--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SECURITIES ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
----------------
AMENDMENT NO. 29
TO
SCHEDULE 14D-9
(AS AMENDED AND RESTATED AT JANUARY 6, 1998)
----------------
SOLICITATION/RECOMMENDATION STATEMENT PURSUANT
TO SECTION 14(D)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
----------------
SAFETY-KLEEN CORP.
(NAME OF SUBJECT COMPANY)
SAFETY-KLEEN CORP.
(NAMES OF PERSON(S) FILING STATEMENT)
COMMON STOCK, PAR VALUE $0.10 PER SHARE
(INCLUDING THE ASSOCIATED COMMON SHARE PURCHASE RIGHTS)
(TITLE OF CLASS OF SECURITIES)
786484105
(CUSIP NUMBER OF CLASS OF SECURITIES)
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON
AUTHORIZED TO RECEIVE NOTICES AND COMMUNICATIONS
ON BEHALF OF THE PERSON(S) FILING STATEMENT)
----------------
WITH A COPY TO:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ESQ.
▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇▇
SEARS TOWER
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
INTRODUCTION
Safety-Kleen Corp. ("Safety-Kleen") hereby amends and restates Amendment No.
28 to its Solicitation/ Recommendation Statement on Schedule 14D-9; such
Amendment No. 28 amended and supplemented Safety-Kleen's
Solicitation/Recommendation Statement on Schedule 14D-9, as amended and
restated at January 6, 1998 and amended by Amendments Nos. 1 through 27
inclusive (as amended, the "Schedule 14D-9"), with respect to the exchange
offer made by LES Acquisition, Inc. (the "Offeror"), a wholly-owned subsidiary
of ▇▇▇▇▇▇▇ Environmental Services, Inc. ("LLE"), for all of the outstanding
Shares. Capitalized terms not defined herein have the meanings assigned
thereto in the Schedule 14D-9.
ITEM 1. SECURITY AND SUBJECT COMPANY.
Item 1 of the Schedule 14D-9 is restated without change:
The name of the subject company is Safety-Kleen Corp., a Wisconsin
corporation ("Safety-Kleen"). The address of the principal executive offices
of Safety-Kleen is ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇. The title of the
class of equity securities to which this Statement relates is the common
stock, par value $0.10 per share (the "Common Stock"), of Safety-Kleen,
including the associated common share purchase rights (the "Rights") issued
pursuant to the Rights Agreement, dated as of November 9, 1988, as amended
(the "Rights Agreement"), between Safety-Kleen and The First National Bank of
Chicago, as Rights Agent. References herein to the "Shares" means shares of
the Common Stock and shall, unless the context requires otherwise, include the
Rights.
ITEM 2. TENDER OFFER OF THE BIDDER
Item 2 of the Schedule 14D-9 is hereby amended and restated to read as
follows:
On March 16, 1998 and ▇▇▇▇▇ ▇▇, ▇▇▇▇, ▇▇▇ filed supplements to its amended
prospectus dated January 28, 1998 (the "Amended Prospectus," and as so
supplemented, the "Revised Amended Prospectus") with the Commission, amending
its exchange offer to acquire all of the outstanding Shares. Under the terms
and subject to the conditions described in the Revised Amended Prospectus, LLE
and the Offeror offer to exchange $18.30 net to the Seller in cash and 2.80
shares of LLE Common Stock (the cash and stock consideration is sometimes
collectively referred to herein as the "Revised LLE Offer Consideration"), for
each outstanding Share (the "Revised LLE Offer"). This Statement relates to
the Revised LLE Offer.
The Revised LLE Offer is made pursuant to an Agreement and Plan of Merger,
dated as of March 16, 1997 among Safety-Kleen, LLE and the Offeror ("LLE
Merger Agreement"). Safety-Kleen entered into the LLE Merger Agreement
following (i) the failure of the Agreement and Plan of Merger dated as of
November 20, 1997 by and among SK Parent Corp. (a newly formed company owned
by ▇▇▇▇▇▇ Services Corp. and affiliates of two merchant banks), SK Acquisition
Corp. and Safety-Kleen ("▇▇▇▇▇▇ Merger Agreement; the merger contemplated
thereby is referred to below as the "▇▇▇▇▇▇ Merger") to receive shareholder
approval at the Safety-Kleen shareholders meeting on ▇▇▇▇▇ ▇, ▇▇▇▇, (▇▇)
termination of the ▇▇▇▇▇▇ Merger Agreement by Safety-Kleen and (iii)
subsequent negotiations with LLE. The ▇▇▇▇▇▇ Merger Agreement provided for
Safety-Kleen to pay SK Parent Corp.'s expenses related to the ▇▇▇▇▇▇ Merger
(up to $25 million) upon such termination of the ▇▇▇▇▇▇ Merger Agreement and,
upon entering into an agreement for a sale of Safety-Kleen (such as the LLE
Merger Agreement) within nine months after November 20, 1997, to also pay a
fee of $50 million to SK Parent.
The LLE Merger Agreement provides, among other things, for the making of the
Revised LLE Offer by the Offerer and further provides that, following the
completion of the Revised LLE Offer and the satisfaction or the waiver of
certain conditions set forth in the Merger Agreement, the Offerer will be
merged with Safety-Kleen (the "LLE Merger", and together with the Revised LLE
Offer, the "LLE Transaction"). The LLE Merger Agreement provides that in the
LLE Merger, Safety-Kleen shareholders would receive, per Share, the Revised
LLE Offer Consideration. The terms of the LLE Merger Agreement are summarized
in Item 3(b).
If Safety-Kleen is a "resident domestic corporation" for purposes of the
Wisconsin Statutes, then unless LLE acquires beneficial ownership of at least
90% of the outstanding Shares, the subsequent merger of the Offeror into
Safety-Kleen would have to be approved by both (a) the holders of at least 80%
of the outstanding Shares and (b) the holders of 66 2/3% of the outstanding
Shares not held by LLE or its affiliates, unless certain fair price standards
are satisfied. There can be no assurance that LLE would obtain the required
shareholder approval or that the Revised LLE Offer Consideration would satisfy
those fair price standards. See "Item 8, Additional Information To Be
Furnished--(c) State Takeover Statutes" in the Schedule 14D-9 (as amended and
restated at January 6, 1998).
According to the Amended Prospectus, the address of the principal executive
offices of the Offeror and LLE is ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
ITEM 3. IDENTITY AND BACKGROUND.
Item 3(b)(2), (3) and (4) of the Schedule 14D-9 are hereby amended and
restated, and Item 3(b)(5) and (6) are hereby added, as follows:
(b)(2) Certain Executive Compensation and Other Employee-Related Matters in
Connection with a Change of Control of Safety-Kleen. The consummation of the
Revised LLE Offer will affect the compensation and benefits to the directors
and executive officers of Safety-Kleen as follows:
Vesting of Stock Options. All of the outstanding stock options to purchase
Shares granted by Safety-Kleen (including stock options related to limited
stock appreciation rights) immediately vest and become exercisable upon a
"change of control", which would occur upon consummation of the Revised LLE
Offer. In addition, within three days of a "change of control" of Safety-
Kleen, holders of options related to limited stock appreciation rights may
receive for each Share subject to such option, an amount in cash equal to the
excess, if any, of the change of control value (generally, the greater of the
highest price at which the Shares trade in the 180 days prior to such change
of control, or the offer consideration, which the Compensation Committee of
the Board, which administers the plans under which the options were granted,
has determined is $30.30 for this purpose) over the per Share exercise price
of such option, reduced by the amount of withholding or other taxes required
by law to be withheld. As of March 13, 1998, directors and executive officers
held in the aggregate options to purchase 2,285,614 Shares (including
2,180,614 options related to limited stock appreciation rights).
Change of Control Severance Agreements. In August, 1997, Safety-Kleen
entered into Change of Control Severance Agreements with its 14 executive
officers and five other employees of Safety-Kleen who are not executive
officers. The Board of Directors of Safety-Kleen approved the Change of
Control Severance Agreements in order to close the gap between the prior
change of control agreements adopted by Safety-Kleen in 1990 and current
competitive practices for change of control agreements. Each Change of Control
Severance Agreement provides for, among other things: (a) a three-year
employment period, beginning on the date of a Change of Control (as defined in
such agreements; a Change of Control would occur upon consummation of the
Revised LLE Offer) at a guaranteed annual base salary equal to at least 12
times the highest base monthly salary payable during the 12-month period
immediately preceding the Change of Control, with increases consistent with
increases in base salary awarded to other peer executives of Safety-Kleen; (b)
a guaranteed bonus for each bonus plan performance period (under each bonus
arrangement) ending within such three year employment period; (c) continued
participation in the incentive, savings, retirement, welfare and other fringe
benefit plans sponsored by Safety-Kleen; (d) full vesting on the date of the
Change of Control of all stock options (or a lump sum payment of the spread of
all non-vested, forfeited options); and (e) full payment on the date of the
Change of Control, of the value of the executive's accrued benefits under
Safety-Kleen's excess benefit, supplemental retirement and any other
nonqualified retirement plans.
If, during the three year employment period, the executive's employment is
terminated by Safety-Kleen (other than for Cause (as defined in such
agreements) or by reason of the executive's death or disability), or if the
executive terminates employment for Good Reason (as defined in such
agreements), the executive will
2
receive: (i) guaranteed annual base salary, guaranteed bonus and accrued
vacation pay through the date of termination; (ii) previously deferred and
unpaid compensation; (iii) an amount equal to three times the sum of the
executive's guaranteed base salary and guaranteed bonus in the year in which
the termination occurs; (iv) the value of the unvested portion of the
executive's accounts under qualified Safety-Kleen plans; (v) reimbursement for
unpaid benefits which would have accrued if the executive had remained
employed by Safety-Kleen until three years after the Change of Control under
Safety-Kleen's excess benefit and supplemental plans; and (vi) continuation of
all medical, life insurance and other welfare benefits for a period of three
years from termination. The sum of the amounts referred to in clauses (i) and
(ii) is referred to as the "Accrued Obligations".
If during the three year employment period, the executive's employment is
terminated (i) by Safety-Kleen for Cause, as defined, the executive is
entitled only to his guaranteed base salary through the date of termination
plus any deferred compensation and accrued vacation pay not previously paid;
(ii) by the executive other than for Good Reason, the executive is entitled
only to the Accrued Obligations; (iii) by Safety-Kleen for disability, the
executive is entitled to receive the Accrued Obligations and disability and
other benefits at least equal to the greater of those provided to peer
executives by Safety-Kleen immediately prior to the executive's termination
and those provided to peer executives by Safety-Kleen at any time during the
90 day period immediately preceding a Change of Control; and (iv) by the
executive's death, his estate is entitled to the Accrued Obligations and
benefits at least equal to the most favorable in the aggregate as the most
favorable provided to the executive during the 90 days preceding a Change of
Control.
Each of the Change of Control Severance Agreements provides that if it is
determined that benefits received by the executive thereunder (or otherwise)
are subject to any excise tax under Section 4999 of the Internal Revenue Code
or any similar excise taxes, then Safety-Kleen will also pay the executive an
amount (the "Gross-up Payment") such that, after the payment of all income and
excise taxes, the executive will be in the same after-tax position that he
would have been in had no excise tax been imposed.
Each Change of Control Severance Agreement contains a non-compete provision
that during the period of the executive's employment and for one year
thereafter, prohibits the executive from certain participation in the business
of any company engaged in business that directly or materially competes with
Safety-Kleen, and certain other competitive activity. Each such agreement also
obligates the executive to maintain the confidentiality of Safety-Kleen's
Confidential Information (as defined in such agreement).
Payments that would be made to the persons who are parties to the Change of
Control Severance Agreements in the event they are all terminated during the
three year employment period after a Change of Control (other than for Cause
or by reason of the executive's death or disability) are approximately
$46,000,000 for all officers with Change of Control Severance Agreements,
including approximately $3,950,000 for ▇▇. ▇▇▇▇▇▇▇▇▇.
The foregoing description of the Change of Control Severance Agreements does
not purport to be complete and is qualified in its entirety by reference to
the Change of Control Severance Agreement filed as Exhibit 4 hereto and
incorporated herein by reference.
Investment Banking Fees. ▇▇. ▇▇▇▇▇▇▇▇, a director of Safety-Kleen, is a
Senior Director of ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Company L.L.C. ("▇▇▇▇▇▇▇ ▇▇▇▇▇"). ▇▇▇▇▇▇▇
▇▇▇▇▇ will receive a fee from Safety-Kleen upon consummation of the Revised
LLE Offer. See "Item 5. Persons Retained, Employed Or To Be Compensated," in
the Schedule 14D-9, as amended and restated at January 6, 1998.
(b)(3) Certain Executive Compensation and Other Employee-Related Matters in
Connection with the LLE Merger.
Indemnification and Insurance. Pursuant to the LLE Merger Agreement, LLE has
agreed that all rights to indemnification existing in favor of the present or
former directors, officers, employees and agents of Safety-Kleen or any of its
subsidiaries as provided in Safety-Kleen's Articles of Incorporation and
Bylaws or the articles of incorporation and bylaws of any of Safety-Kleen
subsidiaries, as in effect on the date of the LLE Merger
3
Agreement, shall survive the LLE Merger and continue in full force and effect
for not less than six years after the effective time of the LLE Merger. LLE
also agreed, subject to certain limitations, to cause to be maintained in
effect for not less than six years after the effective time of the LLE Merger
the current policies of directors' and officers' liability insurance
maintained by Safety-Kleen and its subsidiaries with respect to matters
occurring prior to the effective time of the LLE Merger.
LLE Merger Agreement Provisions Relating to Benefit Plans. In accordance
with the LLE Merger Agreement, Safety-Kleen will use its best efforts to
cancel the outstanding stock options not related to limited stock appreciation
rights for each Share subject to an option, paying cash in an amount equal to
the excess of $30.30 over the exercise price of the option, reduced by the
amount of withholding or other taxes required by law to be withheld. However,
as required by the terms of Safety-Kleen's outstanding stock options, holders
of options related to limited stock appreciation rights will receive for each
Share an amount in cash equal to the excess, if any, of the change of control
value (generally, the greater of (i) the highest price at which the Shares
trade in the 180 days prior to closing of the Revised LLE Offer, or (ii) the
Revised LLE Offer Consideration, which the Compensation Committee of the
Board, which administers the plans under which the options were granted, has
determined is $30.30 for this purpose) over the per Share exercise price of
such option, reduced by the amount of withholding or other taxes required by
law to be withheld.
As of March 13, 1998, directors and executive officers held in the aggregate
options to purchase 2,285,614 Shares (including 2,180,614 options related to
limited stock appreciation rights), including options that will vest upon
consummation of the Revised LLE Offer. Upon consummation of the LLE Merger,
(i) the directors who are not officers of Safety-Kleen who hold such options
would be entitled to receive approximately the following amounts: ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇, $94,500, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, $94,500, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ $94,500, ▇▇▇▇
▇. ▇▇▇▇▇, $94,500, ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, $94,500, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, $216,375, and
W. ▇▇▇▇▇▇ ▇▇▇▇, $94,500; and (ii) assuming that the Shares do not trade at a
price in excess of $30.30 prior to shareholder approval of the LLE Merger, all
directors and executive officers who served at any time since the beginning of
Safety-Kleen's last fiscal year as a group would collectively be entitled to
receive approximately $26,820,000, including approximately $6,035,000 for ▇▇.
▇▇▇▇▇▇▇▇▇.
The LLE Merger Agreement provides that for a period of two years following
the effective time of the LLE Merger, LLE intends to 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 of Safety-Kleen and its affiliates
described in the Company disclosure schedule to the LLE Merger Agreement. All
service credited to such employees by Safety-Kleen through the effective time
of the LLE Merger shall be recognized by LLE or the Surviving Corporation for
purposes of eligibility and vesting under any employee benefit plan provided
directly or indirectly by LLE or the Surviving Corporation for the benefit of
the employees and in which the respective employees participate.
The LLE Merger Agreement also provides that LLE shall cause the Surviving
Corporation: (i) to honor (without modification) and assume the written
employment agreements, severance agreements and other agreements listed on the
disclosure schedule to the LLE Merger Agreement, all as in effect on the date
of the LLE Merger Agreement; and (ii) not to terminate, or adversely amend in
any manner which adversely affects, the benefits described in the Company
disclosure schedule to the LLE Merger Agreement that participants in such
plans are entitled to thereunder with respect to any periods prior to and
including the effective time of the LLE Merger. The LLE Merger Agreement also
states that LLE Parent intends to cause the Surviving Corporation to continue
to maintain an office in Elgin, Illinois. As permitted by the LLE Merger
Agreement, the Board of Directors has authorized the payment of an aggregate
of $3 million in special bonuses to executive officers. ▇▇. ▇▇▇▇▇▇▇▇▇ did not
receive such a bonus.
(b)(4) Arrangements with LLE, its Executive Officers, Directors or
Affiliates.
Other than the LLE Merger Agreement, the Confidentiality Agreement dated
March 13, 1998 and existing and present business relationships (e.g.,
providing services to each other or considering the purchase or sale of
4
discrete assets or operations or alliances) in the ordinary course of business
not material to Safety-Kleen or its affiliates and LLE or its affiliates or to
the relationship between them and the sale of certain assets of an LLE
subsidiary to Safety-Kleen in February 1996 and the accompanying cooperative
services agreement which is in the process of being terminated, as of the date
hereof there are no contracts, agreements, arrangements or understandings or
actual or potential conflicts of interest between Safety-Kleen or its
affiliates and LLE, the Offeror or their respective executive officers,
directors or affiliates that are required to be disclosed pursuant to the
rules and regulations of the Commission.
(b)(5) LLE Merger Agreement
Set forth below is a brief description of the material terms of the LLE
Merger Agreement and related matters. This description does not purport to be
complete and is qualified in its entirety by reference to the LLE Merger
Agreement, which is filed as an exhibit hereto and is incorporated herein by
reference.
The Revised LLE Offer. The LLE Merger Agreement provides that the Offeror
has extended until March 27, 1998 at Midnight EST (or a later date if required
by the Securities and Exchange Commission) the Revised LLE Offer to exchange
$18.30 in cash and 2.8 shares of LLE Common Stock for each outstanding Share
and that, upon the terms and subject to the prior satisfaction or waiver
(except that the Minimum Tender Condition and the Solvency Opinion Condition,
each as defined below, may not be waived) of the conditions of the Revised LLE
Offer, the Offeror will purchase all Shares validly tendered pursuant to the
Revised LLE Offer. Notwithstanding the proposed March 27, 1998 expiration date
set forth in the LLE Merger Agreement, the parties have acknowledged that the
Revised LLE Offer will be extended until March 31, 1998, the date ten business
days from the date hereof. The LLE Merger Agreement provides that if all
conditions to the Revised LLE Offer shall not have been satisfied or waived at
the scheduled or extended expiration date of the Revised LLE Offer, LLE may,
without the consent of Safety-Kleen, extend the Revised LLE Offer until the
earlier of June 30, 1998 or satisfaction or waiver of such conditions. In
addition, the Revised LLE Offer can be extended for up to five (5) business
days (but only twice) if at its scheduled or extended expiration, more than
two thirds, but fewer than 90%, of the issued and outstanding Shares have been
tendered. See "--Conditions of the Revised LLE Offer" for a description of the
conditions to LLE's obligation to purchase Shares pursuant to the Revised LLE
Offer.
The LLE Merger--General. The LLE Merger Agreement provides that the Offeror
will be merged with and into Safety-Kleen, with Safety-Kleen becoming a wholly
owned subsidiary of LLE. In the LLE Merger, each outstanding Share (other than
Shares held by LLE and its affiliates and treasury Shares) will be converted
at the Effective Time (as defined below) into the right to receive $18.30 net
in cash and 2.8 shares of LLE Common Stock. LLE will also make certain
payments necessary to satisfy Safety-Kleen's outstanding debt obligations.
Immediately prior to the Effective Time (as defined below) Safety-Kleen will
make certain payments with respect to outstanding options under Safety-Kleen's
stock option plans.
As soon as practicable after the conditions to consummation of the LLE
Merger described below have been satisfied or waived, and unless the LLE
Merger Agreement has been terminated as provided below, articles of merger
(the "Articles of Merger") will be filed with the Secretary of State of the
State of Wisconsin in accordance with the relevant provisions of the Wisconsin
Business Corporation Law ("WBCL"), a certificate of merger (the "Certificate
of Merger") will be filed with the Secretary of State of the State of Delaware
in accordance with the relevant provisions of the General Corporation Law of
the State of Delaware ("DGCL") and the parties will make such other filings,
recordings or publications required under the WBCL and the DGCL in connection
with the LLE Merger. The LLE Merger will become effective upon the date on
which the Articles of Merger have been received for filing by the Secretary of
the State of Wisconsin and the Certificate of Merger has been received for
filing by the Secretary of State of the State of Delaware, or such later date
as is agreed upon by the parties and specified in the Certificate of Merger
and Articles of Merger, and the time of such effectiveness is hereinafter
referred to as the "Effective Time." As a result of the LLE Merger, the
separate
5
corporate existence of the Offeror will cease and Safety-Kleen will continue
as the Surviving Corporation under the name "Safety-Kleen Corp.," and will
become a wholly-owned subsidiary of LLE.
Conversion of Securities. At the Effective Time, each Share issued and
outstanding immediately prior to the Effective Time (other than Shares owned
by LLE, the Offeror or any subsidiary thereof or held in the treasury of
Safety-Kleen or any subsidiary of Safety-Kleen, which will be canceled without
payment) will be canceled and converted at the Effective Time into the right
to receive $18.30 net in cash and 2.8 shares of LLE Common Stock (the "LLE
Merger Consideration").
Pursuant to the LLE Merger Agreement, each share of common stock, par value
$.01 per share, of the Offeror issued and outstanding immediately prior to the
Effective Time shall be automatically converted into and become at the
Effective Time one share of common stock, par value $.01 per share, of the
Surviving Corporation.
Stock Options. The LLE Merger Agreement provides that Safety-Kleen will (a)
terminate its 1985 Stock Option Plan, 1993 Stock Option Plan and 1988 Non-
Qualified Stock Option Plan for Outside Directors (collectively the "Option
Plans"), immediately prior to the Effective Time without prejudice to the
rights of the holders of options awarded pursuant thereto and (b) grant no
additional options or similar rights under the Option Plans or otherwise on or
after the date of the LLE Merger Agreement. "Options" is defined under the
Merger Agreement to include each stock option granted by Safety-Kleen, whether
pursuant to the Option Plans or otherwise.
Safety-Kleen agrees in the LLE Merger Agreement to cancel all Options
(whether or not then exercisable) that Safety-Kleen has the right to cancel,
and to 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, with all such cancellations to
take effect immediately prior to the Effective Time. For Options which may be
settled at exercise by issuance of Shares or cash payment pursuant to the
terms of the applicable Option Plan, Safety-Kleen agrees, in consideration of
such cancellation, to pay to the holders of such Options, immediately after
purchase of Shares pursuant to the Revised LLE Offer, for each Share subject
to such Option, an amount in cash equal to the excess, if any, of the Revised
LLE Offer Consideration (valued for this purpose at $30.30) over the per Share
exercise price of such Option, reduced by the amount of withholding or other
taxes required by law to be withheld. In the case of Options related to
limited stock appreciation rights ("LSARs"), for each Share subject to such
Option, Safety-Kleen agrees to pay (consistent with the rights under the
Option Plans) upon cancellation of such Options, an amount in cash equal to
the excess, if any, of the change of control value (generally, the highest
price at which the Shares trade in the 180 days prior to closing of the
Revised LLE Offer or, if greater, the Revised LLE Offer Consideration (valued
for this purpose at $30.30), over the per Share exercise price of such Option,
reduced by the amount of withholding or other taxes required by law to be
withheld. As of March 13, 1998, directors, executive officers and other
employees held in the aggregate Options to purchase 3,899,068 Shares,
2,263,415 of which were Options related to LSARs.
Directors and Officers; Articles of Incorporation and Bylaws. The LLE Merger
Agreement provides that the directors of the Offeror immediately prior to the
Effective Time will be the initial directors of the Surviving Corporation and
that the officers of Safety-Kleen immediately prior to the Effective Time will
be the initial officers of the Surviving Corporation except to the extent that
LLE designates other or additional officers, until the earlier of their
resignation or removal or until their respective successors are duly elected
and qualified. The LLE Merger Agreement provides that, at the Effective Time,
the Articles of Incorporation and Bylaws of the Surviving Corporation will be
amended and restated to be in the form attached as exhibits to the LLE Merger
Agreement. See "(b)(2) Certain Executive Compensation and Other Employee-
Related Matters in Connection with the LLE Merger--Indemnification and
Insurance."
6
The LLE Merger Agreement provides that promptly following the purchase by
LLE and the Offeror of shares pursuant to the LLE Offer, but subject to
compliance with Exchange Act Rule 14f-1, LLE shall be entitled to designate at
its option up to that number of directors, rounded to the nearest whole
number, of Safety-Kleen's Board of Directors, as will make the percentage of
Safety-Kleen's directors designated by LLE approximately equal to the
aggregate voting power of the Shares held by LLE (and the Offeror). Following
the election or appointment of LLE's designees and prior to the Effective
Time, any amendment to the Restated Articles of Incorporation or Bylaws of
Safety-Kleen, any termination of the LLE Merger Agreement by Safety-Kleen, any
extension by Safety-Kleen of the time for the performance of any of the
obligations or other acts of LLE or waiver or assertion of any of Safety-
Kleen's rights under the LLE Merger Agreement, and any other consent or action
by the Board of Directors with respect to the LLE Merger Agreement, will
require the concurrence of a majority of the directors (if any) not appointed
by LLE. After purchase of Shares pursuant to the Revised LLE Offer but before
LLE designees are named as Safety-Kleen directors, the Safety-Kleen Board of
Directors has agreed not to act without notice to and the participation of
LLE.
Representations and Warranties. Safety-Kleen, LLE and the Offeror have made
certain representations and warranties to each other in the LLE Merger
Agreement. Safety-Kleen represents and warrants, among other things, as to the
organization and qualifications to do business of Safety-Kleen and its
significant subsidiaries, its capitalization, its corporate authority to enter
into and perform the LLE Merger Agreement and the absence of conflict of such
actions with its other obligations, and its ownership of its subsidiaries.
Safety-Kleen also makes certain representations and warranties concerning its
financial reports, the absence of certain changes and liabilities, employee
benefit plans, litigation and legal matters, labor matters, tax matters,
environmental matters and title to its properties. LLE and the Offeror
represent and warrant, among other things, as to their respective organization
and qualification, capital stock, corporate authority to enter into and
perform the LLE Merger Agreement and the absence of conflict of such actions
with its other obligations, and interim operations of LLE and the Offeror. LLE
also makes certain representations and warranties concerning its financial
reports, employee benefit plans, litigation and legal matters, labor matters,
tax matters, environmental matters and title to its properties. The
representations and warranties of LLE, the Offeror and Safety-Kleen will
terminate upon consummation of the LLE Merger.
Conduct of Business Pending the LLE Merger. Pursuant to the LLE Merger
Agreement, Safety-Kleen has agreed that unless LLE shall otherwise agree in
writing (which agreement shall not be unreasonably withheld), prior to the
Effective Time:
(a) the business of Safety-Kleen and its subsidiaries will be conducted
in the ordinary and usual course of business, and Safety-Kleen will 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 Safety-Kleen nor any of its subsidiaries will 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 Safety-Kleen
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 Safety-Kleen declared
in the ordinary course of business and consistent with past practice and
(y) dividends by wholly owned subsidiaries of Safety-Kleen); (iv) redeem,
purchase or otherwise acquire or offer to redeem, purchase or otherwise
acquire any capital stock of Safety-Kleen; (v) adopt a plan of liquidation
or resolutions providing for the liquidation, dissolution, merger,
consolidation or other reorganization of Safety-Kleen; or (vi) authorize or
propose any of the foregoing, or enter into any contract, agreement,
commitment or arrangement to do any of the foregoing;
(c) neither Safety-Kleen nor any of its subsidiaries will, directly or
indirectly, (i) except for Shares (and the associated Rights) issuable upon
exercise of options outstanding under the Option Plans on the
7
date of the LLE Merger Agreement, 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 Safety-Kleen or a wholly owned subsidiary of Safety-Kleen);
(iii) except in the ordinary course of business, and other than
indebtedness to or guarantees for the benefit of Safety-Kleen or any
affiliate of Safety-Kleen and borrowings to fund payments to holders of
Options as contemplated by the LLE Merger Agreement, 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 Safety-Kleen (other than the incurrence of indebtedness
otherwise permitted in the LLE Merger 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) except for the payment to holders of Options as contemplated by the
LLE Merger Agreement, neither Safety-Kleen nor any of its subsidiaries will
(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 Safety-Kleen and its subsidiaries, taken as a whole, or as may
be required pursuant to any agreements in effect at the date of the LLE
Merger Agreement) 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,
in the ordinary course of business, consistent with past practice, increase
the compensation or fringe benefits of any employee or former employee or
pay any benefit not permitted by any existing plan, arrangement or
agreement;
(e) except in the ordinary course of business, neither Safety-Kleen nor
any of its subsidiaries will make any tax election or settle or compromise
any federal, state, local or foreign income tax liability;
(f) except in the ordinary course of business, neither Safety-Kleen nor
any of its subsidiaries will permit any insurance policy naming it as
beneficiary or a loss payee to be cancelled or terminated without notice to
LLE; and
(g) neither Safety-Kleen nor any of its subsidiaries will agree, in
writing or otherwise, to take any of the foregoing actions or any action
which would make any representation or warranty of Safety-Kleen in the LLE
Merger Agreement untrue or incorrect so as to result in any change(s) or
effect(s) that, individually, or in the aggregate, are materially adverse
to the financial condition, properties, business of Safety-Kleen and its
subsidiaries taken as a whole, or that would prevent or materially delay
Safety-Kleen from performing its obligations under the Merger Agreement (a
"Material Adverse Effect").
No Solicitation of Proposals. The LLE Merger Agreement provides that Safety-
Kleen (and its subsidiaries and affiliates) will not, and will use their best
efforts to ensure that their respective directors, officers, employees,
8
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 LLE and its subsidiaries and their respective directors, officers,
employees, representatives and agents) concerning (a) any merger, sale of
assets not in the ordinary course (except for any sale of assets otherwise
permitted under the terms of the LLE Merger Agreement), or other similar
transaction involving Safety-Kleen or any subsidiary or division of Safety-
Kleen, or the sale of any equity interest in Safety-Kleen or any subsidiary,
or (b) any sale by Safety-Kleen or its subsidiaries of authorized but unissued
Shares or of any shares (whether or not outstanding) of any of Safety-Kleen's
subsidiaries (all such inquiries and proposals being referred to herein as
"Acquisition Proposals"), provided, however, that nothing contained in such
provisions of the LLE Merger Agreement prohibits Safety-Kleen or its Board of
Directors from (i) subject to certain duties to consult with LLE and the
Offeror, issuing a press release or otherwise publicly disclosing the terms of
the LLE Merger Agreement; (ii) proceeding with the transactions contemplated
by the LLE Merger Agreement; (iii) communicating to Safety-Kleen's
shareholders a position as contemplated by Rule 14e-2 promulgated under the
Exchange Act; (iv) making any disclosure to Safety-Kleen's shareholders which,
in the judgment of the Board of Directors of Safety-Kleen, 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 Safety-Kleen by
any court of competent jurisdiction; and, provided, further, that the Board of
Directors of Safety-Kleen may, on behalf of Safety-Kleen, furnish or cause to
be furnished information and may direct Safety-Kleen, its directors, officers,
employees, representatives or agents to information, in each case pursuant to
appropriate confidentiality agreements, and to participate in discussions or
negotiations with any person or entity commencing any Acquisition Proposal
which was not solicited by Safety-Kleen 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
such non-solicitation provisions of the LLE Merger Agreement, if (x) the Board
of Directors of Safety-Kleen concludes 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 Safety-Kleen's Shareholders from a financial point of view than
the transactions contemplated hereby, and (y), in the opinion of the Board of
Directors of Safety-Kleen, only after receipt of advice from its independent
legal counsel, the failure to provide such information or access or to engage
in such discussions or negotiations would cause the Board of Directors of
Safety-Kleen to violate its fiduciary duties to Safety-Kleen's Shareholders
under applicable law (an Acquisition Proposal which satisfies clauses (x) and
(y) being hereinafter referred to as a "Superior Proposal").
Safety-Kleen has agreed pursuant to the LLE Merger Agreement to immediately
notify LLE of the terms of any proposal, discussion, negotiation or inquiry
(and to disclose any written materials received by Safety-Kleen 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 Safety-Kleen determines,
based on the advice of outside legal counsel to Safety-Kleen, that giving such
notice would cause the Board of Directors of Safety-Kleen to violate its
fiduciary duties to Safety-Kleen's shareholders under applicable law. Safety-
Kleen agrees pursuant to the LLE Merger Agreement to, and to cause each
subsidiary to, immediately cease and cause to be terminated any existing
activities, discussions or negotiations by Safety-Kleen, its subsidiaries or
any officer, director or employee of, or investment banker, attorney,
accountant or other advisor or representative of, Safety-Kleen or any
subsidiary with parties conducted prior to the date of the LLE Merger
Agreement with respect to any of the foregoing.
The LLE Merger Agreement also provides that, except as set forth therein,
neither the Board of Directors of Safety-Kleen nor any committee thereof shall
(a) withdraw or modify, or propose to withdraw or modify, in a manner adverse
to LLE or the Offeror, the approval or recommendation by the Board of
Directors of Safety-Kleen or any such committee of the LLE Merger Agreement or
the LLE Merger, (b) approve or recommend, or propose to approve or recommend,
any Acquisition Proposal, or (c) enter into any agreement with respect to any
Acquisition Proposal. Notwithstanding the foregoing, the Board of Directors of
Safety-Kleen may (subject to the terms of this and the following sentence)
withdraw or modify its approval or recommendation of the LLE Merger Agreement
or the LLE Merger, approve or recommend a Superior Proposal or enter into an
agreement with
9
respect to a Superior Proposal at any time after the second business day
following LLE's receipt of written notice advising LLE that the Board of
Directors of Safety-Kleen 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 Safety-Kleen shall not
enter into an agreement with respect to a Superior Proposal unless Safety-
Kleen has furnished LLE 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 caused its financial and legal advisors to negotiate with
LLE to make such amendments to the terms and conditions of the LLE Merger
Agreement as would make the LLE Merger Agreement as so amended at least as
favorable to Safety-Kleen's shareholders from a financial point of view as the
Superior Proposal. In addition, the LLE Merger Agreement provides that if
Safety-Kleen 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 LLE the Termination Amount (as defined and
described in "--Fees and Expenses" below). The LLE Merger Agreement also
includes a provision authorizing the Safety-Kleen Board of Directors to
withdraw or modify the approval or recommendation by
the Board of Directors of Safety-Kleen of the Revised LLE Offer or the LLE
Merger if there is a material adverse change in the business or financial
condition of LLE prior to consummation of the exchange pursuant to the Revised
LLE Offer.
Conditions to Consummation of the LLE Merger. The respective obligations of
the parties to cause the LLE Merger to be consummated are subject to the
satisfaction or waiver of certain conditions, including, among other things:
(a) the approval of the LLE Merger Agreement by the vote of the holders of
two-thirds of Safety-Kleen's outstanding Shares; (b) no statute, rule, order,
decree or regulation shall have been enacted or promulgated by any domestic
government or any agency or authority of competent jurisdiction which
prohibits the consummation of the LLE Merger; (c) consummation of the LLE
Merger shall not result in violation of any applicable United States federal
or state law providing for criminal penalties; and (d) 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
LLE Merger shall be in effect; provided, however, that the parties to the LLE
Merger Agreement shall have used their best efforts to have any such
injunction or order vacated.
The obligations of LLE to effect the LLE Merger are further subject to the
condition that LLE and the Offeror shall have purchased all Shares duly
tendered and not withdrawn pursuant to the terms of the LLE Offer, provided
that this condition does not apply if the failure to purchase the Shares
constitutes a breach of the LLE Merger Agreement by LLE or the Offeror.
The obligation of Safety-Kleen to effect the LLE Merger is further subject
to the condition that Safety-Kleen shall have received an opinion or
certificate of a reputable expert firm confirming the solvency of the
Surviving Corporation after the LLE Merger and related financings addressed to
or for the benefit of the Board of Directors of Safety-Kleen so that the Board
of Directors of Safety-Kleen is entitled to rely thereon.
Termination. The LLE Merger Agreement may be terminated, and the LLE Merger
abandoned, prior to the Effective Time, either before or after its approval by
Safety-Kleen's shareholders, as follows: (a) by the mutual written consent of
Safety-Kleen and LLE; (b) by either LLE or Safety-Kleen 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 LLE Merger and such order,
decree, ruling or other action shall have become final and non-appealable;
provided that such right to terminate the LLE Merger Agreement shall not be
available to any party that has breached its obligations under the LLE Merger
Agreement to use its commercially reasonable best efforts to take such actions
as are necessary to consummate the transactions contemplated by the LLE Merger
Agreement; (c) by either LLE or Safety-Kleen if the Shares tendered pursuant
to the Revised LLE Offer have not been acquired by LLE or the Offeror on or
before June 30, 1998; (d) by the Board of Directors of LLE, (i) if prior to
the exchange of tendered Shares pursuant to the Revised LLE Offer Safety-Kleen
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 the LLE Merger Agreement to be
complied with or performed by Safety-Kleen at or prior to consummation of the
LLE Merger
10
and such breach or failure shall have resulted in a Material Adverse Effect,
or (ii) Safety-Kleen shall have received from a third party a bona fide
Acquisition Proposal, and the Board of Directors of Safety-Kleen, shall have
accepted such a proposal or (iii) the Board of Directors of Safety-Kleen shall
have withdrawn or modified in a manner adverse to LLE or the Offeror its
approval or recommendation with respect to the LLE Merger; or (e) by the Board
of Directors of Safety-Kleen, if (i) prior to the exchange of tendered Shares
pursuant to the Revised LLE Offer, LLE or the Offeror 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 the LLE Merger Agreement to be complied with or performed by LLE
or the Offeror, or (ii) if Safety-Kleen enters into a written agreement
concerning a transaction that constitutes a Superior Proposal, provided that
Safety-Kleen shall have complied with the provisions described under "--No
Solicitation of Proposals" above (including the payment of the Termination
Amount).
In the event of termination of the LLE Merger Agreement by either Safety-
Kleen or LLE, no party to the LLE Merger Agreement (or any of its directors,
officers, employees, agreements, legal and financial advisors or other
representatives) shall have any liability or further obligation to any other
party to the LLE Merger Agreement, except with respect to the covenants in the
LLE Merger Agreement relating to confidential information and payment of
expenses. In addition, LLE, the Offeror and Safety-Kleen will each remain
liable for any wilful breach by it of the LLE Merger Agreement.
Amendment. Subject to the applicable provisions of the WBCL and the DGCL,
the LLE Merger Agreement may be amended by the parties thereto, at any time
before or after any required approval of matters presented in connection with
the LLE Merger by the shareholders of Safety-Kleen; 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. The LLE Merger Agreement may not be amended except by an
instrument in writing signed by the parties thereto. After the purchase of
Shares pursuant to the Revised LLE Offer but prior to the Effective Time, any
amendment to the LLE Merger Agreement requires the concurrence of a majority
of the Safety-Kleen directors (if any) not appointed by LLE.
Waiver. Subject to the applicable provisions of the WBCL and the DGCL, at
any time prior to the Effective Time, any party to the LLE Merger Agreement
may (a) extend the time for the performance of any of the obligations or other
acts of the other parties thereto, or (b) subject to certain limitations after
shareholder approval has been obtained, waive compliance with any of the
agreements or conditions contained herein. In addition to the provisions
contained in the LLE Merger Agreement regarding the failure to object to
notice of certain defaults, at any time prior to consummation of the LLE
Merger any party thereto may waive any inaccuracies in the representations and
warranties contained herein or in any documents delivered pursuant thereto.
Any agreement on the part of a party to the LLE Merger Agreement to any such
extension or waiver shall be valid only if set forth in an instrument in
writing signed by such party. After the purchase of Shares pursuant to the
Revised LLE Offer but prior to the Effective Time, any waiver by Safety-Kleen
under the LLE Merger Agreement requires the concurrence of a majority of the
Safety-Kleen directors (if any) not appointed by LLE.
Fees and Expenses. The LLE Merger Agreement provides that Safety-Kleen and
LLE will each pay its own expenses in connection with the LLE Merger Agreement
and the transactions contemplated thereby, but that if LLE terminates the LLE
Merger Agreement prior to the purchase of Shares pursuant to the Revised LLE
Offer because, (i) Safety-Kleen has accepted an Acquisition Proposal from a
third party, (ii) the Safety-Kleen Board of Directors has failed to recommend
approval of the LLE Merger to the Safety-Kleen Shareholders (if shareholder
approval is required), (iii) the Safety-Kleen Board of Directors withdraws or
modifies its approval or recommendation with respect to the LLE Merger, or
(iv) Safety-Kleen has breached a representation or warranty or failed to
comply with a covenant included in the LLE Merger Agreement and such breach or
failure has resulted in a material adverse effect on Safety-Kleen's business
or financial condition, LLE shall be entitled to reimbursement of up to $25
million in expenses incurred in connection with the Revised LLE Offer or the
LLE Merger Agreement. The LLE Merger Agreement also provides that if Safety-
Kleen terminates the LLE Merger
11
Agreement because of a breach of a LLE representation or warranty or failure
to satisfy a covenant or agreement, Safety-Kleen shall be entitled to
reimbursement of up to $25 million in expenses incurred in connection with the
LLE Merger Agreement and the transactions contemplated thereby.
Effect on Benefit Plans and Related Matters. The Merger Agreement provides
that for a period of two years following the Effective Time, LLE intends to
cause the Surviving Corporation to 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 of the Company and its affiliates existing on the date
of the LLE Merger Agreement. All service credited to each employee by Safety-
Kleen through the Effective Time shall be recognized by LLE or the Surviving
Corporation for purposes of eligibility and vesting under any employee benefit
plan provided directly or indirectly by LLE or the Surviving Corporation for
the benefit of the employees and in which the respective employees
participate.
The LLE Merger Agreement also provides that LLE shall cause the Surviving
Corporation: (i) to honor (without modification) and assume Safety-Kleen's
written employment agreements, severance agreements and consulting agreements,
all as in effect on the date of the LLE Merger Agreement; and (ii) not to
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. The LLE
Merger Agreement also states that LLE intends to cause the Surviving
Corporation to continue to maintain an office in Elgin, Illinois for two years
after the Effective Time.
Notices. Safety-Kleen, LLE and the Offeror agree pursuant to the LLE Merger
Agreement to give prompt notice to each other at any time from the date of the
LLE Merger Agreement 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 the LLE Merger Agreement so as to
result in a Material Adverse Effect or in a material adverse effect upon LLE
or any of its affiliates. If any party receiving a notice shall not object
thereto within five 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 such a Default Notice by giving
timely notice of such party's objection thereto as provided herein to the
party giving such notice. For purposes of this provision, the "actual
knowledge" of a party to the LLE Merger Agreement means the best actual
knowledge of its chairman of the board, president and chief financial officer.
Exchange of Shares For Merger Consideration. Promptly after the Effective
Time, each shareholder of record of Safety-Kleen will be provided with written
instruction from a payment agent designated by LLE, with the prior approval of
Safety-Kleen (the "Exchange Agent") as to how Shares may be surrendered and
exchanged for payment of the LLE Merger Consideration. Certificates evidencing
Shares should not be surrendered for payment prior to receipt of written
instructions from the Exchange Agent. As of the Effective Time, LLE will
deposit with the Exchange Agent cash and LLE Common Stock sufficient to pay
the Revised LLE Offer Consideration.
Conditions of the Revised LLE Offer.
1. Minimum Tender Condition. The Revised LLE Offer is conditioned upon,
among other things, there being validly tendered and not withdrawn prior to
the Expiration Date a number of Shares which, together with Shares owned by
LLE and its affiliates, will constitute at least two-thirds of the total
number of outstanding Shares on a fully diluted basis (as though all
outstanding options or other outstanding securities convertible into or
exercisable or exchangeable for Shares, other than the Rights, had been so
converted, exercised or exchanged) as of the date the Shares are accepted for
exchange by LLE pursuant to the Revised LLE Offer. Under the terms of the LLE
Merger Agreement, this condition cannot be waived by LLE without the consent
of Safety-Kleen. As of ▇▇▇▇▇ ▇▇, ▇▇▇▇, ▇▇▇ owned 601,100 Shares, or
approximately 1.03% of the outstanding Shares. LLE has
12
stated that it believes that, based on its ownership of Shares and Safety-
Kleen's outstanding Shares at September 6, 1997, the Minimum Tender Condition
would be satisfied if at least an aggregate of 42,302,789 Shares (or 66 2/3%)
of the Shares expected to be outstanding immediately prior to the consummation
of the Revised LLE Offer had been validly tendered pursuant to the Revised LLE
Offer and not withdrawn.
2. Solvency Opinion Condition. Under the terms of the LLE Merger Agreement,
LLE has agreed that it will not purchase Shares pursuant to the Revised LLE
Offer unless, prior to such purchase, LLE has delivered to Safety-Kleen an
opinion or certificate of a reputable expert firm confirming the solvency of
the surviving corporation after the LLE Merger (which opinion may assume that
the purchase of Shares pursuant to the Revised LLE Offer and the LLE Merger
are consummated simultaneously) and related financings, addressed to or for
the benefit of the Board of Directors of Safety-Kleen. This condition cannot
be waived without the consent of the Safety-Kleen Board of Directors.
3. Certain Other Conditions of the Revised LLE Offer. Notwithstanding any
other provision of the Revised LLE Offer and subject to any applicable rules
and regulations of the Commission, including Rule 14e-1(c) under the Exchange
Act (relating to LLE's obligation to exchange or return tendered Shares
promptly after the termination or withdrawal of the Revised LLE Offer), and
subject to LLE's obligation under the LLE Merger Agreement to use its
commercially reasonable best efforts to consummate the transactions
contemplated by the LLE Merger Agreement (the "Best Efforts Obligation"), LLE
shall not be required to accept for exchange or exchange any Shares, may
postpone the acceptance for exchange or exchange for tendered Shares and may,
in its sole discretion, terminate or amend the Revised LLE Offer as to any
Shares not then exchanged, if at the Expiration Date the Minimum Tender
Condition has not been satisfied or waived or if on or after the date of
commencement of the Revised LLE Offer and on or prior to the Expiration Date
any of the following events shall not have occurred:
(a) The shares of LLE Common Stock (and accompanying Rights) which shall
be issued to the Safety-Kleen Shareholders in the Revised LLE Offer and the
LLE Merger shall have been authorized for listing on the NYSE, subject to
official notice of issuance.
(b) The Registration Statement registering the LLE Common Stock included
in the Revised LLE Offer shall have become effective under the Securities
Act, and no stop order suspending the effectiveness of the Registration
Statement shall have been issued and no proceedings for that purpose shall
have been initiated or threatened by the Commission.
(c) No order, injunction or decree issued by any court or agency of
competent jurisdiction or other legal restraint or prohibition preventing
the consummation of the Revised LLE Offer and/or the LLE Merger or any of
the other transactions contemplated by this Prospectus shall be in effect.
No statute, rule, regulation, order, injunction or decree shall have been
enacted, entered, promulgated or enforced by any court, administrative
agency or commission or other governmental authority or instrumentality
which prohibits, restricts or makes illegal the consummation of the Revised
LLE Offer and/or the LLE Merger.
(d) There shall not have occurred or been threatened (i) any general
suspension of trading in, or limitation on times or prices for, securities
on any national securities exchange or in the over-the-counter market in
the United States, (ii) any significant adverse change in interest rates,
the financial markets or major stock exchange indices in the United States
or abroad or in the market price of Shares, including, without limitation,
a decline of at least 10% in either the Dow ▇▇▇▇▇ Average of Industrial
Stocks or the Standard & Poor's 500 Index from that existing at the close
of business on January 14, 1998, (iii) any change in the general political,
market, economic, regulatory or financial conditions in the United States
or abroad that could, in the reasonable judgment of LLE, have a material
adverse effect upon the business, properties, assets, liabilities,
capitalization, stockholders' equity, condition (financial or otherwise),
operations, license or franchises, results of operations or prospects of
Safety-Kleen or any of its subsidiaries or the trading in, or value of, the
Shares, (iv) any material change in United States currency exchange rates
13
or any other currency exchange rates or a suspension of, or limitation on,
the markets therefor, (v) a declaration of a banking moratorium or any
suspension of payments in respect of banks in the United States, (vi) any
limitation (whether or not mandatory) by any government, domestic, foreign
or supranational, or governmental entity on, or other event that in the
reasonable judgment of LLE might affect, the extension of credit by banks
or other lending institutions, (vii) a commencement of a war or armed
hostilities or other national or international calamity directly or
indirectly involving the United States or (viii) in the case of any of the
foregoing existing at the time of the commencement of the Revised Offer, a
material acceleration or worsening thereof.
(e) The representations and warranties of Safety-Kleen set forth in the
LLE Merger Agreement shall be true and correct in all material respects.
(f) Safety-Kleen shall have performed all obligations and complied with
any agreement or covenant of Safety-Kleen to be performed or complied with
by it under the LLE Merger Agreement.
(g) The LLE Merger Agreement shall not have been terminated in accordance
with its terms.
The foregoing conditions (a) through (g) are for the sole benefit of LLE
and, subject to the Best Efforts Obligation, may be asserted by LLE regardless
of the circumstances giving rise to any such conditions or may be waived by
LLE in whole or in part (other than the condition relating to effectiveness of
this Registration Statement). LLE reserves the right to assert the failure of
a condition following expiration of the Revised LLE Offer but prior to
acceptance for exchange in order to delay exchange or avoid the obligation to
exchange properly tendered Shares: LLE will either promptly exchange such
Shares or promptly return such Shares.
(b)(6) Confidentiality Agreement
Safety-Kleen and LLE have entered into a bilateral confidentiality agreement
pursuant to which each party agrees to maintain the confidentiality of
information furnished to it by the other.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
Item 4(a) of the Schedule 14D-9 is hereby amended and restated, as follows:
(a) Recommendation Of The Board of Directors.
THE BOARD OF DIRECTORS OF SAFETY-KLEEN (THE "BOARD"), HAVING NEGOTIATED
IMPROVEMENTS IN LLE'S PROPOSED TRANSACTION REFLECTED IN THE TERMS OF THE
REVISED LLE OFFER, HAS UNANIMOUSLY DETERMINED TO APPROVE THE REVISED LLE OFFER
AND RECOMMENDS THAT SHAREHOLDERS OF SAFETY-KLEEN TENDER THEIR SHARES PURSUANT
TO THE REVISED LLE OFFER.
Rights Agreement. In light of its determination stated above, the Board
decided at its March 15, 1998 meeting to amend the Rights Agreement to exempt
LLE'S purchases of Shares pursuant to the LLE Merger Agreement.
Business Combination Statute. In light of its determination stated above,
the Board at its March 15 meeting approved the LLE Merger Agreement, thereby
rendering Section 180.1141 of the Wisconsin Statutes inapplicable to the LLE
Merger. Section 180.1141 would otherwise have restricted consummation of the
LLE Merger until three years after closing of the Revised LLE Offer.
14
Item 4(b) of the Schedule 14D-9 is hereby amended and supplemented by adding
the following:
(b)(1) and (b)(2) Background and Reasons for the Recommendation.
Following unsuccessful negotiations on March 10 and March 11, 1998,
representatives of Safety-Kleen and LLE conducted negotiations on March 13,
14, and 15, 1998, concerning the terms of the LLE Merger Agreement and the
consideration payable thereunder. Also on March 14, Safety-Kleen and LLE
entered into a confidentiality agreement. As a result of these negotiations,
LLE agreed with Safety Kleen to amend the consideration in its proposed
transaction to $18.30 in cash and 2.8 shares of LLE Common Stock.
At a special meeting of the Board of Directors of Safety-Kleen on March 15,
Safety-Kleen's legal advisors advised the Board of the progress of the
negotiations with LLE. The Board discussed the LLE Transaction, including its
structure and the improvements reflected in the Revised LLE Offer
Consideration. ▇▇▇▇▇▇▇ ▇▇▇▇▇ then made a presentation and rendered its written
opinion to the effect that, as of such date and based upon and subject to
certain matters stated in such opinion, the consideration to be received by
the holders of Shares in the LLE Transaction is fair to such holders from a
financial point of view, and reviewed with the Board the financial analysis
performed by it in connection with its opinion (see "--Opinions of Financial
Adviser--March 15, 1997 Opinion").
In the course of reaching its determining with respect to the Revised LLE
Offer referred to in Item 4(a), the Board at its meeting on March 15, 1998,
consulted with Safety-Kleen legal counsel and ▇▇▇▇▇▇▇ ▇▇▇▇▇, and considered a
number of factors, including, but not limited to:
(i) the Board's knowledge of Safety-Kleen's financial performance and
future opportunities and prospects;
(ii) the presentation of ▇▇▇▇▇▇▇ ▇▇▇▇▇ at the March 15, 1998 Board
meeting and the written opinion of ▇▇▇▇▇▇▇ ▇▇▇▇▇ dated March 15, 1998 that,
based upon and subject to the matters set forth therein and as of the date
thereof, the Revised LLE Offer Consideration to be received by Safety-
Kleen's shareholders in the LLE Transaction is fair to Safety-Kleen's
shareholders from a financial point of view; the full text of the March 15,
1998 opinion of ▇▇▇▇▇▇▇ ▇▇▇▇▇ is attached hereto as Annex A and should be
read in its entirety (See "--(3) Opinions of Financial Advisor--March 15,
1998 Opinion" below);
(iii) the fact that at the conclusion of the process of exploring
strategic alternatives, the ▇▇▇▇▇▇ Merger, providing for $27 per share all
cash consideration, failed to obtain the approval of Safety-Kleen
shareholders, leaving no viable alternative of comparable value to the LLE
Transaction;
(iv) negotiated improvements reflected in the Revised LLE Offer
Consideration;
(v) the fact that the Revised LLE Offer Consideration has a value of
slightly over $30 (based on LLE's closing stock price of $4.25 on March 13,
1998), representing a premium of more than 68% over the closing price of
$17.81 per Share on August 7, 1997, the last trading day prior to the
public announcement that Safety-Kleen was considering strategic
alternatives and had retained ▇▇▇▇▇▇▇ ▇▇▇▇▇ in connection therewith; and
(vi) the terms and conditions of LLE Merger Agreement, including its
provisions concerning the improvement and protection, of benefits for
employees. The Board's consideration of these benefits was part of its
consideration under the Wisconsin Constituency Statute of the effects of
the LLE Merger Agreement on Safety-Kleen's employees.
In addition, the Board considered the fact that ▇▇. ▇▇▇▇▇▇▇▇, a Director of
Safety-Kleen, is a Senior Director of ▇▇▇▇▇▇▇ ▇▇▇▇▇.
The foregoing describes all material factors considered and given weight by
the Board in connection with its evaluation of the Revised LLE Offer. In view
of the variety of factors considered in connection with its evaluation of the
Revised LLE Offer, the Board did not find it practicable to and did not
quantify or otherwise assign relative weights to the specific factors
considered in reaching its determinations and recommendation. In
15
addition, individual members of the Board may have given different weight to
different factors. The Board viewed its position and recommendation as being
based on the totality of the information presented to and considered by it.
Following the March 15th Board meeting, Safety-Kleen, LLE and the Offeror
entered into the LLE Merger Agreement. Safety-Kleen and LLE also issued press
releases announcing the LLE Merger Agreement on March 16, 1998, which are
filed as Exhibits 58 and 59 to the Schedule 14D-9 and incorporated herein by
reference.
(3) Opinions of Financial Advisor.
March 15, 1998 Opinion. At the March 15, 1998 meeting of the Safety-Kleen
Board of Directors, ▇▇▇▇▇▇▇ ▇▇▇▇▇ rendered its oral opinion (which opinion was
subsequently confirmed by delivery of a written opinion dated March 15, 1998),
that, as of such date, and based upon and subject to the factors and
assumptions set forth in such opinion, the consideration to be received by
Safety-Kleen's shareholders in the LLE Transaction is fair to Safety-Kleen's
shareholders from a financial point of view. The full text of ▇▇▇▇▇▇▇ ▇▇▇▇▇'▇
opinion to Safety-Kleen's Board of Directors dated as of March 15, 1998 is
attached hereto as Annex A and is incorporated herein by reference and should
be read in its entirety in connection with this Statement. The following
summary of ▇▇▇▇▇▇▇ ▇▇▇▇▇'▇ opinion is qualified in its entirety by reference
to the full text of ▇▇▇▇▇▇▇ ▇▇▇▇▇'▇ opinion. ▇▇▇▇▇▇▇ ▇▇▇▇▇'▇ opinion was
addressed to the Safety-Kleen Board of Directors for the purposes of its
evaluation of the LLE Transaction and does not constitute a recommendation to
any Safety-Kleen shareholder as to whether such shareholder should tender
Shares into the Revised LLE Offer.
In connection with its opinion, ▇▇▇▇▇▇▇ ▇▇▇▇▇ reviewed a final draft of the
LLE Merger Agreement, including its financial terms and conditions, as well as
certain financial and other information that was publicly available or
furnished to ▇▇▇▇▇▇▇ ▇▇▇▇▇ by Safety-Kleen, including certain internal
financial analyses, financial forecasts, reports and other information
prepared by the management of Safety-Kleen. ▇▇▇▇▇▇▇ ▇▇▇▇▇ held discussions
with members of management of Safety-Kleen concerning Safety-Kleen's
historical and current operations, financial condition and prospects. In
addition, ▇▇▇▇▇▇▇ ▇▇▇▇▇ (i) compared the financial position and operating
results of Safety-Kleen with those of publicly traded companies ▇▇▇▇▇▇▇ ▇▇▇▇▇
deemed relevant for its opinion; (ii) compared certain financial terms of the
LLE Transaction to certain financial terms of other selected business
combinations ▇▇▇▇▇▇▇ ▇▇▇▇▇ deemed relevant for its opinion and (iii) conducted
such other financial studies, analyses and investigations and reviewed such
other factors as ▇▇▇▇▇▇▇ ▇▇▇▇▇ deemed appropriate for the purposes of
rendering its opinion. In connection with ▇▇▇▇▇▇▇ ▇▇▇▇▇'▇ review of the LLE
Transaction and the preparation of its opinion, ▇▇▇▇▇▇▇ ▇▇▇▇▇: (a) analyzed
the historical revenue, operating earnings, net income, dividend capacity and
capitalization of both LLE and certain other publicly held companies that
▇▇▇▇▇▇▇ ▇▇▇▇▇ believes to be comparable to LLE; (b) analyzed certain publicly
available financial and other information relating to LLE and the unaudited
pro forma combined financial information in the Revised Amended Prospectus and
performed a sensitivity analysis on such pro forma financial information based
upon variable synergy assumptions; (c) reviewed the historical market prices
and trading volume of the LLE Common Stock as well as its stock ownership and
analyzed factors which could influence the trading price of the LLE Common
Stock on the anticipated closing date for the Revised LLE Offer; and (d)
performed such other analyses as ▇▇▇▇▇▇▇ ▇▇▇▇▇ deemed appropriate. ▇▇▇▇▇▇▇
▇▇▇▇▇'▇ opinion with respect to the LLE Transaction reflects only limited
access to LLE management and no access to internal LLE projections.
In rendering its opinion, ▇▇▇▇▇▇▇ ▇▇▇▇▇ relied upon and assumed the
accuracy, completeness and fairness of all of the financial and other
information that was available to it from public sources and that was provided
to ▇▇▇▇▇▇▇ ▇▇▇▇▇ by Safety-Kleen. With respect to the financial projections
supplied to ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ assumed that they were reasonably
prepared and reflected the best currently available estimates and judgments of
the management of Safety-Kleen as to the future operating and financial
performance of Safety-Kleen. ▇▇▇▇▇▇▇ ▇▇▇▇▇'▇ opinion relates to financial
fairness only as of the opinion date; no opinion is expressed as to the
soundness of the financial condition of LLE subsequent to the effective time
of the LLE Transaction. ▇▇▇▇▇▇▇ ▇▇▇▇▇ did not assume any responsibility for
making any independent evaluation of Safety-Kleen's or LLE's respective assets
or liabilities or for making any independent verification of any of the
information reviewed by ▇▇▇▇▇▇▇ ▇▇▇▇▇.
16
▇▇▇▇▇▇▇ ▇▇▇▇▇'▇ opinion was necessarily based on economic, market, financial
and other conditions as they existed on March 15, 1998, the date of ▇▇▇▇▇▇▇
▇▇▇▇▇'▇ opinion, and on the information made available to ▇▇▇▇▇▇▇ ▇▇▇▇▇ as of
such date. It should be understood that, although subsequent developments may
affect its opinion, ▇▇▇▇▇▇▇ ▇▇▇▇▇ does not have any obligation to update,
revise or reaffirm ▇▇▇▇▇▇▇ ▇▇▇▇▇'▇ opinion. The following is a summary of the
material factors considered and principal financial analyses performed by
▇▇▇▇▇▇▇ ▇▇▇▇▇ to arrive at its opinion. ▇▇▇▇▇▇▇ ▇▇▇▇▇ performed certain
procedures, including each of the financial analyses described below, and
reviewed with the management of Safety-Kleen the assumptions upon which such
analyses were based, and other factors.
Current Nominal Value Received in the Revised LLE Offer. ▇▇▇▇▇▇▇ ▇▇▇▇▇
reviewed the Revised LLE Offer and, pursuant to its terms, LLE and a
subsidiary propose to exchange, for each outstanding Share, cash in the amount
of $18.30 plus 2.8 shares of LLE Common Stock. ▇▇▇▇▇▇▇ ▇▇▇▇▇ noted that on
March 13, 1998, the LLE Common Stock closed at $4.25 per share. In addition,
▇▇▇▇▇▇▇ ▇▇▇▇▇ noted that for the four days following the March 9, 1998 Safety-
Kleen shareholders meeting at which the ▇▇▇▇▇▇ Merger was not approved, the
average closing price of the LLE Common Stock was $4.11, and that the stock
price at the time of the opinion of $4.25 would result in the stock portion
having a market value of $11.90 per Share. Therefore, at the time of the
opinion, the nominal value of the Revised LLE Offer was $30.20 per Share.
Factors which could affect LLE's share price prior to closing of the Revised
LLE Offer. ▇▇▇▇▇▇▇ ▇▇▇▇▇ identified several factors which could place downward
pressure on the price of the LLE Common Stock prior to the closing of the
Revised LLE Offer. The analysis utilized the same assumptions as set forth
under "The Merger--Opinions of Financial Advisor--December 20, 1997 Opinion"
in the Schedule 14D-9 as amended and restated on January 6, 1998 and "Recent
Developments--Opinion of Financial Advisor--January 31, 1998 Opinion" in the
Schedule 14D-9 as amended on February 9, 1998. The principal factors include:
1. Possible revision in financial analysts' estimates for accretion in
LLE's fiscal 1998 EPS resulting from a combination of Safety-Kleen and
LLE.
2. Possible price/earnings multiple contraction in the LLE Common Stock
prior to closing.
3. The substantial market overhang resulting from the fact that Safety-
Kleen shareholders would receive approximately 164 million shares of the
LLE Common Stock in the Revised LLE Offer.
4. The potential impact of an overall market correction.
Based on the foregoing ▇▇▇▇▇▇▇ ▇▇▇▇▇ concluded that it is likely that there
would be some downward movement in the LLE Common Stock price following an
announcement of a definitive agreement with LLE. However, ▇▇▇▇▇▇▇ ▇▇▇▇▇ noted
that these factors have already been communicated to investors and may already
be influencing the LLE Common Stock price. Furthermore, ▇▇▇▇▇▇▇ ▇▇▇▇▇ opined
that it is unlikely that such downward movement would be of substantial
magnitude prior to closing.
Summaries of Valuation Analyses. In connection with its opinion and the
presentation of its opinion to the Board of Directors of Safety-Kleen, ▇▇▇▇▇▇▇
▇▇▇▇▇ performed certain valuation analyses, including: (i) a comparison with
comparable publicly traded companies, (ii) a discounted cash flow analysis,
(iii) an analysis of certain comparable acquisitions and (iv) a premium
analysis. Such analyses are summarized below.
Analysis of Certain Publicly Traded Companies. ▇▇▇▇▇▇▇ ▇▇▇▇▇ reviewed and
compared certain financial information relating to Safety-Kleen to
corresponding financial information, ratios and public market multiples for
nine publicly traded companies in the environmental services industry. Five of
these companies are solid waste management companies (the "Solid Waste
Comparables") and four are in the industrial waste management industry (the
"Industrial Waste Comparables"). The Solid Waste Comparables are (i) Allied
Waste Industries, Inc., (ii) ▇▇▇▇▇▇▇▇-▇▇▇▇▇▇ Industries, Inc., (iii) USA Waste
Services, Inc., (iv) Waste Management, Inc. and (v) Waste Management
International PLC. The Industrial Waste Comparables are (i) Clean Harbors,
Inc., (ii) Envirosource, Inc., (iii) LLE and (iv) ▇▇▇▇▇▇ Services, Inc.
▇▇▇▇▇▇▇ ▇▇▇▇▇ selected these companies
17
because they are publicly traded companies which ▇▇▇▇▇▇▇ ▇▇▇▇▇ deemed most
comparable to Safety-Kleen's operations and financial condition. Although
▇▇▇▇▇▇▇ ▇▇▇▇▇ compared the trading multiples of the selected companies at the
date of ▇▇▇▇▇▇▇ ▇▇▇▇▇'▇ opinion to the implied purchase multiples of Safety-
Kleen, none of the selected companies is identical to Safety-Kleen. The per
Share price calculations based on such multiples ranged from $24.24 to $28.18
per Share.
Among the information considered were revenue, operating income ("EBIT"),
earnings before interest, taxes, depreciation and amortization ("EBITDA"), net
income, earnings per share ("EPS"), gross profit margins, EBIT margins and net
income margins, growth in revenues and net income, return on assets and
equity, and capital structure. The multiples and ratios for Safety-Kleen and
the comparable companies were based on the most recent publicly available
financial information and on EPS estimates for 1998 and 1999 from First Call
Corporation, and used the closing share prices as of March 13, 1998.
▇▇▇▇▇▇▇ ▇▇▇▇▇ observed that the multiples of common stock share price
("Price") to EPS, as well as multiples of market equity value plus book value
of total debt (including minority interests and preferred stock) less cash and
equivalents ("Enterprise Value") to revenues, EBIT and EBITDA implied by the
terms of the LLE Transaction compared favorably, from Safety-Kleen's
perspective, to the median of the corresponding multiples of the comparable
companies. Specifically, the terms of the Revised LLE Offer implied 2.0x
latest twelve month ("LTM") revenues, 17.0x LTM EBIT and 10.2x LTM EBITDA. By
comparison, the analysis of selected environmental service companies resulted
in a median multiple of 1.7x for Enterprise Value to LTM revenues, 14.6x for
Enterprise Value to LTM EBIT and 8.5x for Enterprise Value to LTM EBITDA. The
analysis of selected environmental service companies also resulted in a median
multiple of 26.8x for the Price to LTM EPS, 21.6x for Price to estimated
calendar 1998 EPS and 16.7x for Price to estimated calendar 1999 EPS. The
terms of the Revised LLE Offer implied 28.2x for Price to LTM EPS, 24.8x for
Price to estimated fiscal 1998 EPS and 22.0x for Price to estimated fiscal
1999 EPS.
Discounted Cash Flow Analysis. Using a discounted cash flow ("DCF")
analysis, ▇▇▇▇▇▇▇ ▇▇▇▇▇ estimated the net present value of the unleveraged
free cash flows that Safety-Kleen could produce on a stand-alone basis over a
five year period from 1998 to 2002. In estimating these cash flows the
management of Safety-Kleen made certain assumptions about the operating
performance of Safety-Kleen over the five year period. Such assumptions
include assumptions regarding volume growth and pricing in Safety-Kleen's
principal businesses. Over the five year period ending 2002, Safety-Kleen
management projected volume growth for three of Safety-Kleen's principal
businesses--North American Parts Cleaner Services, North American Industrial
Waste Services and Automotive Parts Cleaner Services--to be 3.2%, 5.0% and
0.0% and annual price increases to be 5.6%, 2.7% and 1.0%, respectively. In
its Oil Recovery Services business, Safety-Kleen management projected revenue
to increase at a compound annual rate of 11% over the five year period ending
2002. Approximately 62% of the Oil Recovery Services growth is expected to
result from increased sales of lubricating oils, primarily blended products.
Also, approximately 9% of the total increase in Oil Recovery Services revenue
over the same period reflects increases in base lubricating oil from $0.91 in
1998 to $ 1.00 by 2001. The balance of the increase reflects increases in oil
collection volume and price. The estimates for cash flows are based upon the
assumption that markets for the hazardous waste industry and that U.S. and
international economic conditions remain relatively stable. Without
limitation, these cash flow estimates assumed that certain possible changes or
developments in Safety-Kleen's business, which could potentially favorably
impact value, would not affect cash flow during such period. In calculating
the "terminal value", ▇▇▇▇▇▇▇ ▇▇▇▇▇ assumed multiples of Enterprise Value to
EBITDA ranging from 6.0x to 8.0x, which multiples ▇▇▇▇▇▇▇ ▇▇▇▇▇ believed to be
appropriate for such an analysis. The annual and terminal free cash flows were
discounted to determine a net present value of the unleveraged equity value of
Safety-Kleen. Discount rates in a range of 10.0% to 12.0% were chosen based
upon an analysis of the weighted average cost of capital of the publicly
traded comparable group of companies described above. The DCF analysis
indicated a valuation of the equity of Safety-Kleen of between $1.5 billion to
$1.8 billion, or $24.95 to $29.56 per share. As a result, ▇▇▇▇▇▇▇ ▇▇▇▇▇
believes that the price to be paid in the Revised LLE Offer compares
favorably, from Safety-Kleen's perspective, to the values indicated by the DCF
analysis.
18
Comparable Acquisitions. ▇▇▇▇▇▇▇ ▇▇▇▇▇ performed an analysis of selected
recent merger or acquisition transactions in the environmental services
industry. The selected transactions were chosen based on ▇▇▇▇▇▇▇ ▇▇▇▇▇'▇
judgment that they were generally comparable, in whole or in part, to the
proposed transaction. In total ▇▇▇▇▇▇▇ ▇▇▇▇▇ examined sixteen transactions
that were announced between March 17, 1995 and March 11, 1998 involving
certain environmental services companies. The selected transactions were not
intended to be representative of the entire range of possible transactions in
the environmental services industry. Although ▇▇▇▇▇▇▇ ▇▇▇▇▇ compared the
transaction multiples of these companies to the implied purchase multiples of
Safety-Kleen, none of the selected companies is identical to Safety-Kleen.
▇▇▇▇▇▇▇ ▇▇▇▇▇ reviewed the consideration paid in such transactions in terms
of the Enterprise Value of such transactions as a multiple of revenues, EBIT
and EBITDA for the latest twelve months prior to the announcement of such
transactions. Additionally, ▇▇▇▇▇▇▇ ▇▇▇▇▇ reviewed the consideration paid in
such transactions in terms of the price paid for the common stock ("Equity
Purchase Price") of such transactions as a multiple of net income for the
twelve months prior to the announcement of such transactions. ▇▇▇▇▇▇▇ ▇▇▇▇▇
observed that the multiples of Equity Purchase Price to net income, as well as
multiples of Enterprise Value to revenues, EBIT and EBITDA implied by the
terms of the Revised LLE Offer compared favorably, from Safety-Kleen's
perspective, to the median of the corresponding multiples of the comparable
acquisitions.
Such analysis of the sixteen acquisitions in the environmental services
industry resulted in a median multiple of 1.7x for Enterprise Value to LTM
revenues, 18.2x for Enterprise Value to LTM EBIT, 9.3x for Enterprise Value to
LTM EBITDA and 25.3x for Equity Purchase Price to LTM net income. In contrast,
the implied purchase multiples for Safety-Kleen were 2.0x for Enterprise Value
to LTM revenues, 17.0x for Enterprise Value to LTM EBIT, 10.2x for Enterprise
Value to LTM EBITDA and 28.2x for Equity Purchase Price to LTM net income.
Premium Analysis. In addition to evaluating multiples paid in transactions
in the environmental services industry, ▇▇▇▇▇▇▇ ▇▇▇▇▇ considered, for twenty
six industrial transactions which were announced from March 29, 1996 to
February 9, 1998 and whose Enterprise Value ranged from $783.4 million to $2.8
billion, the premiums paid over each company's stock price prior to the
announcement of a transaction. The median premium paid in those transactions
was 42.5%, 39.8% and 28.7%, respectively, over each company's stock price one
month, one week and one day before each respective announcement. In contrast,
the premium paid over the price of the Shares on July 8, 1997, August 1, 1997
and August 7, 1997, or one month, one week and one day, respectively, prior to
the announcement that Safety-Kleen was evaluating strategic alternatives, was
75.1%, 71.3% and 69.6%, respectively. As a result, ▇▇▇▇▇▇▇ ▇▇▇▇▇ believes that
the premium paid over the price of the Shares compares favorably, from Safety-
Kleen's perspective, to the values indicated by the premium analysis.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
Item 6(b) of the Schedule 14D-9 is hereby amended and restated as follows:
(b) To the best knowledge of Safety-Kleen, and subject to applicable
securities laws and personal considerations, its executive officers,
directors, affiliates and subsidiaries presently intend to tender, pursuant to
the Revised LLE Offer, or otherwise sell, any Shares which are held of record
or are beneficially owned by such persons.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
Item 7 of the Schedule 14D-9 is hereby amended and restated as follows:
(a) Other than as set forth or referenced in Items 3(b) or 4, no negotiation
is being undertaken or is underway by Safety-Kleen in response to the Revised
LLE Offer which relates to or would result in:
(1) an extraordinary transaction such as a merger or reorganization,
involving Safety-Kleen or any subsidiary of Safety-Kleen;
19
(2) a purchase, sale or transfer of a material amount of assets by
Safety-Kleen or any subsidiary of Safety-Kleen.
(3) a tender offer for or other acquisition of securities by or of
Safety-Kleen; or
(4) any material change in the present capitalization or dividend policy
of Safety-Kleen.
(b) Except as described above, in Item 3(b), there are no transactions,
board resolutions, agreements in principle or signed contracts in response to
the Revised LLE Offer which relate to or would result in one or more of the
matters referred to in Item 7(a).
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED
Item 8(a) of the Schedule 14D-9 is hereby amended and supplemented by adding
the following:
(a) Rights Agreement
See Item 4(a) "--Rights Agreement," of this Amendment No. 29, incorporated
herein by reference.
Item 8(c) of the Schedule 14D-9 is hereby amended and supplemented by adding
the following:
(c) State Takeover Statutes
Item 8(c) of the Schedule 14D-9 is hereby amended and supplemented by adding
the following at the end of the paragraph therein captioned "Business
Combination Statute":
See Item 4(a) "--Business Combination Statute," of this Amendment No. 29,
incorporated herein by reference.
20
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Safety-Kleen Corp.
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
By: _________________________________
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Chairman and Chief
Executive Officer
Dated: March 18, 1998
21
EXHIBIT INDEX
Except as noted below, the following Exhibits have been previously filed in
connection with this Statement.
EXHIBIT
NO. DESCRIPTION
------- -----------
Exhibit 1 Excerpts from Safety-Kleen's Proxy Statement, dated March 28, 1997,
relating to Safety-Kleen's 1997 Annual Meeting of Shareholders.
Exhibit 2 Share Ownership of Certain Beneficial Owners and Management.
Exhibit 3 Agreement and Plan of Merger, dated as of November 20, 1997, by and
among SK Parent Corp., SK Acquisition Corp. and Safety-Kleen Corp.
Exhibit 4 Form of Change of Control Severance Agreement.
Exhibit 5 Letter to Shareholders of Safety-Kleen Corp., dated December 22,
1997.
Exhibit 6 Press Release issued by Safety-Kleen Corp., dated December 22,
1997.
Exhibit 7 Text of September 24, 1997 letter from ▇▇▇▇▇▇▇ Environmental
Services, Inc.
Exhibit 8 Text of November 4, 1997 letter from ▇▇▇▇▇▇▇ Environmental
Services, Inc.
Exhibit 9 Text of November 13, 1997 letter from ▇▇▇▇▇▇▇ Environmental
Services, Inc.
Exhibit 10 Complaint filed by Safety-Kleen Corp. ▇. ▇▇▇▇▇▇▇ Environmental
Services, Inc. (dated November 17, ▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇ Eastern Division).
Exhibit 11 Opinion of ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Company L.L.C., dated November 20, 1997.
Exhibit 12 Text of November 20, 1997 letter from ▇▇▇▇▇▇▇ Environmental
Services, Inc.
Exhibit 13 Verified Answer, Affirmative Defenses, and Counterclaim filed by
▇▇▇▇▇▇▇ Environmental Services, Inc. v. Safety-Kleen Corp., et al.
(dated November 24, ▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ for the
Northern District of Illinois Eastern Division).
Exhibit 14 Opinion of ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Company L.L.C., dated December 20, 1997.
Exhibit 15 Complaint filed by ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ against ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, et
al. (dated November 4, ▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
Department, Chancery Division).
Exhibit 16 Complaint filed by ▇▇▇▇ ▇▇▇▇▇▇ against ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, et al.
(dated November 5, 1997, Circuit Court of ▇▇▇▇ County, Illinois
County Department, Chancery Division).
Exhibit 17 Complaint filed by ▇▇▇▇▇▇▇ ▇▇▇▇▇ against ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, et al.
(dated November 5, 1997, Circuit Court of ▇▇▇▇ County, Illinois
County Department, Chancery Division).
Exhibit 18 Complaint filed by ▇▇▇▇▇ ▇▇▇▇▇ against Safety-Kleen Corp. et al.
(dated November 5, 1997, Circuit Court of ▇▇▇▇ County, Illinois
County Department, Chancery Division).
Exhibit 19 Complaint filed by ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ against Safety-Kleen Corp. et al.
(dated November 6, 1997, Circuit Court of ▇▇▇▇ County, Illinois
County Department, Chancery Division).
Exhibit 20 Complaint filed by ▇▇▇▇▇▇▇ Family Trust against Safety-Kleen Corp.
et al (dated November 12, 1997, Circuit Court of ▇▇▇▇ County,
Illinois County Department, Chancery Division).
Exhibit 21 Complaint filed by ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ against Safety-Kleen Corp. et
al. (dated December 5, 1997, Circuit Court of ▇▇▇▇ County, Illinois
County Department, Chancery Division).
Exhibit 22 Press Release issued by Safety-Kleen Corp., dated January 8, 1998.
Exhibit 23 Press Release issued by Safety-Kleen Corp., dated January 9, 1998.
Exhibit 24 Definitive Additional Materials.
Exhibit 25 Press Release issued by Safety-Kleen Corp., dated January 15, 1998.
Exhibit 26 Definitive Additional Materials.
Exhibit 27 Definitive Additional Materials.
22
EXHIBIT
NO. DESCRIPTION
------- -----------
Exhibit 28 Definitive Additional Materials.
Exhibit 29 Press Release issued by Safety-Kleen Corp., dated January 27, 1998.
Exhibit 30 Press Release issued by Safety-Kleen Corp., dated February 4, 1998.
Exhibit 31 Letter to Shareholders of Safety-Kleen, dated February 2, 1998.
Exhibit 32 Press Release issued by Safety-Kleen Corp., dated February 2, 1998.
Exhibit 33 Opinion of ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Company L.L.C., dated January 31, 1998.
Exhibit 34 Press Release issued by SK Parent, dated February 10, 1998.
Exhibit 35 Letter to Shareholders of Safety-Kleen Corp., dated February 12, 1998.
Exhibit 36 Press Release issued by Safety-Kleen Corp., dated February 13, 1998.
Exhibit 37 Press Release issued by Safety-Kleen Corp., dated February 16, 1998.
Exhibit 38 Press Release issued by Safety-Kleen Corp., dated February 18, 1998.
Exhibit 39 Press Release issued by ▇▇▇▇▇▇ Services Corp., dated February 20, 1998.
Exhibit 40 Press Release issued by SK Parent Corp., dated February 20, 1998.
Exhibit 41 Press Release issued by Safety-Kleen Corp., dated February 20, 1998.
Exhibit 42 Definitive Additional Materials.
Exhibit 43 Press Release issued by SK Parent Corp., dated February 23, 1998.
Exhibit 44 Press Release issued by Safety-Kleen Corp., dated February 25, 1998.
Exhibit 45 Press Release issued by Safety-Kleen Corp., dated February 25, 1998.
Exhibit 46 Press Release issued by ▇▇▇▇▇▇ Services Corp., dated February 26, 1998.
Exhibit 47 Letter to Shareholders of Safety-Kleen Corp., dated February 27, 1998.
Exhibit 48 Press Release issued by Safety-Kleen Corp., dated March 2, 1998.
Exhibit 49 Press Release issued by Safety-Kleen Corp., dated March 5, 1998.
Exhibit 50 Press Release issued by SK Parent Corp., dated March 5, 1998.
Exhibit 51 Definitive Additional Materials.
Exhibit 52 Definitive Additional Materials.
Exhibit 53 Definitive Additional Materials.
Exhibit 54 Press Release issued by Safety-Kleen Corp., dated March 6, 1998.
Exhibit 55 Press Release issued by Safety-Kleen Corp., dated March 9, 1998.
Exhibit 56 Press Release issued by Safety-Kleen Corp., dated March 10, 1998.
Exhibit 57 Press Release issued by Safety-Kleen Corp., dated March 12, 1998.
Exhibit 58 Press Release issued by Safety-Kleen Corp., dated March 16, 1998.
Exhibit 59 Press Release issued by ▇▇▇▇▇▇▇ Environmental Services, Inc. dated March 16, 1998.
Exhibit 60 Form of Confidentiality Agreement, dated March 13, between Safety-Kleen Corp. and ▇▇▇▇▇▇▇
Environmental Services, Inc.
Exhibit 61* Opinion of ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Company L.L.C., dated March 15, 1998.
Exhibit 62** Revised Amended Prospectus (including the LLE Merger Agreement attached thereto as Annex A).
--------
*Filed herewith, replacing form of opinion filed with Amendment No. 28.
**The LLE Merger Agreement, including Schedule 1.1 thereto, included as Annex
A of the Revised Amended Prospectus, is incorporated by reference in the
Schedule 14D-9, but not included in the mailing to shareholders. No other
section of the Revised Amended Prospectus is incorporated by reference
herein or shall be deemed filed with the SEC by Safety-Kleen.
23