EXHIBIT 3
AGREEMENT AND PLAN OF MERGER
DATED AS OF NOVEMBER 20, 1997,
BY AND AMONG
SK PARENT CORP.
SK ACQUISITION CORP.
AND
SAFETY-KLEEN CORP.
TABLE OF CONTENTS
PAGE
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ARTICLE I. THE MERGER................................................ 1
1.1. The Merger................................................ 1
1.2. Closing................................................... 1
1.3. Effective Time............................................ 1
1.4. Effects Of The Merger..................................... 2
1.5. Articles Of Incorporation; By-laws; Purposes.............. 2
1.6. Directors................................................. 2
1.7. Officers.................................................. 2
ARTICLE II. EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS................................. 2
2.1. Conversion of Shares...................................... 2
2.2. Employee Stock Options.................................... 2
2.3. Surrender of Certificates................................. 3
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE COMPANY............ 4
3.1. Organization and Qualifications........................... 4
3.2. Capitalization............................................ 4
3.3. Authority and Absence of Conflict......................... 5
3.4. Reports................................................... 6
3.5. Absence of Certain Changes; Liabilities................... 6
3.6. Employee Benefit Plans.................................... 6
3.7. Litigation; Violation of Law.............................. 8
3.8. Labor..................................................... 8
3.9. Taxes..................................................... 8
3.10. Environmental Matters..................................... 9
3.11. Brokers................................................... 10
3.12. Title to Properties....................................... 10
3.13. Information Supplied...................................... 10
3.14. Opinion Of Financial Advisor.............................. 11
3.15. Board Recommendation...................................... 11
3.16. Required Company Vote..................................... 11
3.17. Rights Agreement.......................................... 11
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER... 11
4.1. Organization and Qualification............................ 11
4.2. Capital Stock of Purchaser................................ 11
4.3. Authority and Absence of Conflict......................... 12
4.4. Brokers................................................... 12
4.5. Interim Operations Of Parent and Purchaser................ 12
4.6. Proxy Statement........................................... 12
4.7. Funds Available........................................... 13
4.8. Ownership of Shares....................................... 13
4.9. No Litigation............................................. 13
COVENANTS RELATING TO CONDUCT OF BUSINESS PRIOR TO
ARTICLE V. MERGER................................................... 13
5.1. Conduct Of Business Of The Company........................ 13
ARTICLE VI. ADDITIONAL AGREEMENTS.................................... 14
6.1. Preparation Of Proxy Statement; Shareholders Meeting...... 14
6.2. Access To Information; Confidentiality.................... 15
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6.3. Filings; Commercially Reasonable Best Efforts............ 15
6.4. Public Announcements..................................... 16
6.5. Notification of Certain Matters.......................... 16
6.6. Employee Benefits........................................ 16
6.7. Indemnification And Insurance............................ 16
6.8. Solicitation............................................. 17
ARTICLE VII. CONDITIONS PRECEDENT.................................... 18
Conditions To Each Party's Obligation To Effect The
7.1. Merger................................................... 18
7.2. Conditions To Obligations Of Parent...................... 19
7.3. Conditions To Obligation Of The Company.................. 20
ARTICLE VIII. TERMINATION, AMENDMENT AND WAIVER....................... 20
8.1. Termination.............................................. 20
8.2. Effect Of Termination.................................... 21
ARTICLE IX. GENERAL PROVISIONS...................................... 21
9.1. Nonsurvival Of Representations And Warranties............ 21
9.2. Payment Of Expenses...................................... 21
9.3. Notices.................................................. 22
9.4. Certain Definitions; Interpretation...................... 23
9.5. Entire Agreement......................................... 23
9.6. Counterparts............................................. 23
9.7. Severability............................................. 23
9.8. Captions................................................. 23
9.9. Amendment................................................ 23
9.10. Waiver................................................... 24
9.11. No Third-Party Beneficiaries; Assignability.............. 24
9.12. Best Knowledge........................................... 24
9.13. Governing Law............................................ 24
SCHEDULES
Company Disclosure Schedule
Parent Disclosure Schedule
ii
9.13. Governing Law.................................................. 35
SCHEDULES
Company Disclosure Schedule
Parent Disclosure Schedule
-iii-
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement"), dated as of November
20, 1997, is by and among SK Parent Corp., a Delaware corporation ("Parent"),
SK Acquisition Corp., a Wisconsin corporation and a wholly owned subsidiary of
Parent ("Purchaser"), and Safety-Kleen Corp., a Wisconsin corporation (the
"Company").
WHEREAS, the respective Boards of Directors of the Company, Parent and
Purchaser have determined that the merger of Purchaser with and into the
Company (the "Merger"), upon the terms and subject to the conditions set forth
in this Agreement, would be fair and in the best interests of their respective
stockholders, and such Boards of Directors have approved such Merger, pursuant
to which each issued and outstanding share of common stock, par value $.10 per
share, of the Company and the Rights (as defined in Section 3.2) (the
"Shares") associated therewith (other than Shares owned, directly or
indirectly, by the Company or any subsidiary (as defined in Section 9.4) of
the Company or by Parent) will be converted into the right to receive $27 per
share in cash;
WHEREAS, the Merger and this Agreement require the vote of at least 66 2/3%
of the outstanding Shares for the approval thereof (the "Company Shareholder
Approval");
WHEREAS, Parent, as the sole stockholder of Purchaser, has voted all of its
Shares by a consent of sole stockholder, dated November 19, 1997, in favor of
the Merger;
WHEREAS, Parent, Purchaser and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to prescribe various conditions to the Merger; and
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement, the parties agree as
follows:
ARTICLE I.
THE MERGER
1.1. The Merger. Upon the terms and subject to the conditions set forth in
this Agreement, and in accordance with the provisions of the Wisconsin
Business Corporation Law (the "WBCL"), Purchaser shall be merged with and into
the Company at the Effective Time (as defined in Section 1.3). Upon the
Effective Time, the separate existence of Purchaser shall cease, and the
Company shall continue as the surviving corporation (the "Surviving
Corporation") and shall continue, under the name "Safety-Kleen Corp.," to be
governed by the laws of the State of Wisconsin.
1.2. Closing. Unless this Agreement shall have been terminated and the
transactions herein contemplated shall have been abandoned pursuant to Section
8.1 and subject to the satisfaction or waiver of the conditions set forth in
Article VII, the closing of the Merger (the "Closing") will take place at
10:00 a.m. on the second business day after satisfaction of the conditions set
forth in Section 7.1 (or as soon as practicable thereafter following
satisfaction or waiver of the conditions set forth in Sections 7.2 and 7.3)
(the "Closing Date"), at the offices of ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, unless another date, time or place is
agreed to in writing by the parties hereto.
1.3. Effective Time. As soon as practicable following the satisfaction or
waiver of the conditions set forth in Article VII, the parties shall file
appropriate Articles of Merger (the "Articles of Merger") as provided in the
WBCL and shall make such other filings, recordings or publications required
under the WBCL in connection with the Merger. The Merger shall become
effective upon the date on which the Articles of Merger have been received for
filing by the Secretary of the State of Wisconsin, or such later date as is
agreed upon by the parties and specified in the Articles of Merger, and the
time of such effectiveness is hereinafter referred to as the "Effective Time."
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1.4. Effects Of The Merger. The Merger shall have the effects set forth in
Section 180.1106 of the WBCL.
1.5. Articles Of Incorporation; By-laws; Purposes. (a) Subject to Section
6.7, at the Effective Time of the Merger, and without any further action on
the part of the Company, Parent or Purchaser, the Restated Articles of
Incorporation of Purchaser, as in effect immediately prior to the Effective
Time, shall be the Articles of Incorporation of the Surviving Corporation,
until thereafter amended, subject to Section 6.7 of this Agreement, as
provided therein and under the WBCL.
(b) At the Effective Time of the Merger, and without any further action
on the part of the Company or Parent or Purchaser, the By-laws of Purchaser
as in effect at the Effective Time shall be the By-laws of the Surviving
Corporation until thereafter amended, subject to Section 6.7 of this
Agreement, as provided therein or by applicable law.
1.6. Directors. The directors of Purchaser at the Effective Time shall be
the initial directors of the Surviving Corporation, until the earlier of their
resignation or removal or until their respective successors are duly elected
and qualified, as the case may be.
1.7. Officers. The officers of the Company at the Effective Time shall be
the initial officers of the Surviving Corporation, until the earlier of their
resignation or removal or until their respective successors are duly elected
or appointed and qualified, as the case may be.
ARTICLE II.
EFFECT OF THE MERGER ON THE CAPITAL STOCK
OF THE CONSTITUENT CORPORATIONS
2.1. Conversion of Shares. At the Effective Time and by virtue of the
Merger, and without any action on the part of the holders thereof:
(a) Each Share issued and outstanding immediately prior to the Effective
Time (other than Shares to be cancelled pursuant to Subsection 2.1(b)
below) shall be converted into the right to receive $27 in cash (the
"Merger Consideration"). All such Shares, when so converted, shall no
longer be outstanding and shall automatically be cancelled and retired and
shall cease to exist, and each holder of a certificate representing any
such Shares shall cease to have any rights with respect thereto, except the
right to receive the Merger Consideration therefor, without interest, upon
the surrender of such certificate in accordance with Section 2.3.
(b) Each Share held in the treasury of the Company, if any, and each
Share owned by Parent, Purchaser or the Company, or by any direct or
indirect subsidiary of any of them, shall be cancelled and retired without
payment of any consideration therefor.
(c) All shares of common stock, par value $.01 per share, of Purchaser
issued and outstanding immediately prior to the Effective Time shall be
converted into that number of validly issued, fully paid and non-assessable
(except for certain statutory personal liability which may be imposed on
shareholders under Section 180.0622(2)(b) of the WBCL) shares of common
stock, par value $.01 per share, of the Surviving Corporation equal to the
aggregate number of shares of the Company issued and outstanding
immediately prior to the Effective Time.
2.2. Employee Stock Options. The Company shall (i) terminate its 1985 Stock
Option Plan, 1993 Stock Option Plan and 1988 Non-Qualified Stock Option Plan
for Outside Directors (collectively the "Option Plans"), immediately prior to
the Effective Time without prejudice to the rights of the holders of options
awarded pursuant thereto and (ii) grant no additional options or similar
rights under the Option Plans or otherwise on or after the date hereof. As
used hereafter in this Section 2.3, "Options" shall include each stock option
granted by the Company, whether pursuant to the Option Plans or otherwise.
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The Company shall use its best efforts to obtain the consent of each holder
of any Options (whether or not then exercisable) that it does not have the
right to cancel to the cancellation of his Options (irrespective of their
exercise price), and upon obtaining such consent, shall cancel the options
covered by such consent or, in the case of Options that the Company has the
right to cancel, shall cancel such Options, such cancellation (whether or not
consent is required therefor) to take effect immediately prior to the
Effective Time. In consideration of each cancellation of Options, the Company
shall agree to and shall pay to such holders, immediately prior to the
Effective Time, in respect of each Option (whether or not then exercisable) so
cancelled, an amount equal to the excess, if any, of the Merger Consideration
over the exercise price thereof, multiplied by the number of Shares subject
thereto, reduced by the amount of withholding or other taxes required by law
to be withheld (or, in the case of options related to limited stock
appreciation rights, the Change of Control Value as defined in the Option Plan
under which such options were issued).
2.3. Surrender of Certificates. (a) From and after the Effective Time, a
bank or trust company to be designated by Parent, with the prior approval of
the Company (the "Exchange Agent"), shall act as exchange agent in effecting
the exchange, for the Merger Consideration multiplied by the number of Shares
formerly represented thereby, of certificates (the "Certificates") that, prior
to the Effective Time, represented Shares entitled to payment pursuant to
Section 2.1. As of the Effective Time, Parent shall, on behalf of Purchaser,
deposit with the Exchange Agent, for the benefit of the holders of Shares
(excluding any Shares described in Section 2.1(b)), for the payment in
accordance with this Article II, through the Exchange Agent, cash in an amount
equal to the Merger Consideration multiplied by the number of outstanding
Shares immediately prior to the Effective Time (excluding any Shares described
in Section 2.1(b)) (such cash being hereinafter referred to as the "Payment
Fund"). Parent shall cause the Paying Agent, pursuant to irrevocable
instructions, to deliver the cash contemplated to be paid pursuant to Section
2.1(a) out of the Payment Fund. The Payment Fund shall not be used for any
other purpose. Upon the surrender of each Certificate and the delivery by the
Exchange Agent of the Merger Consideration in exchange therefor, such
Certificate shall forthwith be cancelled. Until so surrendered and exchanged,
each such Certificate (other than Certificates representing Shares held by
Parent, Purchaser or the Company or any direct or indirect subsidiary of
Parent, Purchaser or the Company) shall represent solely the right to receive
the Merger Consideration applicable to the Shares represented by such
Certificate multiplied by the number of Shares represented by such
Certificate. No interest shall be paid or shall accrue on any amount payable
on and after the Effective Time by reason of the Merger upon the surrender of
any such Certificate. Upon the surrender and exchange of such an outstanding
Certificate, the holder shall receive the Merger Consideration applicable to
the Shares represented thereby, without any interest thereon. If the Merger
Consideration is to be paid to a person other than the person in whose name
the Certificate representing Shares surrendered in exchange therefor is
registered, it shall be a condition to such payment or exchange that such
Certificate so surrendered be properly endorsed or otherwise be in proper form
for transfer, and that the person requesting such payment or exchange shall
pay to the Exchange Agent any transfer or other taxes required by reason of
the payment of such Merger Consideration to a person other than the registered
holder of the Certificate surrendered, or such person shall establish to the
satisfaction of the Exchange Agent that such tax has been paid or is not
applicable. Notwithstanding the foregoing, neither the Exchange Agent nor any
party hereto shall be liable to a holder of Shares for any Merger
Consideration or interest delivered to a public official pursuant to
applicable abandoned property, escheat or similar laws.
(b) Promptly following the date of the first anniversary of the Effective
Time, the Exchange Agent shall return to the Surviving Corporation all cash in
its possession relating to the transactions described in this Agreement, and
the Exchange Agent's duties shall terminate. Thereafter, each holder of a
Certificate formerly representing Shares may surrender such Certificate to the
Surviving Corporation and (subject to applicable abandoned property, escheat
or similar laws) receive in exchange therefor the Merger Consideration
applicable to the Shares represented thereby, without any interest thereon,
but shall have no greater rights against the Surviving Corporation than may be
accorded to general creditors of the Surviving Corporation under applicable
law.
(c) Promptly after the Effective Time, the Exchange Agent shall mail, to
each record holder of Certificates that immediately prior to the Effective
Time represented Shares, a form of letter of transmittal and instructions,
approved by Parent, for use in surrendering such Certificates and receiving
the Merger Consideration therefor.
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(d) At and after the Effective Time, holders of Certificates shall cease to
have any rights as shareholders of the Company except for the right to
surrender such Certificates in exchange for the Merger Consideration, and
there shall be no transfers on the stock transfer books of the Company or the
Surviving Corporation of any Shares that were outstanding immediately prior to
the Merger. If, after the Effective Time, Certificates are presented to the
Surviving Corporation or the Exchange Agent, they shall be cancelled and
exchanged for the Merger Consideration, as provided in Section 2.1 hereof.
(e) The Exchange Agent shall invest any cash included in the Payment Fund,
as directed by the Surviving Corporation, provided that such investment shall
be (i) securities issued or directly and fully guaranteed or insured by the
United States government or any agency or instrumentality thereof having
maturities of not more than six months from the Effective Time, (ii)
certificates of deposit, eurodollar time deposits and bankers' acceptances
with maturities not exceeding six months and overnight bank deposits with any
commercial bank, depository institution or trust company incorporated or doing
business under the laws of the United States of America, any state thereof or
the District of Columbia, provided that such commercial bank, depository
institution or trust company has, at the time of investment, (A) capital and
surplus exceeding $250 million and (B) outstanding short-term debt securities
which are rated at least A-1 by Standard & Poor's Rating Group Division of The
▇▇▇▇▇▇-▇▇▇▇ Companies, Inc. or at least P-1 by ▇▇▇▇▇'▇ Investors Services,
Inc. or carry an equivalent rating by a nationally recognized rating agency if
both of the two named rating agencies cease to publish ratings of investment,
(iii) repurchase obligations with a term of not more than 30 days for
underlying securities of the types described in clauses (i) and (ii) above
entered into with any financial institution meeting the qualifications
specified in clause (ii) above, (iv) commercial paper having a rating in the
highest rating categories from Standard & Poor's Rating Group Division of The
McGraw-Hills Companies, Inc. or ▇▇▇▇▇'▇ Investors Services, Inc. or carrying
an equivalent rating by a nationally recognized rating agency if both of the
two named rating agencies cease to publish ratings of investments and in each
case maturing within six months of the Effective Time and (v) money market
mutual or similar funds having assets in excess of $1 billion. Any interest
and other income resulting from such investments shall be paid to the
Surviving Corporation.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Purchaser that, except as
specifically disclosed or reflected (including, in the case of financial
statements, provided for) in the Company Disclosure Schedule delivered
herewith to Parent and Purchaser, or in the Company's Form 10-K for the fiscal
year ended December 28, 1996 ("Form 10-K") as filed with the Securities and
Exchange Commission (the "Commission"), any subsequently filed Forms 10-Q and
Forms 8-K, the annual report to shareholders for the fiscal year ended
December 28, 1996 delivered to Parent (the "Annual Report"), and the proxy
statement for the 1997 Annual Meeting (such Forms, the Annual Report and such
proxy statement, including without limitation any financial statements and
related notes or schedules included in such documents and all exhibits and
schedules included or incorporated by reference therein, are herein
collectively referred to as the "SEC Reports"):
3.1. Organization and Qualifications. Each of the Company and its
Significant Subsidiaries (as defined in Section 9.4) is a corporation duly
incorporated, validly existing and in good standing under the laws of its
respective jurisdiction of incorporation and is in good standing as a foreign
corporation in each jurisdiction where the properties owned, leased or
operated by it, or the business conducted by it, requires such qualification
and where failure to so qualify or be in good standing would have a Material
Adverse Effect (as defined in Section 9.4). Each of the Company and its
Significant Subsidiaries has the corporate power to carry on its respective
businesses as they are now being conducted. Copies of the charter and by-laws
of each of the Company and its Significant Subsidiaries, and all amendments
thereto as presently in effect, have been delivered to Parent, and such copies
are complete and correct as of the date hereof.
3.2. Capitalization. (a) The authorized capital stock of the Company
consists of (i) 300,000,000 Shares of which, as of November 18, 1997,
58,520,180 Shares were issued and outstanding and (ii) 1,000,000 Shares of
4
preferred stock, par value $.10 per share, of the Company (the "Preferred
Stock"), none of which is issued and outstanding. As of November 18, 1997, (i)
5,271,343 Shares were reserved for issuance upon the exercise of outstanding
options granted pursuant to the Option Plans, 119,269 Shares are reserved for
issuance under the Employee Stock Purchase Plan and 220,000 Shares are
reserved for issuance under the Company's 1988 Non-Qualified Stock Option Plan
for outside directors and (ii) 64,330,792 Shares were reserved for issuance in
connection with the Common Stock Purchase Rights (the "Rights") issued
pursuant to the Rights Agreement dated as of November 9, 1988, as amended by a
First Amendment to Rights Agreement dated as of August 10, 1990 and Second
Amendment to Rights Agreement dated as of November 20, 1997 (as so amended,
the "Rights Agreement"), between the Company and The First National Bank of
Chicago, as Rights Agent. Except as set forth above, and except for warrants
dated January 27, 1995 issued to H. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ to purchase up to 200,000
Shares, there are no outstanding options, warrants, agreements, contracts,
calls, commitments or demands of any character, preemptive or otherwise, other
than this Agreement, relating to any of the capital stock of the Company. All
of the outstanding Shares are duly authorized, validly issued, fully paid and
non-assessable (except as provided in Section 180.0622(2)(b) of the WBCL and
judicial interpretations thereof). The Company Disclosure Schedule lists each
subsidiary of the Company and the ownership interest therein of the Company.
All outstanding shares of capital stock of the Company's subsidiaries are
owned by the Company or a direct or indirect wholly owned subsidiary of the
Company, free and clear of all liens, charges, encumbrances, claims and
options of any nature.
(b) There are no voting trusts or other agreements or understandings to
which the Company or any of its subsidiaries is a party with respect to the
voting of the capital stock of the Company or any of the subsidiaries. None of
the Company or its subsidiaries is required to redeem, repurchase or otherwise
acquire shares of capital stock of the Company, or any of its subsidiaries.
3.3. Authority and Absence of Conflict. (a) The Company has the requisite
corporate power and authority to enter into this Agreement, to perform its
obligations hereunder and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement by the Company and the
consummation by it of the transactions contemplated hereby have been duly and
unanimously authorized by the Board of Directors of the Company, and, except
for the Company Shareholder Approval, no other corporate proceedings on the
part of the Company are necessary to authorize the execution, delivery and
performance of this Agreement and the transactions contemplated hereby. This
Agreement has been duly executed and delivered by the Company and (assuming
due authorization, execution and delivery by Parent and Purchaser) constitutes
a valid and binding obligation of the Company, enforceable against the Company
in accordance with its terms, except to the extent that its enforceability may
be limited by applicable bankruptcy, insolvency, reorganization or other laws
affecting the enforcement of creditors' rights generally or by general
equitable principles.
(b) Neither the execution and delivery of this Agreement by the Company, nor
the consummation by the Company of the transactions contemplated hereby, nor
compliance by the Company with any of the provisions hereof, will (i) violate,
conflict with, or result in a breach of any provision of, or constitute a
default (or an event which, with notice or lapse of time or both, would
constitute a default) under, or result in the termination of, or accelerate
the performance or payment required by, or result in a right of termination or
acceleration under, or result in the creation of any lien, security interest,
charge or encumbrance upon any of the properties or assets of the Company or
any of its subsidiaries under, any of the terms, conditions or provisions of
(x) the charter or by-laws of the Company or any of its Significant
Subsidiaries, (y) the charter or by-laws of any of its Subsidiaries that are
not Significant Subsidiaries, or (z) any note, bond, mortgage, indenture, deed
of trust, license, lease, agreement or other instrument or obligation to which
the Company or any of its subsidiaries is a party or to which any of them or
any of their respective properties or assets may be subject, or (ii) subject
to compliance with the statutes and regulations referred to in the next
subsection, violate any judgment, ruling, order, writ, injunction, decree,
statute, rule or regulation applicable to the Company and its subsidiaries or
any of their respective properties or assets; except, in the case of each of
clauses (i)(y), (i)(z), and (ii) above, for such violations, conflicts,
breaches, defaults, terminations, accelerations or creations of liens,
security interests, charges or encumbrances which would not have a Material
Adverse Effect or prevent or delay in any material respect the consummation of
the Merger.
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(c) Other than in connection with or in compliance with the provisions of
the WBCL, the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as amended
(the "HSR Act"), the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), the laws of any foreign country in which the Company or any
of its subsidiaries conducts any business or owns any property or assets, the
federal, state and local environmental, health or safety laws or regulations,
and to the best knowledge of the Company, certain state securities or
"takeover" statutes, no notice to, filing with, or authorization, consent or
approval of, any domestic or foreign public body or authority is necessary for
the consummation by the Company of the transactions contemplated by this
Agreement, except where the failure to give such notices, make such filings or
obtain such authorizations, consents or approvals would not have a Material
Adverse Effect or prevent or delay in any material respect the consummation of
the Merger.
3.4. Reports. The Company has filed all forms, reports and documents
required under Section 13(a) under the Exchange Act with the Commission since
December 31, 1995, and none of such forms, reports or documents, including
without limitation any financial statements or schedules included therein,
when filed, contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in order to
make the statements therein not misleading. The consolidated balance sheet
(including the related notes) included in the Form 10-K and in the Form 10-Q
for the thirty-six weeks ended September 6, 1997 (the "Form 10-Q") fairly
presented the consolidated financial position of the Company and its
consolidated subsidiaries as of the date thereof, and the other related
statements (including the related notes) included therein fairly presented the
consolidated results of operations and the changes in consolidated financial
position of the Company and its consolidated subsidiaries for the fiscal
period set forth therein. Each of the financial statements (including the
related notes) included in the Form 10-K and in the Form 10-Q has been
prepared in accordance with generally accepted accounting principles
consistently applied during the periods involved, except as otherwise noted
therein and except that the quarterly financial statements do not contain all
footnotes required by generally accepted accounting principles. The
representations and warranties set forth in this Section 3.4 shall not apply
to any noncompliance, non-filings, misstatements, omissions or failures to
present fairly or conform to generally accepted accounting principles which
either (i) were corrected in a subsequent form, report or document filed with
the Commission prior to the date of this Agreement, or (ii) would not have a
Material Adverse Effect or prevent or delay in any material respect the
consummation of the Merger. None of the Company's subsidiaries is required to
file any forms, reports or other documents with the Commission.
3.5. Absence of Certain Changes; Liabilities. Since December 28, 1996, (i)
the Company and its Subsidiaries have conducted their respective businesses
and operations only in the ordinary and usual course, (ii) there has not been
any change in the financial condition, properties, business or results of
operations of the Company and its subsidiaries that has had a Material Adverse
Effect, (iii) neither the Company nor any of its subsidiaries has incurred any
liabilities or obligations (secured or unsecured and whether accrued,
absolute, contingent, direct, indirect or otherwise) (the "Liabilities")
except Liabilities that do not have a Material Adverse Effect, and (iv)
neither the Company nor any of its subsidiaries has taken any of the actions
contemplated by Section 5 hereof.
3.6. Employee Benefit Plans. (a) With respect to all employees and former
employees of the Company, neither the Company nor any of its affiliates
presently maintains, sponsors, contributes to, is required to contribute to or
has any liability under: (i) any bonus, incentive compensation, profit
sharing, retirement, pension, group insurance, death benefit, cafeteria,
flexible spending account, medical, dependent care, stock option, stock
purchase, stock appreciation rights, savings, deferred compensation,
employment, consulting, severance or termination pay, funded vacation pay,
welfare or other employee compensation, benefit or fringe benefit plan,
program, agreement, or arrangement, the existence of which or the failure of
the Company or any of its affiliates to comply with which or to satisfy such
liability would have, either individually or in the aggregate, a Material
Adverse Effect; or (ii) any plan, program, agreement, or arrangement which is
an "employee pension benefit plan" as such term is defined in Section 3(2) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or
an "employee welfare benefit plan" as defined in Section 3(1) of ERISA, the
existence of which or the failure of the Company or any of its affiliates to
comply with which or to satisfy such liability would have, either individually
or in the aggregate, a Material Adverse Effect. The Company Disclosure
Schedule includes a list of all plans, programs, agreements, and arrangements
set forth in clauses (i) and (ii) of
6
the preceding sentence which are maintained, sponsored, contributed to or
required to be contributed to by the Company or any of its affiliates (the
"Employee Benefit Plans"). The term "affiliate" for purposes of this Section
3.6 means any organization that would be aggregated with the Company under
Section 414(b), (c) or (m) of the Internal Revenue Code of 1986, as amended
(the "Internal Revenue Code").
(b) Each Employee Benefit Plan which is intended to comply with the
provisions of Section 401(a) of the Internal Revenue Code has been submitted
to the Internal Revenue Service (the "IRS") and received a determination
letter which states that such Employee Benefit Plan is so qualified, and to
the best of the Company's knowledge no event has occurred since the date of
such letter which would (i) cause such Employee Benefit Plan not to be so
qualified or (ii) cause any trust maintained under such Employee Benefit Plan
not to be exempt from taxation under Section 501(a) of the Internal Revenue
Code.
(c) To the best knowledge of the Company, with respect to each Employee
Benefit Plan which is subject to Title I of ERISA, neither the Company nor any
of its affiliates has failed to comply with any applicable reporting,
disclosure or other requirements of ERISA and the Internal Revenue Code,
except for such failures to comply which would not have, either individually
or in the aggregate, a Material Adverse Effect, and there has been no
"prohibited transaction" as described in Section 4975 of the Internal Revenue
Code or Section 406 of ERISA the failure to correct which would have, either
individually or in the aggregate, a Material Adverse Effect.
(d) Neither the Company nor any affiliate maintains any Employee Benefit
Plans subject to the minimum funding standards of ERISA and the Internal
Revenue Code.
(e) Neither the Company nor any of its affiliates presently maintains,
contributes to or has any liability (including current or potential withdrawal
liability) with respect to any "multiemployer plan" as such term is defined in
Section 3(37) of ERISA.
(f) Neither the Company nor any of its affiliates has maintained an employee
pension benefit plan subject to Title IV of ERISA.
(g) There is no pending or, to the best knowledge of the Company, threatened
legal action, proceeding or investigation against or involving any Employee
Benefit Plan (other than routine claims for benefits), the adverse resolution
of which would have, either individually or in the aggregate, a Material
Adverse Effect.
(h) With respect to any employee or former employee of the Company, except
as required by the Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended ("COBRA"), neither the Company nor any of its affiliates presently
sponsors, maintains, contributes to, is required to contribute to or has any
liability under any funded or unfunded medical, health or life insurance plan
or similar arrangement for present or future retirees or present or future
terminated employees the existence of which or the failure to satisfy which
would have, either individually or in the aggregate, a Material Adverse
Effect. Neither the Company nor any subsidiary or affiliate of the Company
maintains or contributes to a trust, organization or association described in
any of Sections 501(c)(9), 501(c)(17) or 501(c)(20) of the Internal Revenue
Code.
(i) With respect to each of the Employee Benefit Plans, the Company has
delivered or made reasonably available to Parent true and complete copies of:
(i) the plan documents, including any related trust agreements, insurance
contracts or other funding arrangements, or a written summary of the terms and
conditions of the plan if there is no written plan document; (ii) the most
recent IRS Form 5500; (iii) the most recent financial statement; (iv) the most
recent Summary Plan Description required under ERISA; (v) the most recent
actuarial report, if required under ERISA and (vi) the most recent
determination letter received from the IRS with respect to each Employee
Benefit Plan intended to qualify under Section 401 of the Internal Revenue
Code.
(j) To the best of the Company's knowledge, each Employee Benefit Plan has
been operated and administered in all material respects in accordance with its
terms and applicable law, including but not limited to ERISA and the Internal
Revenue Code.
(k) No liability under Title IV or Section 302 of ERISA has been incurred by
the Company or any affiliate that has not been satisfied in full, and no
condition exists that presents a material risk to the Company or any
7
affiliate of incurring any such liability (other than for premiums due the
Pension Benefit Guaranty Corporation ("PBGC") (which premiums have been paid
when due)). Insofar as the representation made in this section 3.6(k) applies
to Sections 4064, 4069 or 4204 of Title IV of ERISA, it is made with respect
to any employee benefit plan, program, agreement or arrangement subject to
Title IV of ERISA to which the Company or any affiliate made, or was required
to make, contributions during the five (5)-year period ending on the last day
of the most recent plan year ended prior to the Effective Time.
(l) The PBGC has not instituted proceedings to terminate any Employee
Benefit Plan subject to Title IV of ERISA ("Title IV Plan") and to the best of
the Company's knowledge no condition exists that presents a risk that such
proceedings will be instituted.
(m) With respect to the Title IV Plans, the present value of the accumulated
benefit obligation under such plan, calculated based upon the actuarial
assumptions used for funding purposes in the most recent actuarial report
prepared by such plan's actuary with respect to such plan did not exceed, as
of its latest valuation date, the then fair value of the assets of such plans
in the aggregate as calculated pursuant to FAS 87.
(n) No Title IV Plan or any trust established thereunder has incurred any
"accumulated funding deficiency" (as defined in Section 302 of ERISA and
Section 412 of the Internal Revenue Code), whether or not waived, as of the
last day of the most recent fiscal year of each Title IV Plan ended prior to
the Effective Time. All contributions required to be made with respect to any
Employee Benefit Plan on or prior to the Effective Time have been (or will
have been) timely made.
(o) The consummation of the transactions contemplated by this Agreement will
not, either alone or in combination with another event, entitle the current
and former employees and current and former officers of the Company and any
affiliates to severance pay, which, in the aggregate, will exceed $45,744,000
unless the Surviving Corporation does not offer employment to an employee who
is an eligible employee who is eligible for severance pay under the Safety-
Kleen Corp. Severance Pay Plan in a position with total compensation that is
within 15 percent of the employee's current total compensation and at a
location that is within a 30 mile radius of the employee's current work
location.
(p) All actions will have been taken, or which have failed to be taken, with
respect to the Employee Benefit Plans, would not, in the aggregate, have a
Material Adverse Effect.
3.7 Litigation; Violation of Law. (a) There are no claims, actions, suits or
proceedings or investigations pending or, to the best knowledge of the
Company, threatened against the Company or any of its subsidiaries, nor is the
Company or any of its subsidiaries subject to any order, judgment, writ,
injunction or decree, except in either case for matters which would not have a
Material Adverse Effect or materially impair the ability of the Company to
consummate the Merger, and as of the date of this Agreement there are no such
matters involving a contingent liability, within the meaning of that term in
Financial Accounting Standards Bulletin No. 5, of more than $20,000,000.
(b) To the best knowledge of the Company, the businesses of the Company and
its subsidiaries are not being conducted in violation of any applicable law,
ordinance, rule, regulation, decree or order of any court or governmental
entity, except for violations which do not have a Material Adverse Effect.
3.8. Labor. There is no material dispute, grievance, controversy, strike or
request for union representation pending, or, to the best knowledge of the
Company, threatened, against either the Company or any of its Significant
Subsidiaries.
3.9. Taxes. (a) The Company and each subsidiary of the Company have timely
filed (or have had timely filed on their behalf) or will file or cause to be
timely filed, all Tax Returns required by applicable law to be filed by any of
them prior to or as of the Effective Time, except where the failure to do so
would not have a Material Adverse Effect. All material Tax Returns are, or
will be at the time of filing, true, complete and correct in all material
respects.
8
(b) The Company and each subsidiary of the Company have paid (or have had
paid on their behalf) or, where payment is not yet due, have established (or
have had established on their behalf and for their sole benefit and recourse)
or will establish or cause to be established on or before the Effective Time
an adequate accrual for the payment of all Taxes due with respect to any
period ending prior to or as of the Effective Time, except where the failure
to pay or establish adequate reserves would not have a Material Adverse
Effect.
(c) No deficiencies for any material Taxes have been proposed, asserted or
assessed against the Company or any subsidiary of the Company, and no requests
for waivers of the time to assess any such material Taxes are pending. The
Federal Income Tax Returns of the Company and each subsidiary of the Company
consolidated in such Tax Returns are not currently being examined for years
prior to the year ended December 31, 1992 and the statute of limitations has
run for years prior to December 31, 1992.
(d) There are no material Liens for Taxes upon the assets of the Company
except (i) with respect to matters beings contested in good faith and (ii)
Liens for Taxes not yet due.
(e) There are no material United States federal, state, local or foreign
audits or other administrative proceedings or court proceedings presently
pending with regard to any Taxes or Tax Returns of the Company.
(f) The Company is not a party to any agreement or arrangement (written or
oral) providing for the allocation or sharing of Taxes.
(g) The Company has not filed a consent pursuant to Section 341(f)(2) of the
Internal Revenue Code or agreed to have Section 341(f)(2) of the Internal
Revenue Code apply to any disposition of a subsection (f) asset (as such term
is defined in Section 341(f)(4) of the Internal Revenue Code) owned by the
Company.
(h) The Company is a corporation within the meaning of (S)7701(a)(3) of the
Internal Revenue Code.
(i) For purposes of this Agreement, the following terms shall have the
following meanings:
(i) "Taxes" shall mean all United States Federal, state, territorial,
local and foreign taxes, and other assessments of a similar nature (whether
imposed directly or through withholding), including any interest, additions
to tax, or penalties applicable thereto.
(ii) "Tax Returns" shall mean all United States Federal, state,
territorial, local and foreign tax returns, declarations, statements,
reports, schedules, forms and information returns and any amended tax
return relating to Taxes.
3.10. Environmental Matters. (a) Except for violations of the following
clauses (i) through (vii) that would not have a Material Adverse Effect on the
Company, to the best knowledge of the Company, (i) the Company and its
subsidiaries have conducted their respective businesses in compliance with all
applicable Environmental Laws and are currently in compliance with all such
laws, including, without limitation, having all permits, licenses and other
approvals and authorizations necessary for the operation of their respective
businesses as presently conducted, (ii) none of the properties currently or
formerly owned or operated by the Company or any of its subsidiaries contains
any Hazardous Substance in amounts exceeding the levels permitted by
applicable Environmental Laws, (iii) neither the Company nor any of its
subsidiaries has received any notices, demand letters or requests for
information from any court or governmental entity or third party indicating
that the Company or any of its subsidiaries may be in violation of, or liable
under, any Environmental Law in connection with the ownership or operation of
their businesses, including, without limitation, liability relating to sites
not owned or operated by the Company or any of its subsidiaries, (iv) there
are no civil, criminal or administrative actions, suits, demands, claims,
hearings, investigations or proceedings, pending or threatened, against the
Company or any subsidiaries relating to any violation of or liability under,
or alleged violation of or liability under, any Environmental Law, (v) all
reports that are required to be filed by the Company or any of its
subsidiaries concerning the release of any Hazardous Substance or the
threatened or actual violation of any Environmental Law have been so filed,
(vi) no Hazardous Substance has been disposed of, released or transported in
violation of or under circumstances that could create liability under any
applicable Environmental Law from any properties owned by the Company or any
of its subsidiaries as a result of any activity of the
9
Company or any of its subsidiaries during the time such properties were owned,
leased or operated by the Company or any subsidiaries, (vii) neither the
Company, any of its subsidiaries nor any of their respective properties are
subject to any material liabilities or expenditures (fixed or contingent)
relating to any suit, settlement, court order, administrative order,
regulatory requirement, judgment or claim asserted or arising under any
Environmental Law, and (viii) the Company has provided Parent with each
environmental audit, test or analysis performed within the last three years of
any property currently or formerly owned or operated by the Company or any of
its subsidiaries (x) sufficient to put the Parent on notice of any condition
of environmental impairment which would give rise to a Material Adverse Effect
and (y) of which the Company has knowledge.
(b) As used herein, "Environmental Law" means any United States Federal,
territorial, state, local or foreign law, statute, ordinance, rule,
regulation, code, license, permit, authorization, approval, consent, legal
doctrine, order, judgment, decree, injunction, requirement or agreement with
any governmental entity relating to (i) the protection, preservation or
restoration of the environment (including, without limitation, air, water
vapor, surface water, groundwater, drinking water supply, surface land,
subsurface land, plant and animal life or any other natural resource) or to
human health or safety or (ii) the exposure to, or the use, storage,
recycling, treatment, generation, transportation, processing, handling,
labeling, production, release or disposal of Hazardous Substances, in each
case as amended and as in effect on the date hereof. The term "Environmental
Law" includes, without limitation, (i) the Federal Comprehensive Environmental
Response Compensation and Liability Act of 1980, the Superfund Amendments and
Reauthorization Act, the Federal Water Pollution Control Act of 1972, the
Federal Clean Air Act, the Federal Clean Water Act, the Federal Resource
Conservation and Recovery Act of 1976 (including the Hazardous and Solid Waste
Amendments thereto), the Federal Solid Waste Disposal Act and the Federal
Toxic Substances Control Act, the Federal Insecticide, Fungicide and
Rodenticide Act, and the Federal Occupational Safety and Health Act of 1970,
each as amended and as in effect on the date hereof, and (ii) any common law
or equitable doctrine (including, without limitation, injunctive relief and
tort doctrines such as negligence, nuisance, trespass and strict liability)
that may impose liability or obligations for injuries or damages due to, or
threatened as a result of, the presence of, effects of or exposure to any
Hazardous Substance.
(c) As used herein, "Hazardous Substance" means any substance presently
listed, defined, designated or classified as hazardous, toxic, radioactive, or
dangerous, or otherwise regulated, under any Environmental Law. Hazardous
Substance includes any substance to which exposure is regulated by any
government authority or any Environmental Law including, without limitation,
any toxic waste, pollutant, contaminant, hazardous substance, toxic substance,
hazardous waste, special waste, industrial substance or petroleum or any
derivative or by-product thereof, radon, radioactive material, asbestos, or
asbestos containing material, urea formaldehyde foam insulation, lead or
polychlorinated byphenyls.
3.11. Brokers. No agent, broker, investment banker, financial advisor or
other person or entity is or will be entitled to any brokerage commission,
finder's fee or like payment in connection with any of the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
the Company.
3.12. Title to Properties. The Company and its subsidiaries have good, valid
and marketable title to the properties and assets listed on the most recent
consolidated balance sheet included in the SEC Reports (the "Balance Sheet")
as owned by it (other than properties and assets disposed of in the ordinary
course of business since the date of the Balance Sheet), and all such
properties and assets are free and clear of any liens, except as described in
the SEC Reports and the financial statements included therein or in the
Company Disclosure Schedule and other than liens for current taxes not yet due
and other liens, security interests, charges, encumbrances, easements,
covenants, restrictions or title imperfections that do not have a Material
Adverse Effect.
3.13. Information Supplied. None of the information supplied or to be
supplied by the Company for inclusion or incorporation by reference in the
Proxy Statement (as defined in Section 6.1(a)) will, at the date it is first
mailed to the Company's shareholders or at the time of the Shareholders
Meeting, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they are
made, not misleading. The Proxy Statement will comply as to form in all
material respects with the requirements of the Exchange Act and
10
the rules and regulations promulgated thereunder, except that no
representation is made by the Company with respect to statements made or
incorporated by reference therein based on information supplied in writing by
or on behalf of Parent or Purchaser specifically for inclusion therein.
3.14. Opinion Of Financial Advisor. The Company has received the opinion of
▇▇▇▇▇▇▇ ▇▇▇▇▇ & Company L.L.C., dated the date of this Agreement, to the
effect that, as of such date, the consideration to be received in the Merger
by the Company's shareholders (other than Parent or any affiliate thereof) is
fair to such holders of Shares from a financial point of view.
3.15. Board Recommendation. The Board of Directors of the Company, at a
meeting duly called and held, has duly and unanimously, subject to the terms
and conditions set forth herein, (i) determined that this Agreement and the
transactions contemplated hereby, including the Merger, are fair to and in the
best interests of the shareholders of the Company and (ii) subject to the
other provisions hereof, resolved to recommend that the holders of Shares
approve this Agreement and the transactions contemplated herein, including the
Merger.
3.16. Required Company Vote. The Company Shareholder Approval, being the
affirmative vote of at least 66 2/3% of the outstanding Shares, is the only
vote of the holders of any class or series of the Company's securities
necessary to approve this Agreement, the Merger and the other transactions
contemplated hereby (assuming for purposes of this representation the accuracy
of representations contained in Section 4.8).
3.17. Rights Agreement. The Board of Directors of the Company has amended
the Rights Agreement prior to the execution of this Agreement so that neither
the execution nor the delivery of this Agreement nor the consummation of the
Merger will (i) cause any Rights issued pursuant to the Rights Agreement to
become exercisable or to separate from the stock certificates to which they
are attached, (ii) cause Parent or any of its affiliates to be an Acquiring
Person (as such term is defined in the Rights Agreement) or (iii) trigger
other provisions of the Rights Agreement, including giving rise to a
Distribution Date (as such term is defined in the Rights Agreement).
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER
Parent and Purchaser each represent and warrant, jointly and severally, to
the Company that, except as disclosed or reflected in the Parent Disclosure
Schedule delivered herein to the Company:
4.1. Organization and Qualification. Each of Parent and Purchaser is a
corporation duly organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation and is in good standing as a foreign
corporation in each jurisdiction where the properties owned, leased or
operated by it, or the business conducted by it, requires such qualification
and where failure to so qualify or be in good standing would have a material
adverse effect on the financial condition or business of Parent and its
subsidiaries, taken as a whole. Each of Parent and Purchaser has the corporate
power to carry on its respective businesses as they are now being conducted.
Copies of the respective charter documents and by-laws of Parent and Purchaser
have heretofore been delivered to the Company, and such copies are complete
and correct as of the date hereof.
4.2. Capital Stock of Parent and Purchaser. As of the date hereof, and at
all times thereafter up to and including the Effective Time, all of the
outstanding shares of common stock, par value $.01 per share, of Purchaser
shall be duly authorized, validly issued, fully paid, non-assessable and owned
directly by Parent, free and clear of all liens, claims and encumbrances and
subject to compliance with the HSR Act, all of the outstanding shares of
common stock of Parent shall be duly authorized, validly issued, fully paid
and non-assessable and owned equally by ▇▇▇▇▇▇ Services Corp.; Blackstone
Capital Partners III Merchant Banking Fund L.P. and Blackstone Offshore
Capital Partners III L.C. (collectively, "Blackstone"); and Apollo Investment
Fund III, L.P., Apollo Overseas Partners III, L.P. and Apollo (U.K.) Partners,
L.P. and one or more other investment funds under common management
(collectively, "Apollo").
11
4.3. Authority and Absence of Conflict. (a) Each of Parent and Purchaser has
the requisite corporate power and authority to enter into this Agreement and
to perform its obligations hereunder and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by Parent
and Purchaser and the consummation by Parent and Purchaser of the transactions
contemplated hereby have been duly authorized by the respective Boards of
Directors of Parent and Purchaser, and by Parent as sole shareholder of
Purchaser, and no other corporate proceedings on the part of Parent or
Purchaser are necessary to authorize the execution, delivery and performance
of this Agreement and the transactions contemplated hereby. This Agreement has
been duly executed and delivered by Parent and Purchaser and (assuming due
authorization, execution and delivery by the Company) constitutes a valid and
binding obligation of each of them, enforceable against each of them in
accordance with its terms except to the extent that its enforceability may be
limited by applicable bankruptcy, insolvency, reorganization or other laws
affecting the enforcement of creditors' rights generally or by general
equitable principles.
(b) Neither the execution and delivery of this Agreement by Parent or
Purchaser, or ▇▇▇▇▇▇ Services Corp. nor the consummation by them of the
transactions contemplated hereby, nor compliance by Parent or Purchaser with
any of the provisions hereof, will (i) violate, conflict with, or result in a
breach of any provision of, or constitute a default (or an event which, with
notice or lapse of time or both, would constitute a default) under, or result
in the termination of, or accelerate the performance required by, or result in
a right of termination or acceleration under, or result in the creation of any
lien, security interest, charge or encumbrance upon any of the properties or
assets of Parent or Purchaser or any other direct or indirect subsidiary or
affiliate of Parent under any of the terms, conditions or provisions of (x)
the charter documents or by-laws of Parent or Purchaser or any other direct or
indirect subsidiary or affiliate of Parent or (y) any note, bond, mortgage,
indenture, deed of trust, license, lease, agreement or other instrument or
obligation to which Parent or Purchaser or any other direct or indirect
subsidiary of Parent is a party, or to which any of them, or any of their
respective properties or assets, may be subject, or (ii) subject to compliance
with the statutes and regulations referred to in the next subsection, violate
any judgment, ruling, order, writ, injunction, decree, statute, rule or
regulation applicable to Parent or Purchaser or any other direct or indirect
subsidiary or affiliate of Parent or any of their respective properties or
assets; except, in the case of each of clauses (i)(y) and (ii) above, for such
violations, conflicts, breaches, defaults, terminations, accelerations or
creations of liens, security interests, charges or encumbrances which, in the
aggregate, would not have a material adverse effect upon the business or
financial condition of Parent and Purchaser taken as a whole or of any
affiliate of Parent or Purchaser or prevent or delay in any material respect
the consummation of the Merger.
(c) Other than in connection with or in compliance with the provisions of
the WBCL the HSR Act (with respect to the formation of Parent), the HSR Act
(with respect to the transactions contemplated hereby, if applicable), the
Exchange Act, certain state securities or "takeover" statutes and the
environmental, health or safety laws or regulations of various states, no
notice to, filing with, or authorization, consent or approval of, any domestic
or foreign public body or authority is necessary for the consummation by
Parent and Purchaser of the transactions contemplated by this Agreement,
except where the failure to give such notices, make such filings, or obtain
authorizations, consents or approvals would, in the aggregate, have a material
adverse effect upon the business or financial condition of Parent and
Purchaser taken as a whole or prevent or delay in any material respect the
consummation of the Merger.
4.4. Brokers. No agent, broker, investment banker, financial advisor or
other person or entity is or will be entitled to any brokerage commission,
finder's fee or like payment in connection with any of the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
Parent or Purchaser.
4.5. Interim Operations Of Parent and Purchaser. Each of Parent and
Purchaser was formed on November 18, 1997 solely for the purpose of engaging
in the transactions contemplated hereby, has engaged in no other business
activities and has conducted its operations only as contemplated hereby.
4.6. Proxy Statement. None of the information supplied in writing by Parent
or Purchaser specifically for inclusion in the Proxy Statement will, at the
date it is first mailed to the shareholders of the Company or at the
12
time of the Shareholders Meeting, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
4.7. Funds Available. Parent has received equity and debt commitment letters
("Commitment Letters") in an aggregate amount sufficient to fund the Merger
and the transactions contemplated thereby and has delivered copies of such
letters to the Company.
4.8. Ownership of Shares. Neither Parent nor Purchaser is a "significant
shareholder," as defined in Section 180.1130 of the WBCL, of the Company and
neither Parent nor Purchaser is an affiliate, as defined in Section 180.0103
of the WBCL, of a significant shareholder of the Company.
4.9. No Litigation. There are no claims, actions, suits or proceedings or
investigations pending or, to the best knowledge of Parent, threatened against
Parent, Purchaser or any of their respective affiliates, nor is Parent,
Purchaser or any of their respective affiliates subject to any order,
judgment, writ, injunction or decree, in either case which would materially
impair the ability of Parent or Purchaser to consummate the Merger.
ARTICLE V.
COVENANTS RELATING TO CONDUCT OF BUSINESS PRIOR TO MERGER
5.1. Conduct Of Business Of The Company. Except as otherwise contemplated
hereby or as set forth in the Disclosure Schedule, the Company covenants and
agrees that, unless Parent shall otherwise agree in writing (which agreement
shall not be unreasonably withheld), prior to the Effective Time:
(a) The business of the Company and its subsidiaries shall be conducted
only in, and the Company and its subsidiaries shall not take any action
except in, the ordinary and usual course of business, and the Company shall
use its reasonable best efforts to maintain and preserve intact its and its
subsidiaries' business organization, assets, employees, officers and
consultants and advantageous business relationships.
(b) Neither the Company nor any of its subsidiaries shall directly or
indirectly do any of the following: (i) except in the ordinary course of
business, sell, pledge, dispose of or encumber any assets of the Company or
of any of its subsidiaries; (ii) amend its charter or by-laws or similar
organizational documents; (iii) split, combine or reclassify any shares of
its capital stock or declare, set aside, make or pay any dividend or
distribution payable in cash, stock, property or otherwise with respect to
any of its capital stock (except as contemplated by the Rights Agreement
and except for (x) cash dividends to shareholders of the Company declared
in the ordinary course of business and consistent with past practice and
(y) dividends by wholly-owned subsidiaries of the Company); (iv) redeem,
purchase or otherwise acquire or offer to redeem, purchase or otherwise
acquire any capital stock of the Company; (v) adopt a plan of liquidation
or resolutions providing for the liquidation, dissolution, merger,
consolidation or other reorganization of the Company; or (vi) authorize or
propose any of the foregoing, or enter into any contract, agreement,
commitment or arrangement to do any of the foregoing.
(c) Neither the Company nor any of its subsidiaries shall, directly or
indirectly, (i) except for Shares (and the associated Rights) issuable upon
exercise of options outstanding under the Option Plans on the date hereof,
issue, sell, pledge, dispose of or encumber, or authorize, propose or agree
to the issuance, sale, pledge, disposition or encumbrance of, any shares
of, or any options, warrants or rights of any kind to acquire any shares of
or any securities convertible into or exchangeable or exercisable for any
shares of, its capital stock of any class or any other securities in
respect of, in lieu of, or in substitution for Shares outstanding on the
date hereof; (ii) make any material acquisition, by means of merger,
consolidation or otherwise, or material disposition (other than disposition
of assets in the ordinary course of business), of assets or securities, or
make any loans, advances or capital contributions to, or investment in, any
individual or entity (other than to the Company or a wholly-owned
subsidiary of the Company); (iii) except in the ordinary course of
business, and other than indebtedness to or guarantees for the benefit of
the Company or any affiliate of the Company and (B) borrowings to fund
payments contemplated in Section 2.2 hereof, incur
13
any indebtedness or issue any debt securities or assume, guarantee, endorse
or otherwise become liable or responsible (whether directly, contingently
or otherwise) for, the obligations of any other individual or entity; (iv)
change the capitalization of the Company (other than the incurrence of
indebtedness otherwise permitted in this Agreement); (v) except in the
ordinary course, change any assumption underlying, or method of
calculating, any bad debt, contingency or other reserve; (vi) pay,
discharge or satisfy any claims, liabilities or obligations (absolute,
accrued, contingency or otherwise), other than the payment, discharge or
satisfaction of liabilities in the ordinary course of business or as
required by applicable law; (vii) waive, release, grant or transfer any
rights of value or modify or change in any material respect any existing
license, lease, contract or other document, other than in the ordinary
course of business; or (viii) authorize any of the foregoing, or enter into
or modify any contract, agreement, commitment or arrangement to do any of
the foregoing.
(d) Subject to Section 2.2, neither the Company nor any of its
subsidiaries shall (except for salary increases or other employee benefit
arrangements in the ordinary course of business consistent with past
practice that, in the aggregate, do not result in a material increase in
benefits or compensation expense to the Company and its subsidiaries, taken
as a whole, or as may be required pursuant to any agreements in effect at
the date hereof) adopt or amend or take any actions to accelerate any
rights or benefits under (except as may be required by law) any bonus,
profit sharing, compensation, stock option, pension, retirement, deferred
compensation, employment, severance, termination or other employee benefit
plan, agreement, trust, fund or other arrangement for the benefit or
welfare of any employee or any officer or director or former employee or,
except in the ordinary course of business, consistent with past practice,
increase the compensation or fringe benefits of any employee or former
employee or pay any benefit not permitted by any existing plan, arrangement
or agreement.
(e) Except in the ordinary course of business, neither the Company nor
any of its subsidiaries shall make any tax election or, except in the
ordinary course of business, settle or compromise any federal, state, local
or foreign income tax liability.
(f) Except in the ordinary course of business, neither the Company nor
any of its subsidiaries shall permit any insurance policy naming it as
beneficiary or a loss payee to be cancelled or terminated without notice to
Parent.
(g) Neither the Company nor any of its subsidiaries shall agree, in
writing or otherwise, to take any of the foregoing actions or any action
which would make any representation or warranty in Article III hereof
untrue or incorrect so as to result in a Material Adverse Effect.
ARTICLE VI.
ADDITIONAL AGREEMENTS
6.1. Preparation Of Proxy Statement; Shareholders Meeting. (a) Promptly
following the date of this Agreement, the Company shall prepare a proxy
statement relating to the Shareholders Meeting (the "Proxy Statement"), and
the Company shall prepare and file with the Commission the Proxy Statement.
Parent will cooperate with the Company in connection with the preparation of
the Proxy Statement including, but not limited to, furnishing to the Company
any and all information regarding Parent or Purchaser and their affiliates as
may be required to be disclosed therein. The information provided and to be
provided by Parent and the Company, respectively, for use in the Proxy
Statement shall, at the date it is first mailed to the Company's shareholders
and on the date of the Shareholders Meeting referred to below, be true and
correct in all material respects and shall not omit to state any material fact
required to be stated therein or necessary in order to make such information
not misleading, and the Company and Parent each agree to correct any
information provided by it for use in the Proxy Statement which shall have
become false or misleading.
(b) The Company will as promptly as practicable notify Parent of (i) the
receipt of any comments from the Commission and (ii) any request by the
Commission for any amendment to the Proxy Statement or for additional
information. All filings by the Company with the Commission, including the
Proxy Statement and any
14
amendment thereto, and all mailings to the Company's shareholders in
connection with the Merger, including the Proxy Statement, shall be subject to
the prior review, comment and approval of Parent (such approval not to be
unreasonably withheld or delayed). Parent will furnish to the Company the
information relating to it and its affiliates, including Purchaser, required
by the Exchange Act and the rules and regulations promulgated thereunder to be
set forth in the Proxy Statement.
(c) The Company will: (i) as promptly as practicable following the date of
this Agreement, duly call, give notice of, convene and hold a meeting of its
shareholders (the "Shareholders Meeting") for the purpose of approving this
Agreement and the transactions contemplated hereby to the extent required by
the WBCL and the Company's Restated Articles of Incorporation; (ii) through
its Board of Directors, and subject to the other provisions hereof, recommend
to its shareholders approval of the foregoing matters; and (iii) use its
reasonable best efforts to obtain the necessary approval of this Agreement and
the transactions contemplated hereby by its shareholders; provided, however,
that, subject to Section 6.8(b), the Company may fail to make or withdraw or
modify such recommendation and shall not be obligated to use its reasonable
best efforts or take any action pursuant to this Section 6.1 if the Company
shall have concluded in good faith, based on advice from outside legal counsel
to the Company, that such actions would be in breach of the Company's Board
and Directors' fiduciary duties under applicable law. Any such recommendation,
together with a copy of the opinion referred to in Section 3.14, shall be
included in the Proxy Statement.
6.2. Access To Information; Confidentiality. (a) From and after the date of
this Agreement and until the earlier of the Effective Time or termination of
this Agreement, the Company shall, and shall cause its subsidiaries, officers,
directors, employees and agents to, afford to Parent, and to the officers,
employees and agents of Parent, complete access at all reasonable times to the
officers, employees, agents, properties, books, records and contracts of the
Company and its subsidiaries, and shall furnish Parent and its respective
officers, employees and agents, all financial, operating and other data and
information as Parent may reasonably request.
(b) Parent hereby confirms to the Company that the confidentiality agreement
dated as of August 28, 1997 by and between ▇▇▇▇▇▇ Services Corp. ("▇▇▇▇▇▇")
and the Company ("the Confidentiality Agreement") is in full force and effect.
Parent hereby agrees to be bound by and to comply with the Confidentiality
Agreement to the same extent as ▇▇▇▇▇▇ is bound thereby, and agrees that it
will cause Purchaser and the affiliates of Parent and Purchaser to be bound by
and to comply with that Agreement to the same extent that ▇▇▇▇▇▇ is bound
thereby, and Parent shall cause Parent's, Purchaser's and such affiliates'
officers, employees, agents and representatives, including, without
limitation, attorneys, accountants, consultants, financial advisers and
lenders and their respective counsel to comply therewith as though they were
parties thereto.
6.3. Filings; Commercially Reasonable Best Efforts. (a) Subject to the terms
and conditions herein provided, each of the parties hereto agrees to use its
commercially reasonable best efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations or otherwise to consummate and
effect the transactions contemplated by this Agreement, including but not
limited to (i) determining whether any filings are required to be made or
consents, approvals, waivers, licenses, permits or authorizations are required
to be obtained (or, which if not obtained, would result in an event of
default, termination or acceleration of any agreement) under any applicable
law or regulation or from any governmental entities or third parties,
including parties to loan agreements or other debt instruments, in connection
with the transactions contemplated by this Agreement, including the Merger and
the transactions contemplated thereby, (ii) promptly making any such filings,
furnishing information required in connection therewith and timely seeking to
obtain any such consents, approvals, permits or authorizations and (iii) doing
all things necessary, proper or advisable to remove any injunctions or other
impediments or delays, legal or otherwise, to the consummation of the Merger
and the other transactions contemplated by this Agreement. Notwithstanding the
foregoing, the Company will not be required to commit to a divestiture
transaction that is to be consummated prior to the Effective Time.
(b) Notwithstanding the foregoing, none of Parent, Purchaser or the Company
shall be obligated to use its commercially reasonable best efforts or take any
action pursuant to this Section 6.3 if it determines in good faith,
15
based on the advice of outside legal counsel, that such actions would be in
breach of its Board of Directors' fiduciary duties under applicable law.
6.4. Public Announcements. Parent, Purchaser and the Company shall consult
with each other before issuing any press release or otherwise making any
public statements with respect to the Merger, and shall not issue any such
press release or make any such public statement prior to such consultation,
except as may be required by law or any listing agreement with a national
securities exchange.
6.5. Notification of Certain Matters. The Company, Parent and Purchaser each
agree to give prompt notice (a "Default Notice") to each other at any time
from the date hereof to the Effective Time of the obtaining by it of actual
knowledge as to the occurrence, or failure to occur, of any event which
occurrence or failure would be likely to cause a breach of any covenant,
representation or warranty contained in this Agreement so as to result in a
Material Adverse Effect or in a material adverse effect upon Parent or any of
its affiliates. If any party receiving a Default Notice shall not object
thereto within 5 business days after receiving such Default Notice, then such
party shall be deemed to have waived all rights accruing to it as a result of
such breach. A party shall object to a Default Notice by giving timely notice
of such party's objection thereto as provided herein to the party giving such
Default Notice. For purposes of this Section 6.5, an "actual knowledge" of a
party to this Agreement shall mean the best actual knowledge of its chairman
of the board, president and chief financial officer.
6.6. Employee Benefits, etc. (a) For a period of two years following the
Effective Time, Parent intends to cause the Surviving Corporation to, and upon
being so caused, the Surviving Corporation shall, provide employee benefit
plans and programs for the benefit of employees of the Surviving Corporation
and its subsidiaries that are in the aggregate no less favorable to such
employees than the Employee Benefit Plans. All service credited to each
employee by the Company through the Effective Time shall be recognized by
Parent or the Surviving Corporation for purposes of eligibility and vesting
under any employee benefit plan provided directly or indirectly by Parent or
the Surviving Corporation for the benefit of the employees and in which the
respective employees participate.
(b) Notwithstanding anything in this Agreement to the contrary, Parent shall
cause the Surviving Corporation to honor (without modification) and assume the
written employment agreements, severance agreements and other agreements
listed on the Disclosure Schedule, all as in effect on the date of this
Agreement.
(c) Parent shall cause the Surviving Corporation not to, and the Surviving
Corporation shall not, terminate or adversely amend in any manner which
adversely affects the benefits that participants in such Plans are entitled to
thereunder with respect to any periods prior to and including the Effective
Time.
(d) Parent intends to cause the Surviving Corporation to continue to
maintain its principal offices in Elgin, Illinois and to maintain its
charitable commitments and community involvement.
6.7. Indemnification And Insurance. (a) The Articles of Incorporation and
by-laws of the Company (and the Surviving Corporation after the Effective
Time) shall contain the provisions with respect to indemnification set forth
in the Restated Articles of Incorporation and By-Laws of the Company on the
date of this Agreement, which provisions shall not be amended, repealed or
otherwise modified for a period of six years after the Effective Time in any
manner that would adversely affect the rights thereunder of any individual who
at any time prior to the Effective Time was an employee, agent, director or
officer of the Company or any of the Company's subsidiaries, together with
each such person's heirs, representatives, successors and assigns
(individually, an "Indemnified Party" and collectively the "Indemnified
Parties") in respect of actions or omissions occurring at or prior to the
Effective Time (including, without limitation, the transactions contemplated
by the Agreement). Parent shall cause the Company (or the Surviving
Corporation if after the Effective Time) to, and the Company (or the Surviving
Corporation if after the Effective Time) shall, maintain in effect for not
less than 6 years after the Effective Time the current policies of directors'
and officers' liability insurance maintained by the Company and the Company's
subsidiaries on the date hereof (provided that the Company may
16
substitute therefor policies having at least substantially the same coverage
and containing terms and conditions which are no less advantageous in any
material respect to the persons currently covered by such policies as
insureds) with respect to matters existing or occurring at or prior to the
Effective Time; provided, however, that if the aggregate annual premiums for
such insurance at any time during such period shall exceed 300% of the per
annum rate of premium currently paid by the Company and its subsidiaries for
such insurance on the date of this Agreement, then Parent shall cause the
Company (or the Surviving Corporation if after the Effective Time) to, and the
Company (or the Surviving Corporation if after the Effective Time) shall,
provide the maximum coverage that shall then be available at an annual premium
equal to 300% of such rate. The Company represents to Parent that such per
annum rate of premium currently paid by the Company and its subsidiaries is
approximately $400,000. Without limiting the foregoing, in the event any
Indemnified Party becomes involved in any capacity in any action, proceeding
or investigation based in whole or in part on, or arising in whole or in part
out of, any matter, including the transactions contemplated hereby, existing
or occurring at or prior to the Effective Time, then to the extent permitted
by law, Parent shall cause the Company (or the Surviving Corporation if after
the Effective Time) to, and the Company (or the Surviving Corporation if after
the Effective Time) shall, periodically advance to such Indemnified Party its
legal and other expenses (including the cost of any investigation and
preparation incurred in connection therewith), subject to the provision by
such Indemnified Party of an undertaking to reimburse the amounts so advanced
in the event of a final determination by a court of competent jurisdiction
that such Indemnified Party is not entitled thereto. Parent shall cause the
Company (or the Surviving Corporation if after the Effective Time) to, and the
Company (or the Surviving Corporation if after the Effective Time) shall, pay
all expenses, including attorneys' fees, that may be incurred by any
Indemnified Party in enforcing the indemnity and other obligations provided
for in this Section 6.7.
(b) The provisions of this Section 6.7 are intended for the benefit of, and
shall be enforceable by, the respective Indemnified Parties and shall be
binding on all successors and assigns of Parent, Purchaser, the Company and
the Surviving Corporation.
(c) Notwithstanding anything herein to the contrary, if any claim, action,
suit, proceeding or investigation (whether arising before, at or after the
Effective Time) is made or threatened against any Indemnified Party on or
prior to the sixth anniversary of the Effective Time, the provisions of this
Section 6.7 shall continue in effect until the final disposition of such
claim, action, suit, proceeding or investigation.
6.8. Solicitation. (a) The Company (and its subsidiaries and affiliates)
will not, and the Company (and its subsidiaries and affiliates) will use their
best efforts to ensure that their respective directors, officers, employees,
representatives and agents do not, directly or indirectly, solicit or initiate
inquiries or proposals from, or provide any confidential information to, or
participate in any discussions or negotiations with, any person or entity
(other than Parent and its subsidiaries and their respective directors,
officers, employees, representatives and agents) concerning (i) any merger,
sale of assets not in the ordinary course (except for any sale of assets
otherwise permitted under the terms of this Agreement), or other similar
transaction involving the Company or any subsidiary or division of the
Company, or the sale of any equity interest in the Company or any subsidiary,
or (ii) any sale by the Company or its subsidiaries of authorized but unissued
Shares or of any shares (whether or not outstanding) of any of the Company's
subsidiaries (all such inquiries and proposals being referred to herein as
"Acquisition Proposals"), provided, however, that nothing contained in this
Section 6.8 shall prohibit the Company or its Board of Directors from (i)
subject to the provisions of Section 6.4, issuing a press release or otherwise
publicly disclosing the terms of this Agreement, including, without
limitation, this Section 6.8; (ii) proceeding with the transactions
contemplated by this Agreement; (iii) communicating to the Company's
shareholders a position as contemplated by Rule 14e-2 promulgated under the
Exchange Act; (iv) making any disclosure to the Company's shareholders which,
in the judgment of the Board of Directors of the Company, with the advice of
outside counsel, should reasonably be made under applicable law (including,
without limitation, laws relating to the fiduciary duties of directors) or (v)
taking any non-appealable, final action ordered to be taken by the Company by
any court of competent jurisdiction; and, provided, further, that the Board of
Directors of the Company may, on behalf of the Company, furnish or cause to be
furnished information and may direct the Company, its directors, officers,
employees, representatives or agents to furnish information, in each case
pursuant to appropriate confidentiality agreements, and to participate in
discussions or negotiations with any
17
person or entity concerning any Acquisition Proposal which was not solicited
by the Company or any of its subsidiaries or affiliates or any of their
respective directors, officers, employees, representatives or agents, or which
did not otherwise result from a breach of this Section 6.8, if (x) the Board
of Directors of the Company shall conclude in good faith, after consultation
with its financial advisor, that such person or entity has made or is
reasonably likely to make a bona fide Acquisition Proposal for a transaction
more favorable to the Company's shareholders from a financial point of view
than the transactions contemplated hereby, and (y), in the opinion of the
Board of Directors of the Company, only after receipt of advice from
independent legal counsel to the Company, the failure to provide such
information or access or to engage in such discussions or negotiations would
cause the Board of Directors of the Company to violate its fiduciary duties to
the Company's stockholders under applicable law (an Acquisition Proposal which
satisfies clauses (x) and (y) being referred to herein as a "Superior
Proposal"). The Company will immediately notify Parent of the terms of any
proposal, discussion, negotiation or inquiry (and will disclose any written
materials received by the Company in connection with such proposal, discussion
negotiation, or inquiry) and the identity of the party making such proposal or
inquiry which it may receive in respect of any such transaction unless the
Board of Directors of the Company determines, based on the advice of outside
legal counsel to the Company, that giving such notice would cause the Board of
Directors of the Company to violate its fiduciary duties to the Company's
shareholders under applicable law. The Company agrees not to release any
person or entity from, or waive any provision of, any standstill agreement to
which it is a party or any confidentiality agreement between it and another
person or entity, unless the Company's Board of Directors shall conclude in
good faith, after consultation with its financial advisor, that such person or
entity has made or is reasonably likely to make a bona fide Acquisition
Proposal for a transaction more favorable to the Company's shareholders from a
financial point of view than the transactions contemplated hereby. The Company
shall, and shall cause each subsidiary to, immediately cease and cause to be
terminated any existing activities, discussions or negotiations by the
Company, any subsidiary of the Company or any officer, director or employee
of, or investment banker, attorney, accountant or other advisor or
representative of, the Company or any subsidiary with parties conducted
heretofore with respect to any of the foregoing.
(b) Except as set forth herein, neither the Board of Directors of the
Company nor any committee thereof shall (i) withdraw or modify, or propose to
withdraw or modify, in a manner adverse to Parent or the Purchaser, the
approval or recommendation by the Board of Directors of the Company or any
such committee of this Agreement or the Merger, (ii) approve or recommend, or
propose to approve or recommend, any Acquisition Proposal, or (iii) enter into
any agreement with respect to any Acquisition Proposal. Notwithstanding the
foregoing, the Board of Directors of the Company may (subject to the terms of
this and the following sentence) withdraw or modify its approval or
recommendation of this Agreement or the Merger, approve or recommend a
Superior Proposal or enter into an agreement with respect to a Superior
Proposal at any time after the second business day following Parent's receipt
of written notice advising Parent that the Board of Directors of the Company
has received a Superior Proposal, specifying the material terms and conditions
of such Superior Proposal and identifying the person making such Superior
Proposal; provided that the Company shall not enter into an agreement with
respect to a Superior Proposal unless the Company shall have furnished Parent
with written notice not later than noon (New York time) two business days in
advance of any date that it intends to enter into such agreement and shall
have caused its financial and legal advisors to negotiate with Parent to make
such amendments to the terms and conditions of this Agreement as would make
this Agreement as so amended at least as favorable to the Company's
shareholders from a financial point of view as the Superior Proposal. In
addition, if the Company proposes to enter into an agreement with respect to
any Acquisition Proposal, it shall concurrently with entering into such
agreement pay, or cause to be paid, to Parent the Termination Amount (as
defined in Section 9.2) subject to the provisions of Section 9.2.
ARTICLE VII.
CONDITIONS PRECEDENT
7.1. Conditions To Each Party's Obligation To Effect The Merger. The
respective obligation of each party to effect the Merger is subject to the
satisfaction or waiver on or prior to the Closing Date of the following
conditions:
(a) Company Shareholder Approval. The Company Shareholder Approval shall
have been obtained.
18
(b) Antitrust. The waiting periods (and any extensions thereof)
applicable to the formation of Parent under the HSR Act shall have been
terminated or shall have expired and, if applicable, the waiting periods
(and any extensions thereof) applicable to the transactions contemplated by
this Agreement under the HSR Act shall have been terminated or shall have
expired. Any consents, approvals and filings required under the Competition
Act (Canada) and any other applicable foreign law shall have been obtained
or made, as applicable.
(c) Statutes. No statute, rule, order, decree or regulation shall have
been enacted or promulgated by any domestic government or any governmental
agency or authority of competent jurisdiction which prohibits the
consummation of the Merger.
(d) Violation of Law. Consummation of the Merger shall not result in
violation of any applicable United States federal or state law providing
for criminal penalties.
(e) Litigation. No preliminary or permanent injunction or other order
issued by any federal or state court of competent jurisdiction in the
United States preventing the consummation of the Merger shall be in effect;
provided, however, that the parties hereto shall use their best efforts to
have any such injunction or order vacated.
7.2. Conditions To Obligations Of Parent. The obligations of Parent to
effect the Merger are further subject to the following conditions:
(a) Representations And Warranties. The representations and warranties of
the Company set forth in this Agreement shall be true and correct in each
case as of the date of this Agreement and (except to the extent such
representations and warranties speak as of an earlier date) as of the
Closing Date as though made on and as of the Closing Date, except where the
failure of such representations and warranties to be so true and correct
(without giving effect to any limitation as to "materiality" or "Material
Adverse Effect" set forth therein) would not have a Material Adverse
Effect; provided that, notwithstanding any other term or provision hereof,
the entering into or modification or amendment of any contract or
agreement, in form and substance mutually agreeable to the parties hereto,
in contemplation of the completion of the Merger (including, without
limitation, employment agreements (and the options granted pursuant
thereto), any option plan, any corporation services agreement and any
indemnity agreements) shall not be deemed to cause any breach of, or
inaccuracy in, any of the representations and warranties or covenants of
the Company contained in this Agreement.
(b) Performance Of Obligations Of The Company. The Company shall have
performed the obligations required to be performed by it under this
Agreement at or prior to the Closing Date (except for such failures to
perform as have not had a Material Adverse Effect), and Parent shall have
received a certificate signed on behalf of the Company by the Chief
Executive Officer and the Chief Financial Officer of the Company to such
effect, to their best knowledge.
(c) No Litigation. There shall not be instituted or pending any suit,
action or proceeding (having a substantial likelihood of success) against
Parent, Purchaser, the Company or any subsidiary of the Company (i)
challenging the acquisition by Parent or Purchaser of any Shares, seeking
to restrain or prohibit the consummation of the Merger or any of the other
transactions contemplated by this Agreement or seeking to obtain from the
Company, Parent or Purchaser any damages that are material in relation to
the Company and its subsidiaries taken as a whole, (ii) seeking to prohibit
or limit the ownership or operation by the Company, Parent or any of their
respective subsidiaries of any material portion of the business or assets
of the Company, Parent or any of the respective subsidiaries or to compel
the Company, Parent or any of their respective subsidiaries to dispose of
or hold separate any material portion of the business or assets of the
Company or Parent and their respective subsidiaries, in each case taken as
a whole, (iii) seeking to impose material limitations on the ability of
Parent or Purchaser to acquire or hold, or exercise full rights of
ownership of, the shares of capital stock of the Surviving Corporation,
including the right to vote such capital stock on all matters properly
presented to the stockholders of the Surviving Corporation, (iv) seeking to
prohibit or impose material limitations on the ability of Parent to
effectively control in any material respect the business or operations of
the Company or its subsidiaries or (v) which otherwise is reasonably likely
to have a Material Adverse Effect.
19
(d) Statutes. There shall not be any statute, rule, regulation, judgment,
order or injunction enacted, entered, enforced, promulgated, or deemed
applicable, pursuant to an authoritative interpretation by or on behalf of
a governmental entity, to the Merger, or any other action shall be taken by
any governmental entity, other than the application or the Merger of
applicable waiting periods under HSR Act and the Canadian Competitition Act
or any other applicable foreign law, that is substantially likely to
result, directly or indirectly, in any of the consequences referred to in
clauses (i) through (v) of Section 7.2(c) above.
(e) Funding. Parent shall have received sufficient funds pursuant to the
Commitment Letters to consummate the Merger and the transactions
contemplated thereby, provided that such failure to receive funds shall not
have resulted from the failure of Parent to use its reasonable commercial
efforts to consummate the transactions contemplated by the Commitment
Letters.
7.3. Conditions To Obligation Of The Company. The obligation of the Company
to effect the Merger is further subject to the following conditions:
(a) Representations And Warranties. The representations and warranties of
Parent and Purchaser set forth in this Agreement shall be true and correct,
in each case as of the date of this Agreement and (except to the extent
such representations and warranties speak as of an earlier date) as of the
Closing Date as though made on and as of the Closing Date, except where the
failure of such representations and warranties to be so true and correct
(without giving effect to any limitation as to "materiality" or "material
adverse effect" set forth therein) would not reasonably be expected to
individually or in the aggregate have a material adverse effect on the
financial condition or business of Parent or adversely affect the ability
of Parent to consummate the Merger.
(b) Performance Of Obligations Of Parent. Parent shall have performed the
obligations required to be performed by it under this Agreement at or prior
to the Closing Date (except for such failures to perform as have not had,
either individually or in the aggregate, a material adverse effect on the
financial condition or business of Parent or adversely affect the ability
of Parent to consummate the Merger).
(c) Solvency Opinion. The Company shall have received an opinion or
certificate of a reputable expert firm confirming the solvency of the
Company after the Merger and related financings addressed to or for the
benefit of the Board of Directors of the Company so that the Board of
Directors of the Company is entitled to rely thereon.
ARTICLE VIII.
TERMINATION, AMENDMENT AND WAIVER
8.1. Termination. This Agreement may be terminated and abandoned at any time
prior to the Effective Time, whether before or after approval of matters
presented in connection with the Merger by the shareholders of the Company:
(a) by mutual written consent of Parent and the Company; or
(b) by either Parent or the Company if any governmental body or
regulatory authority of the United States of America shall have issued an
order, decree or ruling or taken any other action, in each case permanently
enjoining, restraining or otherwise prohibiting the Merger and such order,
decree, ruling or other action shall have become final and non-appealable;
provided that the right to terminate this Agreement pursuant to this
Section 8.1(b) shall not be available to any party that has breached its
obligations under Section 6.3; or
(c) by either Parent or the Company if the Merger shall not have been
consummated on or before June 30, 1998 (other than due to the failure of
the party seeking to terminate this Agreement) to perform its obligations
under this Agreement required to be performed at or prior to the Effective
Time); or
(d) by either Parent or the Company if at the duly held meeting of the
shareholders of the Company (including any adjournment thereof) held for
the purpose of voting on the Merger, this Agreement and the
20
consummation of the transactions contemplated hereby, the holders at least
of 66 2/3% of the outstanding Shares shall not have approved the Merger,
this Agreement and the consummation of the transactions contemplated
hereby; or
(e) by the Board of Directors of Parent, (i) if the Company shall have
breached any of its representations and warranties or failed to comply with
any of the covenants or agreements (without, in each instance, giving
effect to any limitation as to "materiality" or "material adverse effect"
set forth therein) contained in this Agreement to be complied with or
performed by the Company at or prior to consummation of the Merger and such
breach or failure shall have resulted in a Material Adverse Effect, or (ii)
the Company shall have received from a third party a bona fide Acquisition
Proposal, and the Board of Directors of the Company, shall have accepted
such a proposal or (iii) the Board of Directors of the Company shall have
failed to recommend to the Company Shareholders that they give the Company
Shareholder Approval or shall have withdrawn or modified in a manner
adverse to Parent or Purchaser its approval or recommendation with respect
to the Merger, or
(f) by the Board of Directors of the Company, if (i) Parent or Purchaser
shall have breached in any material respect any of its representations and
warranties or failed to comply in any material respect with any of the
covenants or agreements contained in this Agreement to be complied with or
performed by Parent or Purchaser, or (ii) if the Company enters into a
written agreement concerning a transaction that constitutes a Superior
Proposal, provided that the Company shall have complied with the provisions
of Section 6.8(a) and (b) hereof (including the payment of the Termination
Amount) or (iii) the condition set forth in Section 7.2(e) cannot be
satisfied.
8.2 . Effect Of Termination. In the event of termination of this Agreement
by either the Company or Parent as provided in Section 8.1, no party hereto
(or any of its directors, officers, employees, agents, legal and financial
advisors or other representatives) shall have any liability or further
obligation to any other party to this Agreement, except as provided in this
Section 8.1 and Sections 6.2(b), 9.1 and 9.2 of this Agreement, and except
that nothing herein will relieve any party from liability for its wilful
breach of this Agreement.
ARTICLE IX.
GENERAL PROVISIONS
9.1. Nonsurvival Of Representations And Warranties. The representations and
warranties in this Agreement or in any instrument delivered pursuant to this
Agreement shall expire with, and be terminated and extinguished upon,
consummation of the Merger. This Section 9.1 have no effect upon any other
obligation of the parties hereto, whether to be performed before or after the
Effective Time. The Confidentiality Agreement shall survive the termination of
this Agreement and the provisions of such Confidentiality Agreement shall
apply to all information and material delivered by any party hereunder.
9.2. Payment Of Certain Fees and Expenses. (a) All costs and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby and thereby shall be paid by the party incurring such expenses.
(b) Notwithstanding the foregoing, if this Agreement is terminated pursuant
to Section 8.1(e)(ii) or (iii) or 8.1(f)(ii) hereof, or prior to the
termination of the Agreement, any person other than Parent, Purchaser or an
affiliate thereof acquires in excess of 20% of the issued and outstanding
Shares, then the Company shall pay to Parent (i) concurrently with such
termination, an amount equal to U.S. $50 million (the "Termination Fee"), plus
(ii) promptly, but in no event later than two days after being furnished
documentation in respect thereto by Parent ("Documentation"), Parent's or its
affiliates' out-of-pocket fees and expenses (including legal, investment
banking, financing commitment fees, and commercial banking fees and expenses)
actually incurred in connection with the Merger, due diligence investigation,
the negotiation and execution of this Agreement and the transactions
contemplated hereby up to a maximum amount of $25 million (the "Termination
Expenses", and
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together with the Termination Fee, the "Termination Amount"). In addition, if
this Agreement is terminated pursuant to Section 8.1(d) and at the time of
such termination, Parent is not in material breach of this Agreement, then the
Company shall pay to Parent, promptly but in no event later than two days
after being furnished Documentation by Parent, the Termination Expenses, and,
if the Company shall thereafter, within nine months after such termination,
enters into an agreement with respect to an Acquisition Proposal or a third
party acquires more than 50% of the Company's outstanding shares or more than
50% of the Company's assets, then the Company shall pay the Termination Fee to
Parent concurrently with entering into such agreement. Any payments required
to be made pursuant to this Section shall be made by wire transfer of same day
funds to an account designated by Parent. Notwithstanding anything to the
contrary herein, in no event shall there be more than one payment each of the
Termination Fee and Termination Expenses, provided that Termination Expenses
may be paid from time to time upon submission of Documentation.
9.3. Notices. All notices and other communications hereunder shall be in
writing and shall be deemed to have been duly given if delivered personally,
telecopied (which is confirmed) or sent by an overnight courier service, such
as Federal Express, to the parties at the following addresses or at such other
addresses as shall be specified by the parties by like notice:
(a)If to Parent or Purchaser:
▇▇▇▇▇▇ Services Corp.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇▇, LCD #1
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Telecopy No. (▇▇▇) ▇▇▇-▇▇▇▇
Apollo Management, L.P.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telecopy No. (▇▇▇) ▇▇▇-▇▇▇▇
The Blackstone Group
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telecopy No. (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
22
(b) If to the Company:
Safety-Kleen Corp.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Chairman
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
9.4. Certain Definitions; Interpretation. When a reference is made in this
Agreement to subsidiaries of Parent, Purchaser or the Company, the word
"subsidiaries" means any corporation 50 percent or more of whose outstanding
voting securities, or any partnership, joint venture or other entity 50
percent or more of whose total equity interest, is directly or indirectly
owned by Parent, Purchaser or the Company, as the case may be. The words
"Significant Subsidiaries" shall have the meaning ascribed to it under Rule 1-
02 of Regulation S-X of the Commission. As used in this Agreement, the term
"affiliate(s)" shall have the meaning set forth in Rule 12b-2 under the
Exchange Act. (Without limiting the generality of the foregoing, ▇▇▇▇▇▇,
Blackstone, Apollo shall be deemed to be affiliates of Parent and Purchaser.)
As used in this Agreement, "Material Adverse Effect" means any change(s) or
effect(s) that, individually, or in the aggregate, are materially adverse to
the financial condition, properties, business of the Company and its
subsidiaries, taken as a whole, or that would prevent or materially delay the
Company from performing its obligations under this Agreement. Whenever this
Agreement requires Purchaser to take any action, such requirement shall be
deemed to include an undertaking on the part of Parent to cause Purchaser to
take such performance and a guarantee of the performance thereof.
9.5. Entire Agreement. This Agreement (including the Disclosure Schedule and
the exhibits hereto) and the Confidentiality Agreement contain the entire
agreement between the parties with respect to the transactions contemplated
hereby, and supersedes all written or oral negotiations, representations,
warranties, commitments, offers, bids, bid solicitations, and other
understandings prior to the date hereof, except to the extent expressly
confirmed or provided herein.
9.6. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
9.7. Severability. If any provision hereof shall be held invalid or
unenforceable by any court of competent jurisdiction or as a result of future
legislative action, such holding or action shall be strictly construed and
shall not affect the validity or effect of any other provision hereof.
9.8. Captions. The captions of the various Articles and Sections of this
Agreement have been inserted only for convenience of reference and shall not
be deemed to modify, explain, enlarge or restrict any provision of this
Agreement or affect the construction hereof.
9.9. Amendment. Subject to the applicable provisions of the WBCL, this
Agreement may be amended by the parties hereto, at any time before or after
any required approval of matters presented in connection with the Merger by
the shareholders of the Company; provided, however, that after any such
approval, there shall be made no amendment that by law requires further
approval by such shareholders without the further approval of such
shareholders. This Agreement may not be amended except by an instrument in
writing signed by the parties hereto.
23
9.10. Waiver. Subject to the applicable provisions of the WBCL, at any time
prior to the Effective Time, any party hereto may (a) extend the time for the
performance of any of the obligations or other acts of the other parties
hereto, or (b) subject to the proviso of Section 9.9, waive compliance with
any of the agreements or conditions contained herein. In addition to the
provisions contained in Section 6.5 hereof, at any time prior to consummation
of the Merger any party hereto may waive any inaccuracies in the
representations and warranties contained herein or in any documents delivered
pursuant hereto. Any agreement on the part of a party hereto to any such
extension or waiver shall be valid only if set forth in an instrument in
writing signed by such party.
9.11. No Third-Party Beneficiaries; Assignability. Except for Sections 2.2,
2.3, 6.6 and 6.7 (which are intended for the benefit of, and may be enforced
by, the persons or entities specified therein), this Agreement is not intended
to confer or impose upon any person not a party hereto any rights, remedies,
obligations or liabilities hereunder. This Agreement shall not be assigned by
any party hereto, by operation of law or otherwise. Subject to the preceding
two sentences, this Agreement will be binding upon, inure to the benefit of,
and be enforceable by, the parties and their respective successors and
assigns.
9.12. Best Knowledge. When used with respect to the Company in this
Agreement, the term "best knowledge" shall mean to the best actual knowledge
of any of the Company's Chairman of the Board, President and chief financial
officer.
9.13. Governing Law. (a) The validity, interpretation and effect of this
Agreement shall be governed exclusively by the laws of the State of Wisconsin,
without giving effect to the principles of conflict of laws thereof.
(b) Each of the parties hereto (i) consents to submit itself to the personal
jurisdiction of any federal court located in the State of Illinois or any
Illinois state court in the event any dispute arises out of this Agreement or
any of the transactions contemplated hereby, (ii) agrees that it will not
attempt to deny or defeat such personal jurisdiction by motion or other
request for leave from any such court and (iii) agrees that it will not bring
any action relating to this Agreement or any of the transactions contemplated
hereby in any court other than a federal or state court sitting in the State
of Illinois.
IN WITNESS WHEREOF, Parent, Purchaser and the Company have caused this
Agreement to be executed as of the date first written above by their
respective officers thereunder duly authorized.
Safety-Kleen Corp.
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
By: _________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Chairman and Chief
Executive Officer
SK Parent Corp.
/s/ ▇▇▇▇▇ ▇▇▇▇▇
By: _________________________________
▇▇▇▇▇ ▇▇▇▇▇
President
SK Acquisition Corp.
/s/ ▇▇▇▇▇ ▇▇▇▇▇
By: _________________________________
▇▇▇▇▇ ▇▇▇▇▇
President
24