the number of Common Shares purchasable upon the exercise of a
Right. Each of the Rights outstanding after the adjustment in the number of
Rights shall be exercisable for the number of Common Shares for which a Right
was exercisable immediately prior to such adjustment. Each Right held of record
prior to such adjustment of the number of Rights shall become that number of
Rights (calculated to the nearest one ten-thousandth) obtained by dividing the
Exercise Price in effect immediately prior to adjustment of the Exercise Price
by the Exercise Price in effect immediately after adjustment of the Exercise
Price. The Corporation shall make a public announcement of its election to
adjust the number of Rights, indicating the record date for the adjustment,
and, if known at the time, the amount of the adjustment to be made. This record
date may be the date on which the Exercise Price is adjusted or any day
thereafter, but, if Rights Certificates have been issued, shall be at least ten
(10) days later than the date of the public announcement. If Rights
Certificates have been issued, upon each adjustment, of the number of Rights
pursuant to this Subsection 2.3(i), the Corporation shall, as promptly as
practicable, cause to be distributed to holders of record of Rights
Certificates on such record date Rights Certificates evidencing, subject to
Section 5.5 hereof, the additional Rights to which such holders shall be
entitled as a result of such adjustment, or, at the option of the Corporation,
shall cause to be distributed to such holders of record in substitution and
replacement for the Rights Certificates held by such holders prior to the date
of adjustment, and upon surrender thereof, new Rights Certificates evidencing
all the Rights to which such holders shall be entitled after such adjustment.
Rights Certificates so to be distributed shall be issued, executed and
countersigned in the manner provided for herein and may bear, at the option of
the Corporation, the adjusted Exercise Price and shall be registered in the
names of the holders of record of
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Rights Certificates on the record date for the adjustment specified in the
public announcement.
(j) RIGHTS CERTIFICATES MAY CONTAIN EXERCISE PRICE BEFORE ADJUSTMENT.
Irrespective of any adjustment or change in the Exercise Price or the number of
Common Shares issuable upon the exercise of the Rights, the Rights Certificates
theretofore and thereafter issued may continue to express the Exercise Price
per share and the number of shares which were expressed in the initial Rights
Certificates issued hereunder.
(k) CORPORATION MAY IN CERTAIN CASES DEFER ISSUES OF SECURITIES. In any
case in which this Section 2.3 shall require that an adjustment in the Exercise
Price be made effective as of a record date for a specified event, the
Corporation may elect to defer until the occurrence of such event the issuance
to the holder of any Right exercised after such record date the number of
Common Shares and other securities of the Corporation, if any, issuable upon
such exercise over and above the number of Common Shares and other securities
of the Corporation, if any, issuable upon such exercise on the basis of the
Exercise Price in effect prior to such adjustment; provided, however, that the
Corporation shall deliver to such holder an appropriate instrument evidencing
such holder's right to receive such additional shares (fractional or otherwise)
or securities upon the occurrence of the event requiring such adjustment.
(l) CORPORATION HAS DISCRETION TO REDUCE EXERCISE PRICE FOR TAX REASONS.
Notwithstanding anything in this Section 2.3 to the contrary, the Corporation
shall be entitled to make such reductions in the Exercise Price, in addition to
those adjustments expressly required by this Section 2.3, as and to the extent
that in their good faith judgment, the Board of Directors shall determine to be
advisable in order that any (A) consolidation or subdivision of the Common
Shares, (B) issuance of any Common Shares at less than the Market Price, (C)
issuance of securities convertible into or exchangeable for Common Shares, (D)
stock dividends or (E) issuance of rights, options or warrants, referred to in
this Section 2.3 hereafter made by the Corporation to holders of its Common
Shares, shall not be taxable to such shareholders.
2.4 DATE ON WHICH EXERCISE IS EFFECTIVE
Each person in whose name any certificate for Common Shares is issued upon
the exercise of Rights, shall for all purposes be deemed to have become the
holder of record of the Common Shares represented thereby on, and such
certificate shall be dated, the date upon which the Rights Certificate
evidencing such Rights was duly surrendered (together with a duly completed
Election to Exercise) and payment of the Exercise Price for such Rights (and
any applicable transfer taxes and other governmental charges payable by the
exercising holder hereunder) was made; provided, however, that if the date of
such surrender and payment is a date upon which the Common Share transfer
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books of the Corporation are closed, such person shall be deemed to have become
the record holder of such shares on, and such certificate shall be dated, the
next succeeding Business Day on which the Common Share transfer books of the
Corporation are open.
2.5 EXECUTION, AUTHENTICATION, DELIVERY AND
DATING OF RIGHTS CERTIFICATES
(a) The Rights Certificates shall be executed on behalf of the Corporation
by its President or any of its Vice-Presidents, together with its Secretary or
Assistant Secretary. The signature of any of these officers on the Rights
Certificates may be manual or facsimile. Rights Certificates bearing the manual
or facsimile signatures of individuals who were at any time the proper officers
of the Corporation shall bind the Corporation, notwithstanding that such
individuals or any of them have ceased to hold such offices prior to the
countersignature and delivery of such Rights Certificates.
(b) Promptly after the Corporation learns of the Separation Time, the
Corporation will notify the Rights Agent of such Separation Time and will
deliver Rights Certificates executed by the Corporation to the Rights Agent for
countersignature, and the Rights Agent shall manually countersign and send such
Rights Certificates to the holders of the Rights pursuant to Subsection 2.2(c)
hereof. No Rights Certificate shall be valid for any purpose until
countersigned by the Rights Agent as aforesaid.
(c) Each Rights Certificate shall be dated the date of countersignature
thereof.
2.6 REGISTRATION, REGISTRATION OF TRANSFER AND EXCHANGE
(a) The Corporation will cause to be kept a register (the "Rights
Register") in which, subject to such reasonable regulations as it may
prescribe, the Corporation will provide for the registration and transfer of
Rights. The Rights Agent is hereby appointed "Rights Registrar" for the purpose
of maintaining the Rights Register for the Corporation and registering Rights
and transfers of Rights as herein provided. In the event that the Rights Agent
shall cease to be the Rights Registrar, the Rights Agent will have the right to
examine the Rights Register at all reasonable times.
After the Separation Time and prior to the Expiration Time, upon
surrender for registration of transfer or exchange of any Rights Certificate
and subject to the provisions of Subsection 2.6(c) below and the other
provisions of this Agreement, the Corporation will execute and the Rights Agent
will manually countersign and deliver, in the name of the holder or the
designated transferee or transferees as required pursuant to the holder's
instructions, one or more new Rights Certificates evidencing the same aggregate
number of Rights as did the Rights Certificates so surrendered.
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(b) All Rights issued upon any registration of transfer or exchange of
Rights Certificates shall be the valid obligations of the Corporation, and such
Rights shall be entitled to the same benefits under this Agreement as the
Rights surrendered upon such registration of transfer or exchange.
(c) Every Rights Certificate surrendered for registration of transfer or
exchange shall be duly endorsed, or be accompanied by a written instrument of
transfer in form satisfactory to the Corporation or the Rights Agent, as the
case may be, duly executed by the holder thereof or such holder's attorney duly
authorized in writing, As a condition to the issuance of any new Rights
Certificate under this Section 2.6, the Corporation or the Rights Agent may
require the payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in relation thereto and the Corporation may require
payment of a sum sufficient to cover any other expenses (including the fees and
expenses of the Rights Agent) in connection therewith.
2.7 Mutilated, Destroyed, Lost and Stolen Right Certificates
(a) If any mutilated Rights Certificate is surrendered to the Rights Agent
prior to the Expiration Time, the Corporation shall execute and the Rights
Agent shall manually countersign and deliver in exchange therefor a new Rights
Certificate evidencing the same number of Rights as did the Rights Certificate
so surrendered.
(b) If there shall be delivered to the Corporation and the Rights Agent
prior to the Expiration Time (i) evidence to their reasonable satisfaction of
the destruction, loss or theft of any Rights Certificate, and (ii) such
indemnity or other security as may be required by them to save each of them and
any of their agents harmless, then, in the absence of notice to the Corporation
or the Rights Agent that such Rights Certificate has been acquired by a bona
fide purchaser, the Corporation shall execute and upon its request the Rights
Agent shall countersign and deliver, in lieu of any such destroyed, lost or
stolen Rights Certificate, a new Rights Certificate evidencing the same number
of Rights as did the Rights Certificate so destroyed, lost or stolen.
(c) As a condition to the issuance of any new Rights Certificate under this
Section 2.7, the Corporation or the Rights Agent may require the payment of a
sum sufficient to cover any tax or other governmental charge that may be
imposed in relation thereto and the Corporation may require payment of a sum
sufficient to cover any other expenses (including the fees and expenses of the
Rights Agent) in connection therewith.
(d) Every new Rights Certificate issued pursuant to this Section 2.7 in
lieu of any destroyed, lost or stolen Rights Certificate shall evidence an
original additional contractual obligation of the Corporation, whether or not
the destroyed lost or stolen Rights Certificate shall be at any time
enforceable by anyone, and the holder thereof shall be entitled to all the
benefits of this
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Agreement equally and proportionately with any and all other holders of Rights
duly issued by the Corporation.
2.8 PERSONS DEEMED OWNERS
Prior to due presentment of a Rights Certificate (or, prior to the
Separation Time, the associated Common Share certificate) for registration of
transfer, the Corporation, the Rights Agent and any agent of the Corporation or
the Rights Agent shall be entitled to deem and treat the person in whose name a
Rights Certificate (or, prior to the Separation Time, the associated Common
Share certificate) is registered as the absolute owner thereof and of the
Rights evidenced thereby for all purposes whatsoever. As used in this
Agreement, unless the context otherwise requires, the term "holder" of any
Rights shall mean the registered holder of such Rights (or, prior to the
Separation Time, the associated Common Shares).
2.9 DELIVERY AND CANCELLATION OF RIGHTS CERTIFICATES
All Rights Certificates surrendered upon exercise or for redemption,
registration of transfer or exchange shall, if surrendered to any person other
than the Rights Agent, be delivered to the Rights Agent and, in any case, shall
be promptly cancelled by the Rights Agent. The Corporation may at any time
deliver to the Rights Agent for cancellation any Rights Certificates previously
countersigned and delivered hereunder which the Corporation may have acquired
in any manner whatsoever, and all Rights Certificates so delivered shall be
promptly cancelled by the Rights Agent. No Rights Certificate shall be
countersigned in lieu of or in exchange for any Rights Certificates cancelled
as provided in this Section 2.9 except as expressly permitted by this
Agreement. The Rights Agent shall destroy all cancelled Rights Certificates
and deliver a certificate of destruction to the Corporation.
2.10 AGREEMENT OF RIGHTS HOLDERS
Every holder of Rights, by accepting the same, consents and agrees with
the Corporation and the Rights Agent and with every other holder of Rights:
(i) to be bound by and subject to the provisions of this Agreement, as
amended or supplemented from time to time in accordance with the terms
hereof, in respect of all Rights held;
(ii) that prior to the Separation Time each Right will be transferable
only together with, and will be transferred by a transfer of, the Common
Share certificate representing such Right;
(iii) that after the Separation Time, the Rights Certificates will be
transferable only on the Rights Register as provided herein;
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(iv) that prior to due presentment of a Rights Certificate (or, prior to
the Separation Time, the associated Common Share certificate} for
registration of transfer, the Corporation, the Rights Agent and any agent
of the Corporation or the Rights Agent shall be entitled to deem and treat
the person in whose name the Rights Certificate (or prior to the Separation
Time, the associated Common Share certificate) is registered as the
absolute owner thereof and of the Rights evidenced thereby (notwithstanding
any notations of ownership or writing on such Rights Certificate or the
associated Common Share certificate made by anyone other than the
Corporation or the Rights Agent) for all purposes whatsoever, and neither
the Corporation nor the Rights Agent shall be affected by any notice to the
contrary;
(v) that such holder of Rights has waived his right to receive any
fractional Rights or any fractional shares upon exercise of Right; and
(vi) that without the approval of any holder of Rights and upon the sole
authority of the Board of Directors acting in good faith this Agreement may
be supplemented or amended from time to time pursuant to and as provided
herein.
2.11 RIGHTS CERTIFICATE HOLDER NOT DEEMED A SHAREHOLDER
No holder, as such, of any Rights or Rights Certificate shall be entitled
to vote, receive dividends or be deemed for any purpose whatsoever the holder
of any Common Share or any other share or security of the Corporation which may
at any time be issuable on the exercise of the Rights represented thereby, nor
shall anything contained herein or in any Rights Certificate be construed or
deemed to confer upon the holder of any Right or Rights Certificate, as such,
any of the rights, titles, benefits or privileges of a holder of Common Shares
or any other shares or securities of the Corporation of any right to vote at
any meeting of shareholders of the Corporation whether for the election of
directors or otherwise or upon any matter submitted to holders of shares of the
Corporation at any meeting thereof, or to give or withhold consent to any
action of the Corporation, or to receive notice of any meeting or other action
affecting any holder of Common Shares or any other shares or securities of the
Corporation except as expressly provided herein, or to receive dividends,
distributions or subscription rights, or otherwise, until the Right or Rights
evidenced by Rights Certificates shall have been duly exercised in accordance
with the terms and provisions hereof.
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ARTICLE 3 - ADJUSTMENTS TO THE RIGHTS
IN THE EVENT OF CERTAIN TRANSACTIONS
3.1 Flip-in Event
(a) Subject to Subsection 3.1 (b) below, and Subsections 5.1 (b), 5.1 (c)
and 5.1 (d) hereof, in the event that prior to the Expiration Time a Flip-in
Event shall occur, the Corporation shall take such action as may be necessary to
ensure and provide within eight (8) Business Days of such occurrence, or such
longer period as may be required to satisfy all applicable requirements of the
Securities Act (Ontario), and the securities legislation of each other province
of Canada and, if applicable, of the United States of America that, except as
provided below, each Right shall thereafter constitute the right to purchase
from the Corporation upon exercise thereof in accordance with the terms hereof
that number of Common Shares of the Corporation having an aggregate Market Price
on the date of the consummation or occurrence of such Flip-in Event equal to
twice the Exercise Price for an amount in cash equal to the Exercise Price
(such Right to be appropriately adjusted in a manner analogous to the applicable
adjustment provided for in Section 2.3 hereof in the event that after such date
of consummation or occurrencte an event of a type analogous to any of the events
described in Section 2.3 hereof shall have occurred with respect to such Common
Shares).
(b) Notwithstanding anything in this Agreement to the contrary, upon the
occurrence of any Flip-in Event, any Rights that are Beneficially Owned by (i)
an Acquiring Person or any Affiliate or Associate of an Acquiring Person or any
Person acting jointly or in concert with an Acquiring Person or any Affiliate or
Associate of such Acquiring Person, or any Affiliate or Associate of such Person
so acting jointly or in concert, or (ii) a transferee or other successor in
title of Rights, directly or indirectly, of an Acquiring Person (or of any
Affiliate or Associate of an Acquiring Person) or of any Person acting jointly
or in concert with an Acquiring Person or any Associate or Affiliate of an
Acquiring Person who becomes a transferee or successor in title concurrently
with or subsequent to the Acquiring Person becoming such, shall become null and
void without any further action, and any holder of such Rights (including
transferees or successors in title) shall not have any rights whatsoever to
exercise such Rights under any provision of this Agreement and shall not have
thereafter any other rights whatsoever with respect to such Rights, whether
under any provision of this Agreement or otherwise.
(c) In the event that there shall not be sufficient Common Shares
authorized but unissued to permit the exercise in full of the Rights in
accordance with this Section 3.1, the Corporation shall take all such action as
may be necessary and within its power to authorize additional Common Shares for
issuance upon exercise of Rights.
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ARTICLE 4 - THE RIGHTS AGENT
4.1 General
(a) The Corporation hereby appoints the Rights Agent to act as agent for
the Corporation in accordance with the terms and conditions hereof, and the
Rights Agent hereby accepts such appointment. The Corporation may from time to
time appoint such co-Rights Agents as it may deem necessary or desirable. In the
event the Corporation appoints one or more co-Rights Agents, the respective
duties of the Rights Agents and co-Rights Agents shall be as the Corporation may
determine. The Corporation agrees to pay to the Rights Agent reasonable
compensation for all services rendered by it hereunder and, from time to time,
on demand of the Rights Agent, its reasonable expenses and other disbursements
incurred in the administration and execution of this Agreement and the exercise
and performance of its duties hereunder. The Corporation also agrees to
indemnify the Rights Agent for, and to hold it harmless against, any loss,
liability, or expense incurred that is not the result of negligence, bad faith
or wilful misconduct on the part of any one or all of the Rights Agent, its
officers, employees or other representatives, for anything done or omitted by
the Rights Agent in connection with the acceptance and administration of this
Agreement, including the costs and expenses of defending against any claim of
liability, which right to indemnification will survive the termination of this
Agreement.
(b) The Rights Agent shall be protected and shall incur no liability for
or in respect of any action taken, suffered or omitted by it in connection with
its administration of this Agreement in reliance upon any certificate for Common
Shares or any Rights Certificate or certificate for other securities of the
Corporation, instrument of assignment or transfer, power of attorney,
endorsement, affidavit, letter, notice, direction, consent, certificate,
statement, or other paper or document believed by it to be genuine and to be
signed, executed and, where necessary, verified or acknowledged, by the proper
Person or Persons.
4.2 Merger or Amalgamation or Change of Name of Rights Agent
(a) Any corporation into which the Rights Agent or any successor Rights
Agent may be merged or amalgamated or with which it may be consolidated, or any
corporation resulting from any merger, amalgamation, statutory arrangement or
consolidation to which the Rights Agent or any successor Rights Agent is a
party, or any corporation succeeding to the shareholder or stockholder services
business of the Rights Agent or any successor Rights Agent, will be the
successor to the Rights Agent under this Agreement without the execution or
filing of any paper or any further act on the part of any of the parties hereto,
provided that such corporation would be eligible for appointment as a successor
Rights Agent under the provisions of Section 4.4 hereof. In case at the time
such successor Rights Agent succeeds
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to the agency created by this Agreement any of the Rights Certificates have been
countersigned but not delivered, any such successor Rights Agent may adopt the
countersignature of the predecessor Rights Agent and deliver such Rights
Certificates so countersigned; and in case at that time any of the Rights
Certificates have not been countersigned, any successor Rights Agent may
countersign such Rights Certificates either in the name of the predecessor
Rights Agent or in the name of the successor Rights Agent; and in all such cases
such Rights Certificates will have the full force provided in the Rights
Certificates and in this Agreement.
(b) In case at any time the name of the Rights Agent is changed and at
such time any of the Rights Certificates shall have been countersigned but not
delivered, the Rights Agent may adopt the countersignature under its prior name
and deliver Rights Certificates so countersigned; and in case at that time any
of the Rights Certificates shall not have been countersigned, the Rights Agent
may countersign such Rights Certificates either in its prior name or in its
changed name; and in all such cases such Rights Certificates shall have the full
force provided in the Rights Certificates and in this Agreement.
4.3 Duties of Rights Agent
The Rights Agent undertakes the duties and obligations imposed by this
Agreement upon the following terms and conditions, to all of which the
Corporation and the holders of Rights Certificates, by their acceptance thereof,
shall be bound.
(a) The Rights Agent may consult with legal counsel (who may be legal
counsel for the Corporation) and the opinion of such counsel will be full and
complete authorization and protection to the Rights Agent as to any action taken
or omitted to be taken by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this Agreement the
Rights Agent deems it necessary or desirable that any fact or matter be proved
or established by the Corporation prior to taking or suffering any action
hereunder, such fact or matter (unless other evidence in respect thereof be
herein specifically prescribed) may be deemed to be conclusively proven and
established by a certificate signed by a person believed by the Rights Agent to
be the Chairman of the Board, the President or any Vice-President, the Treasurer
or the Secretary of the Corporation and delivered to the Rights Agent; and such
certificate will be full authorization to the Rights Agent for any action taken
or suffered in good faith by it under the provisions of this Agreement in
reliance upon such certificate.
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(c) The Rights Agent will be liable hereunder only for events which are the
result of its own negligence, bad faith or wilful misconduct and that of its
officers, employees and other representatives.
(d) The Rights Agent will not be liable for or by reason of any of the
statements of fact or recitals contained in this Agreement or in the
certificates for Common Shares or the Rights Certificates (except its
countersignature thereof) or be required to verify the same, but all such
statements and recitals are and will be deemed to have been made by the
Corporation only.
(e) The Rights Agent will not be under any responsibility in respect of the
validity of this Agreement or the execution and delivery hereof (except the due
authorization, execution and delivery hereof by the Rights Agent) or in respect
of the validity or execution of any Common Share certificate or Rights
Certificate (except its countersignature thereof); nor will it be responsible
for any breach by the Corporation of any covenant or condition contained in
this Agreement or in any Rights Certificate; nor will it be responsible for any
change in the exercisability of the Rights (including the Rights becoming void
pursuant to Subsection 3.1 (b) hereof) or any adjustment required under the
provisions of Section 2.3 hereof or responsible for the manner, method or
amount of any such adjustment or the ascertaining of the existence of facts
that would require any such adjustment (except with respect to the exercise of
Rights after receipt of the certificate contemplated by Section 2.3 hereof
describing any such adjustment); nor will it by any act hereunder be deemed to
make any representation or warranty as to the authorization of any Common
Shares to be issued pursuant to this Agreement or any Rights or as to whether
any Common Shares will, when issued, be duly and validly authorized, executed,
issued and delivered or fully paid and non-assessable.
(f) The Corporation agrees that it will perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged, and delivered all
such further and other acts, instruments and assurances as may reasonably be
required by the Rights Agent for the carrying out or performing by the Rights
Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from any
person believed by the Rights Agent to be the Chairman of the Board, President,
any Vice-President, Treasurer or any Assistant Treasurer or the Secretary or
any Assistant Secretary of the Corporation and to apply to such persons for
advice or instructions in connection with its duties, and it shall not be
liable for any action taken qr suffered by it in good faith in accordance with
instructions of any such person.
<PAGE> 35
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(h) The Rights Agent and any shareholder or stockholder, director, officer
or employee of the Rights Agent may buy, sell or deal in Common Shares,
Rights or other securities of the Corporation or become pecuniarily
interested in any transaction in which the Corporation may be interested or
contract with or lend money to the Corporation or otherwise act as fully and
freely as though it were not Rights Agent under this Agreement. Nothing
herein shall preclude the Rights Agent from acting in any other capacity for
the Corporation or for any other legal entity.
4.4 Change of Rights Agent
The Rights Agent may resign and be discharged from its duties under this
Agreement upon ninety (90) days' notice (or such lesser notice as is acceptable
to the Corporation) in writing mailed to the Corporation and to each transfer
agent of Voting Shares of the Corporation by registered or certified mail, and
to the holders of the Rights in accordance with Section 5.8 hereof. The
Corporation may remove the Rights Agent upon thirty (30) days' notice in
writing, mailed to the Rights Agent and to each transfer agent of the Voting
Shares of the Corporation by registered or certified mail and to the holders of
the Rights in accordance with Section 5.8 hereof. If the Rights Agent should
resign or be removed or otherwise become incapable of acting, the Corporation
will appoint a successor to the Rights Agent. If the Corporation fails to
make such appointment within a period of ninety (90) days after such removal or
after it has been notified in writing of such resignation or incapacity by the
resigning or incapacitated Rights Agent or by the holder of any Rights (which
holder shall, with such notice, submit such holder's Rights Certificate for
inspection by the Corporation), then the holder of any Rights may apply to any
court of competent jurisdiction for the appointment of a new Rights Agent. Any
successor Rights Agent, whether appointed by the Corporation or by such a
court, shall be a corporation incorporated under the laws of Canada or a
province thereof authorized to carry on the business of a trust company in
Canada. After appointment, the successor Rights Agent will be vested with the
same powers, rights, duties and responsibilities as if it had been originally
named as Rights Agent without further act or deed; but the predecessor Rights
Agent, upon receiving from the Corporation payment in full of all amounts
outstanding under this Agreement, shall deliver and transfer to the successor
Rights Agent any property at the time held by it hereunder, and execute and
deliver any further assurance, conveyance, act or deed necessary for the
purpose. Not later than the effective date of any such appointment, the
Corporation will file notice thereof in writing with the predecessor Rights
Agent and each transfer agent of the Voting Shares of the Corporation, and mail
a notice thereof in writing to the holders of the Rights. The cost of giving
any notice required under this Section 4.4 shall be borne solely by the
Corporation. Failure to give any notice provided for in this Section 4.4
however, or any defect therein, shall not affect the legality or validity of
the resignation or
<PAGE> 36
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removal of the Rights Agent or the appointment of the successor Rights Agent,
as the case may be.
ARTICLE 3 - MISCELLANEOUS
5.1 Redemption and Waiver
(a) Subject to the prior consent of the holders of Voting Shares or Rights
obtained as set forth in Subsections 5.4(b) or 5.4(c) hereof, as applicable,
the Board of Directors acting in good faith may, at any time prior to the
occurrence of a Flip-in Event, elect to redeem all but not less than all of the
then outstanding Rights at a redemption price of $0.0001 per Right
appropriately adjusted in a manner analogous to the applicable adjustment
provided for in Section 2.3 hereof in the event that an event of the type
described in Section 2.3 hereof shall have occurred (such redemption price
being herein referred to as the "Redemption Price").
(b) The Board of Directors acting in good faith, may, prior to the
occurrence of a Flip-in Event, and upon prior written notice delivered to the
Rights Agent, determine to waive the application of Section 3.1 hereof to a
Flip-in Event that may occur by reason of Take-over Bid made by means of a
take-over bid circular to all holders of Voting Shares (which for greater
certainty shall not include the circumstances described in Subsection 5.1(h)
below); provided that if the Board of Directors waives the application of
Section 3.1 hereof to a particular Flip-in Event pursuant to this Subsection
5.1 (b), the Board of Directors shall be deemed to have waived the application
of Section 3.1 hereof to any other Flip-in Event occurring by reason of any
Take-over Bid made by means of a take-over bid circular to all holders of
record of Voting Shares prior to the expiry of any Take-over Bid in respect of
which a waiver is, or is deemed to have been granted, pursuant to this
Subsection 5.1(b).
(c) The Board of Directors may prior to the close of business on the tenth
(10th) day following the Stock Acquisition Date determine, upon prior written
notice delivered to the Rights Agent, to waive or to agree to waive the
application of Section 3.1 hereof to a Flip-in Event, provided that both of the
following conditions are satisfied:
(i) the Board of Directors has determined that a Person became an
Acquiring Person by inadvertence and without any intention to become, or
knowledge that Person would become, an Acquiring Person; and
(ii) such Acquiring Person has reduced its Beneficial Ownership of Voting
Shares (or has entered into a contractual arrangement with the Corporation,
acceptable to the Board of Directors, to do so within thirty (30) days of the
date on which such contractual arrangement is entered into) such that at the
time the waiver
<PAGE> 37
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becomes effective pursuant to this Subsection 5.1 (c) it is no longer an
Acquiring Person;
and in the event of such a waiver, for the purposes of this Agreement, the
Flip-in Event shall be deemed never to have occurred.
(d) Where a Person acquires pursuant to a Permitted Bid, a Competing Bid
or an Exempt Acquisition under Subsection 5.1 (b) above, outstanding Voting
Shares, other than Voting Shares Beneficially Owned by such Person at the date
of the Permitted Rid, the Competing Bid or the Exempt Acquisition under
Subsection 5.1 (b) above, then the Corporation shall immediately upon the
consummation of such acquisition redeem the Rights at the Redemption Price.
(e) If the Corporation is obligated under Subsection 5.1 (d) above to
redeem the Rights, or if the Board of Directors elects under Subsection 5.1 (a)
above or 5.1 (g) below to redeem the Rights, the right to exercise the Rights
will thereupon, without further action and without notice, terminate and each
Right will after redemption be null and void and the only right thereafter of
the holders of Rights shall be to receive the Redemption Price.
(f) Within ten (10) days after the Corporation is obligated to under
Subsection 5.1 (d) above to redeem the Rights, or the Board of Directors elects
under Subsection 5.1 (a) above or 5.1 (g) below to redeem the Rights, the
Corporation shall give notice of redemption to the holders of the then
outstanding Rights by mailing such notice to all such holders at their last
address as they appear upon the Rights Register or, prior to the Separation
Time, on the registry books of the Transfer Agent for the Common Shares. Any
notice which is mailed in the manner herein provided shall be deemed given,
whether or not the holder receives the notice. Each such notice of redemption
will state the method by which the payment of the Redemption Price will be
made. The Corporation may not redeem, acquire or purchase for value any Rights
at any time in any manner other than that specifically set forth in this
Section 5.1 and other than in connection with the purchase of Common Shares
prior to the Separation Time.
(g) Where a Take-over Bid that is not a Permitted Bid Acquisition is
withdrawn or otherwise terminated after the Separation Time has occurred and
prior to the occurrence of a Flip-in Event, the Board of Directors may elect to
redeem all the outstanding Rights at the Redemption Price.
(h) Upon the Rights being redeemed pursuant to Subsection 5.1 (g) above,
all the provisions of this Agreement shall continue to apply as if the
Separation Time had not occurred and Rights Certificates representing the
number of Rights held by each holder of record of Common Shares as of the
Separation Time had not been mailed to each such holder and for all purposes of
this Agreement the Separation Time shall be deemed not to have occurred.
<PAGE> 38
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5.2 Expiration
No person shall have any rights whatsoever pursuant to or arising out of
this Agreement or in respect of any Right after the Expiration Time, except the
Rights Agent as specified in Subsection 4.1 (a) hereof.
5.3 Issuance of New Right Certificates
Notwithstanding any of the provisions of this Agreement or of the Rights
to the contrary, the Corporation may, at its option, issue new Rights
Certificates evidencing Rights in such form as may be approved by its Board of
Directors to reflect any adjustment or change in the number or kind or class of
shares purchasable upon exercise of Rights made in accordance with the
provisions of this Agreement.
5.4 Supplements and Amendments
(a) The Corporation may prior to the 1995 Annual Meeting of Shareholders of
the Corporation, supplement or amend this Agreement without the approval of any
holder of Rights or Voting Shares or Debentures in order to make any changes
which the Board of Directors may deem necessary or desirable. Thereafter, the
Corporation may from time to time supplement or amend this Agreement without
the approval of any holders of Rights or Voting Shares or Debentures to correct
any clerical or typographical error or to maintain the validity of the
Agreement as a result of a change in any applicable legislation or regulations
thereunder.
Notwithstanding anything in this Section 5.4 to the contrary, no
supplement or amendment shall be made to the provisions of Article 4 hereof
except with the written concurrence of the Rights Agent to such supplement or
amendment.
(b) Subject to Subsection 5.4(a) above, the Corporation may, with the
prior consent of the holders of the Voting Shares obtained as set forth below,
at any time prior to the Separation Time amend, vary or rescind any of the
provisions of this Agreement and the Rights (whether or not such action would
materially adversely affect the interests of the holders of Rights generally).
Such consent shall be deemed to have been given if provided by the holders of
Voting Shares at a meeting of the holders of Voting Shares, which meeting shall
be called and held in compliance with applicable laws and regulatory
requirements and the requirements in the articles and by-laws of the
Corporation. Subject to compliance with any requirements imposed by the
foregoing, consent shall be given if the proposed amendment, variation or
revision is approved by the affirmative vote of a majority of the votes cast by
all holders of Voting Shares (other than any holder of Voting Shares who is an
offeror pursuant to a Take-over Bid that is not a Permitted Bid or, Competing
<PAGE> 39
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Bid with respect to all Voting Shares Beneficially Owned by such Person),
represented in person or by proxy at the meeting.
(c) The Corporation may, with the prior consent of the holders of Rights,
at any time after the Separation Time and before the Expiration Time, amend,
vary or rescind any of the provisions of this Agreement and the Rights (whether
or not such action would materially adversely affect the interests of the
holders of Rights generally).
(d) Any approval of the holders of Rights shall be deemed to have been
given if the action requiring such approval is authorized by the affirmative
votes of the holders of Rights present or represented at and entitled to be
voted at a meeting of the holders Rights and representing a majority of the
votes cast in respect thereof. For the purposes hereof, each outstanding Right
(other than Rights which are void pursuant to the provisions hereof) shall be
entitled to one vote, and the procedures for the calling, holding and conduct
of the meeting shall be those, as nearly as may be, which are provided in the
Corporation's by-laws and the Business Corporations Act (Ontario) with respect
to a meeting of shareholders of the Corporation.
(e) Any supplements or amendments made by the Corporation to this
Agreement pursuant to Subsection 5.4(a) above which are required to maintain
the validity of this Agreement as a result of any change in any applicable
legislation or regulations thereunder shall:
(i) if made before the Separation Time, be submitted to the shareholders
of the Corporation at the next meeting of shareholders and the shareholders
may, by the majority referred to in Subsection 5.4(b) above confirm or reject
such amendment;
(ii) if made after the Separation Time, be submitted to the holders of
Rights at a meeting to be called for on a date not later than immediately
following the next meeting of shareholders of the Corporation and the holders
of Rights may, by resolution passed by the majority referred to in Subsection
5.4(d) above confirm or reject such amendment.
A supplement or amendment shall be effective from the date of the
resolution of the Board of Directors adopting such supplement or amendment
until it is confirmed or rejected or until it ceases to be effective (as
described in the next sentence) and, where such supplement or amendment is
confirmed, it continues in effect in the form so confirmed. If such supplement
or amendment is rejected by the shareholders or the holders of Rights or is not
submitted to the shareholders or holders of rights as required, then such
supplement or amendment shall cease to be effective from and after the
<PAGE> 40
-40-
termination of the meeting at which it was rejected or to which it should have
been but was not submitted or from and after the date of the meeting of holders
of Rights that should have been but was not held, and no subsequent resolution
of the Board of Directors to amend, vary or delete any provision of this
Agreement to substantially the same effect shall be effective until confirmed by
the shareholders or holders of Rights, as the case may be.
5.5 Fractional Rights and Fractional Shares
(a) The Corporation shall not be required to issue fractions of Rights or
to distribute Rights Certificates which evidence fractional Rights. Any such
fractional Right shall be null and void and the Corporation will not have any
obligation or liability in respect thereof.
(b) The Corporation shall not be required to issue fractions of Common
Shares or other securities upon exercise of the Rights or to distribute
certificates which evidence fractional Common Shares or other securities. In
lieu of issuing fractional Common Shares or other securities, the Corporation
shall pay to the registered holders of Rights Certificates at the time such
Rights are exercised as herein provided, an amount in cash equal to the same
fraction of the Market Price of one Common Share.
5.6 Rights of Action
Subject to the terms of this Agreement, all rights of action in respect of
this Agreement, other than rights of action vested solely in the Rights Agent,
are vested in the respective registered holders of the Rights; and any
registered holder of any Rights, without the consent of the Rights Agent or of
the registered holder of any other Rights, may, on such holder's own behalf and
for such holder's own benefit and the benefit of other holders of Rights
enforce, and may institute and maintain any suit, action or proceeding against
the Corporation to enforce such holder's right to exercise such holder's Rights
in the manner provided in such holder's Rights Certificate and in this
Agreement. Without limiting the foregoing or any remedies available to the
holders of Rights, it is specifically acknowledged that the holders of Rights
would not have an adequate remedy at law for any breach of this Agreement and
will be entitled to specific performance of the obligations under, and
injunctive relief against actual or threatened violations of the obligations of
any Person subject to this Agreement.
5.7 Notice of Proposed Actions
In case the Corporation shall propose after the Separation Time and prior
to the Expiration Time to effect the liquidation, dissolution or winding up of
the Corporation or the sale of all or substantially all of the Corporation's
assets, then, in each such case, the Corporation shall give to each holder of a
Right, in accordance with Section 5.8 hereof, a notice of such proposed action,
<PAGE> 41
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which shall specify the date on which such liquidation, dissolution, winding
up, or sale is to take place, and such notice shall be so given at least twenty
(20) Business Days prior to the date of taking of such proposed action.
5.8 Notices
Notices or demands authorized or required by this Agreement to be given
or made by the Rights Agent or by the holder of any Rights to or on the
Corporation shall be sufficiently given or made if delivered or sent by first-
class mail, postage prepaid, addressed (until another address is filed in
writing with the Rights Agent) as follows:
Philip Environmental Inc.
2 First Canadian Place
Suite 1720
P.O. Box 366
Toronto, Ontario
M5X lE2
Attention: President
Any notice or demand authorized or required by this Agreement to be given
or made by the Corporation or by the holder of any Rights to or on the Rights
Agent shall be sufficiently given or made if delivered or sent by first-class
mail, postage prepaid, addressed (until another address is filed in writing
with the Corporation) as follows:
Montreal Trust Company of Canada
151 Front Street West
8th Floor
Toronto, Ontario
M5J 2Nl
Attention: Manager, Client Services Department
Notices or demands authorized or required by this Agreement to be given
or made by the Corporation or the Rights Agent to or on the holder of any
Rights shall be sufficiently given or made if delivered or sent by first-class
mail, postage prepaid, addressed to such holder at the address of such holder
as it appears upon the Rights Register or, prior to the Separation Time, on the
registry books of the transfer agent for the Common Shares. Any notice which is
mailed in the manner herein provided shall be deemed given, whether or not the
holder receives the notice.
<PAGE> 42
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5.9 SUCCESSORS
All the covenants and provisions of this Agreement by or for the benefit
of the Corporation or the Rights Agent shall bind and enure to the benefit of
their respective successors and assigns hereunder.
5.10 BENEFITS OF THIS AGREEMENT
Nothing in this Agreement shall be construed to give to any Person other
than the Corporation, the Rights Agent and the holders of the Rights any legal
or equitable right, remedy or claim under this Agreement; but this Agreement
shall be for the sole and exclusive benefit of the Corporation, the Rights
Agent and the holders of the Rights,
5.11 GOVERNING LAW
This Agreement and each Right issued hereunder shall be deemed to be a
contract made under the laws of the Province of Ontario and for all purposes
shall be governed by and construed in accordance with the laws of such
province.
5.12 SEVERABILITY
If any Section, Subsection, Clause, Subclause, term or provision hereof
or the application thereof to any circumstances or any right hereunder shall,
in any jurisdiction and to any extent, be invalid or unenforceable, such
Section, Subsection, Clause, Subclause, term or provision or such right shall
be ineffective only in such jurisdiction and to the extent of such invalidity
or unenforceability in such jurisdiction without invalidating or rendering
unenforceable or ineffective the remaining Sections, Subsections, Clauses,
Subclauses, terms and provisions hereof or rights hereunder in such
jurisdiction or the application of such Section, Subsection, Clause, Subclause,
term or provision or rights hereunder in any other jurisdiction or to
circumstances other than those as to which it is specifically held invalid or
unenforceable.
5.13 EFFECTIVE DATE
This Agreement is effective and in full force and effect in accordance
with its terms as of and from l2:OO p.m. (Toronto time) on April 11, 1995 (the
"Effective Date"). If this Agreement is not confirmed by a majority of the
votes cast by the holders of Common Shares of the Corporation represented in
person or by proxy at the 1995 Annual Meeting of Shareholders of the
Corporation who vote in respect of confirmation of this Agreement at such
meeting, then this Agreement and any then outstanding Rights shall be of no
further force and effect from the date of the 1995 Annual Meeting of
Shareholders of the Corporation.
<PAGE> 43
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5.14 DETERMINATIONS AND ACTIONS BY THE BOARD OF DIRECTORS
The Board of Directors shall have the exclusive power and authority to
administer this Agreement and to exercise all rights and powers specifically
granted to the Board of Directors or to the Corporation as may be necessary or
advisable in the administration of this Agreement.
All such actions, calculations and determinations (including all
omissions with respect to the foregoing) which are done or made by the Board of
Directors, in good faith, shall not subject the Board of Directors or any
director of the Corporation to any liability to the holders of the Rights.
5.15 RIGHTS OF BOARD, CORPORATION AND OFFEROR
Without limiting the generality of the foregoing, nothing contained herein
shall be construed to suggest or imply that the Board of Directors shall not be
entitled to recommend that holders of Voting Shares reject or accept any
Take-over Bid or take any other action (including, without limitation, the
commencement, prosecution, defence or settlement of any litigation and the
submission of additional or alternative Take-over Bids or other proposals to
the Shareholders of the Corporation) with respect to any Take-over Bid or
otherwise that the Board of Directors believes is necessary or appropriate in
the exercise of its fiduciary duties.
5.16 REGULATORY APPROVALS
Any obligation of the Corporation or action or event contemplated by this
Agreement shall be subject to the prior receipt of any requisite approval or
consent from any governmental or regulatory authority including, without
limiting the generality of the foregoing, any necessary approval of any
securities regulatory authority or stock exchange.
5.17 DECLARATION AS TO NON-CANADIAN HOLDERS
If in the opinion of the Board of Directors (who may rely upon the advice
of counsel) any action or event contemplated by this Agreement would require
compliance with the securities laws or comparable legislation of a jurisdiction
outside Canada, the Board of Directors acting in good faith may take such
actions as it may deem appropriate to ensure such compliance. In no event shall
the Corporation or the Rights Agent be required to issue or deliver Rights or
securities issuable on exercise of Rights to Persons who are citizens,
residents or nationals of any jurisdiction other than Canada or the United
States in which such issue or delivery would be unlawful without registration
of the relevant Persons or securities for such purposes.
<PAGE> 44
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5.18 TIME OF THE ESSENCE
Time shall be of the essence in this Agreement.
5.19 EXECUTION IN COUNTERPARTS
This Agreement may be executed in any number of counterparts and each of
such counterparts shall for all purposes be deemed to be an original, and all
such counterparts shall together constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
PHILIP ENVIRONMENTAL INC
By:________________________
MONTREAL TRUST COMPANY CANADA
By:________________________
By:________________________
<PAGE> 45
Exhibit A
[FORM OF RIGHTS CERTIFICATE]
Certificate No. ______________________ ______________________ Rights
THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE CORPORATION, ON THE
TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN CIRCUMSTANCES (SPECIFIED
IN CLAUSE 3.1 (b) OF THE RIGHTS AGREEMENT), RIGHTS BENEFICIALLY OWNED BY AN
ACQUIRING PERSON, ANY PERSON ACTING JOINTLY OR IN CONCERT WITH AN ACQUIRING
PERSON OR THEIR RESPECTIVE ASSOCIATES AND AFFILIATES (AS SUCH TERMS ARE DEFINED
IN THE RIGHTS AGREEMENT) AND THEIR RESPECTIVE TRANSFEREES SHALL BECOME VOID
WITHOUT ANY FURTHER ACTION.
RIGHTS CERTIFICATE
This certifies that ____________________ or registered assigns, is the
registered holder of the number of Rights set forth above each of which entitles
the registered holder thereof, subject to the terms, provisions and conditions
of the Shareholder Rights Plan Agreement dated as of the 11th day of April, 1995
as amended and restated as of the 19th day of May, 1995 (the "Rights Agreement")
between Philip Environmental Inc., a corporation amalgamated under the Business
Corporations Act (Ontario) (the "Corporation"), and Montreal Trust Company of
Canada, a trust company incorporated under the laws of Canada, as rights agent
(the "Rights Agent", which term shall include any successor Rights Agent under
the Rights Agreement) to purchase from the Corporation at any time after the
Separation Time (as such term is defined in the Rights Agreement) and prior to
the close of business on the 30th day of June, 1998 (or such earlier expiration
time as is provided in the Rights Agreement) one fully paid and non-assessable
Common Share of the Corporation (a "Common Share") at the Exercise Price
referred to below, upon presentation and surrender of this Rights Certificate
together with the Form of Election to Exercise duly executed and submitted to
the Rights Agent at its principal office in any of the cities of Vancouver,
Calgary, Toronto and Montreal. The Exercise Price shall initially be $75.00
(Canadian) per Right and shall be subject to adjustment in certain events as
provided in the Rights Agreement.
In certain circumstances described in the Rights Agreement, each Right
evidenced hereby may entitle the registered holder thereof to purchase or
receive assets, debt securities or other equity securities of the Corporation
(or a combination thereof) all as provided in the Rights Agreement.
<PAGE> 46
-2-
This Rights Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of right, obligations, duties and immunities thereunder of the
Rights Agent, the Corporation and the holders of the Rights. Copies of the
Rights Agreement are on file at the registered head office of the Corporation
and are available upon written request.
This Rights Certificate, with or without other Rights Certificates, upon
surrender at any of the offices of the Rights Agent designated for such purpose,
may be exchanged for another Rights Certificate or Rights Certificates of like
tenor and date evidencing an aggregate number of Rights entitling the holder to
purchase a like aggregate number of Common Shares as the Rights evidenced by the
Rights Certificate or Rights Certificates surrendered. If this Rights
Certificate shall be exercised in part, the registered holder shall be entitled
to receive, upon surrender hereof, another Rights Certificate or Rights
Certificates for the number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights evidenced by
this Rights Certificate may be, and under certain circumstances are required to
be, redeemed by the Corporation at a redemption price of $0.0001 per Right.
No fractional Common Shares will be issued upon the exercise of any Right
or Rights evidenced hereby.
No holder of this Rights Certificate, as such, shall be entitled to vote,
receive dividends or be deemed for any purpose the holder of Common Shares or of
any other securities of the Corporation which may at any time be issuable upon
the exercise hereof, nor shall anything contained in the Rights Agreement or
herein be construed to confer upon the holder hereof, any of the rights of a
shareholder of the Corporation or any right to vote for the election of
directors or upon any matter submitted to shareholders of the Corporation at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting shareholders of the
Corporation (except as expressly provided in the Rights Agreement), or to
receive dividends, distributions or subscription rights, or otherwise until the
Rights evidenced by this Rights Certificate shall have been exercised as
provided in the Rights Agreement.
This Rights Certificate shall not be valid or obligatory for any purpose
until it shall have been manually countersigned by the Rights Agent.
<PAGE> 47
-3-
WITNESS the facsimile signature of the proper officers of the Corporation.
Date ________________________
Philip Environmental Inc.
BY _____________________________ BY _______________________________ c/s
Countersigned
Montreal Trust Company of Canada
Transfer Agent and Registrar
BY _____________________________
Authorized Signature
<PAGE> 48
(To be attached to each Rights Certificate)
FORM OF ELECTION TO EXERCISE
TO: PHILIP ENVIRONMENTAL INC.
The undersigned hereby irrevocably elects to exercise whole Rights
represented by the attached Rights Certificate to purchase the Common Shares
issuable upon the exercise of such Rights and requests that certificates for
such Shares be issued to:
__________________________________
(NAME)
__________________________________
(ADDRESS)
__________________________________
(CITY AND STATE OR PROVINCE)
If such number of Rights shall not be all the Rights evidenced by this Rights
Certificate, a new Rights Certificate for the balance of such Rights shall be
registered in the name of and delivered to:
__________________________________
(NAME)
__________________________________
(ADDRESS)
__________________________________
(CITY AND STATE OR PROVINCE)
Dated _______________________
Signature Guaranteed
________________________________
Signature
(Signature must correspond to name as written
upon the face of this Rights Certificate in every
particular, without alteration or enlargement or
any change whatsoever)
<PAGE> 49
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Signature must be guaranteed by a Canadian chartered bank, a Canadian trust
company or a member of a recognized stock exchange or a member of the Transfer
Association Medallion (Stamp) Program.
[To be completed if true]
The undersigned hereby represents, for the benefit of all holders of Rights
and Common Shares, that the Rights evidenced by this Rights Certificate are not,
and, to the knowledge of the undersigned, have never been, Beneficially Owned by
an Acquiring Person or an Affiliate or Associate thereof or any Person acting
jointly or in consent with any of the foregoing or any Affiliate or Associate of
such Person (as defined in the Rights Agreement).
_______________________________
Signature
NOTICE
In the event the certification set forth in the Form of Election to
Exercise is not completed, the Corporation will deem the Beneficial Owner of the
Rights evidenced by this Rights Certificate to be an Acquiring Person or an
Affiliate or Associate thereof (as defined in the Rights Agreement) and
accordingly such Rights shall be null and void.
<PAGE> 50
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer the Rights Certificate)
FOR VALUE RECEIVED _____________________________________________
hereby sells, assigns and transfers unto
_________________________________________________
(Please print name and address of transferee)
the Rights represented by this Rights Certificate, together with all right,
title and interest therein and does hereby irrevocably constitute and appoint
_____________________ as attorney to transfer the within Rights on the books of
the Corporation, with full power of substitution.
Dated _________________
Signature Guaranteed
_________________________________
Signature
(Signature must correspond to name as written upon
the face of this Rights Certificate in every
particular, without alteration or enlargement or
any change whatsoever)
Signature must be guaranteed by a Canadian chartered bank, a Canadian trust
company or a member of a recognized stock exchange or a member of the Transfer
Association Medallion (Stamp) Program.
<PAGE> 51
-2-
[To be completed if true]
The undersigned hereby represents, for the benefit of all holders of
Rights and Common Shares, that the Rights evidenced by this Rights Certificate
are not, and, to the knowledge of the undersigned, have never been,
Beneficially Owned by an Acquiring Person or an Affiliate or Associate thereof
or any Person acting jointly or in consent with any of the foregoing (as
defined in the Rights Agreement).
___________________________________
Signature
NOTICE
In the event the certification set forth in the Form of Assignment is not
completed, the Corporation will deem the Beneficial Owner of the Rights
evidenced by this Rights Certificate to be an Acquiring Person or an Affiliate
or Associate thereof (as defined in the Rights Agreement) and accordingly such
Rights shall be null and void.
<PAGE> 1
EXHIBIT 10.5
AMENDING AGREEMENT NO. 1
THIS IS AN AMENDING AGREEMENT made as of October 31, 1997 among PHILIP
SERVICES CORP. as a borrower in Canada (the "CDN. BORROWER"), PHILIP SERVICES
(DELAWARE), INC. (formerly Philip Environmental (Delaware), Inc.), as a borrower
in the United States of America (the "U.S. BORROWER") and CANADIAN IMPERIAL BANK
OF COMMERCE, as administrative agent (the "ADMINISTRATIVE AGENT") on behalf of
itself, the Lenders, the Other Agents and their respective Eligible Affiliates.
WHEREAS:
A. The Cdn. Borrower and the U.S. Borrower, as borrowers (the "BORROWERS"),
the Persons from time to time party to such agreement as lenders (the
"LENDERS"), the Administrative Agent, as administrative agent for the
Lenders, Bankers Trust Company, as syndication agent, Canadian Imperial
Bank of Commerce and Bankers Trust Company, as co-arrangers, and Dresdner
Bank Canada, Dresdner Bank AG New York Branch and Royal Bank of Canada, as
documentation agents, are parties to a credit agreement dated as of August
11, 1997 (the "CREDIT AGREEMENT").
B. The Borrowers have requested certain amendments to the Credit Agreement.
C. The Lenders, subject to the conditions set forth in this amending
agreement, have consented to the amendments requested by the Borrowers and
have authorized the Administrative Agent to execute and deliver this
amending agreement to the Borrowers on behalf of itself, the Lenders, the
Other Agents and their respective Eligible Affiliates.
NOW THEREFORE THIS AMENDING AGREEMENT WITNESSES that, in consideration of
the mutual covenants and agreements contained in this amending agreement and for
other good and valuable consideration, the receipt and sufficiency of which are
acknowledged, the Borrowers and the Administrative Agent, on behalf of itself,
the Lenders, the Other Agents and their respective Eligible Affiliates, agree as
follows:
ARTICLE ONE
INTERPRETATION
SECTION 1.01 ONE AGREEMENT: This amending agreement amends the Credit
Agreement. This amending agreement and the Credit Agreement shall be read,
interpreted, construed and
<PAGE> 2
- 2 -
have effect as, and shall constitute, one agreement with the same effect as if
the amendments made by this amending agreement had been contained in the Credit
Agreement as of the date of this amending agreement.
SECTION 1.02 DEFINED TERMS: In this amending agreement, unless something in
the subject matter or context is inconsistent:
(a) terms defined in the description of the parties or in the
recitals have the respective meanings given to them in the
description or recitals, as applicable; and
(b) all other capitalized terms have the respective meanings
given to them in the Credit Agreement as amended by Article Two of
this amending agreement.
SECTION 1.03 HEADINGS: The headings of the Articles and Sections of this
amending agreement are inserted for convenience of reference only and shall not
affect the construction or interpretation of this amending agreement.
SECTION 1.04 REFERENCES: All references to Articles and Sections, unless
otherwise specified, are to Articles and Sections of the Credit Agreement.
ARTICLE TWO
AMENDMENTS
SECTION 2.01 DEFINITIONS: The definition of Additional Debt in Section 1.01 of
the Credit Agreement is amended by:
(a) (x) removing the words "the Cdn. Borrower or" from the third
line of paragraph (a) of such definition, and (y) revising the words
"such Debt shall not be capable of being accelerated prior to an
acceleration of Debt under this Agreement" found at the end of
clause (iv) of paragraph (a) of such definition and at the end of
clause (v) of paragraph (b) of such definition to read "such Debt
shall not be capable of being accelerated in circumstances which
would not also permit an acceleration of Debt under this Agreement";
and
(b) adding the following definition to such Section to be
inserted in the correct alphabetical order:
"EQUITY FINANCING CLOSING DATE" shall mean the closing date
of the equity offering of common shares of the Cdn. Borrower
announced by the
<PAGE> 3
-3-
Cdn. Borrower on September 29, 1997 as the terms of, and the
number of shares comprised in, such equity offering may be
finalized by the Cdn. Borrower prior to the closing of such
offering."
SECTION 2.02 FINANCIAL COVENANTS: Subsections 8.03(a) and 8.03(b) of the Credit
Agreement are amended to read as follows:
"(a) will ensure that the Interest Coverage Ratio is at all times:
(i) on or before March 31, 1998, greater than 3.0 to 1.0; and
(ii) on or after April 1, 1998, greater than 3.5 to 1.0;
(b) will ensure that the Debt to EBITDA Covenant Ratio is at all
times:
(i) on or before the earlier of March 31, 1998 and the Equity
Financing Closing Date, equal to or less than 5.0 to 1.0;
(ii) on or after the earlier of April 1, 1998 and the Equity
Financing Closing Date and on or before December 31, 1998,
equal to or less than 4.25 to 1.0;
(iii)on or after January 1, 1999 and on or before December 31,
1999, equal to or less than 4.0 to 1.0; and
(iv) on or after January 1, 2000, equal to or less than 3.75 to
1.0;"
SECTION 2.03 SCHEDULES: Schedule 4 of the Credit Agreement is amended by
deleting reference to Philip Services (Europe) Limited in such Schedule and by
adding PSC (Europe) Limited to such Schedule.
ARTICLE THREE
REPRESENTATIONS AND WARRANTIES
SECTION 3.01 CONFIRMATION OF REPRESENTATIONS: Each of the Borrowers represents
and warrants that, as at the date of this amending agreement, no Default or
Event of Default has occurred and is continuing and the representations and
warranties contained in Article Seven of the Credit Agreement are true and
correct.
<PAGE> 4
- 4 -
ARTICLE FOUR
GENERAL
SECTION 4.01 CONFIRMATION: The Credit Agreement, as amended by this amending
agreement, is hereby confirmed by the Borrowers and the Administrative Agent,
on behalf of itself, the Lenders, the Other Agents and their respective
Eligible Affiliates.
SECTION 4.02 AMENDMENT FEES: In consideration of the Lenders agreeing to the
amendments to the Credit Agreement effected by this amending agreement, the
Cdn. Borrower has paid to each of the Lenders a fee of U.S. $7,500. This fee
shall be deemed to have been fully earned by each of the Lenders on the date of
the execution and delivery of this amending agreement by the Administrative
Agent.
SECTION 4.03 BINDING NATURE: This amending agreement shall enure to the
benefit of and be binding upon the Borrowers, the Administrative Agent, the
Lenders, the Other Agents, their respective Eligible Affiliates and their
respective successors and permitted assigns.
SECTION 4.04 CONFLICTS: If, after the date of this amending agreement, any
provision of this amending agreement is inconsistent with any provision of the
Credit Agreement the relevant provision of this amending agreement shall
prevail.
SECTION 4.05 LAW OF CONTRACT: This amending agreement shall be governed by
and construed in accordance with the laws of the Province of Ontario and of the
laws of Canada applicable in the Province of Ontario.
SECTION 4.06 COUNTERPART AND FACSIMILE: This amending agreement may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
instrument. Delivery of an executed signature page to this amending agreement
by any party by facsimile transmission shall be as effective as delivery of a
manually executed copy of this amending agreement by such party.
IN WITNESS OF WHICH the Borrowers and the Administrative Agent, on behalf
of itself, the Lenders, the Other Agents and their respective Eligible
Affiliates, have executed
<PAGE> 5
- 5 -
this amending agreement as of the date indicated on
the first page of this amending agreement.
PHILIP ENVIRONMENTAL
PHILIP SERVICES CORP. (DELAWARE), INC.
by: /s/ Marvin Boughton by: /s/ Marvin Boughton
___________________________ ______________________________
name: Marvin Boughton name: Marvin Boughton
title: Chief Financial Officer, title: Chief Financial Officer,
Executive Vice President Executive Vice President
by: /s/ Colin Soule by: /s/ Colin Soule
___________________________ _______________________________
name: Colin Soule name: Colin Soule
title: Executive Vice President, title: Executive Vice President,
General Counsel General Counsel
CANADIAN IMPERIAL BANK OF
COMMERCE (in its capacity
as Administrative Agent)
by: /s/ Steve Nishimora
____________________________
name: Steve Nishimora
title: Director
ACKNOWLEDGEMENT AND CONFIRMATION
<PAGE> 6
- 6 -
Each of the undersigned consents to the above referenced amendments to the
Credit Agreement and to the Borrowers and the Administrative Agent, on behalf of
itself, the Lenders, the Other Agents and their respective Eligible Affiliates,
entering into this amending agreement and acknowledges and agrees that all of
the guarantees and security delivered by it to any one or more of the
Administrative Agent and the Lenders in connection with, or otherwise applicable
to, the debts and liabilities of itself or either one or both of the Borrowers
to any one or more of the Administrative Agent, the Lenders, the Other Agents
and their respective Eligible Affiliates under, in connection with or with
respect to any one or more of the Credit Agreement, the other Credit Documents
and the Lender/Borrower Hedging Arrangements are hereby ratified and confirmed
and remain in full force and effect notwithstanding the entering into of this
amending agreement by the Borrowers and the Administrative Agent, on behalf of
itself, the Lenders, the Other Agents and their respective Eligible Affiliates,
and notwithstanding the amendments to the Credit Agreement effected by this
amending agreement.
This acknowledgement and confirmation may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same instrument. Delivery of an executed
signature page to this acknowledgement and confirmation by any party by
facsimile transmission shall be as effective as delivery of a manually executed
copy of this acknowledgement and confirmation by such party.
IN WITNESS OF WHICH each of the undersigned have executed this
acknowledgement and confirmation as of the date referred to on the first page of
this amending agreement.
PHILIP INTERNATIONAL DEVELOPMENT INC.
PHENCORP INTERNATIONAL B.V.
PHILIP ENVIRONMENTAL (ATLANTIC) LIMITED
REFLUENT INVESTMENTS LIMITED
1244764 ONTARIO LIMITED
SCHIFLUENT LIMITED
IVOR SIMMONS FAMILY HOLDINGS INC.
<PAGE> 7
- 7 -
PHILIP INVESTMENT CORP.
CHEM-SERV ASSOCIATES INC.
LYNX ENVIRONMENTAL SERVICES LTD.
PHILIP ANALYTICAL SERVICES CORPORATION
RECYCLAGE D'ALUMINIUM QUEBEC INC./QUEBEC ALUMINUM
RECYCLING INC.
PHILIP ENVIRONMENTAL (ELMIRA) INC.
PHILIP ENTERPRISES INC.
PHILIP ENVIRONMENTAL SERVICES LIMITED
PHENCORP REINSURANCE COMPANY INC.
2766906 CANADA INC.
TARO AGGREGATES LTD.
1233793 ONTARIO INC.
1195613 ONTARIO INC.
842578 ONTARIO LIMITED
ALLWASTE OF CANADA LTD.
CALIGO RECLAMATION LTD.
CALIGO REINGUNGSGES M.B.H.
SERV-TECH CANADA INC.
ST DELTA CANADA INC.
LUNTZ CORPORATION
<PAGE> 8
- 8 -
RMF GLOBAL, INC.
(the surviving corporation from the merger of RMF Global, Inc., RMF Industrial
Services, Inc. and RMF Global Management Co., Inc. into Philip Environmental
Services Acquisition Corporation)
RMF INDUSTRIAL CONTRACTING, INC.
RMF ENVIRONMENTAL, INC.
COUSINS WASTE CONTROL CORPORATION
(the surviving corporation from the merger of LWC Equipment Company, BBC
Environmental Enterprises, Inc. and Cousins Waste Control Corporation into
Philip Environmental Services Acquisition (Ohio) Corporation)
PEN METALS (DELAWARE), INC.
PHILIP METALS (DELAWARE), INC.
LUNTZ ACQUISITION (DELAWARE) CORPORATION
PHILIP METALS RECOVERY (USA) INC.
(the surviving corporation from the merger of Conversion Resources, Incorporated
and Warrenton Resources, Inc. into Philip Metals Recovery (USA) Inc.)
PHILIP ENVIRONMENTAL OF IDAHO CORPORATION
PHILIP ENVIRONMENTAL (SOUTH CAROLINA), INC.
PHILIP ENVIRONMENTAL (WASHINGTON) INC.
BURLINGTON ENVIRONMENTAL INC.
(a Delaware corporation)
<PAGE> 9
- 9 -
PHILIP ENVIRONMENTAL SERVICES CORPORATION
(the surviving corporation from the merger of Jaca Corp.
into Philip Environmental Services Corporation)
SOLVENT RECOVERY CORPORATION
BURLINGTON ENVIRONMENTAL INC.
(a Washington corporation)
RESOURCE RECOVERY CORPORATION
TERMCO CORPORATION
UNITED DRAIN OIL SERVICE, INC.
GASOLINE TANK SERVICE COMPANY, INC.
PHILIP ENVIRONMENTAL (NEW YORK) INC.
ROTH BROS. SMELTING CORP.
NORTRU, INC.
ALLWORTH, INC.
CHEMICAL RECLAMATION SERVICE, INC.
CYANOKEM INC.
RHO-CHEM CORPORATION
SESSA, S.A. DE C.V.
THERMALKEM INC.
ALLWASTE, INC.
PSC ENTERPRISES INC.
(formerly Allquest Enterprises, Inc.)
<PAGE> 10
- 10 -
ALLIES STAFFING, INC.
ALLQUEST CAPITAL, INC.
ALLQUEST ENERGY SERVICES, INC.
ALLWASTE TANK CLEANING, INC.
ALLWASTE RECOVERY SYSTEMS, INC.
HYDROWASH RECYCLING SYSTEMS, INC.
ALLWASTE RAILCAR CLEANING, INC.
GRS/LAKE CHARLES, LTD.
GEORGIA RECOVERY SYSTEMS
ALLWASTE ENVIRONMENTAL SERVICES, INC.
CALIGO LTD.
ALL SAFETY & SUPPLY, INC.
ALLWASTE ENVIRONMENTAL SERVICES OF LOUISIANA, INC.
ALLWASTE ENVIRONMENTAL SERVICES OF MISSOURI, INC.
ALLWASTE ACCESS SERVICES, INC.
ALLWASTE ENVIRONMENTAL SERVICES OF OKLAHOMA, INC.
ALLWASTE ENVIRONMENTAL SERVICES OF TEXAS, INC.
ALLWASTE ENVIRONMENTAL SERVICES/SOUTHWEST, INC.
<PAGE> 11
- 11 -
ALLWASTE/NAL, INC.
ALLWASTE ENVIRONMENTAL SERVICES/SOUTH CENTRAL, INC.
ALLWASTE EXPLOSIVE SERVICES, INC.
JAMES & LUTHER SERVICES, INC.
ALLWASTE SERVICES OF EL PASO, INC.
ALLWASTE TEXQUISITION, INC.
ACE/ALLWASTE ENVIRONMENTAL SERVICES OF INDIANA, INC.
ALLWASTE ENVIRONMENTAL SERVICES OF OHIO, INC.
J.D. MEAGHER/ALLWASTE, INC.
ALLWASTE ENVIRONMENTAL SERVICES/NORTH CENTRAL, INC.
(an Iowa corporation)
ALLWASTE ENVIRONMENTAL SERVICES/NORTH CENTRAL, INC.
(an Illinois corporation)
OIL RECYCLING, INC.
CLEAN AMERICA, INC.
ALLWASTE ENVIRONMENTAL SERVICES/NORTH ATLANTIC, INC.
JESCO INDUSTRIAL SERVICES, INC.
ALLWASTE/WHITING, INC.
ALLWASTE ENVIRONMENTAL SERVICES/WEST
<PAGE> 12
- 12 -
COAST, INC.
ALLWASTE TRANSPORTATION AND REMEDIATION, INC.
ALLWASTE OF HAWAII, LTD.
ALLWASTE INTERMOUNTAIN PLANT SERVICES, INC.
ALLSCAFF, INC.
ALLWASTE ENVIRONMENTAL SERVICES/CENTRAL FLORIDA,
INC.
ALLWASTE ENVIRONMENTAL SERVICES OF ATLANTA, INC.
ALLWASTE SERVICES OF CHARLOTTE, INC.
ALLWASTE SERVICES OF MOBILE, INC.
BEC/ALLWASTE, INC.
INDUSTRIAL CONSTRUCTION SERVICES COMPANY, INC.
MADSEN/BARR-ALLWASTE, INC.
APLC, INC.
ALRC, INC.
AWI/ETSS ACQUISITION, INC.
TIPCO ACQUISITION CORP.
AWI/SOUTHWEST ACQUISITION
ALLWASTE SERVICIOS INDUSTRIALES DE CONTROL
ECOLOGICO S.A. DE C.V.
<PAGE> 13
- 13 -
ALLWASTE PAINT SERVICES S.A. DE C.V.
ALLWASTE ASBESTOS ABATEMENT, INC.
ALLWASTE ASBESTOS ABATEMENT HOLDINGS, INC.
ALLWASTE ASBESTOS ABATEMENT OF NEW ENGLAND, INC.
ONEIDA ASBESTOS REMOVAL, INC.
ONEIDA ASBESTOS ABATEMENT INC.
SERV-TECH, INC.
HARTNEY INDUSTRIAL SERVICES CORPORATION
HARTNEY CORPORATION
TOTAL REFRACTORY SYSTEMS, INC.
CON-SEAL, INC.
UNITED INDUSTRIAL MATERIALS, INC.
ADVANCED REFRACTORY SERVICES, INC.
CASTING CONCEPTS, INC.
TURNAROUND MAINTENANCE, INC.
ENTERPRISE SERVICE CORPORATION
PRS HOLDING, INC.
PETRO RECOVERY SYSTEMS, INC.
TERMINAL TECHNOLOGIES, INC.
<PAGE> 14
- 14 -
SERV-TECH OF NEW MEXICO, INC.
DM ACQUISITION CORPORATION
DELTA MAINTENANCE, INC.
CHEMISOLV HOLDINGS, INC.
CHEMI-SOLV, INC.
CHEMISOLV LIMITED
ST PIPING, INC.
SERV-TECH EUROPE GMBH
REFINERY MAINTENANCE INTERNATIONAL LIMITED
SERV-TECH SERVICES, INC.
MAC-TECH, INC.
SERV-TECH MEXICANA S DE R.L.
SERV-TECH DE MEXICO S DE R.L.
HILL TECHNICAL SERVICES, INC.
PETROCHEM FIELD SERVICES DE VENEZUELA
AMERICAN MECHANICAL SERVICES, INC.
SERV-TECH SUDAMERICANA S.A.
SERV-TECH EPC, INC.
SERV-TECH ENGINEERS, INC.
F.C. SCHAFFER & ASSOCIATES, INC.
<PAGE> 15
- 15 -
SERV-TECH CONSTRUCTION AND MAINTENANCE, INC.
SERV-TECH INTERNATIONAL SALES
INTSEL SOUTHWEST LIMITED PARTNERSHIP
by all of its partners
PEN METALS (DELAWARE), INC.
PHILIP METALS (DELAWARE), INC.
SECO INDUSTRIES, INC.
and all other Guarantor Subsidiaries (if any)
in each case by:
____________________________________________
Colin Soule
Authorized Signatory
<PAGE> 1
Exhibit 10.6
AMENDING AGREEMENT NO. 2
THIS IS AN AMENDING AGREEMENT made as of February 19, 1998 among PHILIP
SERVICES CORP. as a borrower in Canada (the "CDN. BORROWER"), PHILIP SERVICES
(DELAWARE), INC., as a borrower in the United States of America (the "U.S.
BORROWER") and CANADIAN IMPERIAL BANK OF COMMERCE, as administrative agent (the
"ADMINISTRATIVE AGENT") on behalf of itself, the Lenders, the Other Agents and
their respective Eligible Affiliates.
WHEREAS:
A. The Cdn. Borrower and the U.S. Borrower, as borrowers (the "BORROWERS"),
the Persons from time to time parties to such agreement as lenders (the
"LENDERS"), the Administrative Agent, as administrative agent for the
Lenders, Bankers Trust Company, as syndication agent, Canadian Imperial
Bank of Commerce and Bankers Trust Company, as co-arrangers, and Dresdner
Bank Canada, Dresdner Bank AG New York Branch and Royal Bank of Canada, as
documentation agents, are parties to a credit agreement dated as of August
11, 1997 as amended by an amending agreement dated as of October 31, 1997
(collectively the "CREDIT AGREEMENT").
B. The Borrowers have requested certain amendments to the Credit Agreement.
C. The Lenders, subject to the conditions set forth in this amending
agreement, have consented to the amendments requested by the Borrowers and
have authorized the Administrative Agent to execute and deliver this
amending agreement to the Borrowers on behalf of itself, the Lenders, the
Other Agents and their respective Eligible Affiliates.
NOW THEREFORE THIS AMENDING AGREEMENT WITNESSES that, in consideration of
the mutual covenants and agreements contained in this amending agreement and
for other good and valuable consideration, the receipt and sufficiency of which
are acknowledged, the Borrowers and the Administrative Agent, on behalf of
itself, the Lenders, the Other Agents and their respective Eligible Affiliates,
agree as follows:
ARTICLE ONE
INTERPRETATION
SECTION 1.01 ONE AGREEMENT: This amending agreement amends the Credit
Agreement. This amending agreement and the Credit Agreement shall be read,
interpreted, construed and have effect as, and shall constitute, one agreement
with the same effect as if the amendments made by this amending agreement had
been contained in the Credit Agreement as of the date of this amending
agreement.
<PAGE> 2
- 2 -
SECTION 1.02 DEFINED TERMS: In this amending agreement, unless something in
the subject matter or context is inconsistent:
(a) terms defined in the description of the parties or in the
recitals have the respective meanings given to them in the
description or recitals, as applicable; and
(b) all other capitalized terms have the respective meanings
given to them in the Credit Agreement as amended by Article Two of
this amending agreement.
SECTION 1.03 HEADINGS: The headings of the Articles and Sections of this
amending agreement are inserted for convenience of reference only and shall not
affect the construction or interpretation of this amending agreement.
SECTION 1.04 REFERENCES: All references to Articles and Sections, unless
otherwise specified, are to Articles and Sections of the Credit Agreement.
ARTICLE TWO
AMENDMENTS
SECTION 2.01 DEFINITIONS: Section 1.01 of the Credit Agreement is amended by:
(a) revising the definition of the term 'Acquisition' to add the
following sentence at the end of such definition:
"For greater certainty the Cdn. Borrower's Safety-Kleen
Equity Investment is an Investment and not an Acquisition."
(b) revising the definition of the term 'Debt' to add the
following words at the end of such definition:
"and provided further that the Designated Subordinated Debt
shall not be included as Debt for the purpose of this
definition.";
(c) revising the definition of the term 'Fixed Charge Ratio' to
read as follows:
<PAGE> 3
- 3 -
""FIXED CHARGE RATIO" on any day shall mean the ratio of (a)
EBITDA for the Reference Financial Period for such day
decreased by the amount of all Capital Expenditures made by
the Restricted Parties during such Reference Financial Period
to (b) Interest Expense (other than Interest Expense in the
form of capitalized interest on the Designated Subordinated
Debt prior to the time such capitalized interest is paid or
becomes payable) for such Reference Financial Period plus
Restricted Payments on preferred shares of the Cdn. Borrower
made during such Reference Financial Period.";
(d) revising the definition of the term 'Interest Coverage Ratio'
to read as follows:
""INTEREST COVERAGE RATIO" shall mean on any day the ratio of
(a) EBITDA for the Reference Financial Period for such day to
(b) Interest Expense (other than Interest Expense in the form
of capitalized interest on the Designated Subordinated Debt
prior to the time such capitalized interest is paid or
becomes payable) for the Reference Financial Period for such
day.";
(e) revising the definition of the term "Interest Expense" to add
the words 'or Designated Subordinated Debt' after the word "Debt" in
the third and eleventh lines of such definition;
(f) revising the definition of the term 'Net Income' by deleting
the word 'and' in the third last line of such definition and by
adding the following at the end of such definition:
", and (g) with respect to any Financial Quarter ending in
1997, any Inventory Discrepancy Charge to a maximum aggregate
amount for all Financial Quarters ending in 1997 of U.S.
$125,000,000";
(g) revising the definition of the term "Security" to read as
follows:
"SECURITY" shall mean (a) for purposes other than Section
9.03, the Security referred to in Section 6.01 and all
Additional Security, and (b) for the purpose of Section 9.03,
(i) the Security referred to in Section 6.01, and (ii) all
Additional Security held by the Administrative Agent, and
(iii) the right, title and interest of the Administrative
Agent, the Other Agents, the Lenders and their respective
Eligible/Affiliates in and to the Additional Security held by
a security agent or a security trustee for the benefit of such
Persons, the holders of the Designated Subordinated Debt and
the holders of any Debt or credit arrangements refinancing any
Debt under this Agreement or the Designated Subordinated Debt
as contemplated under Section 6.06.
<PAGE> 4
- 4 -
(h) adding the following new definitions to such Section in the
appropriate alphabetical order:
"ADDITIONAL SECURITY" shall have the meaning specified in
Section 6.06.
"ADJUSTED DEBT TO EBITDA COVENANT RATIO" shall mean, on any
day, the ratio of (a) the sum of (i) Debt and (ii) Designated
Subordinated Debt on such day to (b) EBITDA for the Reference
Financial Period for such day.
"CDN. BORROWER'S SAFETY-KLEEN EQUITY INVESTMENT" shall mean
the U.S. $200,000,000 equity investment to be made by the
Cdn. Borrower or one of its Affiliates in SK Parent Corp
under arrangements which result in each of the Cdn. Borrower,
Apollo Advisors, L.P. and Blackstone Management Associates
III, L.P. (in each case whether directly or through one or
more of their respective Affiliates) holding a one third
equity interest in SK Parent Corp and also result in the
closing under a definitive merger agreement under which a
wholly-owned subsidiary of SK Parent Corp. acquires
Safety-Kleen, Corp. of Elgin Illinois.
"DESIGNATED SUBORDINATED DEBT" shall mean up to U.S.
$210,000,000 of subordinated debt made available by CIBC
Capital Partners to the Cdn. Borrower to finance the Cdn.
Borrower's Safety-Kleen Equity Investment, which subordinated
debt shall be substantially on the terms set forth in the
February 12, 1998 summary of the terms respecting such
subordinated debt titled 'Philip Services Corp. Secured
Debentures' forwarded to the Lenders on February 16, 1998 and
subject to the terms and provisions of a subordination
agreement between the holders of such subordinated debt and
the Administrative Agent in form, scope and substance
satisfactory to the Administrative Agent.
"INVENTORY DISCREPANCY CHARGE" shall mean the one time
year-end charge of U.S. $125,000,000 that the Cdn. Borrower
announced on January 27, 1998 and described in such
announcement as being related in part to a physical inventory
adjustment."
SECTION 2.02 INTEREST: Section 3.01 of the Credit Agreement is amended by
replacing the chart at the end of such Section with the following:
<PAGE> 5
- 5 -
<TABLE>
<CAPTION>
U.S. BASE U.S. REFERENCE
DEBT TO RATE LOANS RATE LOANS
EBITDA PRICING PRIME RATE LOANS U.S. Base U.S. Reference LIBOR LOANS
ADJUSTMENT RATIO Prime Rate + Rate + Rate + LIBOR +
<S> <C> <C> <C> <C>
< 2.0:1 0 bps 0 bps 0 bps 50 bps
< 2.5:1 0 bps 0 bps 0 bps 75 bps
< 3.0:1 0 bps 0 bps 0 bps 100 bps
< 3.5:1 25 bps 25 bps 25 bps 125 bps
< 4.0:1 50 bps 50 bps 50 bps 150 bps
= or > 4.0:1 75 bps 75 bps 75 bps 175 bps
</TABLE>
Notwithstanding any other provision of this Agreement, the Applicable
Interest Pricing Adjustment will be reset on February 19, 1998, to be
applicable from and including such date to the next Pricing Adjustment
Date (being April 1, 1998), to the amount indicated above as being
applicable where the Debt to EBITDA Pricing Adjustment Ratio is greater
than 4.0 to 1.0."
SECTION 2.03 FEES FOR BANKERS' ACCEPTANCES AND BA EQUIVALENT NOTES: Section
3.09 of the Credit Agreement is amended by replacing the chart at the end of
such Section with the following:
<TABLE>
<CAPTION>
DEBT TO EBITDA
PRICING ADJUSTMENT APPLICABLE
RATIO STAMPING FEE
<S> <C>
< 2.0:1 50 bps
< 2.5:1 75 bps
< 3.0:1 100 bps
< 3.5:1 125 bps
< 4.0:1 150 bps
= or > 4.0:1 175 bps
</TABLE>
Notwithstanding any other provision of this Agreement, the Applicable
Stamping Fee
<PAGE> 6
- 6 -
will be reset on February 19, 1998, to be applicable from and including
such date to the next Pricing Adjustment Date (being April 1, 1998), to
the amount indicated above as being applicable where the Debt to EBITDA
Pricing Adjustment Ratio is greater than 4.0 to 1.0."
SECTION 2.04 FEES FOR LETTERS OF CREDIT: Section 3.10 of the Credit Agreement
is amended by replacing the chart in such Section with the following:
<TABLE>
<CAPTION>
"DEBT TO EBITDA
PRICING ADJUSTMENT APPLICABLE LC FEE
RATIO PRICING RATE
<S> <C>
< 2.0:1 50 bps
< 2.5:1 75 bps
< 3.0:1 100 bps
< 3.5:1 125 bps
< 4.0:1 150 bps
= or > 4.0:1 175 bps
</TABLE>
Notwithstanding any other provision of this Agreement, the Applicable LC
Fee Pricing Rate will be reset on February 19, 1998, to be applicable
from and including such date to the next Pricing Adjustment Date (being
April 1, 1998), to the amount indicated above as being applicable where
the Debt to EBITDA Pricing Adjustment Ratio is greater than 4.0 to 1.0."
SECTION 2.05 STANDBY FEE: Section 3.11 of the Credit Agreement is amended by
replacing the chart in such Section with the following:
<TABLE>
<CAPTION>
"DEBT TO EBITDA
PRICING ADJUSTMENT APPLICABLE STANDBY
RATIO FEE PRICING RATE
<S> <C>
< 2.0:1 20 bps
< 2.5:1 25 bps
< 3.0:1 30 bps
< 3.5:1 35 bps
</TABLE>
<PAGE> 7
- 7 -
<TABLE>
<S> <C>
< 4.0:1 40 bps
=or > 4.0:1 45 bps
</TABLE>
Notwithstanding any other provision of this Agreement, the Applicable
Standby Fee Pricing Rate will be reset on February 19, 1998, to be
applicable from and including such date to the next Pricing Adjustment
Date (being April 1, 1998), to the amount indicated above as being
applicable where the Debt to EBITDA Pricing Adjustment Ratio is greater
than 4.0 to 1.0."
SECTION 2.06 MANDATORY REPAYMENTS: The following Section is added to Article
Four of the Credit Agreement:
"4.07 DESIGNATED SUBORDINATED DEBT
On the date on which any Designated Subordinated Debt is drawn by
the Cdn. Borrower, the limit of the Credit (on a pro rata basis among
Tranches 1, 2 and 3 until the limit of such Tranches is reduced to 0 and
thereafter on a pro rata basis among the remaining Tranches) will be
permanently reduced by an amount equal to the amount of the Designated
Subordinated Debt so obtained on such date (up to an aggregate overall
reduction in the limit of the Credit for all such dates of U.S.
$200,000,000), and each of the Borrowers will repay sufficient
Accommodation under the affected Tranches so that, after giving effect to
such repayment and any concurrent repayments made by the other Borrower,
the U.S. Dollar Amount of the Accommodation then outstanding under each
such Tranche does not exceed the reduced limit of such Tranche."
SECTION 2.07 ADDITIONAL SECURITY: Article Six of the Credit Agreement is
amended by deleting "(collectively the Security)" in lines 5 and 6 of Section
6.01 and by adding the following Section at the end of such Article:
"6.06 FORM OF ADDITIONAL SECURITY
As additional general and continuing security for the due payment and
performance of all present and future indebtedness and liability of the
Borrowers to (w) the Administrative Agent, the Other Agents and the Lenders
under the Credit Documents, (x) the Administrative Agent, the Other Agents, the
Lenders and their respective Eligible Affiliates under all Lender/Borrower
Hedging Arrangements, (y) the holders of the Designated Subordinated Debt, and
(z) the holders of any Debt or credit arrangements refinancing any Debt under
this Agreement or the Designated Subordinated Debt, the following security
(collectively the "ADDITIONAL SECURITY") will be provided, as soon as possible
after February 19, 1998 (and in any event prior to April 15, 1998 or such later
date as the Administrative Agent may from time to time designate with respect
to any particular item or items of Additional Security), to the Administrative
Agent or as provided
<PAGE> 8
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below to a security agent or a security trustee for the benefit of the
Administrative Agent, the Other Agents, the Lenders, their respective Eligible
Affiliates, the holders of the Designated Subordinated Debt and the holders of
any such Debt or credit arrangements refinancing any Debt under this Agreement
or the Designated Subordinated Debt:
(a) an unlimited guarantee and a postponement of
claim from each of the Borrowers;
(b) a general security agreement (and equivalent
security documentation where required in applicable
jurisdictions) from each of the Borrowers constituting a
first-priority Lien (subject only to Permitted Liens) on all
of the present and future property of such Borrower;
(c) an unlimited guarantee and a postponement of
claim from each present and future Restricted Party (other
than a Borrower);
(d) a general security agreement (and equivalent
security documentation where required in applicable
jurisdictions) from each of the Restricted Parties (other than
the Borrowers) constituting a first-priority Lien (subject
only to Permitted Liens) on all of the present and future
property of such Restricted Party;
(e) a securities pledge agreement from each present
and future Restricted Party constituting a first-priority Lien
(subject only to Permitted Liens) on all of the present and
future securities in any and all of their respective present
and future Subsidiaries which are also Restricted Parties,
whether wholly or partially owned, acknowledged by such
Subsidiaries, together with such resolutions and consents as
the Administrative Agent may determine are legally required or
advisable and the security certificates duly issued by each of
such Subsidiaries evidencing such pledge of securities duly
endorsed in blank for transfer;
(f) charge/mortgages of land in a principal amount at
least equal to such principal amount as may be designated by
the Administrative Agent having regard to, among other things,
the amount of the Debt under the Credit Documents, the
apparent value of such real property and the registration
charges relative to the registration of such charge/mortgage
of land against such real property constituting a
first-priority Lien (subject only to Permitted Liens) over all
of the real property owned by the Restricted Parties from time
to time designated in writing by the Administrative Agent;
(g) assignments with appropriate mortgagee clauses of
all insurance held by the Restricted Parties together with
loss payable and standard mortgage clauses in form and content
satisfactory to the Administrative Agent;
<PAGE> 9
- 9 -
(h) a postponement, subordination and priority agreement from the
holders of Designated Subordinated Debt (or from an agent or
trustee acting on behalf of such holders) postponing and
subordinating all Designated Subordinated Debt from time to
time payable by the Restricted Parties to such holders to all
debts and liabilities from time to time of the Restricted
Parties to the Administrative Agent, the Other Agents, the
Lenders and their Respective Eligible Affiliates under or in
respect of the Credit Documents and the Lender/Borrower
Hedging Arrangements; and
(i) if any of the Additional Security referred to above is to be
held by a security trustee or security agent as provided for
above, a security agency agreement or security trust agreement
between the Borrowers, the applicable security agent or
security trustee, the Administrative Agent (on behalf of the
Administrative Agent, the Other Agents, the Lenders and their
respective Eligible Affiliates) and the holders of Designated
Subordinated Debt (or an agent or trustee acting on behalf of
such holders) in form and substance satisfactory to the
Administrative Agent."
SECTION 2.08 REPRESENTATIONS AND WARRANTIES: Section 7.01 of the Credit
Agreement is amended by adding the following subsection at the end of such
Section:
"(ah) In connection with the Inventory Discrepancy Charge:
(i) the Inventory Discrepancy Charge is related primarily to the
Restricted Parties' copper inventory and primarily to such
copper inventory located at plants of the Restricted Parties
located in Hamilton, Ontario;
(ii) the Restricted Parties no longer engage in trading in copper
except for Hedging Arrangements entered into in accordance
with subsection 8.02(r) to protect against fluctuations in the
price of copper;
(iii) the Restricted Parties have taken internal security and
management control steps to address confirmation of inventory
entering and leaving their premises;
(iv) the aggregate amount of the Inventory Discrepancy Charge, when
conclusively finalized, will not exceed U.S. $125,000,000,
although the amounts of the relative components of the
Inventory Discrepancy Charge may change;
(v) the Inventory Discrepancy Charge will not be included in or
have an impact on the Restricted Parties' cash flow or budget
for the Financial Year ending on December 31, 1998;
<PAGE> 10
- 10 -
(vi) the issues giving rise to the Inventory Discrepancy Charge do
not exist in, or impact on, any of the other divisions or
operations of the Restricted Parties; and
(vii) the 1997 revenue from the Restricted Parties' Hamilton,
Ontario copper operations constitutes less than 10% of the
overall 1997 revenue of the Restricted Parties.
SECTION 2.09 POSITIVE COVENANTS: Section 8.01 of the Credit Agreement is
amended by:
(a) revising clause 8.01(a)(i)(y) to require the Cdn. Borrower to
deliver to the Administrative Agent prior to March 16, 1998 a copy
of the unaudited consolidated balance sheet of the Cdn. Borrower and
its Subsidiaries as at December 31, 1997, together with the related
unaudited consolidated statements of earnings, changes in financial
position and shareholders' equity of the Cdn. Borrower and its
Subsidiaries for the Financial Year ending on such date, setting
forth in each case in comparative form the figures for the previous
Financial Year and budgeted figures for such Financial Year.
(b) deleting the word 'and' at the end of paragraph 8.01(b)(ix),
changing the '.' at the end of paragraph 8.01(b)(x) to read '; and',
and adding the following paragraph at the end of subsection 8.01(b):
"(xi) prior to April 30, 1998, the Restricted Parties' three year
projections for the 1998, 1999 and 2000 Financial Years of the
Restricted Parties."
(c) adding the following subsections at the end of such Section:
"(x) Designated Subordinated Debt. Comply, and cause the other
Restricted Parties to comply, with the terms and provisions of
the Designated Subordinated Debt and the related subordination
agreement entered into between the Cdn. Borrower, the
Administrative Agent and the holders of the Designated
Subordinated Debt.
(aa) KPMG Report. Take all commercially reasonable
steps to implement, and to cause the other Restricted Parties
to implement, as soon as reasonably possible all
recommendations, if any, which are (i) made by KPMG
Investigation and Security Inc. in its final report (or where
there are separate final reports on different issues, in any
of its final reports) under its February 3, 1998 engagement
letter to Stikeman, Elliott and Blake, Cassels & Graydon, and
(ii) designated by the Administrative Agent, acting
reasonably, as recommendations which should be implemented by
the Restricted Parties.
<PAGE> 11
- 11 -
SECTION 2.10 NEGATIVE COVENANTS: Section 8.02 of the Credit Agreement is
amended by:
(a) adding the following words at the end of paragraph 8.02(a)(viii):
"provided, however, that if any Designated Subordinated Debt is
drawn by the Cdn. Borrower, Additional Debt may thereafter only be
incurred with the prior written consent of, and subject to any
conditions imposed at the time of the giving of such consent by,
the Required Lenders"
(b) revising subsection 8.02(e) of the Credit Agreement to read as
follows:
"(e) Investments. Make any Investments in any one or
more Persons who are not Wholly-Owned Restricted Parties
except for:
(i) the Cdn Borrower's Safety-Kleen Equity Investment to the
extent it is financed from the proceeds of the
Designated Subordinated Debt; and
(ii) other Investments which do not exceed, in the aggregate
for all such Investments made after the date of this
Agreement and all Financial Assistance given after the
date of this Agreement as permitted under paragraph
8.02(l)(ii) by all Restricted Parties, U.S. $50,000,000
(or the Equivalent Amount in any other currency or
currencies)."
(c) revising subsection 8.02(f) of the Credit Agreement by removing the
word "and" at the end of paragraph 8.02(f)(i), changing the "." at
the end of paragraph 8.02(f)(ii) to read "; and", and adding the
following paragraph at the end of such subsection:
"(iii) the Cdn. Borrower may repay the Designated Subordinated
Debt (including interest thereon) if such repayment is
made in compliance with the provisions of subsection
8.02(u)."
(d) revising subsection 8.02(l) of the Credit Agreement to read as
follows:
"(l) Limitation of Financial Assistance) Limitation of Financial
Assistance. Provide any Financial Assistance to any one or
more Persons which are not Wholly-Owned Restricted Parties
except:
(i) the Cdn Borrower's Safety-Kleen Equity Investment to the
extent it is financed from the proceeds of the
Designated Subordinated Debt; and
(ii) other Financial Assistance which does not exceed, in the
aggregate
<PAGE> 12
- 12 -
for all such Financial Assistance made after the
date of this Agreement and all Investments given after
the date of this Agreement as permitted under paragraph
8.02(e)(ii) by all Restricted Parties, U.S. $50,000,000
(or the Equivalent Amount in any other currency or
currencies); provided, however, that this limitation
shall not apply to assurances or obligations of
Restricted Parties which are excluded from the
definition of Contingent Obligation pursuant to
paragraph (c) of such definition.
(e) revising subsection 8.02(r) of the Credit Agreement by changing the
"." at the end of such subsection to read ";" and by adding the
following clause after paragraph 8.02(r)(ii) at the end of such
subsection as part of the main paragraph of such subsection:
"provided however, that the provisions of this subsection shall not
apply to any Hedging Arrangements existing prior to December 31, 1997
to the extent that they gave rise to all or any part of the Inventory
Discrepancy Charge."
(f) adding the following new subsections at the end of such Section:
"(s) Standstill Respecting Certain Activities. Notwithstanding any
other provision of this Agreement, at any time between February
9, 1998 and June 30, 1998:
(i) enter into any material Purchase Money Obligation or
Capitalized Lease Obligation otherwise permitted under
subsection 8.02(a);
(ii) make any further Investments under the basket provided
for under paragraph 8.02(e)(ii);
(iii) enter into any further sale and leaseback transactions
otherwise permitted under subsection 8.02(j) other than
a U.S. $25,000,000 pending sale and leaseback
transaction with National City Leasing Corporation;
(iv) make any further Acquisitions otherwise permitted under
subsection 8.02(k);
(v) provide any further Financial Assistance under the
basket provided for under paragraph 8.02(l)(ii); or
(vi) enter into any further arrangements to monetize
inventory otherwise permitted under paragraph
8.02(d)(iv) except for continuations, renewals or
rollovers of inventory monetization arrangements in
existence on February 9, 1998.
<PAGE> 13
- 13 -
(t) Obtaining Designated Subordinated Debt. Obtain any of the
Designated Subordinated Debt:
(i) unless the holder of such Designated Subordinated Debt
has first entered into a subordination agreement in
form, scope and substance satisfactory to the
Administrative Agent; and
(ii) unless the entire proceeds of such Designated
Subordinated Debt are used only for the purpose of
financing the Cdn. Borrower's Safety-Kleen Equity
Investment and paying the fees associated therewith.
(u) Payment of Designated Subordinated Debt. Make or provide for
any payment of any of the Designated Subordinated Debt at any
time except to the extent that such payment is expressly
permitted under the provisions of the subordination agreement
referred to in paragraph 8.02(t)(i)."
SECTION 2.11 FINANCIAL COVENANTS: Section 8.03 of the Credit Agreement is
amended by deleting the word 'and' at the end of subsection 8.03(c), changing
the '.' at the end of subsection 8.03(d) to read '; and' and adding the
following subsection at the end of such Section:
"(e) will ensure that the Adjusted Debt to EBITDA Covenant Ratio
is at all times:
(1) on or before December 31, 1998, equal to or less than
5.0 to 1.0;
(2) on or after January 1, 1999 and on or before December
31, 1999, equal to or less than 4.75 to 1.0; and
(3) on or after January 1, 2000, equal to or less than 4.5
to 1.0."
SECTION 2.12 EVENTS OF DEFAULT: Section 9.01 of the Credit Agreement is
amended by adding the following subsections at the end of such Section:
"(v) Inventory Discrepancy Charge. If any of the representations
and warranties made in subsection 7.01(ah) are determined by
the Required Lenders to be untrue in any material respect (it
being acknowledged and agreed by the Borrowers that a finding
by KPMG Investigation and Security Inc. pursuant to the
investigation undertaken by it under the February 3, 1998
engagement letter from KPMG Investigation and Security Inc. to
Stikeman, Elliott and Blake, Cassels & Graydon (as the same may
be supplemented or amended from time to time in accordance with
its terms) will be deemed to be conclusive for the purpose of
assessing the truth of any such matter).
<PAGE> 14
- 14 -
(w) KPMG Report. If the final report of KPMG Investigation and
Security Inc. referred to in subsection 8.01(aa) (or where there are
separate final reports on different issues, any one of such final
reports) or the results of investigations relative to the Inventory
Discrepancy Charge by the Cdn. Borrower, its auditors or KPMG
Investigation and Security Inc. disclose any matter respecting the
Restricted Parties' financial position, performance, accounting or
reporting, or the Restricted Parties' internal controls, management
or governance systems, which matter, in the opinion of the Required
Lenders, (i) is material, and (ii) was not known by such Lenders on
February 19, 1998, and (iii) has had or would have a Material
Adverse Effect.
SECTION 2.13 CONDITIONS PRECEDENT: Section 10.02 of the Credit Agreement is
amended by revising subsection (c) of such Section to read as follows:
"(c) After giving effect to the applicable Borrowing the Borrowers
will continue to be in compliance with the Debt to EBITDA
Covenant Ratio requirements set forth in subsection 8.03(b) and
the Adjusted Debt to EBITDA Covenant Ratio requirements set forth
in subsection 8.03(e), and the applicable Borrower shall have
delivered to the Administrative Agent, if so requested by the
Administrative Agent, an Officer's Certificate to such effect."
SECTION 2.14 SCHEDULES: The Schedules to the Credit Agreement are amended by:
(a) amending Schedule 6 (Permitted Liens) by adding the following
paragraph to such Schedule;
"(y) Liens in favour of the holders of the Designated Subordinated
Debt provided that such Liens:
(i) secure only the Designated Subordinated Debt;
(ii) do not at any time extend to collateral that is not
subject to the Liens created under the Security or the
Additional Security; and
(iii) rank subsequent to all Liens in favour of the
Administrative Agent, the Other Agents, the Lenders and
their respective Eligible Affiliates relative to the
Credit Documents and Lender/Borrower Hedging
Arrangements and are validly subordinated to all such
Liens pursuant to a subordination agreement in form,
scope and substance satisfactory to the Administrative
Agent."
(b) amending Schedule 10 (Form of Notice of Borrowing) by revising
paragraph (iii) on page 3 of such form of Notice of Borrowing to read
as follows:
"(iii) after giving effect to the Borrowing requested under this
Notice of
<PAGE> 15
-15-
Borrowing:
(A) the Debt to EBITDA Covenant Ratio on the Borrowing Date
under this Notice of Borrowing will be less than to
1.0; and
(B) the Adjusted Debt to EBITDA Covenant Ratio on the
Borrowing Date under this Notice of Borrowing will be
less than to 1.0; and"
(c) amending Schedule 21 (Quarterly Compliance Certificate) by adding a
new paragraph 8a to the Quarterly Financial Compliance Certificate
forming part of such Schedule to read as follows:
"8a The Borrower is in compliance with the Adjusted Debt to
EBITDA Covenant Ratio requirements of subsection 8.03(e) of
the Credit Agreement as of the first day following the
Reference Date as demonstrated in the calculations set forth
in Appendix to this Certificate. Debt as of the first
day following the Reference Date was U.S. $ (x), Subordinated
Debt as of the first day following the Reference Date was U.S.
$ (y) and EBITDA for the Reference
Financial Period ended on the Reference Date was U.S. $ (z).
Accordingly the Adjusted Debt to EBITDA Covenant Ratio on
the first day following the Reference Date was ((x)+(y))
divided by (z) which is to 1.0."
ARTICLE THREE
REPRESENTATIONS AND WARRANTIES
SECTION 3.01 CONFIRMATION OF REPRESENTATIONS: Each of the Borrowers
represents and warrants that, as at the date of this amending agreement and
assuming that the amendments made to the Credit Agreement by this amending
agreement have become effective, no Default or Event of Default has occurred
and is continuing and the representations and warranties contained in Article
Seven of the Credit Agreement are true and correct.
ARTICLE FOUR
GENERAL
SECTION 4.01 CONFIRMATION: The Credit Agreement, as amended by this amending
agreement, is hereby confirmed by the Borrowers and the Administrative Agent,
on behalf of itself, the Lenders, the Other Agents and their respective
Eligible Affiliates.
SECTION 4.02 BINDING NATURE: This amending agreement shall enure to the
benefit of and be
<PAGE> 16
-16-
binding upon the Borrowers, the Administrative Agent, the Lenders, the Other
Agents, their respective Eligible Affiliates and their respective successors
and permitted assigns.
SECTION 4.03 CONFLICTS: If, after the date of this amending agreement, any
provision of this amending agreement is inconsistent with any provision of the
Credit Agreement the relevant provision of this amending agreement shall
prevail.
SECTION 4.04 LAW OF CONTRACT: This amending agreement shall be governed by
and construed in accordance with the laws of the Province of Ontario and of the
laws of Canada applicable in the Province of Ontario.
SECTION 4.05 COUNTERPART AND FACSIMILE: This amending agreement may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
instrument. Delivery of an executed signature page to this amending agreement
by any party by facsimile transmission shall be as effective as delivery of a
manually executed copy of this amending agreement by such party.
IN WITNESS OF WHICH the Borrowers and the Administrative Agent, on behalf
of itself, the Lenders, the Other Agents and their respective Eligible
Affiliates, have executed this amending agreement as of the date indicated on
the first page of this amending agreement.
PHILIP SERVICES
PHILIP SERVICES CORP. (DELAWARE), INC.
by: __________________________________ by: __________________________________
name: Marvin Boughton name: Marvin Boughton
title: Chief Financial Officer, title: Chief Financial Officer,
Executive Vice President Executive Vice President
by: __________________________________ by: __________________________________
name: Colin Soule name: Colin Soule
title: Executive Vice President, title: Executive Vice President,
General Counsel General Counsel
CANADIAN IMPERIAL BANK OF
COMMERCE (in its capacity
as Administrative Agent)
<PAGE> 17
- 17 -
by: __________________________________
name:
title:
ACKNOWLEDGEMENT AND CONFIRMATION
Each of the undersigned consents to the above referenced amendments to the
Credit Agreement and to the Borrowers and the Administrative Agent, on behalf
of itself, the Lenders, the Other Agents and their respective Eligible
Affiliates, entering into this amending agreement and acknowledges and agrees
that all of the guarantees and security delivered by it to any one or more of
the Administrative Agent and the Lenders in connection with, or otherwise
applicable to, the debts and liabilities of itself or either one or both of the
Borrowers to any one or more of the Administrative Agent, the Lenders, the
Other Agents and their respective Eligible Affiliates under, in connection with
or with respect to any one or more of the Credit Agreement, the other Credit
Documents and the Lender/Borrower Hedging Arrangements are hereby ratified and
confirmed and remain in full force and effect notwithstanding the entering into
of this amending agreement by the Borrowers and the Administrative Agent, on
behalf of itself, the Lenders, the Other Agents and their respective Eligible
Affiliates, and notwithstanding the amendments to the Credit Agreement effected
by this amending agreement.
This acknowledgement and confirmation may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same instrument. Delivery of an executed
signature page to this acknowledgement and confirmation by any party by
facsimile transmission shall be as effective as delivery of a manually executed
copy of this acknowledgement and confirmation by such party.
IN WITNESS OF WHICH each of the undersigned have executed this
acknowledgement and confirmation as of the date referred to on the first page
of this amending agreement.
PHILIP INTERNATIONAL DEVELOPMENT INC.
PHENCORP INTERNATIONAL B.V.
PHILIP ENVIRONMENTAL (ATLANTIC) LIMITED
REFLUENT INVESTMENTS LIMITED
<PAGE> 18
- 18 -
1244764 ONTARIO LIMITED
SCHIFLUENT LIMITED
IVOR SIMMONS FAMILY HOLDINGS INC.
PHILIP INVESTMENT CORP.
CHEM-SERV ASSOCIATES INC.
LYNX ENVIRONMENTAL SERVICES LTD.
PHILIP ANALYTICAL SERVICES CORPORATION
RECYCLAGE D'ALUMINIUM QUEBEC INC./QUEBEC ALUMINUM RECYCLING
INC.
PHILIP ENVIRONMENTAL (ELMIRA) INC.
PHILIP ENTERPRISES INC.
PHILIP ENVIRONMENTAL SERVICES LIMITED
PHENCORP REINSURANCE COMPANY INC.
2766906 CANADA INC.
TARO AGGREGATES LTD.
1233793 ONTARIO INC.
1195613 ONTARIO INC.
842578 ONTARIO LIMITED
ALLWASTE OF CANADA LTD.
CALIGO RECLAMATION LTD.
CALIGO REINGUNGSGES M.B.H.
SERV-TECH CANADA INC.
<PAGE> 19
- 19 -
ST DELTA CANADA INC.
LUNTZ CORPORATION
RMF GLOBAL, INC.
(the surviving corporation from the merger of RMF
Global, Inc., RMF Industrial Services, Inc. and
RMF Global Management Co., Inc. into Philip
Environmental Services Acquisition Corporation)
RMF INDUSTRIAL CONTRACTING, INC.
RMF ENVIRONMENTAL, INC.
COUSINS WASTE CONTROL CORPORATION
(the surviving corporation from the merger of LWC
Equipment Company, BBC Environmental Enterprises,
Inc. and Cousins Waste Control Corporation into
Philip Environmental Services Acquisition (Ohio)
Corporation)
PEN METALS (DELAWARE), INC.
PHILIP METALS (DELAWARE), INC.
LUNTZ ACQUISITION (DELAWARE) CORPORATION
PHILIP METALS, INC.
PHILIP METALS RECOVERY (USA) INC.
(the surviving corporation from the merger of
Conversion Resources, Incorporated and Warrenton
Resources, Inc. into Philip Metals Recovery (USA)
Inc.)
PHILIP ENVIRONMENTAL OF IDAHO CORPORATION
PHILIP ENVIRONMENTAL (WASHINGTON) INC.
BURLINGTON ENVIRONMENTAL INC.
(a Delaware corporation)
PHILIP ENVIRONMENTAL SERVICES CORPORATION (the
surviving corporation from the
<PAGE> 20
- 20 -
merger of Jaca Corp. into Philip Environmental
Services Corporation)
SOLVENT RECOVERY CORPORATION
BURLINGTON ENVIRONMENTAL INC.
(a Washington corporation)
RESOURCE RECOVERY CORPORATION
TERMCO CORPORATION
UNITED DRAIN OIL SERVICE, INC.
GASOLINE TANK SERVICE COMPANY, INC.
PHILIP SERVICES (NEW YORK) INC.
(the surviving corporation from the merger of
Philip Environmental (New York) Inc. into Roth
Bros. Smelting Corp.)
NORTRU, INC.
ALLWORTH, INC.
CHEMICAL RECLAMATION SERVICE, INC.
CYANOKEM INC.
RHO-CHEM CORPORATION
SESSA, S.A. DE C.V.
THERMALKEM INC.
PHILIP INDUSTRIAL SERVICES GROUP, INC.
(formerly Allwaste, Inc.)
PSC ENTERPRISES INC.
(formerly Allquest Enterprises, Inc.)
ALLIES STAFFING, INC.
ALLQUEST CAPITAL, INC.
<PAGE> 21
- 21 -
ALLQUEST ENERGY SERVICES, INC.
ALLWASTE TANK CLEANING, INC.
ALLWASTE RECOVERY SYSTEMS, INC.
HYDROWASH RECYCLING SYSTEMS, INC.
ALLWASTE RAILCAR CLEANING, INC.
GRS/LAKE CHARLES, LTD.
GEORGIA RECOVERY SYSTEMS
ALLWASTE ENVIRONMENTAL SERVICES, INC.
CALIGO LTD.
PHILIP PLANT SERVICES, INC.
ALL SAFETY & SUPPLY, INC.
PHILIP SERVICES/LOUISIANA, INC.
(formerly Allwaste Environmental Services of
Louisiana, Inc.)
PHILIP SERVICES/MISSOURI, INC.
(formerly Allwaste Environmental Services of
Missouri, Inc.)
ALLWASTE ACCESS SERVICES, INC.
PHILIP SERVICES/OKLAHOMA, INC.
(formerly Allwaste Environmental Services of
Oklahoma, Inc.)
PHILIP INDUSTRIAL SERVICES OF TEXAS, INC.
(formerly Allwaste Environmental Services of
Texas, Inc.)
ALLWASTE ENVIRONMENTAL SERVICES/SOUTHWEST, INC.
ALLWASTE/NAL, INC.
<PAGE> 22
- 22 -
ALLWASTE ENVIRONMENTAL SERVICES/SOUTH CENTRAL,
INC.
ALLWASTE EXPLOSIVE SERVICES, INC.
JAMES & LUTHER SERVICES, INC.
ALLWASTE SERVICES OF EL PASO, INC.
ALLWASTE TEXQUISITION, INC.
ACE/ALLWASTE ENVIRONMENTAL SERVICES OF INDIANA,
INC.
ALLWASTE ENVIRONMENTAL SERVICES OF OHIO, INC.
J.D. MEAGHER/ALLWASTE, INC.
ALLWASTE ENVIRONMENTAL SERVICES/NORTH CENTRAL,
INC.
(an Iowa corporation)
PHILIP SERVICES/NORTH CENTRAL, INC.
(formerly Allwaste Environmental Services/North
Central, Inc.) (an Illinois corporation)
OIL RECYCLING, INC.
PHILIP MID-ATLANTIC, INC.
(formerly Clean America, Inc.)
PHILIP SERVICES/NORTH ATLANTIC, INC.
(formerly Allwaste Environmental Services/North
Atlantic, Inc.)
JESCO INDUSTRIAL SERVICES, INC.
PHILIP/WHITING, INC.
(formerly Allwaste/Whiting, Inc.)
ALLWASTE ENVIRONMENTAL SERVICES/WEST COAST, INC.
<PAGE> 23
- 23 -
ALLWASTE TRANSPORTATION AND REMEDIATION, INC.
ALLWASTE OF HAWAII, LTD.
ALLWASTE INTERMOUNTAIN PLANT SERVICES, INC.
ALLSCAFF, INC.
PHILIP SERVICES/CENTRAL FLORIDA, INC.
(formerly Allwaste Environmental Services/Central
Florida, Inc.)
PHILIP SERVICES/ATLANTA, INC.
(formerly Allwaste Environmental Services of
Atlanta, Inc.)
ALLWASTE SERVICES OF CHARLOTTE, INC.
PHILIP SERVICES/MOBILE, INC.
(formerly Allwaste Services of Mobile, Inc.)
PHILIP/BEC, INC.
(formerly BEC/Allwaste, Inc.)
INDUSTRIAL CONSTRUCTION SERVICES COMPANY, INC.
MADSEN-BARR/PHILIP UTILITIES MANAGEMENT
CORPORATION, INC.
(formerly Madsen/Barr-Allwaste, Inc.)
APLC, INC.
ALRC, INC.
AWI/ETSS ACQUISITION, INC.
TIPCO ACQUISITION CORP.
AWI/SOUTHWEST ACQUISITION
<PAGE> 24
- 24 -
ALLWASTE SERVICIOS INDUSTRIALES DE CONTROL
ECOLOGICO S.A. DE C.V.
ALLWASTE PAINT SERVICES S.A. DE C.V.
ALLWASTE ASBESTOS ABATEMENT, INC.
ALLWASTE ASBESTOS ABATEMENT HOLDINGS, INC.
ALLWASTE ASBESTOS ABATEMENT OF NEW ENGLAND, INC.
ONEIDA ASBESTOS REMOVAL, INC.
ONEIDA ASBESTOS ABATEMENT INC.
PHILIP ST, INC.
(formerly Serv-Tech, Inc.)
HARTNEY INDUSTRIAL SERVICES CORPORATION
HARTNEY CORPORATION
TOTAL REFRACTORY SYSTEMS, INC.
CON-SEAL, INC.
UNITED INDUSTRIAL MATERIALS, INC.
ADVANCED REFRACTORY SERVICES, INC.
CASTING CONCEPTS, INC.
TURNAROUND MAINTENANCE, INC.
PHILIP ENTERPRISE SERVICE CORPORATION
(formerly Enterprise Service Corporation)
PRS HOLDING, INC.
PHILIP PETRO RECOVERY SYSTEMS, INC.
(formerly Petro Recovery Systems, Inc.)
<PAGE> 25
- 25 -
TERMINAL TECHNOLOGIES, INC.
SERV-TECH OF NEW MEXICO, INC.
DM ACQUISITION CORPORATION
DELTA MAINTENANCE, INC.
CHEMISOLV HOLDINGS, INC.
PHILIP CHEMI-SOLV, INC.
(formerly Chemi-Solv, Inc.)
CHEMISOLV LIMITED
PHILIP ST PIPING, INC.
(formerly ST Piping, Inc.)
SERV-TECH EUROPE GMBH
REFINERY MAINTENANCE INTERNATIONAL LIMITED
SERV-TECH SERVICES, INC.
MAC-TECH, INC.
SERV-TECH MEXICANA S DE R.L.
SERV-TECH DE MEXICO S DE R.L.
PHILIP TECHNICAL SERVICES, INC.
(formerly Hill Technical Services, Inc.)
PETROCHEM FIELD SERVICES DE VENEZUELA
PHILIP MECHANICAL SERVICES OF LOUISIANA INC.
(formerly American Mechanical Services, Inc.)
SERV-TECH SUDAMERICANA S.A.
SERV-TECH EPC, INC.
<PAGE> 26
- 26 -
SERV-TECH ENGINEERS, INC.
PHILIP F.C. SCHAFFER, INC.
(formerly F.C. Schaffer & Associates, Inc.)
SERV-TECH CONSTRUCTION AND MAINTENANCE, INC.
SERV-TECH INTERNATIONAL SALES
INTSEL SOUTHWEST LIMITED PARTNERSHIP
by all of its partners
PEN METALS (DELAWARE), INC.
PHILIP METALS (DELAWARE), INC.
PHILIP/SECO INDUSTRIES, INC.
(formerly Seco Industries, Inc.)
1247701 ONTARIO INC.
1248076 ONTARIO INC.
INTERMETCO LIMITED
ARC DUST PROCESSING (BARBADOS) LIMITED
HARRINGTON ENGINEERING LIMITED
SPITMAN INDUSTRIE SERVICES B.V.
ALLWASTE TANK SERVICES S.A. DE C.V.
CALIGO DE MEXICO, S.A. DE C.V.
SERV-TECH INTERNATIONAL SALES, INC.
PSC/IML ACQUISITION CORPORATION
21ST CENTURY ENVIRONMENTAL MANAGEMENT, INC.
21ST CENTURY ENVIRONMENTAL
<PAGE> 27
- 27 -
MANAGEMENT, INC. OF NEVADA
21ST CENTURY ENVIRONMENTAL MANAGEMENT, INC. OF
PUERTO RICO
21ST CENTURY ENVIRONMENTAL MANAGEMENT, INC. OF
RHODE ISLAND
CHEMICAL POLLUTION CONTROL, INC. OF FLORIDA
CHEMICAL POLLUTION CONTROL, INC. OF NEW YORK
NORTHLAND ENVIRONMENTAL, INC.
RESI ACQUISITION (DELAWARE) CORPORATION
CHEM-FREIGHT, INC.
REPUBLIC ENVIRONMENTAL RECYCLING (NEW JERSEY),
INC.
REPUBLIC ENVIRONMENTAL SYSTEMS (PENNSYLVANIA),
INC.
REPUBLIC ENVIRONMENTAL SYSTEMS (TECHNICAL
SERVICES GROUP), INC.
REPUBLIC ENVIRONMENTAL SYSTEMS (TRANSPORTATION
GROUP), INC.
D & L INC.
INTERMETCO US INC.
BUTCO INC.
INTERMETCO USA LTD.
GEORGIA TUBULAR PRODUCTS, INC.
MEKLO, INCORPORATED
<PAGE> 28
- 28 -
SOUTHEAST ENVIRONMENTAL SERVICES, INC.
ALLSCAFF, INC. (a Tennessee corporation)
PHILIP INDUSTRIAL SERVICES (USA), INC.
PHILIP PLANT SERVICES, INC.
PHILIP METALS, INC.
INDUSTRIAL SERVICES TECHNOLOGIES, INC.
ADVANCED ENVIRONMENTAL SYSTEMS, INC.
ADVANCED ENERGY CORPORATION
INTERNATIONAL CATALYST, INC.
IST HOLDING CORP.
CHEM-FAB, INC.
PIPING HOLDINGS CORP.
PIPING COMPANIES, INC.
PIPING MECHANICAL CORP.
HYDRO-ENGINEERING & SERVICE, INC.
AES ACQUISITION CORP.
PHILIP METALS (USA), INC.
PHILIP SERVICES (PENNSYLVANIA), INC.
<PAGE> 29
- 29 -
and all other Guarantor Subsidiaries (if any)
in each case by:
/s/ Colin Soule
____________________________
Colin Soule
Authorized Signatory
<PAGE> 1
EXHIBIT 21
PHILIP SERVICES CORP. SUBSIDIARY LIST - AS AT MARCH 1, 1998
<TABLE>
<CAPTION>
COMPANY OWNERSHIP JURISDICTION
<S> <C> <C>
Philip Services Corp. Ontario
2766906 Canada Inc. 100% Canada
721646 Alberta Ltd. 100% Alberta
Arc Dust Processing (Barbados) Limited 100% Barbados
Allwaste of Canada Ltd. 100% Ontario
Caligo Partnership 90% Ontario
Caligo Reclamation Ltd. 100% Ontario
Cecatur Holdings 100% Ireland
Philip Services (Delaware) L.L.C. 100% Delaware
Luntz Corporation 80% Delaware
Luntz Acquisition (Delaware) Corporation 100% Delaware
21st Century Environmental Management, Inc. 100% Delaware
21st Century Environmental Management, Inc. of Nevada 100% Nevada
21st Century Environmental Management, Inc. of
Puerto Rico 100% Delaware
21st Century Environmental Management, Inc. of Rhode
Island 100% Rhode Island
Chemical Pollution Control, Inc. of Florida 100% Florida
Chemical Pollution Control, Inc. of New York 100% New York
Northland Environmental, Inc. 100% Delaware
RESI Acquisition (Delaware) Corporation 100% Delaware
Chem-Freight, Inc. 100% Ohio
Republic Environmental Recycling (New Jersey), Inc. 100% New Jersey
Republic Environmental Systems (Pennsylvania), Inc. 100% Pennsylvania
Republic Environmental Systems (Technical Services Group), Inc. 100% New Jersey
Republic Environmental Systems (Transportation Group), Inc. 100% Pennsylvania
Philip Enterprises Inc./Les Entreprises Philip Inc. 100% Ontario
1195613 Ontario Limited 100% Ontario
1233793 Ontario Inc. 100% Ontario
2842-7979 Quebec Inc. 100% Quebec
800151 Ontario Inc. 100% Ontario
821059 Ontario Inc. 25% Ontario
842578 Ontario Limited 100% Ontario
912613 Ontario Ltd. 100% Ontario
Fercyco & Partners 33% Not Available
Fercyco Incorporated 50% Ontario
Fers et Meteaux Recycles Ltd. 50% Quebec
K-Scrap Resources Inc. 42% Ontario
Luntz Corporation 19% Delaware
Phencorp International Finance Inc. 100% Ireland
Phencorp International B.V. 100% Netherlands
Spitman Industrie Service B.V. 100% Netherlands
Philip Services (Europe) Limited 100% United Kingdom
Allied Metals Limited 100% United Kingdom
Arc Dust processing (UK) Limited 33% United Kingdom
B.M. Metals (Recycling) Ltd. 100% United Kingdom
Bath Reclamation (Avonmouth) Co. Limited 100% United Kingdom
</TABLE>
1
<PAGE> 2
SUBSIDIARY LIST - as at March 1, 1998
<TABLE>
<CAPTION>
Company Ownership Jurisdiction
<S> <C> <C>
Blackbushe Limited 100% United Kingdom
Blackbushe Metals (Western) Limited 100% United Kingdom
Elliott Metal Company Limited 100% United Kingdom
Southern Hauliers Limited 100% United Kingdom
T.C. Fraser Metals Limited 75% United Kingdom
Cardiff Facility Company Limited 50% United Kingdom
E. Pearse (Holdings) Limited 100% United Kingdom
E. Pearse & Co. Limited 100% United Kingdom
C. Phillip and Sons (Bristol) Limited 100% United Kingdom
Mayer Pearse Limited 100% United Kingdom
Widsite Limited 100% United Kingdom
Philip Cardiff Facility Company Limited 50% United Kingdom
Philip Metals (Europe) Limited 100% United Kingdom
Philip Services (Delaware), Inc. 100% Delaware
Philip Industrial Services (USA), Inc. 100% Texas
Cousins Waste Control Corporation
(formerly Philip Environmental Services Acquisition (Ohio) Corporation) 100% Ohio
Nortru Inc. 100% Michigan
Allworth Inc. 100% Alabama
Chemical Reclamation Service, Inc. 100% Texas
Meklo, Incorporated 100% Texas
Southeast Environmental Services, Inc. 100% Texas
CyanoKEM, Inc. 100% Michigan
Nortru, Ltd. 100% Ontario
Rho-Chem Corporation 100% California
Sessa, S.A. de C.V. 100% Mexico
ThermalKEM, Inc. 100% Delaware
Philip Environmental of Idaho Corporation 100% Delaware
Philip Environmental Washington Inc. 100% Washington
Burlington Environmental Inc. 100% Delaware
Burlington Environmental Inc.
(formerly Chemical Processors Inc.) 100% Washington
Resource Recovery Corporation 100% Washington
Termco Corporation 100% Washington
Gasoline Tank Service
Company Inc. 100% Washington
United Drain Oil Service Inc. 100% Washington
Philip Environmental Services Corporation
(formerly Burlington Environmental Inc.) 100% Missouri
Solvent Recovery Corporation 100% Missouri
Philip Industrial Services Group, Inc.
(formerly Allwaste, Inc.) 100% Delaware
ALRC, Inc. 100% Delaware
APLC, Inc. 100% Delaware
Allwaste Asbestos Abatement Holdings, Inc.
(formerly Combined Waste Services, Inc.) 100% Delaware
Allwaste Asbestos Abatement, Inc. 100% Delaware
Allwaste Asbestos Abatement of New England, Inc. 100% Massachusetts
Oneida Asbestos Removal, Inc. 100% Not Available
</TABLE>
2
<PAGE> 3
SUBSIDIARY LIST - as at March 1, 1998
<TABLE>
<CAPTION>
Company Ownership Jurisdiction
<S> <C> <C>
Oneida Asbestos Abatement, Inc. 100% Delaware
Allwaste Environmental Services, Inc.
(formerly Allwaste Services, Inc.) 100% Delaware
Ace/Allwaste Environmental Services of Indiana, Inc.
(formerly Ace Power Rodding Corporation) 100% Illinois
All Safety and Supply, Inc. 100% Texas
AllScaff, Inc.
(formerly Southern Scaffold, Inc.) 100% Tennessee
Allwaste Environmental Services/North Central, Inc.(ILLINOIS CORP -
FOR UNION PURPOSES ONLY) 100% Illinois
Allwaste Environmental Services/Southwest, Inc.
(formerly Western Hydrovac, Inc.) 100% Arizona
Allwaste Servicios Industriales de Control Ecologico S.A. de C.V. 60% Mexico
Allwaste Tank Services S.A. de C.V. 60% Mexico
Allwaste Texquisition Inc.
(formerly Hydrowash Acquisition Company, Inc.) 100% Texas
Caligo de Mexico, S.A. de C.V. 99% Not Available
Caligo, Ltd. 100% Pennsylvania
Industrial Construction Services Co., Inc. 100% Alabama
J.D. Meagher/Allwaste, Inc. 100% Massachusetts
James & Luther Services, Inc. 100% Delaware
Allwaste Services of El Paso, Inc. 100% Delaware
Jesco Industrial Service, Inc. 100% Kentucky
Oil Recycling, Incorporated 100% North Dakota
Philip Services Hawaii, Ltd.
(formerly SmithService Hawaii, Ltd.) 100% Hawaii
Philip Industrial Services of Texas, Inc.
(formerly Allwaste Services of Freeport, Inc.) 100% Texas
Philip Services/Louisiana, Inc.
(formerly Allwaste Oilfield Services, Inc.) 100% Louisiana
Philip Mid-Atlantic, Inc.
(formerly Clean America, Inc.) 100% Maryland
Philip Services/Missouri, Inc.
(formerly Allwaste Environmental Services of Missouri, Inc.) 100% Delaware
Philip Services/Mobile, Inc.
(formerly Ed Nemer Construction Co., Inc.) 100% Alabama
Philip Services/North Atlantic, Inc.
(formerly Allwaste Environmental Services/North Atlantic, Inc.) 100% Delaware
Philip Services/North Central, Inc..
(formerly Allwaste Environmental Services/North Central, Inc.) 100% Illinois
Philip Services/Ohio, Inc.
(formerly AWI/C&K Acquisition, Inc.) 100% Ohio
Philip Services/Oklahoma, Inc.
(formerly Allwaste Environmental Services of Oklahoma, Inc.) 100% Oklahoma
Philip Plant Services, Inc.
(formerly Allwaste Intermountain Plant Services, Inc.) 100% Delaware
Philip Scaffold Corporation
(formerly Glenn's Enterprises, Inc.) 100% Colorado
Philip Services/Atlanta, Inc.
(formerly Allwaste Field Services of Atlanta, Inc.) 100% Georgia
Philip Services South Central, Inc..
(formerly Vac-N-Jet Environmental, Inc.) 100% Colorado
</TABLE>
3
<PAGE> 4
SUBSIDIARY LIST - as at March 1, 1998
<TABLE>
<CAPTION>
Company Ownership Jurisdiction
<S> <C> <C>
Philip West Industrial Services, Inc.
(formerly Allwaste Services of San Francisco, Inc.) 100% California
Philip Transportation and Remediation, Inc.
(formerly C.K.C., Inc.) 100% California
Philip/BEC, Inc.
(formerly BEC/Allwaste, Inc.) 100% Alabama
Philip/Whiting, Inc.
(formerly Allwaste/Whiting, Inc.) 100% Delaware
Allwaste Tank Cleaning, Inc.
(formerly Atlanta Truck Wash) 100% Georgia
Allwaste Railcar Cleaning, Inc. 100% Delaware
Allwaste Recovery Systems, Inc.
(formerly Allwaste Services of Georgia, Inc) 100% Georgia
Georgia Recovery Systems 50% Not Available
GRS/Lake Charles, Ltd. 50% Not Available
PSC Enterprises, Inc. 100% Delaware
Allies Staffing, Inc. 100% Delaware
Allies Staffing Ltd. 100% Ontario
Allquest Capital, Inc. 100% Delaware
Allquest Compression Services L.L.C. 50% Delaware
HydroServe Westlake, L.L.C. 50% Delaware
Philip ST, Inc.
(formerly Serv-Tech, Inc.) 100% Texas
Philip Chemisolv Holdings, Inc. 100% Delaware
Chemisolv Limited 100% United Kingdom
Nutrisolv Ireland Ltd. 100% Not Available
Philip Chemi-Solv, Inc.
(formerly Chemi-Solv, Inc) 100% Texas
DM Acquisition Corporation 100% Nevada
Delta Maintenance, Inc. 100% Louisiana
Dotspec Ltd. 100% Not Available
Industrial Services Technologies, Inc. 100% Colorado
Advanced Environmental Systems, Inc. 62% Colorado
Advanced Energy Corporation 100% Colorado
International Catalyst, Inc. 100% Colorado
IST Holding Corp. 100% Colorado
Chem-Fab, Inc. 100% Colorado
Piping Holdings Corp. 100% Colorado
Piping Companies, Inc. 100% Colorado
Piping Mechanical Corp. 100% Colorado
Hydro-Engineering &
Service, Inc. 100% Colorado
Mac-Tech, Inc. 100% Texas
Serv-Tech de Mexico, S. de R.L. 95% Mexico
Serv-Tech Mexicana, s. de R.L. 95% Mexico
Petrochem Field Services de Venezuela, S.A. 70% Venezuela
Philip Enterprise Service Corporation
(formerly Enterprise Service Corporation) 100% North Carolina
Philip Mechanical Services of Louisiana, Inc.
(formerly American Mechanical Services, Inc.) 100% Louisiana
Philip Refractory and Corrosion Corporation 100% Nevada
</TABLE>
4
<PAGE> 5
SUBSIDIARY LIST - as at March 1, 1998
<TABLE>
<CAPTION>
Company Ownership Jurisdiction
<S> <C> <C>
Advanced Refractory Services, Inc. 100% Nevada
Casting Concepts, Inc. 100% Texas
Hartney Corporation 100% Nevada
Philip Refractory Services, Inc. 100% Nevada
Advanced Refractory
Services, Inc. 100% Nevada
Casting Concepts, Inc. 100% Texas
Hartney Corporation 100% Nevada
Total Refractory Systems, Inc. 100% Nevada
Turnaround Maintenance, Inc. 100% Nevada
United Industrial Materials, Inc. 100% Nevada
Philip ST Piping, Inc.
(formerly ST Piping, Inc.) 100% Texas
Philip Technical Services, Inc.
(formerly Hill Technical Services, Inc.) 100% Texas
Philip/SECO Industries, Inc.
(formerly SECO Industries, Inc.) 100% Louisiana
TIPCO Acquisition Corp. 100% Texas
PRS Holding, Inc. 100% Texas
Philip Petro Recovery Systems, Inc.
(formerly Petro Recovery Systems, Inc.) 100% Texas
Serv-Tech EPC, Inc. 100% Nevada
Petrochem Field Services de Venezuela, S.A. 30% Venezuela
Serv-Tech Construction and Maintenance, Inc. 100% Texas
Serv-Tech Engineers, Inc. 100% Louisiana
Philip F.C. Schaffer, Inc.
(formerly F. C. Schaffer & Associates, Inc.) 100% Louisiana
Serv-Tech Europe GMBH 100% Germany
Refinery Maintenance International Limited 100% United Kingdom
Serv-Tech International Sales, Inc. 100% Virgin Islands
Serv-Tech of New Mexico, Inc. 100% New Mexico
Serv-Tech Services, Inc. 100% Texas
Serv-Tech Sudamericana, S.A. 98% Venezuela
ServTech Canada, Inc. 100% Canada
ST Delta Canada 100% Canada
Terminal Technologies, Inc. 100% Texas
RMF Global, Inc.
(formerly Philip Environmental Services Acquisition Corporation) 100% Ohio
RMF Industrial Contracting, Inc. 100% Michigan
RMF Environmental, Inc. 100% Ohio
Philip Metals (USA), Inc. 100% Ohio
D & L, Inc. 100% Pennsylvania
Intermetco US Inc. 100% Michigan
Butco Inc. 100% New York
Alltift Inc. 50% New York
Intermetco USA Ltd. 100% New York
Georgia Tubular Products, Inc. 100% Georgia
JW Ventures Inc. 50% Texas
</TABLE>
5
<PAGE> 6
SUBSIDIARY LIST - as at March 1, 1998
<TABLE>
<CAPTION>
Company Ownership Jurisdiction
<S> <C> <C>
Pen Metals (Delaware), Inc. 100% Delaware
Philip Metals (Delaware), Inc. 100% Delaware
Intsel Southwest Limited Partnership 99% Connecticut
Philip Metals Recovery (USA) Inc.
(formerly Waxman Resources (USA) Inc.) 100% Arizona
Philip Metals Inc.
(formerly Philip Metals (Ohio), Inc.) 100% Ohio
Philip Services (New York) Inc. 100% New York
Philip Services (Pennsylvania), Inc. 100% Pennsylvania
R&R Trucking Inc. 50% Ontario
Sablix Inc. 100% Quebec
Phencorp Reinsurance Company Inc. 100% Barbados
Philip Analytical Services Corporation
(formerly Barringer Laboratories Limited) 100% Ontario
Philip Environmental (Atlantic) Limited 100% Nova Scotia
Philip Environmental (Elmira) Inc.
(formerly 1008746 Ontario Inc.) 100% Ontario
Philip Environmental Services Limited
(formerly Delsan Environmental Group Inc.) 100% Ontario
Delsan Aim Environmental Services Inc. 50% Quebec
Delsan Cleveland Environmental Services Inc. 50% Canada
Delsan Demolition Limited
(formerly Delsan Contracting Limited) 100% Ontario
York Thomas Delsan Decommissioning Inc. 33% Ontario
Philip Industries (Europe) Limited 100% United Kingdom
Philip Industrial Services (Europe) Limited 100% United Kingdom
Philip International Development Inc. 100% Barbados
Philip Services Industriais do Brazil Ltda 99% Brazil
Recycomb S.A. 24% Argentina
Resicontrol S.A. 25% Brazil
Philip Investment Corp. 100% Ontario
Philip Plasma Metals Inc. 100% Ontario
PSC (Europe) Limited 100% United Kingdom
PSC/IML Acquisition Corp. 100% Not Available
Philip Utilities Management Corporation 70% Ontario
1242204 Ontario Inc. 100% Ontario
Philip Utilities Management (Delaware) Corporation 100% Delaware
Allwaste/NAL, Inc. 100% Arizona
CDM Philip Inc. 80% Washington
Enviroganics of Texas, Inc. 100% Texas
Madsen-Barr/Philip Utilities Management Corporation, Inc.
(formerly AWI/Cirrus Acquisition, Inc.) 100% Delaware
Philip Automated Management Controls, Inc. 100% Georgia
Philip Utilities Management (Indiana) Corporation 100% Indiana
Philip Utilities Management (Massachusetts) Corporation 100% Massachusetts
Philip Utilities Management (Texas) Corporation 100% Texas
Dittman-Merka Enterprises Inc. 51% Texas
Southwest Utilities, Inc. 100% Texas
Philip Utilities Management (Louisiana)Corporation 100% Louisiana
Magnolia Construction Company, Inc. 100% Louisiana
Rockcliffe Research Management Inc. 100% Canada
</TABLE>
6
<PAGE> 7
SUBSIDIARY LIST - as at March 1, 1998
<TABLE>
<CAPTION>
Company Ownership Jurisdiction
<S> <C> <C>
(formerly Radian Research Management)
Thorburn Penny Limited 100% Ontario
Trimax Environmental Services Inc. 100% Alberta
Uniflo Utilities Management Corporation 100% Canada
Construction et Pavage Nord Americain Ltee 51% Quebec
Canarehab Inc. 100% Quebec
Cormar Contracting Limited 100% Ontario
Uniflo Pipeliners East Inc. 100% Ontario
Uniflo Sewer Systems Inc. 100% Ontario
Uniflow Drain Services, Inc. 100% Ontario
Recyclage d'Aluminium Quebec Inc./Quebec Aluminium Recycling Inc. 100% Canada
</TABLE>
7
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 48,809
<SECURITIES> 0
<RECEIVABLES> 560,111
<ALLOWANCES> (22,437)
<INVENTORY> 223,613
<CURRENT-ASSETS> 879,169
<PP&E> 605,710
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,819,426
<CURRENT-LIABILITIES> 483,660
<BONDS> 0
<COMMON> 1,348,066
0
0
<OTHER-SE> (109,099)
<TOTAL-LIABILITY-AND-EQUITY> 2,819,426
<SALES> 0
<TOTAL-REVENUES> 1,750,930
<CGS> 0
<TOTAL-COSTS> 1,516,476
<OTHER-EXPENSES> 348,451
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 46,807
<INCOME-PRETAX> (146,476)
<INCOME-TAX> (42,235)
<INCOME-CONTINUING> (104,241)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (104,241)
<EPS-PRIMARY> (1.18)
<EPS-DILUTED> (1.18)
</TABLE>
