TAX ALLOCATION AGREEMENT
THIS TAX ALLOCATION AGREEMENT (this "Agreement"), dated as of May 7, 1998
among American Waste Services, Inc., an Ohio corporation (the "AWS"), Avalon
Holdings Corporation, a Delaware corporation and a wholly owned subsidiary of
AWS ("Avalon"), and USA Waste Services, Inc., a Delaware corporation ("USA").
W I T N E S S E T H:
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WHEREAS, AWS, USA, and C&S Ohio Corp., an Ohio corporation and a wholly
owned subsidiary of USA ("Sub") have entered into an Agreement and Plan of
Merger dated as of February 6, 1998 (the "Merger Agreement"), providing for the
Merger (as defined in the Merger Agreement) of Sub with and into AWS;
WHEREAS, the Board of Directors of AWS has approved a Contribution and
Distribution Agreement in the form attached to the Merger Agreement (the
"Distribution Agreement");
WHEREAS, the execution and delivery of this Agreement by the parties hereto
is a condition to the obligations of the parties to the Merger Agreement to
consummate the Merger;
WHEREAS, the execution and delivery of this Agreement by the parties hereto
is a condition to the obligations of the parties to the Distribution Agreement
to consummate the Contribution and Distribution (as defined in the Distribution
Agreement); and
WHEREAS, USA and AWS, on behalf of each of them and the AWS Group (as
defined herein) and Avalon, on behalf of itself and the Avalon Group (as defined
herein), wish to provide for the allocation between the AWS Group and the Avalon
Group of all responsibilities, liabilities and benefits relating to or affecting
Taxes (as defined herein) paid or payable by either of them for all taxable
periods, whether beginning before, on or after the Distribution Date (as defined
herein) and to provide for certain other matters.
NOW, THEREFORE, in consideration of the premises and of the respective
covenants and agreements set forth herein, the parties hereto hereby agree as
follows:
ARTICLE I
DEFINITIONS
Section 1.1. Definitions. Capitalized terms used in this Agreement and
not otherwise defined herein shall have the meanings assigned to such terms in
the Merger Agreement or the Distribution Agreement, as the case may be. As used
in this Agreement, the following terms shall have the following respective
meanings:
"Actually Realized" or "Actually Realizes" means, for purposes of
determining the timing of any Taxes (or related Tax cost or benefit) relating to
any Payment, transaction, occurrence or event (including the receipt of any Tax
Refund), the time at which the amount of Taxes payable by such person is
increased above or reduced below, as the case may be, the amount of Taxes that
such person would be required to pay but for such payment, transaction,
occurrence or event.
"Affiliate" means with respect to each of the parties hereto, (i) a
corporation, partnership, limited liability company, trust, joint venture or
other business entity in which 50% or more of the outstanding equity or voting
power is owned (directly or indirectly) by such party, and (ii) a partnership in
which a general partner interest is owned by such party. For purposes of this
Agreement, in no event shall AWS or Avalon be treated as an Affiliate of the
other.
"Affiliated Group" means the affiliated group of corporations within the
meaning of Section 1504 of the Code of which AWS is the common parent.
"Code" means the Internal Revenue Code of 1986, as amended, and shall
include corresponding provisions of any subsequently enacted Federal Tax laws.
"The AWS Group" means, solely for purposes of this Agreement, AWS and its
Affiliates, other than Avalon and its Affiliates (determined after giving effect
to the Contribution and Distribution) and, for Post-Tax Indemnification Periods,
shall include USA and its Affiliates.
"AWS Tax Difference" has the meaning set forth in Section 4.1(b).
"AWS Tax Item" means a Tax Item that is attributable to the AWS Group and
is not a Avalon Tax Item.
"Consolidated Federal Tax Returns" are the Federal Tax Returns for the
Affiliated Group filed on a consolidated basis pursuant to Section 1501 of the
Code for any Pre-Distribution Taxable Period.
"Consolidated State Tax Returns" are the state Tax Returns for the
Affiliated Group filed on a consolidated, unitary or combined basis pursuant to
the laws of any state Taxing Authority for any Pre-Distribution Taxable Period.
"Distribution Date" means the date on which the Distribution occurs or is
deemed to occur for Federal Income Tax purposes and shall be deemed effective as
of the close of business on such date.
"Group" means either the AWS Group or the Avalon Group, as the context
provides.
"Income Tax Benefit" means for any taxable period the excess of (i) the
Income Tax liability of the taxpayer for the taxable period calculated as if the
Timing Difference or Reverse
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Timing Difference, as the case may be, had not occurred but with all other facts
unchanged, over (ii) the Income Tax liability of the taxpayer for the taxable
period, calculated taking into account the Timing Difference or Reverse Timing
Difference, as the case may be (treating an Income Tax Refund as a negative
Income Tax liability for purposes of such calculation).
"Income Tax Detriment" means for any taxable period the excess of (i) the
Income tax liability of the taxpayer for the taxable period, calculated taking
into account the Timing Difference or Reverse Timing Difference, as the case may
be, over (ii) the Income Tax liability of the taxpayer for the taxable period,
calculated as if the Timing Difference or Reverse Timing Difference, as the case
may be, had not occurred but with all other facts unchanged (treating an Income
Tax Refund as a negative Income Tax liability for purposes of such calculation).
"Income Taxes" means any Tax based upon, measured by, or calculated with
respect to (i) net income or profits (including, but not limited to, any capital
gains, alternative minimum Tax and any Tax on items of Tax preference, but not
including sales, use, real property gains, real or personal property, gross or
net receipts, transfer or similar Taxes) or (ii) multiple bases (including, but
not limited to, corporate franchise, doing business or occupation Taxes) if one
or more of the bases upon which such Tax may be based, measured by, or
calculated with respect to, is described in clause (i) above.
"Indemnitee" has the meaning set forth in Section 5.2.
"Indemnitor" has the meaning set forth in Section 5.2.
"Indemnity Issue" has the meaning set forth in Section 5.2.
"IRS" means the Internal Revenue Service.
"Loss Group" has the meaning set forth in Section 4.1(a)(ii).
"Post-Distribution Taxable Period" means a taxable period beginning after
the Distribution Date.
"Post-Tax Indemnification Period" means any Post-Distribution Taxable
Period and that portion of any Straddle Period that begins on the day after the
Distribution Date.
"Pre-Distribution Taxable Period" means a taxable period ending on or
before the Distribution Date.
"Pro Forma Tax Returns" has the meaning set forth in Section 2.1(c).
"Reverse Timing Difference" means an increase in income, gain or recapture,
or a decrease in deduction, loss or credit, as calculated for Income Tax
purposes, of the taxpayer for
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any Tax Indemnification Period coupled with an increase in deduction, loss or
credit, or a decrease in income, gain or recapture, of the taxpayer for any
Post-Tax Indemnification Period.
"Avalon Group" means Avalon and its Affiliates, determined immediately
after the Contribution and Distribution.
"Avalon Tax Difference" has the meaning set forth in Section 4.1(c).
"Avalon Tax Item" means a Tax Item solely attributable to the Avalon Group.
"Straddle Period" means a taxable period that begins before and includes
but does not end on the Distribution Date.
"Tax" or "Taxes" means all forms of taxation, whenever created or imposed,
and whether imposed by a local, municipal, governmental, state, foreign, federal
or other body, and without limiting the generality of the foregoing, shall
include income, sales, use, ad valorem, gross receipts, license, value added,
franchise, transfer, recording, withholding, payroll, wage withholding,
employment, excise, occupation, unemployment insurance, social security,
business license, business organization, stamp, environmental, premium and
property taxes, together with any related interest (including the actual
interest that would have accrued if there were no netting of Taxes), penalties
and additions to any such tax, or additional amounts imposed by any Taxing
Authority (domestic or foreign) upon the AWS Group, the Avalon Group, the USA or
any of their Affiliates.
"Tax Audit Proceeding" means any audit or other examination, judicial or
administrative proceeding relating to liability for, or refunds or adjustments
with respect to, Taxes.
"Tax Contest" has the meaning set forth in Section 5.2.
"Tax Deficiency" means a net increase in Taxes payable as a result of a Tax
Audit Proceeding or an amendment of a Tax Return or an event having a similar
effect.
"Tax Indemnification Period" means any Pre-Distribution Taxable Period and
that portion of any Straddle Period that ends on and includes the Distribution
Date.
"Tax Item" means any item of income, gain, loss, deduction, credit,
provisions for reserves, recapture of credits or any other item which is taken
into account in determining taxable income or is otherwise taken into account in
determining Taxes paid or payable, including an adjustment under Section 481 of
the Code resulting from a change in accounting method, and amounts of property,
payroll, sales or other items that are relevant to the apportionment, allocation
and determination of Taxes for purposes of determining Tax liabilities other
than Federal Income Tax liability.
"Tax Records" has the meaning set forth in Section 6.2
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"Tax Refund" means a refund of Taxes (including a reduction in Taxes as a
result of the utilization of any credit or any offset against Taxes or Tax
Items) reduced (but not below zero) by any net increase in Taxes Actually
Realized by the recipient (or its Affiliate) thereof as a result of the receipt
thereof.
"Tax Return" means any return, filing, questionnaire, information return or
other document required to be filed, including requests for extensions of time,
filings made with respect to estimated tax payments, claims for refund and
amended returns that may be filed, for any period with any Taxing Authority
(whether domestic or foreign) in connection with any Tax or Taxes (whether or
not a payment is required to be made with respect to such filing).
"Taxing Authority" means any governmental or quasi-governmental body
exercising any Taxing authority or Tax regulatory authority.
"Timing Difference" means an increase in income, gain or recapture, or a
decrease in deduction, loss or credit, as calculated for Income Tax purposes, of
the taxpayer for any Post-Tax Indemnification Period coupled with an increase in
deduction, loss or credit, or a decrease in income, gain or recapture, of the
taxpayer for any Tax Indemnification Period.
ARTICLE II
PREPARATION AND FILING OF TAX RETURNS
Section 2.1. Preparation of Tax Returns.
(a) Consistent with Agreements. Each of the parties to this Agreement
agrees to, and to cause each of its relevant Affiliates to, report the
Contribution, the Distribution and the Merger consistent with the provisions of
the Merger Agreement and the Distribution Agreement.
(b) Consistent with Past Practice. Except for any accounting method
changes pursuant to applications that are approved by the IRS and reflected in
Schedule 6.12 of the Merger Agreement and any accounting method elections and
changes that may be effective as of the day after the Distribution Date and are
applicable only to the Avalon Group (or otherwise have no adverse effect on the
AWS Group, as determined by the AWS Group in its reasonable discretion), all Tax
Returns described in Sections 2.2(a), (b), (c) and (d) filed after the date of
this Agreement, in the absence of a controlling change in law or circumstance,
shall be prepared on a basis consistent with the elections, accounting methods,
conventions and principles of taxation used for the most recent taxable periods
for which Tax Returns involving similar Tax Items have been filed. Subject to
the provisions of this Agreement, all decisions relating to the preparation of
Tax Returns shall be made in the sole discretion of the party responsible under
this Agreement for such preparation.
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(c) Avalon Obligations. Avalon agrees to cooperate in good faith with
AWS to determine the appropriate amount of Tax Items, if any, attributable to
the AWS Group to be reflected on any Tax Returns for Pre-Distribution Taxable
Periods and Straddle Periods to be prepared by Avalon in accordance with Section
2.2 (b) and (c). With respect to each of the 1997 taxable year and the taxable
year ending on and including the Distribution Date, Avalon (i) will deliver to
AWS at least 45 days prior to the due date for filing of the Tax Returns (giving
effect to applicable extensions) for such taxable year, pro forma Federal and
state Income Tax Returns (the "Pro Forma Tax Returns") for such taxable years
and (ii) will consult with AWS with respect to the application of the Tax Items
shown on the Pro Forma Tax Returns to the Tax Items to be shown on the Tax
Returns. The computations made with respect to the Pro Forma Tax Returns shall
be made, where applicable, on a basis consistent with the principles of Treasury
Regulation Section 1.1502-76(b)(2). Avalon will inform and consult with AWS
regarding any Tax Audit Proceedings or any other adjustments which would
materially affect any of the Tax Items shown on the Pro Forma Tax Returns.
Avalon will provide AWS with copies of all Tax Returns prepared by Avalon in
accordance with Section 2.2(b) and (c) promptly after filing.
(d) AWS Obligations. AWS shall provide Avalon with comments and/or
objections to the Pro Forma Tax Returns at least 21 days prior to the due date
for filing such Tax Returns (giving effect to applicable extensions). AWS
agrees to cooperate in good faith with Avalon to determine the appropriate
amount of Tax Items attributable to the Avalon Group to be reflected on any Tax
Returns for Straddle Periods to be prepared and filed by AWS in accordance with
Section 2.2(d). AWS further agrees to provide Avalon with a copy of each such
Tax Return at least 30 days before it is filed and to follow the procedures in
Section 4.2 relating to the calculation of Taxes and to not file any such Tax
Returns without the prior written consent of Avalon, which consent shall not be
unreasonably withheld. If such consent is withheld, Avalon shall so notify AWS
at least 10 days prior to the due date for filing such Tax Returns (giving
effect to applicable extensions). AWS will provide Avalon with copies of all
Tax Returns prepared by AWS in accordance with Section 2.2(d) promptly after
filing.
Section 2.2. Filing of Tax Returns.
(a) Consolidated Federal Tax Returns and Consolidated State Tax
Returns. The Consolidated Federal Tax Returns and the Consolidated State Tax
Returns required to be filed after the date hereof shall be prepared or caused
to be prepared by Avalon and delivered to AWS at least 30 days prior to the due
date thereof (giving effect to applicable extensions). AWS shall review the
returns prepared pursuant to this Section 2.2(a) and shall, to the extent
necessary or required, sign such returns and see to the timely filing thereof.
(b) Pre-Distribution Taxable Period Tax Returns. All Tax Returns
other than those described in Section 2.2(a) which include a member of the
Avalon Group that are required to be filed for any Pre-Distribution Taxable
Period shall be prepared and timely filed or caused to be prepared and timely
filed by Avalon. All Tax Returns other than those described in Section 2.2(a)
which include a member of the AWS Group that are required to be filed for any
Pre-Distribution Taxable Period shall be prepared or caused to be prepared by
Avalon and delivered
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to AWS at least 30 days prior to the due date thereof (giving effect to
applicable extensions). AWS shall review any such return that includes a member
of the AWS Group and shall, to the extent necessary or required, sign such
returns and see to the timely filing thereof.
(c) Avalon Straddle Period Tax Returns. All Tax Returns other than
those described in Section 2.2(a) which are required to be filed by any member
of the Avalon Group for any Straddle Period (including Ohio Forms FT-1120C and
FT-1120, insofar as such Forms FT-1120 are for members of the Avalon Group)
shall be prepared and timely filed or caused to be prepared and timely filed by
Avalon.
(d) AWS Straddle Period Tax Returns. All Tax Returns other than those
described in Section 2.2(a) which are required to be filed by any member of the
AWS Group for any Straddle Period (including Ohio Forms FT-1120 for members of
the AWS Group) shall be prepared and timely filed or caused to be prepared and
timely filed by AWS.
(e) Post-Distribution Taxable Period Tax Returns. The filing of all
Tax Returns for all Post-Distribution Taxable Periods shall be the
responsibility of the Avalon Group if such Tax Returns relate to a member or
members of the Avalon Group or their respective assets or businesses, or shall
be the responsibility of the AWS Group if such Tax Returns relate to a member or
members of the AWS Group or their respective assets or businesses.
Section 2.3. Procedures for Filing Tax Returns.
(a) Designation. AWS hereby irrevocably designates, and agrees to
cause each of its Affiliates to so designate, Avalon as its agent to take any
and all actions necessary or incidental to (i) the preparation (but not filing)
of the Tax Returns described in Section 2.2(a) and (b) and (ii) the preparation
and filing of the Tax Returns described in Section 2.2(c). Avalon hereby
irrevocably designates, and agrees to cause each of its Affiliates to so
designate, AWS as its agent to take any and all actions necessary or incidental
to the preparation and filing of the Tax Returns described in Section 2.2(d).
(b) Closing of Straddle Period. To the extent permitted by law or
administrative practice, the taxable year of any member of the AWS Group which
includes the Distribution Date shall be treated as closing on (and including)
the Distribution Date. AWS, USA, Avalon and their respective Affiliates agree
to treat, on all Tax Returns and in all Tax Audit Proceedings, the Affiliated
Group as terminating for Federal Income Tax purposes as a result of and on the
date of the Merger.
ARTICLE III
PAYMENT OF TAXES
Section 3.1. Payment of Tax Liabilities.
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(a) Consolidated and Pre-Distribution Tax Liabilities.
(i) Avalon Liability. Except as otherwise provided in this
Agreement, Avalon or a member of the Avalon Group shall pay or cause to be
paid, directly to, or at the direction of, AWS (such direction may specify
payment by direct wire transfer), at least two days prior to the date
payment (including estimated payment) thereof is due, all Taxes due with
respect to the Tax Returns described in Sections 2.2(a) and 2.2(b) that are
attributable to any member or members of the Avalon Group, the respective
assets or businesses of any member or members of the Avalon Group and any
Avalon Tax Item.
(ii) AWS Liability. Except as otherwise provided in this
Agreement, AWS or a member of the AWS Group shall pay or cause to be paid,
on a timely basis, all Taxes due with respect to the Tax Returns described
in Sections 2.2(a) and 2.2(b) that are attributable to any member or
members of the AWS Group, the respective assets or businesses of any member
or members of the AWS Group and any AWS Tax Item.
(b) Separate Straddle Period Tax Liabilities.
(i) Avalon Liability. Except as otherwise provided in this
Agreement, Avalon or a member of the Avalon Group shall pay or cause to be
paid, on a timely basis, all Taxes due with respect to the Tax Returns
described in Section 2.2(c); provided, however, that AWS shall pay directly
to, or at the direction of, Avalon (such direction may specify payment by
direct wire transfer), at least two days prior to the date payment
(including estimated payment) thereof is due, that portion of those Taxes
due that are attributable to any member or members of the AWS Group, the
respective assets or businesses of any member or members of the AWS Group
or any AWS Tax Item.
(ii) AWS Liability. Except as otherwise provided in this
Agreement, AWS or a member of the AWS Group shall pay or cause to be paid,
on a timely basis, all Taxes due with respect to the Tax Returns described
in Section 2.2(d); provided, however, that Avalon shall pay directly to, or
at the direction of, AWS (such direction may specify payment by direct wire
transfer), at least two days prior to the date payment (including estimated
payment) thereof is due, that portion of those Taxes due that are
attributable to any member or members of the Avalon Group, the respective
assets or businesses of any member or members of the Avalon Group or any
Avalon Tax Item.
(c) Post-Distribution Taxable Period Tax Liabilities. Except as
otherwise provided in this Agreement, all Taxes for all Post-Distribution
Taxable Periods shall be paid or caused to be paid by the party responsible
under this Agreement for filing the Tax Return pursuant to which such Taxes are
due or, if no such Tax Returns are due, by the party liable for such Taxes.
Section 3.2. Tax Refunds and Carrybacks.
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(a) Consent. Without the prior consent of AWS (such consent not to be
unreasonably withheld), no member of the Avalon Group shall carry back any net
operating loss or other Tax Item from a Post-Tax Indemnification Period to a Tax
Indemnification Period; and, without the prior consent of Avalon (such consent
not to be unreasonably withheld), no member of the AWS Group shall carry back
any net operating loss or other Tax Item from a Post-Tax Indemnification Period
to a Tax Indemnification Period.
(b) Retention and Payment of Tax Refunds. Except as otherwise
provided in this Agreement, Avalon shall be entitled to retain, and to receive
within 10 days after Actually Realized by the AWS Group, the portion of all Tax
Refunds of Taxes for which the Avalon Group is liable pursuant to Section 3.1 or
Section 5.1(a), and AWS shall be entitled to retain, and to receive within 10
days after Actually Realized by the Avalon Group, the portion of all Tax Refunds
of Taxes for which the AWS Group is liable pursuant to Section 3.1 or Section
5.1(b). Notwithstanding the foregoing, (i) all Tax Refunds resulting from the
carryback of any AWS Tax Item arising in a Post-Tax Indemnification Period to a
Tax Indemnification Period shall be for the account and benefit of the AWS Group
and, if and to the extent Actually Realized by Avalon, Avalon shall pay over to
AWS any such Tax Refund within 10 days after it is Actually Realized by Avalon
or any member of the Avalon Group, (ii) all Tax Refunds resulting from the
carryback of any Avalon Tax Item arising in a Post-Tax Indemnification Period to
a Tax Indemnification Period shall be for the account of Avalon and, if and to
the extent Actually Realized by AWS, AWS shall pay over to Avalon any such Tax
Refund within 10 days after it is Actually Realized by AWS or any member of the
AWS Group, (iii) all Tax Refunds resulting from the utilization of any Tax Items
(such as the utilization of a minimum or foreign tax credit or Section 481(a)
adjustments which reduces current year Taxes) attributable to the Avalon Group
or the respective assets or businesses of any member or members of the Avalon
Group arising in a Tax Indemnification Period shall be for the account of Avalon
and, if and to the extent Actually Realized by AWS, AWS shall pay over to Avalon
any such Tax Refund within 10 days after it is Actually Realized by AWS or any
member of the AWS Group and (iv) all Tax Refunds resulting from the utilization
of any Tax Items (such as the utilization of a minimum or foreign tax credit or
Section 481(a) adjustments which reduces current year Taxes) attributable to the
AWS Group or the respective assets or businesses of any member or members of AWS
Group arising in a Tax Indemnification Period shall be for the account of AWS
and, if and to the extent Actually Realized by Avalon, Avalon shall pay over to
AWS any such Tax Refund within 10 days after it is Actually Realized by Avalon
or any member of the Avalon Group. In computing the amount of any Tax Refunds
described in (i), (ii), (iii) or (iv) above, the party paying over such Tax
Refunds shall be deemed to recognize all other items of income, gain, loss,
deduction or credit for that taxable period together with the utilization of any
Tax Item causing a Tax Refund described in this Section 3.2(b). Avalon, USA,
AWS and their respective Affiliates will use commercially reasonable efforts to
claim and utilize the Tax Items referred to in (i), (ii), (iii) or (iv) in a
manner which is designed to maximize (on a present value basis) the Tax Refunds
described therein.
(c) Refund Claims. Avalon shall be permitted to file at Avalon's sole
expense, and AWS shall reasonably cooperate with Avalon in connection with, any
claims for
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Tax Refunds to which Avalon is entitled pursuant to this Section 3.2 or any
other provision of this Agreement. Avalon shall reimburse AWS for any reasonable
out-of-pocket costs and expenses incurred by any member of the AWS Group in
connection with such cooperation. AWS shall be permitted to file at AWS's sole
expense, and Avalon shall reasonably cooperate with AWS in connection with, any
claims for Tax Refund to which AWS is entitled pursuant to this Section 3.2 or
any other provision of this Agreement. AWS shall reimburse Avalon for any
reasonable out-of-pocket costs and expenses incurred by any member of the Avalon
Group in connection with such cooperation. Any claim for a Tax Refund under this
Section 3.2 to which Avalon is entitled and which relates to a Tax Return for
which AWS is required to file under Section 2.2 shall be subject to the AWS
Group's consent (such consent not to be unreasonably withheld). Any claim for a
Tax Refund under this Section 3.2 to which the AWS Group is entitled shall be
subject to the Avalon Group's consent (such consent not to be unreasonably
withheld). A copy of a claim for any Tax Refund to which either party is
entitled to file under this Section 3.2 shall be provided to the other party no
later than 30 days prior to the filing of such Tax Refund claim. In the event
that Avalon and AWS are each entitled to file a Tax Refund claim pursuant to
this Section 3.2 for the same period, such Tax Refunds of AWS and Avalon shall
be allocated in a manner corresponding to the allocation and calculation of
Taxes for such periods under Article IV.
ARTICLE IV
ALLOCATION AND CALCULATION OF TAXES
Section 4.1. Allocations.
(a) (i) In the case of any Consolidated Federal Tax Return described
in Section 2.2(a), the AWS Group and the Avalon Group will each be allocated the
portion of such Taxes due with respect to such Tax Returns attributable to each
Group, the respective assets or businesses of any member or members of each
Group and any Tax Item of each Group. This allocation shall be made in
accordance with the principles set forth in Treasury Regulation Section 1.1552-
1(a)(2) on the basis of the percentage of the total Tax liability for each
Group, if computed on a separate consolidated federal income tax return of each
Group, would bear to the aggregate amount of such Tax liability of the AWS Group
and the Avalon Group so computed.
(ii) The principles of Treasury Regulation Section 1.1502-33(d)(3)
also shall apply to the allocation set forth in Section 4.1(a)(i). If the
amount of the Affiliated Group's consolidated federal income tax liability is
less than the sum of the aggregate separate return tax liabilities of the Avalon
Group and the AWS Group (as computed pursuant to Section 4.1(a)(i) above) due to
losses or tax credits of one Group (including losses or tax credits carried over
from prior years), the decrease in tax liability resulting therefrom shall be
allocated 100 percent to that Group. A Group thus may have a "negative" income
tax liability as a result of such an allocation (a "Loss Group"). If a Loss
Group exists, the other Group shall pay to the Loss Group an amount equal to
such "negative" income tax liability. In other words, if Tax attributes (e.g.,
losses or tax credits) of one Group are utilized by the other Group to reduce
taxable income or
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Tax, as the case may be, the Group utilizing such Tax attributes shall pay to
the other Group, with respect to losses, an amount equal to such reduction in
taxable income resulting from the utilization of such losses multiplied by the
top marginal federal corporate income Tax rate actually used by the Group
utilizing the losses in calculating its deemed Tax liability (prior to the
application of Tax credits against such liability) under this Section 4.1(a) for
the taxable period during which such losses are utilized and, with respect to
Tax credits, an amount equal to the actual amount by which the deemed Tax
liability calculated pursuant to this Section 4.1(a) is reduced by such Tax
credits for the taxable period during which such Tax credits are utilized. Any
such payments shall be consistent with the procedures and timing set forth in
Section 3.1(b) hereof.
(b) In the case of any Tax Return described in Section 2.2(b) to be
prepared by Avalon or any Consolidated State Tax Returns described in Section
2.2(a) or any Tax returns described in Section 2.2(c), the Avalon Group will be
allocated all of the Taxes due with respect to each such Tax Return; provided,
however, if a AWS Tax Item is included in any such Tax Return, the Taxes that
would be due with respect to such Tax Return, calculated as if AWS Tax Item had
not been included but with all other Tax Items unchanged, shall be subtracted
from the Taxes due with respect to such Tax Return taking into account AWS Tax
Item (the "AWS Tax Difference"). If AWS Tax Difference is a positive amount,
the AWS Group shall be allocated an amount of Taxes due on such Tax Return equal
to AWS Tax Difference. If AWS Tax Difference is a negative amount, the Avalon
Group shall pay to the AWS Group an amount equal to AWS Tax Difference
consistent with the procedures and timing set forth in Section 3.1(b) hereof.
(c) In the case of any Tax Return described in Section 2.2(b) to be
filed by AWS or in Section 2.2(d), the AWS Group will be allocated all the Taxes
due with respect to each such Tax Return; provided, however, if a Avalon Tax
Item is included in any such Tax Return, the Taxes that would be due with
respect to such Tax Return, calculated as if the Avalon Tax Item had not been
included with all other Tax Items unchanged, shall be subtracted from the Taxes
due with respect to such Tax Return taking into account the Avalon Item (the
"Avalon Tax Difference"). If the Avalon Tax Difference is a positive amount,
the Avalon Group shall be allocated an amount of Taxes due on such Tax Return
equal to the Avalon Tax Difference. If the Avalon Tax Difference is a negative
amount, the AWS Group shall pay to the Avalon Group an amount equal to the
Avalon Tax Difference consistent with the procedures and timing set forth in
Section 3.1(b) hereof.
(d) In the case of any Tax Return described in Section 2.2(e) to be
filed by Avalon, the Avalon Group will be allocated all the Taxes due with
respect to each such Tax Return if the Avalon Group is responsible for filing
such Tax Return under this Agreement.
(e) In the case of any Tax Return described in Section 2.2(e) to be
filed by AWS, the AWS Group will be allocated all the Taxes due with respect to
each such Tax Return if the AWS Group is responsible for filing of such Tax
Return under this Agreement.
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(f) The allocations under this Section 4.1 shall be determined in a
manner consistent with the principles set forth in Section 4.3.
Section 4.2. Calculations and Determinations. All calculations and
determinations required to be made pursuant to this Agreement (including the
calculation in Section 4.1) shall be made in good faith by the party making such
calculations or determinations. Except for any accounting method changes
pursuant to applications for accounting method changes filed prior to the date
hereof and any accounting method elections and changes that may be effective as
of the day after the Distribution Date, all calculations and determinations
required to be made pursuant to this Agreement (including the calculation in
Section 4.1), shall be made, in the absence of a controlling change in law or
circumstance, on a basis consistent with the elections, accounting methods,
conventions and principles of taxation used for the most recent taxable periods
for which Tax Returns involving similar Tax Items have been filed.
Section 4.3. Principles of Determination. In implementing this Agreement,
except as otherwise specifically provided, the parties shall make any
adjustments that are necessary to ensure that, with respect to Taxes for
Straddle Periods or Pre-Distribution Taxable Periods, payments and
reimbursements between the parties reflect the principles that (i) Avalon is to
bear responsibility only for that portion of Taxes for Straddle Periods and Pre-
Distribution Taxable Periods that are attributable to the Avalon Group, the
respective assets or businesses of any member or members of the Avalon Group and
any Avalon Tax Item, (ii) AWS is to bear responsibility for all other Taxes for
Straddle Periods and Pre-Distribution Taxable Periods, (iii) AWS is responsible
for all Taxes for Post-Distribution Taxable Periods (calculated by treating the
day after the Distribution Date as the first day of any Post-Distribution
Taxable Period) reflected on the Tax Returns, the responsibility for the filing
thereof is imposed on AWS pursuant to this Agreement, (iv) Avalon is responsible
for all Taxes for Post-Distribution Taxable Periods (calculated by treating the
day after the Distribution Date as the first day of any Post-Distribution
Taxable Period) reflected on the Tax Returns, the responsibility for the filing
thereof is imposed on Avalon pursuant to this Agreement, (v) AWS will be
entitled to any Tax Refunds relating to Tax Items attributable to the AWS Group,
the respective assets or businesses of any member or members of the AWS Group or
any AWS Tax Item arising in a Tax Indemnification Period and (vi) Avalon will be
entitled to any Tax Refunds relating to Tax Items attributable to the Avalon
Group or the respective assets or businesses of any member or members of the
Avalon Group or any Avalon Tax Item arising in a Tax Indemnification Period.
ARTICLE V
TAX INDEMNIFICATION; TAX CONTESTS
Section 5.1. Indemnification.
(a) Avalon Indemnification. Except as otherwise provided in Section
5.1(b), Avalon and the Avalon Group shall be liable for and shall indemnify,
defend and hold harmless the members of the AWS Group and USA and each of their
respective Affiliates and
12
representatives from and against (A) all Taxes attributable to the Avalon Group,
the respective assets or businesses of any member or members of the Avalon Group
and any Avalon Tax Item for Pre-Distribution Taxable Periods, (B) all Taxes
attributable to the Avalon Group, the respective assets or businesses of any
member or members of the Avalon Group and any Avalon Tax Item for the portion of
any Straddle Period ending on and including the Distribution Date, (C) all Taxes
attributable to the Avalon Group, the respective assets or businesses of any
member or members of the Avalon Group and any Avalon Tax Item for the portion of
any Straddle Period beginning on the day after the Distribution Date (calculated
by treating the day after the Distribution Date as the first day of a taxable
period), (D) all Taxes of the Avalon Group for Post-Distribution Taxable
Periods, (E) all liability (as a result of Treasury Regulation Section 1.1502-
6(a) or a comparable state, local or foreign law) for Income Taxes of any person
(other than a member of the AWS Group or the Avalon Group) which is or has ever
been affiliated with any member of the Avalon Group or with which any member of
the Avalon Group joins or has ever joined (or is or has ever been required to
join) in filing any consolidated, combined or unitary Tax Return for any Pre-
Distribution Taxable Period or Straddle Period; provided, however, if any member
of the AWS Group also is or ever has been affiliated with or files or has ever
filed (or is or has ever joined in the filing of) any such consolidated,
combined or unitary Tax Return for the same Pre-Distribution Period or Straddle
Period with any such person, then the amount of the liability under this
provision shall be allocated between such member or members of the AWS Group and
the Avalon Group in accordance with the principles described in Section 4.1(a),
(F) all Taxes for any taxable period (whether beginning before, on or after the
Distribution Date) that would not have been payable but for the breach by any
member of the Avalon Group of any representation, warranty or obligation under
this Agreement or the Merger Agreement, and (G) all liability for any reasonable
legal, accounting, appraisal, consulting or similar fees and expenses relating
to the foregoing.
(b) AWS and USA Indemnification. Except as otherwise provided in
Section 5.1(a), AWS and USA shall be liable for and shall indemnify, defend and
hold harmless the Avalon Group from and against (A) all Taxes attributable to
the AWS Group, the respective assets or businesses of any member or members of
the AWS Group and any AWS Tax Item for Pre-Distribution Taxable Periods, (B) all
Taxes attributable to the AWS Group, the respective assets or businesses of any
member or members of the AWS Group and any AWS Tax Item for the portion of any
Straddle Period ending on and including the Distribution Date, (C) all Taxes
attributable to the AWS Group, the respective assets or businesses of any member
or members of the AWS Group and any AWS Tax Item for the portion of any Straddle
Period beginning on the day after the Distribution Date (calculated by treating
the day after the Distribution Date as the first day of a taxable period), (D)
all Taxes of the AWS Group for Post-Distribution Taxable Periods, (E) all
liability (as a result of Treasury Regulation Section 1.1502-6(a) or a
comparable state, local or foreign law) for Income Taxes of any person (other
than a member of the AWS Group or the Avalon Group) which is or has ever been
affiliated with any member of the AWS Group or with which any member of the AWS
Group joins or has ever joined (or is or has ever been required to join) in
filing any consolidated, combined or unitary Tax Return for any Pre-Distribution
Taxable Period or Straddle Period; provided, however, if any member of the
Avalon Group also is or ever has been affiliated with or files or has ever filed
(or is or has ever joined in
13
the filing of) any such consolidated, combined or unitary Tax Return for the
same Pre-Distribution Period or Straddle Period with any such person, then the
amount of the liability under this provision shall be allocated between such
member or members of the AWS Group and the Avalon Group in accordance with the
principles described in Section 4.1(a), (F) all Taxes for any taxable period
(whether beginning before, on or after the Distribution Date) that would not
have been payable but for the breach by any member of the AWS Group of any
representation, warranty or obligation under this Agreement or the Merger
Agreement, and (G) all liability for any reasonable legal, accounting,
appraisal, consulting or similar fees and expenses relating to the foregoing; --
provided, however, the indemnification obligation of AWS and USA under this
Section 5.1(b) shall not include any Taxes resulting from a breach of any
representation and warranty made to USA in the Merger Agreement without regard
to any materiality limitation thereunder.
(c) Payments. Subject to Section 5.5(b), any indemnity payment
required to be made pursuant to this Section 5.1 shall be paid within 30 days
after the indemnified party makes written demand upon the indemnifying party,
but in no case earlier than five business days prior to the date on which the
relevant Taxes are required to be paid (or would be required to be paid if no
such Taxes are due) to the relevant Taxing Authority.
Section 5.2. Notice of Indemnity. Whenever any member of the AWS Group or
the Avalon Group, as the case may be, (hereinafter an "Indemnitee") receives
written notice from any Tax Authority or otherwise of any pending or threatened
Tax examination, audit or other administrative or judicial proceeding
(hereinafter a "Tax Contest") which could reasonably be expected to result in a
determination that would increase the liability for any Tax of such member or
any other member of its Group for any Tax Indemnification Period or for any
Post-Tax Indemnification Period or require a payment hereunder to the other
party (hereinafter an "Indemnity Issue"), the Indemnitee shall notify the other
Group (hereinafter the "Indemnitor") of such Indemnity Issue within 30 days of
receipt of such notice. The failure of any Indemnitee to give (or any delay in
giving) such notice shall not relieve any Indemnitor of its obligations under
this Agreement except to the extent that such failure to give (or such delay in
giving) such notice shall have adversely affected the Indemnitor's ability to
defend against, settle, or satisfy any action, suit or proceeding against
Indemnitor, or any damage, loss, claim, or demand for which Indemnitee is
entitled to indemnification from Indemnitor under this Agreement.
Section 5.3. Tax Contests. To the extent that a Tax Contest relates to
any Taxes for which a member of the Avalon Group is directly liable or has
indemnification obligations hereunder, Avalon shall at its own expense control
the defense and settlement of that portion of such Tax Contest. To the extent
that a Tax Contest relates to any Taxes for which a member of the AWS Group is
directly liable hereunder, AWS shall at its own expense control the defense and
settlement of that portion of such Tax Contest. Provided, however, that the
party in control of the Tax Contest shall in no event take any position in any
such proceeding that would subject the party not in control of the defense to
any civil fraud or any civil or criminal penalty, and provided, further, that
the party in control of the Tax Contest shall not consent, without the prior
written consent of the party not in control of the defense, which prior written
consent shall not be
14
unreasonably withheld, to any change in the treatment of any Tax Item that in
any material respect adversely affects the Tax liability of the party not in
control of the defense for a period for which that party is directly or
indirectly liable under this Agreement.
Section 5.4. Timing Adjustments.
(a) Timing Differences. If a Tax Audit Proceeding or an amendment of a
Tax Return results in a Timing Difference, and such Timing Difference results in
a decrease in an indemnity obligation AWS or Avalon has, or otherwise would have
had, under Section 5.1 and/or an increase in the amount of a Tax Refund to which
AWS or Avalon is entitled under Section 3.2, then in each Post-Tax
Indemnification Period in which the AWS Group or the Avalon Group Actually
Realizes an Income Tax Detriment, either AWS or Avalon, as the case may be,
shall pay to the other an amount equal to such Income Tax Detriment; provided,
however, that the aggregate payments required to be made under this Section
5.4(a) with respect to any Timing Difference shall not exceed the aggregate
amount of the Income Tax Benefits realized by the Group from which such payment
is made for all taxable periods and the Group receiving such payment for all Tax
Indemnification Periods as a result of such Timing Difference. All such
payments shall be made within 10 days after the relevant Income Tax Detriment
has been Actually Realized and the Group Actually Realizing such Income Tax
Detriment notifies the other Group, as the case may be.
(b) Reverse Timing Differences. If a Tax Audit Proceeding or an
amendment of a Tax Return results in a Reverse Timing Difference, and such
Reverse Timing Difference results in an increase in an indemnity obligation of
AWS or Avalon under Section 5.1 and/or a decrease in the amount of a Tax Refund
to which AWS or Avalon is or would otherwise be entitled to under Section 3.2,
then in each Post-Tax Indemnification Period in which the AWS Group or the
Avalon Group Actually Realizes an Income Tax Benefit, AWS or Avalon, as the case
may be, shall pay to the other an amount equal to such Income Tax Benefit;
provided, however, that the aggregate payments required to be made under this
Section 5.4(b) with respect to any Reverse Timing Difference shall not exceed
the aggregate amount of the Income Tax Detriments realized by the Group from
which such payment is made for all taxable periods and the Group receiving such
payment for all Tax Indemnification Periods as a result of such Reverse Timing
Difference. All such payments shall be made within ten days after the relevant
Income Tax Benefit has been Actually Realized.
Section 5.5. Payments Net of Taxes.
(a) Gross Up and Characterization. The amount of any payment under
this Agreement shall be (i) increased to take account of any net Tax cost
incurred by the recipient thereof as a result of the receipt or accrual of
payments hereunder (grossed-up for such increase) and (ii) reduced to take
account of any net Tax benefit realized by the recipient arising from the
incurrence or payment of any such payment, other than any such net Tax benefit
that the recipient is specifically entitled to retain pursuant to this
Agreement. In computing the amount of any such Tax cost or Tax benefit, the
recipient shall be deemed to recognize all other items of
15
income, gain, loss, deduction or credit before recognizing any item arising from
the receipt or accrual of any payment hereunder. Except as provided in Section
5.5(b), or unless the parties otherwise agree to an alternative method for
determining the present value of any such anticipated Tax benefit or Tax cost,
any payment hereunder shall initially be made without regard to this Section and
shall be increased or reduced to reflect any such net Tax cost (including gross-
up) or net Tax benefit only after the recipient has Actually Realized such cost
or benefit. It is the intention of the parties that payments made pursuant to
this Agreement are to be treated as relating back to the Contribution and
Distribution as an adjustment to the assets and liabilities contributed
thereunder, and the parties shall not take any position inconsistent with such
intention before any Taxing Authority, except to the extent that a final
determination (as defined in Section 1313 of the Code) with respect to the
recipient party causes any such payment not to be so treated.
(b) Time for Payment. Notwithstanding any other provision of this
Agreement, to simplify the administration of this Agreement, the payment of any
amount less than $25,000 required to be made pursuant to this Agreement by one
party hereto to another party hereto need not be made to such other party prior
to 30 days following the later of (i) the close of the calendar quarter during
which such payment obligation arose and (ii) the day during such calendar
quarter when the aggregate amount of all such less than $25,000 payment
obligations arising during such calendar quarter exceeds $150,000. Unless
otherwise specified by the recipient for items exceeding $100,000, any such
payment may be made on a net Tax basis (i.e., reduced to take account of any net
Tax benefit to be realized by the recipient (computed at an effective Tax rate
to be agreed upon from time-to-time by the parties)) to the extent such
recipient is entitled to a corresponding deduction.
(c) Right to Offset. Any party making a payment under this Agreement
shall have the right to reduce any such payment by any amounts owed to it by the
other party to this Agreement.
ARTICLE VI
COOPERATION AND EXCHANGE OF INFORMATION
Section 6.1. Cooperation and Exchange of Information. Each party hereto,
on behalf of itself and its Affiliates, agrees to provide the other parties
hereto with such cooperation and information as such other parties shall
reasonably request, and as promptly as practicable, in connection with the
preparation or filing of any Tax Return or claim for or allocation of a Tax
Refund not inconsistent with this Agreement or in conducting any Tax Audit
Proceedings or other proceeding in respect to Taxes or to carry out the
provisions of this Agreement. To the extent necessary to carry out the purposes
of this Agreement and subject to the other provisions of this Agreement, such
cooperation and information shall include without limitation the non-exclusive
designation of an officer of Avalon as an officer of AWS and USA and each of
their respective Affiliates solely for the purpose of pursuing refund claims,
dealing with Taxing Authorities and defending Tax Audit Proceedings, in each
case if such actions relate to Tax
16
matters pertaining to or arising in the Tax Indemnification Period, as well as
promptly forwarding copies of appropriate notices and forms or other
communications received from or sent to any Taxing Authority which relate to the
Tax Items on the Pro Forma Tax Returns and providing copies of all relevant Tax
Returns for the Tax Indemnification Period, together with accompanying schedules
and related workpapers, documents relating to rulings or other determinations by
Taxing Authorities, and records concerning the ownership and Tax basis of
property, which either party may possess and which relate to the Tax Items on
the Pro Forma Tax Returns. Subject to the rights of the AWS Group under the
other provisions of this Agreement, such officer shall have the authority to
execute powers of attorney (including Form 2848) on behalf of each member of the
AWS Group with respect to Tax Returns and Taxes for the Tax Indemnification
Period. Each party to this Agreement shall make, or shall cause its Affiliates
to make, their employees and facilities available on a mutually convenient basis
to provide an explanation of any documents or information provided hereunder.
Section 6.2. Record Retention. AWS and Avalon agree to (i) retain all Tax
Returns, related schedules and workpapers, and all material records and other
documents as required under Section 6001 of the Code and the regulations
promulgated thereunder relating thereto (`Tax Records") existing on the
Distribution Date or created through the Distribution Date, for 10 years from
the Distribution Date and (ii) allow the other parties to this Agreement and
their representatives (and representatives of any of its Affiliates), at times
and dates reasonably acceptable to the retaining party, to inspect, review and
make copies of such records, and have access to such employees, as AWS and
Avalon may reasonably deem necessary or appropriate from time to time, such
activities to be conducted during normal business hours and without disruption
to the respective business of either party. At the end of the 10-year period
described in clause (i) AWS or Avalon, as the case may be, shall transfer such
records (or cause such records to be transferred) to the other party (at such
other party's sole expense), unless such other party notifies AWS or Avalon, as
the case may be, within 90 days prior to the expiration of the 10-year period,
that such other party does not desire to receive such Tax Records, in which case
AWS or Avalon, as the case may be, may destroy or otherwise dispose of such
undesired documents.
ARTICLE VII
MISCELLANEOUS
Section 7.1. Entire Agreement. This Tax Allocation Agreement constitutes
the entire agreement, and supersedes all other prior agreements, understandings,
representations and warranties, both written and oral, among the parties, with
respect to the subject matter hereof and thereof.
Section 7.2. AWS Representation. AWS represents that (i) it will become a
member of the USA's "consolidated group," as such term is defined in Treasury
Regulation Section 1.1502-1(h), on the date of the Merger, and (ii) all of its
income and other Tax Items will be included in USA's consolidated Federal Tax
Returns from and after the date of the Merger.
17
Section 7.3. Modification or Amendment. The parties hereto may modify or
amend this Agreement only by written agreement executed and delivered by duly
authorized officers of the respective parties. Anything in this Agreement or
the Merger Agreement to the contrary notwithstanding, in the event and to the
extent that there shall be a conflict between the provisions of this Agreement
and the Merger Agreement, the provisions of this Agreement shall control.
Section 7.4. Resolution of Disputes. Any disputes between the parties
with respect to this Agreement that cannot be resolved by good faith effort by
the parties shall be submitted to the Pittsburgh office of ββββββ ββββββββ LLP
("ββββββ ββββββββ"), which shall render its opinion as to such matters. ββββββ
ββββββββ'β determination shall be final and binding on all parties and ββββββ
ββββββββ'β fees and expenses shall be shared by each of Avalon and AWS in
accordance with the final allocation of the Tax liability in dispute.
Section 7.5. Notices. Any notice, request, instruction or other
communication to be given hereunder by any party to any other party shall be in
writing and shall be deemed to have been duly given (i) on the date of delivery
if delivered personally, or by telecopy or telefacsimile, upon confirmation of
receipt, (ii) on the first business day following the date of dispatch if
delivered by Federal Express or other nationally reputable next-day courier
service, or (iii) on the third business day following the date of mailing if
delivered by registered or certified mail, return receipt requested, postage
prepaid. All notices hereunder shall be delivered as set forth below, or
pursuant to such other instructions as may be designated in writing by the party
to receive such notice:
(a) If to Avalon:
Avalon Holdings Corporation
βββ ββββββββ βββ
ββββββ, ββββ βββββ
Attention: ββββββ β. βββββββ
Telecopy No: (βββ) βββ-ββββ
with copies to:
βββββββββββ & ββββββββ, LLP
ββββ ββββββ ββββββββ
ββββββββββ, ββ βββββ
Attention: βββββββ β. ββββββββ
Telecopy No: (βββ) βββ-ββββ
18
(b) if to USA or AWS:
USA Waste Services, Inc.
ββββ ββββββ, βββββ ββββ
βββββββ, βββββ βββββ
Attention: Chief Executive Officer
Telecopy No: (βββ) βββ-ββββ
with copies to:
βββββββ β. ββββββββ
ββββ ββββββ, βββββ ββββ
βββββββ, βββββ βββββ
Telecopy No.: (βββ) βββ-ββββ
and
Liddell, Sapp, Zivley, Hill & ββββββ, L.L.P.
ββββ βββββ ββββββββ βββββ
βββββββ, βββββ βββββ
Attention: ββββββ β. βββββ
Telecopy No: (βββ) βββ-ββββ
Section 7.6. No Third Party Beneficiaries. Except as otherwise expressly
provided herein, nothing contained in this Agreement is intended to confer upon
any person or entity other than the parties hereto and their respective
successors and permitted assigns, any benefit, right or remedies under or by
reason of this Agreement.
Section 7.7. Assignment. No party to this Agreement shall convey, assign
or otherwise transfer any of its rights or obligations under this Agreement
without the express written consent of the other parties hereto in their sole
and absolute discretion. Any such conveyance, assignment or transfer without
the express written consent of the other parties shall be void ab initio. No
assignment of this Agreement shall relieve the assigning party of its
obligations hereunder.
Section 7.8. Term. This Agreement shall commence on the date of execution
indicated below and shall continue in effect until otherwise agreed to in
writing by Avalon and AWS, or their successors.
Section 7.9. Captions. The Article, Section and paragraph captions herein
are for convenience of reference only, do not constitute part of this Agreement
and shall not be deemed to limit or otherwise affect any of the provisions
hereof.
19
Section 7.10. Severability. If any provision of this Agreement or the
application thereof to any person or circumstance is determined by a court of
competent jurisdiction to be invalid, void or unenforceable, the remaining
provisions hereof, or the application of such provision to persons or
circumstances other than those as to which it has been held invalid or
unenforceable, shall remain in full force and effect and shall in no way be
affected, impaired or invalidated thereby, so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to any party. Upon any such determination, the parties shall negotiate
in good faith in an effort to agree upon a suitable and equitable substitute
provision to effect the original intent of the parties.
Section 7.11. Specific Performance. In the event of any actual or
threatened default in, or breach of, any of the terms, conditions and provisions
of this Agreement, the party or parties who are or are to be thereby aggrieved
shall have the right of specific performance and injunctive relief giving effect
to its or their rights under this Agreement, in addition to any and all other
rights and remedies at law or in equity, and all such rights and remedies shall
be cumulative. The parties agree that the remedies at law for any breach or
threatened breach, including monetary damages, are inadequate compensation for
any loss and that any defense in any action for specific performance that a
remedy at law would be adequate is waived.
Section 7.12. Counterparts. For the convenience of the parties, this
Agreement may be executed in any number of separate counterparts, each such
counterpart being deemed to be an original instrument, and all such counterparts
shall together constitute the same agreement.
Section 7.13. Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of Delaware
applicable to contracts made and to be performed entirely within such State,
without regard to the conflicts of law principles of such State.
Section 7.14. Agent. Any consent rights of members of the Avalon Group
under this Agreement shall be exercised by Avalon on behalf of the Avalon Group,
and any notices given by the AWS Group to Avalon shall be deemed to be given to
each member of the Avalon Group. Any consent rights of the AWS Group under this
Agreement shall be exercised by USA on behalf of the AWS Group, and any notices
given by Avalon to USA shall be deemed to be given to each member of the AWS
Group.
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IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
the duly authorized officers of the parties hereto on the date first hereinabove
written.
AMERICAN WASTE SERVICES, INC.
By:
----------------------------------
Name:
---------------------------------
Title:
-------------------------------
AVALON HOLDINGS CORPORATION
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
USA WASTE SERVICES, INC.
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
21