EXHIBIT 2.1
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
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PAGE
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ARTICLE I. THE MERGER................................................... 1
1.1. The Merger................................................... 1
1.2. Closing...................................................... 1
1.3. Effective Time............................................... 2
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..................................... 3
2.1. Conversion of Shares......................................... 3
2.2. Employee Stock Options....................................... 3
2.3. Surrender of Certificates.................................... 4
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE COMPANY................ 6
3.1. Organization and Qualifications.............................. 7
3.2. Capitalization............................................... 7
3.3. Authority and Absence of Conflict............................ 8
3.4. Reports...................................................... 9
3.5. Absence of Certain Changes; Liabilities...................... 9
3.6. Employee Benefit Plans....................................... 10
3.7. Litigation; Violation of Law................................. 12
3.8. Labor........................................................ 13
3.9. Taxes........................................................ 13
3.10. Environmental Matters........................................ 14
3.11. Brokers...................................................... 16
3.12. Title to Properties.......................................... 16
3.13. Information Supplied......................................... 16
3.14. Opinion Of Financial Advisor................................. 16
3.15. Board Recommendation......................................... 16
3.16. Required Company Vote........................................ 17
3.17. Rights Agreement............................................. 17
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF PARENT AND
PURCHASER.................................................... 17
4.1. Organization and Qualification............................... 17
4.2. Capital Stock of Purchaser................................... 17
4.3. Authority and Absence of Conflict............................ 18
4.4. Brokers...................................................... 19
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4.5. Interim Operations Of Parent and Purchaser................... 19
4.6. Proxy Statement.............................................. 19
4.7. Funds Available.............................................. 19
4.8. Ownership of Shares.......................................... 19
4.9. No Litigation................................................ 19
4.10. Ownership of Parent.......................................... 20
ARTICLE V. COVENANTS RELATING TO CONDUCT OF BUSINESS PRIOR
TO MERGER.................................................... 20
5.1. Conduct Of Business Of The Company........................... 20
ARTICLE VI. ADDITIONAL AGREEMENTS........................................ 22
6.1. Preparation Of Proxy Statement; Shareholders Meeting......... 22
6.2. Access To Information; Confidentiality....................... 23
6.3. Filings; Commercially Reasonable Best Efforts................ 23
6.4. Public Announcements......................................... 24
6.5. Notification of Certain Matters.............................. 24
6.6. Employee Benefits............................................ 24
6.7. Indemnification And Insurance................................ 24
6.8. Solicitation................................................. 26
6.9. Capital Adequacy of Parent................................... 28
ARTICLE VII. CONDITIONS PRECEDENT......................................... 28
7.1. Conditions To Each Party's Obligation To Effect The Merger... 28
7.2. Conditions To Obligations Of Parent.......................... 28
7.3. Conditions To Obligation Of The Company...................... 29
ARTICLE VIII. TERMINATION, AMENDMENT AND WAIVER............................ 30
8.1. Termination.................................................. 30
8.2. Effect Of Termination........................................ 31
ARTICLE IX. GENERAL PROVISIONS........................................... 31
9.1. Nonsurvival Of Representations And Warranties................ 31
9.2. Payment Of Expenses.......................................... 32
9.3. Notices...................................................... 32
9.4. Certain Definitions; Interpretation.......................... 33
9.5. Entire Agreement............................................. 33
9.6. Counterparts................................................. 34
9.7. Severability................................................. 34
9.8. Captions..................................................... 34
9.9. Amendment.................................................... 34
9.10. Waiver....................................................... 34
9.11. No Third-Party Beneficiaries; Assignability.................. 34
9.12. Best Knowledge............................................... 35
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9.13. Governing Law.................................................. 35
SCHEDULES
Company Disclosure Schedule
Parent Disclosure Schedule
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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
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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
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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
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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."
1.4. Effects Of The Merger. The Merger shall have the effects set forth
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in Section 180.1106 of the WBCL.
1.5. Articles Of Incorporation; By-laws; Purposes. (a) Subject to Section
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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
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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
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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.
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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
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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
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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.
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
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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.
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(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.
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(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.
(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 Moody's 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
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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
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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
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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 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
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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.
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(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
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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.
(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
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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
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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,
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(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.
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(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 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
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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
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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
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
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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.
(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.
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(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.
(i) "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
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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 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
-14-
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 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.
-15-
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
-16-
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")
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
-17-
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 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.
-18-
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
-19-
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 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.
-20-
(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 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.
-21-
(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
-22-
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,
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
-23-
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 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
-24-
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
-25-
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 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
-26-
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.
(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.
-27-
(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
-28-
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.
(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 Competition 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
-29-
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 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
-30-
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
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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 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. (▇▇▇) ▇▇▇-▇▇▇▇
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The Blackstone Group
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telecopy No. (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
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
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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.
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
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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.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
---------------------------
Title: Chairman and Chief
Executive Officer
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SK PARENT CORP.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇
---------------------------
Title: President
SK ACQUISITION CORP.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇
---------------------------
Title: President
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