STOCK OPTION AGREEMENT, dated as of the 10th day of August,
1998 (this "Agreement"), between American Disposal Services, Inc., a Delaware
corporation ("Issuer"), and Allied Waste Industries, Inc., a Delaware
corporation ("Grantee").
WHEREAS, contemporaneously with the execution of this
Agreement, the Grantee, a wholly-owned subsidiary of Grantee ("Merger Sub"), and
Issuer are entering into an Agreement and Plan of Merger, dated as of the date
hereof (the "Merger Agreement"), pursuant to which Grantee and Issuer intend to
effect a merger of Merger Sub with and into Issuer (the "Merger"); and
WHEREAS, as an inducement and condition to Grantee's
willingness to enter into the Merger Agreement, and in consideration thereof,
the Board of Directors of Issuer has approved the grant to Grantee of the option
pursuant to this Agreement; provided, that such grant was expressly conditioned
upon, and made of no effect until after, execution and delivery of the Merger
Agreement by Issuer, Grantee and Merger Sub.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and agreements set forth in this Agreement and in the Merger
Agreement, the parties agree as follows:
1. The Option. (a) Issuer hereby grants to Grantee an
unconditional, irrevocable option (the "Option") to purchase, subject to the
terms hereof, up to 4,000,000 fully paid and nonassessable shares of common
stock, having a par value of .01 per share ("Common Stock"), of Issuer at a
price per share in cash equal to $40.00 (the "Option Price"); provided, however,
that in no event shall the number of shares for which the Option is exercisable
exceed 19.9% of the shares of Common Stock issued and outstanding at the time of
exercise (without giving effect to the shares of Common Stock issued or issuable
under the Option) (the "Maximum Applicable Percentage"). The number of shares of
Common Stock purchasable upon exercise of the Option and the Option Price are
subject to adjustment as set forth in this Agreement.
(b) In the event that any additional shares of Common Stock
are issued or otherwise become outstanding after the date of this Agreement
(other than pursuant to this Agreement), the aggregate number of shares of
Common Stock purchasable upon exercise of the Option (inclusive of shares, if
any, previously purchased upon exercise of the Option) shall automatically be
increased (without any further action on the part of Issuer or Grantee being
necessary) so that, after such issuance, it equals the Maximum Applicable
Percentage. Any such increase shall not affect the Option Price.
2. Exercise; Closing.
(a) Conditions to Exercise; Termination. Grantee or any other
person that shall become a holder of all or a part of the Option in accordance
with the terms of this Agreement (each such person, including Grantee, being
referred to as the "Holder") may exercise the Option, in whole or in part, after
the occurrence of a Triggering Event by delivering a written notice as provided
in Section 2(d) within 180 days of the occurrence of a Triggering Event (as
defined in Section 2(b)). The Option shall terminate upon either (i) the
occurrence of the Effective Time (as defined in the Merger Agreement) or (ii)
(A) if the Notice Date (as hereinafter defined) has not previously occurred, the
close of business on the earlier of (x) the day 180 days after the date that
Grantee becomes entitled to receive the Termination Fee (as defined in the
Merger Agreement) and (y) the date that Grantee is no longer potentially
entitled to receive the Termination Fee, in each case under Section 7.6(b) of
the Merger Agreement, and (B) if the Notice Date has previously occurred, one
year after the Notice Date (the events in (i) or (ii) being referred to as
"Exercise Termination Events".)
(b) Triggering Event. A "Triggering Event" shall have occurred
if the Merger Agreement is terminated and Grantee then or thereafter becomes
entitled to receive the Termination Fee pursuant to Section 7.6(b) of the Merger
Agreement.
(c) Notice of Trigger Event by Issuer. Issuer shall notify
Grantee promptly in writing of the occurrence of any Triggering Event, it being
understood that the giving of the notice by Issuer shall not be a condition to
the right of the Holder to exercise the Option.
(d) Notice of Exercise by Grantee. If a Holder shall be
entitled to and wishes to exercise the Option, it shall send to Issuer a written
notice (the date on which it is given, as defined in Section 16, is referred to
as the "Notice Date") specifying (i) the total number of shares that the Holder
will purchase pursuant to the exercise and (ii) a place and date (a "Closing
Date") not earlier than three business days nor later than 60 business days from
the Notice Date for the closing of the purchase (a "Closing"); provided, that if
a filing is required under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended (the "HSR Act") or prior notification to or approval of any
other authority is required in connection with this purchase, the Holder or
Issuer, as required, promptly after the giving of the notice shall file the
notice or application for approval and shall expeditiously process the same and
the period of time referred to in clause (ii) shall commence on the date on
which the Holder furnishes to Issuer a supplemental written notice setting forth
the Closing Date, which notice shall be furnished as promptly as practicable
after all required notification periods shall have expired or been terminated
and all required approvals shall have been obtained and all requisite waiting
periods shall have passed. Each of the Holder and the Issuer agrees to use all
reasonable efforts to cooperate with and provide information to Issuer or
Holder, as the case may be, for the purpose of any required notice or
application for approval.
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(e) Payment of Purchase Price. At each Closing, the Holder
shall pay to Issuer the aggregate purchase price for the shares of Common Stock
purchased pursuant to the exercise of the Option in immediately available funds
by a wire transfer to a bank account designated by Issuer; provided, that
failure or refusal of Issuer to designate a bank account shall not preclude the
Holder from exercising the option, in whole or in part.
(f) Delivery of Common Stock. At such Closing, simultaneously
with the payment of the purchase price by the Holder, Issuer shall deliver to
the Holder a certificate or certificates representing the number of shares of
Common Stock purchased by the Holder and, if the Option shall be exercised in
part only, a new option evidencing the rights of the Holder to purchase the
balance (as adjusted pursuant to Section l(b)) of the shares then purchasable
hereunder.
(g) Restrictive Legend. Certificates for Common Stock
delivered at a Closing may be endorsed with a restrictive legend that shall read
substantially as follows:
"The transfer of the shares represented by this certificate is
subject to certain provisions of an agreement between the registered
holder and Issuer, a copy of which agreement is on file at the
principal office of Issuer, and to resale restrictions arising under
the Securities Act of 1933, as amended. A copy of the aforementioned
agreement will be mailed to the holder without charge promptly after
receipt by Issuer of a written request."
It is understood and agreed that: (i) the reference to the resale restrictions
of the Securities Act of 1933, as amended (the "Securities Act"), in the above
legend shall be removed by delivery of substitute certificate(s) without this
reference if the Holder shall have delivered to Issuer a copy of a letter from
the staff of the Securities and Exchange Commission, or a written opinion of
counsel, in form and substance reasonably satisfactory to Issuer, to the effect
that this legend is not required for purposes of the Securities Act; (ii) the
reference to the provisions of this Agreement in the above legend shall be
removed by delivery of substitute certificate(s) without this reference if the
shares have been sold or transferred in compliance with the provisions of this
Agreement and under circumstances that do not require the retention of such
reference; and (iii) the legend shall be removed in its entirety if the
conditions in the preceding clauses (i) and (ii) both are satisfied. In
addition, the certificates shall bear any other legend as may be required by
applicable law.
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(h) Ownership of Record; Tender of Purchase Price; Expenses.
Upon the giving by the Holder to Issuer of a written notice of exercise referred
to in Section 2(e) and the tender of the applicable purchase price in
immediately available funds, the Holder shall be deemed to be the holder of
record of the shares of Common Stock issuable upon such exercise,
notwithstanding that the stock transfer books of Issuer shall then be closed or
that certificates representing such shares of Common Stock shall not have been
delivered to the Holder. Issuer shall pay all expenses, and any and all United
States federal, state and local taxes (other than income taxes payable by
Holder) and other charges that may be payable in connection with the
preparation, issue and delivery of stock certificates under this Section 2 in
the name of the Holder or its assignee, transferee or designee.
3. Covenants of Issuer. In addition to its other
agreements and covenants herein, Issuer agrees:
(a) Shares Reserved for Issuance. To maintain, free from
preemptive rights, sufficient authorized but unissued or treasury shares of
Common Stock so that the Option may be fully exercised without additional
authorization of Common Stock after giving effect to all other options,
warrants, convertible securities and other rights of third parties to purchase
shares of Common Stock from Issuer, or to issue the appropriate number of shares
of Common Stock pursuant to the terms of this Agreement;
(b) No Avoidance. Not to avoid or seek to avoid (whether by
charter amendment or through reorganization, consolidation, merger, issuance of
rights, dissolution or sale of assets, or by any other voluntary act) the
observance or performance of any of the covenants, agreements or conditions to
be observed or performed hereunder by Issuer and not to take any action which
would cause any of its representations or warranties not to be true; and
(c) Further Assurances. Promptly after the date hereof to take
all actions as may from time to time be required (including (i) complying with
all applicable premerger notification, reporting and waiting period requirements
under the HSR Act and (ii) in the event that prior approval of or notice to any
other regulatory authority is necessary under any applicable federal, state or
local law before the Option may be exercised, cooperating fully with the Holder
in preparing and processing the required applications or notices) in order to
permit each Holder to exercise the Option and purchase shares of Common Stock
pursuant to such exercise and to take all action necessary to protect the rights
of the Holder against dilution.
4. Representations and Warranties of Issuer. Issuer hereby
represents and warrants to Grantee that Issuer has all requisite corporate power
and authority and has taken all corporate action necessary to authorize,
execute, deliver and perform its
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obligations under this Agreement and to consummate the transactions
contemplated hereby; this Agreement has been duly and validly authorized,
executed and delivered by Issuer and constitutes a valid and binding agreement
of Issuer enforceable against Issuer in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors' rights
and to general equity principles. Issuer hereby further represents and warrants
to Grantee that it has taken all necessary corporate action to authorize and
reserve for issuance upon exercise of the Option the shares of Common Stock
issuable upon exercise of the Option and that all shares of Common Stock, upon
issuance pursuant to the Option, will be delivered free and clear of all claims,
liens, encumbrances, and security interests (other than those created by this
Agreement) and not subject to any preemptive rights. There are no agreements,
instruments, securities, arrangements, or plans which would create any
additional cost or burden on any exercise of the Option. Issuer has taken all
action necessary to make inapplicable to Grantee any state takeover, business
combination, control share or other similar statute and any charter provisions
which would otherwise be applicable to Grantee or any transaction involving
Issuer and Grantee by reason of the grant of the Option, the acquisition of
beneficial ownership of shares of Common Stock as a result of the grant of the
Option, or the acquisition of shares of Common Stock upon exercise of the
Option, except for statutes or provisions which by their terms cannot be waived
or rendered inapplicable by any action of the Board of Directors of the Issuer.
5. Representations and Warranties of Grantee. Grantee hereby
represents and warrants to Issuer that Grantee has all requisite corporate power
and authority and has taken all corporate action necessary in order to
authorize, execute, deliver and perform its obligations under this Agreement and
to consummate the transactions contemplated hereby; this Agreement has been duly
and validly authorized, executed and delivered by Grantee and constitutes a
valid and binding agreement of Grantee enforceable against Grantee in accordance
with its terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability relating to
or affecting creditors' rights and to general equity principles.
6. Exchange; Replacement. This Agreement and the Option
granted hereby are exchangeable, without expense, at the option of the Holder,
upon presentation and surrender of this Agreement at the principal office of
Issuer, for other Agreements providing for Options of different denominations
entitling the holder thereof to purchase in the aggregate the same number of
shares of Common Stock purchasable at such time hereunder, subject to
corresponding adjustments in the number of shares of Common Stock purchasable
upon exercise so that the aggregate number of such shares under all Stock Option
Agreements issued in respect of this Agreement shall not exceed the Maximum
Applicable Percentage. Unless the context shall require otherwise, the terms
"Agreement" and "Option" as used in this Agreement include any Stock Option
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Agreements and related options for which this Agreement (and the option granted
hereby) may be exchanged. Upon (i) receipt by Issuer of evidence reasonably
satisfactory to it of the loss, theft, destruction, or mutilation of this
Agreement, (ii) receipt by Issuer of reasonably satisfactory indemnification in
the case of loss, theft or destruction and (iii) surrender and cancellation of
this Agreement in the case of mutilation, Issuer will execute and deliver a new
Agreement of like tenor and date. Any new Agreement executed and delivered shall
constitute an additional contractual obligation on the part of Issuer, whether
or not the Agreement so lost, stolen, destroyed or mutilated shall at any time
be enforceable by any person other than the holder of the new Agreement.
7. Adjustments. In addition to the adjustment to the total
number of shares of Common Stock purchasable upon exercise of the Option
pursuant to Section l(b), the total number of shares of Common Stock purchasable
upon the exercise and the Option Price shall be subject to adjustment from time
to time as follows:
(a) In the event of any change in the outstanding shares of
Common Stock by reason of stock dividends, split-ups, mergers,
recapitalizations, combinations, subdivisions, conversions, exchanges of shares
or the like, the type and number of shares of Common Stock purchasable upon
exercise of the Option shall be appropriately adjusted, and proper provision
shall be made in the agreements governing any such transaction, so that (i) any
Holder shall receive upon exercise of the Option the number and class of shares,
other securities, property or cash that such Holder would have received in
respect of the shares of Common Stock purchasable upon exercise of the option if
the Option had been exercised and such shares of Common Stock had been issued to
such Holder immediately prior to such event or the record date therefor, as
applicable; and (ii) in the event any additional shares of Common Stock are to
be issued or otherwise become outstanding as a result of any such change (other
than pursuant to an exercise of the Option), the number of shares of Common
Stock purchasable upon exercise of the Option shall be increased so that, after
such issuance and together with shares of Common Stock previously issued
pursuant to the exercise of the Option (as adjusted on account of any of the
foregoing changes in the Common Stock), the number of shares so purchasable
equals the Maximum Applicable Percentage of the number of shares of Common Stock
issued and outstanding immediately after the consummation of such change; and
(b) Whenever the number of shares of Common Stock purchasable
upon exercise hereof is adjusted as provided in this Section 7, the Option Price
shall be adjusted by multiplying the Option Price by a fraction, the numerator
of which is equal to the number of shares of Common Stock purchasable prior to
the adjustment and the denominator of which is equal to the number of shares of
Common Stock purchasable after the adjustment.
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8. Registration. (a) At any time after the occurrence of a
Triggering Event prior to an Exercise Termination Event, Issuer shall, at the
request of Grantee delivered in the written notice of exercise of the option
provided for in Section 2(e), as promptly as practicable prepare, file and keep
current a shelf registration statement under the Securities Act covering any or
all shares issued and issuable pursuant to the Option and shall use its best
efforts to cause such registration statement to become effective and remain
current in order to permit the sale or other disposition of any shares of Common
Stock issued upon total or partial exercise of the Option ("Option Shares") in
accordance with any plan of disposition requested by Grantee; provided, however,
that Issuer may postpone filing a registration statement relating to a
registration request by Grantee under this Section 8 for a period of time (not
in excess of 90 days) if in its judgment such filing would require the
disclosure of material information that Issuer has a bona fide business purpose
for preserving as confidential. Issuer will use its best efforts to cause such
registration statement first to become effective and then to remain effective
for 365 days after the later of the (i) day the registration statement first
becomes effective or until such earlier date as all shares registered shall have
been sold by Grantee or the Holders and (ii) the Closing Date. In connection
with any such registration, Issuer and Grantee shall provide each other with
representations, warranties, indemnities and other agreements customarily given
in connection with such registrations. If requested by Grantee in connection
with such registration, Issuer shall become a party to any underwriting
agreement relating to the sale of such shares, but only to the extent of
obligating Issuer in respect of representations, warranties, indemnities,
contribution and other agreements customarily made by issuers in such
underwriting agreements.
(b) In the event that Grantee so requests, the closing of the
sale or other disposition of the Common Stock or other securities pursuant to a
registration statement filed pursuant to Section 8(a) shall occur substantially
simultaneously with the exercise of the Option.
9. Repurchase of Option and/or Shares.
(a) Repurchase; Repurchase Price. Upon the occurrence of a
Triggering Event prior to an Exercise Termination Event, (i) at the request of a
Holder, delivered in writing within 180 days of this occurrence (or such later
period as provided in Section 2(d) with respect to any required notice or
application or in Section 10), Issuer shall repurchase the Option from the
Holder, in whole or in part, at a price (the "Option Repurchase Price") equal to
the number of shares of Common Stock then purchasable upon exercise of the
Option (or such lesser number of shares as may be designated in the Repurchase
Notice (as defined below)) multiplied by the amount by which the market/offer
price (as defined below) exceeds the Option Price and (ii) at the request of a
Holder or any person who has been a Holder (for purposes of this Section 9 only,
each such person being referred to as a "Holder"), delivered in writing within
180 days of this
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occurrence (or such later period as provided in Section 2(d) with respect
to any required notice or application or in Section 10), Issuer shall repurchase
such number of Option Shares from such Holder as the Holder shall designate in
the Repurchase Notice at a price (the "Option Share Repurchase Price") equal to
the number of shares designated multiplied by the market/offer price. The term
"market/offer price" shall mean the highest of (w) the Option Price plus $2.00,
(x) the price per share of Common Stock at which a tender or exchange offer for
Common Stock has been made after the date of this Agreement and prior to the
delivery of the Repurchase Notice and which offer has either been consummated or
has not been withdrawn or terminated as of the date payment of the Repurchase
Price is made, (y) the price per share of Common Stock to be paid by any third
party pursuant to an agreement with Issuer for a merger, share exchange,
consolidation or reorganization entered into after the date hereof and on or
prior to the delivery of the Repurchase Notice and (z) the average closing price
for shares of Common Stock on the NYSE (or, if the Common Stock is not then
listed on the NYSE, any other national securities exchange or automated
quotation system on which the Common Stock is then listed or quoted) for the
twenty consecutive trading days immediately preceding the delivery of the
Repurchase Notice. In the event that a tender or exchange offer is made for the
Common Stock or an agreement is entered into for a merger, share exchange,
consolidation or reorganization involving consideration other than cash, the
value of the securities or other property issuable or deliverable in exchange
for the Common Stock shall be determined in good faith by a nationally
recognized investment banking firm selected by Issuer and reasonably acceptable
to Grantee.
(b) Method of Repurchase. A Holder may exercise its right to
require Issuer to repurchase the Option, in whole or in part, and/or any Option
Shares then owned by such Holder pursuant to this Section 9 by surrendering for
this purpose to Issuer, at its principal office, this Agreement or certificates
for Option Shares, as applicable, accompanied by a written notice or notices
stating that the Holder elects to require Issuer to repurchase the Option and/or
such Option Shares in accordance with the provisions of this Section 9 (each
such notice, a "Repurchase Notice"). Within two business days after the
surrender of the Option and/or certificates representing Option Shares and the
receipt of the Repurchase Notice, Issuer shall deliver or cause to be delivered
to the Holder the applicable Option Repurchase Price and/or the Option Share
Repurchase Price or, in either case, the portion that Issuer is not then
prohibited under applicable law and regulation from so delivering. In the event
that the Repurchase Notice shall request the repurchase of the Option in part,
Issuer shall deliver with the Option Repurchase Price a new Stock Option
Agreement evidencing the right of the Holder to purchase that number of shares
of Common Stock purchasable pursuant to the Option at the time of delivery of
the Repurchase Notice minus the number of shares of Common Stock represented by
that portion of the Option then being repurchased.
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(c) Effect of Statutory or Regulatory Restraints on
Repurchase. To the extent that, upon or following the delivery of a Repurchase
Notice, Issuer is prohibited under applicable law or regulation from
repurchasing the Option (or a portion) and/or any Option Shares subject to such
Repurchase Notice (and Issuer hereby undertakes to use its reasonable best
efforts to obtain all required regulatory and legal approvals and to file any
required notices as promptly as practicable in order to accomplish this
repurchase), Issuer shall immediately so notify the Holder in writing and
thereafter deliver or cause to be delivered, from time to time, to the Holder
the portion of the option Repurchase Price and the Option Share Repurchase Price
that Issuer is no longer prohibited from delivering, within 2 business days
after the date on which it is no longer so prohibited; provided, however, that
upon notification by Issuer in writing of this prohibition, the Holder may,
within 5 days of receipt of this notification from Issuer, revoke in writing its
Repurchase Notice, whether in whole or to the extent of the prohibition,
whereupon, in the latter case, Issuer shall promptly (i) deliver to the Holder
that portion of the option Repurchase Price and/or the Option Share Repurchase
Price that Issuer is not prohibited from delivering; and (ii) deliver to the
Holder, as appropriate, (a) with respect to the Option, a new Stock Option
Agreement evidencing the right of the Holder to purchase that number of shares
of Common Stock for which the surrendered Stock Option Agreement was exercisable
at the time of delivery of the Repurchase Notice less the number of shares as to
which the Option Repurchase Price has theretofore been delivered to the Holder,
and/or (b) with respect to Option Shares, a certificate for the option Shares as
to which the Option Share Repurchase Price has not theretofore been delivered to
the Holder. Notwithstanding anything to the contrary in this Agreement,
including, without limitation, the time limitations on the exercise of the
Option, the Holder may exercise the Option for 180 days after a notice of
revocation has been issued pursuant to this Section 9(c).
(d) Acquisition Transactions. In addition to any other
restrictions covenants, Issuer hereby agrees that, in the event that a Holder
delivers a Repurchase Notice, it shall not enter or agree to enter into any
Acquisition Transaction unless the other party or parties thereto agree to
assume in writing Issuer's obligations under Section 9(a) and, notwithstanding
any notice of revocation delivered pursuant to the proviso to Section 9(c), a
Holder may require such other party or parties to perform Issuer's obligations
under Section 9(a) unless such party or parties are prohibited by law or
regulation from such performance, in which case such party or parties shall be
subject to the obligations of the Issuer under Section 9(c).
10. Extension of Exercise Periods. The 180-day periods for
exercise of certain rights under Sections 2 and 9 shall be extended in each such
case at the request of the Holder to the extent necessary to avoid liability by
the Holder under Section 16(b) of the Exchange Act by reason of this exercise.
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11. Standstill. Upon an exercise of the Option which results
in Grantee or any Holder owning in excess of 9.9% of the then outstanding shares
of Common Stock, the person who would own in excess of 9.9% of such shares shall
be subject to the following restrictions:
(a) it and its affiliates will not (and will not assist,
provide or arrange financing to or for others or encourage other to), directly
or indirectly, acting alone or as part of a group, (i) propose to Issuer or to
any of Issuer's security holders or any other person any merger, consolidation
or similar transaction, acquisition of a substantial portion of Issuer's
business or assets, an acquisition of any of Issuer's securities or any other
transaction involving any of Issuer's securities, in any such case involving it
and the Issuer or the Issuer and any third party, (ii) acquire by purchase or
otherwise, or agree, propose or offer to acquire any of the securities of Issuer
or any interest therein (other than pursuant to exercises of the Option, stock
dividends or other distributions by the Issuer or offerings by Issuer made
available to holder of shares of Common Stock generally), (iii) otherwise seek
to influence or control, in any manner whatsoever, (including proxy
solicitation, becoming a "participant" in any "election contest," or otherwise),
the management or policies of the Issuer or (iv) enter into discussions,
negotiations, arrangements or understandings with, or solicit or encourage, any
third party with respect to any of the foregoing or make public disclosure in
respect of any of the foregoing or request permission to do any of the
foregoing. (As used in this Agreement, the term "affiliate" shall have the
meaning set forth in Rule 12b-2 of the Securities Exchange Act of 1934.)
(Notwithstanding the foregoing, any employee benefit, pension or similar plan of
such person or the Company, as the case may be, may own, acquire or transfer up
to 1% of any class of securities of an Issuer in the ordinary course of
business, solely for investment.); and
(b) it shall not sell, transfer or dispose of the Option
Shares (a "Transfer") except:
(i) to affiliated or associated persons who
agree to become subject to this
Agreement on the same terms as such person;
(ii) in connection with a bona fide pledge, after
default in the obligation secured by the
pledge;
(iii) an offering or distribution of the Shares in
compliance with the Securities Act in which
reasonable efforts are made not to knowingly
sell 5% or more of the then outstanding
shares of Common Stock to any one person
(including its affiliates and other members
of a "group" within the meaning of Rule
13(d)(3) of the Securities Exchange Act of
1934);
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(iv) in compliance with the requirements of Rule
144 under the Securities Act;
(v) in privately negotiated transactions which
would not, to the reasonable knowledge of
such person after reasonable inquiry, after
giving effect to the Transfer result in the
acquiror's ownership of 5% or more of the
outstanding shares of Common Stock;
(vi) pursuant to a tender or exchange offer (as
such terms are used in the Securities
Exchange Act of 1934 and the rules and
regulations promulgated thereunder) made by
a party not affiliated or associated with
such person for all outstanding Shares as to
which offer a majority of the directors of
the Issuer then in office have not
recommended that stockholders not tender or
exchange their Shares; or
(vii) pursuant to a tender or exchange offer by
the Issuer or in a merger or other
transaction pursuant to an agreement with
the Issuer.
These restrictions shall expire upon the earlier of (i) five
years from the date of this Agreement and (ii) the date upon which such person
owns less than 5% of the outstanding shares of Common Stock so long as this
person continues to own less than 5% of the outstanding shares of Common Stock
for the next twelve consecutive months and, if its ownership is 5% or more of
the outstanding shares during this twelve month period, then these restrictions
shall once again apply to that person.
12. Assignment. Neither party hereto may assign any of its
rights or obligations under this Agreement or the Option to any other person
without the express written consent of the other party except that Grantee may
assign its rights in whole or in part to any of its affiliates and, in the event
that a Triggering Event shall have occurred, Grantee may assign the Option, in
whole or in part to one or more third parties, provided that the affiliate and
any third party shall execute this Agreement and become subject to its terms.
Any attempted assignment in contravention of the preceding sentence shall be
null and void.
13. Filings; Other Actions. Each of Grantee and Issuer will
use its best efforts to make all filings with, and to obtain consents of, all
third parties and govern mental authorities necessary for the consummation of
the transactions contemplated by this Agreement.
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14. Specific Performance. The parties acknowledge that damages
would be an inadequate remedy for a breach of this Agreement by either party and
that the obligations of the parties shall be specifically enforceable through
injunctive or other equitable relief.
15. Severability; Etc. If any term, provision, covenant, or
restriction contained in this Agreement is held by a court or a federal or state
regulatory agency of competent jurisdiction to be invalid, void, or
unenforceable, the remainder of the terms, provisions, covenants, and
restrictions contained in this Agreement shall remain in full force and effect,
and shall in no way be affected, impaired, or invalidated. If for any reason a
court or regulatory agency determines that the Holder is not permitted to
acquire, or Issuer is not permitted to repurchase pursuant to Section 9, the
full number of shares of Common Stock provided in Section l(a) hereof (as
adjusted pursuant (b) and 7 hereof), it is the express intention of Issuer to
allow Holder to acquire or to require Issuer to repurchase such lesser number of
shares as may be permissible, without any amendment or modification of this
Agreement.
16. Notices. All notices, requests, instructions, or other
documents to be given hereunder shall be in writing and shall be deemed given
(i) three business days following sending by registered or certified mail,
return receipt requested, postage prepaid, (ii) when sent if sent by facsimile,
provided that the fax is promptly confirmed by telephone confirmation, (iii)
when delivered, if delivered personally to the intended recipient, and (iv) one
business day later, if sent by overnight delivery via a national courier
service, in each case at the respective addresses of the parties set forth in
the Merger Agreement.
17. Governing Law. This Agreement shall be deemed to be made
in and in all respects shall be interpreted, construed and governed by and in
accordance with the law of the State of Delaware, without regard to the conflict
of law principles thereof.
18. Expenses. Except as otherwise expressly provided in this
Agreement or in the Merger Agreement, all costs and expenses incurred in
connection with this Agreement and the transactions contemplated by this
Agreement shall be paid by the party incurring the expense, including fees and
expenses of its own financial consultants, investment bankers, accountants, and
counsel.
19. Entire Agreement, Etc. This Agreement and the Merger
Agreement constitute the entire agreement, and supersede all other prior
agreements, understandings, representations and warranties, both written and
oral, between the parties, with respect to the subject matter of this Agreement.
The terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective successors and permitted
assigns. Nothing in this Agreement, expressed or implied, is
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intended to confer upon any party, other than the parties, and their
respective successors and permitted assigns, any rights, remedies, obligations
or liabilities under or by reason of this Agreement, except as expressly
provided in this Agreement.
20. Limitation on Profit. (a) Notwithstanding any other
provision of this Agreement, in no event shall the Grantee's Total Profit (as
hereinafter defined) plus any Termination Fee paid to Grantee pursuant to
Section 7.6(b) of the Merger Agreement exceed in the aggregate $40 million and,
if it otherwise would exceed this amount, the Grantee, at its sole election,
shall either (i) reduce the number of shares of Common Stock subject to this
Option, (ii) deliver to the Issuer for cancellation Option Shares previously
purchased by Grantee, (iii) pay cash to the Issuer, or (iv) any combination
thereof, so that Grantee's realized Total Profit, when aggregated with the
Termination Fee so paid to Grantee shall not exceed $40 million after taking
into account the foregoing actions.
(b) Notwithstanding any other provision of this Agreement,
this Option may not be exercised for a number of shares as would, as of the date
of exercise, result in a Notional Total Profit (as defined below) which,
together with any Termination Fee theretofore paid to Grantee would exceed $40
million; provided, that nothing in this sentence shall restrict any exercise of
the Option permitted hereby on any subsequent date.
(c) As used in this Agreement, the term "Total Profit" shall
mean the aggregate amount (before taxes) of the following: (i) (x) the amount
received by Grantee and any other Holder pursuant to Issuer's repurchase of the
Option (or any portion thereof) or any Option Shares pursuant to Section 9,
less, in the case of any repurchase of Option Shares, (y) the Grantee's and any
other Holder's purchase price for such Option Shares, as the case may be, (ii)
(x) the net cash amounts (and the fair market value of any other consideration)
received by Grantee and any other Holder pursuant to the sale of Option Shares
(or any other securities into which such Option Shares are converted or
exchanged) to any unaffiliated party, less (y) the Grantee's (or any other
Holder's) purchase price of the Option Shares, and (iii) the net cash amounts
(and the fair market value of any other consideration) received by Grantee (or
any other Holder) on the transfer of the Option (or any portion thereof) to any
unaffiliated party. In the case of clauses (ii)(x) and (iii) above, the Grantee
and any Holder agrees to furnish as promptly as reasonably practicable after any
disposition of all or a portion of the Option or Option Shares a complete and
correct statement, certified by a responsible executive officer or partner of
the Grantee or Holder, of the net cash amounts (and the fair market value of any
other consideration) received in connection with any sale or transfer of the
Option or Option Shares.
(d) As used in this Agreement, the term "Notional Total
Profit" with respect to any number of shares as to which Grantee and any other
Holder may propose to
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exercise this Option shall be the Total Profit determined as of the date of
this proposal assuming that this Option were exercised on such date for this
number of shares and assuming that such shares, together with all other Option
Shares held by Grantee and any other Holders and their respective affiliates as
of such date, were sold for cash at the closing market price for the Common
Stock as of the close of business on the preceding trading day (less customary
brokerage commissions).
21. Captions. The Article, Section and paragraph captions in
this Agreement are for convenience of reference only, do not constitute part of
this Agreement
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and shall not be deemed to limit or otherwise affect any of the provisions of
this Agreement.
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the duly authorized officers of the parties hereto as of the date
first written above.
AMERICAN DISPOSAL SERVICES, INC.
By: /s/ XXXXXXX XX XXXXX
----------------------------------
Name: Xxxxxxx Xx Xxxxx
----------------------------------
Title: President and Chief Executive Officer
----------------------------------
ALLIED WASTE INDUSTRIES, INC.
By: /s/ XXXXXX X. XXX XXXXXXX
----------------------------------
Name: Xxxxxx X. Xxx Xxxxxxx
----------------------------------
Title: President and Chief Executive Officer
----------------------------------
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